SCHEDULE 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO] nTelos
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
April 16, 2002
Dear Shareholder:
You are cordially invited to attend our 2002 annual meeting of
shareholders at 10:00 a.m. on Tuesday, May 21, 2002. 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 copy of NTELOS' 2001 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,
/s/ J.S. Quarforth
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J. S. Quarforth
Chief Executive Officer
[LOGO] nTelos
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 21, 2002, at 10:00 a.m. for the
following purposes:
(1) To elect Class II directors (Proposal 1);
(2) To ratify the selection of independent accountants for the fiscal year
ending December 31, 2002
(Proposal 2); and
(3) To transact any other business that may properly come before the meeting.
Only shareholders of record at the close of business on March 18, 2002 will
be entitled to vote at the meeting.
By Order of the Board of Directors
/s/ Michael B. Moneymaker
M. B. Moneymaker
Corporate Secretary
Waynesboro, Virginia
April 16, 2002
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] nTelos
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 21, 2002
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 21, 2002, 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 April 16, 2002. Our annual report to
shareholders that includes financial statements for the years ending December
31, 2001, 2000 and 1999 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, you
appoint the individuals named on the card (your "proxies") to 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 18, 2002, the record
date for the meeting, are entitled to vote at the annual meeting. As of the
record date, there were 17,227,317 shares of common stock outstanding, and
17,138,859 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, there were 112,500 shares of Senior
Cumulative Convertible Preferred Stock, Series B outstanding and 137,500 shares
of Senior Cumulative Convertible Preferred Stock, Series C outstanding. On an
as-converted basis, holders of our preferred stock are entitled to cast an
aggregate of 6,401,189 votes.
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 is 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 or
represented 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.
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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.
Brokers who hold shares in street name for customers have the authority to
vote on various "routine" proposals, such as the election of directors and the
selection of independent accountants, when they have not received instructions
from beneficial owners. If a share is represented for any purpose at the
meeting, it is deemed to be present for all other matters. Abstentions and
shares held of record by a broker or its nominee (known as broker shares) that
are voted on any matter are included in determining the number of votes
present. Broker shares that are not voted on any matter at the meeting will not
be included in determining whether a quorum is present.
VOTES REQUIRED TO APPROVE PROPOSALS
Election of directors. For each director nominee, except Mr. Sorrel, 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. Abstentions and broker
shares that are not voted will not be taken into account in determining the
election of directors. With respect to Mr. Sorrel, who is a nominee of a
majority of the holders of Series B preferred stock, the affirmative vote of
the holders of Series B preferred stock voting as a single class to the
exclusion of all other shareholders, is required for his election. Welsh,
Carson, Anderson & Stowe, holder of a majority of the outstanding shares of our
Series B preferred stock, has indicated that it intends to vote its shares for
the election of Mr. Sorrel as director.
Selection of independent accountants. In order to be approved, a majority of
the votes cast must be in favor of selection of the independent accountants.
Broker shares that are not voted will not be taken into account in the
selection of independent accountants. Abstentions have the effect of a negative
vote on this matter.
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.
STOCK OWNERSHIP
The following table presents information, as of March 18, 2002, 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
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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 18, 2002, we had 17,227,317 shares of common stock
outstanding, and 17,138,859 common shares outstanding and entitled to vote at
the annual meeting. Our Series B and Series C preferred stock also 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 a total of 6,401,189
shares, on an as-converted basis, 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) 6,057,187 25.7%
John Hancock Advisors, LLC (3) 1,863,120 7.9%
Phyllis H. Arnold (4) 5,725 *
Anthony J. de Nicola (5) 14,873 *
William W. Gibbs, V (6) 162,347 *
A. William Hamill (7) 7,008 *
J. Allen Layman (8) 779,594 3.3%
John B. Mitchell, Sr. (9) 14,908 *
John N. Neff (10) 12,598 *
James S. Quarforth (11) 213,387 *
Carl A. Rosberg (12) 120,608 *
Lawrence B. Sorrel (13) 12,764 *
John B. Williamson, III (14) 5,819 *
Warren C. Catlett (15) 32,803 *
David R. Maccarelli (16) 63,681 *
Mary McDermott 0 *
Michael B. Moneymaker (17) 53,202 *
Don Marie Persing (18) 25,194 *
Charles A. Richardson (19) 5,110 *
All directors and executive officers as a group (17 persons) 1,529,621 6.5%
* 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.
(2) Welsh, Carson, Anderson & Stowe will have the power to vote 24.5% of the
votes entitled to be cast at the annual meeting by the holders of common stock
and the holders of preferred stock, voting on an as-converted basis. Of these
shares, Welsh, Carson, Anderson & Stowe VIII, L.P. and Welsh, Carson, Anderson
& Stowe IX, L.P. each own 2,767,851 shares beneficially and of record. These
shares include 221,485 shares owned beneficially and of record by individuals
who are members of the limited liability company that serves as the sole
general partner of Welsh, Carson, Anderson & Stowe VIII, L.P. and Welsh,
Carson, Anderson & Stowe IX, L.P., including Messrs. de Nicola and Sorrel 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. 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 as of December 31,
2001, filed with the Securities and Exchange Commission.
(4) Includes 4,725 shares that Ms. Arnold has the right to acquire through the
exercise of stock options.
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(5) Includes 4,014 shares that 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 5,747,106 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, Anderson & Stowe. Mr. de Nicola disclaims beneficial ownership
of such shares. See footnote (2) above.
(6) Includes 2,588 shares that Mr. Gibbs has the right to acquire through the
exercise of stock options.
(7) Includes 3,008 shares that Mr. Hamill has the right to acquire through the
exercise of stock options.
(8) Includes 10,240 shares that Mr. Layman has the right to acquire through the
exercise of stock options.
(9) Includes 4,488 shares that Mr. Mitchell has the right to acquire through
the exercise of stock options.
(10) Includes 6,998 shares that Mr. Neff has the right to acquire through the
exercise of stock options.
(11) Includes 154,638 shares that Mr. Quarforth has the right to acquire
through the exercise of stock options.
(12) Includes 82,700 shares that Mr. Rosberg has the right to acquire through
the exercise of stock options.
(13) Includes 472 shares that Mr. Sorrel 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 5,745,673 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, Anderson & Stowe. Mr. Sorrel disclaims beneficial ownership of such
shares. See footnote (2) above.
(14) Includes 2,830 shares that Mr. Williamson has the right to acquire through
the exercise of stock options.
(15) Includes 30,125 shares that Mr. Catlett has the right to acquire through
the exercise of stock options.
(16) Includes 56,765 shares that Mr. Maccarelli has the right to acquire
through the exercise of stock options.
(17) Includes 41,288 shares that Mr. Moneymaker has the right to acquire
through the exercise of stock options.
(18) Includes 20,950 shares that Ms. Persing has the right to acquire through
the exercise of stock options.
(19) Includes 2,211 shares that Mr. Richardson has the right to acquire through
the exercise of stock options.
Welsh, Carson, Anderson & Stowe owns 100,000 shares and Morgan Stanley & Co.
Incorporated owns 12,500 shares of our Series B preferred stock, representing
88.9% and 11.1%, respectively, of the Series B shares outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of the forms and written representations received by us
during 2001 pursuant to Section 16(a) of the Securities Exchange Act of 1934,
we believe that our directors and executive officers complied with all
applicable Section 16 filing requirements with the exception of Charles A.
Richardson, who did not timely file a Form 4 with respect to one transaction
involving the purchase of 500 shares, William W. Gibbs, V., who did not timely
file a Form 4 with respect to one transaction involving the purchase of 800
shares, and John N. Neff, who did not timely file Form 4's with respect to five
transactions involving the purchase of an aggregate of 4,700 shares.
ELECTION OF DIRECTORS
Our bylaws provide that our board of directors consist of eleven directors,
divided into three classes. One class is elected each year for a three-year
term. This year, the term of our Class II directors will expire at the annual
meeting.
There are currently ten members of the board of directors. However, as
described below, it is anticipated that prior to our annual meeting an
additional director, Lawrence B. Sorrel, will be appointed to serve as a Class
II director to fill the existing vacancy. The board of directors proposes that
the directors listed under "Nominees for Class II Directors" be re-elected or
elected for a three-year term expiring in 2005.
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As of the meeting date, the nominees listed below are all current directors
who have consented to stand for re-election or 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.
As holder of a majority of the outstanding shares of Series B preferred
stock, Welsh, Carson, Anderson & Stowe is entitled to nominate two directors to
our board. Welsh, Carson, Anderson & Stowe had previously agreed with NTELOS
not to elect more than 14.9% of our directors until such time as Federal
Communications Commission regulations would permit full voting rights. Under
this agreement, effective as of April 28, 2002, Welsh, Carson, Anderson & Stowe
is permitted to nominate two directors. Welsh, Carson, Anderson & Stowe
previously nominated Mr. de Nicola, who is currently a Class I director, and
has notified us that it is nominating Mr. Sorrel as its second nominee to the
board of directors. Mr. Sorrel will become a member of the board of directors
effective as of April 28, 2002. The terms of the Series B preferred stock
provide that the holders of Series B preferred stock are entitled to vote as a
separate class, to the exclusion of all other shares of capital stock, with
respect to the election of their nominees. Welsh, Carson, Anderson & Stowe has
indicated that it intends to vote its shares for the election of Mr. Sorrel as
director.
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 II DIRECTORS WHOSE TERM WILL EXPIRE IN 2005
John B. Mitchell, Sr., age 61, 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 47, has been a director of NTELOS since 1987. Mr.
Quarforth has been Chief Executive Officer of NTELOS 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 Group, Inc., Staunton,
Virginia.
John B. Williamson, III, age 47, 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.
Lawrence B. Sorrel, age 43, was appointed a director of NTELOS in April
2002. Mr. Sorrel joined Welsh Carson in 1998 and is a managing member or
general partner of the respective sole general partners of Welsh, Carson,
Anderson & Stowe VIII, L.P. and Welsh, Carson, Anderson & Stowe IX, L.P. and
other associated investment partnerships. For the prior 12 years, he worked in
the private equity investment business at Morgan Stanley & Co. Incorporated
where he was a Managing Director and one of the senior executives responsible
for the firm's private equity investment activities. Mr. Sorrel is chairman of
the board of SpectraSite Holdings, Inc. and is a director of Emmis
Communications, Westminster Healthcare Ltd., Valor Telecommunications and
Firstmark Communications. In accordance with the terms of our Series B
preferred stock, Welsh, Carson, Anderson & Stowe has designated Mr. Sorrel as
one of its two representatives on our board of directors.
The board of directors recommends a vote "FOR" Proposal 1.
CLASS I DIRECTORS WHOSE TERMS WILL EXPIRE IN 2004
Anthony J. de Nicola, age 37, 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 VIII, L.P., Welsh,
Carson, Anderson & Stowe IX, L.P., WCAS Capital Partners III, L.P. and other
associated
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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 Corp. and 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 as one of its two representatives on our board of directors.
Carl A. Rosberg, age 49, has been a director of NTELOS since 1992. Mr.
Rosberg is currently the Executive Vice President and Chief Operating Officer
of NTELOS. 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 54, has been a director of NTELOS since January 2001.
Mr. Hamill is President of H3 Companies LLC, an investments and advisory firm.
From 1999 until May 2001, he served as Executive Vice President and Chief
Financial Officer of United Dominion Realty Trust Inc., Richmond, Virginia.
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. Mr. Hamill is
a director of SOLA International Inc.
CLASS III DIRECTORS WHOSE TERMS WILL EXPIRE IN 2003
J. Allen Layman, age 50, 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.
Phyllis H. Arnold, age 53, 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 50, 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 61, 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 2003 annual
meeting of shareholders should be submitted in writing to our Corporate
Secretary not later than March 22, 2003 and must include a 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 14 regularly scheduled and special meetings
during 2001. All directors attended more than 75% of the meetings of the board
and committees of which he or she is a member.
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DIRECTOR COMPENSATION
In 2001, non-employee directors received a monthly retainer fee of $1,900,
$1,000 of which is payable in options for common stock pursuant to the
Non-Employee Directors' Stock Plan. Upon election by December 15 of the
preceding year, non-employee directors may elect to receive all, or a portion
of the remaining $900 monthly retainer fee in options for our common stock
pursuant to our Non-Employees Directors' Stock Plan. Beginning on January 1,
2001, non-employee directors received a fee of $875 for each board meeting
attended.
COMMITTEES OF THE BOARD
During fiscal 2001, the board of directors had four standing committees: the
Executive Committee, the Compensation Committee, the Audit 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., Phyllis H. Arnold and Anthony J. de Nicola
currently comprise the Executive Committee, which met six times during 2001.
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.,
Anthony J. de Nicola and John B. Williamson, III currently comprise the
Compensation Committee, which held five meetings during 2001.
Audit Committee. The functions of the Audit Committee and its activities
during 2002 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, A. William Hamill and John B. Williamson,
III. The Audit Committee met four times during 2001.
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
two meetings in 2001.
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, as amended, 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 the Audit Committee's charter was attached to the proxy
statement issued to NTELOS shareholders in connection with NTELOS' 2001 annual
meeting of shareholders, which proxy statement is on file with the Securities
and Exchange Commission.
Management is responsible for the preparation, presentation and integrity of
the company's financial statements, the maintenance of appropriate accounting
and financial reporting principles and practices and internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The company's independent accountants, Ernst &
Young, LLP, are responsible for auditing the
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company's financial statements and expressing an opinion on the conformity of
the audited financial statements with accounting principles generally accepted
in the United States of America. On behalf of the board of directors, the Audit
Committee's primary responsibilities are focused in four broad categories, as
set forth in more detail in the charter:
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 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 Rule 4200(a)(15) of the National Association of Securities Dealers'
(referred to as NASD) current listing standards, 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 voting 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 Ernst & Young LLP,
among other things, matters related to its independence from us and our
management, including the written disclosures and letter to the Audit Committee
received from Ernst & Young LLP as required by the Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). In addition,
we also discussed with Ernst & Young LLP the overall scope and plans for its
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, and without
other independent verification, 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, 2001, for filing with the Securities and Exchange Commission.
AUDIT FEES
For 2001, Ernst & Young LLP billed us $176,000 for their audit of our annual
financial statements, and Ernst & Young LLP and McGladrey & Pullen, LLP billed
us $22,000 and $15,000, respectively, for their reviews of our interim
financial statements included in our quarterly reports on Form 10-Q.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
We did not engage Ernst & Young LLP or McGladrey & Pullen, LLP to provide
advice regarding our financial information systems design and implementation
during 2001.
- 8 -
ALL OTHER FEES
The aggregate fees for all other services rendered by Ernst & Young LLP and
McGladrey & Pullen, LLP in 2001 for matters such as consents related to SEC
registration statements, due diligence pertaining to the proposed Conestoga
Enterprises, Inc. acquisition and consultation on accounting standards or
transactions were $86,934 and $52,156, respectively.
The Audit Committee has considered whether the provision of non-audit
services by Ernst & Young LLP is compatible with maintaining the independence
of Ernst & Young LLP. The Audit Committee has determined that Ernst & Young's
performance of non-audit services for NTELOS does not interfere with their
independence from the company.
William W. Gibbs, V (chairperson)
A. William Hamill
Anthony J. de Nicola
John B. Williamson, III
SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee recommended, and the board of directors approved, the
selection of Ernst & Young LLP as independent accountants to audit NTELOS'
financial statements for the fiscal year ending December 31, 2002. The board of
directors recommends that shareholders vote for ratification of such selection.
Although action by shareholders is not required by our bylaws or under
applicable law, the board of directors has determined that it is desirable to
request approval of this selection by its shareholders. Notwithstanding the
selection, the board of directors, in its discretion, may direct the
appointment of new independent accountants at any time during the year, if the
board of directors feels that such a change would be in the best interest of
NTELOS and its shareholders. If the shareholders fail to ratify the selection,
the board of directors will reconsider whether or not to retain Ernst & Young
LLP as independent accountants for the fiscal year ending December 31, 2002.
The firm of Ernst & Young LLP audited our financial statements for the
fiscal year ended December 31, 2001. A representative of Ernst & Young LLP is
expected to be present at the annual meeting and will have the opportunity to
make a statement if he or she desires to do so and will be available to answer
appropriate questions.
The board of directors recommends a vote "FOR" Proposal 2.
ACCOUNTING AND AUDITING MATTERS
On June 22, 2001, upon the recommendation of the Audit Committee, the board
of directors approved the dismissal of McGladrey & Pullen, LLP as its
independent accountants.
The reports issued by McGladrey & Pullen, LLP on NTELOS' financial
statements for the fiscal years ended December 31, 1999 and 2000 did not
contain an adverse opinion or disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles. During the
fiscal years ended December 31, 1999 and 2000 and through June 22, 2001, there
were no disagreements with McGladrey & Pullen, LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of
McGladrey & Pullen, LLP, would have caused it to make reference thereto in its
report on the financial statements for such periods. Further, during those time
periods, there were no "reportable events," as such term is used in Item
304(a)(1)(v) of Regulation S-K.
On June 25, 2001, NTELOS engaged the firm of Ernst & Young LLP, independent
public accountants, as NTELOS' independent accountants for the fiscal year
ended December 31, 2001. During fiscal years ended December 31, 1999 and 2000
and through June 22, 2001, NTELOS did not consult with Ernst & Young LLP with
respect to the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on NTELOS' financial statements.
- 9 -
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 2001, with
comparisons to 2000 and 1999 information, as well as information as to option
grants and exercises:
EXECUTIVE COMPENSATION
Long Term
Compensation
------------
Annual Compensation Awards
- -----------------------------------------------------------------------------------
Name and Options/ All Other
Principal Position Year Salary Bonus (1) SARs Compensation (2)
- ------------------ ---- -------- ---------- -------- ----------------
James S. Quarforth 2001 $330,836 $ 123,865 39,730 $21,406
Chief Executive Officer 2000 296,700 225,022 51,700 14,283
1999 267,250 64,140 40,000 14,230
J. Allen Layman (3) 2001 269,069 1,084,200 52,850 4,097
President and
Chairman of the Board
Carl A. Rosberg 2001 222,296 60,000 17,730 12,160
Executive Vice President and 2000 201,500 83,748 21,675 10,015
Chief Operating Officer 1999 183,500 38,535 18,000 9,614
Michael B. Moneymaker 2001 170,553 48,350 9,740 9,747
Senior Vice President, 2000 146,250 80,620 15,925 6,992
Chief Financial Officer, 1999 132,000 23,760 10,000 6,825
Treasurer and Secretary
Don Marie Persing 2001 151,020 48,075 8,540 8,460
Senior Vice President 2000 132,000 62,370 15,975 6,503
1999 108,000 21,636 6,000 5,236
(1) Based on 2001 company performance objectives, each of the executive
officers would be eligible to receive a bonus for 2001 if NTELOS' board of
directors, in its discretion, elects to pay such bonuses. Although it is
contemplated these executive bonuses will be paid, NTELOS' board of directors
is deferring the final determination as to whether it will approve payment of
the executive bonuses until fourth quarter 2002. Also see footnote 3 below.
(2) In 2001, we made contributions to the savings plan of $4,829 for James S.
Quarforth, $6,120 for Carl A. Rosberg, $2,518 for Michael B. Moneymaker, and
$2,463 for Don Marie Persing. Contributions were also made to the deferred
compensation plan of $15,461 for James S. Quarforth, $3,269 for J. Allen
Layman, $5,261 for Carl A. Rosberg, $6,662 for Michael B. Moneymaker, and
$5,479 for Don Marie Persing. In addition, we made the group life insurance
premium payments of $1,044 for James S. Quarforth, $767 for J. Allen Layman,
$717 for Carl A. Rosberg, $522 for Michael B. Moneymaker, and $477 for Don
Marie Persing and accidental death and disability payments of $72 for James S.
Quarforth, $61 for J. Allen Layman, $62 for Carl A. Rosberg, $45 for Michael B.
Moneymaker and $41 for Don Marie Persing. In 2000, we made contributions to the
savings plan of $5,414 for James S. Quarforth, $6,120 for Carl A. Rosberg,
$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, $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, $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, $41 for Michael B. Moneymaker and $35 for Don Marie Persing.
- 10 -
In 1999, we made contributions to the savings plan of $5,760 for James S.
Quarforth, $5,760 for Carl A. Rosberg, $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 for Carl A.
Rosberg, $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, $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, $44 for Michael B. Moneymaker and
$34 for Don Marie Persing.
(3) Mr. Layman became an officer of NTELOS effective as of February 13, 2001,
in connection with our merger with R&B Communications, Inc. Mr. Layman's
employment agreement, effective as of the merger closing, provided that he
would receive a signing bonus of $1,000,000.
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 Exercise
Options/ Options/SARs or Base
SARs Granted to Price
Granted(1) Employees in per Expiration
Name (Shares) Fiscal Year Share Date 5%(2) 10%(2)
---- ---------- ------------ -------- ---------- -------- ----------
James S. Quarforth 18,150 10.5% 15.5300 02/27/2011 $177,326 $ 449,213
21,580 20.3700 05/08/2011 276,440 700,487
J. Allen Layman 30,960 14.0% 22.3125 02/13/2011 434,437 1,100,949
10,000 15.5300 02/27/2011 97,700 247,500
11,890 20.3700 05/08/2011 152,311 385,949
Carl A. Rosberg 8,100 4.7% 15.5300 02/27/2011 79,137 200,475
9,630 20.3700 05/08/2011 123,360 312,590
Michael B. Moneymaker 4,450 2.6% 15.5300 02/27/2011 43,477 110,138
5,290 20.3700 05/08/2011 67,765 171,713
Don Marie Persing 3,900 2.3% 15.5300 02/27/2011 38,090 96,528
4,640 20.3700 05/08/2011 59,441 150,635
(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 $36.34 and $57.87, respectively, at the end of the
ten-year option term for options granted February 13, 2001. The price per share
of our common stock would be $25.30 and $40.28, respectively, at the end of the
ten-year option term for options granted February 27, 2001. The price per share
of our common stock would be $33.18 and $52.83, respectively, at the end of the
ten-year option term for options granted May 8, 2001.
- 11 -
OPTION/SAR EXERCISES AND YEAR END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year, and Fiscal Year End Option/SAR Value
- -----------------------------------------------------------------------------------------
Value of Unexercised
Number of Securities In-The-Money
Underlying Unexercised Options/SARS
Options/SARS at Fiscal at Fiscal Year End
Shares Acquired Value Year End Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
---- --------------- -------- ---------------------- --------------------
James S. Quarforth 11,000 $90,090 124,850 /94,980 -- / --
J. Allen Layman -- -- 0 / 52,850 -- / --
Carl A. Rosberg 7,600 56,620 68,675 / 43,230 -- / --
Michael B. Moneymaker -- -- 33,425 / 23,990 -- / --
Don Marie Persing -- -- 15,975 / 20,540 -- / --
Closing price on December 31, 2001, the last day of our fiscal 2001, was
$15.49 and was used in calculating the value of unexercised options.
- 12 -
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 2001 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, J. Allen
Layman, Carl A. Rosberg, Michael B. Moneymaker, and Don Marie Persing is 22
years, 1 year, 13 years, 6 years and 5 years, respectively.
- 13 -
REPORT OF THE COMPENSATION COMMITTEE
The following report of the Compensation 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, as amended, except to the extent we
specifically incorporate this report by reference therein.
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 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 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 base salary in 2001 was $330,836, an increase
of $34,136 compared to 2000. However, his total compensation decreased $59,898
from 2000, a year in which the company engaged in significant strategic
transactions which substantially expanded the company's wireless network, and a
year in which the company divested certain non-core assets. A number of factors
and criteria were utilized by the Compensation Committee in evaluating the
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
$34,136. The achievement of strong revenue, customer growth and strategic
accomplishments toward our long-term business goals in 2001 resulted in
eligibility for incentive compensation of $123,865. Although it is contemplated
this bonus will be paid, NTELOS' board of directors, in its discretion, has
determined to defer the final determination as to whether it will approve
payment of this bonus until fourth quarter 2002. Specifically, during 2001, we
completed the merger with R&B Communications, Inc., completed the integration
and transition of PrimeCo's Virginia operations, sold or entered into
definitive agreements to sell $87.6 million of non-core assets, increased
ownership interests in the Virginia Alliance and West Virginia Alliance to 97%
and 98%, respectively, through the merger with R&B Communications, Inc. and the
purchases of an aggregate of 6% of the Virginia Alliance and 19% of the West
Virginia Alliance. During 2001, our consolidated total assets exceeded $1.2
billion, up from $1.1 billion a year ago, and consolidated net operating
revenues increased $101.5 million or 89% (compared to $43.7 million or 63% for
2000 over 1999). This growth reflects the aforementioned transactions and
internal growth from the addition of 55,000 digital PCS customers within the
Virginia and West Virginia Alliances, nearly 9,000 Internet subscribers and
nearly 13,000 competitive business telephone lines.
John N. Neff (chairperson)
Anthony J. de Nicola
John B. Williamson, III
John B. Mitchell, Sr.
- 14 -
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 2001, 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 years 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 employment agreements with our named executive
officers, James S. Quarforth, J. Allen Layman, Carl A. Rosberg, Michael B.
Moneymaker and Don Marie Persing. Each was approved by the non-employee members
of the board of directors.
Messrs. Quarforth, Rosberg and Moneymaker and Ms. Persing entered into
employment agreements with us in December 2001. Mr. Layman entered into his
employment agreement effective as of the closing of our merger with R&B
Communications, Inc., on February 13, 2001. The term of the employment
agreement with Mr. Quarforth is 36 months, with Mr. Layman is 60 months, with
Mr. Rosberg is 30 months, and with each of Mr. Moneymaker and Ms. Persing is 24
months.
In addition to base salary and annual incentive bonuses, the executives are
entitled to participate in our long-term stock-based incentive compensation
program and all other employee benefit plans, including our executive
supplemental retirement plan and 401(k) restoration plan.
NTELOS may terminate the executive's employment agreement for continued
disability or, upon written notice, for cause. The executive may terminate the
agreement, upon prior written notice, for good reason. "Cause" generally means
any of the following: gross or willful misconduct; willful and repeated failure
to comply with the lawful directives of the board of directors; any criminal
act or act of dishonesty or fraud that has a material adverse impact on the
company or its subsidiaries or any fraud, dishonesty or misappropriation
involving the company or its subsidiaries; material breach of the terms of any
confidentiality, non-competition, non-solicitation or employment agreement with
the company; acts of malfeasance or negligence; material failure to perform the
duties and responsibilities of his or her position; grossly negligent conduct;
or activities materially damaging the company or its subsidiaries. "Good
reason" generally means any of the following: base salary or target incentive
payments are reduced; responsibilities are diminished; relocation of more than
50 miles (25 miles with respect to Mr. Layman) is required; deferred
compensation is withheld; benefits diminish following a change of control;
directed by the board of directors or an officer to engage in conduct that is
illegal; material breach of the company's obligations under the agreement; or,
with respect to Mr. Layman, any purported termination that does not satisfy the
requirements of the agreement; or, with respect to Messrs. Quarforth, Rosberg
and Moneymaker and Ms. Persing, failure to increase the executive's
compensation consistent with performance ratings.
If any of Messrs. Quarforth, Rosberg or Moneymaker or Ms. Persing is
terminated, other than for cause, or if any one of them terminates the
agreement for good reason, he or she is entitled to (1) base salary for a
period of time thereafter equal to the term of his or her employment agreement,
and (2) target incentive payments for the same period and standard termination
payments.
The agreements with Messrs. Quarforth, Rosberg and Moneymaker and Ms.
Persing provide for certain benefits if we have a change in control during the
term of the agreement followed by (1) termination of the executive's employment
without cause, or (2) resignation of the executive for good reason (even if
such termination or resignation occurs after the term of the agreement). If
Messrs. Quarforth, Rosberg or
- 15 -
Moneymaker or Ms. Persing is terminated within 30 months (36 months with
respect to Mr. Quarforth) of a change in control, he or she will receive
severance benefits, including three years' base salary and target incentive
payments. Any severance pay due to the executive will be paid in a lump sum on
a net present value basis. In addition, the employment agreements with Messrs.
Quarforth, Rosberg and Moneymaker and Ms. Persing provide that we will pay
additional amounts to the executive to compensate him or her for excise taxes
and penalties imposed on the severance pay.
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 standard termination payments and pro rata incentive payments for the
fiscal year in which the termination occurs. Upon a change in control, 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 management continuity agreement provides for certain benefits
if we have a change in control followed by (1) his termination without cause
prior to the fifth anniversary of the change in control date, or (2) his
resignation for good reason prior to the fifth anniversary of the change in
control date. If Mr. Layman is terminated within 24 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.
The agreements with Messrs. Quarforth, Layman, Rosberg and Moneymaker and
Ms. Persing provide that during the term of the agreement and for a period of
24 months (60 months with respect to Mr. Layman) after his or her employment
with the company ends, the executive will not compete, directly or indirectly,
with the company. In addition, pursuant to non-solicitation provisions, the
executive may not solicit certain current and former employees during the term
of their agreements and for 24 months (60 months with respect to Mr. Layman)
thereafter. Following the end of Mr. Layman's agreement and as long as he is
not in violation of these non-competition and non-solicitation provisions, we
will pay him $250,000 annually, with adjustments for an increase in the
Consumer Price Index, for 60 months.
We have amended our Executive Supplemental Retirement Plan to provide that
participation in the plan may not be rescinded by the company so long as the
participant remains employed with the company. We have also amended the
definition of change of control and provided that any payment required under
the plan following a change of control be paid in a lump sum in cash on an
actuarial basis. As amended, "change of control" generally means (i) any person
or entity, acquires direct or indirect ownership of more than 30% of the
combined voting power of NTELOS, except Welsh, Carson, Anderson & Stowe may own
up to 40% of the then outstanding securities or up to 37.5 % of the voting
securities (provided that it is in compliance with the amended and restated
shareholders agreement); (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; (iv) our shareholders approve
a plan of complete liquidation or an agreement for the sale of all or
substantially all of our assets and such liquidation or sale is consummated; or
(v) the sale or disposition of all or substantially all of the assets of one or
more of our material lines of business (with respect to participants who are
employed in such material line of business and whose employment is terminated
by the company or the acquiror prior to the third anniversary of the sale or
who terminates for good reason prior to the third anniversary).
- 16 -
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 $0.4 million to
Nielsen Builders, Inc. for these renovations during 2001.
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. We paid $0.6 million to
Nielsen Builders, Inc. for construction performed on the facility in 2001. Mr.
John Neff currently serves as President and Chief Executive Officer of Nielsen
Builders, Inc.
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 leases 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, and
the Nasdaq Telecommunications Index. The graph assumes that the value of the
investment in each scenario was $100 at December 31, 1996 and that all
dividends were reinvested in their respective common stock issue in the month
paid.
[CHART]
Comparison of Five-Year Cumulative Total Return
Fiscal Year Ending December 31
NTELOS Inc. NASDAQ Composite NASDAQ Telecom
1996 100 100 100
1997 103 122 142
1998 110 171 233
1999 165 318 418
2000 84 194 215
2001 74 153 110
- 17 -
FINANCIAL STATEMENTS
Our 2001 Annual Report to Shareholders contains audited financial statements
for 2001, 2000 and 1999 and the report of Ernst & Young LLP for 2001 and the
reports of McGladrey & Pullen, LLP for 2000 and 1999. Management's Discussion
and Analysis of Financial Condition and Results of Operations is also contained
in the 2001 Annual Report.
SHAREHOLDER PROPOSALS
In order for proposals of shareholders to be considered for inclusion in the
proxy materials for our 2003 annual meeting of shareholders, such proposals
must be received by our Corporate Secretary by December 18, 2002.
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
April 16, 2002
- 18 -
P R O X Y
NTELOS INC.
Proxy Solicited by the Board of Directors
The undersigned hereby appoints C. A. Rosberg 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
21, 2002, at 10:00 a.m., or any adjournment thereof.
The Board of Directors recommends a vote "FOR" items 1 and 2.
1. Election of three Class II Directors
[_] 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.)
J. B. Mitchell, Sr. J. S. Quarforth J. B. Williamson, III
(Class II) (Class II) (Class II)
FOR AGAINST ABSTAIN
2. To ratify the selection of Ernst & Young LLP [_] [_] [_]
as independent accountants.
3. 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: ____________________________________________ , 2002
___________________________________________________
(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 THREE DIRECTORS AND APPROVAL OF THE OTHER
MATTERS TO BE CONSIDERED AT
THE MEETING.
P R O X Y
NTELOS INC.
Proxy Solicited by the Board of Directors
The undersigned hereby appoints C. A. Rosberg 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 outstanding shares of Senior
Cumulative Convertible Preferred Stock, Series B and Senior Cumulative
Convertible Preferred Stock, Series C 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 21, 2002, at 10:00 a.m.,
or any adjournment thereof.
The Board of Directors recommends a vote "FOR" items 1(a) and (b) and 2.
1. a. Election of three Class II Directors, Series B and Series C Preferred
Stock voting on an as-converted basis
[_] 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.)
J. B. Mitchell, Sr. J. S. Quarforth J. B. Williamson, III
(Class II) (Class II) (Class II)
b. Election of one Class II Director, Series B Preferred Stock voting as a
single class to the exclusion of all other classes
[_] FOR the nominee [_] WITHHOLD AUTHORITY
listed below (Except to vote for all
as marked to the nominees listed below
contrary below)
L. B. Sorrel (Class II)
SERIES B AND C PREFERRED STOCK
VOTING ON AN AS-CONVERTED BASIS FOR AGAINST ABSTAIN
2. To ratify the selection of Ernst & Young LLP [_] [_] [_]
as independent accountants.
3. 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: , 2002 _________________________________________________________
_________________________________________________________
(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 FOUR DIRECTORS AND APPROVAL
OF THE OTHER MATTERS TO BE CONSIDERED AT THE
MEETING.