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
Filed by the Registrant
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Filed by a party other than the Registrant
o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to §240.14a-12
Shenandoah Telecommunications Company
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
o
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction
applies:
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(2)
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Aggregate number of securities to which transactions
applies:
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(3)
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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)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount previously paid:
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Form, Schedule or Registration Statement No.:
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SHENANDOAH TELECOMMUNICATIONS COMPANY
500 Shentel Way
Edinburg, Virginia 22824
______________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 16, 2019
______________________________
To our shareholders:
Notice is hereby given that the 2019 annual meeting of shareholders
of Shenandoah Telecommunications Company will be held in the auditorium of the Company’s offices at 500 Shentel Way, Edinburg,
Virginia, on Tuesday, April 16, 2019, at 11:00 a.m., local time, for the following purposes:
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1.
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to consider and vote upon a proposal to elect two directors of the Company to the Board of Directors
of the Company (the “Board”) for a term expiring at the annual meeting of shareholders in the year 2022;
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2.
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to ratify the audit committee’s selection of KPMG LLP as the Company’s independent
registered public accounting firm for 2019;
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3.
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to consider and approve, in a non-binding vote, the Company’s named executive officer compensation;
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4.
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to consider and act upon any other business as may properly come before the meeting or any adjournment or postponement thereof.
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Only shareholders of record at the close of business on February
22, 2019 will be entitled to notice of, and to vote at, the annual meeting or any adjournment or postponement thereof. All shareholders
are cordially invited to attend this meeting. A light lunch will be provided.
We have elected to furnish certain proxy materials to our shareholders
electronically, so that we can both provide our shareholders with the information they need and also reduce our costs of printing
and delivery and reduce the environmental impact of our Annual Meeting.
Your vote is very important to us. Whether or not you plan to attend
the meeting in person, your shares should be represented and voted. Please promptly vote your proxy. You may vote online at www.proxyvote.com
where you will need to enter the control number provided in the proxy materials, and then follow the instructions provided. Submitting
the proxy online, by telephone or by mail, before the annual meeting will not preclude you from voting in person at the annual
meeting if you should decide to attend.
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By Order of the Board of Directors,
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Raymond B. Ostroski
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Secretary
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Dated: March 7, 2019
SHENANDOAH TELECOMMUNICATIONS COMPANY
500 Shentel Way
Edinburg, Virginia 22824
Annual Meeting of Shareholders
April 16, 2019
GENERAL INFORMATION
Proxy Solicitation
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Shenandoah Telecommunications Company for use at Shenandoah Telecommunications Company’s
2019 annual meeting of shareholders to be held in the auditorium of the Company’s offices at 500 Shentel Way, Edinburg, Virginia,
on Tuesday, April 16, 2019, at 11:00 a.m., local time. The purpose of the annual meeting and the matters to be acted upon are set
forth in the accompanying notice of annual meeting.
The Company will pay the cost of this proxy solicitation. In addition
to the solicitation of proxies by electronic delivery, officers and other employees of the Company may solicit proxies by personal
interview, telephone and e-mail. None of these individuals will receive compensation for such services, which will be performed
in addition to their regular duties. The Company also has made arrangements with brokerage firms, banks, nominees and other fiduciaries
to forward proxy solicitation material for shares held of record by them to the beneficial owners of such shares. The Company will
reimburse such persons for their reasonable out-of-pocket expenses in forwarding such material.
A list of shareholders entitled to vote at the annual meeting will
be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours for a period
of ten days before the meeting at the Company’s offices at 500 Shentel Way, Edinburg, Virginia, and at the time and place
of the meeting during the whole time of the meeting.
This proxy statement and the enclosed voting instructions are first
being delivered to the Company’s shareholders on or about March 7, 2019. In accordance with the rules of the Securities and
Exchange Commission, we are furnishing certain proxy materials (Proxy Statement, Proxy Card, Annual Report on Form 10-K) and letter
to shareholders by providing access to these materials electronically on the Internet. As such, we are not mailing a printed copy
of these proxy materials to each shareholder of record or beneficial owner, and our shareholders will not receive printed copies
of these proxy materials unless they request this form of delivery. Printed copies will be provided upon request at no charge.
We are delivering a Notice of Meeting and a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”)
to our shareholders on or about March 7, 2019. The Notice of Internet Availability is in lieu of mailing the printed proxy materials,
and contains instructions for our shareholders as to how they may: (1) access and review our proxy materials on the Internet; (2)
submit their proxy; and (3) receive printed proxy materials. Shareholders may request to receive printed proxy materials by mail
or electronically by e-mail on an ongoing basis by following the instructions in the Notice of Internet Availability. We believe
that providing proxy materials electronically will enable us to save costs associated with printing and delivering the materials
and reduce the environmental impact of our annual meetings. A request to receive proxy materials in printed form will remain in
effect until such time as the shareholder elects to terminate it.
Voting and Revocability of Proxies
Shares of the Company’s common stock represented by a properly
executed proxy, if such proxy is received in time and not revoked, will be voted at the annual meeting in accordance with the instructions
indicated in such proxy. If no instructions are indicated, such shares will be voted
FOR:
(1) the election of the two director
nominees to the Company’s Board of Directors for a term expiring in 2022; (2) auditor ratification; and (3) the approval,
in a non-binding vote, of the named executive officer compensation. Discretionary authority is provided in the proxy as to any
matters not specifically referred to in the proxy. Management is not aware of any other matters that are likely to be brought before
the annual meeting. If any other matter is properly presented at the annual meeting for action, including a proposal to adjourn
or postpone the annual meeting to permit the Company to solicit additional proxies in favor of any proposal, the persons named
in the proxy will vote on such matter in their own discretion.
A shareholder executing a proxy may revoke the proxy at any time
before it is exercised by giving written notice revoking the proxy to the Company’s Secretary, by subsequently filing another
proxy bearing a later date or by attending the annual meeting and voting in person. Attending the annual meeting will not automatically
revoke the shareholder’s proxy. All written notices of revocation or other communications with respect to revocation of proxies
should be addressed to Shenandoah Telecommunications Company, 500 Shentel Way, P.O. Box 459, Edinburg, Virginia 22824, Attention:
Corporate Secretary.
Voting Procedure
All holders of record of the common stock at the close of business
on February 22, 2019, will be eligible to vote at the annual meeting. Each holder of common stock is entitled to one vote at the
annual meeting for each share held by such shareholder. As of February 22, 2018, there were 49,830,871 shares of common stock outstanding.
A majority of the shares of common stock issued and outstanding and
entitled to vote at the annual meeting, present in person or represented by proxy, will constitute a quorum at the annual meeting.
Votes cast in person or by proxy at the annual meeting will be tabulated by the inspectors of election appointed for the annual
meeting, who will determine whether or not a quorum is present. Abstentions and any broker non-votes, which are described below,
will be counted for purposes of determining the presence of a quorum at the annual meeting.
The election of directors requires the affirmative vote of a majority
of the votes cast for the election of directors. Accordingly, the directorships to be filled at the annual meeting will be filled
by the nominees receiving more than half of the votes cast in favor of their election. In the election of directors, votes may
be cast in favor of or withheld with respect to any or all nominees.
The proposal to ratify the Audit Committee’s selection of KPMG
LLP as the Company’s independent registered public accounting firm for 2019 will be approved if the number of votes cast
in favor of the proposal exceeds the number of votes cast against approval of the proposal. Abstentions and broker non-votes will
have no effect on the outcome of the vote on this proposal.
The proposal to approve, in a non-binding vote, the named executive
officer compensation will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against
the proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote on this proposal.
Broker-dealers who hold their customers’ shares in street name
may, under the applicable rules of the exchanges and other self-regulatory organizations of which the broker-dealers are members,
vote the shares of their customers on routine proposals, which under such rules typically include the ratification of auditors,
when they have not received instructions from their customers. Under these rules, brokers may not vote shares of their customers
on non-routine matters without instructions from their customers. A broker non-vote occurs with respect to any proposal when a
broker holds shares of a customer in its name and is not permitted to vote on that proposal without instruction from the beneficial
owner of the shares and no instruction is given. A broker non-vote will not affect whether any proposal to be acted upon at the
annual meeting is approved.
Annual Report to Shareholders
The Company is required to file an Annual Report on Form 10-K for
the year ended December 31, 2018 with the Securities and Exchange Commission (the “SEC”). A copy of the Company’s
Annual Report on Form 10-K does not accompany this proxy statement. Shareholders may obtain, free of charge, a copy of the 2018
Annual Report on Form 10-K, without exhibits, by following the instructions in the Notice of Internet Availability or by writing
to Shenandoah Telecommunications Company, 500 Shentel Way, P.O. Box 459, Edinburg, Virginia 22824, Attention: Corporate Secretary.
The Annual Report on Form 10-K is also available through the Company’s website at
www.shentel.com
. The Annual Report
on Form 10-K and letter to shareholders are not part of the proxy-soliciting materials.
Important Notice Regarding Delivery of Shareholder Documents
The Company has taken advantage of the “householding”
rules of the SEC. For shareholders requesting to receive proxy materials in printed form, the householding rules permit the delivery
of one set of the printed proxy materials to shareholders who have the same address, to conserve resources and achieve the benefit
of reduced printing and mailing costs. If you wish to receive a paper copy of our Annual Report on Form 10-K, this proxy statement,
or the letter to shareholders, you may follow the instructions on the Notice of Internet Availability or make a written request
to Shenandoah Telecommunications Company, 500 Shentel Way, P.O. Box 459, Edinburg, Virginia 22824, Attention: Shareholder Services,
or call us at 540-984-5200. If you are receiving multiple copies of our Annual Report on Form 10-K, proxy statement or letter to
shareholders, you can request householding or electronic delivery by contacting Shareholder Services in the same manner.
SECURITY OWNERSHIP
Management Ownership of Common Stock
The following table presents, as of February 22, 2019, information
based upon the Company’s records and filings with the SEC regarding beneficial ownership of the common stock by the following
persons:
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each director and each nominee to the Board of Directors;
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·
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each executive officer of the Company named in the summary compensation table under the “Executive Compensation”
section of this proxy statement; and
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·
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all directors and executive officers of the Company as a group.
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As of February 22, 2019, there were 49,830,871 shares of common stock outstanding.
The information presented below regarding beneficial ownership of
the Company’s common stock has been presented in accordance with rules of the SEC and is not necessarily indicative of beneficial
ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if
that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition
of the security. A person is also deemed to be the beneficial owner of any security as to which a person has the right to acquire
sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant,
option or other right. More than one person may be deemed to be a beneficial owner of the same securities.
Name of Beneficial Owner
(Directors, Nominees and Executive Officers)
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Amount and Nature of
Beneficial Ownership
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Percent of
Class (%)
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Thomas A. Beckett
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1,361
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*
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Tracy Fitzsimmons
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19,492
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*
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John W. Flora
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22,686
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*
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Christopher E. French
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1,923,137
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(a)
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3.86
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Richard L. Koontz, Jr.
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27,846
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(b)
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*
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Dale S. Lam
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26,048
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*
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Kenneth L. Quaglio
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4,096
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*
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Leigh Ann Schultz
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4,874
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(c)
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*
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James E. Zerkel II
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59,980
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*
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David L. Heimbach
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--
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*
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James F. Woodward
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1,881
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*
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William L. Pirtle
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43,276
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(d)
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*
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Thomas A. Whitaker
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42,641
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*
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Earle A. MacKenzie
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65,557
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(e)
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*
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All directors, nominees and executive officers as a group (17 persons)
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2,343,290
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(f)
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4.70
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*Less than 1%.
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The percentage of beneficial ownership as to any person as of February
22, 2019, is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares
as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares
outstanding as of February 22, 2019, plus the number of shares as to which such person has the right to acquire voting or investment
power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner.
Except as otherwise indicated below and under applicable community property laws, the Company believes that the beneficial owners
of the Company’s common stock listed in the table have sole voting and investment power with respect to the shares shown.
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(a)
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The shares of common stock shown as beneficially owned by Mr. French include 64,296 shares of common stock owned by his wife,
13,668 shares owned by one of his adult children, 1,287,129 shares owned of record by 11 trusts for the benefit of Mr. French’s
family members for which Mr. French serves as trustee, and 345,000 shares of common stock owned of record by a trust for the benefit
of his family members for which one of his adult children serves as trustee. Mr. French disclaims beneficial ownership of the shares
owned of record by spouse, his child and the trust for which his child serves as trustee. Of the shares shown as beneficially owned
by Mr. French, 23,000 shares are pledged as security for personal indebtedness.
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(b)
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The shares of common stock shown as beneficially owned by Mr. Koontz include 52 shares owned of record by his son. Mr. Koontz
disclaims beneficial ownership of such shares.
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(c)
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The shares of common stock shown as beneficially owned by Ms. Schultz include 38 shares owned of record by her spouse. Ms.
Schultz disclaims beneficial ownership of such shares.
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(d)
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The shares of common stock shown as beneficially owned by Mr. Pirtle include options exercisable within 60 days of February
22, 2019 to purchase 6,792 shares of common stock.
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(e)
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The shares of common stock shown as beneficially owned by Mr. MacKenzie include 47,691 shares of common stock owned of record
by his spouse. Mr. MacKenzie disclaims beneficial ownership of the shares owned of record by his spouse. Mr. MacKenzie retired
as Executive Vice President - Special Projects of the Company on June 29, 2018.
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(f)
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The shares of common stock shown as beneficially owned by all directors, nominees and executive officers as a group include
options exercisable within 60 days of February 22, 2019 to purchase 31,853 shares of common stock.
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Principal Shareholders
The following table presents, as of February 22, 2019, information
based upon the Company’s records and filings with the SEC regarding beneficial ownership of the common stock by each person
known to the Company to be the beneficial owner of more than 5% of the common stock. The information is based on the most recent
Schedule 13G filed with the SEC on behalf of such persons.
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Name and Address
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Amount and Nature of
Beneficial Ownership
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Percent of
Class (%)
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BlackRock, Inc.
55 East 52
nd
Street
New York, NY 10055
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3,320,596
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6.66
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The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, PA 19355
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4,394,274
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8.82
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The shares of common stock shown as beneficially owned by BlackRock,
Inc. were reported on Schedule 13G filed with the Securities and Exchange Commission on February 6, 2019. BlackRock, Inc. reported
sole power to vote 3,320,596 shares and sole power to dispose of all 3,320,596 shares shown.
The shares of common stock shown as beneficially owned by The Vanguard
Group, Inc. were reported on Schedule 13G filed with the Securities and Exchange Commission on February 11, 2019. The Vanguard
Group, Inc. reported sole power to vote 97,072 shares and sole power to dispose of 4,294,650 shares.
ELECTION OF DIRECTORS
Nominees for Election as Directors for Terms Expiring in 2022
The Company’s articles of incorporation provide that the Board
of Directors is to be divided into three classes of directors, with the classes to be as nearly equal in number as possible. The
terms of office of the three current classes of directors expire at this annual meeting, at the annual meeting of shareholders
in 2020 and at the annual meeting of shareholders in 2021, respectively. Upon the expiration of the term of office of each class,
the nominees for such class will be elected for a term of three years to succeed the directors whose terms of office expire.
Christopher E. French and Dale S. Lam have been nominated for election
to the class with a three-year term that will expire at the annual meeting of shareholders in 2022. Mr. French and Mr. Lam are
incumbent directors who have served on the Board of Directors since 1996 and 2004, respectively. James E. Zerkel II will be retiring
from the Board effective at this annual meeting. The Board elected not to fill the vacancy created by Mr. Zerkel’s retirement
at this time. The Company has amended the Company’s bylaws to provide that, as of the date of the 2019 annual meeting, the
Board will consist of eight directors.
Director Nomination Process
The Board of Directors has, by resolution, adopted a director nomination
policy. The purpose of the nomination policy is to describe the process by which candidates for possible inclusion in the Company’s
recommended slate of director nominees are selected. The nomination policy is administered by the Nominating and Corporate Governance
Committee of the Board of Directors.
The Nominating and Corporate Governance Committee takes a variety
of factors into account in selecting candidates for nomination as directors, including the Company’s current needs and the
qualities needed for Board service; experience and achievement in business, finance, technology or other areas relevant to the
Company’s activities; the candidate’s reputation, ethical character and maturity of judgment; the desirability of establishing
a diversity of viewpoints, backgrounds and experiences among Board members; the candidate’s independence under SEC and Nasdaq
Marketplace Rules; the candidate’s service on other Boards of Directors; the absence of conflicts of interest that might
impede the proper performance of the candidate’s responsibilities as a director; the candidate’s ability to devote
sufficient time to Board matters; and the candidate’s ability to work effectively and collegially with other Board members.
The Committee does not give particular weight to any one factor, but instead considers how the attributes of a candidate or nominee
would enhance the Board’s overall qualifications and effectiveness. In the case of an incumbent director whose term of office
is set to expire, the Nominating and Corporate Governance Committee will review such director’s overall service to the Company
during his or her term, including the number of meetings attended, level of participation, quality of performance, and any transactions
of such directors with the Company during the term. For those potential new director candidates who appear upon first consideration
to meet the Board’s selection criteria, the Nominating and Corporate Governance Committee will conduct appropriate inquiries
into their background and qualifications and, depending on the result of such inquiries, arrange for in-person meetings with the
potential candidates. The effectiveness of the Nominating and Corporate Governance Committee’s candidate selection criteria
is assessed through the Committee’s annual review of policies regarding Board and committee membership.
The Nominating and Corporate Governance Committee may use multiple
sources for identifying director candidates, including its own contacts and referrals from other directors, members of management,
the Company’s advisors, and executive search firms. The Nominating and Corporate Governance Committee will consider director
candidates recommended by shareholders and will evaluate such director candidates in the same manner in which it evaluates candidates
recommended by other sources. In making recommendations for director nominees for the annual meeting of shareholders, the Nominating
and Corporate Governance Committee will consider any written recommendations of director candidates by shareholders received by
the Secretary of the Company not later than 120 days before the anniversary of the previous year’s annual meeting of shareholders.
Recommendations must include the candidate’s name and contact information and a statement of the candidate’s background
and qualifications, and must be mailed to Shenandoah Telecommunications Company, 500 Shentel Way, P.O. Box 459, Edinburg, Virginia
22824, Attention: Corporate Secretary.
The nomination policy is intended to provide a flexible set of guidelines
for the effective functioning of the Company’s director nomination process. The Nominating and Corporate Governance Committee
intends to review the nomination policy at least annually and anticipates that modifications may be necessary from time to time
as the Company’s needs and circumstances evolve, and as applicable legal or listing standards change. The Nominating and
Corporate Governance Committee may amend the nomination policy at any time, in which case the most current version will be available
on the Company’s website at
www.shentel.com
.
PROPOSAL ONE – APPROVAL OF NOMINEES
Approval of the nominees requires the affirmative vote of a majority
of the votes cast at the annual meeting. Unless authority to do so is withheld, it is the intention of the persons named in the
proxy to vote such proxy
FOR
the election of each of the nominees. In the event that any nominee should become unable or
unwilling to serve as a director, the persons named in the proxy intend to vote for the election of such substitute nominee for
director as the Board of Directors may recommend. It is not anticipated that any nominee will be unable or unwilling to serve as
a director.
The Board of Directors unanimously recommends that the shareholders
of the Company vote FOR the election of the nominees to serve as directors.
Information About Nominees and Continuing Directors
Biographical information concerning each of the nominees and each
of the directors continuing in office is presented below.
Nominees for Terms Expiring in 2022
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Name
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Age
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Director Since
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Christopher E. French
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61
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1996
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Dale S. Lam
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56
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2004
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Christopher E. French
has served as President and Chief Executive
Officer of the Company and its subsidiaries since 1988. Prior to his appointment as President, he held a variety of positions with
the Company, including Executive Vice President and Vice President - Network Service. Mr. French served on the Board of Directors
of First National Corporation until May of 2018. Mr. French brings to the Board additional qualifications, including his engineering
and business education, telecommunications industry experience, knowledge of and history with the Company, and public company knowledge,
including knowledge gained from his past service as a director of First National Corporation. In addition, his substantial ownership
of the Company’s common stock serves to align his interests with the Company’s shareholders.
Dale S. Lam
has served as President of Strategent Financial,
LLC, a financial advisory firm, since November 2008. Mr. Lam previously served as Chief Financial Officer and member of the Board
of Directors of ComSonics, Inc., a cable television equipment manufacturer and repair operation headquartered in Harrisonburg,
Virginia, from April 2001 through October 2008. He is also a Certified Public Accountant. Mr. Lam brings to the Board additional
qualifications, including his industry knowledge gained through his prior employment in a business related to the telecommunications
industry, his experience serving as a chief financial officer of a public company, his financial education, and his work experience
and qualification as a Certified Public Accountant. Mr. Lam also serves as an audit committee financial expert.
Directors Whose Terms Expire in 2020
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Name
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Age
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Director Since
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Tracy Fitzsimmons
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52
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2005
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John W. Flora
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64
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2008
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Kenneth L. Quaglio
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60
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2017
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Tracy Fitzsimmons
is President of Shenandoah University,
located in Winchester, Virginia, a position she has held since July 2008. She previously served as Senior Vice President and Vice
President for Academic Affairs of Shenandoah University since October 2006 and Vice President of Academic Affairs since July 2002.
Dr. Fitzsimmons also currently serves as a professor of political science at Shenandoah University. Dr. Fitzsimmons received Ph.D.
and M.A. degrees from Stanford University and a B.A. degree from Princeton University. Dr. Fitzsimmons brings to the Board additional
qualifications, including her educational background, budgeting and financial experience with a large diverse educational organization,
overall leadership experience and responsibilities as president of a university that offers undergraduate, masters and professional
doctorate degrees and is considered a technology leader among higher education institutions.
John W. Flora
has been an attorney-at-law since 1980, and
currently is a shareholder of Lenhart Pettit PC in Harrisonburg, Virginia. Mr. Flora’s business and tax practice has ranged
from serving as lead counsel of a publicly-held Fortune 500 company to representing private companies and their owners from business
formation through succession. Mr. Flora brings to the Board additional qualifications, including his career as an attorney with
a regional law firm and his substantial experience in advising public companies, as well as his experience in assisting businesses
with a wide variety of legal and regulatory issues.
Kenneth L. Quaglio
is currently CEO and President of Celerity
IT, LLC, a business acceleration consulting group that specializes in developing digital business solutions, including mobile applications,
which he joined in 2017. From 2014 through 2017, Mr. Quaglio was CEO and President of Siteworx, LLC, a leading digital marketing
consultancy. From 2012 through 2014, Mr. Quaglio served as Chief Operating Officer of 3Pillar Global, Inc., a global software product
development company. From 2009 through 2012 he was Partner/Principal, Advisory Services Performance Improvement for Ernst and Young,
LLP. Mr. Quaglio brings to the Board additional qualifications, including his experience as a CEO, and his expertise in strategy,
planning and execution, leadership and management, new business development, and technology services. Mr. Quaglio also serves as
an audit committee financial expert.
Directors Whose Terms Expire in 2021
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Name
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Age
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Director Since
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Thomas A. Beckett
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51
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2018
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Richard L. Koontz, Jr.
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61
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2006
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Leigh Ann Schultz
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45
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2016
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Thomas A. Beckett
has served as the Senior Vice President,
General Counsel and Secretary of American Public Education, Inc. (APEI), a publicly-traded provider of online and on-campus postsecondary
education headquartered in Charles Town, West Virginia since 2016. Mr. Beckett also serves as the General Counsel and Secretary
of American Public University System, Inc. (APUS), a wholly owned subsidiary of APEI, and has held various other positions with
APUS since joining the company in 2011. From 2007 to 2010, Mr. Beckett was the General Counsel and Chief Operating Officer of InnoZen,
Inc. (now CURE Pharmaceutical) and HealthSport, Inc., pharmaceutical and dietary supplement technology companies located in California.
Mr. Beckett also held various other leadership positions at these companies. Prior to this work, Mr. Beckett was an attorney at
the international law firms King & Spalding LLP and Holland & Knight LLP. Mr. Beckett began his career as a banking officer
with First Union National Bank. Mr. Beckett brings to the Board additional qualifications, including his significant experience
providing advice and guidance to Boards of Directors and executive management, his expertise in corporate governance, and his experience
as an executive officer of a public company.
Richard L. Koontz, Jr.
has served as Vice President of Holtzman
Oil Corporation, a supplier and distributor of petroleum products located in Mt. Jackson, Virginia, since 1988. He is currently
a member of the Shenandoah County Public Schools Board. Mr. Koontz brings to the Board additional qualifications, including his
experience as a member of senior management of a successful regional business, with substantial budget authority and finance responsibilities,
his community service through membership on the Shenandoah County Public Schools Board, and his knowledge of the Company’s
extensive local shareholder base.
Leigh Ann Schultz
has been CFO of Streetsense, LLC, a strategy
and design consultancy, since May 2017. Previously, she was founder and CEO of Vintage Advisory, LLC, a strategic advisory firm
providing transaction, financial advisory and strategic planning support to start-up and growth companies, as well as non-profits.
From 2014 through 2016, she was Managing Director for MorganFranklin Consulting, a strategy and execution-focused business consulting
firm. From 2012 through 2014, she was Mid-Atlantic Managing Director of Riveron Consulting, a mergers and acquisition advisory
firm. From 2010 through 2012, Ms. Schultz served in the Division of Corporation Finance of the U.S. Securities and Exchange Commission
(“SEC”), where she focused on the telecommunications sector, among others. Her responsibilities at the SEC included
examining complex filings made under the Securities Act of 1933 and the Securities Exchange Act of 1934, providing guidance on
financial statement disclosure requirements and resolving accounting and disclosure issues arising in filings. Ms. Schultz brings
to the Board additional qualifications, including her financial background and expertise in strategic planning, mergers and acquisitions,
acquisition integration, SEC reporting and compliance, business process improvement, and project management. Ms. Schultz also serves
as an audit committee financial expert.
Board of Directors and Committees of the Board of Directors
The Board of Directors has determined that, with the exception of
Christopher E. French, each of the directors and director nominees is an “independent director,” as that term is defined
in Nasdaq Marketplace Rule 4200(a)(15).
The Board of Directors welcomes communications from its shareholders,
and has adopted a procedure for receiving and addressing those communications. Shareholders may send written communications to
either the full Board of Directors or the non-management directors as a group by writing to the Board of Directors or the non-management
directors at the following address: Board of Directors/Non-Management Directors, Shenandoah Telecommunications Company, 500 Shentel
Way, P.O. Box 459, Edinburg, Virginia 22824, Attention: Corporate Secretary. Communications by e-mail should be addressed to corpsec@shentel.net
and marked “Attention: Corporate Secretary” in the “Subject” field. The secretary will review and forward
all shareholder communications to the intended recipient, except for those shareholder communications that are outside the scope
of Board matters or duplicative of other communications by the applicable shareholder previously forwarded to the intended recipient.
The Board of Directors held thirteen meetings during 2018. During
2018 each director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors and of each
committee of the Board of Directors on which such director served. In addition, the independent directors, under the leadership
of the Lead Independent Director, met without management present ten times during 2018.
All of the Company’s directors attended the Company’s
annual meeting of shareholders in 2018. The Board of Directors has adopted a policy that all directors should attend the annual
meeting of shareholders.
The Board of Directors currently has a standing Audit Committee,
a standing Compensation Committee, and a standing Nominating and Corporate Governance Committee.
The Audit Committee, which held eight meetings during 2018, consists
of Ms. Schultz, who is the Chair, Mr. Lam and Mr. Quaglio. The Board of Directors has determined that each current Audit Committee
member meets the independence requirements applicable to audit committee members under the Nasdaq Marketplace Rules and rules of
the SEC. The Board of Directors has also determined that Ms. Schultz , Mr. Lam, and Mr. Quaglio are “audit committee financial
experts,” as such term is defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC, and are independent of management.
The Audit Committee is responsible, among its other duties, for engaging, overseeing, evaluating and replacing the Company’s
independent auditors; pre-approving all audit and non-audit services by the independent auditors; reviewing the scope of the audit
plan and the results of each audit with management and the independent auditors; reviewing the adequacy of the Company’s
system of internal accounting controls and disclosure controls and procedures; reviewing the performance of the Company’s
internal audit department; reviewing the financial statements and other financial information included in the Company’s annual
and quarterly reports filed with the SEC; and, providing oversight of the Company’s enterprise risk management process, including
cybersecurity risk. The Audit Committee’s duties are set forth in the Committee’s charter, a copy of which is available
on the Company’s website at
www.shentel.com.
The Compensation Committee, which held four meetings during 2018,
consists of Dr. Fitzsimmons, who is the Chair, Mr. Flora, Mr. Koontz and Mr. Zerkel, all of whom meet the independence requirements
prescribed by the Nasdaq Marketplace Rules. The Compensation Committee is responsible, among its other duties, for establishing
compensation philosophy, considering and making recommendations to the Board of Directors concerning the salaries and incentive
compensation awards for the top levels of management of the Company (including the Chief Executive Officer), considering and making
recommendations to the Board of Directors with respect to programs for human resource development and management organization and
succession, overseeing the Company’s employee benefit and incentive plans (including the Company’s stock incentive
plans) and for administering such plans, as well as overseeing the Company’s stock ownership guidelines for officers and
directors. The Compensation Committee’s duties are set forth in the Committee’s charter, a copy of which is available
on the Company’s website at
www.shentel.com
.
For 2018, the Board of Directors did not delegate to the Compensation
Committee the authority to determine the overall compensation of the Company’s Chief Executive Officer or Chief Operating
Officer. Instead, in accordance with the Nasdaq Marketplace Rules, the compensation of the Chief Executive Officer and Chief Operating
Officer was determined by the Board of Directors upon the recommendation of the Compensation Committee. Compensation of all other
executive officers was determined in accordance with the Nasdaq Marketplace Rules by the Compensation Committee.
During 2015, the Compensation Committee engaged Frederic W. Cook
& Co., Inc. (“Frederic Cook”), a company that consults on employee benefits and compensation issues, to provide
a review and assessment of the Company’s executive compensation practices and to recommend possible changes that should be
considered to those practices. Frederic Cook was also asked to make recommendations regarding the structure of executive compensation,
including the relative levels of base salaries, short-term incentive compensation, and long-term equity-based compensation. Frederic
Cook also provided advice regarding the composition of the peer group used in evaluating the Company’s executive compensation
practices. The Compensation Committee continues to consult with Frederic Cook from time to time as appropriate.
The Company’s Chief Executive Officer is responsible for reviewing
the performance of the executive officers who report to him, which included each of the Company’s named executive officers
identified in this proxy statement, and bringing individual recommendations for those officers to the independent directors for
their review, consideration and approval. In addition, the Chief Executive Officer and the Company’s Chief Operating Officer
are responsible for establishing individual performance objectives for the payment of annual incentive bonuses to the other executive
officers.
The Nominating and Corporate Governance Committee, which held three
meetings during 2018, presently consists of Mr. Zerkel, who is the Chair, Dr. Fitzsimmons, who is Vice-Chair, Mr. Beckett and Mr.
Lam. The Board of Directors has determined each Nominating and Corporate Governance Committee member meets the independence requirements
prescribed by the Nasdaq Marketplace Rules. The committee is responsible for recommending candidates for election to the Board
of Directors for approval and nomination by the Board of Directors. The committee is also responsible for making recommendations
to the Board of Directors or otherwise acting with respect to corporate governance matters, including Board size, director independence
and membership qualifications. In addition, the committee is responsible for new director orientation; committee structure and
membership; communications with shareholders; Board and committee self-evaluations; and exercising oversight with respect to the
Company’s code of conduct, insider trading policy, corporate governance guidelines and other policies and procedures regarding
adherence with legal requirements. The charter of the Nominating and Corporate Governance Committee is available on the Company’s
website at
www.shentel.com
.
Leadership Structure and the Board’s Role in Risk Oversight
Leadership Structure
. Leadership of the Board of Directors consists of two positions,
the Board’s Chairman and the Board’s Lead Independent Director. Mr. French serves as Chairman and Dr. Fitzsimmons serves
as Lead Independent Director.
The Company combines the roles of Chairman and Chief Executive Officer.
The Board has given careful consideration to the merits of separating the roles of Chairman and Chief Executive Officer and has
determined that the Company and its shareholders are best served by having Mr. French serve as both Chairman of the Board
of Directors and Chief Executive Officer. Mr. French’s combined role as Chairman and Chief Executive Officer promotes
unified leadership and direction for the Board and executive management and it allows for a single, clear focus for the chain of
command to execute the Company’s strategic initiatives and business plans. Mr. French receives assistance with his Board
and executive management responsibilities from the Lead Independent Director and the Chief Operating Officer, respectively.
Requiring that the Chairman of the Board be an independent director
is not necessary to ensure that our Board provides independent and effective oversight of the Company’s business and affairs.
Such oversight is maintained through the composition of our Board, the strong leadership of our independent directors and Board
committees, and our corporate governance structures and processes.
The Board of Directors is composed of independent, active and effective
directors. Eight out of our current nine directors meet the independence requirements of the Nasdaq Marketplace Rules. Mr. French
is the only member of executive management who is also a director.
The Board of Directors and its committees vigorously oversee the
effectiveness of the Company’s policies and management’s decisions, including the execution of key strategic initiatives.
Each of the Board’s committees is composed entirely of independent directors. Consequently, independent directors directly
oversee such critical matters as the integrity of the Company’s financial statements, the compensation of executive management,
including Mr. French’s compensation, the selection and evaluation of directors, and the development and implementation
of corporate governance programs. The Compensation Committee, together with the other independent directors, conducts an annual
performance review of the Chief Executive Officer, assessing the Company’s financial and non-financial performance and the
quality and effectiveness of Mr. French’s leadership.
The Board designated Dr. Fitzsimmons as Lead Independent Director
in September 2016. The Lead Independent Director leads all meetings of independent directors, assists with ensuring the proper
functioning of the Board such as maintaining the Board’s focus on strategic issues, and ensures appropriate participation
in discussions and meetings by all Board members. In addition to their reliance upon the Lead Independent Director, the Board and
each Board committee have complete and open access to any member of management and the authority to retain independent legal, financial
and other advisors as they deem appropriate.
Board Role in Risk Oversight
. The Board discharges its risk oversight primarily
through its committees, each of which reports its activities to the Board. The Audit Committee has responsibility to monitor that
the Company’s risk management process is followed. The additional risk oversight responsibilities of the committees include:
Audit Committee.
The Audit Committee has primary responsibility
for the integrity of the Company’s financial statements and financial reporting process and the Company’s systems of
internal accounting and financial controls; the performance of the Company’s internal audit department; the performance of
the third parties engaged to perform internal control testing to support management’s assessment of internal control; the
annual independent audit of the Company’s financial statements, including the engagement of, and the evaluation of the qualifications,
independence and performance of, the independent auditors; and the Company’s compliance with legal and regulatory requirements,
including the Company’s disclosure controls and procedures. As part of its duties, the Audit Committee discusses with management
the Company’s risk management process, including cybersecurity risk, and the steps management has taken to monitor and control
risk exposures. The Committee also reviews the Company’s risk assessment and risk management policies.
Compensation Committee.
The Compensation Committee is responsible
for exercising oversight with respect to potential compensation-related risks, including management’s assessment of risks
related to employee compensation programs.
Nominating and Corporate Governance Committee.
The Nominating
and Corporate Governance Committee receives periodic reports with respect to compliance with the Company’s Code of Business
Conduct and Ethics, and acts upon any request by executive officers for waivers under the Code of Business Conduct and Ethics,
Insider Trading Policy and Corporate Governance Guidelines. The Committee periodically reviews and assesses the adequacy of the
Code of Business Conduct and Ethics, Insider Trading Policy and Corporate Governance Guidelines, and makes recommendations to the
Board regarding any desirable revisions.
Director Compensation
During 2018, directors who are not employees of the Company received
a cash retainer fee of $3,333 per month. Committee members of the Audit, Compensation and Nominating and Corporate Governance Committee
received additional cash retainer fees of $625, $417 and $208 per month, respectively. Directors who served as committee chairs
for the Audit, Compensation, and Nominating and Corporate Governance Committees, and the Lead Independent Director received additional
monthly cash retainer fees of $833, $444, $333 and $611, respectively. It is the Company’s policy that directors will not
receive per-meeting fees unless the number of committee meetings in any given year exceeds a preset number of committee meetings
expected to be held during the year. If such a circumstance occurs, directors who are members of the Audit, Compensation and Nominating
and Corporate Governance committees would be paid $1,071, $1,000 and $833, respectively, per additional meeting. Additional meeting
fees were paid for one Audit Committee meeting during 2018. All directors’ fees are paid in arrears on a monthly basis. In
addition to cash compensation, the Board may determine, from time to time, to award stock options or restricted stock as compensation
to non-employee directors. On February 20, 2018, each non-employee director then serving on the Board was awarded a grant of 2,740
restricted stock units with a fair value of $32.85 per share. All of such shares vest fully on the first anniversary of the grant
date.
In lieu of receiving their fees in cash, each director can elect
to have some or all of his or her fees paid in unrestricted shares of the Company’s common stock, with such shares being
issued to the director out of the shares reserved for issuance under the Company’s 2014 Equity Incentive Plan. The award
of shares in lieu of cash uses the closing price as of the last trading day of the month for which the fees are being paid and
the shares are held in book entry. Any cash in lieu of fractional shares resulting from the transfer of whole shares is paid out
in accordance with the same methodology used in the Company’s Dividend Reinvestment Plan. A director’s election to
receive shares in lieu of cash must have been made by July 1 of each year, and may only be changed on an annual basis.
All directors are reimbursed for the out-of-pocket expenses they
incur in attending director education programs. Additionally, directors are reimbursed for documented mileage and other related
expenses incurred for travel to and from Board and committee meetings.
The following table sets forth the compensation paid to the non-employee
directors of the Company for their service in 2018.
2018 Director Compensation Table
Name
|
|
Fees Earned
or Paid In
Cash ($)
|
|
Stock Awards
($)(a)
|
|
Total ($)
|
Thomas A Beckett (b)
|
|
|
25,192
|
(c)
|
|
|
67,497
|
|
|
|
92,289
|
|
Tracy Fitzsimmons
|
|
|
61,000
|
(c)
|
|
|
90,009
|
|
|
|
151,009
|
|
John W. Flora
|
|
|
45,000
|
|
|
|
90,009
|
|
|
|
135,009
|
|
Richard L. Koontz, Jr.
|
|
|
45,000
|
(c)
|
|
|
90,009
|
|
|
|
135,009
|
|
Dale S. Lam
|
|
|
55,682
|
|
|
|
90,009
|
|
|
|
145,691
|
|
Kenneth L. Quaglio
|
|
|
49,196
|
(c)
|
|
|
90,009
|
|
|
|
139,205
|
|
Leigh Ann Schultz
|
|
|
54,405
|
|
|
|
90,009
|
|
|
|
144,414
|
|
James E. Zerkel II (d)
|
|
|
52,264
|
|
|
|
90,009
|
|
|
|
142,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Ken L. Burch (e)
|
|
|
18,392
|
(c)
|
|
|
90,009
|
|
|
|
108,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_________________________
|
(a)
|
On February 20, 2018, each then
serving director was awarded a grant of 2,740 shares with a fair value of $32.85 per
share. On May 1, 2018, Mr. Beckett was awarded a grant of 1,788 restricted stock units
with a fair value of $37.75 per share. All the shares awarded in 2018 vested fully on
February 20, 2019.
|
|
(b)
|
Mr. Beckett was elected to the
Board of Directors on May 1, 2018.
|
|
(c)
|
For 2018 service, Mr. Burch, Mr.
Beckett, Dr. Fitzsimmons, Mr. Koontz, and Mr. Quaglio elected to receive $600, $2,400,
$12,833, $6,000 and $3,750, respectively, of his or her cash compensation in the form
of unrestricted shares of common stock, which were valued at the closing price as of
the last trading day of the service month.
|
|
(d)
|
Mr. Zerkel will be retiring from
the Board effective as of the date of this annual meeting.
|
|
(e)
|
Mr. Burch retired from the Board
effective as of the 2018 annual meeting on May 1, 2018.
|
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis
describes the Company’s compensation program for its executive officers, including its Chief Executive Officer and other
“named executive officers” identified in the 2018 Summary Compensation Table below, and explains how the Company’s
independent directors determined the levels and forms of the compensation that was earned by or paid to the executive officers
for 2018. In addition to the matters described below, the independent directors considered the results of the advisory vote by
shareholders on the “say-on-pay” proposal presented to shareholders at the May 1, 2017 Annual Meeting of Shareholders
in determining the levels and forms of compensation that were earned by or paid to the named executive officers in 2018. As reported
in the Company’s Current Report on Form 8-K, filed with the SEC on May 3, 2017, more than 88% of the votes cast on the say-on-pay
proposal were in favor of our named executive officer compensation. Accordingly, the Company did not make any changes to its executive
compensation program as a result of the vote.
During 2015, the Compensation Committee engaged
Frederic W. Cook & Co., Inc. (“Frederic Cook”), a company that consults on employee benefits and compensation issues,
to provide a review and assessment of the Company’s executive compensation practices and to recommend possible changes that
should be considered to those practices. Frederic Cook was also asked to make recommendations regarding the structure of executive
compensation, including the relative levels of base salaries, short-term incentive compensation, and long-term equity-based compensation.
Frederic Cook also provided advice regarding the composition of the peer group used in evaluating the Company’s executive
compensation practices. The Compensation Committee continues to consult with Frederic Cook from time to time as appropriate.
The Company’s executive compensation program serves to attract
and retain the management talent needed to successfully lead our Company and increase shareholder value. It rewards executives
for using their knowledge and skill to meet defined objectives set by the Board, and motivates their behavior by rewarding desired
performance or the meeting of established corporate objectives.
The Company’s executive compensation program primarily consists
of base salary, annual incentive bonuses, long-term incentives in the form of equity-based compensation, and retirement compensation.
Base salary represents the fixed component of the Company’s executive compensation program and is designed to provide compensation
to executives based upon their experience, duties and scope of responsibilities. Annual incentive bonuses represent a variable
component of compensation, and are intended to compensate executives for specific achievements or improvements in the Company’s
performance and individual accomplishments toward specific objectives. Long-term, equity-based incentive compensation represents
a variable component which seeks to reward executives for performance that maximizes long-term shareholder value, while further
aligning the executives’ financial interests with those of our shareholders, and also serves as a retention tool. Retirement
compensation is a variable component of compensation and is designed to allow the participants to accumulate assets that will assist
in meeting their post-retirement needs.
All incentive compensation (both cash and equity compensation) received
by executive officers and certain other employees of the Company (“Senior Management”) is subject to reduction, cancellation,
forfeiture and recoupment under the Company’s Executive Compensation Recovery Policy (the “Recovery Policy”).
Currently, individual compensation is subject to recovery from a member of Senior Management who, as a result of his or her misconduct,
received incentive compensation in excess of compensation that would have been paid had such misconduct not occurred. For purposes
of the Recovery Policy, “misconduct” includes gross negligence, willful misconduct, fraudulent or deceitful activity,
as well as any failure to act (including a failure to adequately supervise other employees) in circumstances where such employee
knew, or reasonably should have known, that action was required. Excess compensation is subject to recovery by the Company if the
misconduct is identified or alleged within a period of three years from the later of the date of receipt of the subject compensation,
or the most recent date of misconduct. The Board of Directors has full discretion whether to seek recovery of incentive compensation
and to determine the amount of such compensation that is subject to recovery. The Recovery Policy is intended to supplement, but
not limit or constrain, any statutory or regulatory right or obligation of the Company to recover compensation from its employees
(including, without limitation, the requirements of the Sarbanes-Oxley Act of 2002 and Section 16(b) of the Securities Exchange
Act of 1934, as amended).
The Company also provides various benefit programs to executive officers
and to other employees. The following table generally identifies such benefit plans and identifies those employees who may be eligible
to participate:
Benefit Plan
|
Executive
Officers
|
Full-time
Employees
|
401(k) Plan (a)
|
X
|
X
|
Medical/Dental/Vision Plans (a)
|
X
|
X
|
Life and Disability Insurance (a)
|
X
|
X
|
Annual Incentive Plan (Bonus)
|
X
|
X
|
Equity Incentive Plan (Stock Awards)
|
X
|
X
|
Deferred Compensation Plan (b)
|
X
|
Not offered
|
Defined Benefit Pension Plan
|
Not offered
|
Not offered
|
Defined Benefit Executive Supplemental Retirement Plan
|
Not offered
|
Not offered
|
Employee Stock Purchase Plan
|
Not offered
|
Not offered
|
Change in Control and Severance Plan
|
Not offered
|
Not offered
|
Employment Contracts
|
Not offered
|
Not offered
|
_________________________
|
(a)
|
All full-time employees meeting
certain eligibility requirements are eligible to participate in these plans on essentially
the same terms (except for certain differences resulting from differences in annual base
compensation).
|
|
(b)
|
The Company maintains an Executive
Supplemental Retirement Plan for certain of its executive officers, but discontinued
contributions to the Plan as of June 2010.
|
The Company further believes that perquisites for executive officers
should be extremely limited in scope and value, and has historically provided few perquisites. The following table lists the perquisites
offered, and which employees are eligible to receive them:
Type of Perquisites
|
Executive
Officers
|
Full-time
Employees
|
Employee Discounts (a)
|
X
|
X
|
Spousal Travel Reimbursements (b)
|
X
|
X
|
Financial Planning Allowances
|
Not offered
|
Not offered
|
Automobile Allowance
|
Not offered
|
X
|
Country Club Memberships
|
Not offered
|
Not offered
|
Personal Use of Company Aircraft (c)
|
Not offered
|
Not offered
|
Security Services
|
Not offered
|
Not offered
|
Dwellings for Personal Use (d)
|
Not offered
|
Not offered
|
_________________________
|
(a)
|
All employees are eligible for
discounts on Company services.
|
|
(b)
|
The Company encourages the spouses
of executive officers and certain employees to accompany them to certain Company-sponsored
events (such as industry association conventions and conferences). The Company reimburses
the executive or employee for the cost of the spouse’s travel and expenses, and
adds such reimbursements to taxable pay for W-2 purposes. The Company does not gross
up pay to cover the taxes on such reimbursements.
|
|
(c)
|
The Company does not own, lease,
or use private aircraft.
|
|
(d)
|
The Company does, under certain
circumstances, provide hiring/relocation bonuses to newly hired employees and executive
officers that may, in whole or in part, be used for temporary living expenses.
|
Base Salaries
Base salaries reflect the scope of an executive’s responsibilities
and his or her performance in directing and managing the efforts of the Company or the business unit for which the executive is
responsible. Base salaries are initially determined by evaluating the responsibilities of the position, the experience and knowledge
of the executive, and the competitive marketplace for recruiting executive talent. Base salaries are reviewed annually by the Compensation
Committee, taking into consideration such factors as individual performance and responsibilities, changes to cost of living, the
executive’s potential overall compensation package and general economic conditions. Comparisons to base salaries for comparable
positions at public companies considered to be peers of the Company are also taken into consideration. For decisions made regarding
changes to executive compensation in 2018, the Compensation Committee reviewed compensation data disclosed in the proxy filings
of the following companies: Alaska Communications Systems Group Inc.; ATN International, Inc.; Cable One, Inc.; Cincinnati Bell,
Inc.; Cogent Communications Holdings, Inc.; Consolidated Communications Holdings Inc.; Fairpoint Communications Inc.; General Communication
Inc.; Hawaiian Telcom Holdco, Inc.; IDT Corporation; Lumos Networks Corp.; Spok Holdings, Inc.; and Vonage Holdings Corp. These
companies were selected for comparison because they reflect similar company attributes and core competencies for executive talent,
and reflect the labor market for the Company’s executive talent, in terms of both industry and organizational complexity.
Although the Compensation Committee generally believes that the target total compensation should be at the median of the peer group,
the Company does not specifically “benchmark” compensation for specific executives or strive to pay our executive officers,
including the named executive officers, at a particular level of compensation. Instead, the Compensation Committee used the information
to understand the range of compensation among these comparison companies and to obtain a general understanding of compensation
practices.
Annual Incentive Bonuses
Annual bonuses are intended to focus the executive’s energy
into improving corporate performance based on priorities set by the Board, and to reward the executives for the achievement of
specific objectives that are deemed to be important to the ongoing success of the Company. Annual bonuses are calculated as a percentage
of base pay. Target bonuses for executives were 95%, 70%, 60%, 50%, 50% and 70% for Christopher E. French, the Chief Executive
Officer; David L. Heimbach, Chief Operating Officer; James F. Woodward, Chief Financial Officer; William L. Pirtle, Senior Vice
President - Sales and Marketing; Thomas A. Whitaker, Senior Vice President - Fiber Operations; and Earle A. MacKenzie, former Executive
Vice President - Special Projects, respectively. Mr. Pirtle served as the Company’s Senior Vice President - Wireless prior
to assuming his new and expanded position, and Mr. Whitaker held the position of Senior Vice President - Cable prior to taking
leadership over the Company’s fiber operations as Senior Vice President - Fiber Operations. Mr. Pirtle and Mr. Whitaker assumed
their new positions at the Company on January 1, 2019, so compensation decisions for fiscal year 2018 described in this report
relate to the work they achieved while holding their previous titles.
Annual bonuses for salaried employees, including the named executive
officers, have been based upon the achievement of a combination of company-wide financial and service performance goals and achievement
of individual objectives. For 2018, the company-wide objectives represented 80% of the total target, and individual objectives
represented 20% of the total target, for each of the named executive officers, except for Mr. Heimbach. Company-wide objectives
represented 100% of Mr. Heimbach’s total target. Individual objectives for the Chief Executive Officer and the former Executive
Vice President - Special Projects were established by the independent directors. Individual objectives for the other named executive
officers who had individual objectives were established by the Chief Executive Officer. Each officer’s actual bonus can range
up to 150% of the target bonus for exceeding all of the goals and objectives reflected in a given year’s plan. The actual
bonus can also range as low as zero in the event there is a failure to achieve any of the goals or objectives in a given year’s
plan.
For 2018, company-wide performance goals consisted of three components
for salaried Company employees, including the named executive officers. The first component, representing 70% of the total target
for the Chief Executive Officer, 87.5% of the total target for the Chief Operating Officer, 60% of the total target for the Chief
Financial Officer, the Senior Vice President - Sales and Marketing, and the Senior Vice President - Fiber Operations, and 70% of
the total target for the former Executive Vice President - Special Projects was a financial objective based on adjusted operating
income, which the Company believes is a key driver to creating long-term shareholder value. Adjusted operating income was defined
as operating income before depreciation and amortization (OIBDA), excluding accrued expenses for the current year’s incentive
plan and expenses relating to the Executive Supplemental Retirement Plan.
The target levels of adjusted operating income for the named executive
officers were: a minimum of approximately $233.6 million (below which no bonus would be earned on this component); a goal of approximately
$258.2 million (which represented 100% achievement toward this component); and a high of approximately $282.7 million (which represented
150% achievement, and beyond which no additional bonus would be earned on this component). The maximum threshold of $282.7 million
represented 115% of budgeted adjusted operating income for 2018, and was viewed as evidencing high achievement.
Calculated with the exclusions described above, the 2018 adjusted
operating income was approximately $260.0 million. Based upon these results and after considering whether any unusual items impacted
the financial accomplishments in 2018, the Company’s independent directors determined that the $258.2 million goal threshold
had been exceeded, resulting in a 104% achievement for the financial objective.
The other two company-wide performance goals for 2018 for the named
executive officers were customer growth in the number of post-paid customers in our PCS business and growth in the gross margin
in the Cable business. The PCS growth measure was chosen as a performance objective because of the Company’s belief that
increased customer growth reflects that the Company is providing good service and is a direct measure of how well the Company is
performing in the wireless segment against alternative providers. The goal for net PCS customer additions anticipated continued
growth over 2018 results in the legacy Shentel and acquired nTelos wireless markets. The Cable segment gross margin measure was
calculated as the annual Cable service revenue less the annual cost of goods sold, and was chosen as a performance objective because
of the Company’s focus on increasing the Cable segment’s contribution to overall operating income. The goal for gross
margin in the Cable segment represented significant growth in the gross margin over 2018 results.
The PCS growth component represented 5% of the total target bonus
for the Chief Executive Officer, 6.25% of the total target bonus for the Chief Operating Officer, 10.0% of the total target bonus
for each of the Chief Financial Officer, the Senior Vice President - Sales and Marketing, and the Senior Vice President - Fiber
Operations, and 5% of the total target for the former Executive Vice President - Special Projects. The PCS growth targets were
a minimum of 44,296 net post-paid PCS additions (below which no bonus would be earned), a goal of 49,218 net post-paid PCS additions
(which represented 100% achievement toward this component) and a high of 54,140 net post-paid PCS additions (which represented
150% achievement, and beyond which no additional bonus would be earned on this component). In 2018, there was an actual gain of
20,236 post-paid customers which failed to meet the minimum threshold, resulting in a 0% achievement for this component for the
Company’s employees, including the named executive officers.
The Cable segment gross margin component represented 5% of the total
target bonus for the Chief Executive Officer, 6.25% of the total target bonus for the Chief Operating Officer, 10.0% of the total
target bonus for each of the Chief Financial Officer, the Senior Vice President - Sales and Marketing, and the Senior Vice President
- Fiber Operations, and 5% of the total target for the former Executive Vice President - Special Projects. The target levels for
Cable segment gross margins were a minimum of approximately $72.6 million (below which no bonus would be earned), a goal of approximately
$80.7 million (which represented 100% achievement toward this component) and a high of approximately $84.7 million (which represented
150% achievement, and beyond which no additional bonus would be earned on this component). In 2018, actual Cable gross margin was
$83.0 million, which exceeded the goal threshold, and resulted in 128% achievement for the Company’s employees, including
the named executive officers.
For 2018, individual objectives represented 20% of the total potential
achievement toward the incentive bonuses of the each of the named executive officers other than the Chief Operating Officer. Because
he joined the Company mid-year, the Chief Operating Officer was not assigned individual objectives for 2018. The individual objectives
of the Chief Executive Officer were to strengthen and develop the executive management team, including recruitment of senior executive
talent; to develop a succession plan for key roles within the executive management structure; and, in coordination with the Chief
Financial Officer, to improve the accounting and internal control environment. As a result of meeting expectations with respect
to those goals, the Chief Executive Officer achieved a weighted performance of 100% of his individual goal.
The individual objectives of the Chief Financial Officer were to
improve the accounting and internal control environment; to develop the technical knowledge and experience of the accounting and
finance staff; and to support the evaluation of business opportunities. As a result of exceeding expectations with respect to those
goals, the Chief Financial Officer achieved a weighted performance of 125% of his individual goal.
The individual objectives the Senior Vice President - Sales and Marketing
were to achieve growth in the operating income of the Wireless segment; to complete new site construction in the Company’s
mobile territory; and to upgrade and migrate acquired cell sites in the Company’s mobile expansion areas, which were weighted
40%, 30% and 30%, respectively. The targets for Wireless operating income were a minimum of $211.6 million (below which no bonus
would be earned on this component), a goal of $235.1 million (which represented 100% achievement toward this component) and a high
of $258.7 million (which represented 150% achievement, and beyond which no additional bonus would be earned on this component).
Actual wireless operating income was $244.9 million, resulting in 121% achievement for this component. The targets for new site
construction were 134 new sites constructed (below which no bonus would be earned on this component), a goal of 143 new sites constructed
which represented 100% achievement toward this component) and a high of 147 new sites constructed (which represented 150% achievement,
and beyond which no additional bonus would be earned on this component). Actual new sites constructed were 118, resulting in a
0% achievement for this component. The targets for site upgrades and migration were 138 sites successfully upgraded and migrated
(below which no bonus would be earned on this component), a goal of 147 sites successfully upgraded and migrated which represented
100% achievement toward this component) and a high of 152 sites successfully upgraded and migrated (which represented 150% achievement,
and beyond which no additional bonus would be earned on this component). Actual sites successfully upgraded and migrated were 56,
resulting in a 0% achievement for this component. As a result of his achievement on these components, the Senior Vice President
- Sales and Marketing achieved a weighted performance of 48% of his individual goal.
The individual objective the Senior Vice President - Fiber Operations
was based upon growth in the gross margin in the Cable segment. The target levels for Cable segment gross margins were a minimum
of approximately $72.6 million (below which no bonus would be earned), a goal of approximately $80.7 million (which represented
100% achievement toward this component) and a high of approximately $88.6 million (which represented 150% achievement, and beyond
which no additional bonus would be earned on this component). In 2018, actual Cable gross margin was $83.0 million, which exceeded
the goal threshold, and resulted in the Senior Vice President - Fiber Operations achieving a performance of 114% of his individual
goal.
The individual objectives of the former Executive Vice President
- Special Projects were to support the successful recruitment and hiring of a candidate for the Chief Operating Officer position
and support the newly-hired Chief Financial Officer in the valuation of business opportunities and implementation of improvements
to the Company’s internal control environment. As a result of exceeding expectations with respect to those goals, the former
Executive Vice President - Special Projects achieved a weighted performance of 150% of his individual goal.
Based on these assessments and results the Chief Executive Officer,
Chief Financial Officer, Senior Vice President - Sales and Marketing, Senior Vice President - Fiber Operations, and the former
Executive Vice President - Special Projects achieved 100%, 125%, 48%, 114% and 150% of target, respectively, for their personal
objectives. Along with the combined performance on the company-wide objectives, the Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, Senior Vice President -Sales and Marketing, Senior Vice President - Fiber Operations, and the former Executive
Vice President - Special Projects achieved 99%, 99%, 100%, 85%, 98% and 109%, respectively, of their total targeted bonus.
Long-Term Equity-Based Compensation
Equity-based compensation is intended to focus each of the executives
on the long-term, overall impact of their decisions on the Company as a whole, as opposed to the shorter, annual time frame associated
with the annual incentive bonuses. Equity-based compensation also aligns the executives’ interests more closely to those
of the Company’s shareholders by generally rewarding executives in proportion to increases in value seen by the entire shareholder
base. Due to the long-term nature of this component of compensation, it also serves as a retention tool, helping the Company retain
desired management talent.
As part of their overall review of executive compensation, and based
on the history of prior equity grants, the Compensation Committee recommended, and the Board of Directors approved, a grant of
restricted stock units in February 2018 to the named executive officers and other management employees.
The Company does not have a program, plan or practice to time equity
awards, including option grants, to its executive officers or employees in coordination with the release of material non-public
information. The grant date of long-term equity awards for our executive officers is the date of the Board of Directors meeting
at which the award determinations are made. The exercise price of stock options issuable under the Company’s 2014 Equity
Incentive Plan is the last closing price of the common stock as reported on the Nasdaq Global Select Market prior to the grant.
Retirement Compensation
The Company maintains a defined contribution Executive Supplemental
Retirement Plan. Vesting in the Executive Supplemental Retirement Plan is subject to a ten-year service requirement. The Company
discontinued contributions to the Executive Supplemental Retirement Plan during 2010.
Summary Compensation
The following table presents details about compensation paid or earned
by the Company’s Chief Executive Officer, Chief Financial Officer, and the next three most highly compensated executive officers
serving with the Company at December 31, 2018. The table also includes compensation paid to Earle MacKenzie (Former Executive Vice
President - Special Projects), who retired as of June 29, 2018.
2018 Summary Compensation Table
|
Year
|
Salary
|
Stock
Awards
(a)
|
Non-Equity
Incentive
Plan Comp
(b)
|
All Other
Compensation
(c)
|
Total
|
|
|
|
|
|
|
|
Christopher E. French
President and CEO
|
2018
|
$631,134
|
$712,009
|
$591,941
|
$24,000
|
$1,959,084
|
2017
|
597,739
|
576,532
|
644,836
|
23,600
|
1,842,707
|
2016
|
558,602
|
453,191
|
688,191
|
22,700
|
1,722,684
|
|
|
|
|
|
|
|
David L. Heimbach
EVP & COO (d)
|
2018
|
238,462
|
250,000
|
164,918
|
312,686(e)
|
966,066
|
2017
|
-
|
-
|
-
|
-
|
-
|
2016
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
James F. Woodward
SVP–Finance & CFO
|
2018
|
391,594
|
507,815
|
234,626
|
14,673
|
1,148,708
|
2017
|
15,385
|
249,991
|
9,576
|
-
|
274,952
|
2016
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
William L. Pirtle
Senior VP–Sales and Marketing
|
2018
|
296,224
|
179,170
|
122,654
|
25,162
|
623,210
|
2017
|
277,206
|
175,683
|
147,604
|
23,600
|
624,093
|
2016
|
262,787
|
166,162
|
164,444
|
136,830
|
730,223
|
|
|
|
|
|
|
|
Thomas A. Whitaker
Senior VP–Fiber Operations
|
2018
|
264,544
|
162,888
|
129,109
|
22,665
|
579,206
|
2017
|
251,428
|
160,850
|
131,322
|
21,755
|
565,356
|
2016
|
228,928
|
152,835
|
153,621
|
19,041
|
554,424
|
|
|
|
|
|
|
|
Earle A. MacKenzie(f)
Former EVP – Special Projects
|
2018
|
219,847
|
545,985
|
165,303
|
90,684(g)
|
1,021,819
|
2017
|
389,558
|
540,302
|
325,336
|
23,600
|
1,278,796
|
2016
|
370,565
|
474,900
|
354,508
|
147,405
|
1,347,378
|
|
(a)
|
For
all periods shown, amounts represent grant date fair values for awards of share-based
compensation. See See Note 2, Summary of Significant Accounting Policies, subsection
“Stock Compensation”, included with the Company’s consolidated financial
statements included in the Annual Report on Form 10-K for the year ended December 31,
2018, for additional details.
|
|
(b)
|
Amounts
for each year were earned for performance in that year and were paid in the first fiscal
quarter of the following year.
|
|
(c)
|
Amounts
for all years include employer and matching contributions to the Company’s 401(k)
plan and employer contributions to health spending accouts for each named officer. The
tax-deferred 401(k) contributions for the Company’s named executive officers were
as follows for 2018: $22,000 for Mr. French, $8,686 to Mr. Heimbach, $14,673 for Mr.
Woodward, $23,162 for Mr. Pirtle, and $23,162 for Mr. Whitaker.
|
|
(d)
|
Mr.
Heimbach became Chief Operating Officer on May 3, 2018.
|
|
(e)
|
This
amount includes a signing bonus and relocation payment of $300,000 to Mr. Heimbach to
assist with his relocation to the Shenandoah Valley.
|
|
(f)
|
Mr.
MacKenzie retired as Executive Vice President - Special Projects of the Company on June
29, 2018.
|
|
(g)
|
This
amount includes payments made to Mr. MacKenzie following Mr. MacKenzie’s retirement
on June 29, 2018, pursuant to a consulting agreement with the Company pursuant to which
he provided advisory services to the Company. The consulting agreement was terminated
as of December 31, 2018.
|
The Company’s executive officers do not have employment agreements,
and thus are not entitled to any additional benefits upon separation from the Company or following a change in control. Vested
stock options must be exercised before separation from the Company (except in the case of retirement) and unvested stock and options
at separation are forfeited upon separation (except in the case of retirement). If an employee is at least fifty-five years old
at retirement and has completed at least ten years of continuous service with the Company, the equity awards will continue to vest
according to the agreed-upon vesting schedule, if so provided in the applicable award agreement.
Grants of Plan-Based Awards
The following table presents information with respect to the grants
of plan-based awards by the Company to the named executive officers during 2018.
All executive officers were granted Relative Total Shareholder Return
performance units (“RTSR Awards”) on February 20, 2018. Pursuant to the terms of the RTSR Awards, the Company’s
stock performance over a three-year period ended December 31, 2020 will be compared to a group of 32 peer companies, and the actual
number of shares to be issued will be determined based upon the performance of the company’s stock as compared with that
of the peer group. A target number of performance units (as shown in the 2018 Grants of Plan-Based Awards Table, below) was established
for each executive officer at the time of the grant. The actual number of shares to be issued ranges from 0 shares (if the Company’s
stock performance is in the bottom 25% of the peer group) to 150% of the target shares (if the Company’s stock performance
is in the top 25% of the peer group). Subject to requirements relating to continued employment with the Company, and to special
vesting provisions in case of a change of control, the shares will vest on the date (which will be no earlier than January 1 and
no later than March 15, 2021) that the Compensation Committee makes the determination of the Company’s performance relative
to the peer group.
All executive officers were also granted restricted stock unit awards
(“RSU Awards”) in the amounts reflected in the “2018 Grants of Plan-Based Awards Table” under the 2014
Equity Incentive Plan. The RSU Awards vest ratably on each anniversary of the grant date over a period of four years. The RSU Awards
are subject to forfeiture in the case of death, termination (for any reason), or resignation, but will continue to vest along the
normal vesting schedule in the case of retirement.
2018 Grants of Plan-Based Awards Table
|
|
|
|
Estimated
Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
Estimated
Future Payouts Under
Equity Incentive Plan Awards
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
|
|
All other
option
awards:
Number of
securities
underlying
|
|
Exercise
or base
price of
option
|
|
Grant
Date Fair
Value of
Stock
and
Option
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
or
Units
(#)
|
|
options
(#)
|
|
awards
($/Sh)
|
|
Awards
($)
|
Christopher E. French
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,335
|
|
|
|
10,670
|
|
|
|
16,005
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
361,500
|
(a)
|
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,670
|
|
|
|
-
|
|
|
|
-
|
|
|
|
350,510
|
(b)
|
|
|
2/20/2018
|
|
|
0
|
|
|
|
599,578
|
|
|
|
899,366
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Heimbach
|
|
5/15/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,026
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,007
|
(c)
|
|
|
5/15/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,864
|
|
|
|
31.05
|
|
|
|
124,993
|
(c)
|
|
|
5/15/2018
|
|
|
0
|
|
|
|
166,923
|
|
|
|
250,385
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F. Woodward
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,805
|
|
|
|
7,610
|
|
|
|
11,415
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
257,827
|
(a)
|
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,610
|
|
|
|
-
|
|
|
|
-
|
|
|
|
249,989
|
(b)
|
|
|
2/20/2018
|
|
|
0
|
|
|
|
234,956
|
|
|
|
352,435
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William L. Pirtle
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,343
|
|
|
|
2,685
|
|
|
|
4,028
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
90,968
|
(a)
|
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,685
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,202
|
(b)
|
|
|
2/20/2018
|
|
|
0
|
|
|
|
148,112
|
|
|
|
222,168
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas A. Whitaker
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,211
|
|
|
|
2,441
|
|
|
|
3,662
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82,701
|
(a)
|
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,441
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,187
|
(b)
|
|
|
2/20/2018
|
|
|
0
|
|
|
|
132,272
|
|
|
|
198,408
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earle A. MacKenzie (d)
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,091
|
|
|
|
8,182
|
|
|
|
12,273
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
277,206
|
(a)
|
|
|
2/20/2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,182
|
|
|
|
-
|
|
|
|
-
|
|
|
|
268,778
|
(b)
|
|
|
2/20/2018
|
|
|
0
|
|
|
|
153,893
|
|
|
|
230,840
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(a)
|
The
fair value of the RTSR Awards was calculated using a combination of a Monte Carlo simulation
model and the closing stock price as of the day before the grant which resulted in a
grant date fair value of approximately $33.88 per unit.
|
|
(b)
|
The
closing stock price as of the day before the grant of the RSU Awards, which also represents
the fair value of a share of restricted stock units, was $32.85 per share
|
|
(c)
|
On
May 15, 2018, Mr. Heimbach was granted 4,026 restricted stock units (RSUs) that will
vest one-fourth on each of the first through fourth anniversaries of the grant; the closing
price as of the day before the grant of restricted stock units, which also represents
the fair value of a share of restricted stock unit, was $31.05 per share. Mr. Heimbach
was also granted 6,864 options with an exercise price of $31.05 per share, the closing
price of Company stock as of the day before the grant. The Black-Scholes grant date fair
value of the option award is approximately $18.21 per share. These option awards are
subject to forfeiture in the case of death, termination (for any reason), or resignation,
but will continue to vest along the normal vesting schedule in the case of retirement.
|
|
(d)
|
Mr.
MacKenzie retired as Executive Vice President - Special Projects of the Company on June
29, 2018.
|
Outstanding Equity Awards at Fiscal Year-End
The following table presents information with respect to the outstanding
equity awards at 2018 fiscal year-end for the named executive officers.
Outstanding Equity Awards at Fiscal Year-End
|
|
Option
Awards
|
|
Stock
Awards
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested (#)
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested (a)($)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Units
That Have
Not
Vested (#)
|
|
Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Units
That Have
Not
Vested ($) (b)
|
Christopher E. French
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,670
|
(c)
|
|
|
472,148
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,113
|
(d)
|
|
|
314,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,947
|
(e)
|
|
|
218,905
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,710
|
(f)
|
|
|
119,918
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,670
|
(g)
|
|
|
472,148
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,484
|
(h)
|
|
|
419,667
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,947
|
(i)
|
|
|
218,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Heimbach
|
|
|
-
|
|
|
|
6,864
|
(j)
|
|
|
31.05
|
|
|
|
5/15/2028
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,026
|
(k)
|
|
|
178,151
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F. Woodward
|
|
|
-
|
|
|
|
6,524
|
(l)
|
|
|
35.10
|
|
|
|
12/31/2027
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,671
|
(m)
|
|
|
118,192
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William L. Pirtle
|
|
|
3,998
|
|
|
|
-
|
|
|
|
6.92
|
|
|
|
2/18/2023
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,794
|
|
|
|
-
|
|
|
|
5.41
|
|
|
|
2/19/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,685
|
(c)
|
|
|
118,811
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,167
|
(d)
|
|
|
95,890
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,814
|
(e)
|
|
|
80,270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
990
|
(f)
|
|
|
43,808
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,685
|
(g)
|
|
|
118,811
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,890
|
(h)
|
|
|
127,883
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,814
|
(i)
|
|
|
80,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas A. Whitaker
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,441
|
(c)
|
|
|
108,014
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,984
|
(d)
|
|
|
87,792
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,668
|
(e)
|
|
|
73,809
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
914
|
(f)
|
|
|
40,445
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,441
|
(g)
|
|
|
108,014
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,646
|
(h)
|
|
|
117,086
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,668
|
(i)
|
|
|
73,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earle A. MacKenzie(n)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,182
|
(c)
|
|
|
362,054
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,666
|
(d)
|
|
|
294,971
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,184
|
(e)
|
|
|
229,392
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,206
|
(f)
|
|
|
141,866
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,888
|
(h)
|
|
|
393,294
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,184
|
(i)
|
|
|
229,392
|
|
_________________________
|
(a)
|
The market value of the RSU Awards
is based on the closing price of the Company’s common stock ($44.25) as of December
31, 2018.
|
|
(b)
|
The market value of the RTSR Awards
is based on the target number of shares under the award times the closing price of the
Company’s stock ($44.25) on December 31, 2018.
|
|
(c)
|
The RSU Awards granted on February
20, 2018 vest ratably each year for four years.
|
|
(d)
|
The RSU Awards granted on February
22, 2017 vest ratably each year for four years.
|
|
(e)
|
The RSU Awards granted on February
16, 2016 vest ratably each year for four years.
|
|
(f)
|
The RSU Awards granted on February
18, 2015 vest ratably each year for four years.
|
|
(g)
|
The RSTR Awards awards granted February
20, 2018 will vest as of December 31, 2020; provided, however, that the actual number
of shares that vest will be certified by the Compensation Committee after review of the
Company’s stock price performance relative to the peer group. The table above represents
payout at the target amount for these performance-based awards.
|
|
(h)
|
The RSTR Awards awards granted February
22, 2017 will vest as of December 31, 2019; provided, however, that the actual number
of shares that vest will be certified by the Compensation Committee after review of the
Company’s stock price performance relative to the peer group. The table above represents
payout at the target amount for these performance-based awards.
|
|
(i)
|
The RSTR Awards awards granted February
16, 2016 vested and became non-forfeitable on December 31, 2018. Pursuant to the terms
of the awards, on January 29, 2019, the Compensation Committee certified the Company’s
performance relative to the peer group, which resulted in maximum payout of 150% of the
target number of shares awarded. The shares actually delivered under the awards were:
14,842 for Mr. French; 5,442 for Mr. Pirtle; 5,005 for Mr. Whitaker; and 15,553 for Mr.
MacKenzie.
|
|
(j)
|
The option award granted to Mr. Heimbach
on May 15, 2018 will vest ratably on each of the third through seventh anniversaries
of the grant date.
|
|
(k)
|
The RSU award granted to Mr. Heimbach
on May 15, 2018 will vest ratably each year for four years.
|
|
(l)
|
Mr. Woodward was granted an award
of options on December 13, 2017. His unvested options at December 31, 2018 are scheduled
to vest as follows: 1,304 options on December 13, 2020, and 1,305 options per year in
each year from December 13, 2021 through December 31, 2024. These options were granted
with an exercise price of $35.10 per share and a fair value of $19.16 per share.
|
|
(m)
|
The RSU Award granted to Mr. Woodward
on December 13, 2017 will vest ratably each year for four years.
|
|
(n)
|
Mr.
MacKenzie retired as Executive Vice President - Special Projects of the Company on June
29, 2018.
|
Option Exercises and Stock Vested
The following table presents information with respect to the options
exercised and stock awards vested during the 2018 fiscal year for the named executive officers.
2018 Option Exercises and Stock Vested Table
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Shares Acquired
Upon Exercise
|
|
Value Realized
Upon Exercise
|
|
Number of
Shares Acquired
Upon Vesting
|
|
Value Realized
Upon Vesting
|
|
|
|
|
|
|
|
|
|
Christopher E. French
|
|
|
58,934
|
|
|
|
2,571,000
|
|
|
|
24,083
|
|
|
$
|
800,000
|
|
David L. Heimbach
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
James F. Woodward
|
|
|
-
|
|
|
|
-
|
|
|
|
890
|
|
|
|
41,990
|
|
William L. Pirtle
|
|
|
-
|
|
|
|
-
|
|
|
|
8,382
|
|
|
|
219,819
|
|
Thomas A. Whitaker
|
|
|
13,266
|
|
|
|
578,167
|
|
|
|
7,718
|
|
|
|
256,614
|
|
Earle A. MacKenzie(a)
|
|
|
-
|
|
|
|
-
|
|
|
|
28,238
|
|
|
|
938,462
|
|
|
(a)
|
Mr.
MacKenzie retired as Executive Vice President - Special Projects of the Company on June
29, 2018.
|
Nonqualified Defined Contribution Plan
In March 2007, effective January 1, 2007, the Company amended the
Executive Supplemental Retirement Plan to convert it from a defined benefit plan to a defined contribution plan. The Company discontinued
contributions to the plan effective June 2010. Participants may direct their balances to a variety of investment options, and returns
on these investment options will be reflected as gains or losses in the participants’ accounts under this plan. The Company
will also reflect those gains or losses as investment gains or losses on its financial statements. The Company elected to establish
a rabbi trust and to contribute amounts to the rabbi trust equal to the participants’ opening balances in the plan, as well
as Company contributions required under the plan, and to make investments under the rabbi trust as directed by the participants’
election choices.
2018 Nonqualified Deferred Compensation Table
|
|
|
Aggregate
Earnings
|
|
Aggregate
Balance at
|
|
|
Name
|
|
in
Last FY
|
|
Last
FY
|
|
|
|
|
|
|
|
|
|
Christopher E. French
|
|
$
|
(109,696
|
)
|
|
$
|
1,238,073
|
|
|
|
David L. Heimbach
|
|
|
-
|
|
|
|
-
|
|
|
|
James F. Woodward
|
|
|
-
|
|
|
|
-
|
|
|
|
William L. Pirtle
|
|
|
(67,089
|
)
|
|
|
491,118
|
|
|
|
Thomas A. Whitaker
|
|
|
-
|
|
|
|
-
|
|
|
|
Earle A. MacKenzie(a)
|
|
|
-
|
|
|
|
-
|
|
|
|
(a)
|
Mr. MacKenzie liquidated his
entire balance from the Executive Supplemental Retirement Plan subsequent to his retirement.
|
Potential Payments Upon Termination or Change in Control
As previously noted, the Company’s named executive officers
do not have employment or change of control agreements. Upon termination of employment, whether by resignation, change of control,
severance, retirement, or other reason, all officers are eligible to receive lump-sum distributions of their vested accumulated
benefits under the Executive Supplemental Retirement Plan. Vesting of equity-based compensation does not automatically accelerate
upon a change of control, except for any unvested RTSR performance shares granted on February 16, 2016, February 22, 2017, or February
20, 2018 and outlined in the above Outstanding Equity Awards at Fiscal Year End Table which will vest upon change of control, and
vest on a prorated basis based on the number of months an officer was employed during the relevant performance period. In addition,
certain of the equity-based compensation will continue to vest following retirement for executive officers who are at least 55
years of age and have completed at least 10 years of continuous service with the Company as of the date of retirement. Such vesting
will be in accordance with the original vesting schedule determined at the date of grant. Vested stock options as of December 31,
2018, are shown in the Outstanding Equity Awards at Fiscal Year-End table. No other payments to any officers would be triggered
by such officer’s termination of employment.
Although Mr. Heimbach does not have an employment agreement with
the Company, he will be entitled to the sum of his annual base salary, $400,000 and his target annual cash bonus, $280,000, for
a total of $680,000, if the Company terminates Mr. Heimbach without cause or he resigns for good reason during the first year of
Mr. Heimbach’s employment. If such termination or resignation occurs during the second year of Mr. Heimbach’s employment,
the Company will pay to him an amount equal to one-half of the sum of his annual base salary and target annual cash bonus
Stock Ownership Guidelines and Anti-Hedging Policy
The Compensation Committee has implemented stock ownership guidelines
for the Company’s directors and executive officers in order to reinforce the importance of stock ownership and long-term
focus. The guidelines apply to all members of the Board of Directors and executive officers of the Company. Stock ownership is
the sum of the shares of the Company’s stock beneficially owned in addition to unvested restricted stock units. Pledged shares
and shares from awards of stock options that are unvested or vested but unexercised are not included in the ownership amount. Expected
ownership levels are: i) five times base salary for the Chief Executive Officer; ii) three times base salary for the Chief Operating
Officer and Chief Financial Officer; iii) two times base salary for all other executive officers; and iv) sixty times the monthly
retainer fee for members of the Board.
Additionally, to emphasize the importance of sharing the same objectives
as all shareholders of the Company, the Company’s Insider Trading policy prohibits directors, senior executives, and other
designated employees from engaging in hedging transactions.
Pay Ratio Disclosure
In 2015, the U.S. Securities and Exchange Commission adopted rules
(as required by the Dodd-Frank Act) requiring disclosure of: (i) the annual total compensation of our median employee (excluding
our Chief Executive Officer) (ii) the annual total compensation of our Chief Executive Officer; and (iii) the ratio of the annual
total compensation of our median employee to the annual total compensation of our Chief Executive Officer. The annual total compensation
of our Chief Executive Officer for fiscal year 2018, as reported in the Summary Compensation Table included in this Proxy Statement,
was $1,959,084. The median of the annual total compensation of all employees, excluding our Chief Executive Officer, for fiscal
year 2018 was $60,726. As a result, we estimate that the annual total compensation of our CEO was 32.3 times that of the annual
total compensation of the median employee for fiscal year 2018.
We identified the median employee by using the actual compensation paid during 2018,
as reported on IRS Form W-2, to our employees as of December 29, 2018. Compensation for employees who joined the Company after
January 1, 2018 was annualized for purposes of identifying the median employee. After identifying the median employee, we calculated
annual total compensation for such employee using the same methodology used for calculating the total compensation of our Chief
Executive Officer as set forth in the Summary Compensation Table.
Compensation Committee Report
We have reviewed and discussed with management the Compensation Discussion
and Analysis for the year ended December 31, 2018 to be included in the Company’s 2019 Annual Meeting of Shareholders Proxy
Statement (the “Proxy”). Based on the reviews and discussions referred to above, we have recommended to the Board of
Directors, and the Board of Directors has approved, that the Compensation Discussion and Analysis referred to above be included
in the Company’s Proxy and incorporated by reference into the Company’s Annual Report on Form 10-K.
|
Respectfully submitted,
|
|
|
|
THE COMPENSATION COMMITTEE
|
|
|
|
Tracy Fitzsimmons, Chair
|
|
John W. Flora
|
|
Richard L. Koontz, Jr.
|
|
James E. Zerkel II
|
Certain Relationships and Related Transactions
As set forth in the Audit Committee charter, the Audit Committee
is responsible for reviewing all related party transactions required to be disclosed pursuant to Item 404 of Regulation S-K of
the SEC. During 2018, the Company and its subsidiaries made numerous purchases of fuel from Holtzman Oil Corporation and entities
affiliated with Holtzman Oil Corporation. The Company also leases a small parcel of land to Holtzman Oil Corporation, and sells
telephone and internet services to Holtzman Oil Corporation. Mr. Koontz is a Vice President of Holtzman Oil Corporation. For the
period from January 1, 2018 through December 31, 2018, total purchases of fuel by the Company were approximately $214 thousand.
For the period from January 1, 2018 through December 31, 2018, the Company received rent in the amount of approximately $504, and
received payment for services in the amount of approximately $62 thousand, from Holtzman Oil Corporation. All transactions with
Holtzman Oil Corporation and its affiliates were at market or tariffed rates pursuant to arms-length agreements.
PROPOSAL TWO: SHAREHOLDER RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed KPMG
LLP (“KPMG”), as the Company’s independent registered public accounting firm for the Company’s fiscal
year ending December 31,
2019. Our shareholders are asked to ratify
that appointment at the annual meeting. In accordance with its charter, the Audit Committee will periodically assess the suitability
of our incumbent independent registered public accounting firm taking into account all relevant facts and circumstances, including
the possible consideration of the qualifications of other accounting firms. If the shareholders do not ratify the appointment
of KPMG, the Audit Committee will reconsider whether or not to retain KPMG as the Company’s independent registered public
accounting firm. Even if the appointment of KPMG is ratified by the shareholders, the Audit Committee may change the appointment
at any time if it determines that a change would be in the best interests of the Company and its shareholders.
Representatives of KPMG are expected to attend the annual meeting,
will have the opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions from
shareholders.
KPMG served as the Company’s independent registered public
accounting firm for the Company’s fiscal years ended December 31, 2017 and 2018. The following sets forth the aggregate fees
billed by KPMG to the Company for the audit of our annual financial statements for the years ended December 31, 2017 and 2018,
and fees billed for other services rendered by KPMG during those periods (in thousands).
|
|
|
2017
|
|
2018
|
|
|
Audit services (1)
|
|
$
|
3,835
|
|
|
$
|
4,242
|
|
|
|
Audit-related services (2)
|
|
|
-
|
|
|
|
5
|
|
|
|
Tax services (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
All other services (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
Total
|
|
$
|
3,835
|
|
|
$
|
4,247
|
|
|
|
(1)
|
Fees
for services in connection with the audit of our financial statements and review of our
quarterly financial statements.
|
|
(2)
|
Fees
for services provided in connection with financial due diligence.
|
|
(3)
|
Fees
for tax compliance, tax planning, and tax advice, including tax return preparation and
requests for rulings or technical advice from tax authorities.
|
|
(4)
|
Fees
for services provided, excluding the services described above, if any.
|
In making its appointment of KPMG as the Company’s independent
registered public accounting firm
for the Company’s
fiscal year ending December 31,
2019,
the Audit
Committee considered whether KPMG’s provision of non-audit services is compatible with maintaining KPMG’s independence.
KPMG does not presently provide any non-audit services to the Company.
Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee is responsible for appointing, setting compensation
for and overseeing the work of the independent
registered
public accounting firm
. The Audit Committee pre-approves all audit and permissible non-audit services provided by
such
firm
. For both types of pre-approval, the Audit Committee considers whether such services are consistent with the
SEC’s
rules on auditor independence.
The Board of Directors unanimously recommends that the shareholders
of the Company vote FOR the ratification of the appointment of KPMG LLP.
Report of the Audit Committee
The Audit Committee of the Company’s
Board
of Directors is a standing committee composed of three non-employee directors who meet the independence and expertise requirements
of the listing standards of the Nasdaq Stock Market.
During
the fiscal
year ended December 31
,
2018,
the Audit Committee reviewed with the Company’s management, internal audit department, and KPMG (the Company’s independent
registered public accounting firm), the scope of the annual audit and audit plans, the results of internal control testing and
external audit examinations, the evaluation of the Company’s system of internal controls, the quality of the Company’s
financial reporting, and the Company’s process for legal and regulatory compliance. The Audit Committee also monitored the
progress and results of the testing of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley
Act of 2002
.
Management is responsible for the
Company’s
system of internal controls, the
financial statements and the
financial
reporting process
,
and the assessment
of the effectiveness of internal control over financial reporting. KPMG is responsible for performing an integrated audit and issuing
reports on the following: (1) the Company’s consolidated financial statements; and (2) the Company’s internal controls
over financial reporting. As provided in its charter, the Audit Committee’s responsibilities include monitoring and overseeing
these processes.
Consistent
with this oversight responsibility, KPMG reports directly to the Audit Committee. The Audit Committee appointed KPMG as the Company’s
independent registered public accounting firm and approved the firm’s fees.
The Audit Committee discussed with KPMG the matters required to be
discussed by the Nasdaq Stock Market, the Securities and Exchange Commission
,
the
Public Company Accounting Oversight Board, and the American Institute of Certified Public Accountants
. In addition, KPMG
provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company
Accounting Oversight Board regarding that firm’s communications with the Audit Committee concerning independence and the
Audit Committee has discussed with KPMG the firm’s independence.
In reliance on the review and discussions referred to above, the
Audit Committee recommended to the Board of Directors, and the Board of Directors has approved, the inclusion of the audited consolidated
financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the
Securities and Exchange Commission.
|
Respectfully submitted,
|
|
|
|
THE AUDIT COMMITTEE
|
|
|
|
Leigh Ann Schultz, Chair
|
|
Dale S. Lam
|
|
Kenneth L. Quaglio
|
PROPOSAL THREE: NON-BINDING VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with Section 14A of the Exchange Act and the SEC’s
rules thereunder, the Board of Directors is asking shareholders to approve, in a non-binding vote, the Company’s named executive
officer compensation as disclosed in this proxy statement.
As described above in the “Compensation Discussion and Analysis”
section of this proxy statement, the Compensation Committee has structured our executive compensation program to attract and retain
the management talent needed to successfully lead our Company and increase shareholder value.
The Board urges shareholders to read the Compensation Discussion
and Analysis beginning on page 12 of this proxy statement, which describes in more detail how the Company’s executive compensation
policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table
appearing on page 17 and other related compensation tables and narratives of this proxy statement, which provide detailed information
on the compensation of our named executive officers. The Compensation Committee and the Board of Directors believe that the policies
and procedures articulated in the Compensation Discussion and Analysis are effective in achieving our goals and that the compensation
of our named executive officers reported in this proxy statement reflects and supports these compensation policies and procedures.
A vote on this resolution, commonly referred to as a “say-on-pay”
resolution, is not binding on the Board of Directors or the Company. Although the vote is non-binding, the Board and the Compensation
Committee will review and consider the voting results when evaluating our executive compensation program.
This proposal will be approved if the number of votes cast in favor
of the proposal exceeds the number of votes cast against the proposal.
The Board of Directors unanimously recommends that stockholders
vote “FOR” the approval of the compensation of the Company’s named executive officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company’s directors and executive officers and persons who own more than 10% of a registered class of the Company’s
equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of the common stock and
other equity securities of the Company. The reporting persons are required by rules of the SEC to furnish the Company with copies
of all Section 16(a) reports they file. On November 21, 2018, Leigh Ann Schultz filed a Form 4 report to correct an inadvertent
failure to timely report one transaction where she acquired four shares of Shentel stock on November 16, 2018. Based solely upon
a review of Section 16(a) reports furnished to the Company for 2018 or written representations that no other reports were required,
the Company believes that, except as noted above, the foregoing reporting persons complied with all filing requirements for fiscal
year 2018.
SHAREHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 2019
Under SEC rules, in order for shareholder proposals to be presented
at the Company’s annual meeting of shareholders in 2020, such proposals must be received by the Company’s secretary
at the Company’s principal office in Edinburg, Virginia, no later than November 19, 2019. The submission by a shareholder
of a proposal for inclusion in the proxy statement is subject to regulation by the SEC.
In addition, the Company’s bylaws require that notice of proposals
by shareholders to be brought before any annual meeting generally must be delivered to the Company not less than 120 days before
the meeting. The notice shall set forth as to each matter the shareholder proposes to bring before the annual meeting: (a) a brief
description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the
annual meeting; (b) the name and record address of the shareholder proposing such business; (c) the class, series and number of
shares of the Company’s stock that are beneficially owned by the shareholder proposing such business; and (d) any material
interest of the shareholder in such business.
The provisions in the Company’s bylaws concerning notice of
proposals by shareholders are not intended to affect any rights of shareholders to request inclusion of proposals in the Company’s
proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934.
SHAREHOLDER COMMUNICATIONS
Shareholders may send communications directly to the Company’s
Board of Directors at the following address: Board of Directors, Shenandoah Telecommunications Company, 500 Shentel Way, P.O. Box
459, Edinburg, Virginia 22824, Attention: Corporate Secretary.
OTHER MATTERS
The Board of Directors does not intend to present to the meeting
any other matters not referred to above and does not presently know of any matters that may be presented to the meeting by others.
If other matters are properly brought before the meeting, the persons named in the enclosed proxy will vote on such matters in
their own discretion.
|
By Order of the Board of Directors,
|
|
|
|
Raymond
B. Ostroski
|
|
Secretary
|
Dated: March 7, 2019
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