UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] 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
NTELOS Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
[ntelos logo]
401 Spring Lane
Suite 300
JAMES S. QUARFORTH P. O. Box 1990
CHIEF EXECUTIVE OFFICER Waynesboro, VA 22980
Telephone: 540 946-3500
Telecopier: 540 946-3595
March 30, 2001
Dear Shareholder:
You are cordially invited to attend our 2001 annual meeting of shareholders
at 10:00 a.m. on Tuesday, May 8, 2001. The meeting will be held at the Holiday
Inn at the intersection of Route 275 and I-81, North of Staunton, Virginia.
Please join us for refreshments at 9:30 a.m.
You will find complete information about the meeting in the enclosed Notice
and Proxy Statement. Your 2000 Annual Report is being sent to you with this
Proxy Statement.
We sincerely hope you will be able to be present at the meeting, but
whether or not you plan to attend, we request that you sign your Proxy Card
and mail it in the enclosed envelope. The prompt return of your Proxy will be
appreciated.
Sincerely,
J. S. Quarforth
Chief Executive Officer
[NTELOS LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the annual meeting of shareholders of NTELOS
Inc. will be held at the Holiday Inn at the intersection of Route 275 and I-
81, North of Staunton, Virginia, on Tuesday, May 8, 2001, at 10:00 a.m. for
the following purposes:
(1) To elect five directors (Proposal 1);
(2) To approve an amendment to our Non-Employee Directors' Stock Option
Plan reserving up to an additional 100,000 shares of our common stock
for issuance thereunder (Proposal 2);
(3) To approve an amendment to our 1997 Stock Compensation Plan
reserving up to an additional 1,550,000 shares of our common stock
for issuance thereunder (Proposal 3); and
(4) To transact any other business that may properly come before the
meeting.
Only shareholders of common stock of record at the close of business on
March 13, 2001 will be entitled to vote at the meeting.
By Order of the Board of Directors
M. B. Moneymaker
Corporate Secretary
Waynesboro, Virginia
March 30, 2001
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING. SHAREHOLDERS
ATTENDING THE MEETING MAY PERSONALLY VOTE ON ALL MATTERS WHICH ARE CONSIDERED,
IN WHICH EVENT THE SIGNED PROXIES WILL BE REVOKED.
[LOGO OF NTELOS]
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 2001
GENERAL INFORMATION
This proxy statement is furnished to the shareholders of NTELOS Inc.
("NTELOS") in connection with the solicitation of proxies by our board of
directors to be voted at the annual meeting of shareholders to be held at
10:00 a.m. on Tuesday, May 8, 2001, at the Holiday Inn at the intersection of
Route 275 and I-81, North of Staunton, Virginia, and at any adjournment. The
mailing address of our corporate office is 401 Spring Lane, Suite 300, P. O.
Box 1990, Waynesboro, Virginia 22980.
This proxy statement and enclosed proxy card are being mailed to
shareholders beginning on or about March 30, 2001. Our annual report to
shareholders that includes financial statements for the years ending December
31, 2000, 1999 and 1998 is enclosed.
INFORMATION ABOUT VOTING
Shareholders can vote on matters being brought at the annual meeting in two
ways: by proxy or in person. To vote in person, simply come to the meeting and
cast your vote there. If you wish to vote by proxy, you need to sign, date and
return the enclosed proxy card. By signing and returning your proxy card, the
individuals named on the card (your "proxies") will vote your shares as
directed. If no direction is made on the proxy card, your shares will be voted
in accordance with the recommendations of the board of directors that are
found in this proxy statement. Any person who has returned a proxy has the
power to revoke it at any time before it is exercised by submitting a
subsequently dated proxy, or by voting in person at the meeting.
We do not know of any matters other than those referred to in the
accompanying notice which are to come before the meeting. If any other matters
are properly presented for action, your proxies will vote the proxy in
accordance with their best judgment.
SHAREHOLDERS ENTITLED TO VOTE
Only shareholders as of the close of business on March 13, 2001, the record
date for the meeting, are entitled to vote at the annual meeting. As of the
record date, there were 16,852,922 shares of common stock outstanding, and
15,868,648 shares outstanding and entitled to vote at the annual meeting.
Also, our outstanding convertible preferred stock votes with our common stock
on an as converted basis. As of the record date, our preferred stock was
entitled to an aggregate of 5,979,194 votes.
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QUORUM REQUIREMENTS
A quorum of shareholders is required to hold a valid meeting. Under our
bylaws, a quorum exists if a majority of the outstanding shares entitled to
vote are represented, in person or by proxy, at the meeting. If a share is
represented for any purpose at the meeting, it is deemed to be present for
purposes of establishing a quorum. If less than a quorum is present at the
annual meeting, a majority of those shares present or represented by proxy may
adjourn the meeting without notice, other than by announcement at the meeting.
Abstentions may be specified for any of the proposals being considered at
the meeting. A properly executed proxy marked as "ABSTAIN" or "WITHHOLD
AUTHORITY" will be counted as present for purposes of determining if there is
a quorum and for purposes of determining the aggregate voting power and number
of shares represented and entitled to vote at the meeting.
Under Nasdaq rules, brokers who hold shares in street name for customers
have the authority to vote on various "routine" proposals, such as the
election of directors, when they have not received instructions from
beneficial owners. These brokers may not exercise their voting discretion with
respect to proposals for non-routine matters such as the amendments to the
Non-Employee Directors' Stock Option Plan and the 1997 Stock Compensation
Plan. If beneficial owners of our shares do not give brokers specific
instructions as to how to vote their shares, referred to as broker non-votes,
brokers cannot vote such shares with respect to the approval and adoption of
the non-routine proposals. Shares held by brokers that are not voted on any
matter will not be included in determining whether a quorum is present, and,
therefore, will have no effect on the approval of the proposals.
VOTES REQUIRED TO APPROVE PROPOSALS
Election of directors. The affirmative vote of a plurality of the votes
cast at the meeting for each director nominee is required for his or her
election. A properly executed proxy marked "WITHHOLD AUTHORITY" with respect
to the election of one or more nominees will not be voted with respect to the
nominee or nominees indicated, and will have no effect on the outcome of the
election.
Other proposals. Approval of the amendments to the Non-Employee Directors'
Stock Option Plan and the 1997 Stock Compensation Plan requires the
affirmative vote of a majority of the shares of common stock present at the
meeting, in person or by proxy. Therefore, a properly executed proxy marked
"ABSTAIN" with respect to these proposals will have the same effect as a vote
against the proposal, and shares held by brokers that are not voted on any
matter will have no effect on the outcome of these proposals.
COST OF PROXY SOLICITATION
Solicitations of proxies will be made by use of the United States mail and
may be made by direct or telephone contact by NTELOS through our employees,
officers and agents. All solicitation expenses will be borne by us. Brokerage
houses and nominees will be requested to forward the proxy materials to the
beneficial holders of the shares held of record by these persons and we will
reimburse them for their reasonable charges in connection with this
distribution.
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STOCK OWNERSHIP
The following table presents information, as of March 13, 2001, regarding
the beneficial ownership of our common stock by:
. each person known to us to be a beneficial owner of five percent or more
of our common stock;
. each director;
. each executive officer; and
. all directors and executive officers as a group.
Under Securities and Exchange Commission rules, beneficial ownership of our
common stock includes any shares as to which a person, directly or indirectly,
has or shares voting power or investment power and also any shares as to which
a person has the right to acquire such voting or investment power within 60
days through the exercise of an option, warrant, right of conversion of a
security or otherwise. Unless otherwise indicated in the footnotes to this
table, each of the beneficial owners named in the table has sole voting and
investment power with respect to their shares of our common stock. Unless
otherwise noted, the address for each of our directors and executive officers
is c/o NTELOS Inc., 401 Spring Lane, Suite 300, Waynesboro, Virginia 22980. As
of March 13, 2001, we had 16,852,922 shares of common stock outstanding, and
15,868,648 shares outstanding and entitled to vote at the annual meeting.
Also, our Series B and Series C preferred stock votes with our common stock on
an as-converted basis. Accordingly, for purposes of calculating the percentage
of total voting power below, we have included in the number of outstanding
shares of common stock the shares of common stock outstanding and entitled to
vote at the annual meeting and 5,979,194 shares of our Series B and Series C
preferred stock.
Number of Shares Percentage of
Name and Address of Beneficial Owner Beneficially Owned (1) Total Voting Power
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Welsh, Carson, Anderson & Stowe (2) 5,678,529 14.9%
John Hancock Advisors, Inc. (3) 1,401,000 6.4
James S. Quarforth (4) 177,596 *
Carl A. Rosberg (5) 102,908 *
Phyllis H. Arnold (6) 3,206 *
Anthony J. de Nicola (7) 11,691 *
William W. Gibbs, V (8) 157,517 *
A. William Hamill (9) 1,534 *
J. Allen Layman 769,354 3.5
C. Wilson McNeely, III (10) 19,793 *
John B. Mitchell, Sr. (11) 8,797 *
John N. Neff (12) 5,881 *
John B. Williamson, III 2,190 *
Warren C. Catlett (13) 24,023 *
David R. Maccarelli (14) 54,226 *
Michael B. Moneymaker (15) 37,261 *
Don Marie Persing (16) 11,803 *
Charles A. Richardson 2,170 *
All directors and executive officers as a group
(16 persons) 1,389,950 6.4%
* Less than one percent
(1) Includes shares held by spouses, children, trusts, and companies in which
the director or officer owns a controlling interest and over which the
director or officer has voting and investment power.
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(2) Gives effect to the agreement of Welsh, Carson, Anderson & Stowe not to
vote more than 14.9% of the votes entitled to be cast. Absent this agreement,
Welsh Carson would have the power to vote 24.6% of the votes entitled to be
cast. Of these shares, Welsh, Carson, Anderson & Stowe VIII, L.P. and Welsh,
Carson, Anderson & Stowe IX, L.P. each own 2,585,805 shares beneficially and
of record. These shares include 206,918 shares owned beneficially and of
record by individuals who are members of the limited liability company that
serves as the sole general partners of Welsh, Carson, Anderson & Stowe VIII
and IX, L.P.s, including Mr. de Nicola and individuals employed by its
investment advisor. Each of Welsh, Carson, Anderson & Stowe VIII L.P. and
Welsh, Carson, Anderson & Stowe IX, L.P. disclaim beneficial ownership of all
shares except to the extent owned of record by them. The address for Welsh,
Carson, Anderson & Stowe VIII, L.P. and Welsh, Carson, Anderson & Stowe IX,
L.P. is 320 Park Avenue, Suite 2500, New York, New York 10022. Morgan Stanley
has the right, by grant of a proxy from Welsh Carson, to cast votes in excess
of 14.9% of the outstanding votes that Welsh Carson otherwise would be
entitled to vote, except that Morgan Stanley will not vote more than 9.9% of
the votes entitled to be cast. Shares owned by Welsh Carson that represent
more than 14.9% of the votes entitled to be cast and that are not voted by
Morgan Stanley pursuant to this proxy, will be voted proportionately with the
votes cast at this meeting by our public shareholders. These shares also
include 300,000 shares which WCAS Capital Partners III, L.P. has the right to
acquire through the exercise of warrants.
(3) Based on information contained in Schedule 13G, dated February 28, 2001,
filed with the Securities and Exchange Commission.
(4) Includes 124,150 shares which Mr. Quarforth has the right to acquire
through the exercise of stock options.
(5) Includes 72,600 shares which Mr. Rosberg has the right to acquire through
the exercise of stock options.
(6) Includes 2,206 shares which Ms. Arnold has the right to acquire through
the exercise of stock options.
(7) Includes 1,495 shares which Mr. de Nicola has the right to acquire through
the exercise of stock options and 778 shares issuable upon the exercise of
warrants to purchase common stock at an initial exercise price of $50.00 per
share. Excludes 5,669,111 shares owned beneficially and of record by Welsh,
Carson, Anderson & Stowe VIII, L.P., Welsh, Carson, Anderson & Stowe IX, L.P.,
WCAS Capital Partners III, L.P. and other individuals who are affiliated with
Welsh Carson. Mr. de Nicola disclaims beneficial ownership of such shares. See
footnote (2) above.
(8) Includes 1,558 shares which Mr. Gibbs has the right to acquire through the
exercise of stock options.
(9) Includes 534 shares which Mr. Hamill has the right to acquire through the
exercise of stock options.
(10) Includes 2,107 shares which Mr. McNeely has the right to acquire through
exercise of stock options.
(11) Includes 2,377 shares which Mr. Mitchell has the right to acquire through
the exercise of stock options.
(12) Includes 4,981 shares which Mr. Neff has the right to acquire through the
exercise of stock options.
(13) Includes 22,285 shares which Mr. Catlett has the right to acquire through
the exercise of stock options.
(14) Includes 50,666 shares which Mr. Maccarelli has the right to acquire
through the exercise of stock options.
(15) Includes 27,500 shares which Mr. Moneymaker has the right to acquire
through the exercise of stock options.
(16) Includes 8,500 shares which Ms. Persing has the right to acquire through
the exercise of stock options.
Morgan Stanley Dean Witter Equity Funding, Inc. owns 600,665 shares of our
Series B and Series C preferred stock, representing 2.7% of the total voting
power. Morgan Stanley has informed us that, as of March 13, 2001, entities
affiliated with Morgan Stanley also own 2,763 shares (less than 1%) of our
common stock. In addition, Morgan Stanley has the right, by grant of a proxy
from Welsh Carson, to cast votes entitled to be cast by Welsh in excess of
14.9% of the outstanding votes on matters presented at this meeting, except
that Morgan Stanley will not, in the aggregate, cast more than 9.9% of the
votes entitled to be cast.
Based on a review of the forms and written representations received by us
pursuant to Section 16(a) of the Securities Exchange Act of 1934, we believe
that during 2000 our directors and executive officers complied with all
applicable Section 16 filing requirements.
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ELECTION OF DIRECTORS
PROPOSAL 1
There are currently eleven members of the board of directors, divided into
three classes. One class is elected each year for a three-year term. This
year, the term of our Class I directors will expire at the annual meeting. The
board of directors proposes that the directors listed under "Nominees for
Class I Directors" be re-elected for a three year term expiring in 2004.
In addition to the Class I directors, there are two directors who have been
appointed since our last annual meeting to classes other than Class I, who
must now stand for election. The board of directors proposes that the
directors listed under "Nominee for Class II Directors" and "Nominee for Class
III Directors" be elected for terms expiring in 2002 and 2003, respectively.
The nominees listed below are all current directors who have consented to
stand for re-election. It is not anticipated that any nominee for election
will become unable to serve as a director, but if any or all are unable to
accept nomination, it is intended that shares represented by proxies in the
accompanying form will be voted for the election of substitute nominees
selected by the board of directors.
The term of Mr. C. Wilson McNeely, III, as a Class I director will expire
at the 2001 annual meeting coincident with Mr. McNeely's planned retirement as
a director. As a result of Mr. McNeely's retirement, we will have 10 directors
but will continue to maintain a board of directors constituting 11 members. We
are maintaining a vacant director's seat in order to provide the flexibility
to add an additional director if the board of directors so determines. Any
director added before the 2002 annual meeting would be subject to election by
shareholders at the 2002 annual meeting.
Due to Mr. McNeely's planned retirement as a Class I director, Mr. de
Nicola has been realigned from a Class II director to a Class I director. Mr.
de Nicola's realignment makes the three board classes as nearly equal in size
as possible--three Class I directors, three Class II directors and four Class
III directors.
Shares represented by proxies in the accompanying form cannot be voted for
a greater number of persons than the number of nominees named below. Unless
otherwise specified in the accompanying form of proxy, it is intended that
votes will be cast for the election of all of the nominees for directors.
NOMINEES FOR CLASS I DIRECTORS WHOSE TERM WILL EXPIRE IN 2004
Carl A. Rosberg, age 48, has been a director of NTELOS since 1992. Mr.
Rosberg is currently the Executive Vice President and Chief Operating Officer
of NTELOS as well as President and Chief Operating Officer of its
subsidiaries. Mr. Rosberg served as President and Chief Operating Officer from
May 1, 1999 to February 13, 2001, when our merger with R&B Communications
became effective, and Senior Vice President from May 1, 1990 to May 1, 1999.
A. William Hamill, age 53, was appointed a director of NTELOS in January
2001. Mr. Hamill has been Executive Vice President and Chief Financial Officer
of United Dominion Realty Trust Inc., Richmond, Virginia since April 1999.
Prior to joining United Dominion, Mr. Hamill served as Executive Vice
President and Chief Financial Officer of Union Camp Corporation, Wayne, New
Jersey, from June 1996 to April 1999 and as managing director of Corporate
Finance with Morgan Stanley & Co. Incorporated, New York, prior to June 1996.
Anthony J. de Nicola, age 36, was appointed a director of NTELOS in July
2000. Mr. de Nicola has been the managing member and the general partner of
the sole general partners of Welsh, Carson, Anderson & Stowe
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VIII, L.P., Welsh, Carson, Anderson & Stowe IX, L.P., WCAS Capital Partners
III, L.P. and other associated investment partnerships since 1994. Prior to
1994 he worked for William Blair & Co. in the merchant banking area. Mr. de
Nicola also serves as a director for the following companies: Centennial
Communications; BTI Telecom Corp.; Valor Telecommunications, LLC; Alliance
Data Systems, Inc. and several private companies. In accordance with the terms
of our Series B preferred stock, Welsh, Carson, Anderson & Stowe has
designated Mr. de Nicola its representative on our board of directors.
NOMINEE FOR CLASS II DIRECTORS WHOSE TERM WILL EXPIRE IN 2002
John B. Williamson, III, age 46, has been a director of NTELOS since
February 13, 2001. Mr. Williamson has been President and Chief Executive
Officer and a director of RGC Resources, Inc., Roanoke, Virginia since
February 1998. Prior to that time, Mr. Williamson was Vice President of RGC
Resources. Mr. Williamson was a director of R&B Communications before our
merger with R&B Communications.
NOMINEE FOR CLASS III DIRECTOR WHOSE TERM WILL EXPIRE IN 2003
J. Allen Layman, age 49, has been a director and Chairman of the Board of
NTELOS since February 13, 2001. Mr. Layman is President of NTELOS. Prior to
our merger with R&B Communications, Mr. Layman was Chief Executive Officer and
a director of R&B Communications. Mr. Layman serves as a director for RGC
Resources, Inc., MPHASE Technologies, Inc. and the Bank of Fincastle.
The board of directors recommends a vote "FOR" Proposal 1.
CLASS II DIRECTORS WHOSE TERMS WILL EXPIRE IN 2002
John B. Mitchell, Sr., age 60, has been a director of NTELOS since 1989.
Mr. Mitchell is President and Chairman of the Board of Hammond-Mitchell, Inc.,
a construction contractor in Covington, Virginia.
James S. Quarforth, age 46, has been a director of NTELOS since 1987. Mr.
Quarforth has been Chief Executive Officer of NTELOS and its subsidiaries
since May 1, 1999. Mr. Quarforth served as President and Chief Executive
Officer from May 1, 1990 to May 1, 1999 and Chairman of the Board from May 1,
1999 to February 13, 2001. Mr. Quarforth is also a director of Virginia
Financial Corporation, Staunton, Virginia.
CLASS III DIRECTORS WHOSE TERMS WILL EXPIRE IN 2003
Phyllis H. Arnold, age 52, has been a director of NTELOS since 1999. Ms.
Arnold has been Executive Vice President of BB&T (North Carolina) as well as
President of BB&T's West Virginia operations since July 2000 when her previous
employer, One Valley Bancorp, merged with BB&T. Between 1991 and the merger,
Ms. Arnold was Executive Vice President and Chief Operating Officer of One
Valley Bancorp.
John N. Neff, age 49, has been a director of NTELOS since 1995. Mr. Neff is
President and Chief Executive Officer of Nielsen Builders, Inc., Harrisonburg,
Virginia.
William W. Gibbs, V, age 60, has been a director of NTELOS since 1977. Mr.
Gibbs is President of Comprehensive Computer Consultants, Staunton, Virginia.
SHAREHOLDER NOMINEES FOR DIRECTOR
Any shareholder recommendation for a nominee for director at the 2002
annual meeting of shareholders should be submitted in writing to our Corporate
Secretary not later than March 15, 2002 and must include a
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description of the proposed nominee's qualifications and relevant biographical
information, as well as certain information required by our bylaws, including
(i) the name and business address of the proposed nominee; (ii) the proposed
nominee's consent to being placed in nomination; (iii) the recommending
shareholder's name and address; (iv) the class and number of shares of the
Company's stock beneficially owned by the shareholder, and (v) any material
interest of the shareholder in the proposed nomination.
MEETINGS OF THE BOARD OF DIRECTORS
The board of directors held 13 regular meetings during 2000. All directors
attended more than 75% of the meetings of the board and committees of which he
or she is a member, except C. Wilson McNeely.
DIRECTOR COMPENSATION
In 2000, non-employee directors received a monthly retainer fee of $900.
Upon election by December 15 of the preceding year, non-employee directors may
elect to receive all, or a portion of the $900 monthly retainer fee in options
for our common stock pursuant to our Non-Employees Directors' Stock Plan.
Commencing on August 1, 2000, non-employee directors received an additional
$1,000 per month payable in options for common stock pursuant to the Non-
Employee Directors' Stock Plan. Non-employee directors received a fee of $400
for each board meeting attended until August 1, 2000, when the board meeting
fee increased to $500.
COMMITTEES OF THE BOARD
During fiscal 2000, the board of directors had four standing committees:
the Executive Committee, the Audit Committee, the Compensation Committee and
the Governance Committee.
Executive Committee. The Executive Committee possesses all of the powers of
the board of directors except the power to approve or recommend actions for
shareholder vote, fill vacancies on the board or any of its committees, amend
the articles of incorporation, adopt, amend or repeal bylaws, approve mergers,
approve dividends, and issue stock. James S. Quarforth (chairperson), J. Allen
Layman, John B. Mitchell, Sr. and Anthony J. de Nicola currently comprise the
Executive Committee, which met four times during 2000.
Compensation Committee. The Compensation Committee is charged with
reviewing the board of directors' compensation policies, evaluating the
compensation of the CEO and other senior management, evaluating the
performance of the CEO and other senior management and reviewing our general
compensation strategy and stock option programs. John N. Neff (chairperson),
John B. Mitchell, Sr., C. Wilson McNeely, III, Anthony J. de Nicola and John
B. Williamson, III currently comprise the Compensation Committee, which held
three meetings during 2000.
Audit Committee. The functions of the Audit Committee and its activities
during 2000 are described below under the heading REPORT OF THE AUDIT
COMMITTEE. The current members of the Audit Committee are William W. Gibbs, V
(chairperson), Anthony J. de Nicola, C. Wilson McNeely, III, John N. Neff and
John B. Williamson, III. The Audit Committee met two times during 2000.
Governance Committee. The Governance Committee's responsibilities include
consideration of the size and composition of the board of directors,
monitoring procedures for corporate decision-making, reviewing public policy
issues, recommending actions to increase the board of director's
effectiveness, and evaluating shareholder proposals. The Governance Committee
also considers nominees for director suggested by shareholders. John B.
Mitchell, Sr. (chairperson), James S. Quarforth, J. Allen Layman, Phyllis H.
Arnold and Anthony J. de Nicola currently comprise the Governance Committee,
which held one meeting in 2000.
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REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
of our other filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, except to the extent we specifically
incorporate this report by reference therein.
The Audit Committee acts pursuant to a charter adopted by the board of
directors, a copy of which is attached as Appendix A. As set forth in more
detail in the charter, the Audit Committee's primary responsibilities are
focused in four broad categories:
1. Recommend to the board of directors the appointment of independent
accountants;
2. Consult with management or independent accountants regarding the
audit scope and the audit plan;
3. Review and approve company financial statements; and
4. Review with management and auditors the adequacy of internal
controls.
Each of the Audit Committee members qualifies as an "independent" director
under the current listing standards of the National Association of Securities
Dealers (referred to as NASD), except that Mr. de Nicola may not be considered
independent because he is employed with Welsh, Carson, Anderson & Stowe and
investment funds affiliated with that entity, which collectively own a
significant percentage of our common stock and therefore may be deemed our
affiliate under NASD listing standards. Welsh Carson disclaims affiliate
status with respect to NTELOS. See "STOCK OWNERSHIP" above. The board of
directors has determined that if Welsh Carson was determined to be an
affiliate of ours, it is nevertheless in the best interest of the company and
its shareholders for Mr. de Nicola to serve on the Audit Committee
notwithstanding this relationship, and as permitted by NASD rules, because of
his extensive knowledge of financial matters generally, his significant
experience in the telecommunications industry and his past service on the
board of directors and audit committee of numerous other public companies.
In overseeing the preparation of our financial statements, the Audit
Committee met with both management and our outside auditors to review and
discuss annual financial statements prior to their issuance and to discuss
significant accounting issues. Management advised us that the annual financial
statements were prepared in accordance with generally accepted accounting
principles. The Audit Committee's review included discussions with the outside
auditors of matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication With Audit Committees).
With respect to our outside auditors, we discussed with McGladrey & Pullen,
LLP, among other things, matters related to its independence from us and our
management, including disclosures made to the Audit Committee as required by
the Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees). In addition, we also discussed with McGladrey & Pullen the
overall scope and plans for their respective audit. To this end, the Audit
Committee met with the independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of our
internal controls, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the board of directors, and the board approved, that
the audited consolidated financial statements be included in our annual report
on Form 10-K for the year ended December 31, 2000, for filing with the
Securities and Exchange Commission.
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AUDIT FEES
For 2000, our accountants billed us $271,938 for their audit of our annual
financial statements, their reviews of our financial statements included with
the quarterly reports on Form 10-Q, and research and consultation on audit and
accounting matters arising during the course of such services.
ALL OTHER FEES
For services other than those listed above, audits and associated
consulting, our accountants billed us an aggregate amount of $272,452.
In conjunction with these fees, the Audit Committee has determined that
McGladrey & Pullen's performance of non-audit services for NTELOS does not
interfere with their independence from the company.
William W. Gibbs, V (chairperson)
C. Wilson McNeely, III
John N. Neff
Anthony J. de Nicola
John B. Williamson, III
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SUMMARY COMPENSATION TABLES
The following tables set forth information as to compensation paid to the
chief executive officer and the next four most highly compensated executive
officers of the company, the named executive officers, for 2000, with
comparisons to 1999 and 1998 information, as well as option grants and
exercises for 2000:
EXECUTIVE COMPENSATION
Long Term
Compensation
------------
Annual Compensation Awards
- ------------------------------------------------------------------------------
Name and Options/
Principal Position Year Salary Bonus SARs All Other(1)
- ------------------ ---- ------ ----- -------- ------------
James S. Quarforth 2000 $296,700 $225,022 51,700 $14,283
Chief Executive Officer 1999 267,250 64,140 40,000 14,230
1998 237,000 90,616 21,000 7,800
Carl A. Rosberg 2000 201,500 83,748 21,675 10,015
Executive Vice President and 1999 183,500 38,535 18,000 9,614
Chief Operating Officer 1998 167,500 49,409 12,000 7,392
David R. Maccarelli 2000 151,225 48,271 12,250 7,176
Senior Vice President and 1999 144,200 25,956 10,000 7,566
Chief Technology Officer 1998 137,500 39,917 12,000 7,086
Michael B. Moneymaker 2000 146,250 80,620 15,925 6,992
Senior Vice President, 1999 132,000 23,760 10,000 6,825
Chief Financial Officer, 1998 120,500 31,488 7,000 6,268
Treasurer and Secretary
Don Marie Persing 2000 132,000 62,370 15,975 6,503
Senior Vice President 1999 108,000 21,636 6,000 5,236
1998 59,375 15,453 6,000 1,433
(1) Ms. Persing was hired on May 4, 1998.
In 2000, we made contributions to the savings plan of $5,414 for James S.
Quarforth, $6,120 for Carl A. Rosberg, $5,406 for David R. Maccarelli, $2,417
for Michael B. Moneymaker and $2,429 for Don Marie Persing. Contributions were
also made to the deferred compensation plan of $7,777 for James S. Quarforth,
$2,869 for Carl A. Rosberg, $973 for David R. Maccarelli, $3,837 for Michael
B. Moneymaker and $3,435 for Don Marie Persing. In addition, we made the group
life insurance premium payments of $1,032 for James S. Quarforth, $970 for
Carl A. Rosberg, $753 for David R. Maccarelli, $697 for Michael B. Moneymaker
and $604 for Don Marie Persing and accidental death and disability payments of
$60 for James S. Quarforth, $56 for Carl A. Rosberg, $44 for David R.
Maccarelli, $41 for Michael B. Moneymaker and $35 for Don Marie Persing
In 1999, we made contributions to the savings plan of $5,760 for James S.
Quarforth, $5,760 for Carl A. Rosberg, $4,507 for David R. Maccarelli, $3,680
for Michael B. Moneymaker and $2,298 for Don Marie Persing. In 1999 we also
made contributions to the deferred compensation plan of $7,366 for James S.
Quarforth, $2,916
- 10 -
for Carl A. Rosberg, $2,287 for David R. Maccarelli, $2,467 for Michael B.
Moneymaker and $2,414 for Don Marie Persing. In addition, we made group life
insurance premium payments of $1,032 for James S. Quarforth, $877 for Carl A.
Rosberg, $722 for David R. Maccarelli, $634 for Michael B. Moneymaker and $490
for Don Marie Persing and accidental death and disability payments of $72 for
James S. Quarforth, $61 for Carl A. Rosberg, $50 for David R. Maccarelli, $44
for Michael B. Moneymaker and $34 for Don Marie Persing.
In 1998, we made contributions to the savings plan of $5,760 for James S.
Quarforth, $5,760 for Carl A. Rosberg, $5,760 for David R. Maccarelli, $5,115
for Michael B. Moneymaker and $1,352 for Don Marie Persing. In addition, we
made group life insurance premium payments of $1,968 for James S. Quarforth,
$1,574 for Carl A. Rosberg, $1,279 for David R. Maccarelli, $1,112 for Michael
B. Moneymaker and $78 for Don Marie Persing and accidental death and
disability payments of $72 for James S. Quarforth, $58 for Carl A. Rosberg,
$47 for David R. Maccarelli, $41 for Michael B. Moneymaker and $3 for Don
Marie Persing.
OPTION/SAR GRANTS TABLE
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Value At Assumed Rates of
Stock Price Appreciation
Individual Grants For Option Term
- --------------------------------------------------------- -------------------------
% of Total
Options/ Options/SARs Exercise
SARs Granted to or Base
Granted(1) Employees in Price Expiration
Name (Shares) Fiscal Year per Share Date 5%(2) 10%(2)
---- ---------- ------------ --------- ---------- ----- ------
James S.
Quarforth 40,000 12.6% 40.5000 02/28/2010 $1,018,809 $2,581,863
11,700 33.9375 08/28/2010 249,714 632,825
Carl A.
Rosberg 18,000 5.3% 40.5000 02/28/2010 458,464 1,161,838
3,675 33.9375 08/28/2010 78,436 198,772
David R.
Maccarelli 10,000 3.0% 40.5000 02/28/2010 254,702 645,466
2,250 33.9375 08/28/2010 48,022 121,697
Michael B.
Moneymaker 10,000 3.9% 40.5000 02/28/2010 254,702 645,466
5,925 33.9375 08/28/2010 126,458 320,469
Don Marie
Persing 10,000 3.9% 40.5000 02/28/2010 254,702 645,466
5,975 33.9375 08/28/2010 127,525 323,174
(1) No SARs were granted in tandem with stock options.
(2) In order to realize the potential value set forth, the price per share of
our common stock would be $65.97 and $105.05, respectively, at the end of the
ten-year option term for options granted February 28, 2000. The price per
share of our common stock would be $55.28 and $88.03, respectively, at the end
of the ten-year option term for options granted August 28, 2000.
- 11 -
OPTION/SAR EXERCISES AND YEAR END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year, and FY-End Option/SAR
Value
Value of Unexercised
Number of Securities In-The-Money
Underlying Unexercised Options/SARS
Options/SARS at FY End at FY End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- ----------- --------------- -------- ---------------------- --------------------
James S.
Quarforth 12,000 $375,000 89,700 / 101,400 $66,725 / $525
Carl A.
Rosberg 8,000 247,125 55,450 / 46,325 48,950 / 600
David R.
Maccarelli -- -- 37,516 / 30,900 430 / 600
Michael B.
Moneymaker -- -- 17,400 / 30,275 194 / 338
Don Marie
Persing -- -- 4,500 / 23,475 -- / --
Closing price on December 29, 2000, the last day of our fiscal 2000, was
$17.625 and was used in calculating the value of unexercised options.
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PENSION PLAN/DEFINED BENEFIT PLAN DISCLOSURE
The following table reflects the estimated aggregate retirement benefits to
which certain of our executive officers, including each of the named executive
officers in the Summary Compensation Table, are expected to be entitled under
the provisions of our non-contributory, funded employee retirement plan and
the executive supplemental retirement plan (the "Plans"). The table
illustrates the amount of aggregate annual retirement benefits payable under
the Plans for an executive retiring in 2000 at age 65 computed on a straight
life annuity. The amount of benefit assumes that the executive has completed a
minimum of 15 years of service. The supplemental benefit amount will not be
paid for service of less than 15 years. Additional aggregate benefits are not
earned for service in addition to 35 years. Amounts listed will be reduced by
social security benefits and offset by employer 401(k) contributions.
Annual Retirement Benefits Payable for
Respective Years of Service
--------------------------------------
Average
Annual
Compensation 15 years 20 years 25 years 30 years 35 years
- ------------ -------- -------- -------- -------- --------
$200,000 $100,000 $115,000 $130,000 $145,000 $160,000
275,000 137,500 158,125 178,750 199,375 220,000
350,000 175,000 201,250 227,500 253,750 280,000
425,000 212,500 244,375 276,250 308,125 340,000
500,000 250,000 287,500 325,000 362,500 400,000
575,000 287,500 330,625 373,750 416,875 460,000
650,000 325,000 373,750 422,500 471,250 520,000
The number of credited years of service for James S. Quarforth, Carl A.
Rosberg, David R. Maccarelli, Michael B. Moneymaker and Don Marie Persing is
21 years, 12 years, 8 years, 5 years and 4 years, respectively.
REPORT OF THE COMPENSATION COMMITTEE
We maintain a compensation program designed to motivate, retain and attract
management, with incentives linked to financial performance and enhanced
shareholder value. The fundamental philosophy is to relate the amount of
compensation for an executive directly to his or her contribution to our
success in achieving superior performance objectives. Our executive
compensation program consists of three components: 1) base salary; 2)
potential for annual incentive compensation based on company performance; and,
3) the opportunity to earn long-term stock-based incentives which are intended
to encourage achievement of superior long-term results and to align executive
officer interests with those of the shareholders. The base salary element is
developed based on the performance of the individual executives with reference
to industry, peer group and national surveys, with the objective of having our
chief executive officer receive a level of base salary similar to the average
base salary of chief executives at similarly sized technological service
companies. Base salary levels of other executive officers are established by
reference to the chief executive officer's salary, depending on the type and
level of responsibility of the other executives. The annual incentive
compensation element is based on our attainment of certain levels of
profitability, service and on the individual's overall performance, all as set
forth in our annual management incentive plan. The criteria contained in the
annual management incentive compensation plan (MIP) is developed in
conjunction with our annual business plan. The long-term stock-based element
is developed by reference to competitive practices and trends of other
companies, which use stock options as a component of
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executive compensation. Long-term stock-based compensation is given great
weight in our overall compensation mix in order to provide incentive for
executive officers to increase shareholder value. Accordingly, the
Compensation Committee has taken into account the amount and value of options
held by each of the executive officers when considering new grants to assure
that deserving executives have a significant equity participation in the
company. The Chief Executive Officer's total compensation increased by
$190,332 in 2000 compared to 1999. A number of factors and criteria were
utilized by the Compensation Committee in evaluating the increase in total
compensation. An independent compensation consulting firm's industry market
survey of similarly sized technological service companies as well as
individual performance were utilized to determine the base salary increase of
$29,450. The achievement of strong revenue, customer growth and strategic
accomplishments toward our long-term business goals in 2000 resulted in
incentive compensation of $225,022. Specifically, during 2000, we closed on
the acquisition of PrimeCo's Virginia PCS operations, consolidated the
Virginia PCS Alliance operations, entered into an agreement to merge with R&B
Communications, Inc., raised $250 million in preferred capital, closed on $700
million in new debt facilities and sold our directory assistance and analog
cellular operations. During 2000, our consolidated total assets exceeded $1.0
billion, up from $218 million a year ago, and consolidated net operating
revenues increased $43.5 million or 62% ($11.7 million or 20% for 1999 over
1998). This growth reflects the aforementioned transactions and internal
growth from the addition of 37,000 digital PCS customers within the Virginia
and West Virginia PCS Alliances, nearly 14,000 Internet subscribers and nearly
9,000 competitive business telephone lines.
John N. Neff (chairperson)
Anthony J. de Nicola
John B. Williamson, III
C. Wilson McNeely, III
John B. Mitchell, Sr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, John Neff is a member of the Compensation Committee of
the board of directors. During fiscal 2000, Mr. Neff served as an executive
officer of Nielsen Builders, Inc., with which there is an "interlock"
relationship, as defined by the Securities and Exchange Commission, arising
from Mr. Neff concurrently serving as a director of the company and as an
executive officer of Nielsen Builders, to which the company awarded
construction contracts in fiscal 2000 and 1999. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS." The board of directors believes that the terms of these
transactions were no less favorable to the company than terms available from
unrelated parties for comparable transactions.
OTHER EMPLOYEE ARRANGEMENTS
We have entered into management agreements with our named executive
officers, James S. Quarforth, Carl A. Rosberg, David R. Maccarelli, Michael B.
Moneymaker and Don Marie Persing. The agreements are identical. Each was
approved by the non-employee members of the board of directors.
The agreements provide for certain benefits if we have a change in control
followed by (1) termination of the executive's employment without cause prior
to the fifth anniversary of the change of control date, or (2) resignation of
the executive for good reason prior to the fifth anniversary of the change of
control date (even if such resignation occurs after the term of the
agreement). "Cause" means that the executive has been convicted
- 14 -
of a felony that involves misappropriation or has willfully and continually
failed to perform a material duty or responsibility. "Good reason" means any
of the following: compensation is reduced; responsibilities are diminished;
relocation of more than 50 miles is required; deferred compensation is
withheld; benefits diminish following a change of control; receives direction
from the board of directors or an officer to commit an illegal or unethical
act; or receives direction from the board of directors or an officer to
refrain from acting and to do so is unethical or illegal.
The agreements for the named executive officers provide for two year terms.
At the end of the two year period, the term is extended automatically for an
additional year unless NTELOS provides written notice that the agreement will
not be extended. The current agreements are in effect until December 31, 2001.
If an executive is terminated within twenty-four months of a change in
control, he or she will receive severance benefits equal to two years'
compensation. If the termination comes after twenty-four months but prior to
sixty months of a change in control, the executive will receive severance
benefits equal to one year's compensation or the severance benefits available
to employees, whichever is greater. Any severance pay due to the executive
will be reduced by any cash compensation paid to the executive by another
employer after the executive's termination.
We have amended our Executive Supplemental Retirement Plan to provide that
a participant who terminates his employment with us prior to retirement but
after (i) seven years service or (ii) a change in control date with good
reason, shall be entitled to benefits under the plan as of the date he would
have been eligible to retire. "Change of control" means (i) any person or
entity, except Welsh, Carson, Anderson & Stowe, acquires direct or indirect
ownership of more than 30% of the combined voting power of NTELOS; (ii) during
any period of two consecutive years, individuals who constitute the board of
directors, and any new director whose election was approved by a majority of
the directors who either (a) were directors at the beginning of the period or
(b) were so elected, cease for any reason to constitute at least a majority of
the board of directors; (iii) our shareholders approve a merger or
consolidation with another entity and the merger or consolidation is
consummated, other than (a) a merger or consolidation where our voting
securities outstanding immediately prior to the merger or consolidation
continue to represent 50% of the combined voting power of the surviving entity
or (b) a merger or consolidation effected to recapitalize the company where no
person acquires more than 30% of the combined voting power of our then
outstanding securities; or (iv) our shareholders approve a plan of complete
liquidation or an agreement for the sale of substantially all of our assets
and such liquidation or sale is consummated.
We have also amended our 1997 Stock Compensation Plan to provide that the
options granted thereunder may become fully exercisable upon a change in
control (as defined above). Notwithstanding the foregoing, the exercisability
of the options will not accelerate if we determine that the acceleration will
have an adverse effect on the availability of pooling of interest accounting.
In addition, in connection with our merger with R&B Communications, the
company has entered into an employment agreement and a management continuity
agreement with J. Allen Layman.
The employment agreement with J. Allen Layman, provides that Mr. Layman
will serve as president of NTELOS and president and chief executive officer of
R&B Communications, Inc., a wholly-owned subsidiary of NTELOS, until February
13, 2006. In addition, the board of directors agreed that Mr. Layman would
serve as Chairman of the Board and as a member of the Executive Committee.
- 15 -
Mr. Layman is entitled to (1) a base salary not lower than $275,000 per
year, (2) an annual incentive bonus of up to 35% of his base salary, subject
to approval by the board of directors, and (3) an annual automobile allowance
of $7,920. In addition, Mr. Layman is entitled to participate in our long-term
stock-based incentive compensation program as well as all employee benefit
plans applicable to the company's highest ranking executives, including our
executive supplemental retirement plan and 401(k) restoration plan.
NTELOS may terminate Mr. Layman's employment agreement, upon written
notice, for cause or if Mr. Layman incurs a disability that continues for a
period of six consecutive months or any period totaling six months within any
twelve consecutive months. Mr. Layman may terminate the agreement upon prior
written notice for good reason. "Cause" means any of the following: gross
misconduct; willful and repeated failure to comply with the lawful directives
of the board of directors; any act of dishonesty or fraud; material breach of
the terms of any confidentiality, non-competition, non-solicitation or
employment agreement with NTELOS; acts of malfeasance or negligence; material
failure to perform the duties and responsibilities of his position; or willful
and grossly negligent conduct materially damaging NTELOS. "Good reason" means
any of the following: total compensation is reduced; responsibilities are
diminished; relocation of more than 25 miles is required; deferred
compensation is withheld; benefits diminish following a change of control;
directed by the board of directors or an officer to commit an illegal or
unethical act; material breach of the company's obligations under the
agreement; or any purported termination that does not satisfy the requirements
of the agreement.
If Mr. Layman is terminated, other than for cause, or if Mr. Layman
terminates the agreement for good reason, Mr. Layman is entitled to (1) an
amount equal to the base salary he would have been entitled to receive for the
period between his termination and the end of the term of the agreement, and
(2) the executive standard termination payments and pro rata incentive
payments for the fiscal year in which the termination occurs. Upon a change in
control of NTELOS, if Mr. Layman's employment is terminated by us without
cause or by Mr. Layman with good reason, he will only be entitled to the
compensation and benefits set forth in the management continuity agreement
described below. Mr. Layman's employment agreement terminates automatically
upon his death in which case NTELOS would have no further obligation to Mr.
Layman or his estate other than the disposition of the death benefits under
our employee benefit plans, base salary due through the end of the agreement,
the standard termination payments and any pro rata incentive payments due.
Mr. Layman's employment agreement also provides that during the term of the
agreement and for 60 months after his employment with the company ends, Mr.
Layman will not compete, directly or indirectly, with the company.
Furthermore, pursuant to a non-solicitation provision, Mr. Layman may not
solicit certain current and former employees of NTELOS during the term of the
agreement and for 60 months thereafter. As long as Mr. Layman is not in
violation of these provisions, we will pay him $250,000 annually, with
adjustments for an increase in the Consumer Price Index, for the 60 months
following the end of the agreement.
Mr. Layman's management continuity agreement provides for certain benefits
if we have a change of control followed by (1) his termination without cause
prior to the fifth anniversary of the change of control date, or (2) his
resignation for good reason prior to the fifth anniversary of the change of
control date. If Mr. Layman is terminated within twenty-four months of a
change in control, he will receive severance benefits equal to the greater of
(1) the amount he would be entitled to under his employment agreement if it is
in effect immediately prior to his termination, (2) two year's compensation or
(3) the severance benefit available to employees of the company who are
similarly situated to Mr. Layman on the termination date. This agreement is
for a term ending on February 13, 2006.
- 16 -
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EQUITY INVESTMENT
Welsh Carson has purchased 100,000 shares of our Series B preferred stock
for $100.0 million, and Morgan Stanley has purchased 12,500 shares of the
Series B preferred stock for $12.5 million. The Series B preferred stock is
entitled to receive dividends at an annual rate of 8.5% of the stated value
and is convertible into shares of our common stock at any time at the option
of the holders at a conversion rate equal to the stated value divided by
$41.00. In connection with the issuance of the Series B preferred stock, we
issued to Welsh Carson and Morgan Stanley warrants to purchase 500,000 shares
of our common stock at an exercise price of $50.00 per share.
Welsh Carson has also purchased 55,022 shares of Series C preferred stock
for $55.0 million and 69,978 shares of Series D preferred stock for $70.0
million. Morgan Stanley has purchased 5,278 shares of that same Series C
preferred stock for $5.3 million and 7,222 shares of that same Series D
preferred stock for $7.2 million. The Series D preferred stock automatically
converted into shares of Series C preferred stock upon our shareholders'
approval of the modification to various terms of the preferred stock on
December 4, 2000. The Series C preferred stock is entitled to receive
dividends at an annual rate of 5.5% of the stated value and is convertible
into shares of common stock at any time at the option of the holders at a
conversion rate equal to the stated value divided by $45.00.
The holders of Series B preferred stock are entitled to elect in the
aggregate two of our directors. Welsh Carson has agreed with us that it will
elect one director until such time as Federal Communications Commission
regulations would permit Welsh Carson to control the election of more than
14.9% of our directors. Also, as long as the Series B preferred stock is
outstanding, we will have no more than 11 directors on our board unless Welsh
Carson otherwise agrees.
The holders of the Series B and Series C preferred stock are entitled to
vote with the holders of our common stock on an as-converted basis. Welsh
Carson has agreed with the company not to vote more than 14.9% of the votes
entitled to be cast by all holders of voting securities, until such time as
Federal Communications Commission regulations would permit full voting rights.
Welsh Carson has granted to Morgan Stanley, the other holder of the Series B
and Series C preferred stock, a proxy to cast Welsh Carson's votes in excess
of 14.9%, except that Morgan Stanley will not cast more than 9.9% of the votes
entitled to be cast. Shares owned by Welsh Carson that represent more than
14.9% of the votes entitled to be cast and that are not voted by Morgan
Stanley pursuant to this proxy, will be voted proportionately with the votes
cast at this meeting by our public shareholders.
In connection with these equity investments, we have paid all of the
reasonable out-of-pocket expenses of Welsh Carson.
AFFILIATED TRANSACTIONS
In 2000, we awarded a contract to Nielsen Builders, Inc. for renovations of
a new customer care center. The renovations were required to meet our
increased customer care capacity needs resulting from our acquisition of the
Richmond-Norfolk Virginia markets of PrimeCo PCS, L.P. We paid $2.0 million to
Nielsen Builders, Inc. for these renovations during 2000.
In 1999, we awarded the construction project for a new $3.7 million
corporate facility to Nielsen Builders, Inc. through a competitive bid
process. Construction of this facility commenced in 2000 and we paid $3.1
million to Nielsen Builders, Inc. for construction performed on the facility.
Mr. John Neff currently serves as President and Chief Executive Officer of
Nielsen Builders, Inc.
- 17 -
In February 2001, we engaged in a merger whereby R&B Communications became a
wholly-owned subsidiary. Effective May 2000, R&B Communications entered into a
lease agreement with Layman Family, LLC. Under the terms of the agreement, R&B
Communications will lease a 34,000 square foot building from Layman Family, LLC
for a term of 20 years at a rental rate of $15 per square foot. Mr. Layman, our
President and a director, is the manager of Layman Family, LLC.
PERFORMANCE GRAPH
Below is a performance graph comparing the performance of our common stock
for the last five years with the performance of the Nasdaq Composite Index, the
Nasdaq Telecommunications Index and the S&P Telecom Index against which we have
compared our performance in our last several proxy statements. The graphs
assume that the value of the investment in each scenario was $100 at December
31, 1995 and that all dividends were reinvested in their respective common
stock issue in the month paid.
On a going forward basis we have determined to compare our common stock to
the Nasdaq Telecommunications Index rather than the S&P Telecom Index because
we believe that the Nasdaq Telecommunications Index is comprised of companies
that are more comparable to us.
[Graph]
Comparison of Five-Year Cumulative Total Return
Fiscal Year Ended December 31
1995 1996 1997 1998 1999 2000
NTELOS Inc. 100 128 132 140 211 108
Nasdaq Compositive Index 100 123 150 210 391 238
Nasdaq Telecom Index (1) 100 104 148 242 490 224
S&P Telecom Index (2) 100 101 140 205 216 191
(1) This index consists of securities from 235 companies in the
telecommunications industry, including NTELOS.
(2) This index consists of ALLTEL Corporation, BellSouth Corporation, Century
Telephone, Qwest Communications International, SBC Communications Inc. and
Verizon Communications Inc., and is publicly available.
- 18 -
AMENDMENT TO THE NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
PROPOSAL 2
The board of directors recommends that shareholders approve an amendment to
our Non-Employee Director's Stock Option Plan (the "Directors' Plan"),
reserving up to an additional 100,000 shares of our common stock for issuance
under the Directors' Plan.
The board of directors believes that the amendment to the Directors' Plan
is essential to the continued functioning of the plan, which has played an
important role in promoting a greater identity of interest between our non-
employee directors and our shareholders. By granting stock options to the non-
employee directors, they have a vested interest in our future performance
which aids in aligning the interests of the director participants with the
interests of our shareholders. Thus, the Directors' Plan allows us to provide
an attractive investment opportunity to non-employee directors that directly
ties them to the future success of NTELOS.
As of the record date, and without giving effect to this proposal, 25,000
shares have been reserved for issuance under the Directors' Plan, of which
24,979 options have been granted leaving 21 available for grant. The amendment
to the Directors' Plan would increase the number of shares reserved for
issuance under the plan by 100,000 to 125,000. Proposal 2 was adopted by the
board of directors on December 4, 2000, subject to shareholder approval.
DESCRIPTION OF THE DIRECTORS' PLAN
The general purpose of the Directors' Plan is to promote a greater identity
of interest between non-employee directors and NTELOS' shareholders by
requiring non-employee directors to receive a certain amount of their retainer
fees in options and by permitting them to receive additional options in lieu
of their remaining retainer fees. The board of directors administers the
Directors' Plan and has complete authority to interpret all of its provisions,
to adopt, amend and rescind rules and regulations pertaining to its
administration and to make all other necessary decisions.
Participation in the Directors' Plan is limited to members of the board of
directors who are not employees of NTELOS on the date an option is granted. As
of March 13, 2001, there are eight directors eligible to participate in the
Directors' Plan. On each January 2, or other date as the board of directors
may determine, each eligible director will be granted a stock option to
acquire common stock of NTELOS in lieu of all or part of the retainer fees
payable to that director for the calendar year in which the option is granted.
Also, on or before each December 15, each eligible director may elect to
receive a stock option to acquire common stock of NTELOS in lieu of all or
part of any remaining retainer fees, in multiples of 10 percent, payable to
that director for the following calendar year. A non-employee director's
decision to receive an option in lieu of retainer fees is irrevocable. The
board of directors shall determine for each year (i) the amount of retainer
fees that will be required to be paid in stock options and the number of
shares of stock covered by those options and (ii) the number of shares of
common stock for which an option will be granted for each stated amount of
retainer fees that a director elects to relinquish. Additionally, the board of
directors, in its discretion, may grant additional stock options to
participants as it considers appropriate.
Each option is evidenced by a written agreement containing the terms,
conditions and restrictions, not inconsistent with the Directors' Plan, that
the board of directors considers appropriate. Unless the board of directors
provides otherwise, an option generally is exercisable with respect to 1/12th
of the shares of stock
- 19 -
subject to the option as of the date of grant. Thereafter, provided the
participant is still serving on the board of directors at each of the
following times, the options become exercisable with respect to an additional
1/12th of the granted shares on the first day of each of the following ten
months with the remaining shares becoming effective on the December 1
following the date of grant of the option. The option becomes fully
exercisable if the participant ceases to be a director due to death or
disability. Each option is forfeited as of the date the participant ceases to
be a director except to the extent the option is then exercisable or becomes
exercisable as of that date.
The price per share paid on exercise of the option is the fair market value
of the stock on the option's date of grant. Participants must pay the option
price in cash, by surrendering shares of stock, or by any combination thereof.
No option can be exercised after the tenth anniversary of the date of grant.
Options are nontransferable except by will or the laws of descent and
distribution, and an option may only be exercised by the participant during
his or her lifetime. No interest or right of the participant in any stock
option is liable for, or subject to, any lien, obligation or liability of the
participant. No participant shall have any rights as a shareholder with
respect to shares of common stock subject to an option until the exercise of
the option.
The board of directors may amend the Directors' Plan; provided, however,
that no amendment may become effective without shareholder approval if the
amendment (i) materially increases the aggregate number of shares of common
stock that may be issued under the Directors' Plan, (ii) materially changes
the class of individuals eligible to become participants or (iii) materially
increases the benefits that may accrue to participants under the Directors'
Plan. The maximum number of shares of common stock that may be issued pursuant
to options under the Directors' Plan is subject to certain adjustments. If for
any reason other than exercise an option is terminated in whole or in part,
the number of shares of stock allocated to the terminated option may be
reallocated to other participants under the Directors' Plan. Additionally, if
NTELOS effects one or more stock dividends, stock splits, subdivisions or
consolidations of shares of stock or other similar changes in capitalization,
the maximum number of shares of stock that may be issued pursuant to options
will be adjusted proportionately.
AMENDMENT
If the proposed amendment is approved there will be up to at least 100,021
shares of common stock available for issuance under the Directors' Plan. The
additional shares provided by the amendment will be used for future awards,
which are dependent on eligible directors electing to receive stock options in
lieu of certain directors' fees and, therefore, are not determinable at this
time.
COMMON STOCK PRICE
On March 13, 2001, the closing market price of our common stock on the
NASDAQ National Market was $17.00.
FEDERAL INCOME TAX CONSEQUENCES
The following federal income tax consequences are generally associated with
the exercise of stock options. This summary does not purport to be complete
and does not take into account any state, local, foreign or other tax
consequences that may be applicable.
A participant in the Directors' Plan generally will not recognize any
taxable income on the receipt of a stock option. On exercise of the option, a
participant will recognize as ordinary income the excess of the fair market
value of the stock purchased over the purchase price paid. A participant will
have a tax basis in the shares of
- 20 -
stock purchased equal to the amount paid plus the amount the participant
included in income on exercise, and the participant then will recognize
capital gain (or loss) on a subsequent sale of the stock to the extent the
amount realized on the sale exceeds (or is less than) the tax basis of the
stock sold. That gain (or loss) will be taxed as long-term (if the stock is
held for more than one year) or short-term (if the stock is held for one year
or less) capital gain (or loss), depending on the amount of time the
participant held the shares of stock before he or she sold them. The foregoing
tax consequences will be different if the participant pays the exercise price
of the option by surrendering shares of stock.
On a participant's exercise of an option, NTELOS generally will be entitled
to deduct an amount equal to the ordinary income the participant recognizes.
VOTE REQUIRED
Directors who are not employees of the company may benefit from the
adoption of this amendment, and to that extent may have a conflict of interest
in recommending the amendment.
Approval of this proposal requires the affirmative votes of the majority of
shares of common stock present at the meeting, in person or by proxy.
The board of directors recommends a vote "FOR" proposal 2.
AMENDMENT TO THE 1997 STOCK
COMPENSATION PLAN
PROPOSAL 3
The board of directors recommends that shareholders approve an amendment to
our 1997 Stock Compensation Plan (the "1997 Plan") reserving an additional
1,550,000 shares of our common stock for issuance under the 1997 Plan.
The board of directors believes that this amendment to the 1997 Plan is
important to the continued functioning of the 1997 Plan, which has proved an
effective means of recruiting, motivating and retaining the most qualified
employees needed to maintain and improve our competitive position. In
addition, the 1997 Plan aids in aligning the interest of employees with those
of our shareholders through increased employee ownership of the company.
As of the record date, and without giving effect to this proposal, 950,000
shares have been reserved for issuance under the 1997 Plan, of which 937,212
(net of reallocated forfeitures) have been granted pursuant to the plan. The
amendment would increase the number of shares reserved for issuance under the
1997 Plan by 1,550,000 to 2,500,000. Proposal 3 was adopted by the board of
directors on December 4, 2000, subject to shareholder approval.
DESCRIPTION OF THE 1997 PLAN
The general purpose of the 1997 Plan is to assist NTELOS in recruiting and
retaining individuals with ability and initiative by enabling such persons to
participate in the future success of NTELOS by giving them stock options, both
incentive stock options and nonqualified stock options, stock appreciation
rights (SARs), stock awards and performance shares. The board of directors
appoints a committee to administer the 1997 Plan
- 21 -
on behalf of NTELOS. The administrator has complete authority to grant
options, SARs, stock awards and performance shares on such terms, not
inconsistent with the 1997 Plan, as the administrator considers appropriate.
The administrator has complete authority (i) to interpret the 1997 Plan, (ii)
to prescribe the form of written agreements covering awards granted under the
1997 Plan, and (iii) to adopt, amend and rescind rules and regulations
pertaining to the administration of the 1997 Plan.
Participation in the 1997 Plan is limited to employees of NTELOS or
subsidiaries of NTELOS, including any entity becoming a subsidiary after the
adoption of the 1997 Plan. The administrator, in its discretion, shall grant
awards to those eligible individuals who have contributed significantly or can
be expected to contribute significantly to the profits or growth of NTELOS or
any of its subsidiaries. Directors of NTELOS who are employees may be selected
to participate in the 1997 Plan. Each award under the 1997 Plan is evidenced
by a written agreement in such form and containing such terms, conditions and
restrictions as the administrator considers appropriate. Each award under the
1997 Plan will expire on and after the time specified in the written agreement
governing the award, which generally will not be later than 10 years after the
date of grant of the award.
When an option is granted under the 1997 Plan, the administrator will
designate whether the option is an incentive stock option or a nonqualified
stock option and will specify the number of shares of common stock subject to
the option. Each option shall be exercisable at such time as the administrator
shall provide in the written agreement governing the option. The agreement
will provide the price per share to be paid on exercise of the option, which,
in case of an incentive stock option, will not be less than the fair market
value of the stock on the date the option is granted. Each optionee must pay
the option price in cash except that, if the written agreement governing the
option so provides, payment of the option price may also be made by
surrendering shares of stock.
When an SAR is granted, the administrator will specify the number of shares
of stock covered by each award. An SAR may be granted in tandem with a
particular option, in which case it will only be exercisable upon the
surrender to NTELOS, on exercise of the SAR, of that portion of the option to
which the SAR relates. An SAR granted in tandem with an option may be
exercised only to the extent the related option is exercisable and only when
the fair market value of the underlying stock exceeds the option price of the
related option. At the administrator's discretion, the amount payable on
exercise of an SAR may be settled in cash, common stock or any combination of
cash and common stock.
When a stock award or performance share is granted, the administrator will
specify the number of shares of stock covered by each such award. A
participant's rights in a stock award may be forfeited or otherwise restricted
as set forth in the written agreement covering that award. In connection with
a performance share award, the participant shall be entitled to receive
payment pursuant to the award on the satisfaction of such performance
objectives as are set forth in the written agreement covering the award. The
amount payable under the performance award may be settled in cash, common
stock or a combination of cash and common stock.
As a general rule, awards under the 1997 Plan are nontransferable except by
will or the laws of descent and distribution, and no interest or right of a
participant in any award shall be liable for, or subject to, any lien,
obligation or liability of the participant. Notwithstanding the preceding
sentence, however, a participant may transfer an option that is not an
incentive stock option, and an SAR that is not granted in tandem with an
incentive stock option, to the participant's children, grandchildren, spouse,
a trust for the benefit of such family members or a partnership in which those
family members are the only partners, on such terms and conditions as may be
permitted under the applicable securities law in effect from time to time. In
the event of any transfer of an SAR that was granted in tandem with an option,
the SAR and the option must be transferred to the same person or persons or
entity or entities.
- 22 -
Each recipient of an award shall be responsible for satisfying any income
and employment tax withholdings attributable to the exercise or payment of the
award. Generally, no participant has any rights as a shareholder with respect
to any shares of common stock subject to an award until the award is exercised
or paid pursuant to its terms and only then when it is settled in shares of
stock. However, prior to forfeiture, a participant will have all rights of a
shareholder with respect to a stock award, including the right to receive
dividends and vote the shares; provided, however, that during such period, the
participant may not sell, transfer or dispose of the shares of stock.
The maximum number of shares of stock that may be granted pursuant to
awards under the 1997 Plan is subject to certain adjustments. If (i) an option
is terminated for any reason other than its exercise or the exercise of an SAR
granted in tandem with the option that is settled with stock, (ii) an SAR is
terminated for any reason other than its exercise and settlement with stock or
the exercise of the option granted in tandem with the SAR, (iii) a performance
share is terminated for any reason other than settlement with stock, or (iv) a
stock award is forfeited, the number of shares of common stock allocated to
each such award may be reallocated to other awards to be granted under the
1997 Plan.
AMENDMENT
If the proposed amendment is approved, there will be up to at least
1,562,788 shares of common stock available for issuance under the terms of the
1997 Plan. The newly reserved shares will be used for future awards, which are
subject to the discretion of the administrator and, therefore, are not
determinable at this time.
COMMON STOCK PRICE
On March 13, 2001, the closing market price of our common stock on the
NASDAQ National Market was $17.00.
FEDERAL INCOME TAX CONSEQUENCES
The following federal income tax consequences are generally associated with
awards under the 1997 Plan. This summary does not purport to be complete and
does not take into account any state, local, federal or other tax consequences
that may be applicable.
An optionee generally will not recognize any taxable income on the receipt
of a nonqualified stock option. On exercise of the nonqualified stock option,
an optionee will recognize as ordinary income the excess of the fair market
value of the common stock purchased over the purchase price paid. An optionee
will have a tax basis in the shares of common stock purchased equal to the
amount paid for the stock plus the amount included in income on exercise of
the option, and the holding period for tax purposes of the shares of common
stock begins on the day of purchase. An optionee will recognize capital gain
(or loss) on a subsequent sale of the stock to the extent the amount realized
on the sale exceeds (or is less than) the tax basis in the stock sold. That
gain (or loss) will be taxed as a long-term (if the stock is held for more
than one year) or short-term (if the stock is held for one year or less)
capital gain (or loss), depending on the time the optionee held the shares of
stock before he or she sold them. The foregoing tax consequences will be
different if an optionee pays the exercise price of the option by surrendering
shares of common stock.
An optionee generally will not recognize any taxable income on the receipt
of an incentive stock option or on the exercise of an incentive stock option.
Nonetheless, the exercise of an incentive stock option can increase
- 23 -
the optionee's alternative minimum tax liability. An optionee's tax basis in
the shares of common stock purchased generally equals the purchase price paid
for the stock. The holding period for tax purposes of the stock begins on the
day of purchase. An optionee will recognize taxable income on any subsequent
sale of the shares of common stock. Provided the sale occurs more than two
years after the grant of the incentive stock option and more than one year
after the optionee purchases the stock, the optionee will recognize on the
sale capital gain (or loss) to the extent the amount realized on the sale
exceeds (or is less than) the tax basis in the stock sold. That gain (or loss)
will be taxed as long-term capital gain (or loss). However, if the sale occurs
on or before two years after the date of grant of the incentive stock option
or one year after the optionee purchases the stock, the optionee will have
made a "disqualifying disposition" of the stock. In that event, the optionee
will recognize as ordinary income in the year of the sale the excess of the
fair market value of the shares of stock on the date of exercise of the
incentive stock option over the purchase price paid for the stock. Then, any
additional gain the optionee realizes on the sale, in excess of the ordinary
income recognized, will be treated as long-term, if the stock is held for more
than one year, or short-term, if the stock is held for one year or less,
capital gain, depending on the length of time the optionee held the shares of
stock before he or she sold them. A special rule applies to a disqualifying
disposition of stock where the amount an optionee realizes on the sale is less
than the fair market value of the stock on the date of exercise of the
incentive stock option. In that event, an optionee generally will recognize as
ordinary income the excess, if any, of the amount realized on the sale over
the purchase price paid. Any loss will be treated as a long-term or short-term
capital loss, depending on the length of time the optionee held the shares of
stock before he or she sold them. The foregoing tax consequences will be
different if the optionee pays the exercise price of the option by
surrendering shares of common stock.
On exercise of an SAR, the participant generally will recognize as ordinary
income the cash and the fair market value of any common stock he or she
receives. With a stock award, the participant generally will recognize
ordinary income at the time the stock is no longer subject to forfeiture or
becomes transferable, such as when it vests, in an amount equal to the fair
market value at the time the stock vests. However, the participant can make a
special tax election, called a "Section 83(b) Election," within 30 days of the
award of the stock. As a result of the Section 83(b) Election, the participant
then will be taxed on the fair market value of the stock at the time of the
award, despite the fact that the stock is subject to forfeiture and not
transferable, in lieu of when the stock award vests. A participant generally
will recognize as ordinary income the cash and the fair market value of stock
received on payment of any performance shares. The participant will recognize
capital gain (or loss) on a subsequent sale of any stock received to the
extent the amount realized on the sale exceeds (or is less than) his or her
tax basis in the stock sold.
NTELOS and its subsidiaries generally will not be entitled to a federal
income tax deduction with respect to the grant or exercise of an incentive
stock option. In the event an optionee disposes of shares of common stock
acquired under an incentive stock option in a disqualifying disposition,
NTELOS or its subsidiary generally will be entitled to a federal income tax
deduction equal to the amount of ordinary income the optionee recognizes. On
the other hand, the exercise of a nonqualified stock option generally will
entitle NTELOS or its subsidiary to deduct an amount equal to the ordinary
income the optionee recognizes on exercise of the option. NTELOS or its
subsidiaries generally also will be entitled to a federal income tax deduction
equal to the amount of ordinary income the participant recognizes (i) on
exercise of an SAR, (ii) on either the vesting of a stock award or a Section
83(b) Election, as applicable, or (iii) on payment of a performance share. In
certain cases, however, NTELOS and its subsidiaries may not be entitled to
deduct part or all of the foregoing amounts to the extent the aggregate
compensation paid to certain enumerated employees of NTELOS in any taxable
year exceeds $1,000,000. There are exceptions to the $1,000,000 deduction
limit for "performance-based" compensation. In any event, NTELOS will be
required to withhold or obtain payment from the participant for the amount of
all applicable income and tax withholdings relating to an award under the 1997
Plan.
- 24 -
VOTE REQUIRED
Directors who are employees of the company may benefit from the adoption of
this amendment, and to that extent may have a conflict of interest in
recommending the amendment.
Approval of this proposal requires the affirmative votes of the majority of
shares of common stock present at the meeting, in person or by proxy.
The board of directors recommends a vote "FOR" proposal 3.
FINANCIAL STATEMENTS
Our 2000 Annual Report to Shareholders contains audited financial
statements for 2000, 1999 and 1998 and the report of McGladrey & Pullen, LLP
thereon. Management's Discussion and Analysis of Financial Condition and
Results of Operations is also contained in this 2000 Annual Report.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of McGladrey & Pullen, LLP, P. O. Box 1276, Richmond, Virginia,
23218, independent public accountants, audited our financial statements for
the fiscal year ended December 31, 2000. A representative of McGladrey &
Pullen, LLP is expected to be present at the annual meeting and will be
available to make a statement and to answer appropriate questions with respect
to their audit of our financial statements and records for the fiscal year
ended December 31, 2000.
SHAREHOLDER PROPOSALS
In order for proposals of shareholders to be considered for inclusion in
the proxy materials for our 2002 annual meeting of shareholders, such
proposals must be received by our Corporate Secretary by December 1, 2001.
Shareholders may bring other business before the annual meeting only in
accordance with the provisions of our bylaws, which require, among other
things, that notice be given to us not less than sixty days prior to the
meeting.
FORM 10-K
Upon written request to our Corporate Office, P. O. Box 1990, Waynesboro,
Virginia 22980, shareholders will be furnished without charge a copy of our
Annual Report on Form 10-K required to be filed with the Securities and
Exchange Commission, including the financial statements and the schedules
thereto for the most recent fiscal year.
Waynesboro, Virginia
March 30, 2001
- 25 -
Appendix A
NTELOS INC.
AUDIT COMMITTEE CHARTER
I. APPOINTMENT
There shall be an Audit Committee consisting of not less than three (3)
members of the Board of Directors who are not officers or employees (or their
immediate family members) of the Company and shall be wholly composed of
directors of the Company who are "independent" within the meaning of the Rules
of the Nasdaq Stock Market, Inc., except that the Board of Directors, upon
determining it to be in the best interest of the Company and the shareholders,
may appoint one director who is not independent and is not a current employee
nor an immediate family member of an employee of the Company. The members of
said Committee shall be appointed annually by the Board of Directors and shall
continue to act until their successors are elected, but shall be subject to
removal at any time by the majority of the entire Board. Any such vacancy
shall be filled by the Board in accordance with this Section. All members of
the Audit Committee shall have a requisite working familiarity with basic
finance and accounting practices in compliance with the Rules of The Nasdaq
Stock Market, Inc. Furthermore, at least one member of the Audit Committee
shall have accounting or related financial management expertise in compliance
with the Rules of the Nasdaq Stock Market, Inc.
II. POWERS
The Audit Committee shall: (a) assist the Board of Directors in discharging
its statutory and fiduciary responsibilities with regard to audits of the
books and records of the Company and the monitoring of its accounting and
financial reporting practices; (b) review and consider the work of the
Company's independent accountants and share with the Board the ultimate
authority and responsibility to select, evaluate and, where appropriate,
replace the independent accountants (or to nominate the independent
accountants to be proposed for shareholder approval in any proxy statement);
(c) carry on appropriate oversight to determine that the Company has adequate
administrative and internal accounting controls and that they are operating in
accordance with prescribed procedures and codes of conduct; and (d)
independently review the Company's financial information that is distributed
to shareholders and the general public.
In addition, the Audit Committee shall ensure that the Company's
independent accountants submit on a periodic basis to the Audit Committee a
formal written statement delineating all relationships between the independent
accountants and the Company, consistent with Independence Standards Board
Standard 1. This shall include: (i) disclosing to the Audit Committee of the
Company, in writing, all relationships between the independent accountant and
its related entities and the Company and its related entities that in the
independent accountant's professional judgment may reasonably be thought to
bear on independence, (ii) confirming in the letter that, in its professional
judgment, it is independent of the Company within the meaning of the
Securities Act of 1933, as amended, and (iii) discussing the independent
accountant's independence with the Audit Committee.
III. MEETINGS
The Audit Committee shall meet at least semi-annually and at such other
times as determined by the Chairman of the Committee. Two (2) members of the
Committee shall constitute a quorum for the transaction of business. Unless a
Chairman is elected by the full Board, the members of the Audit Committee may
designate a Chairman by majority vote of the full Audit Committee membership.
A-1
IV. DUTIES AND RESPONSIBILITIES
A. Annually
1. Recommend to the Board of Directors the appointment of the
independent accountants; such recommendation shall reflect consideration
of:
a. Independence and professionalism;
b. Opinions on the performance of the independent accountants by
management;
c. Accessibility to the full Board;
d. Accountability to the full Board of Directors and Audit Committee,
as the shareholders' representative;
e. The report of the independent accountants' latest peer review; and
f. Fees.
2. Review and approve the proposed engagement letter and audit fee.
3. Consult with management or independent accountants to ascertain that
the audit plan and audit scope is reasonable and that resources are
reasonably allocated as to risk and exposure.
4. Meet with the independent accountants to:
a. appraise the efficiency and effectiveness of the audit efforts and
of financial accounting and reporting systems;
b. determine that management places no restrictions on the scope of
the audits or examinations;
c. request their opinion on various matters including the quality of
financial and accounting personnel;
d. inquire about the existence and substance of any significant
accounting accruals, reserves, or estimates made by management that had
a material impact on the financial statements; and
e. determine whether there were any significant financial reporting
issues discussed during the accounting period and if so how they were
resolved.
5. Review the Company's annual financial statements and related notes
thereto including the following:
a. Determine that management and the independent accountants are
satisfied with the disclosures and the form and content of such
financial statements. Management and the independent accountants should
provide to the Audit Committee qualitative judgments about the
appropriateness, not just acceptability of accounting principles and
financial disclosure practices used including degree of aggressiveness
or conservatism of accounting principles used.
6. Review with management and the auditors, their assessments of the
adequacy of internal controls and the resolution of any identified material
weaknesses and reportable conditions.
7. Annually review the process governing the preparation of quarterly
financial statements and related disclosures.
8. Review, approve, update and submit for Board approval the charter of
this Committee.
A-2
9. Include in the Company's proxy or information statements relating to
annual meetings of shareholders at which directors are to be elected (or
special meetings or written consents in lieu of such meetings), a report of
the Audit Committee that complies with the SEC's regulations for such
reports.
10. Following completion of the Company's annual audit, review
separately with the Company's management, the independent accountants and
the internal auditing department any significant difficulties encountered
during the course of the audit, including (i) any restrictions on the scope
of work or access to required information, and (ii) the nature and extent
of any significant changes in accounting principles or the application
therein.
B. Periodically
1. Review and approve any major changes in auditing and accounting
policies, standards, practices or principles which are suggested by the
Company's independent accountants, management or internal auditing
department. Ascertain the reasons for the change and inquire if the
accounting change will be mentioned in the independent accountant's report.
Discussion should include auditor and management qualitative judgments
about the appropriateness, not just acceptability, of the proposed change
and degree of aggressiveness or conservatism underlying the proposed
change.
2. Review internal accounting controls and compliance with applicable
laws and regulations through a review of reports and management letters
issued by the auditors in respect thereof. Determine that management's
responses and proposed actions are appropriate; determine whether such
actions have been or are being implemented by reviewing audit reports.
3. Discuss with management the status of litigation and, if deemed
appropriate, consult with management and legal counsel on the status of
significant litigation.
V. REPORTING
The Chairman of the Audit Committee will periodically report the
Committee's work and findings to the Board of Directors. Said report will
contain recommendations for appropriate Board actions.
VI. MANAGEMENT SUPPORT
To assist the Audit Committee in fulfilling its duties, management will
provide the Committee with information and reports as needed and requested.
Management will provide the Committee or, in absence of a meeting of the Audit
Committee, the Board of Directors or Executive Committee periodic updates on
major developments on existing or new litigation.
VII. CONSISTENCY WITH ARTICLES OF INCORPORATION OR BYLAWS
To the extent that any provision or section of this Charter may be
inconsistent with any article, provision or section of the Articles of
Incorporation or the Bylaws of the Company, the Articles of Incorporation or
the Bylaws, as appropriate, shall fully control.
P R O X Y NTELOS INC.
Proxy Solicited by the Board of Directors
The undersigned hereby constitutes J.B. Mitchell, Sr. and M.B. Moneymaker,
or either of them, attorneys and proxies, with power of substitution in each,
to act for the undersigned with respect to all common stock of the undersigned
at the Annual Meeting of Shareholders to be held at the Holiday Inn at the
intersection of Route 275 and I-81, North of Staunton, Virginia on Tuesday,
May 8, 2001, at 10:00 a.m., or any adjournment thereof.
The Board of Directors recommends a vote "FOR" items 1, 2, 3, and 4.
1. ELECTION OF FIVE DIRECTORS (three Class I, one Class II and one Class III)
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to
(Except as marked to the contrary below) vote for all nominees listed below
(Instruction: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list below.)
C. A. Rosberg A.W. Hamill A.J. de Nicola J.B. Williamson, III J.A. Layman
(Class I) (Class I) (Class I) (Class II) (Class III)
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
2. To amend the Non- [_] [_] [_]
Employee Directors'
Stock Option Plan to
reserve an additional
100,000 shares for
issuance under the plan
3. To amend the 1997 [_] [_] [_]
Stock Compensation
Plan to reserve an
additional 1,550,000
shares for issuance
under the plan
4. To vote on such other [_] [_] [_]
business, if any, that
may properly come
before the meeting.
[_] Please check box if you plan to attend the meeting.
(continued on other side)
(continued from other side)
Dated: ______________________., 2001 _______________________________________
_______________________________________
(Please sign your name(s) exactly as
shown hereon.)
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER(S). IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES FOR ELECTION OF ALL FIVE
DIRECTORS AND APPROVAL OF THE OTHER
MATTERS TO BE CONSIDERED AT THE MEET-
ING.