<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section
240.14a-12
RURAL CELLULAR CORPORATION
- --------------------------------------------------------------------------------
(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>
April 7, 1999
Dear Shareholder of Rural Cellular Corporation:
On behalf of the Board of Directors and Management, it is my pleasure to
invite you to the Annual Meeting of Rural Cellular Corporation (RCC)
Shareholders.
The annual meeting will be held on Thursday, May 20, 1999 at the Company's
headquarters, 3905 Dakota Street S.W., Alexandria, Minnesota, at 2:00 p.m.,
Minnesota time. At the meeting, we will vote on the matters described in the
attached Proxy Statement and Notice of Annual Meeting of Shareholders.
Additionally, we will review RCC's progress and recent growth initiatives as
well as our vision and strategy for continued growth and success.
You are urged to read the enclosed Notice of Annual Meeting and Proxy
Statement so that you may be informed about the business to come before the
Annual Meeting of Shareholders. It is also important that you complete and
sign the enclosed proxy. RCC is your company, and I strongly urge you to
exercise your right to vote. Included with the Proxy Statement is the
Company's Annual Report and Form 10-K for fiscal year 1998 as filed with the
Securities and Exchange Commission.
Please mark, sign and return your proxy(ies) promptly in the enclosed
envelope, which requires no postage if mailed in the United States. If you
prefer, you may vote by phone. The instructions are contained on the proxy
card.
On behalf of your Board of Directors and Management, thank you for returning
your proxy and for your continued support of and interest in Rural Cellular
Corporation.
We hope that you will be able to attend the meeting and look forward to
seeing you there.
Sincerely,
Richard P. Ekstrand
President and Chief Executive Officer
<PAGE>
RURAL CELLULAR CORPORATION
3905 Dakota Street S.W.
Alexandria, Minnesota 56308
___________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1999
___________
Please take notice that the Annual Meeting of the Shareholders of Rural
Cellular Corporation, a Minnesota corporation (the "Company"), will be held
at the Company's headquarters, 3905 Dakota Street S.W., Alexandria,
Minnesota, on Thursday, May 20, 1999 at 2:00 p.m., Minnesota time, to
consider and vote upon the following matters:
1. To elect two directors, each for a three-year term;
2. To ratify appointment of Arthur Andersen LLP as the Company's independent
auditors for fiscal 1999; and
3. To act upon such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
The Board of Directors of the Company has fixed the close of business on
March 22, 1999, as the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting. The transfer books
of the Company will not be closed.
Shareholders are urged to complete, date, sign, and return the accompanying
Proxy in the enclosed, self-addressed envelope or to vote their Proxy by
phone as described on the Proxy card. The Board of Directors of the Company
sincerely hopes, however, that all shareholders who can attend the Annual
Meeting will do so.
BY ORDER OF THE BOARD OF DIRECTORS
Don C. Swenson
Secretary
Dated: April 7, 1999
<PAGE>
RURAL CELLULAR CORPORATION
3905 DAKOTA STREET S.W.
ALEXANDRIA, MINNESOTA 56308
___________
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1999
___________
SOLICITATION AND REVOCATION OF PROXIES
The accompanying Proxy is solicited by the Board of Directors of Rural
Cellular Corporation (the "Company") in connection with the Annual Meeting of
the Shareholders of the Company, which will be held on May 20, 1999, and any
adjournments thereof.
The person giving the enclosed Proxy has the power to revoke it at any
time prior to the convening of the Annual Meeting. Revocation must be in
writing, signed in exactly the same manner as the Proxy, and dated.
Revocations of Proxy will be honored if received at the offices of the
Company, addressed to Don C. Swenson, Secretary, on or before May 19, 1999.
In addition, on the day of the meeting, prior to the convening thereof,
revocations may be delivered to the tellers, who will be present at the
meeting. Revocation may also be effected by delivery of an executed, later
dated Proxy. Unless revoked, all properly executed Proxies received in time
will be voted.
Proxies not revoked will be voted in accordance with the choice
specified by shareholders on the Proxies. Proxies which are signed but which
lack any such specification will, subject to the following, be voted FOR the
directors nominated by the Board of Directors and listed herein and FOR Item
2. If a shareholder abstains from voting as to any matter, then the shares
held by such shareholder will be deemed present at the meeting for purposes
of determining a quorum and for purposes of calculating the vote with respect
to such matter, but shall not be deemed to have been voted in favor of such
matter. Abstentions, therefore, as to any proposal will have the same effect
as votes against such proposal. If a broker turns in a "non-vote" Proxy,
indicating a lack of voting instruction by the beneficial holder of the
shares and lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote Proxy shall
be deemed present at the meeting for purposes of determining a quorum but
shall not be deemed to be represented at the meeting for purposes of
calculating the vote required for approval of such matter.
The Company will pay for costs of soliciting Proxies, including the
costs of preparing and mailing the Notice of Annual Meeting of Shareholders
and this Proxy Statement. Solicitation will be primarily by mailing this
Proxy Statement to all shareholders entitled to vote at the meeting. Proxies
may be solicited by officers or other employees of the Company who will
receive no special compensation for their services. The Company may reimburse
brokers, banks, and others holding shares in their names for others for the
costs of forwarding proxy material to, and obtaining Proxies from, beneficial
owners.
<PAGE>
The Annual Report of the Company, including financial statements, for
the fiscal year ended December 31, 1998, is being mailed with this Proxy
Statement. Copies of this Proxy Statement and Proxies will first be mailed to
shareholders on or about April 7, 1999.
VOTING RIGHTS
Only shareholders of record at the close of business on March 22, 1999
are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of that date, there were issued and outstanding
7,822,137 shares of Class A Common Stock and 1,198,557 shares of Class B
Common Stock, the only classes of securities of the Company entitled to vote
at the meeting. Each holder of record of Class A Common Stock is entitled to
one vote for each share registered in his or her name as of the record date,
and each holder of record of Class B Common Stock is entitled to ten votes
for each share registered in his or her name as of the record date. The
Articles of Incorporation of the Company do not grant the shareholders the
right to vote cumulatively for the election of directors. No shareholder will
have appraisal rights or similar dissenter's rights as a result of any
matters expected to be voted on at the meeting. The presence in person or by
proxy of holders of a majority of the voting power represented by the
outstanding shares of the Class A and Class B Common Stock, in the aggregate,
entitled to vote at the Annual Meeting will constitute a quorum for the
transaction of business.
COMMON STOCK OWNERSHIP
The following table sets forth certain information provided to the
Company by the holders or contained in the Company's stock ownership records
regarding beneficial ownership of the Company's Common Stock as of March 22,
1999 by (i) each person known by the Company to be the beneficial owner of
more than 5% of any class of the Company's outstanding Common Stock; (ii) the
Chief Executive Officer and each executive officer whose total annual salary
and bonus exceeded $100,000 during the year ended December 31, 1998 ("Named
Executive Officers"); (iii) each director of the Company; and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
indicated, each person has sole voting and investment power with respect to
the shares listed. In accordance with the rules of the Securities and
Exchange Commission, a person is deemed to be the beneficial holder of shares
that such person has a right to acquire by exercise of an option exercisable
at or becoming exercisable within 60 days after the record date ("currently
exercisable option").
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
----------------------- -----------------------
PERCENTAGE OF
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER PERCENTAGE COMBINED VOTING
OF BENEFICIAL OWNER SHARES OF CLASS OF SHARES OF CLASS POWER
- --------------------------------------- ---------- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Franklin Resources, Inc. (1). . . . . . 986,280 12.6% -- -- 5.0%
777 Mariners Island Boulevard
San Mateo, CA 94404
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
----------------------- -----------------------
PERCENTAGE OF
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER PERCENTAGE COMBINED VOTING
OF BENEFICIAL OWNER SHARES OF CLASS OF SHARES OF CLASS POWER
- --------------------------------------- ---------- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Baron Capital Group, Inc. (2) . . . . . 892,000 11.4 -- -- 4.5
767 Fifth Avenue
24th Floor
New York, NY 10153
Goldman Sachs & Co. (3) . . . . . . . . 774,650 9.9 -- -- 3.9
85 Broad Street
New York, New York 10004
T. Rowe Price Associates, Inc. (4). . . 764,800 9.8 -- -- 3.9
100 E. Pratt Street
Baltimore, MD 21202
Telephone & Data Systems, Inc. (5). . . 586,799 7.5 132,597 11.1 9.7
30 North LaSalle Street
Chicago, IL 60602
Arvig Enterprises, Inc. . . . . . . . . 358,893 4.6 121,664 10.2 8.0
160 2nd Ave. S.W.
Perham, MN 56573
Consolidated Telephone Company. . . . . 201,107 2.6 86,189 7.2 5.4
1102 Madison Street
Brainerd, MN 56401
Melrose Telcom, Inc.. . . . . . . . . . 185,487 2.4 79,493 6.6 4.9
320 East Main Street
Melrose, MN 56352
Paul Bunyan Rural
Telephone Cooperative (6) . . . . . . . 94,106 1.2 85,332 7.1 4.8
1831 Anne Street NW
Bemidji, MN 56601
West Central CelCom, Inc. . . . . . . . -- -- 79,857 6.7 4.0
209 Minnesota Avenue
Sebeka, MN 56477
Richard P. Ekstrand (7) . . . . . . . . 172,084 2.2 32,708 2.7 2.5
Jeffrey S. Gilbert (8). . . . . . . . . 110,956 1.4 85,332 7.1 4.9
Marvin C. Nicolai (9) . . . . . . . . . 218,257 2.8 86,189 7.2 5.4
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
----------------------- -----------------------
PERCENTAGE OF
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER PERCENTAGE COMBINED VOTING
OF BENEFICIAL OWNER SHARES OF CLASS OF SHARES OF CLASS POWER
- --------------------------------------- ---------- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
George M. Revering (10) . . . . . . . . 31,244 * 38,538 3.2 2.1
Don C. Swenson (11) . . . . . . . . . . 381,507 4.9 121,664 10.2 8.1
George W. Wikstrom (12) . . . . . . . . 98,785 1.3 34,944 2.9 2.3
Scott G. Donlea (13). . . . . . . . . . 33,044 * -- -- *
Wesley E. Schultz (14). . . . . . . . . 67,671 * -- -- *
David DelZoppo (15) . . . . . . . . . . 3,000 * -- -- *
All directors and executive officers
as a group (10 persons) (16). . . . . . 1,131,548 14.0 399,375 33.3 25.5
</TABLE>
- ----------
* Denotes less than 1%.
(1) Based on Schedule 13G dated February 2, 1999, filed jointly by Franklin
Resources, Inc., Charles B. Johnson and Rupert H. Johnson, Jr.,
principal shareholders of Franklin Resources, Inc., and Franklin
Advisers, Inc., a subsidiary of Franklin Resources, Inc. Franklin
Advisers, Inc. has sole voting and dispositive power over such shares,
which are held for the benefit of investment advisory clients.
(2) Based on Schedule 13G dated May 11, 1998, filed jointly by Baron Capital
Group, Inc. ("BCG"), BAMCO, Inc. ("BAMCO"), an investment adviser; Baron
Small Cap Fund ("BSCF"), an investment company, and Ronald Baron. BCG
and Mr. Baron disclaim beneficial ownership of securities held by BAMCO
and BSCF (or the investment advisory clients thereof) to the extent such
shares are held by persons other than BCG and Mr. Baron. BAMCO
disclaims beneficial ownership of shares held by its investment advisory
clients to the extent such shares are held by persons other than BAMCO
and its affiliates.
(3) Based on Schedule 13G dated February 14, 1999, filed jointly by Goldman
Sachs & Co. and The Goldman Sachs Group, LP, which have shared voting
and shared dispositive powers over such shares, which are held for the
benefit of investment advisory clients.
(4) Based on Schedule 13G dated February 12, 1999. According to a statement
provided by T. Rowe Price Associates, Inc., "These securities are owned
by various individual and institutional investors, which T. Rowe Price
Associates, Inc. ("Price Associates") serves as investment adviser with
power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Securities Exchange
Act of 1934, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities."
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
4
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(5) Based on Schedule 13G dated February 11, 1999. Includes 100% of Rural
Cellular Corporation Class A and Class B shares owned by Arvig Cellular,
Inc. (172,348 Class A and 70,243 Class B); Mid-State Telephone Co.
(74,746 Class A and 31,177 Class B); and Minnesota Invco RSA #5 (339,705
Class A and 31,177 Class B). Telephone and Data Systems, Inc. owns (i)
100% of TDS Telecommunications Corporation, which owns 100% of Arvig
Telcom, Inc., which in turn owns 100% of Arvig Cellular, Inc., and 100%
of Mid-State Telephone Co. and (ii) approximately 96% of the issued and
outstanding shares of United States Cellular Corporation, which owns
100% of United States Cellular Investment Company, which owns 100% of
Minnesota Invco RSA #5, Inc.
(6) Includes 19,285 shares of Class A Common Stock owned by a subsidiary of
Paul Bunyan Rural Telephone Cooperative.
(7) Includes 97,276 shares of Class A Common Stock and 32,708 shares of
Class B Common Stock owned by Lowry Telephone Co., Inc., of which Mr.
Ekstrand is the sole shareholder and Vice President, and 1,500 shares of
Class A Common Stock held by or on behalf of Mr. Ekstrand's children.
Also includes 63,950 shares of Class A Common Stock that may be
purchased upon exercise of currently exercisable options.
(8) Includes 74,821 shares of Class A Common Stock and 85,332 shares of
Class B Common Stock owned by Paul Bunyan Rural Telephone Cooperative,
of which Mr. Gilbert is Assistant Manager, and 19,285 shares of Class A
Common Stock owned by Northern Communications, Inc., of which Mr.
Gilbert is the General Manager. Mr. Gilbert disclaims beneficial
ownership of these shares. Also includes 15,750 shares of Class A Common
Stock that may be purchased upon exercise of currently exercisable
options.
(9) Includes 201,107 shares of Class A Common Stock and 86,189 shares of
Class B Common Stock owned by Consolidated Telephone Company, of which
Mr. Nicolai is the General Manager. Mr. Nicolai disclaims beneficial
ownership of these shares. Also includes 15,750 shares of Class A Common
Stock that may be purchased upon exercise of currently exercisable
options.
(10) Includes 26,200 shares of Class B Common Stock owned by Midwest
Telephone Company, of which Mr. Revering is General Manager, and 14,394
shares of Class A Common Stock and 12,338 shares of Class B Common Stock
owned by Peoples Telephone Company of Big Fork, of which Mr. Revering is
President. Mr. Revering disclaims beneficial ownership of these shares.
Also includes 15,750 shares of Class A Common Stock that may be
purchased upon exercise of currently exercisable options.
(11) Includes 358,893 shares of Class A Common Stock and 121,664 shares of
Class B Common Stock owned by affiliates of Arvig Enterprises, Inc., of
which Mr. Swenson is a member of the Board of Directors. Mr. Swenson
disclaims beneficial ownership of these shares. Also includes 15,750
shares of Class A Common Stock that may be purchased upon exercise of
currently exercisable options.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
5
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(12) Includes 81,535 shares of Class A Common Stock and 34,944 shares of
Class B Common Stock owned by Wikstrom Telephone Company, Inc., of which
Mr. Wikstrom is a shareholder and Vice President. Mr. Wikstrom disclaims
beneficial ownership of these shares. Also includes 15,750 shares of
Class A Common Stock that may be purchased upon exercise of currently
exercisable options.
(13) Includes four shares of Class A Common Stock owned by or on behalf of
Mr. Donlea's wife and children and 31,340 shares of Class A Common Stock
that may be purchased upon exercise of currently exercisable options.
(14) Includes 65,000 shares of Class A Common Stock that may be purchased
upon exercise of currently exercisable options.
(15) Includes 3,000 shares of Class A Common Stock that may be purchased upon
exercise of currently exercisable options.
(16) Includes 257,040 shares of Class A Common Stock that may be purchased
upon exercise of currently exercisable options.
ITEM NO. 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that directors are
divided into three classes, with each class serving a three-year term and
approximately one-third of the Board of Directors to be elected each year. At
the 1999 Annual Meeting, two Class II directors will be elected, each to hold
office for a term expiring at the Annual Meeting of Shareholders to be held
in 2002, or until his successor has been elected and qualified, or until his
death, resignation, or removal, if earlier.
The directors in Class II whose terms are expiring, George M. Revering
and Don C. Swenson, have been nominated by the Board of Directors for
reelection.
Election of directors will be determined by a majority vote of the
combined voting power of all shares of Common Stock present in person or by
proxy and voting at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE ABOVE NOMINEES
BE ELECTED. UNLESS INSTRUCTED NOT TO VOTE FOR THE ELECTION OF THE NOMINEES,
THE PROXIES WILL VOTE TO ELECT THE NOMINEES ABOVE NAMED. IF ANY NOMINEE IS
NOT A CANDIDATE FOR ELECTION AT THE MEETING, THE PROXIES MAY VOTE FOR SUCH
OTHER PERSON AS THEY, IN THEIR DISCRETION, MAY DETERMINE.
Certain information regarding the nominees and the continuing directors
of the Company is set forth below:
6
<PAGE>
NOMINEES FOR ELECTION (TERMS EXPIRING IN 2002)
GEORGE M. REVERING, 57, has been a director of the Company since 1990.
Mr. Revering has been President of Midwest Information Systems, Inc. ("MISI")
since 1976 and is President of Midwest Telephone Company and Peoples
Telephone Company of Big Fork, both subsidiaries of MISI and shareholders of
the Company, and President of Osakis Telephone Company, a subsidiary of MISI.
He is a director of Minnesota Equal Access Network Services, Inc. ("MEANS")
and President of Means Telecom, a subsidiary of MEANS.
DON C. SWENSON, 57, has been a director of the Company since 1990 and
Secretary of the Company since 1995. Mr. Swenson has been with Arvig
Enterprises, Inc., a telecommunications holding company and, through its
affiliates, a shareholder of the Company, since 1981, currently serving as
Chief Operating Officer of that company. Mr. Swenson also serves as a
director of Arvig Enterprises, Inc. and Cellular 2000, Inc. ("Cellular
2000"). He is also on the Board of Directors of United Community Bank,
Perham, Minnesota.
CONTINUING CLASS I DIRECTORS (TERMS EXPIRING IN 2001)
JEFFREY S. GILBERT, 49, has been a director of the Company since June
1995. Since September 1996, he has served as Assistant Manager of Paul Bunyan
Rural Telephone Cooperative ("Paul Bunyan") and General Manager of Northern
Communications, Inc., a wholly-owned subsidiary of Paul Bunyan. Both Paul
Bunyan and Northern Communications, Inc. are shareholders of the Company. Mr.
Gilbert had served as General Manager of Deer River Telephone Co., Inc., a
local exchange telephone company and formerly a subsidiary of Paul Bunyan and
a shareholder of the Company, since January 1993 and as a manager and in
other positions with that company since 1982. He is also a director of
Cellular 2000 and the Minnesota Telephone Association ("MTA").
MARVIN C. NICOLAI, 57, has been a director of the Company since June
1995. He became General Manager of Consolidated Telephone Company
("Consolidated"), a local exchange telephone company and a shareholder of the
Company, and Northland Communications Corporation ("Northland"), a
wholly-owned subsidiary of Consolidated, in January 1995. From 1988 to 1995,
he was the manager of Northland. Mr. Nicolai is also a director of Cellular
2000, MEANS, and Independent Information Services Corp. and a member of the
Board of Governors of Independent Emergency Services LLC.
CONTINUING CLASS III DIRECTORS (TERMS EXPIRING IN 2000)
RICHARD P. EKSTRAND, 49, has served as President, Chief Executive
Officer and a director of the Company since 1990. Since 1984, Mr. Ekstrand
has also served as Vice President and a director of Lowry Telephone Co.,
Inc., a local exchange telephone company and a shareholder of the Company, of
which Mr. Ekstrand is the sole shareholder. Mr. Ekstrand currently serves as
a director of Cellular 2000. Mr. Ekstrand is past president of the MTA and
the Association of Minnesota Telephone Utilities. He currently serves as a
director for the Rural Cellular Association and is active in the Cellular
Telecommunications Industry Association ("CTIA"), serving on the Board of
Directors, Executive Committee, Industry Information Council, Small Operators
Caucus and Wireless Foundation Board of Directors.
7
<PAGE>
GEORGE W. WIKSTROM, 61, has been a director of the Company since 1990
and Vice President since 1991. Mr. Wikstrom is a shareholder and has been
Vice President of Wikstrom Telephone Company, Incorporated, a local exchange
telephone company and a shareholder of the Company, for more than ten years.
He also serves as President and a director of Cellular 2000. Mr. Wikstrom
has been a Commissioner of the Northwest Regional Development Commission
since 1979 and serves as a director of the MTA and MEANS.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1998, the Board of Directors held sixteen meetings. All
directors attended at least 75% of the meetings of the Board and the
committees on which they served.
The Company's Board of Directors has established an Audit Committee and
a Compensation Committee. Jeffrey S. Gilbert (Chair), Marvin C. Nicolai and
George M. Revering currently serve on the Audit Committee. The Audit
Committee's duties include examination of matters relating to the financial
affairs of the Company, including reviewing the Company's annual financial
statements, the scope of the independent annual audit, and the independent
accountant's letter to management concerning the effectiveness of the
Company's internal financial and accounting controls. The Audit Committee
held two meetings during 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Don C. Swenson (Chair), Marvin C. Nicolai and George W. Wikstrom served
on the Compensation Committee in fiscal 1998. Messrs. Wikstrom and Swenson
serve as a Vice President and Secretary of the Company, respectively. Mr.
Swenson is Chief Operating Officer and a director of Arvig Enterprises, Inc.,
which together with certain affiliates holds more than 5% of the Company's
Class B Common Stock and has engaged in various transactions with the
Company, all of which are more fully described under "Certain Transactions."
Mr. Nicolai is General Manager of Consolidated Telephone Company, which holds
more than 5% of the Company's Class B Common Stock and has engaged in various
transactions with the Company, all of which are more fully described under
"Certain Transactions." The Compensation Committee's duties include
consideration of and recommendations to the Company's Board of Directors with
respect to programs for executive compensation, employee benefit and
incentive plans, and other compensation matters and policies. The
Compensation Committee held seven meetings during 1998.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES. Each nonemployee director of the Company is paid an
annual fee of $3,000. In addition, each non-employee director is paid $400
for each Board meeting attended in person, $250 for each Board meeting
attended via telephone conference and each committee meeting attended in
person, and $150 for each committee meeting attended via telephone
conference, and is reimbursed for travel and other expenses incurred in
attending meetings and serving as a director. Total fees paid to all
nonemployee directors as a group for services rendered during 1998 were
$48,800.
8
<PAGE>
DIRECTORS' STOCK OPTION PLAN. Directors who are not otherwise employees
of the Company are eligible to be granted options under the Company's Stock
Option Plan for Nonemployee Directors (the "Directors Plan"). The Directors
Plan provides that all nonemployee directors serving as of the day following
an annual meeting will be granted options to purchase 5,250 shares of Class A
Common Stock on that date. Pursuant to the Directors Plan, nonemployee
directors serving as of the day following the 1998 Annual Meeting were
granted options to purchase an aggregate of 26,250 shares of Class A Common
Stock at $16.38 per share.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules promulgated thereunder, requires the Company's
officers, directors, and holders of 10% or more of its outstanding Common
Stock to file certain reports with the Securities and Exchange Commission
(the "Commission"). To the Company's best knowledge, based solely on
information provided to it by the reporting individuals, all of the reports
required to be filed by these individuals were filed.
ITEM NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Company's independent auditors for Fiscal 1998 were Arthur Andersen
LLP, independent public accountants. The Audit Committee of the Board of
Directors has considered the qualifications and experience of Arthur Andersen
LLP, and, based upon the recommendation of the Audit Committee, the Board of
Directors has appointed them as independent auditors of the Company for the
current fiscal year, which ends December 31, 1999 ("Fiscal 1999"). Although
the submission of this matter to the shareholders is not required by law, the
Board of Directors desires to obtain the shareholders' ratification of such
appointment. If ratification is not obtained, the adverse vote will be
considered as a direction to the Board to select other auditors for the
following year. However, because of the difficulty and expense of making any
substitutions of auditors for the fiscal year already in progress, it is
contemplated that the appointment for Fiscal 1999 will stand unless the Board
finds other good reason for making a change.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions.
The affirmative vote of a majority of the combined voting power of the
shares of Common Stock present and voting on such matter is required for
ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL 1999. YOUR PROXY WILL BE SO VOTED UNLESS YOU
SPECIFY OTHERWISE.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with regard to compensation
paid to the Company's Chief Executive Officer and to each other executive
officer whose total annual salary and bonus for fiscal 1998 exceeded $100,000
(the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------ ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS COMPENSATION(1)
- ------------------------------------- ----------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Richard P. Ekstrand . . . . . . . . . 1998 $312,500 $148,393 75,000 $4,970
President and Chief 1997 176,000 54,559 11,750 4,207
Executive Officer 1996 120,000 52,000 81,000 4,255
Wesley E. Schultz . . . . . . . . . . 1998 $217,500 $ 57,068 22,500 $4,970
Senior Vice President, 1997 126,000 30,738 6,500 2,908
Finance and Administration 1996(2) 56,567 13,333 90,000 --
and Chief Financial Officer
Scott G. Donlea . . . . . . . . . . . 1998 $140,000 $ 34,249 12,500 $3,778
Vice President, Sales and 1997 113,000 51,587 2,500 4,116
Marketing 1996 84,100 35,000 64,600 3,170
David J. Del Zoppo . . . . . . . . . 1998 $ 90,000 $ 23,704 15,000 $2,511
Vice President, Controller 1997(3) 49,583 -- 10,000 687
1996 -- -- -- --
</TABLE>
- ----------
(1) For all years, all other compensation consists of Company contributions on
behalf of each Named Executive Officer to the Company's 401(k) plan.
(2) Mr. Schultz joined the Company as Vice President, Finance and Chief
Financial Officer on May 14, 1996.
(3) Mr. Del Zoppo joined the Company as Corporate Controller on May 27, 1997.
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the 1998 fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION ---------------------------
NAME (#)(1) YEAR ($/SHARE) DATE 5% ($)(2) 10% ($)(2)
- ----------------------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard P. Ekstrand . . 25,000(3) 9.4% $13.31 01/02/08 $209,265 $ 530,318
50,000(4) 18.9% 15.50 08/19/08 487,393 1,235,150
Wesley E. Schultz . . . 12,500(5) 4.7% 13.31 01/02/08 104,632 265,159
10,000(4) 3.8% 15.50 08/19/08 97,479 247,030
Scott G. Donlea . . . . 12,500(5) 4.7% 13.31 01/02/08 104,632 265,159
David J. Del Zoppo . . 5,000(5) 1.9% 13.31 01/02/08 41,853 106,064
10,000(5) 3.8% 16.25 06/25/08 102,195 258,983
</TABLE>
- ----------
(1) The number indicated is the number of shares of Class A Common Stock that
can be acquired upon the exercise of options. The Company has not granted
any SARs.
(2) The assumed rates of 5% and 10% are hypothetical rates of stock price
appreciation selected by the Commission and are not intended to, and do
not, forecast or assume actual future stock prices. The Company believes
that future stock appreciation, if any, is unpredictable and is not aware
of any formula that will determine with any reasonable accuracy the present
value of stock options based on future factors which are unknowable and
volatile. No gain to optionees is possible without an appreciation in stock
prices, and any such increase will benefit all shareholders commensurably.
There can be no assurance that the amounts reflected in this table will be
achieved.
(3) Consists of an incentive stock option for 9,000 shares and a nonqualified
stock option for 16,000 shares. Each option has a term of ten years, but
provides for early termination upon termination of employment, is not
transferable, and becomes exercisable in five annual installments of 1,800
and 3,200 shares, respectively.
(4) A nonqualified stock option, which has a term of ten years, but provides
for early expiration upon termination of employment, is not transferable,
and becomes exercisable in five equal annual installments.
(5) An incentive stock option, which has a term of ten years, but provides for
early expiration upon termination of employment, is not transferable, and
becomes exercisable in five equal annual installments.
11
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information relating to option exercises
during fiscal 1998 and the number and value of shares of Common Stock subject
to options held by the Named Executive Officers as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON OPTIONS AT FISCAL FISCAL YEAR-END ($)(2)
EXERCISE VALUE YEAR-END (#)(1) EXERCISABLE/
NAME (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ----------- ------------------------- -----------------------
<S> <C> <C> <C> <C>
Richard P. Ekstrand. . . . 54,200 $307,135 58,950/123,600 $44,775/$66,825
Wesley E. Schultz. . . . . -- -- 45,500/73,500 53,625/70,125
Scott G. Donlea. . . . . . 19,900 115,681 28,840/51,260 30,170/53,101
David J. Del Zoppo . . . . -- -- 2,000/23,000 2,740/10,960
</TABLE>
- ----------
(1) The Company has not granted any SARs.
(2) Value is calculated as the difference between the closing price of Class A
Common Stock on December 31, 1998 ($10.50) and the related option exercise
price (if lower than the closing price) multiplied by the number of shares
underlying the option.
EMPLOYMENT AGREEMENTS/CHANGE IN CONTROL PROVISIONS
The Company has entered into employment agreements with Messrs.
Ekstrand, Schultz and Donlea. Each agreement may be terminated at any time by
either the individual or the Company. Each agreement prohibits the individual
from engaging in any activity competitive with the business of the Company or
contacting customers or employees of the Company for such purpose for a
period of one year (in the case of Mr. Ekstrand) or six months (for Messrs.
Schultz and Donlea) following termination of employment. The employment
agreements with Messrs. Ekstrand and Schultz, which were entered into in
January 1999, provide for an initial term ending December 31, 2001 and are
renewable each year for an additional one-year period, so that the remaining
term of employment is never less than two years. The employment agreement
with Mr. Donlea (originally entered into in December 1995) currently expires
on December 31, 2000. If any of the agreements is terminated at any time by
the Company for other than "Just Cause" (as defined in the employment
agreements), the Company is obligated to continue payment of salary and
certain other benefits for the remainder of the term of the agreement. The
employment agreements provide for annual base salaries plus such increases as
may be determined from time to time, but at least annually.
If any of these individuals is terminated for other than Just Cause
following a "Change in Control" of the Company (as defined in the 1995 Stock
Compensation Plan (the "Plan")), he will be entitled to receive compensation
equal to 2.99 times his "base amount" of compensation (as
12
<PAGE>
defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code")). In addition, in the event of a Change in Control, any
award granted under the Plan will become fully exercisable and vested. A
"Change in Control" occurs when (i) the majority of the directors of the
Company are persons other than persons whose election has been solicited by
the Board of Directors or have been appointed by the Board to fill vacancies
created by death, resignation, or a new position, (ii) any person or group of
persons (as defined in Section 13(d) of the Exchange Act and the rules
thereunder) acquires 30% or more of the outstanding voting stock of the
Company, or (iii) the shareholders of the Company approve a merger or
consolidation (other than a merger or consolidation with a subsidiary of the
Company or in which the Company is the surviving corporation and the
shareholders of the Company immediately prior to the merger own more than 70%
of the outstanding voting stock of the surviving corporation or its parent
corporation), exchange of shares, sale or other disposition of all or
substantially all of the Company's assets, or liquidation or dissolution of
the Company. In the event that any payment made upon the occurrence of a
Change in Control becomes subject to the excise tax imposed by Section 4999
of the Code, the Company will pay such additional amounts as would put the
individual in the same after-tax position as if such excise tax did not apply.
REPORT OF COMPENSATION COMMITTEE
OVERVIEW AND PHILOSOPHY. The Compensation Committee of the Board (the
"Compensation Committee") is composed entirely of nonemployee Directors. The
members of the Compensation Committee during fiscal 1998 were Don C. Swenson
(Chair), Marvin C. Nicolai, and George W. Wikstrom. The Compensation
Committee's duties include consideration of and recommendation to the
Company's Board of Directors with respect to programs for executive
compensation, employee benefit and incentive plans, and other compensation
matters and policies.
The objectives of the Company's executive compensation program are:
(i) to attract and retain superior talent and reward individual
performance;
(ii) to support the achievement of the Company's financial and
strategic goals; and
(iii) through stock-based compensation, to align the executive
officers' interest with the success of the Company.
The Company's executive compensation program strives to be competitive
with the compensation programs of comparable wireless telecommunications
companies. In that respect, the Company compares itself to companies similar
in size within the wireless telecommunications industry. These may include
companies in the peer group described below under "Stock Performance Graph,"
but nonpublic companies similar in size to the Company are also included. In
comparing itself to these companies, the Company relies upon salary survey
data developed and published by external sources, including the Cellular
Telephone Industry Association and a compensation consulting firm.
The Committee periodically conducts a review of its executive
compensation programs to ensure that the Company's executive compensation
programs are meeting the objectives listed above. In its review, the
Committee considers data submitted by management and external data, including
the data referred to in the preceding paragraph.
13
<PAGE>
Compensation for the Company's executives has three components: base
salary, incentive bonuses, and stock options. The Compensation Committee
recommends executive compensation at levels which, in its judgment, are
warranted by external, internal and individual circumstances.
BASE SALARY. In making recommendations to the Board of Directors
regarding an individual's base salary, the Compensation Committee considers
the compensation levels of similar positions at comparable companies, the
responsibilities and performance of the individual executive officer, and the
Company's recent financial performance.
Generally, salary determinations are made prior to the beginning of each
calendar year based upon evaluations and recommendations made by the Chief
Executive Officer. The Chief Executive Officer provides the Compensation
Committee with a performance appraisal for each other executive officer that
assesses the individual's performance in the following areas:
accountabilities of the position, individual goals and objectives, special
projects and assignments, and management skills and the achievement of an
annual training/development plan. A salary recommendation is made based upon
the individual's overall performance assessment and where the individual's
salary falls within the range of salaries for similar positions at comparable
companies within the industry. Salary determinations for newly hired
executive officers are made prior to an offer of employment and are based
upon the individual's prior experience, anticipated contribution to the
Company, and the range of salaries for similar positions at comparable
companies within the industry.
INCENTIVE BONUSES. Each executive officer is eligible to receive a cash
bonus at the end of the fiscal year based upon the Company's financial
performance and the officer's achievement of specified individual goals. The
purpose of this annual cash incentive program is to provide a direct
financial incentive to the executive officers to meet or exceed the Company's
financial and other market-based performance objectives.
Potential bonus awards for executive officers are determined prior to
the beginning of each fiscal year. For fiscal 1998, each Named Executive
Officer's potential annual bonus was based on attainment of certain EBITDA
goals as reflected in the Company's fiscal 1998 budget and specified
individual goals. Target bonuses were between approximately 15% and 42% of
base salary. For fiscal 1998, the Named Executive Officers earned annual
bonuses of between 10% and 31% of base salary.
In addition, in recognition of their efforts in completing the Company's
acquisition of Atlantic Cellular, L.P. and Western Maine Cellular, Inc., and
the related financing, the Named Executive Officers were given special cash
bonuses of between $10,000 and $50,000. Two Named Executive Officers
received stock options in lieu of or in addition to the cash bonus.
STOCK OPTIONS. Stock options are the principal vehicle used by the
Company for the payment of long-term compensation and to provide a
stock-based incentive to improve the Company's financial performance. The
objectives of stock option grants are to assist in the recruitment,
motivation, and retention of key professional and managerial personnel as
well as to reward eligible employees for outstanding performance.
Stock options are designed to align the interest of the Company's
executives with those of shareholders by encouraging executives to enhance
the value of the Company and, hence, the price of the Class A Common Stock
and return to shareholders. In addition, through deferred vesting,
14
<PAGE>
this component of the compensation system is designed to create an incentive
for the individual executive to remain with the Company.
In 1998, stock options to purchase in the aggregate 125,000 shares
(including the bonus options noted above) were granted to the Named Executive
Officers. The grants were based on the individual's actual and/or potential
contributions to the Company. The exercise price for the options was equal
to the market price of the Class A Common Stock on the date of grant.
Accordingly, an executive receiving an option is rewarded only if the market
price of the Company's Class A Common Stock appreciates. Stock options are
recommended by the Compensation Committee and authorized by the Board of
Directors. The Company may periodically grant new options to these
individuals to provide continuing incentives for future performance.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. The Committee determines Mr.
Ekstrand's compensation package in accordance with the methodology described
above. In evaluating and setting the CEO's target annual compensation, the
Committee reviews the Company's business and financial performance,
considering such factors as sales, earnings, customer growth, and market
share, as well as the Company's progress with respect to its long-term goals
and strategies. The Committee does not assign relative weights or rankings
to these factors, but instead makes a subjective determination based upon a
consideration of all of these factors.
For fiscal 1998, the Compensation Committee recommended that the Chief
Executive Officer's salary be increased to $312,500, based upon its
evaluation of Mr. Ekstrand's contribution toward the achievement of the
Company's financial strategies and other goals, significant Company growth
during 1997, and comparative chief executive officer salary information. In
particular, the Committee recognized the Company's increased size, revenues
having grown from $30 million in fiscal 1996 to $54 million in fiscal 1997,
number of customers having increased from approximately 52,000 to
approximately 111,000, and the population served by the Company's service
area (POPs) having nearly doubled from 600,000 to 1.1 million, and the
expected growth through the anticipated acquisition of additional properties
in New England, noting that such growth had been achieved in large part
because of Mr. Ekstrand's leadership, both in strategic planning and action
and in building a team of highly qualified and motivated executives. The
Committee's review of salaries paid to CEOs of telecommunications companies
comparable in size to the Company, both at the end of 1997 and as anticipated
would occur in 1998, indicated that without a substantial increase, Mr.
Ekstrand's compensation would be below market.
Mr. Ekstrand's annual bonus for fiscal 1998 of $98,393 was based on the
Company's achievement of certain financial performance goals and his
achievement of specified personal goals. In addition, Mr. Ekstrand received
a special cash bonus of $50,000 for his extraordinary efforts in completing
the acquisitions and financing noted above.
In 1998 Mr. Ekstrand was granted options to purchase 25,000 shares at
$13.31 per share and 50,000 shares at $15.50 per share. The second grant was
in conjunction with the special cash bonus noted in the preceding paragraph.
OTHER INFORMATION. In 1993, Section 162(m) of the Internal Revenue Code
was adopted which, beginning in 1994, imposes an annual deduction limitation of
$1.0 million on the
15
<PAGE>
compensation of certain executive officers of publicly held companies. The
Compensation Committee does not believe that the Section 162(m) limitation
will materially affect the Company in the near future given the current level
of the compensation of the executive officers.
Don C. Swenson, Chair Marvin C. Nicolai George W. Wikstrom
Members of the Compensation Committee
STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return on its Common Stock for the period beginning February 8, 1996, the
date the Class A Common Stock was first traded on The Nasdaq National Market,
through December 31, 1998, with the cumulative total returns of the Standard
& Poor's Corporation ("S&P") 500 Stock Index and a peer group consisting of
eight publicly traded cellular telephone companies (described below). The
comparison assumes $100 was invested in the Company's Common Stock and in
each index at the beginning of the comparison period and reinvestment of
dividends.
Research Data Group Peer Group Total Return Worksheet
Rural Cellular Corp (RCCC)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------
2/8/96 12/96 12/97 12/98
<S> <C> <C> <C> <C>
RURAL CELLULAR CORPORATION 100 96 131 105
PEER GROUP 100 79 112 186
S & P 500 100 115 153 197
</TABLE>
16
<PAGE>
Note: The Peer Group Index was prepared by Research Data Group specifically
for the Company and consists of AirTouch Communications, Inc., Centennial
Cellular Corp., Commnet Cellular, Inc., Powertel, Inc. (formerly Intercel,
Inc.), Rogers Cantel Mobile Communications, Inc., United States Cellular
Corporation, and Vanguard Cellular Systems, Inc. Cellular Communications of
Puerto Rico, Inc. and Palmer Wireless, Inc., which had been included in the
Peer Group Index for fiscal 1996, and PriCellular Corporation, which had been
included for fiscal 1996 and 1997, are no longer publicly traded.
CERTAIN TRANSACTIONS
SWITCHING SERVICES
The Company utilizes switching services provided by Switch 2000, LLC
("Switch 2000"), in which the Company previously held a 40.8% ownership
interest. Richard P. Ekstrand, President, Chief Executive Officer, and a
director of the Company, served as Chair of the Board of Governors of Switch
2000 until September 30, 1998, when the Company liquidated its interest in
Switch 2000. Under a user agreement with Switch 2000, the Company was
obligated to pay its portion of the costs of cellular switching and related
services. During 1998, charges to the Company from Switch 2000 for switching
services and related equipment totaled $710,000. During fiscal 1997, the
Company activated its own mobile telephone switching office and reduced its
reliance on services provided by Switch 2000.
TRANSACTIONS WITH SHAREHOLDERS AND OTHER RELATED ENTITIES
The Company has entered into various arrangements with shareholders or
their affiliates. Arrangements involving shareholders or their affiliates
that beneficially own more than 5% of any class of the Company's Common Stock
and in which total payments for all such arrangements exceeded $60,000 in
fiscal 1998 and involving affiliates of directors where the total amounts
involved exceeded 5% of the related entity's annual revenues for fiscal 1998
are described below. Except as may be otherwise indicated below, the Company
anticipates that amounts earned or incurred in 1999 will be similar to the
1998 amounts.
LEASES, TRANSMISSION SERVICES, AND AGENCY AGREEMENTS. The Company has
arrangements with several of its shareholders for leasing cell sites and
using telephone lines for transmission between cell sites and the switch
serving the Company's cellular network. The Company leased office space in
Detroit Lakes, Minnesota, from an affiliate of Arvig Enterprises, Inc. In
addition, several of the Company's shareholders and their affiliates serve as
agents for the sale of the Company's cellular and paging services. During
1998, the Company was charged $360,919 by Arvig Enterprises, Inc. and its
affiliates for all such services. Arvig Enterprises, Inc., through certain
of its affiliates, is the beneficial owner of more than 5% of the Company's
outstanding Class B Common Stock. Don C. Swenson, a director of the Company
and a member of the compensation committee, serves as a director and Chief
Operating Officer of Arvig Enterprises, Inc. During 1998, the Company was
charged $180,434 by Consolidated Telephone Company and its affiliates for all
such services. Consolidated Telephone Company beneficially owns more than 5%
of the Company's outstanding Class B Common Stock. Marvin C. Nicolai, a
director of the Company and a member of the compensation committee, is the
General Manager of
17
<PAGE>
Consolidated Telephone Company. During 1998, the Company was charged $90,169
by Paul Bunyan Rural Telephone Cooperative ("Paul Bunyan") and its
affiliates, which beneficially own more than 5% of the Company's outstanding
Class B Common Stock, for all such services. Jeffrey S. Gilbert, a director
of the Company, is General Manager of Northern Communications, Inc., a
subsidiary of Paul Bunyan, and Assistant Manager of Paul Bunyan.
ACQUISITION OF RGI GROUP, INC. Effective February 1, 1999, the Company
acquired all of the outstanding stock of RGI Group, Inc. for approximately
$11.9 million. George M. Revering, a member of the Company's Board of
Directors, was a shareholder, president, and a director of RGI Group, Inc.
The purchase price was determined by negotiations among the parties and the
Company obtained the opinion of an investment banker with regard to the
fairness of the transaction to the Company.
TOWER PURCHASE. In 1995 the Company purchased a transmission tower from
a subsidiary of Consolidated Telephone Company. The total purchase price was
$67,000, of which payments of $17,000 were made in each of 1995, 1996, and
1997. The remainder of the purchase price was paid on January 1, 1998. The
Company paid interest on any outstanding balance of the purchase price at 5%
per annum.
ROAMING ARRANGEMENTS. The Company has roaming agreements with United
States Cellular Corporation ("US Cellular"), a subsidiary of Telephone & Data
Systems, Inc. ("TDS"), which beneficially owns more than 5% of the Company's
outstanding Common Stock. Under the roaming agreements, the Company pays for
service provided to its customers in areas served by US Cellular and receives
payment for service provided to customers of US Cellular in the Company's
cellular service areas. The rates of reimbursement are negotiated by the
Company and US Cellular and reflect rates charged by all carriers. Roaming
charges are passed through to the customer. During 1998, charges to the
Company's customers for services provided by US Cellular totaled $978,557 and
charges to customers of US Cellular by the Company were $314,390.
RESALE OF PAGING SERVICE. The Company has entered into an agreement
with American Paging, Inc., a subsidiary of TDS, to resell certain paging
service provided by American Paging. Under the terms of this agreement, the
Company was charged $158,025 during 1998 for wholesale access fees and paging
equipment.
CELLULAR AND PAGING SERVICE AND EQUIPMENT. Several of the Company's
shareholders are customers of the Company for cellular and paging services
and, in connection therewith, also purchase or lease cellular phones and
pagers from the Company. During 1998, Arvig Enterprises, Inc. and its
affiliates, Consolidated Telephone Company and its affiliates, and Paul
Bunyan and its affiliates were billed $77,108, $6,967, and $25,571,
respectively, for such service and equipment.
OTHER MATTERS
The Board of Directors is not aware that any matter other than those
described in the Notice will be presented for action at the meeting. If,
however, other matters do properly come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote the proxied
shares in accordance with their best judgment on such matters.
18
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company's 2000 Annual Meeting of Shareholders is expected to be held
on or about May 18, 2000, and proxy materials in connection with that meeting
are expected to be mailed on or about April 5, 2000. In order to be included
in the Company's proxy materials for the 2000 Annual Meeting, shareholder
proposals prepared in accordance with the proxy rules must be received by the
Company on or before December 8, 1999.
In addition, pursuant to Rule 14a-4 under the Exchange Act, a
shareholder must give notice to the Company prior to February 21, 2000, of
any proposal which such shareholder intends to raise at the 2000 Annual
Meeting. If the Company receives notice of such proposal on or after
February 21, 2000, under Rule 14a-4, the persons named in the proxy solicited
by the Company's Board of Directors for the 2000 Annual Meeting may exercise
discretionary voting power with respect to such proposal.
Further, under the Company's Bylaws, for business to be properly brought
before the 2000 Annual Meeting, a shareholder must give notice in writing to
the Secretary of the Company no later than March 30, 2000. Any proposal not
submitted by such date will not be considered at the 2000 Annual Meeting.
COPIES OF REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, ACCOMPANIES THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT.
ADDITIONAL COPIES ARE AVAILABLE TO ANY SHAREHOLDER UPON WRITTEN REQUEST.
REQUESTS SHOULD BE DIRECTED TO INVESTOR RELATIONS, 3905 DAKOTA STREET S.W.,
P. O. BOX 2000, ALEXANDRIA, MINNESOTA 56308. THE COMPANY WILL FURNISH ANY
EXHIBIT FILED WITH THE REPORT ON FORM 10-K UPON PAYMENT OF THE EXPENSE OF
COPYING SUCH EXHIBIT.
It is important that Proxies be returned promptly. Shareholders are
urged to sign, date, and forward the Proxy by return mail.
BY ORDER OF THE BOARD OF DIRECTORS
Don C. Swenson
Secretary
April 7, 1999
19
<PAGE>
-----------------------
COMPANY #
CONTROL #
-----------------------
THERE ARE TWO WAYS TO VOTE YOUR PROXY.
VOTE BY PHONE
1-800-240-6326
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week. Have your proxy card in hand when you call. You will be prompted to
enter your 3-digit company number and 7-digit control number, which are
located in the upper right-hand corner of this card. Then follow the simple
instructions given over the phone.
NOTE: IF VOTING BY PHONE
Your telephone vote authorizes the named proxies in the same manner as if you
marked, signed and returned the proxy card. The deadline for telephone
voting is noon CDT, one business day before the annual meeting.
VOTE BY MAIL
POSTAGE-PAID ENVELOPE PROVIDED
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided. If you vote by phone, do not return your proxy
card.
[LOGO]
RURAL CELLULAR CORPORATION
- Please detach here -
1. ELECTION OF TWO DIRECTORS (CLASS II) TO
SERVE A TERM OF THREE YEARS:
01 George M. Revering 02 Don C. Swenson
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed (except as to vote for both
marked to the nominees listed.
contrary below):
(Instructions: To withhold authority to vote for any individual nominee,
write the number(s) in the box provided to the right.) / /
2. PROPOSAL TO RATIFY the selection of Arthur Andersen LLP as independent
accountants for the Company's 1999 fiscal year.
/ / For / / Against / / Abstain
3. IN THEIR DISCRETION, the Proxies are authorized to vote upon such other
and further business as may be brought before the meeting or any
adjournment(s) thereof.
This proxy, when properly executed, will be voted as directed or, if no
direction, FOR each proposal.
Address Change? Mark Box I Plan to Attend the Meeting
Indicate changes below: / / / /
Dated:
-------------------------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
Signature(s) exactly as your name appears hereon
(Note: Executors, guardians, trustees, etc. should add their
title as such and where more than one executor, etc. is named,
a majority must sign. If the signer is a corporation, please
sign full corporate name by a duly authorized officer.)
<PAGE>
[LOGO]
RURAL CELLULAR CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 20, 1999
2:00 P.M.
3905 DAKOTA STREET S.W.
ALEXANDRIA, MINNESOTA
RURAL CELLULAR CORPORATION
P. O. BOX 2000
ALEXANDRIA, MINNESOTA 56308-2000 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL
MEETING ON MAY 20, 1999.
The shares of Class A Common Stock you hold in your account will be voted as
you specify below.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
By signing the proxy, you revoke all prior proxies and appoint Richard P.
Ekstrand and Don C. Swenson, and each of them, with full power of
substitution, to vote your shares of Class A Common Stock on the matters
shown on the reverse side and any other matters that may come before the
Annual Meeting and all adjournments thereof.
SEE REVERSE SIDE FOR VOTING INSTRUCTIONS
<PAGE>
-------------------
COMPANY #
CONTROL #
-------------------
THERE ARE TWO WAYS TO VOTE YOUR PROXY.
VOTE BY PHONE
1-800-240-6326
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.
Have your proxy card in hand when you call. You will be prompted to enter your
3-digit company number and 7-digit control number, which are located in the
upper right-hand corner of this card. Then follow the simple instructions
given over the phone.
NOTE: IF VOTING BY PHONE
Your telephone vote authorizes the named proxies in the same manner as if you
marked, signed and returned the proxy card. The deadline for telephone
voting is noon CDT, one business day before the annual meeting.
VOTE BY MAIL
POSTAGE-PAID ENVELOPE PROVIDED
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided. If you vote by phone, do not return your proxy
card.
[RCC LOGO]
[ARROW] Please detach here [ARROW]
1. ELECTION OF TWO DIRECTORS (CLASS II) TO
SERVE A TERM OF THREE YEARS:
01 George M. Revering 02 Don C. Swenson
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed (except as to vote for both
marked to the nominees listed.
contrary below):
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write the number(s) in the box provided to the right.) / /
2. PROPOSAL TO RATIFY the selection of Arthur Andersen LLP
as independent accountants for the Company's 1999 fiscal year.
/ / For / / Against / / Abstain
3. IN THEIR DISCRETION, the Proxies are authorized to vote upon such other and
further business as may be brought before the meeting or any adjournment(s)
thereof.
This proxy, when properly executed, will be voted as directed or, if no
direction, FOR each proposal.
Address Change? Mark Box I Plan to Attend the Meeting
Indicate changes below: / / / /
Dated:
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Signature(s) exactly as your name appears hereon
(Note: Executors, guardians, trustees, etc. should add their
title as such and where more than one executor, etc. is
named, a majority must sign. If the signer is a corporation,
please sign full corporate name by a duly authorized officer.)
<PAGE>
[RCC LOGO]
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 20, 1999
2:00 P.M.
3905 DAKOTA STREET S.W.
ALEXANDRIA, MINNESOTA
RURAL CELLULAR CORPORATION
P. O. BOX 2000
ALEXANDRIA, MINNESOTA 56308-2000 PROXY
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 20, 1999.
The shares of Class B Common Stock you hold in your account will be voted as
you specify below.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
By signing the proxy, you revoke all prior proxies and appoint Richard P.
Ekstrand and Don C. Swenson, and each of them, with full power of substitution,
to vote your shares of Class B Common Stock on the matters shown on the reverse
side and any other matters that may come before the Annual Meeting and all
adjournments thereof.
SEE REVERSE SIDE FOR VOTING INSTRUCTIONS
