<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
VANGUARD CELLULAR SYSTEMS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[VANGUARD CELLULAR SYSTEMS, INC LETTERHEAD]
April 21, 1997
To the Shareholders of
Vanguard Cellular Systems, Inc.:
I am pleased to invite you to the Annual Meeting of Shareholders of your
Company to be held at 9:30 a.m. on Tuesday, May 20, 1997, at the Company's
principal executive offices, 2002 Pisgah Church Road, Greensboro, North
Carolina. The Notice of the meeting and a Proxy Statement relating to matters
to be considered at the meeting are attached and a proxy card and return
envelope are enclosed. In addition to the reelection of certain members of the
Board of Directors and ratification of the selection of Arthur Andersen LLP as
the Company's independent auditors, the shareholders are being asked to
consider and approve the Company's 1997 Employee Stock Purchase Plan and the
Company's Amended and Restated 1994 Long-Term Incentive Plan. These proposals
are discussed in detail in the enclosed Proxy Statement.
Whether or not you plan to attend the Annual Meeting, please sign and
return the proxy card in the postpaid return envelope so that your vote may be
counted.
Information relating to the Company's activities and operations during
the fiscal year ended December 31, 1996, is contained in the Company's Annual
Report, which is enclosed.
Sincerely,
/s/ Haynes G. Griffin
Haynes G. Griffin
Chairman
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
VANGUARD CELLULAR SYSTEMS, INC.
TO THE SHAREHOLDERS OF VANGUARD CELLULAR SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
VANGUARD CELLULAR SYSTEMS, INC. will be held at the Company's principal
executive offices, 2002 Pisgah Church Road, Greensboro, North Carolina on
Tuesday, May 20, 1997, at 9:30 a.m. for the following purposes:
1. To elect three Class I nominees to the Board of Directors to serve a
three-year term until the 2000 Annual Meeting of Shareholders;
2. To consider and act upon a proposal to approve the Company's 1997
Employee Stock Purchase Plan;
3. To consider and act upon a proposal to approve the Company's Amended
and Restated 1994 Long-Term Incentive Plan;
4. To ratify appointment of Arthur Andersen LLP as auditors for the
present year; and
5. To consider and act upon any other business that may come before the
meeting or any adjournment thereof.
All shareholders are invited to attend the meeting. Only those
shareholders of record as of the close of business on April 4, 1997, shall be
entitled to notice of and to vote at the meeting. It is important that your
stock be represented at this meeting to assure the presence of a quorum.
ENCLOSED IS A PROXY CARD WHICH YOU ARE URGED TO SIGN AND RETURN IN THE
POSTPAID RETURN ENVELOPE.
By Order of the Board of Directors
/s/ Stephen R. Leeolou
Stephen R. Leeolou
Secretary
April 21, 1997
<PAGE> 4
VANGUARD CELLULAR SYSTEMS, INC.
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Vanguard
Cellular Systems, Inc. (the "Company") in connection with the solicitation of
proxies to be used in voting at the Annual Meeting of Shareholders to be held
on May 20, 1997. The address of the Company's principal executive offices is
2002 Pisgah Church Road, Greensboro, North Carolina 27455-3314. The
approximate date on which this Proxy Statement and the enclosed proxy were
first sent or given to shareholders was April 21, 1997.
The enclosed proxy is being solicited by the Board of Directors of the
Company. A shareholder who executes the accompanying proxy may revoke it at
any time before it is voted by filing with the Secretary of the Company a
written revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. All shares represented by
valid proxies received pursuant to this solicitation prior to the meeting and
not revoked before their exercise will be voted, and, if a choice is specified
with respect to any matter to be acted upon, the shares will be voted in
accordance with such specification. If no direction is made in the proxy, the
shares will be voted for the nominees for director named in this Proxy
Statement and for the other proposals described herein.
The cost of solicitation will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone or
telegram by directors, officers and employees of the Company or by D.F. King &
Co., Inc. of New York, New York. D.F. King is being paid a fee of $4,500 for
this service. In addition, brokers and other custodians, nominees or
fiduciaries may be reimbursed for their expenses in forwarding proxy materials
to principals and obtaining their proxies.
VOTING SECURITIES OUTSTANDING
Only shareholders of record as of the close of business on April 4,
1997, will be entitled to notice of and to vote at the Annual Meeting. On such
date, the Company had 40,759,522 shares of Class A Common Stock, par value
$0.01 per share ("Common Stock"), issued and outstanding. There are no other
voting securities outstanding. Each share is entitled to one vote.
1
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following are the only persons known to the Company who beneficially
owned more than five percent of the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)(2)
---------------------------
NAME AND ADDRESS SHARES PERCENT
---------------- ------ -------
<S> <C> <C>
The Equitable Companies Incorporated 5,429,950(3) 13.32 %
787 Seventh Avenue
New York, NY 10019
Key Corp. 3,980,777(4) 9.77 %
127 Public Square
Cleveland, OH 44114
FMR Corp. 2,982,500(5) 7.32%
82 Devonshire Street
Boston, MA 02109
Stuart S. Richardson 2,180,622(6) 5.33%
c/o Lexington Global Asset Managers, Inc.
Park 80 West, Plaza Two
Saddle Brook, NJ 07663
</TABLE>
(1) The descendants of Lunsford Richardson, Sr., their spouses, trusts and
corporations in which they have interests and charitable organizations
established by such descendants (collectively referred to as the
"Richardson Family") beneficially own approximately 9,540,527 shares or
23.01% of the Company's Common Stock and consequently may, if they act in
concert, be in a position to control the management and the affairs of the
Company. Such number of shares includes 704,050 shares which members of
the Richardson Family have the right to acquire under presently
exercisable options granted to them under Company stock option plans. The
individuals and institutions constituting the Richardson Family have
differing interests and may not necessarily vote their shares in the same
manner. Furthermore, trustees and directors have fiduciary obligations
(either individually or jointly with other fiduciaries) that may dictate
positions that differ from their personal interests.
(2) Unless otherwise indicated, all shares are owned of record by the persons
named and the beneficial ownership consists of sole voting power and sole
investment power.
(3) Ownership as of December 31, 1996 as reported to the Company on a Schedule
13G dated February 12, 1997. According to the Schedule 13G, Equitable may
be deemed to exercise sole voting power as to 5,276,900 shares and sole
dispositive power as to 5,317,450 shares. AXA (a French parent holding
company of Equitable), and a group consisting of five French mutual
insurance companies, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, Alpha Assurances I.A.R.D. Mutuelle, Alpha Assurances Vie
Mutuelle and AXA Courtage Assurance Mutuelle, may be deemed to exercise
sole voting and dispositive power over all of the foregoing shares
attributed to Equitable and may also be deemed to exercise sole voting and
dispositive power over an additional 112,500 shares.
(4) Ownership as of December 31, 1996 as reported to the Company on a Schedule
13G dated February 14, 1997. According to the Schedule 13G and a
subsequent letter from Key Corp. to the Company, Key Trust Company of
Ohio, Key Trust Company of Indiana, Society Asset Management and Spears,
Benzak, Solomon & Farrell, subsidiaries of Key Corp., may also be deemed
to beneficially own the securities reported. According to the Schedule
13G, Key Corp. may be deemed to exercise sole voting power as to 12,500
shares, shared voting power as to 3,873,620 shares, sole dispositive power
as to 105,567 shares and shared dispositive power as to 3,875,195 shares.
2
<PAGE> 6
(5) Ownership as of December 31, 1996 as reported to the Company on a Schedule
13G dated January 9, 1997. Certain of these shares may be deemed to be
beneficially owned by Fidelity Management & Research Company and by
Fidelity Management Trust Company, both wholly-owned subsidiaries of FMR
Corp. ("FMR"), and by Edward C. Johnson 3d, Chairman of FMR, and Abigail
P. Johnson, a director of FMR. According to the Schedule 13G, Mr.
Johnson, Ms. Johnson, FMR and these subsidiaries may be deemed together
to exercise sole dispositive power as to all such shares and sole voting
power as to 2,000 shares.
(6) Ownership as of April 4, 1997. Includes 154,750 shares that Mr. Richardson
has the right to acquire under presently exercisable stock options granted
to him under Company stock option plans; 17,900 shares owned by Mr.
Richardson's spouse; 372,882 shares held by the H. Smith Richardson
Testamentary Trust, 1,020,292 shares held by the Smith Richardson
Foundation and 395,542 shares held by the Grace Jones Richardson
Testamentary Trust, of which Mr. Richardson is a trustee; and 157,306
shares held by various other trusts of which Mr. Richardson is also a
trustee. The shares shown as beneficially owned do not include 66,296
shares held in trusts for the benefit of his children. Mr. Richardson
denies beneficial ownership of the shares held by such trusts. The shares
shown also do not include 26,924 shares held by trusts of which Mr.
Richardson may be deemed to share investment power, but exercise no voting
power, and 5,653 shares that may be deemed beneficially owned by his
spouse. Mr. Richardson denies beneficial ownership both of the shares
directly owned by his spouse and of the shares that may be deemed
beneficially owned by his spouse.
3
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock, as of April 4, 1997, by its
directors, nominees for election as directors, the executive officers named in
the Summary Compensation Table and by all directors, nominees and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) PERCENT
- - ---- -- ---------- ----- --------------------------- -------
<S> <C> <C>
Stuart S. Richardson...................................... 2,180,622 (2) 5.33 %
Haynes G. Griffin......................................... 1,434,515 (3) 3.47 %
Stephen R. Leeolou........................................ 1,603,001 (4) 3.88 %
L. Richardson Preyer, Jr.................................. 1,606,019 (5) 3.89 %
Stephen L. Holcombe....................................... 160,609 (6) *
Richard C. Rowlenson ..................................... 169,505 (7) *
F. Cooper Brantley........................................ 22,998 (8) *
Doris R. Bray............................................. 8,600 (9) *
Robert M. DeMichele....................................... 1,035,342 (10) 2.54 %
L. Richardson Preyer, Sr.................................. 56,943 (11) *
Robert A. Silverberg...................................... 162,721 (12) *
All Directors, Nominees and Executive Officers
as a group (14 persons)............................. 7,718,261 (13) 17.92 %
</TABLE>
* Represents less than 1%
(1) Unless otherwise indicated, all shares are owned of record by the persons
named and the beneficial ownership consists of sole voting power and sole
investment power.
(2) For a detailed description of the nature of Mr. Richardson's beneficial
ownership, see "Voting Securities Outstanding."
(3) Includes 543,000 shares that Mr. Griffin has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Also includes 5,271 shares owned by Mr. Griffin's spouse as
to which he shares voting and investment power. Does not include 21,798
shares held by trusts, the sole beneficiaries of which are Mr. Griffin's
sons and the trustee of which is Mr. Griffin's brother. Mr. Griffin
denies beneficial ownership of the foregoing shares owned by his spouse
and held by such trusts. The shares shown also do not include 173,555
shares held by a trust of which Mr. Griffin may be deemed to share
investment power but over which he has no voting power.
(4) Includes 543,000 shares that Mr. Leeolou has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Does not include 31,137 shares held by trusts, the sole
beneficiaries of which are Mr. Leeolou's children and the trustee of which
is Mr. Leeolou's brother. Mr. Leeolou denies beneficial ownership of the
shares held by these trusts. The shares shown also do not include 39,447
shares held by a trust of which Mr. Leeolou may be deemed to share
investment power but over which he has no voting power.
4
<PAGE> 8
(5) Includes 543,000 shares that Mr. Preyer has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Also includes 12,061 shares owned by Mr. Preyer's spouse as
to which he shares voting and investment power. Does not include 63,279
shares held by trusts, the sole beneficiaries of which are Mr. Preyer's
children and the trustee of which is Mr. Preyer's sister. Mr. Preyer
denies beneficial ownership of the foregoing shares owned by his spouse
and held by such trusts. The shares shown also do not include 42,663
shares held by a trust of which Mr. Preyer may be deemed to share
investment power but over which he has no voting power.
(6) Includes 133,500 shares that Mr. Holcombe has the right to acquire under
presently exercisable options granted to him under Company stock option
plans.
(7) Includes 126,000 shares that Mr. Rowlenson has the right to acquire under
presently exercisable options granted to him under Company stock option
plans. Also includes 18,237 shares owned by Mr. Rowlenson's spouse as to
which he shares voting and investment power. Does not include 13,550
shares held by trusts, the sole beneficiaries of which are Mr. Rowlenson's
children and the trustee of which is Mr. Rowlenson's brother-in-law. Mr.
Rowlenson denies beneficial ownership of the foregoing shares owned by his
spouse and held by such trusts.
(8) Includes 1,800 shares that Mr. Brantley has the right to acquire under
presently exercisable options granted to him under Company stock option
plans.
(9) Includes 6,300 shares that Mrs. Bray has the right to acquire under
presently exercisable options granted to her under Company stock option
plans.
(10) Includes 6,300 shares that Mr. DeMichele has the right to acquire under
presently exercisable options granted to him under Company stock option
plans and 1,020,292 shares held by the Smith Richardson Foundation, of
which Mr. DeMichele serves as one of eight trustees. The shares held by
the Smith Richardson Foundation are also reported as beneficially owned by
Stuart S. Richardson. Mr. DeMichele denies beneficial ownership of the
shares held by such foundation.
(11) Includes 6,300 shares that Mr. Preyer has the right to acquire under
presently exercisable options granted to him under Company stock option
plans and 28,245 shares held by Mr. Preyer's spouse. Mr. Preyer denies
beneficial ownership of the foregoing shares owned by his spouse.
(12) Includes 1,800 shares that Mr. Silverberg has the right to acquire under
presently exercisable options granted to him under Company stock option
plans and 45,486 shares that represent Mr. Silverberg's pro rata ownership
of Common Stock owned by a corporation of which he is an officer, director
and principal shareholder.
(13) Includes 2,300,115 shares that directors and executive officers have the
right to purchase under presently exercisable options granted to them
under Company stock option plans.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's directors, its executive
officers, and any persons holding more than 10 percent of the Company's stock
are required to report their ownership of the Company's stock and any changes
in that ownership to the Securities and Exchange Commission. Specific due
dates for these reports have been established and the Company is required to
report in this proxy statement any failure to file by these dates during fiscal
1996. All of these filing requirements were satisfied by its directors,
officers and 10 percent holders, except that Mr. Brantley failed to report a
purchase of 2,000 shares on a timely basis on Form 4 and later did not report
the transaction on Form 5 on a timely basis. In making these statements, the
Company has relied on the written representations of its directors, officers
and 10 percent holders and copies of the reports that they have filed with the
Commission.
5
<PAGE> 9
ELECTION OF DIRECTORS
It is intended that the persons named in the accompanying proxy will
vote for the three nominees listed below for directors, unless the authority so
to vote is withheld. A plurality of the votes cast is required to elect each
director, and, as a result, broker nonvotes will not affect the election
results if a quorum is present. In the event that any nominee should not be
available to serve for any reason, the proxy holders may vote for substitute
nominees designated by the Board of Directors. The Board of Directors has no
reason to believe any of the nominees named below will be unavailable to serve
as a member of the Board of Directors. All three nominees are presently
members of the Board of Directors of the Company.
The Board of Directors of the Company is divided into three classes:
Class I, Class II and Class III. In accordance with this classification, the
members of Class I of the Board of Directors are to be elected at this Annual
Meeting. If elected, the nominees will serve until the 2000 Annual Meeting of
Shareholders. The directors designated as Class II have been previously
elected to serve until the 1998 Annual Meeting of Shareholders and the
directors designated as Class III have been previously elected to serve until
the 1999 Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE AND PRINCIPAL OCCUPATION FOR LAST FIVE YEARS SINCE
- - ------------------------------------------------------ -----
NOMINEES FOR THREE-YEAR TERM (CLASS I)
<S> <C>
Doris R. Bray, 59, Partner, Schell Bray Aycock Abel & Livingston P.L.L.C. (Attorneys-at-Law), 1987-present; 1994
director, Cone Mills Corporation.
Stuart S. Richardson, 50, Vice Chairman of the Board of the Company, 1996-present; Chairman of the Board 1985
of the Company, 1985-1996; Chairman of the Board of Lexington Global Asset Managers, Inc., a
diversified financial services company, 1995-present; executive of Piedmont Management Company, Inc.,
1985-1995, Vice Chairman, 1986-1995; director, Chartwell Reinsurance Co. and Inter#Act Systems,
Incorporated.
Robert A. Silverberg, 62, Executive Vice President and Director of Vectra Banking Corporation, 1995-present; 1985
Chairman of the Board and President of First Denver Corporation and Chairman of the Board of its
subsidiary, First National Bank of Denver, 1981-1995; President and Chairman of the Board of 181 Realty
Company, Inc., a commercial real estate holding company, 1968-present; director, Inter#Act Systems,
Incorporated.
CONTINUING DIRECTORS (CLASS II)
F. Cooper Brantley, 49, Member, Adams Kleemeier Hagan Hannah & Fouts, P.L.L.C. (Attorneys-at-Law), 1995
1981-present; formerly President of Brantley Communications, Inc., a cellular system owner and operator.
Haynes G. Griffin, 50, Chairman of the Board and Co-Chief Executive Officer of the Company, 1996-present; 1984
President and Chief Executive Officer of the Company, 1984-1996; Chairman of the Board of International
Wireless Communications Holdings, Inc.; director, Lexington Global Asset Managers, Inc., Geotek
Communications, Inc. and Inter#Act Systems, Incorporated.
L. Richardson Preyer, Sr., 78, Private Investor; Distinguished Fellow in Public Policy, University of North 1985
Carolina at Greensboro, 1981-1992; director, Lexington Global Asset Managers, Inc.
CONTINUING DIRECTORS (CLASS III)
Robert M. DeMichele, 52, President, Chief Executive Officer and Director of Lexington Global Asset 1987
Managers, Inc., 1995-present; President, Chief Executive Officer and Director of Piedmont Management
Company, Inc., 1981-1995; director, The Navigators Group, Inc., Chartwell Reinsurance Co. and
Inter#Act Systems, Incorporated.
Stephen R. Leeolou, 41, President, Co-Chief Executive Officer and Secretary of the Company, 1996-present; 1984
Executive Vice President, Chief Operating Officer and Secretary of the Company, 1984-1996; Chairman
of the Board of Inter#Act Systems, Incorporated; director, International Wireless Communications
Holdings, Inc.
L. Richardson Preyer, Jr., 49, Vice Chairman of the Board, Executive Vice President, Treasurer and 1984
Assistant Secretary of the Company, 1984-present; director, Inter#Act Systems, Incorporated.
</TABLE>
6
<PAGE> 10
During 1996, there were six meetings of the Board of Directors of the
Company. Each of the directors attended more than 75% of the total number of
meetings of the Board of Directors and of committees of which he or she is a
member.
The Board of Directors has a Compensation Committee that met eight times
during 1996. See "Executive Compensation" -- "Compensation Committee Report on
Executive Compensation" and "Compensation Committee Interlocks and Insider
Participation".
The Board of Directors has an Audit Committee that confers with the
Company's independent auditors and reviews the scope of auditing of the
Company's books and accounts and reports submitted by the officers. The
Committee also reviews, with the independent auditors and appropriate Company
personnel, procedures and methods employed in connection with the Company's
internal audit program and management policies relating to such program. The
Audit Committee met twice during 1996. Members of the Audit Committee are
Robert A. Silverberg, Chairman, Robert M. DeMichele, and F. Cooper Brantley.
The Company has no standing Nominating Committee.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth cash and certain other compensation paid
or accrued by the Company for its five most highly compensated executive
officers (the "Named Executive Officers") for the years ended December 31,
1996, 1995 and 1994, respectively:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- --------------------- -------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND SALARY BONUS COMPEN- AWARD(S) OPTIONS PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR ($) ($) SATION ($) ($) (1)(#) ($) SATION ($)(2)
--------- -------- ---- --- --- ---------- --- ------ --- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
HAYNES G. GRIFFIN 1996 410,670 198,445 -- -- 150,000 -- 4,500
Chairman of the Board and 1995 398,385 204,582 -- -- 150,000 -- 4,500
Co-Chief Executive Officer 1994 374,254 200,000 -- -- 225,000 -- 4,500
STEPHEN R. LEEOLOU 1996 370,413 199,099 -- -- 150,000 -- 4,500
President and 1995 359,357 205,164 -- -- 150,000 -- 4,500
Co-Chief Executive Officer 1994 337,639 200,000 -- -- 225,000 -- 4,500
L. RICHARDSON PREYER, JR. 1996 358,911 179,762 -- -- 150,000 -- 4,500
Executive Vice President 1995 348,205 185,322 -- -- 150,000 -- 4,500
and Treasurer 1994 328,122 180,000 -- -- 225,000 -- 4,500
STEPHEN L. HOLCOMBE 1996 181,000 68,938 -- -- 90,000 -- 4,500
Executive Vice President 1995 172,530 71,070 -- -- 45,000 -- 4,500
and Chief Financial Officer 1994 162,000 70,000 -- -- 44,999 -- 3,984
RICHARD C. ROWLENSON 1996 181,000 68,938 -- -- 90,000 -- 4,500
Executive Vice President 1995 172,530 71,070 -- -- 45,000 -- 4,500
and General Counsel 1994 162,000 70,000 -- -- 44,999 -- 4,500
</TABLE>
(1) Options were granted under Company stock option plans.
(2) Amounts shown represent the Company's contribution to its 401(k) Plan,
except that amounts shown for 1996 includes payments made in lieu of
Company contributions not allowed by I.R.S. limitations in the following
amounts: Mr. Griffin - $630; Mr. Leeolou - $630; Mr. Preyer - $630; Mr.
Holcombe - $380; and Mr. Rowlenson - $880.
7
<PAGE> 11
STOCK OPTIONS
The following table provides details regarding stock options granted to
the Named Executive Officers during 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS EXERCISE ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO OR BASE STOCK APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM (5)
---------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- - ---- ------- ------ ---- --------- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Haynes G. Griffin 75,000(1) 5.6 21.625 02/21/06 0 1,019,988 2,584,851
75,000(2) 5.6 15.125 10/21/06 0 713,402 1,807,902
Stephen R. Leeolou 75,000(1) 5.6 21.625 02/21/06 0 1,019,988 2,584,851
75,000(2) 5.6 15.125 10/21/06 0 713,402 1,807,902
L. Richardson Preyer, Jr. 75,000(1) 5.6 21.625 02/21/06 0 1,019,988 2,584,851
75,000(2) 5.6 15.125 10/21/06 0 713,402 1,807,902
Stephen L. Holcombe 45,000(3) 3.4 26.125 02/21/06 0 611,993 1,550,911
45,000(4) 3.4 15.125 10/21/06 0 428,041 1,084,741
Richard C. Rowlenson 45,000(3) 3.4 26.125 02/21/06 0 611,993 1,550,911
45,000(4) 3.4 15.125 10/21/06 0 428,041 1,084,741
</TABLE>
(1) Includes 4,624 incentive stock options and 70,376 nonqualified stock
options granted under the Company's 1994 Long-Term Incentive Plan.
Options vest over a 5-year period beginning 2/22/97.
(2) Includes 6,611 incentive stock options and 68,389 nonqualified stock
options granted under the Company's 1994 Long-Term Incentive Plan.
Options vest over a 5-year period beginning 10/22/97.
(3) Includes 4,624 incentive stock options and 40,376 nonqualified stock
options granted under the Company's 1994 Long-Term Incentive Plan.
Options vest over a 5-year period beginning 2/22/97.
(4) Includes 6,611 incentive stock options and 38,389 nonqualified stock
options granted under the Company's 1994 Long-Term Incentive Plan.
Options vest over a 5-year period beginning 10/22/97.
(5) As required by the Securities and Exchange Commission, the amounts shown
assume a 0%, 5% and 10% annual rate of appreciation on the price of the
Company's Common Stock throughout a 10-year option term. There can be no
assurance that the rate of appreciation assumed for purposes of this
table will be achieved. The actual value of the stock options to the
Named Executive Officers and all optionees as a group will depend on the
future price of the Company's Common Stock. As reflected in the column
which assumes a 0% rate of appreciation, the options will have no value
to the Named Executive Officers if the price of the Company's Common
Stock does not increase above the exercise price of the options. If the
price of the Company's Common Stock increases, all shareholders will
benefit commensurately with the Named Executive Officers. On December
31, 1996, there were 41,084,522 shares of Common Stock outstanding and
the closing sales price of the Common Stock as reported on NASDAQ was
$15.75. Using the same Assumed Annual Rates of Stock Price Appreciation
for the Option Term to arrive at Potential Realizable Value shown in the
table above, the gain to all shareholders as a group at the 5% and 10%
rates would be $406,945,903 and $1,031,280,818, respectively. The amount
of the gain to all Named Executive Officers as a percent of the gain to
all shareholders under these scenarios would be approximately 1.79%.
8
<PAGE> 12
OPTION EXERCISES AND HOLDINGS
There were no options exercised by the Named Executive Officers during
1996. The following table shows the number of shares covered by both
exercisable and unexercisable stock options owned by the Named Executive
Officers as of December 31, 1996. Also reported are the values for
"in-the-money" options which represent the positive spread between the exercise
price of any such existing stock options and the year-end price of the Common
Stock.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT YEAR-END
OPTIONS AT YEAR-END (#) ($)(1)
---------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Haynes G. Griffin 435,000 495,000 464,940 46,875
Stephen R. Leeolou 435,000 495,000 464,940 46,875
L. Richardson Preyer, Jr. 435,000 495,000 464,940 46,875
Stephen L. Holcombe 116,954 171,045 226,824 31,139
Richard C. Rowlenson 94,500 170,999 4,509 31,131
</TABLE>
(1) The closing sales price of the Common Stock on December 31, 1996, the
last trading day of 1996, was $15.75 as reported on NASDAQ.
DIRECTORS' FEES
Five of the nine present directors are not salaried employees of the
Company. For their services, those directors are paid a retainer at an annual
rate of $12,000 plus $1,000 for the first in-person Board or Board Committee
meeting in any one day, and $500 per day for each telephonic meeting or for
each additional meeting on the same day that they attend. Salaried employees
receive no additional compensation for their services as directors.
EMPLOYMENT AND OTHER RELATED AGREEMENTS
As of March 1, 1995, the Company entered into three-year employment
agreements with Messrs. Griffin, Preyer, Jr., and Leeolou effectively extending
existing agreements that expired on February 28, 1995. Following the initial
three-year term, the agreements continue from year to year until terminated by
either party on one year's notice. Each agreement provides for continuation of
salary and benefits for the remaining term of the agreement if employment is
terminated by the Company "other than for cause" as defined in the agreement.
If the executive's employment is terminated "other than for cause" following a
"change in control" of the Company or if the executive terminates his
employment following a "change in control" because (i) his authority and/or
responsibility are substantially reduced, or (ii) he is required to move his
residence from Greensboro, North Carolina or (iii) his travel obligations are
materially increased without his consent, the executive is entitled to receive
a payment equal to his average annual cash compensation for the immediately
preceding five fiscal years, multiplied by 2.99. However, if necessary, such
payment will be reduced to an amount that would cause the payment not to be
disqualified from deductibility for federal income tax purposes by reason of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), as an "excess parachute payment." Each employment agreement
also provides that the executive will not compete with the Company for the term
of the agreement or for one year following his termination of employment,
whichever is later.
9
<PAGE> 13
As of October 1, 1990, the Company implemented an Executive Officer
Long-Term Compensation Plan in which four executive officers participate.
Under this plan, Haynes G. Griffin, Stephen R. Leeolou and L. Richardson
Preyer, Jr. each would earn two cash bonuses of $500,000 each and Stuart S.
Richardson would earn two cash bonuses of $94,000 each if and when the
consolidated net profits of the Company for four profitable consecutive
quarters equal or exceed $20 million and $40 million, respectively. In order to
be entitled to his bonuses, the participating executive officer must be
employed by the Company at the end of the applicable period or his employment
must have been previously terminated "other than for cause" prior to a "change
of control" or by reason of his death or permanent disability. If there is a
"change of control," the bonuses will become immediately payable. By its
terms, this plan is a legally binding obligation of the Company.
On March 8, 1995, the Board of Directors of the Company adopted the
Senior Management Severance Plan. The Plan is available to certain senior
management employees designated as participants by the Board of Directors of
the Company or its Compensation Committee. The Plan provides that if the
employment of a participant is terminated "other than for cause" following a
"change in control" or if he terminates his employment following a "change in
control" because (i) his authority and/or responsibility are substantially
reduced, or (ii) he is required to move his residence, or (iii) his travel
obligations are materially increased without his consent, he is entitled to
receive a payment equal to his average annual cash compensation for the
immediately preceding five fiscal years, multiplied by 2.99. However, if
necessary, such payment will be reduced to an amount that would cause the
payment not to be disqualified from deductibility for federal income tax
purposes by reason of Section 280G of the Internal Revenue Code as an "excess
parachute payment." The plan requires each Plan participant, as a condition to
his participation, to agree not to compete with the Company for a period of one
year following termination of his employment with the Company. Messrs.
Holcombe and Rowlenson and four other executive officers of the Company have
been designated participants in the Plan.
Messrs. Richardson, Griffin, Leeolou, Preyer, Jr., and Holcombe own
shares of stock that were granted to them pursuant to certain restricted stock
agreements. The restrictions on such shares have expired. The Company has
agreed that in the event there is a "change in control" (as defined in the
agreements) of the Company at any time prior to December 31, 1998, the
executives will be reimbursed for the income taxes they pay with respect to the
restricted stock up to an amount that would not be deemed an "excess parachute
payment" for federal income tax purposes (the executive's average compensation
for the preceding five years, multiplied by three). Both the value of the
stock bonuses and the amount of the tax reimbursements should be deductible
items to the Company or an acquiror, as the case may be, for tax purposes.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Chairman and the President, who are
members of the Office of the Chief Executive, and of the other Named Executive
Officers are made by the Company's Compensation Committee (the "Committee").
Two nonemployee directors currently serve as members of the Committee: Robert
M. DeMichele, Chairman, and Robert A. Silverberg. In addition, compensation
decisions regarding the Chief Executive Officer and the other Named Executive
Officers are generally reviewed and ratified by the full Board of Directors.
Since 1986, the Company has employed independent consultants in
connection with compensation matters to compile for review and analysis
objective survey information from other companies both within and outside of
the industry to establish a range of benchmarks for salary, bonus, and other
incentives for executive officers with similar positions and responsibilities.
Compensation Philosophy
The Company's compensation policies are designed to attract and retain
competent management. The Board's goal is to provide competitive salaries to
its executive officers and to give them performance incentives to motivate
superior performance on behalf of the Company and its shareholders. The
Company has generally used two types of
10
<PAGE> 14
incentive compensation: annual bonuses, payable in cash or in stock, and
long-term compensation in the form of stock options and restricted stock
bonuses and, in the case of its officer-directors, cash bonuses linked to
specific performance goals. The Committee believes that linking long-term
compensation to the value of the Company's Common Stock is especially effective
because it aligns the interests of management with those of the Company's
shareholders.
Executive Officer Compensation
Annual Compensation. The Board approved increases of up to 4.9% in
the salaries of the Named Executive Officers during 1996. The percentage
salary increases were based upon industry salary levels, economic factors such
as inflation and base salary as it relates to the value of the total
compensation package established for the Named Executive Officers. The
Committee considers annual cash and stock bonus awards as an integral part of
the Company's financial incentive package to achieve the Company's goals.
Bonuses for the Chairman, the President and other Named Executive Officers are
based upon the Company's performance during the year in a number of measurable
areas.
In making decisions with regard to annual bonuses to Named Executive
Officers, the Committee examines three key areas:
1. Performance of the Company against the operating and financial
targets established by the Board of Directors each year by
adoption of the annual operating plan;
2. The specific actions of Named Executive Officers to respond
effectively to outside factors such as economic trends and
industry competitive factors that can impact the Company's
operating performance; and
3. The ability of Named Executive Officers to initiate and manage the
Company's joint venture investments and expansion opportunities.
Annual bonuses for 1996 were determined in early 1997 based upon the
Named Executive Officers' contributions to the Company's achievements in the
following performance areas: net gain in subscribers; reduction of marketing
costs per new subscriber; maintenance of revenue per subscriber; increase in
service revenue; control of operating expenses and increase in operating cash
flow; and achievement for the first time of net profitability. The Named
Executive Officers' performance also was evaluated as to their ability to
manage and achieve specific and quantitative targets for the subsidiary equity
investments, while maintaining the competitive thrust of the Company's core
wireless telecommunications business. The Committee's determination of annual
bonuses is within its discretion, and it uses the Company's performance
relative to target performance contained in the Company's operating plan as a
standard in assessing the performance of the Named Executive Officers.
However, no quantifiable weight was given to any particular performance area in
the consideration of 1996 bonuses; rather, the Committee considered the
aggregate results, which, in the Committee's opinion, were outstanding.
The Committee approved in early 1997 cash bonuses for the Named
Executive Officers ranging from 27.58% to 34.95% of their total cash
compensation based on the Company's performance for the past year. The
Committee and the Board considered these bonuses appropriate in view of their
overall assessment that the performance of each Named Executive Officer had
been outstanding.
Long-Term Compensation. The Company's long-term incentive
compensation awards are designed to encourage the retention of key executives.
Long-term compensation for Messrs. Griffin and Leeolou, members of the Office
of the Chief Executive, and for other officer-directors, including Mr. Preyer,
Jr., consists of two elements, both of which have been in place for some time:
(i) restricted stock bonuses and stock options and (ii) a long-term cash
incentive bonus.
11
<PAGE> 15
Restricted Stock Bonuses and Stock Options. The Company currently has
an Amended and Restated Stock Compensation Plan and a 1989 Stock Option Plan
under which incentive and nonqualified stock options have been granted in the
past, some of which remain outstanding. However, no further grants may be made
under these plans. At the 1994 Annual Meeting of Shareholders, the 1994
Long-Term Incentive Plan (the "1994 Plan"), which provides for the grant of
incentive and nonqualified options, stock bonuses and restricted stock, was
approved. The 1994 Plan has been amended by the Board of Directors, subject to
approval at the 1997 Annual Meeting of Shareholders. See "Proposal to Approve
the Amended and Restated 1994 Long-Term Incentive Plan" above. Assuming
approval of the 1997 amendments to the 1994 Plan, the Company believes that
stock options granted under all of these plans are performance-based and,
therefore, deductible by the Company under the Internal Revenue Code. The 1994
Plan provides for other types of compensation, such as stock bonuses and
restricted stock, which will be performance-based only if performance goals are
established by the Committee in compliance with Section 162(m). The Committee
administers these plans and determines, in its discretion, what grants will be
made thereunder. Under these plans, stock options were granted to Named
Executive Officers in 1987, 1990, 1993, 1994, 1995 and 1996. For options
granted in 1996, see Notes 1, 2, 3 and 4 under "Stock Options" above for
vesting schedule. The Committee believes that all grants to Named Executive
Officers under these Plans are performance- based for purposes of Section
162(m).
Long-term Cash Incentives. A long-term cash bonus opportunity was
established in 1990 under the Company's Executive Officer Long-term Incentive
Compensation Plan, which was adopted in conjunction with employment agreements
between the Company and its officer-directors. It is a bonus opportunity
pursuant to which Messrs. Griffin, Leeolou and Preyer, Jr. can earn two bonuses
of $500,000 each at any time prior to September 30, 1998 if the Company
achieves certain profitability levels. The Company believes that its deduction
of this compensation, if paid, will not be limited by Section 162(m) of the
Internal Revenue Code because it is payable under a written binding contract
that was in effect on February 17, 1993. See "Employment and Other Related
Agreements" above.
Compensation of the Members of the Office of the Chief Executive
At a meeting held on November 4, 1996, the Board of Directors created
the Office of the Chief Executive and appointed Haynes G. Griffin and Stephen
R. Leeolou as its members. Prior to that time, Mr. Griffin served as Chief
Executive Officer.
Annual Compensation. Based on information available to it, the
Committee believes that the salaries of Messrs. Griffin and Leeolou are
generally competitive with those of others holding comparable positions in the
industry. Historically, executive salaries have been reviewed in mid-year.
However, in response to a suggestion by management, the Committee has
established January 1 as the normal review date for the Company's executive
officers, and reviews of the salaries of Messrs. Griffin and Leeolou were
deferred to January 1, 1997. The Committee approved in early 1997 cash bonuses
for Messrs. Griffin and Leeolou of $198,445 and $199,009, respectively. These
bonuses represented 32.58% and 34.95% of the total 1996 cash compensation of
Messrs. Griffin and Leeolou, respectively, from the Company. In determining
the amount of these bonuses, the Committee recognized the achievements detailed
under "Executive Officer Compensation - Annual Compensation" above. Mr.
Griffin serves as Chairman of the Board of Directors of International Wireless
Communications Holdings, Inc. ("IWCH") and has principal oversight over the
Company's 36.1% equity interest in that company. Mr. Leeolou serves as
Chairman of the Board of Directors and Chief Executive Officer of Inter.Act
Systems, Incorporated ("Inter.Act") and has principal oversight over the
Company's 24.3% equity interest in that company. Messrs. Griffin and Leeolou
receive from IWCH and Inter.Act, respectively, salaries of $50,000 each, which
are considered by the Compensation Committee in establishing their annual
compensation.
12
<PAGE> 16
Long-Term Compensation. In 1996, each of Messrs. Griffin and Leeolou
were granted option to purchase 150,000 shares of Common Stock under the
Company's 1994 Stock Compensation Plan. The options are subject to the vesting
provisions described in Notes 1 and 2 under "Stock Options" above. Messrs.
Griffin and Leeolou also received certain options from IWCH and Inter.Act in
connection with their services to those companies. In 1996, Mr. Leeolou
received an option to purchase 192,600 shares of Inter.Act at $5.50 per share,
and as a director of IWCH he received an option to purchase 80,000 shares of
IWCH at $8.12 per share. In early 1997, Mr. Griffin received options to
purchase 400,000 shares of IWCH at $9.375 per share and in 1996, as a director
of Inter.Act, he received an option to purchase 20,200 shares of Inter.Act at
$5.50 per share. The Committee considers these options in determining long-term
compensation for Messrs. Griffin and Leeolou.
Robert M. DeMichele Robert A. Silverberg
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert M. DeMichele, a member of the Company's Compensation Committee,
is a director and executive officer of Lexington Global Asset Managers, Inc.
Haynes G. Griffin, Co-Chief Executive Officer of the Company, and Stuart S.
Richardson, Vice Chairman of the Board of the Company, serve on the Board of
Directors of Lexington Global Asset Managers, Inc.
PERFORMANCE GRAPH
The graph shown below compares the Company's cumulative, five-year
shareholder return on an indexed basis with the S&P 500 Stock Index and the
CRSP Index of NASDAQ Telecommunications Stocks.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
[GRAPH HERE]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
-------------------------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vanguard Cellular Systems 100 98.17 107.34 141.67 111.41 86.65
CRSP Index of Nasdaq
Telecommunications Stocks,
a published index of
telecommunications companies 100 122.82 189.38 158.06 206.97 211.57
S&P 500 Stock Index,
a broad based index of
industrial and service
companies 100 107.64 118.50 120.06 165.18 203.11
</TABLE>
Assumes an initial investment of $100 on December 31, 1991
and reinvestment of dividends.
13
<PAGE> 17
CERTAIN TRANSACTIONS
During 1996, the Company made certain investments in Inter #Act
Systems, Incorporated ("Inter#Act"), a development stage company that provides
targeted promotions to retail customers at the point of entry at a retail
outlet, primarily supermarkets, through a computer-equipped kiosk. The Company
invested $6.2 million in 1996 to bring its total ownership of Inter#Act's
outstanding Common Stock as of March 7, 1997 to approximately 24.3%. In
addition, the Company invested $12 million in 1996 in 18,000 units offered by
Inter#Act in a private placement transaction. Each unit consists of a 14% Senior
Discount Note due 2003 in a principal amount at maturity of $1,000 and a warrant
to purchase 7.334 shares of Inter#Act's Common Stock; but if Inter#Act has not
consummated a qualified initial public offering by September 30, 1997, each such
warrant will cover 9.429 shares. Later in 1996, the Senior Discount Notes were
registered with the Securities and Exchange Commission. The Company has no
present commitment, arrangement or plan to invest any additional amounts in
Inter#Act. As of March 7, 1997, Haynes G. Griffin, Stephen R. Leeolou and L.
Richardson Preyer, Jr. each owned 4.58% of Inter#Act's outstanding Common Stock,
and Stephen L. Holcombe, Richard C. Rowlenson, F. Cooper Brantley, Doris R.
Bray, Robert M. DeMichele and Robert A. Silverberg each owned less than 1% of
such stock. In addition, as of March 7, 1997, Piedmont Acorn Investors Limited
Partnership and Piedmont Harbor-Piedmont Associates Limited Partnership, of
which members of the Richardson Family are partners, owned 10.25% and less than
1% respectively, of Inter#Act's Common Stock, and Alonzo Family Partners, Ltd.,
of which members of the immediate family of Haynes G. Griffin are partners, and
the Smith Richardson Foundation, Inc., of which Stuart S. Richardson serves as
Trustee, owned 1.1% and less than 1%, respectively, of such stock. As a group,
the foregoing directors and officers and related partnerships and trust owned
approximately 27% of the outstanding Common Stock of Inter#Act as of March 7,
1997. Mr. Leeolou serves as Chairman and Chief Executive Officer of Inter#Act
and Messrs. Richardson, Griffin, Preyer, DeMichele and Silverberg serve as
directors of Inter#Act. By agreement with certain shareholders of Inter#Act, the
Company has the right to designate six members of Inter#Act's Board until
Inter#Act effects an underwritten public offering of common stock.
As of January 30, 1996, the Company entered into a consulting
agreement with Inter#Act pursuant to which the Company appointed one of its
employees to serve as Inter#Act's Chief Operating Officer and agreed to provide
other consulting services requested by Inter#Act. The Consulting Agreement was
terminated and replaced by a management services agreement as of June 17, 1996.
The management services agreement provides that the Company will provide
services to Inter#Act during its two-year term, including developing
accounting, human resources, information management, legal compliance, sales
training, research and development, business development and operation
procedures, systems and programs. In return for such services, the Company
will receive 10,000 shares of Inter#Act common stock per year plus
reimbursement of its out-of-pocket expenses incurred to render such services.
Pursuant to the two agreements, the Company received approximately $60,000 and
earned 10,000 shares of Inter#Act Common Stock during 1996.
As of December 31, 1996, the Company had approximately a 36.1%
ownership interest in International Wireless Communications Holdings, Inc.
("IWCH"), which interest represents an investment of approximately $13.5
million. IWCH is a development stage company that secures, builds and operates
wireless businesses primarily in Latin America and Asia. As of February 3,
1997, the Company entered into an agreement with IWCH whereby the Company
agreed to surrender a warrant to purchase 554,750 shares of IWCH common stock
at a price of $9.375 per share and IWCH agreed to issue options to purchase an
aggregate of 554,750 shares of IWCH common stock at a price of $9.375 per share
to certain management employees of the Company, subject to the approval of
certain stockholders of IWCH. Haynes G. Griffin, Chairman of the Board and
Co-Chief Executive Officer of the Company, serves as Chairman of the Board of
IWCH and received options to purchase 400,000 of the 554,750 shares of IWCH
common stock. In addition, the other executive officers of the Company
received options to purchase an aggregate amount of 67,500 shares of IWCH
common stock, and employees of the Company who are not also executive officers
received options to purchase an aggregate amount of 87,250 shares. As a
condition to the foregoing arrangement, the Company has agreed to assist IWCH
in arranging interim financing by guaranteeing up to $3.2 million of
indebtedness incurred by IWCH or its subsidiaries until such time as certain
conditions are met but not to extend beyond February 3, 1999.
14
<PAGE> 18
All of the foregoing transactions were approved by the disinterested
nonemployee directors of the Company after a determination that each was in the
best interests of the Company.
Doris R. Bray is a partner of Schell, Bray, Aycock, Abel & Livingston
P.L.L.C., a law firm that provided legal services to the Company in 1996, and
F. Cooper Brantley is a member and partner of Adams Kleemeier Hagan Hannah &
Fouts P.L.L.C., a law firm that also provided legal services to the Company in
1996.
PROPOSAL TO APPROVE THE 1997 EMPLOYEE STOCK PURCHASE PLAN
DESCRIPTION OF PLAN
On February 26, 1997, the Board of Directors adopted, subject to
approval by the Company's shareholders, the 1997 Employee Stock Purchase Plan
(the "1997 Plan"). The 1997 Plan is intended to encourage a broad base of
employees of the Company to remain in the employ of the Company and to
contribute to the success of the Company by permitting them to acquire or
increase their proprietary interest in the Company through the purchase of
shares at a discounted price on an installment basis. The maximum aggregate
number of shares that may be issued under the 1997 Plan is 500,000 shares of
Common Stock.
The 1997 Plan provides that as of the first day of every calendar
quarter (each an "Offering Date"), each eligible employee is deemed to have
been granted an option to purchase (an "Offering") on the last day of the
quarter as many full shares of Common Stock as such employee will be able to
purchase with the payroll deductions authorized by such employee and credited
to such employee's account during such period. The Compensation Committee (as
from time to time constituted) of the Board of Directors (the "Committee"),
none of whom may participate in the 1997 Plan, is authorized to administer the
plan. The Committee will determine the aggregate number of shares that will be
offered by the Company to the employees in each Offering, but the aggregate
number of shares offered in any Offering, when added to the shares issued in
previous Offerings pursuant to the plan, may not exceed the aggregate number of
shares available under the 1997 Plan. The first Offering Date under the 1997
Plan is expected to be October 1, 1997.
All employees of the Company as of an Offering Date who have been
employed by the Company for at least six months (except certain part-time
employees and any employees who own 5% or more of the outstanding Common Stock
of the Company) are eligible to participate in the Offering made on the
Offering Date. No later than 15 days before an Offering Date, an eligible
employee may become a participant in the 1997 Plan by executing and delivering
to the Company a subscription agreement whereby the employee indicates the
contribution percentage that he or she wishes to authorize the Company to
deduct at regular payroll intervals, in integral amounts, ranging from 1% to
25% of such employee's annual base pay, with a minimum deduction of $10.00 per
payday. So long as a participant remains an employee of the Company, payroll
deductions will continue at the rate in effect from Offering to Offering,
unless at least fifteen (15) days prior to the next succeeding Offering Date
the employee elects a different rate by filing a new subscription agreement
with the Committee or terminates his participation in the 1997 Plan. The 1997
Plan provides that the option price will be established by the Committee, but
may not be lower than the lesser of (i) 85% of the fair market value of the
Common Stock on the Offering Date and (ii) 85% of the fair market value of the
Common Stock on the last day of the Offering period (the "Exercise Date").
Unless an employee withdraws his subscription before the Exercise Date, each
outstanding option will be exercised automatically on the Exercise Date. The
exercise of the option is to be effected by applying the amount credited to
each employee's account as of the Exercise Date to the purchase on the Exercise
Date of whole shares of Common Stock at the purchase price in effect for the
Offering. As soon as practicable after each Exercise Date, the Company will
issue and deliver to each subscribing employee a certificate or certificates
evidencing shares purchased in the Offering.
A participant in an Offering may withdraw his subscription at any time
before the Exercise Date and elect to receive a cash payment equal to the total
amount of his payroll deductions, plus interest thereon at the rate of 5% per
annum. If a subscribing employee ceases to be employed by the Company or one
of its subsidiaries for any reason other than death, he will be entitled only
to the prompt refund in cash of all amounts theretofore withheld from and paid
by
15
<PAGE> 19
him pursuant to his subscription agreement, plus interest at the rate of 5% per
annum. If a subscribing employee dies before the Exercise Date of an Offering
while in the employ of the Company, his personal representative will have the
right, before the Exercise Date of the current Offering, (i) to receive the
prompt payment, in cash, of an amount equal to the total of the payroll
deductions pursuant to the deceased employee's subscription agreement, plus
interest at the rate of 5% per annum, or (ii) to receive the number of whole
shares of Common Stock on the Exercise Date that can be purchased with the
total of the payroll deductions pursuant to the deceased employee's
subscription agreement at the time of his death. If an employee has any period
of authorized disability leave during an Offering, such employee shall be
entitled to elect, within 15 days of the commencement of such leave or by the
Exercise Date, whichever is earlier, (i) to receive the prompt payment, in
cash, of an amount equal to the total of the payroll deductions pursuant to the
employee's subscription agreement, plus interest at the rate of 5% per annum,
or (ii) to receive the number of whole shares that can be purchased on the
Exercise Date with the total of the payroll deductions pursuant to the
employee's subscription agreement, or (iii) to make cash payments to the
Company on each normal payday equal to the amount of the normal payroll
deduction had the disability leave not occurred and to have his option
exercised on the Exercise Date.
No subscribing employee may assign any of his rights under the 1997
Plan during his lifetime, and such rights are exercisable only by him. Any
rights an employee may have under the 1997 Plan at his death are transferable
by will or by the laws of descent and distribution. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
subject to the options under the 1997 Plan, and the price per share thereof,
will be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Company.
The 1997 Plan may be amended by the Board of Directors of the Company
in any way that does not adversely affect the rights of employees who have
subscribed for shares under the 1997 Plan, but, without shareholder approval,
no such amendment may change the number of shares of Common Stock subject to
the 1997 Plan or reduce the minimum option price. Furthermore, the 1997 Plan
may not be amended in any manner that will cause it to fail to continue to
qualify as an "employee stock purchase plan" within the meaning of Section 423
of the Internal Revenue Code.
CERTAIN FEDERAL TAX CONSEQUENCES
The 1997 Plan is intended to qualify as an "employee stock purchase
plan" as defined in Section 423 of the Internal Revenue Code. Under the
Internal Revenue Code, a subscribing employee generally realizes no taxable
income for federal income tax purposes either at the time of subscription or
upon receipt of the shares purchased by him under the 1997 Plan. If the
subscribing employee (i) holds the shares purchased by him for more than two
years after the Offering Date of such shares and for more than one year after
the shares are transferred to him or (ii) dies while holding shares purchased
pursuant to the exercise of an option under the 1997 Plan, then, upon
disposition of the shares, the employee or his estate, as the case may be, will
generally recognize ordinary income equal to the excess of (A) the fair market
value of the shares on the Offering Date, or on the date of disposition or
death, if less, over (B) the option price, and any additional gain will be
capital gain (long-term or short-term as the case may be). Neither the Company
nor any of its subsidiaries will generally receive any tax deduction by reason
of the grant or exercise of the options or upon disposition of the shares
purchased pursuant to the option. If the holding period requirements are not
satisfied, then, upon disposition of shares purchased pursuant to the 1997
Plan, a participant will realize ordinary income equal to the excess of (X) the
fair market value of the shares on the Exercise Date, or on the date of
disposition, if less, over (Y) the option price, and any additional gain will
be capital gain (long-term or short-term as the case may be). The Company will
generally be entitled to a deduction equal to the amount of ordinary income
realized by the employee if the holding period requirements are not satisfied.
16
<PAGE> 20
PLAN PARTICIPATION
The Company currently has approximately 1990 employees who would be
eligible to participate under the 1997 Plan. The Company presently pays
approximately $60 million annually in salaries and wages. The Company
estimates that approximately $2.5 million of this amount is attributable to
persons who have been employed by the Company for less than six months and to
certain ineligible employees. Therefore, if the 1997 Plan were currently in
effect, a minimum of approximately $575,000 (at 1% contribution) and a maximum
of $14,375,000 (at 25% contribution) in salaries and wages would be available
for purchase of shares of Common Stock under the plan.
Until the 1997 Plan is approved by the Company's shareholders, no
option may be granted thereunder.
VOTE REQUIRED
Approval of the 1997 Plan will require the affirmative votes of a
majority of the votes cast at a meeting at which a majority of the shares of
the Company's Common Stock is present in person or by proxy. Abstentions and
broker nonvotes will have no effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL TO APPROVE THE AMENDED AND RESTATED
1994 LONG-TERM INCENTIVE PLAN
On March 25, 1994, the Board of Directors adopted the Company's 1994
Long-Term Incentive Plan (the "Existing Plan"). The shareholders of the
Company approved the Existing Plan on May 4, 1994. The Existing Plan is
intended to induce those persons who are in a position to contribute materially
to the success of the Company to remain with the Company, to offer them rewards
in recognition of their contributions to the Company's progress and to offer
them incentives to continue to promote its best interests. Under the Existing
Plan, the Company may grant stock options, stock appreciation rights,
unrestricted stock, restricted stock and performance shares ("Awards") to
officers, other executive and supervisory employees of the Company, consultants
and directors.
On February 26, 1997, the Board of Directors approved the Amended and
Restated 1994 Long-Term Incentive Plan (the "Amended Plan"), subject to
shareholder approval. The changes made in the Amended Plan are intended to
assure that Awards granted under the Amended Plan are eligible to be treated as
"performance-based compensation" as provided in Section 162(m) of the Internal
Revenue Code, so that the Company will receive the full benefit of any
deductions resulting from the grant or exercise of Awards. Such changes
include (i) the number of shares eligible for Awards has been increased from
3,000,000 to 6,000,000 shares of the Company's Common Stock, (ii) the number of
shares of Common Stock eligible for Awards to any one individual (including
Awards already granted under the Existing Plan as well as Awards subsequently
canceled) has been increased from 350,000 to 2,000,000 and (iii) a reload
option feature has been added whereby a particular option agreement may provide
that an option recipient who elects to pay the exercise price of an option by
surrendering shares of Common Stock will receive a new option to purchase the
number of shares of Common Stock surrendered at the then fair market value.
Currently, 11,575 shares remain eligible for Awards under the Existing Plan.
The following summary of the Amended Plan is qualified in its entirety
by express reference to the text of the Amended Plan as filed with the
Securities and Exchange Commission.
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<PAGE> 21
DESCRIPTION OF AMENDED PLAN
The Amended Plan provides for the grant of options and awards of up to
6,000,000 shares of Common Stock. No single person may receive Awards under
the Amended Plan aggregating more than 2,000,000 shares of Common Stock over
the life of the Amended Plan, which amount includes Awards already granted
under the Existing Plan as well as Awards that are subsequently canceled. The
number and class of shares available under the Amended Plan may be adjusted in
the event of stock splits and combinations, stock dividends and similar changes
in the capitalization of the Company. No grants or awards may be made under
the Amended Plan after March 24, 2004.
Awards may be granted under the Amended Plan to officers, other
executive and supervisory employees of the Company, consultants and directors,
except that only employees (including those who are also officers and
directors) will be eligible to receive incentive stock options. The Company
has 24 officers and directors, who are eligible under the Amended Plan. The
Company estimates that approximately 90 additional employees will also be
eligible to participate in the Amended Plan.
The Amended Plan provides that the Board of Directors may terminate,
amend or revise the terms of the Amended Plan except that shareholder approval
is required to (i) increase the aggregate number of shares of Common Stock
issuable under the Amended Plan, (ii) change the minimum purchase price for
shares that may be received by exercise of stock options or stock appreciation
rights under the Amended Plan, (iii) increase the maximum duration established
under the Amended Plan for any award, or (iv) permit the granting of an award
to any person other than as specified under the Amended Plan.
Stock options and stock appreciation rights that have not been
exercised and restricted stock and performance shares that are subject to
restrictions under the Amended Plan may not be transferred by a participant
except by will or applicable laws of descent and distribution, except that the
Committee may grant nonqualified stock options that are transferable to
immediate family members (as defined in the Amended Plan). The Company may
require payment, or withhold payments made under the Amended Plan, in order to
satisfy applicable tax withholding requirements.
The Amended Plan is administered by a Committee appointed by the Board
of Directors (the "Committee"). The Committee must consist of no fewer than
two members, each of whom is an "outside director" of the Company, as defined
in Section 162(m) of the Internal Revenue Code, and a "non-employee director"
within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934. The
Committee has sole authority over the grant of options and other awards under
the Amended Plan and for the administration of the Amended Plan, except that
the Board of Directors may grant Awards from time to time to nonemployee
directors and consultants of the Company. Present members of the Committee are
Robert M. DeMichele, Chairman, and Robert A. Silverberg.
Any shares of Common Stock that are subject to Awards under the
Amended Plan and are not issued, or are issued but have not vested, prior to
termination of the Award may again be made the subject of grants and awards
under the Amended Plan.
The closing market price of the Common Stock as reported on NASDAQ on
April 11, 1997, was $10.875 per share.
Stock Options and Stock Appreciation Rights. The Amended Plan permits
the granting of incentive stock options ("ISOs") and nonqualified stock
options. Stock appreciation rights may be awarded either in tandem with stock
options ("Tandem SARs") or on a stand-alone basis ("Nontandem SARs").
The price of shares subject to options granted under the Amended Plan
will be determined by the Committee at the time of grant, but may not be less
than 100% of the fair market value of the Common Stock at the time of the
grant. The recipient of an option may pay its exercise price by cash, check
or, under certain conditions, the surrender of shares of Common Stock of the
Company. The Committee may agree that, if an option recipient elects to pay
by
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<PAGE> 22
the surrender of stock, he shall automatically receive a new option to purchase
the number of shares surrendered at the then fair market value.
The option price determined with respect to an option will also be
applicable in connection with the exercise of any Tandem SAR granted with
respect to such option. The exercise or base price of a Nontandem SAR will be
determined by the Committee, but may not be less than 100% of the fair market
value of the Common Stock at the time of grant. The appreciation in the Common
Stock that determines the number of shares to be issued to a Nontandem SAR
recipient will be the excess of the fair market value of the shares subject to
the SAR at the time of exercise over the base price of the shares.
The Committee will determine at the time of grant the terms under
which stock options and stock appreciation rights will vest and become
exercisable. No stock option may expire later than 15 years from the date of
grant, except that no ISO may be exercisable more than 10 years from the date
of grant. No ISO may be granted to a participant who, at the time of the
grant, owns stock representing more than 10% of the total voting power of all
classes of stock of the Company (a "10% Shareholder") unless the option price
for the shares subject to such ISO is at least 110% of the fair market value on
the date of grant and such ISO award is exercisable only within five years
after its date of grant. In addition, the total fair market value of a share
subject to ISOs which are exercisable for the first time by an eligible
participant in a given calendar year may not exceed $100,000, valued as of the
date of the ISO's grant.
Upon surrender of a Tandem SAR and the related unexercised option, the
participant will be entitled to receive shares of Common Stock having an
aggregate fair market value equal to (i) the then fair market value of the
shares subject to the unexercised option, less (ii) the aggregate option price
specified in the option. Upon exercise of all or a portion of a Tandem SAR,
the related option will be canceled with respect to a proportionate number of
shares of Common Stock. Upon surrender of a Nontandem SAR, the participant
will be entitled to receive shares of Common Stock having an aggregate fair
market value equal to (i) the then fair market value of the shares covered by
the Nontandem SAR, less (ii) the aggregate base price of such shares specified
by the Committee. The Committee, in its discretion, may cause all or any
portion of the payment to be made in cash in lieu of Common Stock. In that
event, the number of shares of Common Stock issuable under this Amended Plan
will be reduced by the number of shares to which the cash payment relates. The
maximum number of shares that may be awarded under the Amended Plan to the
person receiving such cash payment will also be reduced in the same manner.
Any fractional shares resulting from the exercise of an SAR will be paid in
cash.
Unexercised options and stock appreciation rights will terminate if a
participant ceases to be employed by or otherwise terminates his relationship
with the Company for any reason other than death or disability, unless
otherwise provided in the applicable grant. In the event of death or
disability, options and stock appreciation rights shall expire within one year,
unless the grant provides otherwise.
Unrestricted Stock. Unrestricted stock may be granted to persons
eligible under the Amended Plan at the discretion of the Committee. No payment
is required upon receipt of unrestricted stock.
Restricted Stock. Restricted stock may be issued under the Amended
Plan, subject to restrictions and conditions as determined by the Committee.
Restricted stock will be held in escrow and may not be sold or otherwise
transferred until the restrictions imposed on the stock have lapsed. However,
the participant will have other rights associated with ownership of such
restricted stock, including the right to vote and to receive dividends.
Restricted stock will be forfeited if the participant dies or terminates
employment or association with the Company prior to lapse of the restrictions
on the shares, unless otherwise provided in the grant.
Performance Shares. Performance shares confer upon the participant
the right to receive a specified number of shares of Common Stock contingent
upon the achievement of performance objectives within a specified period (not
to exceed fifteen years) as determined by the Committee. If performance
objectives are achieved, the Committee may distribute cash equal to the fair
market value of the Common Stock in lieu of Common Stock. In that event, the
number
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<PAGE> 23
of shares of Common Stock issuable under the Amended Plan will be reduced by
the number of shares to which the cash payment relates. The maximum number of
shares that may be awarded under the Amended Plan to the person receiving such
cash payment will also be reduced in the same manner. A grant of performance
shares will terminate if the participant dies or terminates employment or
association with the Company prior to achieving the applicable performance
objectives, unless otherwise provided in the grant.
Performance-based Compensation Grants. Stock options and stock
appreciation rights granted under the Amended Plan are exercisable at not less
than 100% of fair market value of the underlying shares at the time of grant,
which should preserve any federal income tax deduction available to the Company
at the time of exercise. The Amended Plan provides that the Committee may also
designate restricted stock awards and performance share awards
performance-based compensation grants within the meaning of Section 162(m) of
the Internal Revenue Code in order to preserve such deductions.
Performance-based compensation grants will be subject to the achievement of an
objective performance goal or goals established in writing by the Committee
prior to the employee's performance of the relevant services and while the
outcome under the goal or goals is substantially uncertain. The performance
goals established by the \Committee with respect to a specific grant must be
based on one or more of the following criteria: net gains in the number of
subscribers; achieving targeted revenues or revenues per subscribers; achieving
targeted marketing costs; increases in service revenue; control of operating
expenses; increases in operating cash flow; increases in operating income; and
increasing net income.
FEDERAL INCOME TAX CONSEQUENCES
ISOs granted under the Amended Plan are intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code. The
grant of an ISO generally does not result in taxable income to the participant
at the time of grant or at the time of exercise. However, for any year in
which Common Stock is purchased upon exercise of an ISO, the difference between
the fair market value of the Common Stock at the time of exercise and its
adjusted basis to the participant will be treated as an item of adjustment for
purposes of computation of the employee's alternative minimum taxable income
under Section 55 of the Internal Revenue Code. If the participant exercises an
ISO and sells the Common Stock purchased thereunder at a gain, the excess of
the sales price of the Common Stock over its adjusted basis to the participant
will be taxable as a long-term capital gain if the sale is made more than two
years from the granting of the ISO and more than one year from the transfer of
the stock to the participant. If the sale is made within two years after the
granting of the option or within one year after the Common Stock is transferred
to the participant and if sales proceeds exceed the fair market value of the
Common Stock on the date of exercise, the participant generally will recognize
ordinary income, equal to the fair market value of the Common Stock on the date
of exercise less the option price, and capital gain (long-term or short-term as
the case may be), equal to the amount realized in excess of the fair market
value of the Common Stock on the date of exercise. No tax deduction generally
will be available to the Company as a result of the granting of ISOs, the
exercise of such options, or the sale by participants of the Common Stock
purchased. However, the Company will be entitled to a deduction in an amount
equal to the ordinary income, if any, realized by a participant on the sale of
Common Stock purchased pursuant to the exercise of an ISO.
Nonqualified stock options granted under the Amended Plan are not
intended to qualify as ISOs under the Internal Revenue Code. The grant of a
nonqualified stock option will not result in taxable income to the participant
or a deduction to the Company. On the date any such option is exercised, a
participant generally will be deemed to receive ordinary income equal to the
amount by which the fair market value of the Common Stock on the exercise date
exceeds the option price, and the Company will generally receive a deduction in
the same amount.
There will be no federal income tax consequences to either the
participant or the Company upon the grant of a stock appreciation right.
However, the participant generally will recognize ordinary income upon the
exercise of a stock appreciation right in an amount equal to the aggregate
amount of cash and the fair market value of the shares of Common Stock received
upon exercise, and the Company will generally receive a deduction in the same
amount.
Participants will recognize taxable income at the time unrestricted
stock is received under the Amended Plan
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<PAGE> 24
equal to the fair market value of the shares received. The Company will be
entitled to a deduction equal to the amount includable in the participant's
income.
In general, there will be no federal income tax consequences to either
the Company or the participant upon the grant of restricted stock or the right
to receive performance shares until the restrictions lapse or the performance
goals achieved, as the case may be. At that time, the participant will
recognize taxable income equal to the then fair market value of the Common
Stock and the Company will generally receive a corresponding deduction.
However, with respect to restricted stock grants, participants may elect,
within 30 days after the date of grant, to recognize ordinary income equal to
the fair market value of the restricted stock on the date of grant and the
Company will be entitled to a corresponding deduction at that time.
Any discussion herein pertaining to a deduction for the Company is
qualified by application of Section 162(m) of the Internal Revenue Code and the
regulations thereunder. Section 162(m) limits to $1,000,000 per year the
allowable deduction for compensation paid to or accrued by the chief executive
officer and the four most highly compensated officers (other than the chief
executive officer), except that such limit does not include "performance-based
compensation," as that term is defined therein. If the Amended Plan is
approved by shareholders in the manner prescribed by applicable regulations,
compensation realized upon the exercise of options and stock appreciation
rights will be "performance-based" if the exercise price (in the case of
options) or the base price (in the case of stock appreciation rights) is at
least equal to the fair market value of the underlying stock on the date of
grant. The Amended Plan is intended to meet the provisions of Section 162(m)
such that any deductions realized from stock option or stock appreciation
rights transactions thereunder will not be limited. Compensation derived from
all other Awards that may be granted under the Plan may be deemed
"performance-based" if they are designated as such by the Committee and if the
grant thereof is subject to the attainment of certain performance goals as
described in the section titled "Description of Amended Plan -
Performance-Based Compensation Grants" hereof. Compensation derived from
Awards that are not "performance-based" will not be deductible by the Company
beyond the prescribed $1,000,000 limit.
PURPOSE OF AMENDMENTS
The Amended Plan, approved by the Board of Directors on February 26,
1997, materially amends the Existing Plan in the following ways. First, to
increase the number of shares that may be awarded in furtherance of its above-
referenced objectives, the Amended Plan increases to 6,000,000 the maximum
number of shares that may be awarded thereunder. Second, the Amended Plan
increases to 2,000,000 (including Awards already granted under the Existing
Plan as well as Awards subsequently canceled) the number of shares that may be
awarded to any one individual thereunder. Although the Committee has generally
disfavored the repricing or the cancellation and regranting of previously
granted Awards, it may from time to time reprice or cancel and regrant certain
stock options or other Awards that are exercisable at substantially higher
prices than the current market value of the Common Stock when in its discretion
it determines that such market price is artificially low for reasons unrelated
to the performance of the Company, such as conditions affecting the industry as
a whole. For purposes of Section 162(m) of the Internal Revenue Code, options
originally granted to a particular individual, whether canceled or not, are
added to any options subsequently granted or repriced when calculating the
number of options that may be granted to that individual. Accordingly, the
Company has established a relatively high number of shares as the maximum
number of shares that may be granted to any one individual under the Amended
Plan to accommodate any repricing or cancellation and regranting of Awards.
Third, to maintain current incentives for option recipients who have elected to
exercise their options, the Amended Plan allows the Committee to agree to
provide reload options at the then fair market value to an option recipient who
elects to pay the exercise price of his options by surrendering Common Stock.
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<PAGE> 25
VOTE REQUIRED; EFFECT OF NONAPPROVAL
Approval of the Amended Plan will require the affirmative votes of a
majority of the votes cast at a meeting at which a majority of the Company's
Common Stock is present either in person or by proxy. Abstentions and broker
nonvotes will have no effect. If such approval is not obtained, the Existing
Plan as currently in effect will remain effective until it expires on March 24,
2004.
AMENDED PLAN BENEFITS
Because the Amended Plan is a discretionary plan, it is not possible
to determine what Awards the Committee will grant or award thereunder. See
the Section above entitled "Executive Compensation - Option Exercises and
Holdings" for a listing of the outstanding options held by the Named Executive
Officers, and see the Section above entitled "Executive Compensation - Stock
Options" for a listing of the awards made to the Named Executive Officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE AMENDED AND RESTATED 1994 LONG-TERM INCENTIVE PLAN.
INDEPENDENT AUDITORS
The accounting firm of Arthur Andersen LLP has been selected by the
Board of Directors as independent auditors of the Company for the fiscal year
ending December 31, 1997. Arthur Andersen LLP has conducted the audit of the
Company's year-end financial statements since its inception.
A representative of Arthur Andersen LLP is expected to be present at
the Annual Meeting and will be given the opportunity to make a statement if he
desires to do so. Such representative will be available to respond to
questions relating to the audit of the Company's 1996 financial statements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
PROPOSAL OF SECURITIES HOLDERS
A proposal of a security holder of the Company intended to be
presented at the next Annual Meeting of Shareholders must be received at the
Company's principal executive offices on or before December 21, 1997 in order
to be considered for inclusion in the Company's Proxy Statement and form of
proxy relating to that meeting.
OTHER MATTERS
Management is not aware of any matter to be brought before the Annual
Meeting other than the matters described herein. However, if other matters do
come before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote said proxy in accordance with their judgment
on such matters.
By Order of the Board of Directors
April 21, 1997
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APPENDIX A
VANGUARD CELLULAR SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stuart S. Richardson, Haynes G. Griffin and
Stephen R. Leeolou, or any of them, proxies with full power of substitution to
vote all shares of Class A Common Stock of Vanguard Cellular Systems, Inc.
standing in the name of the undersigned at the Annual Meeting of Shareholders of
the Company to be held May 20, 1997, and any adjournment thereof.
1. ELECTION OF DIRECTORS (CLASS I):
<TABLE>
<S> <C>
[ ] FOR all nominees listed below (except as [ ] WITHHOLD AUTHORITY to vote for all nominees
indicated to the contrary below) listed below
</TABLE>
Doris R. Bray, Stuart S. Richardson, Robert A. Silverberg
To withhold authority to vote for any nominee or nominees, write the nominee's
name in the space provided below.
- - --------------------------------------------------------------------------------
2. TO APPROVE THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE THE AMENDED AND RESTATED 1994 LONG-TERM INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO RATIFY APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS FOR
1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES NAMED IN THE PROXY STATEMENT AND FOR PROPOSALS 2, 3
AND 4.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated , 1997
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Signature
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Signature
