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. )
( x ) Filed by the Registrant
( ) Filed by a Party other than the Registrant
Check the appropriate box:
( x ) Preliminary Proxy Statement
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
VANGUARD CELLULAR SYSTEMS
(Name of Registrant as Specified In Its Charter)
VANGUARD CELLULAR SYSTEMS
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (Check the appropriate box):
( X ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) 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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: *
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
( ) Filing Fee of $ was previously paid on , 199 ,
the date the Preliminary Proxy Statement was filed.
(Vanguard Logo Graphic appears here)
March 31, 1995
To the Shareholders of
Vanguard Cellular Systems, Inc.:
I am pleased to invite you to the Annual Meeting of Shareholders of your
Company to be held on Wednesday, May 10, 1995. The Notice of the meeting and a
Proxy Statement relating to matters to be considered at the meeting are
attached. A proxy card and return envelope are enclosed. The shareholders are
being asked to consider and approve the election of certain members of the Board
of Directors, to consider and approve an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Class A Common
Stock, and to ratify the selection of Arthur Andersen & Co. as the Company's
independent auditors. These proposals are discussed in detail in the enclosed
Proxy Statement.
You are cordially invited to attend the Annual Meeting in person. Whether
or not you plan to attend, please sign and return the proxy card in the postpaid
return envelope so that your vote may be counted.
Information relating to the Company's activities and operations during the
fiscal year ended December 31, 1994, is contained in the Company's Annual
Report, which is enclosed.
Sincerely,
(signature of Haynes G. Griffin appears here)
Haynes G. Griffin
PRESIDENT
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
VANGUARD CELLULAR SYSTEMS, INC.
TO THE SHAREHOLDERS OF VANGUARD CELLULAR SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of VANGUARD
CELLULAR SYSTEMS, INC. will be held at the Sheraton Greensboro, 303 N. Elm St.,
Virginia Ballroom, Greensboro, North Carolina on Wednesday, May 10, 1995, at
9:30 a.m. for the following purposes:
1. To elect three Class II nominees to the Board of Directors, to serve a
three-year term, until the 1998 Annual Meeting of Shareholders;
2. To consider approval of an amendment to the Company's Articles of
Incorporation to increase the number of shares of Class A Common Stock
that the Company has authority to issue from 60,000,000 shares to
250,000,000 shares;
3. To ratify appointment of Arthur Andersen & Co. as auditors for the
present year; and
4. To consider and act upon any other business that may come before the
meeting or any adjournment thereof.
All shareholders are invited to attend the meeting. Only those shareholders
of record as of the close of business on March 15, 1995, shall be entitled to
notice of and to vote at the meeting. It is important that your stock be
represented at this meeting in order that the presence of a quorum may be
assured.
ENCLOSED IS A PROXY CARD WHICH YOU ARE URGED TO SIGN AND RETURN IN THE
POSTPAID RETURN ENVELOPE.
By Order of the Board of Directors
(signature of Stephen R. Leeolou appears here)
Stephen R. Leeolou
SECRETARY
March 31, 1995
VANGUARD CELLULAR SYSTEMS, INC.
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Vanguard Cellular
Systems, Inc. (the "Company") in connection with the solicitation of proxies to
be used in voting at the Annual Meeting of Shareholders to be held on May 10,
1995. The address of the Company's principal executive offices is 2002 Pisgah
Church Road, Suite 300, Greensboro, North Carolina 27455-3314. The approximate
date on which this Proxy Statement and the enclosed proxy were first sent or
given to shareholders was March 31, 1995.
The enclosed proxy is being solicited by the Board of Directors of the
Company. A shareholder who executes the accompanying proxy may revoke it at any
time before it is voted by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date, or by attending and
voting in person. All shares represented by valid proxies received pursuant to
this solicitation prior to the meeting and not revoked before their exercise
will be voted, and, if a choice is specified with respect to any matter to be
acted upon, the shares will be voted in accordance with such specification. If
no direction is made in the proxy, the shares will be voted for the nominees for
director named in this Proxy Statement and for the other proposals described
herein.
The cost of solicitation will be borne by the Company. In addition to the
use of the mails, proxies may be solicited personally or by telephone or
telegram by directors, officers and employees of the Company. It is not expected
that any compensation will be paid for the solicitation of proxies, but brokers
and other custodians, nominees or fiduciaries may be reimbursed for their
expenses in forwarding proxy materials to principals and obtaining their
proxies.
VOTING SECURITIES OUTSTANDING
Only shareholders of record as of the close of business on March 15, 1995,
will be entitled to notice of and to vote at the Annual Meeting. On such date,
the Company had 40,536,084 shares of Class A Common Stock, par value $0.01 per
share ("Common Stock"), issued and outstanding. There are no other voting
securities outstanding. Each share is entitled to one vote.
1
The following are the only persons known to the Company who beneficially
owned more than five percent of the Company's outstanding Common Stock:
BENEFICIAL OWNERSHIP (2)(3)
NAME AND ADDRESS (1) SHARES PERCENT
FMR Corp. 5,033,100(4) 12.42%
82 Devonshire Street
Boston, MA 02109
The Capital Group Companies, Inc. 3,260,300(5) 8.04%
333 South Hope Street
Los Angeles, CA 90071
The Equitable Companies Incorporated 2,645,600(6) 6.53%
787 Seventh Avenue
New York, NY 10019
Putnam Investments, Inc. 2,295,253(7) 5.67%
One Post Office Square
Boston, MA 02109
Stuart S. Richardson 2,213,318(8) 5.45%
c/o Piedmont Management Company, Inc.
80 Maiden Lane
New York, NY 10038
(1) Does not include certain persons who may be deemed beneficial owners of more
than five percent of the Common Stock by reason of their positions as
trustees of certain trusts. Peter L. Richardson and Robert R. Richardson
serve as trustees of the H. Smith Richardson Testamentary Trust and the
Smith Richardson Foundation. Peter L. Richardson additionally serves as
trustee of the Grace Jones Richardson Testamentary Trust and Robert R.
Richardson additionally serves as trustee of the Randolph Foundation. The H.
Smith Richardson Testamentary Trust holds 453,906 shares of Common Stock
(1.12%), the Smith Richardson Foundation holds 1,020,292 shares of Common
Stock (2.52%), the Randolph Foundation holds 430,902 shares of Common Stock
(1.06%) and the Grace Jones Richardson Testamentary Trust holds 395,542
shares of Common Stock (0.98%). In addition to shares that are held by these
entities and that may be deemed beneficially owned by such shareholders,
Messrs. Peter L. Richardson and Robert R. Richardson, each of whose address
is c/o Piedmont Financial Company, 230 North Elm Street, Greensboro, NC
27401, may be deemed to beneficially own 223,896 shares (0.55%) and 183,160
shares (0.45%), respectively, of Common Stock. As described in footnote (8)
below, Stuart S. Richardson also serves as a trustee of the H. Smith
Richardson Testamentary Trust, the Smith Richardson Foundation and the Grace
Jones Richardson Testamentary Trust and shares held by such entities are
included in his beneficial ownership.
(2) The descendants of Lunsford Richardson, Sr., their spouses, trusts and
corporations in which they have interests and charitable organizations
established by such descendants (collectively referred to as the "Richardson
Family") beneficially own approximately 9,798,083 shares or 23.87% of the
Company's Common Stock and consequently may, if they act in concert, be in a
position to control the management and the affairs of the Company. Such
number of shares includes 517,728 shares which members of the Richardson
Family have the right to acquire under presently exercisable options granted
to them under Company stock option plans. The individuals and institutions
constituting the Richardson Family have differing interests and may not
necessarily vote their shares in the same manner. Furthermore, trustees and
directors have fiduciary obligations (either individually or jointly with
other fiduciaries) under which they must act on the basis of fiduciary
requirements which may dictate positions that differ from their personal
interests.
2
(3) Unless otherwise indicated, all shares are owned of record by the persons
named and the beneficial ownership consists of sole voting power and sole
investment power.
(4) Ownership as of December 31, 1994 as reported to the Company on a Schedule
13G dated February 13, 1995. Certain of these shares may be deemed to be
owned by Fidelty Management & Research Company and by Fidelty Management
Trust Company, both wholly-owned subsidiaries of FMR Corp. ("FMR"), and by
Edward C. Johnson 3d, Chairman of FMR. According to the Schedule 13G. Mr.
Johnson, FMR and these subsidiaries may be deemed to exercise sole
investment power as to all such shares and sole voting power as to 11,550
shares.
(5) Ownership as of December 31, 1994 as reported to the Company on a Schedule
13G dated February 8, 1995. These shares may be deemed to be beneficially
owned by Capital Guardian Trust Company and Capital Research and Management
Company, operating subsidiaries of The Capital Group Companies, Inc.
("Capital"). According to the Schedule 13G, these subsidiaries of Capital
may be deemed to exercise sole voting power as to 726,000 shares and sole
investment power as to all such shares.
(6) Ownership as of December 31, 1994 as reported to the Company on a Schedule
13G dated February 10, 1995. These shares may be deemed to be beneficially
owned by a group consisting of The Equitable Companies Incorporated
("Equitable"), AXA (a French holding company), and five French mutual
insurance companies consisting of AXA Assurances I.A.R.D. Mutuelle, AXA
Assurances Vie Mutuelle, Alpha Assurances I.A.R.D. Mutuelle, Alpha
Assurances Vie Mutuelle and Uni Europe Assurance Mutuelle. According to the
Schedule 13G, the shares are held by subsidiaries of Equitable and were
acquired for investment purposes. The Schedule 13G states that the group may
be deemed to exercise sole voting power as to 2,600,025 shares, sole
investment power as to 2,641,475 shares and shared investment power as to
4,125 shares.
(7) Ownership as of December 31, 1994 as reported to the Company on a Schedule
13G dated January 30, 1995. Putnam Investments, Inc. ("Putnam"), is a
wholly-owned subsidiary of Marsh & McLennan Companies, Inc. Certain shares
may be deemed to be beneficially owned by Putnam Investment Management, Inc.
and Putnam Advisory Company, Inc., both of which are wholly-owned by Putnam.
According to the Schedule 13G, Putnam and these subsidiaries may be deemed
to exercise shared investment power as to all such shares and shared voting
power as to 99,050 shares.
(8) Ownership as of March 15, 1995. Includes 48,750 shares that Mr. Richardson
has the right to acquire under presently exercisable stock options granted
to him under Company stock option plans. Also includes 154,690 shares held
by various trusts of which Mr. Richardson is a trustee. Also includes 17,650
shares owned by Mr. Richardson's spouse and shares owned by various other
trusts and a foundation of which Mr. Richardson is a trustee, including
453,906 shares held by the H. Smith Richardson Testamentary Trust, 1,020,292
shares held by the Smith Richardson Foundation and 395,542 shares held by
the Grace Jones Richardson Testamentary Trust. Mr. Richardson denies
beneficial ownership of the shares owned by his spouse. The shares shown as
beneficially owned do not include 87,972 shares held by a subsidiary of
Piedmont Management Company, Inc. and 59,160 shares held in trusts for the
benefit of his children. Mr. Richardson is an officer, director and
principal shareholder of Piedmont Management Company, Inc. Mr. Richardson
denies beneficial ownership of the 87,972 shares as well as the shares held
by such trusts. The shares shown also do not include 51,852 shares held by
trusts of which Mr. Richardson may be deemed to share investment power, but
exercise no voting power.
3
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock, as of March 15, 1995, by its directors,
nominees for election as directors, the executive officers named in the Summary
Compensation Table and by all directors, nominees and officers as a group.
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) PERCENT
Stuart S. Richardson......................................................... 2,213,318(2) 5.66 %
Haynes G. Griffin............................................................ 1,225,920(3) 3.00 %
Stephen R. Leeolou........................................................... 1,248,304(4) 3.05 %
L. Richardson Preyer, Jr..................................................... 1,254,769(5) 3.07 %
Stephen L. Holcombe.......................................................... 91,045(6) *
Richard C. Rowlenson......................................................... 106,160(7) *
Doris R. Bray................................................................ 4,800(8) *
Robert M. DeMichele.......................................................... 11,250(9) *
L. Richardson Preyer, Sr..................................................... 98,967(10) *
Robert A. Silverberg......................................................... 190,921(11) *
All Directors, Nominees and Officers as a group (13 persons)................. 6,623,996(12) 15.73 %
* Represents less than 1%
(1) Unless otherwise indicated, all shares are owned of record by the persons
named and the beneficial ownership consists of sole voting power and sole
investment power.
(2) For a detailed description of the nature of Mr. Richardson's beneficial
ownership, see "Voting Securities Outstanding."
(3) Includes 351,193 shares that Mr. Griffin has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Also includes 5,271 shares owned by Mr. Griffin's spouse as
to which he shares voting and investment power. Does not include 15,693
shares held by trusts, the sole beneficiaries of which are Mr. Griffin's
sons and the trustee of which is Mr. Griffin's brother. Mr. Griffin denies
beneficial ownership of the foregoing shares owned by his spouse and held
by such trusts. The shares shown also do not include 73,555 shares held by
a trust of which Mr. Griffin may be deemed to share investment power, but
exercise no voting power and 87,972 shares owned by a subsidiary of
Piedmont Management Company, Inc., of which Mr. Griffin is a director.
(4) Includes 388,824 shares that Mr. Leeolou has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Does not include 22,911 shares held by trusts, the sole
beneficiaries of which are Mr. Leeolou's children and the trustee of which
is Mr. Leeolou's brother. Mr. Leeolou denies beneficial ownership of the
shares held by these trusts. The shares shown also do not include 48,868
shares held by a trust of which Mr. Leeolou may be deemed to share
investment power, but exercise no voting power.
4
(5) Includes 388,824 shares that Mr. Preyer has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Also includes 12,061 shares owned by Mr. Preyer's spouse as
to which he shares voting and investment power. Does not include 31,287
shares held by trusts, the sole beneficiaries of which are Mr. Preyer's
children and the trustee of which is Mr. Preyer's sister. Mr. Preyer denies
beneficial ownership of the foregoing shares owned by his spouse and held
by such trusts. The shares shown also do not include 123,925 shares held by
a trust of which Mr. Preyer may be deemed to share investment power, but
exercise no voting power.
(6) Includes 77,400 shares that Mr. Holcombe has the right to acquire under
presently exercisable options granted to him under Company stock option
plans.
(7) Includes 54,890 shares that Mr. Rowlenson has the right to acquire under
presently exercisable options granted to him under Company stock option
plans. Also includes 26,675 shares owned by Mr. Rowlenson's spouse as to
which he shares voting and investment power. Does not include 5,542 shares
held by trusts, the sole beneficiaries of which are Mr. Rowlenson's
children and the trustee of which is Mr. Rowlenson's brother-in-law. Mr.
Rowlenson denies beneficial ownership of the foregoing shares owned by his
spouse and held by such trusts.
(8) Includes 4,500 shares that Mrs. Bray has the right to acquire under
presently exercisable options granted to her under Company stock option
plans.
(9) Includes 4,500 shares that Mr. DeMichele has the right to acquire under
presently exercisable options granted to him under Company stock option
plans. Does not include 87,972 shares held by a subsidiary of Piedmont
Management Company, Inc. Mr. DeMichele is a director and officer of
Piedmont Management Company, Inc.
(10) Includes 80,154 shares that Mr. Preyer has the right to acquire under
presently exercisable options granted to him under Company stock option
plans and 30,545 shares held by Mr. Preyer's spouse.
(11) Includes 75,435 shares that Mr. Silverberg has the right to acquire under
presently exercisable options granted to him under Company stock option
plans and 45,486 shares that represent his pro rata ownership of Common
Stock owned by a corporation of which he is an officer, director and
principal shareholder. Of the shares shown as beneficially owned by Mr.
Silverberg, he exercises shared voting and investment power with respect to
45,486 shares and sole voting and investment power with respect to 70,000
shares.
(12) Includes 1,579,178 shares that directors and officers have the right to
purchase under presently exercisable options granted to them under Company
stock option plans.
Under federal securities laws, the Company's directors, its executive
officers, and any persons holding more than 10 percent of the Company's stock
are required to report their ownership of the Company's stock and any changes in
that ownership to the Securities and Exchange Commission. Specific due dates for
these reports have been established and the Company is required to report in
this proxy statement any failure to file by these dates during fiscal 1994. All
of these filing requirements were satisfied by its directors, officers and 10
percent holders except that Robert M. DeMichele, a director of the Company,
inadvertently failed to file on a timely baiss one report relating to one
transaction involving stock of the Company owned by him. In making these
statements, the Company has relied on the written representations of its
directors, officers and 10 percent holders and copies of the reports that they
have filed with the Commission.
5
ELECTION OF DIRECTORS
It is intended that the persons named in the accompanying proxy will vote
for the three nominees listed below for directors, unless the authority so to
vote is withheld. A plurality of the votes cast is required to elect each
director, and, as a result, abstentions and broker nonvotes will not affect the
election results if a quorum is present. In the event that any nominee should
not be available to serve for any reason, the proxy holders may vote for
substitute nominees designated by the Board of Directors. The Board of Directors
has no reason to believe any of the nominees named below will be unavailable to
serve as a member of the Board of Directors.
The Board of Directors of the Company is divided into three classes: Class
I, Class II and Class III. In accordance with this classification, the members
of Class II of the Board of Directors are to be elected at this Annual Meeting.
If elected, the nominees will serve until the 1998 Annual Meeting of
Shareholders. has been nominated for election, along with the
remaining Class II directors. The directors designated as Class III have been
previously elected to serve until the 1996 Annual Meeting of Shareholders and
the directors designated as Class I have been previously elected to serve until
the 1997 Annual Meeting of Shareholders.
DIRECTOR
NAME, AGE AND PRINCIPAL OCCUPATION FOR LAST FIVE YEARS SINCE
NOMINEES FOR THREE-YEAR TERM (CLASS II)
Haynes G. Griffin, 48, President and Chief Executive Officer of the Company, 1984-present; director, 1984
Piedmont Management Company, Inc., 1993-present.
L. Richardson Preyer, Sr., 76, Distinguished Fellow in Public Policy, University of North Carolina at 1985
Greensboro, 1981-1992; director, Piedmont Management Company, Inc., 1982-present.
[Nominee] --
CONTINUING DIRECTORS (CLASS III)
Robert M. DeMichele, 50, President and Chief Executive Officer of Piedmont Management Company, Inc., 1987
1982-present; director, The Navigators Group, Inc.
Stephen R. Leeolou, 39, Executive Vice President and Chief Operating Officer, and Secretary of the 1984
Company, 1984-present.
L. Richardson Preyer, Jr., 47, Vice Chairman of the Board, Executive Vice President, Treasurer and 1984
Assistant Secretary of the Company, 1984-present.
CONTINUING DIRECTORS (CLASS I)
Doris R. Bray, 57, Partner, Schell Bray Aycock Abel & Livingston, L.L.P. (Attorneys at Law), 1994
1987-present; director, Cone Mills Corporation, 1989-present.
Stuart S. Richardson, 48, Chairman of the Board of the Company, 1985-present; executive of Piedmont 1985
Management Company, Inc., a diversified financial services holding company, 1985-present, Vice
Chairman, 1986-present.
Robert A. Silverberg, 60, Chairman of the Board and President of First Denver Corporation and Chairman 1985
of its subsidiary, First National Bank of Denver, 1981-present; President and Chairman of the Board of
181 Realty Company, Inc., commercial real estate holding company, 1968-present.
During 1994, there were five meetings of the Board of Directors of the
Company. Each of the directors attended more than 75% of the total number of
meetings of the Board of Directors and of committees of which he or she is a
member.
The Board of Directors has a Compensation Committee that met three times
during 1994. See "Executive Compensation" -- "Compensation Committee Report on
Executive Compensation" and "Compensation Committee Interlocks and Insider
Participation".
6
The Board of Directors has an Audit Committee that confers with the
Company's independent auditors and reviews the scope of auditing of the
Company's books and accounts and reports submitted by the officers. The
Committee also reviews, with the independent auditors and appropriate Company
personnel, procedures and methods employed in connection with the Company's
internal audit program and management policies relating to such program. The
Audit Committee met twice during 1994. Members of the Audit Committee are Robert
A. Silverberg, Chairman, and Robert M. DeMichele.
The Company has no standing Nominating Committee.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth cash and certain other compensation paid or
accrued by the Company for its chief executive officer and the four other most
highly compensated executive officers (the "Named Executive Officers") for the
years ended December 31, 1994, 1993 and 1992, respectively:
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
PAYOUTS
(E) (F) (G)
OTHER RESTRICTED SECURITIES (H) (I)
(A) (C) (D) ANNUAL STOCK UNDERLYING LTIP ALL
NAME AND (B) SALARY BONUS COMPEN- AWARD(S) OPTIONS PAYOUTS OTHER COMPEN-
PRINCIPAL POSITION YEAR ($) ($) SATION ($) ($) (1)(#) ($) SATION ($)(2)
Haynes G. Griffin 1994 378,000 -- -- 225,000 -- 4,500
President and Chief Executive Officer 1993 350,000 170,000 -- -- 150,000 -- 2,249
1992 325,000 133,100 -- -- -- -- 2,182
Stephen R. Leeolou 1994 340,200 -- -- 225,000 -- 4,500
Executive Vice President and Chief 1993 315,000 170,000 -- -- 150,000 -- 2,249
Operating Officer 1992 285,000 133,100 -- -- -- -- 2,182
L. Richardson Preyer, Jr. 1994 329,400 -- -- 225,000 -- 4,500
Executive Vice President and Treasurer 1993 305,000 170,000 -- -- 150,000 -- 2,249
1992 285,000 133,100 -- -- -- -- 2,182
Stephen L. Holcombe 1994 162,000 -- -- 44,999 -- 4,500
Senior Vice President and Chief 1993 150,000 40,000 -- -- 30,000 -- 1,369
Financial Officer 1992 124,000 31,944 -- -- -- -- 1,211
Richard C. Rowlenson 1994 162,000 -- -- 44,999 -- 4,500
Senior Vice President and General Counsel 1993 150,000 40,000 -- -- 30,000 -- 1,369
1992 124,000 31,944 -- -- -- -- 1,211
(1) Options were granted under Company stock option plans.
(2) Amounts shown represent the Company's contribution to its 401(k) Plan.
7
STOCK OPTIONS
The following table provides details regarding stock options granted to the
Named Executive Officers during 1994.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
(B) (C) ASSUMED ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL (D) APPRECIATION FOR OPTION TERM
SECURITIES OPTIONS EXERCISE (3)
UNDERLYING GRANTED TO OR BASE (E)
(A) OPTIONS EMPLOYEES IN PRICE EXPIRATION (F) (G) (H)
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
Haynes G. Griffin 225,000(1) 20 21.50 5/31/04 0 3,042,278 7,709,729
Stephen R. Leeolou 225,000(1) 20 21.50 5/31/04 0 3,042,278 7,709,729
L. Richardson Preyer, Jr. 225,000(1) 20 21.50 5/31/04 0 3,042,278 7,709,729
Stephen L. Holcombe 44,999(2) 4 19.25 3/17/04 0 544,768 1,380,549
Richard C. Rowlenson 44,999(2) 4 19.25 3/17/04 0 544,768 1,380,549
(1) Includes 4,614 incentive stock options and 220,386 non-qualified stock
options granted under Company stock option plans. Options vest over a 5-year
period beginning 6/1/95.
(2) Includes 5,194 incentive stock options and 39,805 non-qualified stock
options granted under Company stock option plans. Options vest on 3/18/99
and over a 5-year period beginning 3/18/95, respectively.
(3) As required by Securities and Exchange Commission, the amounts shown assume
a 5% and 10% annual rate of appreciation on the price of the Company's
Common Stock throughout a 10 year Option Term. There can be no assurance
that the rate of appreciation assumed for purposes of this table will be
achieved. The actual value of the stock options to the Named Executive
Officers and all optionees as a group will depend on the future price of the
Company's Common Stock. As reflected in the column which assumes a 0% rate
of appreciation, the options will have no value to the Named Executive
Officers if the price of the Company's Common Stock does not increase above
the exercise price of the options. If the price of the Company's Common
Stock increases, all shareholders will benefit commensurately with the Named
Executive Officers. On December 31, 1994, there were 40,529,334 shares of
Common Stock outstanding and the closing price of the Common Stock was
$25.75. Using the same Assumed Annual Rates of Stock Price Appreciation for
the Option Term to arrive at Potential Realizable Value shown in the table
above, the gain to all shareholders as a group at the 5% and 10% rates would
be $656,333,520 and $1,663,278,002, respectively. The amount of the gain to
all Named Executive Officers as a percent of the gain to all shareholders
under these scenarios would be approximately 1.56%.
8
OPTION EXERCISES AND HOLDINGS
The following table shows stock options exercised by the Named Executive
Officers during 1994, including the aggregate value of gains on the date of
exercise (the "Value Realized"). In addition, this table includes the number of
shares covered by both exercisable and unexercisable stock options as of
December 31, 1994. Also reported are the values for "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock options and the year-end price of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
(A) (B) (C) (D) (D) (E) (E)
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT YEAR-END ($)(1)
SHARES ACQUIRED OPTIONS AT YEAR-END (#)
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Haynes G. Griffin -- -- 351,193 405,000 5,684,261 2,756,250
Stephen R. Leeolou -- -- 388,824 405,000 6,569,719 2,756,250
L. Richardson Preyer, Jr. -- -- 388,824 405,000 6,569,719 2,756,250
Stephen L. Holcombe -- -- 59,400 93,599 778,291 766,651
Richard C. Rowlenson -- -- 43,650 93,599 415,904 766,651
(1) The closing price of the Common Stock on December 31, 1994, was $25.75.
DIRECTORS' FEES
Four of the eight present directors are not salaried employees of the
Company. For their services, those directors are paid a retainer at an annual
rate of $10,000 plus $500 for the first in-person Board or Board Committee
meeting in any one day, and $300 per day for each telephonic meeting or for each
additional meeting on the same day. Salaried employees receive no additional
compensation for their services as directors.
EMPLOYMENT AND OTHER RELATED AGREEMENTS
As of March 1, 1995, the Company entered into five-year employment
agreements with Messrs. Griffin, Preyer, Jr. and Leeolou, extending existing
agreements that expired on February 28, 1995. Each agreement provides for a
continuation of salary and benefits for the remaining term of the agreement if
employment is terminated by the Company "other than for cause" as defined in the
agreement or if the executive terminates his employment following a "change in
control" of the Company because (i) his authority and/or responsibility are
substantially reduced, or (ii) he is required to move his residence from
Greensboro, North Carolina, or (iii) his travel obligations are materially
increased without his consent. Each agreement also provides that the executive
will not compete with the Company for the term of the agreement or for one year
following his termination "with cause," whichever is later.
As of October 1, 1990, the Company implemented an Executive Officer
Long-Term Compensation Plan in which four executive officers participate. Under
this plan, Haynes G. Griffin, Stephen R. Leeolou and L. Richardson Preyer, Jr.
each would earn two cash bonuses of $500,000 each and Stuart S. Richardson would
earn two cash bonuses of $94,000 each if and when the consolidated net profits
of the Company for four profitable consecutive quarters equal or exceed $20
million and $40 million, respectively. In order to be entitled to his bonuses,
the participating executive officer must be employed by the Company at the end
of the applicable period or his employment must have been previously terminated
"other than for cause" prior to a "change of control" or by
9
reason of his death or permanent disability. If there is a "change of control,"
the bonuses will become immediately payable. By its terms, this plan is a
legally binding obligation of the Company.
Messrs. Richardson, Griffin, Leeolou, Preyer, Jr., and Holcombe own shares
of stock that were granted to them pursuant to certain restricted stock
agreements. The restrictions on such shares have expired. The Company has agreed
that in the event there is a "change in control" (as defined in the agreements)
of the Company at any time prior to December 31, 1998, the executives will be
reimbursed for the income taxes they pay with respect to the restricted stock up
to an amount that would not be deemed an "excess parachute payment" for federal
income tax purposes (the executive's average compensation for the preceding five
years, multiplied by three). Both the value of the stock bonuses and the amount
of the tax reimbursements should be deductible items to the Company or an
acquiror, as the case may be, for tax purposes.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Chief Executive Officer and of the other
Named Executive Officers are made by the Company's Compensation Committee (the
"Committee"). Two nonemployee directors currently serve as members of the
Committee: Robert M. DeMichele, Chairman, and Robert A. Silverberg. In addition,
all compensation decisions regarding the Chief Executive Officer and the other
Named Executive Officers are reviewed and ratified by the full Board of
Directors.
The Company has employed independent consultants since 1986, in connection
with compensation matters, to compile for review and analysis objective survey
information from other companies both within and outside of the industry to
establish a range of benchmarks for salary, bonus, and other incentives for
executive officers with similar positions and responsibilities.
COMPENSATION PHILOSOPHY
The Company's compensation policies are designed to attract and retain
competent management. The Board's goal is to provide competitive salaries to its
executive officers and to give them performance incentives to motivate superior
performance on behalf of the Company and its shareholders. The Company has
generally used two types of incentive compensation: annual bonuses, payable in
cash or in stock, and long-term compensation in the form of stock options and
restricted stock bonuses and, in the case of its officer-directors, cash bonuses
linked to specific performance goals. The Committee believes that linking
long-term compensation to the value of the Company's Common Stock is especially
effective because it aligns the interests of management with those of the
Company's shareholders.
EXECUTIVE OFFICER COMPENSATION
SALARIES. The salaries of the Named Executive Officers were increased 8%
during 1994. The Committee and the Board considered these increases appropriate
in view of their overall assessment that the performance of each Named Executive
Officer had been outstanding.
ANNUAL BONUSES. The Committee considers annual cash and stock bonus awards
as an integral part of the Company's financial incentive package to achieve the
Company's goals. Bonuses for the Chief Executive Officer and other Named
Executive Officers are based upon the Company's performance during the year in a
number of measurable areas. The Company is in an industry that is in a start-up
phase of its history, and, therefore, customary measures of performance, such as
net income, return on assets, and return on shareholders' equity are not
applicable as measures of management performance at this time.
10
In making decisions with regard to annual bonuses to Named Executive
Officers, the Committee examines two key areas:
1. Performance of the Company against the operating and financial targets
established by the Board of Directors each year by adoption of the
annual operating plan, and
2. The specific actions of Named Executive Officers to respond effectively
to outside factors such as economic trends and industry competitive
factors that can impact the Company's operating performance.
Annual bonuses were determined in early 1995 based upon the Named Executive
Officers' contributions to the Company's achievements in the following
performance areas: net gain in subscribers; reduction of marketing costs per new
subscriber; maintenance of revenue per subscriber; increase in service revenue;
control of operating expenses; increase in operating cash flow; and reduction of
net loss. The Committee's determination of annual bonuses is within its
discretion, and it uses the Company's performance relative to target performance
contained in the Company's operating plan as a standard in assessing the
performance of the Named Executive Officers. However, no quantifiable weight was
given to any particular performance area in the consideration of 1994 bonuses;
rather, the Committee considered the aggregate results, which in the Committee's
opinion, were outstanding.
The Committee approved in early 1995 cash bonuses for the Named Executive
Officers ranging from % to % of their total cash compensation based on
the Company's performance for the past year.
LONG-TERM COMPENSATION. The Company's long-term incentive compensation
awards are designed to encourage the retention of key executives. Long-term
compensation for the Chief Executive Officer and other officer-directors,
including Messrs. Leeolou and Preyer, Jr., consists of two elements, both of
which have been in place for some time: (i) restricted stock bonuses and stock
options, and (ii) a long-term cash incentive bonus.
RESTRICTED STOCK BONUSES AND STOCK OPTIONS. The Company currently has a
Stock Compensation Plan and a 1989 Stock Option Plan under which incentive and
nonqualified stock options have been granted in the past, some of which remain
outstanding. However, no further grants may be made under these plans. At the
1994 Annual Meeting of Shareholders, the 1994 Long-Term Incentive Plan (the
"1994 Plan"), which provides for the grant of incentive and nonqualified
options, stock bonuses and restricted stock, was approved. The Company believes
that all of these plans are performance-based compensation plans under which
compensation is deductible by the Company under Section 162(m) of the Internal
Revenue Code. The Committee administers these plans and determines, in its
discretion, what grants will be made thereunder. Under these plans, stock
options were granted to Named Executive Officers in 1987, 1990, 1993, and 1994.
For options granted in 1994, see Notes 1 and 2 under "Stock Options" above for
vesting schedule.
LONG-TERM CASH INCENTIVES. A long-term cash bonus opportunity was
established in 1990 under the Company's Executive Officer Long-term Incentive
Compensation Plan, which was adopted in conjunction with employment agreements
between the Company and its officer-directors. It is a bonus opportunity
pursuant to which Messrs. Griffin, Preyer, Jr. and Leelou can earn two bonuses
of $500,000 each at any time prior to September 30, 1998 if the Company achieves
certain profitability levels. The Company believes that this compensation, if
paid, will be deductible by the Company under Section 162(m) of the Internal
Revenue Code because it is payable under a written binding contract that was in
effect on February 17, 1993. See "Employment and Other Related Agreements"
above.
11
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
SALARY. The salary of Haynes G. Griffin, the Chief Executive Officer, was
increased 8% in 1994. Based upon information furnished by the compensation
consultants in 1993, Mr. Griffin's salary falls within the benchmark range of
other salaries for chief executive officers of competitor companies. Since most
of the Company's competitors have been acquired so that separate performance
information about them is no longer available, they are not included in the
performance graph.
ANNUAL BONUS. The Committee approved in early 1995 a cash bonus for Mr.
Griffin of $ , which represents % of his total cash compensation. In
determining the amount of Mr. Griffin's bonus, the Committee recognized the
achievements detailed under "Executive Officer Compensation -- Annual Bonuses"
above.
LONG-TERM COMPENSATION. In 1994, Mr. Griffin was granted options to
purchase 225,000 shares of Common Stock under the 1994 Plan. The options are
subject to the vesting provisions described in Note 1 under "Stock Options"
above.
Robert M. DeMichele Robert A. Silverberg
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert M. DeMichele, a member of the Company's Compensation Committee, is a
director and executive officer of Piedmont Management Company, Inc. Haynes G.
Griffin, Chief Executive Officer of the Company, serves on the Board of
Directors of Piedmont Management Company, Inc.
12
PERFORMANCE GRAPH
The graph shown below compares the Company's cumulative, five-year
shareholder return on an indexed basis with the S&P 500 Stock Index, the CRSP
Index of NASDAQ Telecommunications Stocks and the Hambrecht & Quist Technology
Stock Index. The performance graph in the Company's 1994 proxy statement
included a presentation of shareholder return for a group of cellular telephone
companies. It is not possible to include this peer group in the current proxy
statement because three of the companies in the peer group no longer operate as
independent companies, having been merged into larger companies or otherwise
acquired. The Company has substituted the CRSP Index of NASDAQ
Telecommunications Stock for the peer group index. The Company believes that
this index is widely used as a performance benchmark in the telecommunications
industry. In future proxy statements, the Company intends to discontinue
including the performance of the Hambrecht & Quist Technology Stock Index. The
Company believes the CRSP Index presents a more accurate peer group comparison
for the Company than the Hambrecht & Quist Index, which is comprised largely of
companies that do not directly compete in the telecommunications industry.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
(Graphic of Performance Graph appears here)
(Values are in table below)
Vanguard Cellular $100.00 $66.90 $77.58 $76.16 $83.27 $109.96
S&P 500 Index $100.00 $96.87 $125.81 $134.93 $148.01 $145.73
H&Q Technology Index $100.00 $91.42 $135.14 $155.45 $169.64 $196.90
CRSP Index of Nasdaq
Telecommunications
Stocks $100.00 $67.40 $93.00 $114.20 $176.00 $145.80
Assumes an initial investment of $100 on December 31, 1989 and reinvestment of
dividends.
(diamond Based on quarterly dividends and quarterly closing stock prices.
graphic) Vanguard Cellular Systems, Inc.
(square S&P 500 Stock Index, a broad based index of industrial and service
graphic) companies.
(star Hambrecht & Quist Technology Stock Index, a published index of
graphic) approximately 200 companies in computer software and hardware,
communications, semi-conductor and high technology health care
industries.
(circle CRSP Index of NASDAQ Telecommunications Stocks, a published index of
graphic) telecommunications companies.
13
PROPOSAL TO AMEND ARTICLES OF INCORPORATION
The Board of Directors has proposed and recommends that shareholders
approve an amendment to the Company's Articles of Incorporation that would
increase the number of shares of Class A Common Stock that the Company has
authority to issue from 60,000,000 shares to 250,000,000 shares. Following
adoption of this amendment, the aggregate number of shares that the Company will
have authority to issue would be 281,000,000 shares consisting of 250,000,000
shares of Class A Common Stock, with one vote per share, 30,000,000 shares of
Class B Common Stock, with one-tenth of a vote per share, and 1,000,000 shares
of preferred stock. As of March 15, 1995, the Company had 40,536,084 shares of
Class A Common Stock outstanding. There are no shares of Class B Common Stock or
preferred stock outstanding.
The Board of Directors believes an increase in the authorized number of
shares of Class A Common Stock will be of advantage to the Company. Increasing
the number of authorized shares of Class A Common Stock will provide additional
shares for issuance for any valid corporate purpose, including stock dividends,
stock splits, potential acquisitions and raising capital by the sale of
additional shares. The Boards of Directors declared a 3-for-2 stock split
effected by means of a 50% stock dividend that was paid on August 24, 1994. The
stock dividend increased the number of shares outstanding from 25,719,533 shares
to 38,579,299 shares, as of the dividend payment date. The Board of Directors
has no present plans, agreements, or understanding with respect to any
transactions that would require issuance of any authorized shares of Class A
Common Stock other than the issuance of shares through Company stock
compensation and stock purchase plans. However, should management deem it
advisable, the Company could issue authorized but unissued Class A Common Stock
to consummate any such transaction without the necessity of further shareholder
approval.
The issuance of any additional shares of Class A Common Stock may, among
other things, have a dilutive effect on earnings per share and on the equity of
the present holders of Common Stock, depending upon the terms of these specific
transactions.
A complete copy of the amendment is set forth on Exhibit A hereto. The
proposed amendment requires the approval of the majority of the outstanding
shares of the Common Stock of the Company entitled to vote at the Annual
Meeting. Abstentions and broker nonvotes will have the effect of a vote against
the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE ARTICLES OF INCORPORATION.
INDEPENDENT AUDITORS
The accounting firm of Arthur Andersen & Co. has been selected by the Board
of Directors as independent auditors of the Company for the fiscal year ending
December 31, 1995. Arthur Andersen & Co. has conducted the audit of the
Company's year-end financial statements since its inception.
A representative of Arthur Andersen & Co. is expected to be present at the
Annual Meeting and will be given the opportunity to make a statement if he
desires to do so. Such representative will be available to respond to questions
relating to the audit of the Company's 1994 financial statements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN & CO. AS INDEPENDENT AUDITORS.
14
PROPOSAL OF SECURITIES HOLDERS
A proposal of a security holder of the Company intended to be presented at
the next Annual Meeting of Shareholders must be received at the Company's
principal executive offices on or before December 2, 1995 in order to be
considered for inclusion in the Company's Proxy Statement and form of proxy
relating to that meeting.
OTHER MATTERS
Management is not aware of any matter to be brought before the Annual
Meeting other than the matters described herein. However, if other matters do
come before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote said proxy in accordance with their judgment
on such matters.
By Order of the Board of Directors
March 31, 1995
15
EXHIBIT A
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
Section A of Article IV is proposed to be amended to read in its entirety
as follows:
IV.
(A) The aggregate number of shares which the corporation shall have the
authority to issue is 281,000,000 divided into three classes. The designation
and number of shares of each class and par value of the shares of each class are
as follows:
PAR VALUE
CLASS NO. OF SHARES PER SHARE
Class A Common Stock........................................... 250,000,000 $ .01
Class B Common Stock........................................... 30,000,000 $ .01
Preferred Stock................................................ 1,000,000 $ .01
VANGUARD CELLULAR SYSTEMS, INC.
PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 10, 1995.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stuart Smith Richardson, Haynes G. Griffin
and Stephen R. Leeolou, or any of them, proxies with full power of substitution
to vote all shares of Class A Common Stock of Vanguard Cellular Systems, Inc.
standing in the name of the undersigned at the Annual Meeting of Shareholders of
the Company to be held
May 10, 1995, and any adjournment thereof:
1. Election of Directors (Class II): For all nominees listed below Withhold authority to vote for
(except as indicated to the contrary all nominees listed below . ( )
below) . ( )
Haynes G. Griffin, L. Richardson Preyer, Sr.,
To withhold authority to vote for any nominee or nominees, write the nominee's
name in the space provided below.
2. To approve an amendment to the Company's Articles of Incorporation to
increase the authorized number of shares of Class A Common Stock
to 250,000,000.
FOR ( ) AGAINST ( ) ABSTAIN ( )
(Continued on reverse side)
3. To ratify appointment of Arthur Andersen & Co. as the Company's auditors for
1995. FOR ( ) AGAINST ( ) ABSTAIN ( )
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES NAMED IN THE PROXY STATEMENT AND FOR PROPOSALS 2, AND
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated , 1995
Signature
Signature