<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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
LODGENET ENTERTAINMENT 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>
[LOGO]
3900 WEST INNOVATION STREET
SIOUX FALLS, SOUTH DAKOTA 57107
------------------------
April 12, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of LodgeNet Entertainment Corporation. The meeting will be held on Wednesday,
May 12, 1999, at 9:00 a.m., Central Daylight Time, at LodgeNet's National
Headquarters and Distribution Center, 3900 West Innovation Street, Sioux Falls,
South Dakota 57107. We encourage you to read carefully the enclosed Notice of
Annual Meeting and Proxy Statement.
We hope you will be able to attend the Annual Meeting. Whether or not you
plan to attend, we urge you to complete, sign, date and promptly return the
enclosed proxy card in the enclosed envelope in order to make certain that your
shares will be represented at the Annual Meeting. Your vote is important,
whether you own a few shares or many.
Very truly yours,
<TABLE>
<S> <C>
/s/ Tim C. Flynn /s/ Scott C. Petersen
Tim C. Flynn Scott C. Petersen
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
LODGENET ENTERTAINMENT CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of its
Board of Directors, the Annual Meeting of Stockholders (the "Meeting") of
LodgeNet Entertainment Corporation (the "Company") will be held at LodgeNet's
National Headquarters and Distribution Center, 3900 West Innovation Street,
Sioux Falls, South Dakota 57107 on Wednesday, May 12, 1999, at 9:00 a.m.,
Central Daylight Time, for the purpose of considering and voting upon the
following matters:
TO RECEIVE AND CONSIDER:
The report of Management on the business of the Company and the Company's
audited financial statements for the fiscal year ended December 31, 1998,
together with the report thereon of Arthur Andersen LLP, the Company's
independent public accountants.
TO ACT ON:
1. ELECTION OF DIRECTORS. To elect two persons to the Board of Directors
of the Company to serve for a three-year term expiring in 2002 and until
such persons' successors are elected and qualified. The Board of
Directors' nominees are:
Tim C. Flynn
R. F. Leyendecker
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To
ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1999.
3. OTHER BUSINESS. To transact such other business as may properly come
before the Meeting and at any and all adjournments thereof.
Only those stockholders of record on March 24, 1999 shall be entitled to
notice of and to vote in person or by proxy at the Meeting.
The Proxy Statement which accompanies this notice contains additional
information regarding the proposals to be considered at the Meeting and
stockholders are encouraged to read it in its entirety.
As set forth in the enclosed Proxy Statement, the proxy is solicited by and
on behalf of the Board of Directors of the Company. It is expected that these
materials will be first mailed to stockholders on or about April 12, 1999.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO BE SURE
THAT YOUR STOCK IS VOTED. YOUR VOTE IS IMPORTANT, WHETHER YOU OWN A FEW SHARES
OR MANY.
By Order of the Board of Directors,
/s/ Daniel P. Johnson
Daniel P. Johnson
SECRETARY
Dated: April 12, 1999
<PAGE>
LODGENET ENTERTAINMENT CORPORATION
3900 WEST INNOVATION STREET
SIOUX FALLS, SOUTH DAKOTA 57107
(605) 988-1000
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
---------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of LodgeNet Entertainment Corporation (the
"Company") for use at the Annual Meeting of Stockholders (the "Meeting") of the
Company to be held on Wednesday, May 12, 1999, at LodgeNet's National
Headquarters and Distribution Center, 3900 West Innovation Street, Sioux Falls,
South Dakota 57107 at 9:00 a.m., Central Daylight Time, and at any and all
adjournments thereof. Tim C. Flynn and Scott C. Petersen, the designated
proxyholders (the "Proxyholders"), are members of the Company's management. This
Proxy Statement and the enclosed proxy card (the "Proxy") and other enclosures
will be first mailed to stockholders on or about April 12, 1999. Only
stockholders of record on March 24, 1999 (the "Record Date") are entitled to
vote in person or by proxy at the Meeting.
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Meeting will be:
1. ELECTION OF DIRECTORS. To elect two persons to the Board of Directors
of the Company to serve for a three-year term expiring in 2002 and until
such persons' successors are elected and qualified. The Board of
Directors' nominees are:
Tim C. Flynn
R. F. Leyendecker
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To
ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1999.
3. OTHER BUSINESS. To transact such other business as may properly come
before the Meeting and at any and all adjournments thereof.
VOTING AND REVOCABILITY OF PROXIES
A Proxy for use at the Meeting is enclosed. The Proxy must be signed and
dated by you or your authorized representative or agent. You may revoke a Proxy
at any time before it is exercised at the Meeting by submitting to the Secretary
of the Company a written revocation of such proxy or a duly executed proxy
bearing a later date or by voting in person at the Meeting.
Unless revoked, the shares of common stock represented by Proxies will be
voted in accordance with the instructions given thereon. In the absence of any
instruction in the Proxy, your shares of common stock will be voted: (i) "FOR"
the election of the nominees for director set forth herein; and (ii) "FOR" the
ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1999.
<PAGE>
The enclosed Proxy confers discretionary authority with respect to any
amendments or modifications of the proposals or other business which properly
may be brought before the Meeting. As of the date hereof, management is not
aware of any such amendments or modifications or other matters to be presented
for action at the Meeting. However, if any other matters properly come before
the Meeting, the Proxies solicited hereby will be voted by the Proxyholders in
accordance with the recommendation and in the discretion of the Board of
Directors.
COSTS OF SOLICITATION OF PROXIES
This Proxy is made on behalf of the Board of Directors of the Company and
the Company will bear the costs of solicitation. The expense of preparing,
assembling, printing and mailing this Proxy Statement and the materials used in
this solicitation of Proxies also will be borne by the Company. It is
contemplated that Proxies will be solicited principally through the mail, but
directors, officers and regular employees of the Company may solicit Proxies
personally or by telephone. Although there is no formal agreement to do so, the
Company may reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding these proxy materials to
their principals. The Company does not intend to utilize the services of other
individuals or entities not employed by or affiliated with the Company in
connection with the solicitation of Proxies.
OUTSTANDING SECURITIES AND VOTING RIGHTS
The authorized capital of the Company consists of 20,000,000 shares of
common stock, par value $.01 per share, of which 11,942,387 shares were issued
and outstanding on the Record Date, and 5,000,000 shares of preferred stock,
$.01 par value, of which there are no shares outstanding.
A majority of the outstanding shares of common stock constitutes a quorum
for the conduct of business at the Meeting. Each stockholder is entitled to one
vote, in person or by proxy, for each share of common stock standing in his or
her name on the books of the Company as of the Record Date on any matter
submitted to the stockholders. The Company's Certificate of Incorporation does
not authorize cumulative voting. In the election of directors, the persons
receiving the highest number of votes will be elected. The ratification of
Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending December 31, 1999 requires the affirmative vote of a majority
of the common stock represented and entitled to vote at the Meeting. Shares
represented by a proxy card marked as abstaining on any proposal will be counted
as a vote against that matter. If a broker which is the record holder of certain
shares indicates on a proxy that it does not have discretionary authority to
vote on a particular matter as to such shares, or if shares are not voted in
other circumstances in which proxy authority is defective or has been withheld
with respect to a particular matter, these non-voted shares will be counted for
quorum purposes but are not deemed to be present or represented for purposes of
determining whether stockholder approval of that matter has been obtained.
Brokers and nominees holding common stock in "street name" which are members
of a stock exchange are required by the rules of the exchange to transmit this
Proxy Statement to the beneficial owner of the common stock and to solicit
voting instructions with respect to the matters submitted to the stockholders.
In the event any such broker or nominee has not received instructions from the
beneficial owner by the date specified in the statement accompanying such
material, the broker or nominee may give or authorize the giving of a Proxy to
vote such common stock on the matters to be considered at the Meeting; PROVIDED,
HOWEVER, that the broker or nominee may not give or authorize the giving of a
Proxy for any matter if it has notice of any contest with respect to any matter,
and, PROVIDED, FURTHER, that the broker or nominee may not vote the common stock
"FOR" any matter which substantially affects the rights or privileges of the
common stock without specific instructions from the beneficial owner. If you
hold your common stock in "street name" and you fail to instruct your broker or
nominee as to how to vote your common stock, your broker or nominee may, in its
discretion, vote your common stock "FOR" the election of the Board of Directors'
nominees and "FOR" the proposal to ratify the appointment of Arthur
2
<PAGE>
Andersen LLP as the Company's independent public accountants for the fiscal year
ending December 31, 1999.
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of common stock as
of the Record Date by each person known to the Company to be the record or
beneficial owner of more than five percent of the outstanding shares of common
stock (other than depositories holding shares of common stock in "street name"),
by each director and nominee for director, each executive officer named in the
Summary Compensation Table, and by all directors and executive officers, as a
group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER(1)(2) OWNERSHIP(3) OF CLASS(3)
- ---------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
Tim C. Flynn, Chairman of the Board of Directors(4)....... 654,427 5.5%
Scott C. Petersen, President and Chief Executive
Officer(4).............................................. 409,725 3.4%
John M. O'Haugherty, Senior Vice President and Chief
Operating Officer(4).................................... 95,617 *
Douglas D. Truckenmiller, Former Vice President, Chief
Operating Officer, ResNet Communications,
L.L.C.(4)(5)(14)........................................ 195,111 1.6%
David M. Bankers, Senior Vice President, Chief Technology
Officer(4).............................................. 66,256 *
Jeffrey T. Weisner, Senior Vice President, Chief Financial
Officer(4).............................................. 102,261 *
Steven D. Truckenmiller, Vice President, Guest Pay
Services(4)(14)......................................... 157,343 1.3%
David Austad, Director(6)................................. 25,797 *
Lawrence Flinn, Jr., Director(6).......................... 125,797 1.0%
Richard R. Hylland, Director(7)(8)........................ 502,763 4.2%
R. F. Leyendecker, Director(7)(8)......................... 507,763 4.2%
Alex Brown Investment Management(9)....................... 871,700 7.3%
Dimensional Fund Advisors, Inc.(10)....................... 665,600 5.6%
Investment Advisers, Inc.(11)............................. 682,925 5.7%
Northwestern Networks, Inc.(7)(8)......................... 471,966 4.0%
Wellington Management Company LLP(12)..................... 1,045,300 8.8%
Woodland Partners LLC(13)................................. 687,750 5.8%
Directors and Executive Officers(4)
(A group of 17 persons)................................. 2,445,269 20.5%
</TABLE>
- ------------------------
* Less than 1%.
(1) Unless otherwise indicated, the address of such person is 3900 West
Innovation Street, Sioux Falls, South Dakota 57107.
(2) Each named person has sole voting and investment power with respect to the
shares listed, except as noted below.
(3) Shares which the person (or group) has the right to acquire within 60 days
after the Record Date are deemed to be outstanding in calculating the
percentage ownership of the person (or group) but are not deemed to be
outstanding as to any other person (or group).
3
<PAGE>
(4) Includes shares issuable upon the exercise of options to purchase Common
Stock which the person (or group) has the right to acquire within 60 days
after the Record Date as follows: Mr. Flynn, 62,222 shares; Mr. Petersen,
235,343 shares; Mr. D. Truckenmiller, 51,111 shares; Mr. O'Haugherty,
92,617 shares; Mr. Weisner, 55,486 shares; Mr. Bankers, 68,256 shares; and
Mr. S. Truckenmiller, 37,361 shares; and all directors and executive
officers as a group, 776,896 shares. Does not include 21,144 shares held in
the Company's 401(k) Plan of which Mr. Flynn and Mr. Petersen are Trustees;
and for Mr. Flynn, includes 1,200 shares owned by Mr. Flynn's minor
children; and for Mr. Petersen, includes 150 shares owned by Mr. Petersen's
minor children.
(5) ResNet Communications, L.L.C. ("ResNet") is a majority-owned subsidiary of
ResNet Communications, Inc., which is a wholly-owned subsidiary of the
Company. On November 30, 1998, the business of ResNet was merged into
Global Interactive Communications Corporation ("GICC") and Mr. D.
Truckenmiller left the employ of the Company and accepted a position with
GICC.
(6) Includes 23,000 shares of Common Stock which each of Messrs. Austad and
Flinn have the right to acquire by the exercise of vested stock options.
(7) Messrs. Hylland and Leyendecker are directors of Northwestern Networks,
Inc. ("NNI"), which is a subsidiary of Northwestern Public Service Company
("NPSC"). The shares attributable to Messrs. Hylland and Leyendecker
include 28,000 and 33,000 shares, respectively, which they have the right
to acquire by the exercise of vested stock options, and 471,966 shares held
by NNI as a result of their being directors of NNI. Messrs. Hylland and
Leyendecker disclaim beneficial ownership of all such shares.
(8) The address of NNI and Mr. Leyendecker is 33 Third Street, S.E., Huron,
South Dakota 57350-1318; the address of Mr. Hylland is 125 S. Dakota
Avenue, Suite 1100, Sioux Falls, South Dakota 57104-6403; share ownership
information based on information provided by NNI.
(9) The address for Alex Brown Investment Management is 217 E. Redwood Street,
Suite 1400, Baltimore, Maryland, 21202; address and share ownership
information based on Schedule 13G filed for the year ended December 31,
1998.
(10) The address of Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California, 90401; address and share ownership
information based on Schedule 13G filed for the year ended December 31,
1998.
(11) The address of Investment Advisers, Inc. is 3700 First Bank Place, Box 357,
Minneapolis, Minnesota 55440; address and share ownership information based
on Schedule 13G filed for the year ended December 31, 1998.
(12) The address of Wellington Management Company LLP is 75 State Street,
Boston, Massachusetts 02109; address and share ownership information based
on Schedule 13G filed for the year ended December 31, 1998.
(13) The address of Woodland Partners LLC is 60 South Sixth Street, Suite 3750,
Minneapolis, Minnesota 55402; address and share ownership information based
on Schedule 13G filed for the year ended December 31, 1998.
(14) Douglas D. Truckenmiller and Steven D. Truckenmiller are brothers.
4
<PAGE>
ELECTION OF DIRECTORS
BOARD OF DIRECTORS AND NOMINEES
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors shall be determined from time to time by the Board of
Directors but may not be less than three nor more than nine. The Board of
Directors is currently composed of six members. The Bylaws further provide for
the division of the directors into three classes of approximately equal size,
with directors in each class elected for a three-year term and approximately
one-third of the directors elected each year.
The directors nominated for reelection are Tim C. Flynn and R. F.
Leyendecker. Messrs. Flynn and Leyendecker are completing the terms to which
they were elected by the stockholders in 1996. Each nominee has indicated his
willingness to serve and, unless otherwise instructed, Proxies will be voted in
favor of such nominees. In the event that either Mr. Flynn or Mr. Leyendecker
should be unable to serve as a director, it is intended that the Proxies will be
voted for the election of such substitute nominee(s), if any, as shall be
designated by the Board of Directors. Management has no reason to believe that
the nominees will be unavailable to serve. David Austad is also completing the
term to which he was elected by the stockholders in 1996. Mr. Austad has
indicated that he would not be available to serve for another term. As of the
date of this document the Board of Directors has not recommended a nominee for
that directorship.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
The following table sets forth certain information, as of the Record Date,
with respect to the nominees for director and the continuing directors of the
Company. The number of shares of common stock beneficially owned by the nominees
for director and the continuing directors is set forth above under "Beneficial
Ownership of Principal Stockholders and Management."
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
DIRECTOR
(1)/ TERM
NAME AGE PRINCIPAL OCCUPATION OR EMPLOYMENT FOR THE PAST FIVE YEARS EXPIRES
- -------------------------- --- ----------------------------------------------------------------- ------------
<S> <C> <C> <C>
NOMINEES FOR DIRECTOR:
Tim C. Flynn.............. 49 Chairman of the Board of Directors of the Company. Mr. Flynn 1983/1999
founded the Company in 1980 and served as its President and
Chief Executive Officer from its incorporation in 1983 until
July 1998.
R.F. Leyendecker.......... 53 President and Chief Executive Officer of NorthWestern Energy 1986/1999
Corporation and President and Chief Executive Officer of NorCom
Advanced Technologies, 1998-present; Vice President--Market
Development, Northwestern Public Service Company* ("NPSC"),
1996-1997; Vice President--Energy Services, NPSC from
1994-1996.
OTHER DIRECTORS:
David Austad.............. 38 President and Chief Executive Officer of AGS, Inc. from 1987 to 1994/1999
present; President and Chief Executive Officer, The Austad
Company, Inc., from 1988-1996.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
DIRECTOR
(1)/ TERM
NAME AGE PRINCIPAL OCCUPATION OR EMPLOYMENT FOR THE PAST FIVE YEARS EXPIRES
- -------------------------- --- ----------------------------------------------------------------- ------------
<S> <C> <C> <C>
Richard R. Hylland........ 38 President, Chief Operating Officer and Director of NorthWestern 1990/2000
Corporation from 1998-present; Vice Chairman of NorthWestern
Growth Corporation from 1994-present; Vice Chairman of
Cornerstone Propane GP, Inc.; the Managing General Partner of
Cornerstone Propane Partners, L.P.*; Vice Chairman of Blue Dot.
Service, Inc.; Vice Chairman of Expanets, Inc.; Chairman of
Franklin Industries, Director of Lucht Inc., NorthWestern
Energy Corporation, NorthWestern Services Corporation and NNI.
Lawrence Flinn, Jr........ 63 Chairman Emeritus of United Video Satellite Group, Inc.*, since 1994/2001
1997; previously was Chairman, Chief Executive Officer and
director of United Video Satellite Group, Inc.
Scott C. Petersen......... 43 President and Chief Executive Officer of the Company. Mr. 1993/2001
Petersen joined the Company in 1987 as Senior Vice President
for Corporate and Legal Affairs, was appointed Executive Vice
President and Chief Operating Officer in 1991 and was appointed
President and Chief Executive Officer in July 1998.
</TABLE>
- ------------------------
* Denotes public company.
(1) For purposes of this table, the year in which an individual first became a
director of the Company shall be the year in which such individual was
appointed to the Board of Directors of the Company or its South Dakota
predecessor.
PROCEDURES FOR NOMINATING DIRECTORS
The procedures for nominating directors, other than by the Board of
Directors, are set forth in the Bylaws. Nominations for the election of
directors, other than by the Board of Directors, must be made by a stockholder
entitled to vote for the election of directors by giving timely written notice
to the Secretary of the Company at the Company's principal office. Such notice
must be received at least 90 days prior to the date on which, in the immediately
preceding calendar year, the Company's Annual Meeting of Stockholders for such
year was held; PROVIDED, HOWEVER, that in the event the date of the Annual
Meeting is changed by more than 30 days from such anniversary date, such
stockholder's notice must be received by the Secretary of the Company no later
than 10 days after notice or prior public disclosure of the meeting is first
given or made to stockholders. The stockholder's notice must be in writing and
must set forth as to each proposed nominee all information relating to such
person that is required to be disclosed in solicitations of proxies pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including, but not limited to, such person's written consent to
being named in the proxy statement as a nominee and to serving as a director, if
elected. The stockholder notice must also set forth the name and address of the
nominating stockholder. If the stockholder fails to comply with the above
provisions, then the Chairman of the meeting may declare that the nomination was
not made in accordance with the procedures prescribed by the Bylaws and the
defective nomination may be disregarded.
6
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is composed of Messers.
Hylland, Austad and Flinn, each of whom is a disinterested director. The Audit
Committee provides assistance to the Board in satisfying its responsibilities
relating to accounting, auditing, operating and reporting practices of the
Company. The Audit Committee met four times during 1998.
The Compensation Committee of the Board of Directors is composed of Messrs.
Austad, Flinn and Leyendecker, each of whom is a disinterested director. The
Compensation Committee is responsible for establishing compensation policies,
for setting compensation levels for the Company's executive officers and serves
as disinterested administrators of the Plan. The Compensation Committee met five
times during 1998. For a description of the functions of the Compensation
Committee, see "ELECTION OF DIRECTORS--Executive Compensation--REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION."
The Board of Directors met thirteen times during 1998. All of the persons
who were directors of the Company during 1998 attended at least 75% of the total
number of meetings of the Board of Directors and the committees of the Board of
Directors on which he served.
DIRECTOR COMPENSATION
The compensation to be paid to each non-employee director is set at $20,000
per year, $300 for each committee meeting attended, and reimbursement for travel
and related expenses for attendance at Board and Committee meetings. The
non-employee directors can elect to receive their annual retainer and meeting
fees in the form of cash, options, shares of common stock or a combination
thereof in accordance with such rules as established by the Compensation
Committee. Non-employee directors automatically receive upon their initial
election or appointment to the Board a nonqualified stock option to purchase
6,000 shares of common stock under the Plan plus an additional 6,000 options to
be granted on each anniversary of such election during the term of service.
COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16 OF THE EXCHANGE ACT
Under Section 16(a) of the Exchange Act, the Company's directors, executive
officers and any persons holding ten percent or more of the common stock are
required to report their ownership of common stock and any changes in that
ownership to the Securities and Exchange Commission (the "SEC") and to furnish
the Company with copies of such reports. Specific due dates for these reports
have been established and the Company is required to report in this Proxy
Statement any failure to file on a timely basis by such persons. To the
Company's knowledge, based solely upon a review of copies of such reports
received by the Company which were filed with the SEC from January 1, 1998
through the Record Date, and upon written representations from such persons that
no other reports were required, the Company has been advised that all reports
required to be filed under Section 16(a) have been timely filed with the SEC
except for Form 4 reports for Steven D. Truckenmiller (filed March 9, 1999) and
Jeffrey T. Weisner (filed March 10, 1999) and Form 5 reports for David Austad
(filed March 10, 1999), Richard R. Hylland (filed March 10, 1999), R. F.
Leyendecker (filed March 10, 1999), David Bankers (filed March 11, 1999), John
O'Haugherty (filed March 11, 1999), Steve Pofahl (filed March 11, 1999),
Theodore Racz (filed March 11, 1999), Steven D. Truckenmiller (filed March 11,
1999), Jeffrey T. Weisner, (filed March 11, 1999), Lawrence Flinn Jr. (filed
March 24, 1999), Tim C. Flynn (filed April 2, 1999), and Scott C. Petersen
(filed April 2, 1999).
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chairman, the Chief Executive Officer ("CEO"), the former Vice President, Chief
Operating Officer of ResNet and the four most highly compensated executive
officers other than the CEO (determined as of the end of the last fiscal year)
(the "Named Executives") whose total annual salary and bonus exceeded $100,000
for the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------------------- STOCK
OTHER ANNUAL OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) (#)
- ----------------------------------- ---- --------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Tim C. Flynn....................... 1998 267,800 113,713 22,600 100,000
Chairman of the Board of 1997 260,000 55,765 21,793 20,000
Directors
1996 250,000 92,404 28,614 --
Scott C. Petersen.................. 1998 284,663(2) 181,171 23,781 100,000
President, Chief Executive 1997 250,000 53,620 21,003 20,000
Officer
1996 240,000 88,708 27,386 --
Douglas D. Truckenmiller........... 1998 152,757 -- 336,972 --
Former Vice President, Chief 1997 160,000 18,669 14,293 --
Operating
Officer, ResNet Communications, 1996 156,200(3) 24,000 13,801 75,000
L.L.C.
John M. O'Haugherty................ 1998 164,800 60,114 14,875 40,000
Senior Vice President, Chief 1997 160,000 59,782 14,293 15,000
Operating
Officer 1996 125,400 37,073 11,216 --
David M. Bankers................... 1998 150,000 53,078 13,765 40,000
Senior Vice President, Chief 1997 125,000 16,600 11,668 12,500
Technology
Officer 1996 114,500 33,850 10,754 --
Jeffrey T. Weisner................. 1998 140,000 46,179 13,015 32,500
Senior Vice President, Chief 1997 125,000 16,600 11,668 12,500
Financial
Officer 1996 109,000 32,224 9,986 --
Steven D. Truckenmiller............ 1998 125,000 28,154 11,890 25,000
Vice President, Guest Pay 1997 120,000 54,082 11,293 10,000
Services
1996 109,000 32,224 10,349 --
</TABLE>
- ------------------------
(1) Reflects compensation paid to the Named Executives by the Company in order
for them to purchase individual supplemental insurance coverage and other
benefits. With respect to Mr. D. Truckenmiller also reflects moving
expenses, unused vacation and severance compensation.
(2) On July 21, 1998 Mr. Petersen was appointed President and Chief Executive
Officer at an annual salary of $320,000. Prior to such appointment, Mr.
Petersen was Executive Vice President and Chief Operating Officer at an
annual salary of $257,500.
(3) In February 1996 Mr. D. Truckenmiller was appointed Vice President, Chief
Operating Officer of ResNet. Prior to such appointment, Mr. D. Truckenmiller
was Vice President, Technical Operations of the Company. Compensation for
1996 was based on an annual salary of $114,500 for the month of January and
an annual salary of $160,000 thereafter.
8
<PAGE>
EMPLOYMENT AGREEMENTS
In connection with the Company's initial public offering in October 1993,
the Company entered into an employment agreement with Mr. Flynn, dated August
16, 1993, retaining his services as the Company's President and Chief Executive
Officer. The initial term of this agreement was extended for an additional year
on January 1, 1996 and were then automatically extended each January 1
thereafter unless prior to any such date either Mr. Flynn or the Company
notified the other of an election not to extend. On July 21, 1998, the Company
extended the term of the agreement until July 31, 2000. Mr. Flynn's salary for
1998 was set at $267,800 per year. In addition to his salary, Mr. Flynn is
entitled to participate in any bonus program, insurance program, stock benefit
plan and other employment benefits that may be provided by the Company from time
to time to its executive officers.
Mr. Flynn's employment may be terminated prior to the expiration of the term
of the agreement (i) automatically upon Mr. Flynn's death, disability or
retirement at age 65; (ii) by the Company at any time, with or without cause, by
action of its Board of Directors; or (iii) by Mr. Flynn or the Company within
three months after a change of control of the Company. In the event of any such
termination of employment, the following termination benefits apply: (x) for any
termination, other than for cause (including a termination due to death,
disability or retirement at age 65), the Company will pay a pro rata portion of
the maximum bonus for the then current year under any bonus program in which Mr.
Flynn may be participating at the time, unless such payment is not permitted by
the terms of the plan; and (y) for any termination by the Board of Directors
without cause, the Company will continue to pay Mr. Flynn's salary at the rate
last in effect prior to termination for the balance of the term of his
employment agreement or until his earlier death or reaching age 65, and the
Company will continue at its expense any health, disability and life insurance
coverage in effect immediately prior to his termination. In the event of a
termination after a change in control involving the Company, the terms of Mr.
Flynn's agreement will be superseded by the terms and conditions of the
Severance Agreements described below. The employment agreement contains a
covenant by Mr. Flynn not to compete with the Company, or to work for a
competing business, for the term of his employment and six months thereafter,
provided that employment with a cable television vendor will not be considered
to be a competing business.
The Company entered into an employment agreement with Mr. Petersen, dated
August 16, 1993, retaining his services as the Company's Executive Vice
President and Chief Operating Officer. On July 21, 1998, Mr. Petersen became
President and Chief Executive Officer and the Company continued the employment
agreement and extended the term until July 31, 2000. At that time Mr. Petersen's
salary was increased from $257,500 to $320,000 per year. Other than salary, the
terms of his employment agreement are the same as those in Mr. Flynn's agreement
summarized above.
In July 1995, the Compensation Committee authorized the Company to enter
into agreements (the "Severance Agreements") with the Company's President and
its other executive officers, including the officers named in the Summary
Compensation Table, providing for the payment of certain compensation and other
benefits in the event of a covered termination of the executive's employment
within two years following a "change in control" involving the Company. No
compensation is payable to any executive under the Severance Agreements unless
(i) there has been a change in control and (ii) the executive's employment with
the Company shall have been terminated (including a substantial reduction in
duties or compensation, but excluding termination as a result of the death or
permanent disability of the executive or for cause or voluntary retirement). A
"change in control" is generally defined as the occurrence of any of the
following: (i) any person or group becomes the beneficial owner of securities
representing 30% or more of the voting power of the Company's outstanding
capital stock having the right to vote in the election of directors (excluding
any such transaction that is effected at an actual or implied average valuation
of less than $6.75 per share of common stock); (ii) a majority of the members of
the Board shall not for any reason be the individuals who at the beginning of
such period constitute the Board or persons nominated by such members; (iii) any
merger, consolidation or sale of all or substantially all of the assets of the
Company (meaning assets representing 30% or more of the net tangible assets of
the Company or
9
<PAGE>
generating 30% or more of the Company's operating cash flow), excluding a
business combination or transaction in which: (a) the stockholders of the
Company prior to such transaction continue to represent more than 70% of the
voting power of the Company immediately after giving effect to such transaction;
(b) no person or group becomes the beneficial owner of 30% or more of the
Company's voting stock; or (c) the purchase price results in an actual or
implied average valuation of less than $6.75 per share of common stock; (iv) the
adoption of any plan or proposal for the liquidation or dissolution of the
Company; or (v) the occurrence of any other event that would be required to be
reported as a change in control in response to Item 6(e) of Schedule 14A of
Regulation 14A of the Exchange Act.
Upon a covered termination, the executive is entitled to receive a lump sum
payment equal to the compensation the executive would have received over a
30-month period, a pro rata portion of any bonus the executive would have
received for the year in which such termination occurs, any stock options
previously granted to the executive will become fully vested, and the executive
will be entitled to the continuation of the insurance and other welfare benefits
then being received by such executive for a 30-month period. The Severance
Agreements contain a covenant not to compete with the Company for a period of
six months following a covered termination, and executives are not required to
mitigate any termination benefits (nor will such benefits be reduced by
compensation received from other employment). The Severance Agreements terminate
upon the earlier of: (i) five years (subject to automatic one-year extensions
unless the Board otherwise notifies the executive); (ii) the termination of the
executive's employment other than pursuant to a covered termination described
above; (iii) two years from the date of a change in control of the Company if
there has not been a covered termination; and (iv) prior to a change in control
upon the executive's ceasing to be an executive officer of the Company.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during the fiscal year ended December 31, 1998 to the Named Executives.
OPTION(1) GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------- POTENTIAL REALIZABLE
NUMBER OF AT ASSUMED ANNUAL
SECURITIES PERCENT OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OPTION TERM (3)
GRANTED EMPLOYEES IN 1998 OR BASE PRICE EXPIRATION ---------------------
NAME (#)(2) (%) ($/SH) DATE 5% ($) 10% ($)
- ------------------------------ ------------- ------------------- ------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tim C. Flynn.................. 100,000 15.8 10.96 3/16/2008 689,269 1,746,742
Scott C. Petersen............. 100,000 15.8 10.96 3/16/2008 689,269 1,746,742
John M. O'Haugherty........... 40,000 6.3 10.96 3/16/2008 275,707 698,697
David M. Bankers.............. 40,000 6.3 10.96 3/16/2008 275,707 698,697
Jeffrey T. Weisner............ 32,500 5.1 10.96 3/16/2008 224,012 567,691
Steven D. Truckenmiller....... 25,000 3.9 10.96 3/16/2008 172,317 436,685
</TABLE>
- ------------------------
(1) The Company has no plans pursuant to which stock appreciation rights may be
granted.
(2) The options were granted pursuant to the Plan. The options become
exercisable in four equal annual installments beginning one year after the
date of the grant.
(3) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on a variety of
factors, including market conditions and the price performance of the Common
Stock. There can be no assurance that the rates of appreciation presented in
this table can be achieved.
10
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Executives concerning the exercise of options during the fiscal year ended
December 31, 1998 and unexercised options held by the Named Executives as of
December 31, 1998:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE- MONEY OPTIONS AT
ACQUIRED ON VALUE 12/31/98 (#) 12/31/98 ($)(1)
EXERCISE REALIZED -------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ---------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tim C. Flynn.................... 156,673 1,651,333 62,222 120,000 N/A N/A
Scott C. Petersen............... N/A N/A 235,343 120,000 715,222 N/A
John M. O'Haugherty............. N/A N/A 73,867 71,250 138,127 N/A
Douglas D. Truckenmiller........ N/A N/A 51,111 5,000 N/A N/A
David M. Bankers................ N/A N/A 55,131 54,375 94,387 N/A
Jeffrey T. Weisner.............. N/A N/A 44,236 46,875 N/A N/A
Steven D. Truckenmiller......... N/A N/A 28,611 37,500 N/A N/A
</TABLE>
- ------------------------
(1) Value of unexercised "in-the-money" options is the difference between the
market price of the Company's common stock on December 31, 1998 ($6.875 per
share) and the exercise price of the option, multiplied by the number of
shares subject to the option.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for developing and making recommendations to the Board with respect
to the Company's executive compensation policies. In addition, the Committee,
pursuant to authority delegated by the Board, determines on an annual basis the
compensation to be paid to the Company's chief executive officer and each of the
other executive officers of the Company. The Committee consists exclusively of
disinterested directors. Set forth below is the Report of the Committee
addressing the Company's policies regarding executive compensation for 1998.
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
THE REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION SHALL NOT
BE INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), OR UNDER THE EXCHANGE ACT, EXCEPT TO THE EXTENT THAT THE
COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Company's success is dependent
upon its ability to attract and retain highly qualified and motivated
executives. The Company endorses the philosophy that executive compensation
should reflect Company performance and the contribution of such officers to that
performance. The Company's compensation policies are designed by the Committee
to achieve three fundamental objectives: (i) attract and retain qualified
executives, (ii) motivate performance to achieve specific strategic objectives
of the Company, and (iii) align the interests of senior management with the
long-term interests of the Company's stockholders. The three key interests of
senior management with the long-term interests of the Company's stockholders.
The three key elements of the Company's compensation program are base salary, an
annual performance-based cash bonus, and long-term stock options.
The Company's executive officers are also permitted to participate in the
Company's broad based employee benefit plans and receive supplementary payments
to enable such executives to purchase additional insurance coverage and other
benefits. The incremental cost to the Company of the benefits provided under
these plans to the Named Executives averaged approximately 9% of their base
salaries in 1998.
BASE SALARIES. The Company's approach to compensating executive officers
has been to pay base salaries which are competitive with the salaries paid to
executives of other companies in the media and communications industries, and
based upon the Committee's judgment of the particular individual's experience,
performance and potential contributions to the Company. The Company believes
executive compensation levels must be competitive with those provided to other
executives in the media and communications industries in order to attract and
retain qualified executives crucial to the Company's long-term success. The
group of companies considered by the Committee is broader than the group shown
in the performance graph included below because the Company believes that it
competes with a broader group of companies for executive talent.
The Company's Chairman, Mr. Flynn, and Chief Executive Officer, Mr.
Petersen, are employed pursuant to employment contracts (the "Employment
Contracts") entered into in 1993 between the Company and such executive officers
in connection with and prior to the Company's initial public offering (the
"Offering"). The Employment Contracts had an initial term which expired on
December 31, 1995, and are automatically extended each year unless either the
Company or such executive elects not to extend. In originally approving the
Employment Contracts, the Board made a subjective assessment of management
performance relating to the achievement of financial targets and strategic
milestones and considered the salary levels of executive officers of its
competitors and other public companies of comparable size, and the advice and
recommendations of its financial advisers (who acted as the managing
underwriters in the Offering). In addition, a specific objective of the Board in
approving the Employment Contracts was to
12
<PAGE>
provide compensation to the Company's executive officers sufficient to ensure
the continuity and stability of senior management following the Offering and to
recognize the additional significant demands associated with the management of a
public company. The base salaries paid to Messrs. Flynn and Petersen for 1998
were increased 3.0% from 1997 (from $260,000 to $267,800 and from $250,000 to
$257,500, respectively). Upon Mr. Petersen's appointment as President and Chief
Executive Officer his base salary was an increase to $320,000. See "EXECUTIVE
COMPENSATION--EMPLOYMENT AGREEMENTS." With respect to the Company's other
executive officers, based on the policies and factors described above, including
the performance of the Company and peer group compensation, the Committee
approved base salary adjustments for 1998 averaging 10.4% for such executive
officers.
BONUS COMPENSATION. The Company's officers are eligible to receive annual
cash incentive compensation based on achieving specific goals and objectives
established by the Committee. In February 1998 the Committee established an
executive bonus program for 1998 based on the achievement by the executive of a
combination of target goals relating to earnings before interest, expense,
income taxes, depreciation, and amortization ("EBITDA") for the Company, the
lodging division or ResNet, as appropriate; the effective management of selling,
general and administrative expenses; growth in guest pay rooms, cable
subscribers or cable passings, as appropriate; and the achievement of strategic
goals, the particular combination of targets and their respective weighting
being dependent upon the nature of the participating executive's areas of
responsibility. Projected bonuses under the program could range from 0% to
approximately 40% of base salary depending upon the executive's position. The
Committee met in February 1999 to evaluate the Company's performance and
determine the 1998 bonuses for executive officers. The Committee considered
whether the target goals for 1998 were attained and reviewed strategic events
that occurred during the year. In light of the foregoing, the Committee approved
the cash bonus payments to the Named Executives reflected in the Summary
Compensation Table.
LONG-TERM STOCK OPTIONS. The Company believes that stock ownership by
executive officers and key employees aligns their interests with those of
stockholders. Stock options granted to such persons are intended to provide such
employees with an incentive to achieve superior performance that will be
reflected in the appreciation of the Company's common stock. The terms and
conditions of such options are determined and administered by the Committee.
Generally, stock options are granted annually with an exercise price equal to
the prevailing market value of the Company's common stock at the time of grant,
have ten year terms and vest over a four year period. The nature of the
long-term stock option compensation means that participating executives will not
realize compensation unless the value of the Company's common stock increases.
Each executive officer is considered for stock options based on his or her
responsibilities in the Company and existing stock option position, as well as
stock option award levels of comparable media and communications companies.
SEVERANCE AGREEMENTS. The Board believes that it is in the interest of the
Company and its stockholders to reinforce and encourage the continued dedication
of the Company's executive officers without the distractions occasioned by the
possibility of an abrupt change in control of the Company. In July 1995, the
Committee authorized the Company to enter into severance agreements with the
Company's president and its other executive officers, including the Named
Executives, providing for the payment of certain compensation and other benefits
in the event of a covered termination of the executive's employment within two
years following a "change in control" involving the Company. See "EXECUTIVE
COMPENSATION-- EMPLOYMENT AGREEMENTS."
IRC SECTION 162(m). Section 162(m) of the Internal Revenue Code disallows
the deductibility by the Company of any compensation over $1 million per year
paid to each of the chief executive officers and the four most highly
compensated executive officers (other than the chief executive officer), unless
certain criteria are satisfied. During 1998, the Board discussed the adoption of
an amendment of the Company's stock option plan to, among other things, qualify
for an exemption from the limitation on deductibility with
13
<PAGE>
respect to stock options granted under the plan. No officer of the Company
receives compensation in excess of such amount and, accordingly, such action was
not taken in 1998.
THE COMPENSATION COMMITTEE
David Austad
Lawrence Flinn, Jr.
R.F. Leyendecker
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee has ever served as an officer of the
Company, other than Mr. Leyendecker, who served as the Company's Treasurer from
1988 though 1992. Certain compensation matters were reviewed by the entire Board
of Directors, which includes Mr. Flynn, Chairman of the Board, and Mr. Petersen,
President and Chief Executive Officer of the Company. Mr. Leyendecker, a
director and member of the Compensation Committee, is a director of NNI and an
executive officer of NPSC. Mr. Hylland, a director, is a director of NNI and a
director and executive officer of NPSC.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Board of Directors has authorized loans to Tim C. Flynn and Scott C.
Petersen in amounts not to exceed $1.5 million and $500,000, respectively,
secured by LodgeNet common stock. Interest accrues at a rate commensurate with
the current interest rate of the Company's revolving credit facility. Except for
those loans, none of the directors or executive officers of the Company or any
subsidiary thereof, or any associates or affiliates of any of them, is or has
been indebted to the Company at any time since the beginning of the last
completed fiscal year in excess of $60,000. None of the directors or executive
officers of the Company or any associate or affiliate of such person, had any
material financial interest, direct or indirect, in any transaction or any
proposed transaction with the Company during the past fiscal year.
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's
cumulative total shareholder return on its common stock with (i) the cumulative
total return of the NASDAQ Market Index and (ii) the cumulative total return of
all companies (the "Peer Group") with the same four-digit standard industrial
code (SIC) as the Company (SIC Code 4841--Cable and Other Pay Television
Services) over the period from December 31, 1993 through December 31, 1998. The
graph assumes an initial investment of $100 in each of the Company, the NASDAQ
Market Index and the Peer Group and reinvestment of dividends. The Company did
not declare or pay any dividends in 1998. The graph is not necessarily
indicative of future price performance. THIS GRAPH SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OR UNDER THE
EXCHANGE ACT, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES
THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER
SUCH ACTS.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ MARKET INDEX AND PEER GROUP*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
LODGENET ENTERTAINMENT CORP. $100.00 $51.71 $64.96 $121.37 $75.21 $47.01
CABLE, OTHER PAY TV SERVICES 100.00 72.50 83.70 68.04 113.96 219.36
NASDAQ MARKET INDEX 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
LodgeNet Entertainment................................... $ 100.00 $ 51.71 $ 64.96 $ 121.37 $ 75.21 $ 47.01
Cable, Other Pay TV Services............................. 100.00 72.50 83.70 68.04 113.96 219.36
NASDAQ Market Index...................................... 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
- ------------------------
* Source: Media General Financial Services, Inc.
15
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The accountants of the Company are Arthur Andersen LLP, 45 South Seventh
Street, Minneapolis, MN 55402-1611. Arthur Andersen LLP has performed accounting
services for the Company and its predecessors since its appointment in the
fourth quarter of 1991, which services have consisted of the examination of the
consolidated financial statements of the Company and its affiliates and
predecessors and limited assistance and consultation in connection with filings
with the SEC. All professional services rendered by Arthur Andersen LLP during
1998 were furnished at customary rates and terms.
It is anticipated that representatives of Arthur Andersen LLP will be
present at the Meeting to respond to appropriate questions and to comment on the
Company's consolidated financial statements.
The Board of Directors has appointed Arthur Andersen LLP as the Company's
independent public accountants for the current fiscal year and the stockholders
are being asked to ratify such appointment. The affirmative vote of the holders
of at least a majority of the outstanding shares of the Company's Common Stock
represented and voting at the Meeting will be required for passage of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1999.
ANNUAL REPORT
The Company's Annual Report to Shareholders, incorporating its Annual Report
on Form 10-K for the fiscal year ended December 31, 1998 accompanies this Proxy
Statement. The Form 10-K contains consolidated financial statements of the
Company and its subsidiaries and the report thereon of Arthur Andersen LLP, the
Company's independent public accountants.
PROPOSALS OF STOCKHOLDERS
Under certain circumstances, stockholders are entitled to present proposals
at stockholder meetings. The 2000 Annual Meeting of Stockholders will be held on
or about May 10, 2000. Proposals of stockholders intended to be included in the
proxy materials for the 1999 Annual Meeting of Stockholders must be received by
the Secretary of the Company, 3900 West Innovation Street, Sioux Falls, South
Dakota 57107, by December 9, 1999, in a form that complies with the Company's
Bylaws and applicable requirements.
OTHER BUSINESS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Meeting. If,
however, other matters are properly brought before the Meeting, it is the
intention of the Proxyholders to vote the shares represented thereby on such
matters in accordance with the recommendations of the Board of Directors and
authority to do so is included in the Proxy.
DATED: April 12, 1999
By Order of the Board of Directors,
/s/ Daniel P. Johnson
Daniel P. Johnson
SECRETARY
16
<PAGE>
PROXY PROXY
LODGENET ENTERTAINMENT CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 12, 1999
The undersigned hereby appoints Mr. Tim C. Flynn and Mr. Scott C. Petersen,
and each of them, the attorneys, agents and proxies of the undersigned, with
full powers of substitution to each (the "Proxies"), to attend and act as
proxy or proxies of the undersigned at the Annual Meeting of Stockholders
(the "Annual Meeting") of LodgeNet Entertainment Corporation (the "Company")
to be held at the Company's National Headquarters and Distribution Center,
3900 W. Innovation Street, Sioux Falls, South Dakota 57107 on Wednesday,
May 12, 1999 at 9:00 a.m. Central Daylight Time or any adjournment thereof,
and to vote as specified herein the number of shares which the undersigned,
if personally present, would be entitled to vote.
This Proxy when properly executed will be voted as specified. If no
instruction is specified with respect to a matter to be acted upon, the
shares represented by the Proxy will be voted "FOR" the election of Mr. Tim
C. Flynn and Mr. R.F. Leyendecker; and "FOR" the ratification of Arthur
Andersen LLP as the Company's independent public accountants for the fiscal
year ending December 31, 1999. If any other business is presented at the
Annual Meeting, this Proxy confers authority to and shall be voted in
accordance with the recommendation of the Board of Directors. This Proxy is
solicited on behalf of the Board of Directors and may be revoked prior to its
exercise by filing with the Corporate Secretary of the Company a duly
executed proxy bearing a later date or an instrument revoking this Proxy, or
by attending and electing to vote in person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
LODGENET ENTERTAINMENT CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
For all
1. ELECTION OF DIRECTORS FOR A For Withhold (Except Nominee(s)
TERM OF 3 YEARS-- All All written below)
NOMINEES: Tim C. Flynn
R.F. Leyendecker / / / / / /
-----------------------------------
For Against Abstain
2 . To ratify the appointment of Arthur / / / / / /
Andersen LLP as the Company's Independent
public accountants for the fiscal year ending
December 31, 1999.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting and any and all
adjournments thereof. The Board of Directors at present knows of no other
business to be presented by or on behalf of the Company or the Board of
Directors at the Annual Meeting.
Dated , 1999
--------
Signature(s)
------------------------
Signature(s)
------------------------
- ---------------------------------- Please sign exactly as name appears
PLEASE MARK, SIGN, DATE AND MAIL hereon. Joint owners should each sign.
THIS PROXY CARD PROMPTLY USING Where applicable, indicate official
THE ENCLOSED ENVELOPE position or representative capacity.
- ----------------------------------
- --------------------------------------------------------------------------
FOLD AND DETACH HERE
