<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HECTOR COMMUNICATIONS CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
----------------------------------------------------------
</TABLE>
<PAGE>
HECTOR COMMUNICATIONS CORPORATION
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 2000
------------------------
Notice is hereby given that the Annual Meeting of Shareholders of Hector
Communications Corporation will be held at the Radisson Hotel South and Plaza
Tower, 7800 Normandale Boulevard, Minneapolis, Minnesota, on Thursday, May 18,
2000 at 2:00 p.m., Central Daylight Time, for the following purposes:
1. To elect two (2) directors to hold office until the 2003 Annual Meeting
of Shareholders or until their successors are elected.
2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 24, 2000 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
By Order of the Board of Directors
Richard A. Primuth,
SECRETARY
Hector, Minnesota
April 10, 2000
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND IN
PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN
PERSON IF THEY SO DESIRE.
<PAGE>
HECTOR COMMUNICATIONS CORPORATION
211 SOUTH MAIN STREET
HECTOR, MINNESOTA 55342
(320) 848-6611
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished to the shareholders of Hector
Communications Corporation ("HCC" or the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be voted at
the Annual Meeting of Shareholders to be held at the Radisson Hotel South and
Plaza Tower, 7800 Normandale Boulevard, Minneapolis, Minnesota 55439 on
Thursday, May 18, 2000, beginning at 2:00 p.m. or at any adjournment or
adjournments thereof. The cost of this solicitation will be paid by the Company.
In addition to solicitation by mail, officers, directors and employees of the
Company may solicit proxies by telephone, telegraph or in person. The Company
may also request banks and brokers to solicit their customers who have a
beneficial interest in the Company's Common Stock registered in the names of
nominees and will reimburse such banks and brokers for their reasonable
out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by receipt of a
proxy properly signed and dated subsequent to an earlier proxy, or by revocation
of a written proxy by request in person at the Annual Meeting. If not so
revoked, the shares represented by such proxy will be voted by the persons
designated as proxies in favor of the matters indicated. In the event any other
matters properly come before the meeting calling for a vote of shareholders, the
persons named as proxies will vote in accordance with their judgment on such
matters. The Company's corporate offices are located at 211 South Main Street,
Hector, Minnesota 55342, and its telephone number is (320) 848-6611. The mailing
of this Proxy Statement to shareholders of the Company commenced on or about
April 10, 2000.
The total number of shares outstanding and entitled to vote at the meeting
as of March 24, 2000 were 3,555,454 shares of $.01 par value Common Stock. Each
share of Common Stock is entitled to one vote. Cumulative voting in the election
of directors is not permitted. Only shareholders of record at the close of
business on March 24, 2000 will be entitled to vote at the meeting. The presence
in person or by proxy of the holders of a majority of the shares entitled to
vote at the Annual Meeting of Shareholders constitutes a quorum for the
transaction of business. In addition to its outstanding Common Stock, the
Company had outstanding on the record date 221,700 shares of non-voting
convertible preferred stock. See "Security Ownership of Certain Beneficial
Owners and Management" herein.
Under Minnesota law, each item of business properly presented at a meeting
of shareholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or by
proxy, and entitled to vote on that item of business. However, if the shares
present and entitled to vote on any particular item of business would not
constitute a quorum for the transaction of business at the meeting, then that
item must be approved by holders of a majority of the minimum number of shares
that would constitute such a quorum. Votes cast by proxy or in person at the
Annual Meeting of Shareholders will be tabulated at the meeting to determine
whether or not a quorum is present. Abstentions on a particular item of business
will be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as unvoted for purposes of determining
the approval of the matter. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote with
respect to that matter.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's common
stock by each person known by the Company to own of record or beneficially five
percent (5%) or more of the Company's common stock, and all officers and
directors of the Company as a group based upon information available as of
March 31, 2000.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS*
- ------------------------------------- -------------------- ---------
<S> <C> <C>
Curtis A. Sampson 569,598(1) 16.0%
211 South Main Street
Hector, MN 55342
Mario J. Gabelli 365,800(2) 9.6%
One Corporate Center
Rye, New York 10580
Perkins Capital Management Inc. 238,835 6.7%
730 E Lake Street
Wayzata, MN 55391
All directors and officers as a group 836,604(3) 23.5%
(8 persons)
</TABLE>
- ------------------------
* There are currently outstanding 221,700 shares of the Company's Series A
Convertible Preferred Stock. The holders of preferred stock have no voting
rights, except in limited circumstances, but each share of preferred stock
is convertible at any time at the option of the holder into one share of
common stock. The percent of class calculations in the right column above do
not give effect to the conversion of any shares of Preferred Stock, all of
which are issued to persons and entities directly or indirectly controlled
by or affiliated with Mr. Mario J. Gabelli, except for the percentage
calculation applicable to Mr. Gabelli. See footnote 2. Each such percentage
calculation would decline approximately 6% if such conversion were assumed.
(1) The shares listed above include 398,378 shares owned by Mr. Sampson
directly, 50,000 shares which may be purchased within 60 days pursuant to
outstanding stock options, 14,937 shares owned by Mr. Sampson's wife, 49,688
shares owned by the Communications Systems, Inc. Employee Stock Ownership
Plan ("CSI ESOP") of which Mr. Sampson is a trustee and 56,595 shares owned
by the Hector Communications Corporation Employee Stock Ownership Plan
("Hector ESOP") of which Mr. Sampson is a trustee. See "Certain
Transactions" below. Mr. Sampson disclaims any beneficial ownership of the
shares owned by his wife and disclaims any beneficial ownership of the
shares owned by the CSI ESOP and the Hector ESOP in excess of the shares
allocated to his account, which totaled 10,863 shares at December 31, 1999.
(2) The aggregate number of shares listed above are held by the following
persons or entities, which are deemed to be controlled, direct or
indirectly, by or affiliated with Mr. Gabelli: Gabelli Performance
Partnership, Brighton Communications Corporation and GAMCO Investors. The
aggregate number of shares listed above includes 221,700 shares of the
Company's non-voting Convertible Preferred Stock (which are convertible on a
one for one basis at any time into the Company's common stock).
2
<PAGE>
(3) Includes 106,283 shares owned collectively by the CSI ESOP and the Hector
ESOP of which Messr. C. A. Sampson is trustee, and 160,400 shares deemed
outstanding pursuant to options exercisable within 60 days. Mr. Sampson
disclaims any beneficial ownership of the shares owned by the CSI ESOP and
the Hector ESOP in excess of shares allocated to his account as described
under footnote 1 above.
ELECTION OF DIRECTORS
The Board of Directors has nominated and recommends for election as
directors of the Company Messrs. Paul A. Hoff and Edward E. Strickland. The
class of directors to be elected for a term expiring in 2003 includes a third
director position. No nominee is being submitted to fill this third position at
this time and the resolution proposing the two Board of Director nominees will
also provide for amending the Bylaws of the Company to reduce the size of the
Board to seven directors and to reduce the class of directors with terms ending
in 2003 to two directors. It is intended that proxies will be voted for such
nominees, for reducing the size of the Board to seven and for reducing the size
of the class of directors with terms ending in 2003. The Board of Directors
believes that each nominee named below will be able to serve, but should a
nominee be unable to serve as a director, the persons named in the proxies have
advised that they will vote for the election of such substitute nominee as the
Board of Directors may propose.
Information regarding the nominees and other directors filling unexpired
terms, including information regarding their principal occupations currently and
for the preceding five years, is set forth below and on the following page.
Ownership of Common Stock of the Company is given as of March 24, 2000. To the
best of the Company's knowledge, unless otherwise indicated below, the persons
indicated possess sole voting and investment power with respect to their stock
ownership.
<TABLE>
<CAPTION>
YEAR
CURRENT AMOUNT OF PERCENT OF
PRINCIPAL OCCUPATION DIRECTOR TERM STOCK OUTSTAND-
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE EXPIRES OWNERSHIP ING STOCK
- -------------------- ------------------------------------ -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
NOMINEES PROPOSED FOR ELECTION FOR TERM EXPIRING IN 2003
Paul A. Hoff Chief Executive Officer, Park 1993 2000 6,000(1) *
(52) Regional Mutual Telephone Company,
Underwood, Minnesota.
Edward E. Strickland Business and management consultant; 1990 2000 25,820(2) *
(73) Director of: Reuter Manufacturing,
Inc. (manufacturing); Bio-Vascular,
Inc. (medical devices); Intercim,
Inc. (factory management software);
Communications Systems, Inc.; and
Quantech, Ltd. (medical devices).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR
CURRENT AMOUNT OF PERCENT OF
PRINCIPAL OCCUPATION DIRECTOR TERM STOCK OUTSTAND-
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE EXPIRES OWNERSHIP ING STOCK
- -------------------- ------------------------------------ -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS SERVING UNEXPIRED TERMS
James O. Ericson Business consultant and private 1995 2001 29,099(3) *
(64) investor
Paul N. Hanson Vice President and Treasurer of the 1990 2001 159,470(4) 4.5%
(53) Company; Chief Financial Officer,
Vice President of Finance and
Treasurer of Communications Systems,
Inc.
Wayne E. Sampson Management consultant; director of 1990 2001 60,688(5) 1.7%
(70)+ Communications Systems, Inc.
Curtis A. Sampson Chairman and Chief Executive Officer 1990 2002 569,598(6) 16.0%
(66)+ of the Company; Chairman of the
Board, President and Chief Executive
Officer of Communications Systems,
Inc. (telecommunications
manufacturing); Chairman of the
Board of Canterbury Park Holding
Corporation (thoroughbred
racetrack).
Steven H. Sjogren President and Chief Operating 1990 2002 119,871(7) 3.3%
(57)+ Officer of the Company.
</TABLE>
- ------------------------
+ Wayne E. Sampson and Curtis A. Sampson are brothers and each is a first
cousin to Mr. Sjogren.
* Indicates ownership of less than one percent.
(1) Represents shares deemed outstanding pursuant to options exercisable within
60 days.
(2) Includes 7,500 shares deemed outstanding pursuant to options exercisable
within 60 days.
(3) Includes 5,000 shares deemed outstanding pursuant to options exercisable
within sixty days.
(4) The shares listed above include 18,062 shares owned by Mr. Hanson directly,
25,500 shares which may be purchased within 60 days pursuant to outstanding
stock options, 9,625 shares owned by Mr. Hanson's wife, 49,688 shares owned
by the CSI ESOP of which Mr. Hanson is a trustee and 56,595 shares owned by
the Hector ESOP of which Mr. Hanson is a trustee. Mr. Hanson disclaims any
beneficial ownership of the shares owned by the CSI ESOP and Hector ESOP in
excess of the shares allocated to his account, which totaled 4,133 shares at
December 31, 1999.
(5) Includes 3,500 shares owned by Mr. W. E. Sampson directly, 7,500 shares
which may be purchased within 60 days pursuant to outstanding stock options,
and 49,688 shares owned by the CSI ESOP, of which Mr. Sampson is a trustee.
Mr. Sampson disclaims any beneficial ownership of the shares owned by the
CSI ESOP.
(6) See footnote 1 to "Security Ownership of Certain Beneficial Owners and
Management" above.
(7) Includes 18,076 shares owned by Mr. Sjogren directly, 45,200 shares deemed
outstanding pursuant to options exercisable within 60 days and 56,595 shares
owned by the Hector ESOP of which Mr. Sjogren is a trustee. Mr. Sjogren
disclaims any beneficial ownership of the shares owned by the Hector ESOP in
excess of the shares allocated to his account, which totaled 6,858 shares at
December 31, 1999.
4
<PAGE>
INFORMATION REGARDING BOARD AND BOARD COMMITTEES
The Board of Directors of the Company met four times during 1999. Each
director nominee and each continuing director attended at least 75% of the
meetings of the Board and each committee on which such director served, except
for Mr. Strickland who attended 60% of the meetings of the Board and committees
on which he served.
Each non-employee member of the Board is paid a monthly fee of $500, plus
$400 for each Board or committee meeting attended. Messrs. Curtis A. Sampson,
Sjogren and Hanson, who are otherwise employed by the Company, receive no
additional compensation for service on the Board.
Each non-employee member of the Board of Directors nominated for reelection
or continuing in office receives at the time of each annual meeting of the
shareholders an option to purchase 2,000 shares of the Company's Common Stock.
Each director's option provides for an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant exercisable over a
ten-year period beginning six months after the date the option is granted.
The Company has an Audit Committee consisting of Messrs. Wayne E. Sampson
and Strickland. The Audit Committee recommends to the full Board of Directors
the selection of independent accountants and reviews the activities and reports
of the independent accountants, as well as the internal accounting controls of
the Company. The Audit Committee met once in 1999.
The Company has a Compensation Committee consisting of Messrs. Hoff, Wayne
E. Sampson and Sjogren. The Compensation Committee met once during 1999. The
Compensation Committee recommends to the Board of Directors compensation for
executive officers and key personnel and reviews the Company's compensation
policies and practices. Mr. Sjogren does not participate in the consideration by
the committee of his own compensation.
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following tables show, for the fiscal years ending December 31, 1999,
1998 and 1997, the cash and other compensation paid to or accrued by the Company
for the Company's Chief Executive Officer and Chief Operating Officer in all
capacities served, as well as information relating to option grants, option
exercises and fiscal year end option values applicable to such persons.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION OPTIONS
------------------------------------ (NUMBER OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SHARES) COMPENSATION(2)
- --------------------------- -------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Curtis A. Sampson, Chief Executive
Officer(1)(3)....................... 1999 $154,615 $35,000 10,000 $13,668
1998 $140,769 $25,000 10,000 $10,284
1997 $122,308 $20,000 10,000 $ 9,536
Steven H. Sjogren, Chief Operating
Officer(3).......................... 1999 $114,554 $20,000 12,000 $11,229
1998 $107,615 $15,000 9,000 $ 7,524
1997 $ 96,576 $10,000 8,100 $ 7,436
</TABLE>
- ------------------------
Note: Certain columns have not been included in this table because the
information called for therein is not applicable to the Company or the
individual named above for the periods indicated.
(1) Mr. Sampson devotes approximately 40% of his working time to the Company.
The balance of his working time Mr. Sampson serves as Chairman and Executive
Officer of Communications Systems, Inc., for which he is separately
compensated. See "Certain Transactions."
(2) All other compensation for Messrs. Sampson and Sjogren consisted of Company
contributions to the Company's 401(k) Plan and Employee Stock Ownership
Plan.
(3) In May, 1998, the Company loaned to Curtis A. Sampson $71,500 pursuant to a
two-year promissory note bearing interest at 6.5% to enable Mr. Sampson to
exercise stock options he was granted by the Company. The loan to
Mr. Sampson is secured by the pledge of 10,000 shares of the Company's
common stock. In May 1999, to enable each to exercise stock options granted
by the Company, the Company loaned to Messrs. Curtis A. Sampson and Steven
Sjogren $82,500 and $60,000, respectively, to purchase, respectively, 10,000
shares and 8,000 shares of common stock; in each case, the loans are
pursuant to two-year promissory notes bearing interest at 6.5% and are
secured by a pledge of the shares purchased pursuant to the option exercise.
6
<PAGE>
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL
GRANTED RATES OF STOCK
TO MARKET PRICE APPRECIATION
EMPLOYEES EXERCISE PRICE FOR OPTION TERM
OPTIONS IN FISCAL PRICE ON DATE EXPIRATION ---------------------
NAME GRANTED YEAR PER SHARE OF GRANT DATE 5% 10%
- ---- -------- ---------- --------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Curtis A. Sampson.................... 10,000 12.3% $9.35 $8.50 3/9/04 $14,985 $43,394
Steven H. Sjogren.................... 12,000 14.7% $8.50 $8.50 3/9/04 $28,181 $62,272
</TABLE>
AGGREGATED OPTION EXERCISES IN 1999
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
AT FY-END
(BASED ON 12/31/99)
VALUE REALIZED NUMBER OF UNEXERCISED PRICE OF
(MARKET PRICE OPTIONS AT 12/31/99 $14.00/SHAREHOLDER
SHARES ACQUIRED AT EXERCISE LESS --------------------------- ---------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Curtis A. Sampson.......... 10,000 $25,000 40,000 10,000 $215,790 $35,960
Steven H. Sjogren.......... 8,000 $25,000 34,200 11,000 $208,150 $51,875
</TABLE>
EMPLOYMENT CONTRACTS
The Company entered into an employment agreement effective August 1, 1990
with Mr. Steven H. Sjogren, the Company's President, which has a term of
10 years. Current compensation under the contract is $115,000 per annum which is
subject to increase pursuant to annual salary reviews. In addition to other
customary terms and conditions, the employment agreement requires that any early
termination of the agreement by the Company be "for cause."
COMPENSATION COMMITTEE REPORT
The Compensation Committee appointed by the Company's Board of Directors has
primary responsibility in regard to determinations relating to executive
compensation and administration of the Company's stock option plans. All
decisions by the Compensation Committee pertaining to the compensation of the
Company's executive officers are reviewed and approved by the full Board. Steven
H. Sjogren, the Company's Chief Operating Officer, did not participate in any
discussions or decisions of either the Compensation Committee or the Board of
Directors relating to any aspect of his compensation.
COMPENSATION POLICIES
It is the objective of the Compensation Committee to pay compensation at
levels which will attract, retain and motivate executives with superior
leadership and management abilities and to structure the forms of compensation
paid such that their interests will be closely aligned with achievement of
superior financial performance by the Company. With these objectives in mind,
the compensation currently paid to the Company's executive officers principally
consists of three elements: base salary, bonus and stock option awards.
7
<PAGE>
COMPENSATION ELEMENTS
Base salaries of the Company's executive officers are generally established
by reference to base salaries paid to executives in similar positions with
similar responsibilities based upon publicly available compensation surveys and
limited informal surveys by Compensation Committee members. Base salaries are
reviewed annually. Adjustments to base salaries are determined by reference to
individual and company performance having in mind both measurable financial
factors, as well as subjective judgments by the Compensation Committee in regard
to factors such as development and execution of strategic plans, changes in
areas of responsibility, the development and management of employees and
participation in industry, regulatory and political initiatives beneficial to
the Company. The Compensation Committee does not, however, assign specific
weights to these various quantitative and qualitative factors in reaching its
decisions.
Bonuses are intended to provide executives with an opportunity to receive
additional cash compensation, but only if they earn it through Company and
individual performance. After year end results are available, the Committee
determines each officer's bonus based on the Company's performance, as measured
by such factors as growth in earnings per share, as well as the Compensation
Committee's subjective assessment of individual performance in the executive's
area of responsibility, but without assigning specific weight to the various
qualitative and quantitative factors considered.
Stock options have been awarded to the Company's executives under the
Company's 1990 Stock Plan and the Company's 1999 Stock Plan. Stock options
represent an additional vehicle for aligning management's and stockholders'
interests, specifically motivating executives to remain focused on factors which
will enhance the market value of the Company's common stock. If there is no
price appreciation in the common stock, the option holders receive no benefit
from the stock options, because options are granted with an option exercise
price at least equal to the fair market value of the common stock on the date of
grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Curtis A. Sampson participates in the same executive compensation plans
provided to other senior executives and is evaluated by the same factors
applicable to the other executives as described above. Mr. Sampson's total cash
compensation for 1999 was $189,615, an increase of 14% over total cash
compensation in 1998. In addition, Mr. Sampson was granted options to purchase
10,000 shares in 1999, the same amount granted to Mr. Sampson in 1998. Because
of his significant holdings of Company common stock, under applicable IRS rules,
Mr. Sampson's options are priced at 110% of the market price on the date of
grant. The base salary and bonus compensation payable to Mr. Sampson in 1999 was
determined in May 1999 and reflects the Committee's evaluation of Mr. Sampson
and the Company's performance for fiscal year 1998 as compared to fiscal year
1997. In 1998 the Company experienced a 10% increase in revenues and a 44%
increase in net income. In addition, Mr. Sampson's compensation reflects his
active leadership role in national telecommunications organizations and
associations and the benefits this provides to the Company. The Compensation
Committee believes, based upon their general knowledge of compensation paid to
other chief executives and published regional salary data (but without
conducting a formal survey), that Mr. Sampson's total compensation is below that
which could be reasonably justified in relation to the scope of his
responsibilities, as well as the financial performance of the Company.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
Paul A. Hoff Steven H. Sjogren Wayne E. Sampson
</TABLE>
8
<PAGE>
PERFORMANCE GRAPH
The following graph presents, at the end of each of the Company's last five
fiscal years, the cumulative total return on the common stock of the Company as
compared to the cumulative total return of the NASDAQ Stock Market Total Return
Index (U.S. Companies), and Hickory Tech Corporation which the Company has
selected as a peer issuer in the same industry assuming, in each case, the
investment of $100 on the last business day before January 1, 1994 and the
reinvestment of all dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HECTOR COMMUNICATIONS NASDAQ
<S> <C> <C> <C>
Corporation Hickory Tech Corporation Stock Market
1994 100.00 100.00 100.00
1995 108.93 101.45 141.34
1996 103.57 92.39 173.90
1997 132.14 127.28 213.07
1998 118.76 143.91 300.43
1999 200.00 172.41 555.99
</TABLE>
9
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS AND SHARED MANAGEMENT WITH COMMUNICATIONS SYSTEMS, INC.
The Company receives certain staff services and systems, such as payroll and
pension plan administration, from Communications Systems, Inc. pursuant to an
agreement entered into in August 1990 with the costs and expenses of such
services paid by the Company. CSI has continued to make available to the Company
certain centralized staff services and systems, such as payroll and pension plan
administration, with the related costs and expenses being paid by the Company.
In 1999 and 1998 the Company paid CSI, respectively, $270,000 and $300,000 for
such services, amounts which management believes is less than what the Company
would pay if it was required to pay for such services from another vendor.
Three of the Company's executive officers, Curtis A. Sampson, Paul N. Hanson
and Charles A. Braun, each devote approximately 40% of their working time to the
Company. Messrs. Sampson, Hanson and Braun devote substantially all of the
remainder of their working time to CSI, of which Mr. Sampson serves as Chairman
and Chief Executive Officer. Mr. Hanson serves as Chief Financial Officer, Vice
President of Finance and Treasurer, and Mr. Braun serves as Controller. These
officers are separately compensated for their services to CSI.
REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION
The Company's officers, directors and beneficial holders of 10% or more of
the Company's securities are required to file reports of their beneficial
ownership with the Securities and Exchange Commission on SEC Forms 3, 4 and 5.
According to the Company's records, during the period from January 1, 1999 to
December 31, 1999, officers, directors and ten percent beneficial holders of the
Company filed all reports with the Securities and Exchange Commission required
under Section 16(a) to report their beneficial ownership.
THE COMPANY'S AUDITORS
Olsen Thielen & Co., Ltd. have been the auditors for the Company since 1969
and have been selected by the Board of Directors, upon recommendation of the
Audit Committee, to serve as such for the current fiscal year. A representative
of Olsen Thielen & Co., Ltd. is expected to be present at the Annual Meeting of
Shareholders and will have an opportunity to make a statement and will be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders of the Company, after timely notice to the Company, to present
proposals for shareholder action in the Company's proxy statement where such
proposals are consistent with applicable law, pertain to matters appropriate for
share-holder action and are not properly omitted by Company action in accordance
with the Commission's proxy rules. The next annual meeting of the shareholders
of Hector Communications Corporation is expected to be held on or about May 20,
2001 and proxy materials in connection with that meeting are expected to be
mailed on or about March 31, 2001. Shareholder proposals prepared in accordance
with the Commission's proxy rules must be received at the Company's corporate
office, 211 South Main Street, Hector, Minnesota 55342, Attention: President, by
December 30, 2000, in order to be considered for inclusion in the Board of
Directors' Proxy Statement and proxy card for the 2001 Annual Meeting of
Shareholders. Any such proposals must be in writing and signed by the
shareholder.
10
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The Bylaws of the Company establish an advance notice procedure with regard
to (i) certain business to be brought before an annual meeting of shareholders
of the Company and (ii) the nomination by shareholders of candidates for
election as directors.
PROPERLY BROUGHT BUSINESS. The Bylaws provide that at the annual meeting
only such business may be conducted as is of a nature that is appropriate for
consideration at an annual meeting and has been either specified in the notice
of the meeting, otherwise properly brought before the meeting by or at the
direc-tion of the Board of Directors, or otherwise properly brought before the
meeting by a shareholder who has given timely written notice to the Secretary of
the Company of such shareholder's intention to bring such business before the
meeting. To be timely, the notice must be given by such shareholder to the
Secretary of the Company not less than 45 days nor more than 75 days prior to a
meeting date corresponding to the previous year's annual meeting. Notice
relating to the conduct of such business at an annual meeting must contain
certain information as described in Section 2.9 of the Company's Bylaws, which
are available for inspection by shareholders at the Company's principal
executive offices pursuant to Section 302A.461, subd. 4 of the Minnesota
Statutes. Nothing in the Bylaws precludes discussion by any shareholder of any
business properly brought before the annual meeting in accordance with the
Company's Bylaws.
SHAREHOLDER NOMINATIONS. The Bylaws provide that a notice of proposed
shareholder nominations for the election of directors must be timely given in
writing to the Secretary of the Company prior to the meeting at which directors
are to be elected. To be timely, the notice must be given by such shareholder to
the Secretary of the Company not less than 45 days nor more than 75 days prior
to a meeting date corresponding to the previous year's annual meeting. The
notice to the Company from a shareholder who intends to nominate a person at the
meeting for election as a director must contain certain information as described
in Section 3.7 of the Company's Bylaws, which are available for inspection by
shareholders as described above. If the presiding officer of a meeting of
shareholders determines that a person was not nominated in accordance with the
foregoing procedure, such person will not be eligible for election as a
director.
OTHER MATTERS
Management knows of no other matters that will be presented at the meeting.
If any other matters arise at the meeting, it is intended that the shares
represented by the proxies in the accompanying form will be voted in accordance
with the judgment of the persons named in the proxy.
The Company is transmitting with this Proxy Statement its Annual Report for
the year ended December 31, 1999. SHAREHOLDERS MAY RECEIVE, WITHOUT CHARGE, A
COPY OF THE COMPANY'S 1999 FORM 10-K REPORT AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION BY WRITING TO ASSISTANT SECRETARY, HECTOR COMMUNICATIONS
CORPORATION, 211 SOUTH MAIN STREET, HECTOR, MINNESOTA 55342.
By Order of the Board of Directors,
Richard A. Primuth, SECRETARY
11
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HECTOR COMMUNICATIONS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 18, 2000
The undersigned hereby appoints Curtis A. Sampson and Steven H. Sjogren or
any of them, as proxies, with full power of substitution to vote all the shares
of common stock which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of Hector Communications
Corporation, to be held Thursday, May 18, 2000, at 2:00 p.m. Central Daylight
Time at the Radisson Hotel South and Plaza Tower, 7800 Normandale Boulevard,
Minneapolis, Minnesota 55439, or at any adjournments thereof, upon any and all
matters which may properly be brought before the meeting or adjournment thereof,
hereby revoking all former proxies.
1. ELECTION OF DIRECTORS.
/ / WITH AUTHORITY to vote for all nominees listed below (except as
indicated to the contrary) for a three year term ending at the 2003
Annual Meeting of Shareholders
/ / WITHOUT AUTHORITY to vote for nominees listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
Paul A. Hoff Edward E. Strickland
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(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM PREVIOUS SIDE)
2. In their discretion upon any matters coming before the meeting.
UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF THE DIRECTORS ON THE REVERSE SIDE OF THIS CARD.
Dated ______________________, 2000
__________________________________
Signature
__________________________________
Signature if held jointly
Please date and sign exactly as
your name(s) appears below
indicating, where proper, official
position or representative
capacity in which you are signing.
When signing as executor,
administrator, trustee or
guardian, give full title as such;
when shares have been issued in
names of two or more persons, all
should sign.
