<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AERIAL COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
[LOGO]
AERIAL COMMUNICATIONS, INC.
8410 W. Bryn Mawr Avenue, Suite 1100
Chicago, IL 60631
Phone: (773) 399-4200
Fax: (773) 399-7997
April 19, 1999
Dear Shareholders:
You are cordially invited to attend the Aerial Communications, Inc. 1999
Annual Meeting on Friday, May 7, 1999, at 10:00 a.m., Chicago time, at Harris
Trust and Savings Bank, 111 West Monroe Street, Chicago, Illinois, on the 8th
floor in the Auditorium.
The formal notice of the meeting, the Board of Directors' Proxy Statement
and the Company's 1998 Annual Report are enclosed. During the meeting, we will
report on the accomplishments and plans of the Company. At the Annual Meeting,
shareholders are being asked to elect Directors, ratify the selection of outside
auditors and approve the Company's Retention Restricted Stock Unit Plan. The
Board of Directors recommends a vote "FOR" the nominees for election as
Directors and "FOR" each of the other proposals.
The Board of Directors and members of our management team will be at the
Annual Meeting to meet with shareholders and discuss our recent results and
plans for the future. We would like to have as many shareholders as possible
represented at the meeting.
Please sign and return the enclosed proxy card, whether or not you plan to
attend the meeting. Giving your proxy will not offset your right to vote in
person if you attend the Annual Meeting.
If you have any questions prior to the Annual Meeting, please call Aerial
Investor Relations at (773) 399-7970. We look forward with pleasure to visiting
with you at the Annual Meeting.
As previously reported, the Company received an offer from its parent
company, Telephone and Data Systems, Inc. ("TDS"), to acquire all of the issued
Common Shares of the Company not already owned by TDS in exchange for TDS
tracking stock which would have tracked the performance of the Company. On
December 18, 1998, TDS withdrew its offer to acquire all of the outstanding
shares of the Company that it did not already own and announced that it was
pursuing a tax-free spin-off of its 82.3 percent interest in the Company, as
well as reviewing other alternatives. As discussed in the accompanying Proxy
Statement, certain matters relating to the spin-off are being considered by an
independent special committee of the Board of Directors.
With very best regards,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
[SIGNATURE]
LeRoy T. Carlson, Jr. Don Warkentin
Chairman President and Chief
Executive Officer
</TABLE>
PLEASE HELP US AVOID THE EXPENSE OF FOLLOW-UP
PROXY MAILINGS TO SHAREHOLDERS BY
SIGNING AND RETURNING THE ENCLOSED PROXY CARD PROMPTLY
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
TO THE SHAREHOLDERS OF
AERIAL COMMUNICATIONS, INC.
The 1999 Annual Meeting of the Shareholders of Aerial Communications, Inc.,
a Delaware corporation (the "Company" or "Aerial"), will be held at Harris Trust
and Savings Bank, 111 West Monroe Street, 8th floor, Chicago, Illinois, in the
Auditorium on Friday, May 7, 1999, at 10:00 a.m., Chicago time, for the
following purposes:
1. to elect four Class II Directors and one Class III Director;
2. to ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the year ending December 31, 1999;
3. to consider and approve the Aerial Communications, Inc. Retention
Restricted Stock Unit Plan (the "Restricted Stock Plan"); and
4. to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
This Notice of Annual Meeting and Proxy Statement is being mailed to
shareholders on or about April 19, 1999.
The Board of Directors has fixed the close of business on March 26, 1999, as
the record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting or any adjournments thereof.
The Board of Directors would like to have all shareholders represented at
the Annual Meeting. If you do not expect to be present, please sign and mail
your proxy in the enclosed self-addressed envelope to Aerial Communications,
Inc., c/o Harris Trust and Savings Bank, PO Box 2702, Chicago, Illinois
60690-9402. You have the power to revoke your proxy at any time before it is
voted, and the giving of a proxy will not affect your right to vote in person if
you attend the Annual Meeting.
On March 26, 1999, the Company had 31,908,088 outstanding Common Shares, par
value $1.00 per share, and 40,000,000 Series A Common Shares, par value $1.00
per share. As of March 26, 1999, there were no outstanding Series B Common
Shares, par value $1.00 per share, or Preferred Shares, par value $1.00 per
share, of the Company. Each holder of outstanding Common Shares, as of March 26,
1999, is entitled to one vote for each Common Share held in such holder's name
with respect to all matters on which holders of Common Shares are entitled to
vote at the Annual Meeting. The holder of Series A Common Shares is entitled to
fifteen votes for each Series A Common Share held in such holder's name with
respect to all matters on which the holder of Series A Common Shares is entitled
to vote at the Annual Meeting. Accordingly, the voting power of the Series A
Common Shares was 600,000,000 votes, and the total voting power of all
outstanding shares of capital stock was 631,908,088 votes at March 26, 1999.
Telephone and Data Systems, Inc., a Delaware corporation ("TDS"), is the sole
holder of Series A Common Shares and holds 19,086,000 Common Shares,
representing approximately 60 percent of the Common Shares. By reason of such
holdings, TDS has the voting power to elect all of the Directors of the Company
and approximately 98 percent of the voting power with respect to matters other
than the election of Directors. TDS has advised the Company that it intends to
vote FOR the Company's nominees for election as Directors and FOR each of the
other proposals. Proxies are being requested from holders of Common Shares in
connection with the election of one Class II Director and
1
<PAGE>
one Class III Director, the ratification of the selection of Arthur Andersen
LLP, and the approval of the Restricted Stock Plan.
VOTING INFORMATION
Holders of Common Shares may, with respect to the election of the Class II
and Class III Directors to be elected by the holders of Common Shares, vote FOR
the election of such Director nominees or WITHHOLD authority to vote for such
Director nominees. A shareholder may, with respect to each of the other
proposals, (i) vote FOR approval, (ii) vote AGAINST approval or (iii) ABSTAIN
from voting on such proposal. All properly executed and unrevoked proxies
received in the accompanying form in time for the 1999 Annual Meeting will be
voted in the manner directed therein. If no direction is made, a proxy by any
shareholder will be voted FOR the nominees for Director and FOR the proposals to
ratify the selection of Arthur Andersen LLP as the Company's independent public
accountants for 1999 and to approve the Restricted Stock Plan. If a proxy
indicates that all or a portion of the shares represented by such proxy are not
being voted with respect to a particular matter, such non-votes will not be
considered present and entitled to vote on such matter, although such shares may
be considered present and entitled to vote on other matters and will count for
purposes of determining the presence of a quorum. The holders of a majority of
the voting power of the shares issued and outstanding and entitled to vote,
present in person or represented by proxy, will constitute a quorum at the
Annual Meeting, except that, in the case of matters, where a separate vote by a
class or classes is required, the holders of a majority of the shares of such
class or classes, present in person or represented by proxy, will constitute a
quorum entitled to take action with respect to that vote on that matter.
The election of the Class II Director and Class III Director to be elected
by the holders of Common Shares requires the affirmative vote of a plurality of
the votes of the shares present in person or represented by proxy and entitled
to vote with respect to such Director at the Annual Meeting. Accordingly, if a
quorum exists, the person receiving a plurality of votes of Common Shares with
respect to the election of such Class II Director and Class III Director will be
elected to serve as a Class II Director or Class III Director, respectively. A
majority of the votes entitled to be cast with respect to the election of such
Class II Director and Class III Director by such voting group constitutes a
quorum for action on such proposal. Withheld votes and non-votes with respect to
the election of such Class II and Class III Director will not affect the outcome
of the election of such Director.
The election of the Class II Directors to be elected by the holder of Series
A Common Shares requires the affirmative vote of a plurality of the votes of the
shares present in person or represented by proxy and entitled to vote with
respect to such Directors at the Annual Meeting. Accordingly, if a quorum
exists, each person receiving a plurality of votes of the Series A Common Shares
with respect to the election of such Class II Director will be elected to serve
as a Class II Director. A majority of the votes entitled to be cast with respect
to the election of such Class II Directors by such voting group constitutes a
quorum for action on such proposal. Withheld and non-votes with respect to the
election of such Class II Directors will not affect the outcome of the election
of such Class II Directors.
If a quorum is present at the Annual Meeting, the ratification of the
selection of Arthur Andersen LLP as the Company's independent public accountants
for 1999 requires the affirmative vote of a majority of the voting power of the
Common Shares and Series A Common Shares voting together and present in person
or represented by proxy and entitled to vote on such matter at the Annual
Meeting. A vote to abstain from voting on such proposal will be treated as a
vote against such proposal. Non-votes with respect to such proposal will not
affect the determination of whether such proposal is approved.
If a quorum is present at the Annual Meeting, the proposal to approve the
Restricted Stock Plan requires the affirmative vote of a majority of the voting
power of the Common Shares and Series A Common Shares voting together and
present in person or represented by proxy and entitled to vote on such matter at
the Annual Meeting. A vote to abstain from voting on such proposal will be
treated as a
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<PAGE>
vote against such proposal. Non-votes with respect to such proposal will not
affect the determination of whether such proposal is approved.
A complete list of shareholders entitled to vote at the Annual Meeting,
arranged in alphabetical order and by voting group, showing the number of shares
held by each shareholder, will be kept open at the offices of the Company, 8410
West Bryn Mawr Avenue, Suite 1100, Chicago, Illinois 60631, for examination by
any shareholder during normal business hours, beginning at least ten days prior
to the date of the meeting and continuing through the Annual Meeting.
RECENT DEVELOPMENTS
In December 1997, the Company received an offer from TDS to acquire all of
the issued and outstanding Common Shares of the Company which TDS did not own in
exchange for a TDS tracking stock which would track the performance of the
Company (the "Offer"). The Company's Board of Directors appointed Mr. John D.
Foster and Mr. Thomas W. Wilson, Jr., Independent Directors of the Company, to a
special committee (the "Tracking Stock Special Committee") of the Board of
Directors to consider the Offer. Due to the fact that TDS was unable to reach a
mutually satisfactory agreement with the Tracking Stock Special Committee with
respect to the Offer and other reasons, on December 18, 1998, TDS advised the
Company that it had withdrawn the Offer. Consequently, the Company terminated
the Tracking Stock Special Committee.
On December 18, 1998, TDS announced that it was pursuing a tax-free spin-off
of its 82.3 percent interest in Aerial (the "Spin-Off"), as well as reviewing
other alternatives. TDS intends to ask the Internal Revenue Service ("IRS") to
rule on the tax-free status of such a distribution. There are a number of
conditions that must be met for the Spin-Off to occur, including a receipt of a
favorable IRS ruling, final approval by the TDS Board of Directors, certain
governmental and third party approvals and review by the Securities and Exchange
Commission ("SEC") of appropriate SEC filings. TDS intends to seek approval by
TDS shareholders of a proposal to distribute its Aerial Series A Common Shares,
on a pro-rata basis, to holders of TDS Series A Common Shares, and to distribute
its Aerial Common Shares, on a pro rata basis, to holders of TDS Common Shares.
Prior to the Spin-Off, it is expected that Aerial will seek additional financing
so that Aerial would have the appropriate capitalization to operate as a
stand-alone entity. In connection with such financing, all or a portion of
Aerial's debt to TDS may be converted into equity. There can be no assurance
that the Spin-Off will be consummated or that other alternatives will not be
pursued. The Board of Directors has appointed a finance committee (the "Finance
Committee") and a special committee (the "Spin-Off Special Committee") to
consider certain matters relating to the Spin-Off. In connection with the Tax
Settlement Agreement described below, the Spin-Off Special Committee was also
authorized to consider any proposal relating to certain alternative
transactions. See "Committees and Meetings."
In connection with the Spin-Off, the Spin-Off Special Committee and TDS have
negotiated an agreement (the "Tax Settlement Agreement") to settle amounts that
were anticipated to be due to the Company from TDS in the future pursuant to a
Tax Allocation Agreement between the Company and TDS. The settlement covers tax
losses incurred by the Company and used by TDS for the period commencing January
1, 1996, and ending with the date of the proposed Spin-Off, currently planned
for the third quarter of 1999. Pursuant to the Tax Settlement Agreement, TDS
made a payment to the Company of $114.5 million on March 15, 1999. This amount
is subject to adjustment under certain circumstances. The payment under the Tax
Settlement Agreement is intended to provide the Company with interim financing
while it seeks to obtain permanent financing from sources other than TDS. For
additional information regarding the Tax Allocation Agreement and Tax Settlement
Agreement, see "Arrangements and Transactions with TDS - Tax Allocation
Agreement."
TDS's announcement of its intention to pursue the Spin-Off has resulted in a
claim by Sonera Ltd., as discussed below.
3
<PAGE>
On September 8, 1998, pursuant to a purchase agreement between TDS, the
Company, Aerial Operating Company, Inc., a majority owned subsidiary of the
Company, ("AOC"), and Sonera Ltd., a limited liability company organized under
the laws of Finland ("Sonera"), Sonera purchased approximately 2.4 million
shares of common stock of AOC, representing a 19.423 percent equity interest in
AOC (subject to adjustment under certain circumstances) for an aggregate
purchase price of $200 million. Sonera has the right, subject to adjustment
under certain circumstances, to exchange each share of AOC common stock which it
owns for 6.72919 Common Shares of the Company. Upon the exchange of all of the
AOC shares, Sonera would own an 18.452 percent equity interest in the Company,
reflecting a purchase price equivalent to $12.33 per Common Share (the
"Equivalent Purchase Price"). See "Arrangements and Transactions with Sonera."
Following the announcement by TDS on December 18, 1998, that it intended to
distribute to its shareholders all of the capital stock of the Company that it
owns, and that the Company would seek additional financing from sources other
than TDS in connection therewith, Sonera contacted TDS to express certain
concerns about the announcement. Sonera has asserted, among other things, that
the TDS announcement reflects a change in circumstances that warrants the
renegotiation of certain matters related to Sonera's investment in AOC,
including an adjustment in the Equivalent Purchase Price, and has raised the
possibility of litigation in connection therewith. TDS and the Company intend to
attempt to reach a mutually acceptable resolution of the concerns raised by
Sonera. There can be no assurance that this matter will not lead to litigation
or that it will not have a material adverse effect on the Company or on the
plans relating to the Spin-Off and refinancing of the Company.
PROPOSAL 1
ELECTION OF DIRECTORS
The business of the Company is managed under the direction of the Company's
Board of Directors. On September 8, 1998, the Board of Directors amended the
Bylaws to increase the number of Directors of the Company to twelve. As a result
of such action, one additional Class II directorship and one additional Class
III directorship were added to the Board of Directors. The Board of Directors is
composed of twelve Directors and is divided into three classes. Every year, one
of the classes is elected to serve for three years. At the Annual Meeting, four
Class II Directors will be elected for terms of three years, or until their
successors are elected and qualified. In addition, pursuant to the Company's
Restated Certificate of Incorporation, one Class III Director will be elected at
the Annual Meeting, as discussed below. The person elected as a Class III
Director will serve as a Director until the 2000 Annual Meeting of Shareholders
or until his successor is elected and qualified. The nominees for election as
Class II Directors and Class III Director are identified in the tables below. In
the event any nominee, who has expressed an intention to serve if elected, fails
to stand for election, the persons named in the proxy currently intend to vote
for a substitute nominee designated by the Board of Directors.
NOMINEES
CLASS II DIRECTORS-- TERMS SCHEDULED TO EXPIRE IN 2002
The following persons, if elected at the Annual Meeting of Shareholders on
May 7, 1999, will serve as Class II Directors for a period of three years or
until their successors are qualified and elected:
NOMINEE FOR ELECTION BY HOLDERS OF COMMON SHARES
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---------------------------------------- --- ----------------------------------------- -----------------
<S> <C> <C> <C>
Matti Makkonen.......................... 46 Director of the Company and Executive 1998
Vice President of Sonera
</TABLE>
4
<PAGE>
Mr. Makkonen has been an Executive Vice President of Sonera since 1996. From
1988 to 1996, Mr. Makkonen held the position of Director of Mobile Services for
Sonera. Matti Makkonen was appointed a Director of the Company in September,
1998, by the Board of Directors pursuant to the terms of the Investment
Agreement dated September 8, 1998, among TDS, the Company, AOC and Sonera (the
"Investment Agreement") to fill a vacancy created by the resignation of Mr.
James Barr III. See "Arrangements and Transactions with Sonera."
NOMINEE FOR ELECTION BY HOLDERS OF SERIES A COMMON SHARES
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---------------------------------------- --- ----------------------------------------- -----------------
<S> <C> <C> <C>
James Barr III.......................... 59 Director of the Company and President of 1996
TDS Telecom
Walter C. D. Carlson.................... 45 Director of the Company and Partner, 1996
Sidley & Austin, Chicago, Illinois
J. Clarke Smith......................... 56 Director and Vice President-Finance and 1996
Administration, Chief Financial Officer
and Treasurer of the Company
</TABLE>
James Barr III has been President and Chief Executive Officer of TDS
Telecommunications Corporation ("TDS Telecom"), a subsidiary of TDS which
operates local telephone companies, for more than five years. He is also a
Director of TDS. In connection with the closing of the transactions with Sonera
on September 8, 1998, Mr. Barr resigned from the Board of Directors as a Class
II Director elected by the holders of Common Shares. Immediately following such
resignation, the Board of Directors increased the number of Directors on the
Board of Directors from ten to twelve Directors, resulting in two new
directorship positions. Mr. Barr was then elected as a Class II Director by TDS
as the sole holder of Series A Common Shares to fill one of the newly created
directorships. As discussed above, Mr. Matti Makkonen was appointed to the Board
of Directors to fill the vacancy created by the resignation of Mr. Barr.
Walter C.D. Carlson has been a partner of the law firm of Sidley & Austin
for more than five years. Sidley & Austin performs legal services for the
Company, TDS and their affiliates. He also serves on the Board of Directors of
TDS and United States Cellular Corporation ("United States Cellular"), a
majority owned subsidiary of TDS which operates and invests in cellular
telephone companies and properties. He is the son of LeRoy T. Carlson and the
brother of LeRoy T. Carlson, Jr.
J. Clarke Smith has been Vice President-Finance and Administration, Chief
Financial Officer, and Treasurer of the Company since November, 1995. He has
served as a Director of the Company since February 1996. Prior to that time, he
was President and Chief Executive Officer of Mortgage Edge Corporation from 1993
to 1995.
Messrs. Barr, Carlson and Smith were elected by the holder of Series A
Common Shares.
5
<PAGE>
CLASS III DIRECTOR-- TERM SCHEDULED TO EXPIRE IN 2000
The following person, if elected at the 1999 Annual Meeting of Shareholders,
will complete his term as a Class III Director until the 2000 Annual Meeting of
Shareholders or until his successor is elected and qualified:
NOMINEE FOR ELECTION BY HOLDERS OF COMMON SHARES
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------------------ --- ---------------------------------------- ---------------
<S> <C> <C> <C>
Pertti Miettunen.......................... 40 Director of the Company and Senior Vice 1999
President of Sonera Capital
</TABLE>
Mr. Miettunen has been employed by Sonera Capital, a division of Sonera, as
Senior Vice President since 1995. Prior to joining Sonera Capital, Mr. Miettunen
held the position of Counsel and Project Manager of Merger and Acquisitions at
A. Ahlstrom Corporation, a global paper, packaging and technology group for over
five years. Pertti Miettunen was appointed as a Director in February 1999 by the
Board of Directors of the Company to fill a vacancy created by the resignation
of Mr. Kaj-Erik Relander.
Mr. Relander had been appointed to the Board of Directors of the Company in
September 1998 to fill a vacancy created by the resignation of Mr. Thomas W.
Wilson, Jr. as a Class III Director elected by the holders of Common Shares.
Both Mr. Miettunen and Mr. Relander were appointed to the Board of Directors
pursuant to the terms of the Investment Agreement. See "Arrangements and
Transactions with Sonera." Since Mr. Miettunen was appointed as a Director by
the Board of Directors, pursuant to the Company's Restated Certificate of
Incorporation, he is standing for election by the holders of Common Shares at
the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE NOMINEES FOR
DIRECTOR.
OTHER DIRECTORS
CLASS III DIRECTORS-- TERMS SCHEDULED TO EXPIRE IN 2000
The following persons are current Class III Directors whose terms expire at
the 2000 Annual Meeting or until their successors are qualified and elected:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------------------ --- ---------------------------------------- ---------------
<S> <C> <C> <C>
Thomas W. Wilson, Jr...................... 67 Director of the Company and Chairman and 1996
Chief Executive Officer of Information
Resources, Inc.
LeRoy T. Carlson.......................... 82 Director of the Company and Chairman of 1996
TDS
Sandra L. Helton.......................... 49 Director of the Company and Executive 1998
Vice President-Finance and Chief
Financial Officer of TDS
</TABLE>
Thomas W. Wilson, Jr. has been Chairman and Chief Executive Officer of
Information Resources, Inc., a consumer research corporation based in Chicago,
since 1995. Prior to his retirement in 1990, he
6
<PAGE>
was a Director of McKinsey & Company, where he spent 23 years. He also serves on
the Board of Directors of Information Resources, Inc. and Productivity
Solutions, Inc.
In connection with the closing of the transactions with Sonera in September
1998, Mr. Wilson resigned from the Board of Directors as a Class III Director
elected by the holders of Common Shares. Immediately following such resignation,
the Board of Directors increased the number of Directors on the Board of
Directors from ten to twelve Directors, resulting in two new directorship
positions. Mr. Wilson was then immediately reelected as a Class III Director by
TDS as the sole holder of Series A Common Shares to fill one of the newly
created directorships.
LeRoy T. Carlson has been Chairman of TDS for more than five years. He is
also a Director of TDS and United States Cellular. He is the father of LeRoy T.
Carlson, Jr. and Walter C.D. Carlson.
Sandra L. Helton was appointed Executive Vice President-Finance and Chief
Financial Officer of TDS in August, 1998. Prior to joining TDS, Ms. Helton was
Vice President and Corporate Controller of Compaq Computer Corporation between
1997 and 1998. Prior to that time, Ms. Helton was employed by Corning
Incorporated for more than five years. At Corning Incorporated, Ms. Helton was
Senior Vice President and Treasurer between 1994 and 1997, and was Vice
President and Treasurer between 1991 and 1994. Ms. Helton was elected as a Class
III Director of the Company in October 1998 by TDS as the sole holder of Series
A Common Shares to fill a vacancy created by the resignation from the Board of
Directors of Mr. Murray L. Swanson. Ms. Helton is also a member of the Board of
Directors of TDS, United States Cellular and TDS Telecom.
Messrs. Wilson and Carlson and Ms. Helton were elected by the holder of
Series A Common Shares.
CLASS I DIRECTORS-- TERMS SCHEDULED TO EXPIRE IN 2001
The following persons are current Class I Directors whose terms will expire
at the 2001 Annual Meeting or until their successors are qualified and elected:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------------------ --- ---------------------------------------- ---------------
<S> <C> <C> <C>
LeRoy T. Carlson, Jr...................... 52 Chairman and Director of the Company and 1995
President and Chief Executive Officer
of TDS
Rudolph E. Hornacek....................... 71 Director of the Company and Vice 1991
President-Engineering of TDS
Donald W. Warkentin....................... 43 Director and President and Chief 1995
Executive Officer of the Company
John D. Foster............................ 55 Director of the Company and President of 1996
Vedra International Associates
</TABLE>
LeRoy T. Carlson, Jr., Chairman of the Company, has been President and Chief
Executive Officer of TDS for more than five years. Mr. Carlson also serves on
the Board of Directors of TDS. He is also Chairman and a Director of United
States Cellular and TDS Telecom. He is the son of LeRoy T. Carlson and the
brother of Walter C.D. Carlson.
Rudolph E. Hornacek has been Vice President-Engineering of TDS for more than
five years. He is a Director of TDS and TDS Telecom.
Donald W. Warkentin has been President and Chief Executive Officer of the
Company since June, 1995. He has served as a Director of the Company since
August, 1995. From 1994 to 1995, Mr. Warkentin
7
<PAGE>
was Vice President of Multimedia Marketing for US West Communications. From 1990
to 1994, he was head of Marketing for Mercury One-2-One in the United Kingdom.
John D. Foster was appointed a Director of the Company in 1996. He is
President of Vedra International Associates, an international consulting firm
based in Florida. From 1968 to 1996, Mr. Foster held a number of senior
management positions, both domestic and international, with AT&T Corp.
COMMITTEES AND MEETINGS
The Board of Directors of the Company held seven meetings during 1998. All
of the Directors attended at least 75 percent of the meetings of the Board of
Directors held in 1998.
The Board of Directors does not presently have a formal Director nominating
committee.
The Audit Committee of the Board of Directors, among other things,
determines audit policies, reviews external and internal audit reports and
reviews recommendations made by the Company's internal auditing staff and
independent public accountants. The Audit Committee is composed of Messrs.
Walter C.D. Carlson (Chairman), John D. Foster, Thomas W. Wilson, Jr. and Pertti
Miettunen. Mr. Miettunen was appointed to the Audit Committee pursuant to the
terms of the Investment Agreement. See "Arrangements and Transactions with
Sonera." The Audit Committee held four meetings in 1998. All of the persons who
were members of the Audit Committee during all of 1998 attended at least 75
percent of the meetings held in 1998.
The Stock Option Compensation Committee of the Board of Directors consists
of Thomas W. Wilson, Jr. (Chairman) and John D. Foster. The principal functions
of the Stock Option Compensation Committee are to consider and approve long-term
compensation for Executive Officers and to consider and recommend new long-term
compensation plans or changes to long-term compensation plans to the Board of
Directors. All meetings and other actions of the Stock Option Compensation
Committee in 1998 were attended or taken by both members.
In 1997, the Board of Directors established a special committee consisting
of John D. Foster and Thomas W. Wilson, Jr. (the "Tracking Stock Special
Committee") to consider the Offer by TDS to acquire all of the Common Shares of
the Company which it did not own in exchange for TDS tracking stock which would
have tracked the performance of the Company. See "Recent Developments." On
December 18, 1998, TDS advised the Company that it had withdrawn the Offer and,
consequently, the Company terminated the Tracking Stock Special Committee. The
Tracking Stock Special Committee held sixteen meetings in 1998 which were
attended by both members.
In February 1999, the Board of Directors appointed Messrs. LeRoy T. Carlson,
Jr., J. Clarke Smith, Rudolph E. Hornacek, Pertti Miettunen and Ms. Sandra L.
Helton to the Finance Committee of the Board of Directors to consider financing
alternatives for the Company in connection with the Spin-Off.
In addition, in February 1999, the Board of Directors appointed Messrs. John
D. Foster and Thomas W. Wilson, Jr., Independent Directors of the Company, to
the Spin-Off Special Committee to consider certain matters relating to the
financing alternatives of the Company and other arrangements in connection with
the Spin-Off. In connection with the Tax Settlement Agreement, the Spin-Off
Special Committee was also authorized to consider any proposal relating to
certain alternative transactions. The Spin-Off Special Committee has retained
independent financial advisors and independent legal advisors. See "Recent
Developments" and "Arrangements and Transactions with TDS -- Tax Allocation
Agreement."
8
<PAGE>
EXECUTIVE OFFICERS
Set forth below is a Table identifying other Executive Officers of the
Company who are not identified in the Tables regarding the election of Directors
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
David B. Lowry................................ 52 Chief Technical Officer
Carol J. Ogren................................ 51 Vice President-Human Resources
Gary F. Ballard............................... 53 Vice President-Sales
B. Scott Dailey............................... 37 Vice President- Controller and Assistant Secretary
Michael G. Hron............................... 54 Secretary
</TABLE>
DAVID B. LOWRY. Mr. Lowry became Chief Technical Officer for the Company on
May 26, 1998. From April 10, 1996 to May 26, 1998, Mr. Lowry was Vice
President-Engineering and Operations for the Company. Mr. Lowry joined the
Company from Go Communications Corporation where he was Senior Vice President
and Chief Technical Officer from 1994 to 1996. Mr. Lowry's prior position was
Executive Director, Operations & Engineering-US WEST International from 1992 to
1994.
CAROL J. OGREN. Ms. Ogren has been Vice President-Human Resources for the
Company since March 1, 1996. Prior to March 1, 1996, she served as the Director,
Human Resources of the Company, beginning August 8, 1995. Before joining the
Company, she held a series of key human resources positions with Ameritech from
1982 to 1994.
GARY F. BALLARD. Mr. Ballard has been Vice President-Sales for the Company
since March 1, 1999. From January 8, 1999 to March 1, 1999, Mr. Ballard was
Acting Vice President-Sales. From April 1, 1998 to January 8, 1999, Mr. Ballard
was Regional Vice President of the Company's Minneapolis and Kansas City markets
and, from November 11, 1996 to April 1, 1998, he held the position of Market
Director in the Company's Kansas City market. Prior to joining the Company, Mr.
Ballard held the position of Area Vice President/General Manager for NEXTEL
(formerly OneComm) from 1994 to 1996.
B. SCOTT DAILEY. Mr. Dailey has been the Vice President-Controller of the
Company since September 8, 1998. From December 1995 to September 8, 1998, Mr.
Dailey was the Controller of the Company. He has been Assistant Secretary since
October 21, 1996, and was appointed the Principal Accounting Officer of the
Company in 1996. Mr. Dailey joined the Company from Mortgage Edge Corporation
where he was the Chief Financial Officer from 1994 to 1995.
MICHAEL G. HRON. Mr. Hron has been the Secretary of the Company since 1994.
He has been a partner at the law firm of Sidley & Austin for more than five
years.
All of the Company's Executive Officers devote all of their professional
time to the affairs of the Company, with the exception of LeRoy T. Carlson, Jr.
and Michael G. Hron. Mr. Carlson, who is employed by TDS as its President and
Chief Executive Officer, devotes a portion of his time in that capacity to the
affairs of the Company and Mr. Hron is a practicing attorney.
PROPOSAL 2
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors anticipates continuing the services of Arthur
Andersen LLP as independent public accountants for the 1999 fiscal year.
Representatives of Arthur Andersen LLP, who served as independent public
accountants for the last fiscal year, are expected to be present at the Annual
Meeting
9
<PAGE>
of Shareholders and will have the opportunity to make a statement and respond to
questions at the Annual Meeting.
Shareholder ratification of the selection of Arthur Andersen LLP as the
Company's independent public accountants is not required by the Bylaws or
otherwise. As a matter of good corporate practice, however, the Board of
Directors has elected to seek such ratification by the affirmative vote of the
holders of a majority of the votes cast by shares entitled to vote with respect
to such matter at the Annual Meeting. Should the shareholders fail to ratify the
selection of Arthur Andersen LLP as independent public accountants, the Board of
Directors will consider whether to retain such firm for the year ending December
31, 1999, subject to the obligations of the Company under the Intercompany
Agreement discussed below to engage the firm of independent public accountants
selected by TDS or selected by the Company's Audit Committee and acceptable to
TDS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE
CURRENT FISCAL YEAR.
PROPOSAL 3
RESTRICTED STOCK UNIT PLAN
GENERAL
The Board of Directors has approved and is submitting for shareholder
approval the Aerial Communications, Inc. Retention Restricted Stock Unit Plan
(the "Plan"). The purposes of the Plan are (i) to further align the interests of
Aerial Communications, Inc. (the "Company") and the recipients of awards under
the Plan through awards of stock units, the value of which is related to the
appreciation in the value of Common Shares of the Company, (ii) to advance the
interests of the Company by retaining key employees and (iii) to motivate such
persons to act in the long-term best interests of the shareholders of the
Company.
DESCRIPTION OF THE PLAN
ADMINISTRATION. The Plan will be administered by the Stock Option
Compensation Committee of the Board of Directors (the "Committee"). Each member
of the Committee is currently a "Non-Employee Director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934. The Committee will have
the authority to establish rules and regulations for administering the Plan and
to decide questions of interpretation or application of any provision of the
Plan. A total of 276,000 stock unit awards have been awarded by the Committee as
of February 1, 1999, to certain executive employees of the Company or AOC,
holding a position of Vice President or a more senior position pursuant to the
terms specified by the Committee. See table of "New Plan Benefits" below. The
Committee or the President of the Company will have power to grant up to 180,000
additional stock unit awards to other eligible key employees; provided, however,
that the President of the Company may not grant stock unit awards to any
employee who is an officer of the Company or AOC or any other person subject to
the Securities Exchange Act of 1934, or who is employed by the Company or AOC in
any other position which is senior to that of a Director. Any grant of a stock
unit award by the President pursuant to this Section will be subject to the
review and concurrence of the Chairman of the Board of Directors. All stock unit
awards will be evidenced by a written agreement.
10
<PAGE>
STOCK UNITS. The Plan provides for the grant of stock unit awards. Each
stock unit is a right to receive one share of Common Stock or the fair market
value of one Common Share in cash as of the date the stock unit vests. Stock
units will be nontransferable and subject to forfeiture if the participant does
not remain employed by the Company or AOC until the applicable vesting date;
provided, however, that a participant's stock units will vest upon termination
of employment by reason of disability or death. Forty percent of the stock units
awarded in an initial 1999 award by the Committee will vest on February 1, 2000
and the remaining 60 percent will vest on February 1, 2001. In addition, if a
participant's employment is transferred to an affiliate of the Company as
defined in the Plan (an "Affiliate") after May 1, 1999 but before May 1, 2000,
and such participant remains continuously employed by an Affiliate or the
Company until February 1, 2000, then the participant will receive payment of the
portion of his stock unit award that vests on or before February 1, 2000, and
will forfeit any remaining stock units subject to the award. If a Participant's
employment is transferred to an Affiliate on or after May 1, 2000, and such
participant remains continuously employed by an Affiliate or the Company until
February 1, 2001, then such participant will receive payment of that portion of
his stock unit award that vests as of February 1, 2001.
AVAILABLE SHARES. Under the Plan, 456,000 Common Shares will initially be
available under the Plan, subject to adjustment in the event of a stock split,
stock dividend, recapitalization, reorganization, merger, spin-off or other
similar change or event. Such Common Shares will be reduced by the sum of the
aggregate number of Common Shares then subject to outstanding stock unit awards
under the Plan. To the extent that the Company elects to pay a participant the
value of his vested stock units in cash instead of stock or to the extent a
stock unit award is canceled or forfeited, then the Common Shares subject to the
vested stock units paid in cash or the canceled or forfeited portion of a stock
unit award will again be available under the Plan. Common Shares to be delivered
under the Plan will be made available from authorized and unissued Common
Shares, or authorized and issued Common Shares reacquired and held as treasury
shares or otherwise or a combination thereof.
CHANGE OF CONTROL. All unvested stock units will become fully vested upon a
Change in Control, as defined in the Plan. A Change in Control is defined in the
Plan to include:
1. The acquisition by any person (other than Exempt Acquisitions) of 25
percent or more of the combined voting power of the Company's or TDS's
outstanding securities entitled to vote in matters other than the election of
directors.
2. A change in the constituency of a majority of the members of the Board
of Directors of the Company or TDS, unless a majority of the members of the
resulting Board of Directors of the Company or TDS, as the case may be, have
been approved by a majority of the members of the Board of Directors of the
Company or TDS, as the case may be, prior to such change.
3. The approval of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company or TDS by
its shareholders, unless each of the following three conditions are satisfied:
a) the shareholders of the Company or TDS, as the case may be, receive more
than 51 percent of the combined voting power of the surviving company,
b) no person (other than an Exempted Person, the surviving corporation to
such transaction or a person who prior to such transaction beneficially
owned 25 percent or more of the combined voting power of the Company's
outstanding securities entitled to vote in matters other than the
election of directors) will beneficially own 25 percent or more of the
combined voting power of the surviving company's outstanding securities
entitled to vote in matters other than the election of directors, and
c) a majority of the directors of the surviving corporation will be
individuals who were directors of the Company or TDS, as the case may be,
prior to such transaction.
11
<PAGE>
4. The approval of a complete liquidation or dissolution of the Company or
TDS by its shareholders.
For purposes hereof, Exempt Acquisitions generally means certain
acquisitions from the Company or an Affiliate thereof or acquisitions by (i) the
Company or any Affiliate thereof, (ii) an employee benefit plan sponsored by the
Company or such an Affiliate, (iii) any corporation pursuant to a transaction
which complies with clauses a), b), and c) of paragraph 3., above, or (iv) an
Exempted Person. Exempted Person means LeRoy T. Carlson, his spouse, children
and grandchildren, the estate of any such person, any trust including only such
persons as beneficiaries, and the voting trust which currently controls TDS.
FORFEITURE OF UNVESTED STOCK UNITS UPON COMPETITION WITH COMPANY OR
AFFILIATE OR MISAPPROPRIATION OF CONFIDENTIAL INFORMATION. Any unvested stock
unit granted to a participant under the plan will be forfeited as of any date on
which the participant (i) enters into competition with the Company or an
Affiliate, or (ii) misappropriates confidential information of the Company or an
Affiliate, as determined by the Committee or the Board in its sole discretion.
For purposes of the preceding sentence, a participant will be treated as
entering into competition with the Company or an Affiliate if such participant
(i) directly or indirectly, individually or in conjunction with any person, firm
or corporation, has contact with any customer of the Company or an Affiliate or
any prospective customer which has been contacted or solicited by or on behalf
of the Company or an Affiliate for the purpose of soliciting or selling to such
customer or prospective customer any product or service, except to the extent
such contact is made on behalf of the Company or an Affiliate, or (ii) otherwise
competes with the Company or an Affiliate in any manner or otherwise engages in
the business of the Company or an Affiliate.
A participant will be treated as misappropriating confidential information
of the Company or an Affiliate if such participant (i) uses confidential
information (as described below) for the benefit of anyone other than the
Company or such Affiliate, as the case may be, or discloses the confidential
information to anyone not authorized by the Company or such Affiliate, as the
case may be, to receive such information, (ii) upon termination of employment,
makes any summaries of, takes any notes with respect to, or memorizes any
information or takes any confidential information or reproductions thereof from
the facilities of the Company or an Affiliate, or (iii) upon termination of
employment or upon the request of the Company or an Affiliate, fails to return
all confidential information then in the participant's possession. "Confidential
information" will mean any confidential and proprietary drawings, reports, sales
and training manuals, customer lists, computer programs, and other material
embodying trade secrets or confidential technical, business, personnel or
financial information of the Company or an Affiliate.
EFFECTIVE DATE, TERMINATION AND AMENDMENT. If approved by the shareholders,
the Plan will become effective as of February 1, 1999 and will terminate
February 2, 2001, unless terminated earlier by the Board. The Board may amend
the Plan at any time, subject to any requirement of shareholder approval
required by applicable law.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain U.S. federal income tax
consequences generally arising with respect to awards under the Plan.
A participant will not recognize taxable income at the time a stock unit
award is granted and the Company will not be entitled to a tax deduction at such
time. When a stock unit becomes vested under the terms of the applicable award,
the participant will recognize compensation taxable as ordinary income (and
subject to income tax withholding in respect of an employee) in an amount equal
to the fair market value of any shares delivered and the amount of cash paid by
the Company. This amount is deductible by the participant's employer as
compensation expense, except to the extent the deduction limits of section
162(m) of the Internal Revenue Code of 1986, as amended, apply.
12
<PAGE>
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
NAME UNITS GRANTED AWARD VALUE(1)
- --------------------------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Donald W. Warkentin.............................................................. 45,000 $ 298,125
J. Clarke Smith.................................................................. 27,000 178,875
David B. Lowry................................................................... 27,000 178,875
Gary F. Ballard.................................................................. 27,000 178,875
Carol J. Ogren................................................................... 15,000 99,375
LeRoy T. Carlson, Jr............................................................. -- --
Other Executives................................................................. 15,000 99,375
-------------- ---------------
Executive Group.................................................................. 156,000 1,033,500
Non-Executive Director Group..................................................... -- --
Non-Executive Employee Group(2).................................................. 300,000 1,987,500
-------------- ---------------
TOTAL 456,000 $ 3,021,000
-------------- ---------------
-------------- ---------------
</TABLE>
- ------------------------
(1) Calculated using the closing price of Aerial Common Shares on February 1,
1999, of $6.625 per share.
(2) Includes 120,000 stock unit awards approved by the Committee as of February
1, 1999, and 180,000 additional stock unit awards available to be approved
by the Committee or the President of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE RETENTION
RESTRICTED STOCK UNIT PLAN.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following Table sets forth compensation information for the President
and Chief Executive Officer of the Company and the next four most highly
compensated Executive Officers of the Company for services rendered during the
years ended December 31, 1998, 1997, and 1996.
13
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL ----------------------------
COMPENSATION(2) SECURITIES UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION(1) YEAR SALARY(3) BONUS(4) OPTIONS/SARS(5) COMPENSATION(6)
- ----------------------------------------------- ---- --------------- ---------- ---------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Donald W. Warkentin............................ 1998 $300,586 $ 101,165 $30,850 $27,245
President and Chief Executive Officer 1997 283,011 109,313 255,112 24,817
1996 238,996 264,372(7) -- 12,682
J. Clarke Smith................................ 1998 $209,570 $ 50,134 $13,285 $19,892
Vice President - Finance and Administration 1997 186,674 57,174 69,477 16,987
1996 176,875 56,493 54,735 1,679
David B. Lowry................................. 1998 $206,464 $ 53,764 $12,362 $18,835
Chief Technical Officer 1997 178,518 52,445 46,358 12,491
1996 107,462 35,806 33,250 45,237
Carol J. Ogren................................. 1998 $146,118 $ 32,829 $8,314 $14,401
Vice President - Human Resources 1997 152,725 59,713 30,950 14,357
1996 125,833 38,105 21,000 2,230
LeRoy T. Carlson, Jr........................... 1998 $150,020 $ - N/A N/A
Chairman - See Footnote (1) 1997 113,990 28,694 N/A N/A
1996 94,718 16,317 N/A N/A
</TABLE>
- ------------------------
(1) Mr. LeRoy T. Carlson, Jr., Chairman of the Company, receives no compensation
directly from the Company. Mr. Carlson is compensated by TDS in connection
with his services for TDS and affiliated companies, including the Company. A
portion of Mr. Carlson's salary and bonus paid by TDS is charged to the
Company by TDS pursuant to the Intercompany Agreement discussed below under
"Intercompany Agreement". Accordingly, pursuant to the requirements of the
Securities and Exchange Commission, such amounts charged to the Company by
TDS are reported in the above table in addition to the information presented
for the other named Executive Officers. The amounts reported above represent
the amounts of salary and bonus that have been charged to the Company by
TDS. The amount of Mr. Carslon's 1998 bonus has not yet been determined. Mr.
Carlson does not receive any long-term compensation awards or any other
compensation directly from the Company. Mr. Carlson receives long-term and
other compensation from TDS, but this is not charged to the Company.
(2) Does not include the discount amount of any employee stock purchase plan
since such plans generally are available to all eligible salaried employees.
Does not include the value of any perquisites and other personal benefits,
securities or property, since the aggregate amount of such compensation is
less than the lesser of either $50,000 or 10 percent of the total of annual
salary and bonus reported for the named Executive Officers.
(3) Represents the dollar value of base salary (cash and non-cash) earned by the
named Executive Officer during the fiscal year identified.
(4) Represents the dollar value of bonus (cash and non-cash) earned by the named
Executive Officer during the fiscal year identified.
(5) Represents the number of shares of common stock of the Company subject to
stock options awarded during the fiscal year identified. No stock
appreciation rights ("SARs") were awarded, either on a stand-alone basis or
in tandem with options, during any of the identified fiscal years.
14
<PAGE>
(6) Includes contributions for the benefit of the named Executive Officer under
the TDS Tax-Deferred Savings Plan ("TDSP"), the Wireless Companies' Pension
Plan ("Pension Plan") and the TDS Supplemental Executive Retirement Plan
("SERP"), and the taxable dollar value of any insurance premiums paid during
the covered fiscal year with respect to term life insurance for the benefit
of the named Executive Officer ("Life Insurance") as indicated below for
1998.
<TABLE>
<CAPTION>
Donald W. J. Clarke David B. Carol J.
Warkentin Smith Lowry Ogren
----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
TDSP.................................. $ 4,800 $ 4,800 $ 4,800 $ 4,800
Pension Plan.......................... 7,548 7,548 7,548 7,548
SERP.................................. 14,400 6,116 5,607 1,508
Life Insurance........................ 497 1,428 880 545
-------- ------------- ------------- -------------
Total................................. $ 27,245 $ 19,892 $ 18,835 $ 14,401
-------- ------------- ------------- -------------
-------- ------------- ------------- -------------
</TABLE>
(7) Includes a $150,000 signing bonus on his one-year anniversary date of his
employment by the Company.
GENERAL INFORMATION REGARDING OPTIONS AND SARS
The following Tables show, as to the Executive Officers who are named in the
Summary Compensation Table, information regarding Options and/or SARs.
INDIVIDUAL AND AGGREGATED OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION
NUMBER OF % OF TOTAL FOR OPTION
SECURITIES OPTIONS/SARS TERMS(5)
UNDERLYING GRANTED TO EXERCISE MARKET EXPIRATION ------------------
NAME(1) OPTIONS/SARS(2) EMPLOYEES(3) PRICE PRICE(4) DATE 5% 10%
- -------------------------------------------- --------------- ------------ -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald W. Warkentin
1997 Performance Options(6) 30,850 4.5% $ 7.36 $ 7.19 12/15/08 $144,687 $381,615
J. Clarke Smith
1997 Performance Options(6) 13,285 2.0% $ 7.36 $ 7.19 12/15/08 $ 62,307 $164,335
David B. Lowry
1997 Performance Options(6) 12,362 1.8% $ 7.36 $ 7.19 12/15/08 $ 57,978 $152,918
Carol J. Ogren
1997 Performance Options(6) 8,314 1.2% $ 7.36 $ 7.19 12/15/08 $ 38,993 $102,884
</TABLE>
- --------------------------
(1) Mr. LeRoy T. Carlson, Jr. does not receive Options/SARs from the Company.
Mr. Carlson receives long-term compensation from TDS, but this is not
charged to the Company by TDS.
(2) Represents the number of Company shares underlying Options/SARs which were
awarded for the named Executive Officer during the fiscal year.
(3) Represents the percent of total Options/SARs awarded in 1998 to each
participant.
(4) Represents the average of the high and low sales price of the shares as of
the award date.
(5) Represents the potential realizable value of each grant of Options, assuming
that the market price of the shares appreciates in value from the award date
to the end of the Option term at the indicated annualized rates.
(6) The 1997 Performance Options became exercisable on December 15, 1998, and
are exercisable until December 15, 2008, at an exercise price of $7.36 per
share.
15
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND
AGGREGATED DECEMBER 31, 1998 OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS(2) OPTIONS/SARS(3)
---------------------------- ----------------------------
NAME(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Donald W. Warkentin
1997 Performance Options(4)........................ 30,850 -- -- --
1996 Performance Options(5)........................ 43,729 -- $ 35,420 --
1996 Supplemental Options(6)....................... 62,700 41,800 -- --
1996 Automatic Options(7).......................... 64,129 42,754 -- --
------------ -------------- ------------ --------------
TOTAL.............................................. 201,408 84,554 $ 35,420 --
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
J. Clarke Smith
1997 Performance Options(4)........................ 13,285 -- -- --
1996 Performance Options(5)........................ 15,977 -- $ 12,941 --
1996 Supplemental Options(6)....................... 32,100 21,400 -- --
1996 Automatic Options(7).......................... 32,841 21,894 -- --
------------ -------------- ------------ --------------
TOTAL.............................................. 94,203 43,294 $ 12,941 --
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
David B. Lowry
1997 Performance Options(4)........................ 12,362 -- -- --
1996 Performance Options(5)........................ 13,958 -- $ 11,306 --
1996 Supplemental Options(6)....................... 19,440 12,960 -- --
1996 Automatic Options(7).......................... 19,950 13,300 -- --
------------ -------------- ------------ --------------
TOTAL.............................................. 65,710 26,260 $ 11,306 --
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
Carol J. Ogren
1997 Performance Options(4)........................ 8,314 -- -- --
1996 Performance Options(5)........................ 10,250 -- $ 8,303 --
1996 Supplemental Options(6)....................... 12,420 8,280 -- --
1996 Automatic Options(7).......................... 12,600 8,400 -- --
------------ -------------- ------------ --------------
TOTAL.............................................. 43,584 16,680 $ 8,303 --
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
</TABLE>
- ------------------------
(1) Mr. LeRoy T. Carlson, Jr., does not receive Options or SARs from the
Company. Mr. Carlson receives long-term compensation from TDS, but this is
not charged to the Company by TDS.
(2) Represents number of shares subject to free-standing Options and/or
free-standing SARs, as indicated as of December 31, 1998.
(3) Represents the aggregate dollar value of the in-the-money, unexercised
Options and/or SARs held at December 31, 1998, based on the difference
between the exercised price and $5.75, the average of the high and low sales
price on December 31, 1998.
(4) The 1997 Performance Options became exercisable on December 15, 1998, and
are exercisable until December 15, 2008, at the exercise price of $7.36 per
share.
(5) The 1996 Performance Options became exercisable on December 15, 1997, and
are exercisable until December 15, 2007, at the exercise price of $4.94 per
share.
16
<PAGE>
(6) The 1996 Supplemental Options became exercisable with respect to 20 percent
of such options on January 23, 1997, December 15, 1997, and December 15,
1998, and will become exercisable with respect to 20 percent of such options
on December 15 in 1999 and 2000, at the exercise price of $9.74 per share
and expire on April 18, 2006.
(7) The 1996 Automatic Options became exercisable with respect to 20 percent of
such options on December 15, 1996, December 15, 1997, and December 15, 1998,
and will become exercisable with respect to 20 percent of such options on
December 15 in 1999 and 2000, at the exercise price of $17.00 per share and
expire on April 18, 2006.
None of the named Executive Officers exercised options in 1998, 1997 or
1996.
SUPPLEMENTAL BENEFIT AGREEMENT WITH DONALD W. WARKENTIN
In 1996, the Company entered into a nonqualified supplemental benefit
agreement with Donald W. Warkentin which requires the Company to pay a
supplemental retirement benefit to Mr. Warkentin. The agreement was entered into
when Mr. Warkentin left employment with TDS and took employment with the Company
at the completion of the initial public offering of the Company's Common Shares
in 1996 and, as a result, he was no longer eligible to participate in the TDS
Pension Plan. Under the supplemental benefit agreement, the Company is obligated
to pay Mr. Warkentin an amount equal to the difference between the retirement
benefit he will receive from the TDS Wireless Pension Plan and that which he
would have received had he continued to work for TDS, less any amounts which he
is entitled to receive under any other qualified defined benefit or money
purchase pension plan (such as the Wireless Pension Plan). The Company will pay
any such benefit at the same time as Mr. Warkentin receives payments from the
TDS Wireless Pension Plan. The actual benefits payable to Mr. Warkentin upon
retirement will be based upon the facts that exist at the time and will be
determined actuarially. Since the nature of this agreement is a defined benefit
arrangement, no amounts related thereto are included above in the Summary
Compensation Table.
COMPENSATION OF DIRECTORS
Prior to October 21, 1996, members of the Board of Directors of the Company
who were not employees of the Company or its subsidiaries or affiliates received
$1,000 for attendance at each meeting of the Board of Directors and $500 for
attendance at each Audit Committee meeting and an annual Director's fee
consisting of $10,000 in cash and $10,000 in Common Shares of the Company per
year. Directors who were employees of the Company or a subsidiary or affiliate
thereof did not receive any additional compensation for services rendered as
members of the Board of Directors. All Directors were reimbursed for
out-of-pocket travel expenses incurred in connection with attendance at meetings
of the Board of Directors and meetings of committees thereof.
On October 21, 1996, the Board of Directors of the Company approved a
compensation plan (the "Non-Employee Director Plan") for non-employee members of
the Board of Directors ("Non-Employee Directors"). A Non-Employee Director is a
member of the Board of Directors who is not an employee of the Company, TDS,
United States Cellular, or TDS Telecom or their subsidiaries or other corporate
affiliates. The purpose of the Non-Employee Director Plan is to provide
reasonable compensation to Non-Employee Directors in connection with their
services to the Company in order to induce qualified persons to become and serve
as Non-Employee Directors of the Company's Board of Directors.
The Non-Employee Director Plan provides that, effective for the 12 month
period ending at the time of the Company's Annual Meeting, each Non-Employee
Director will receive an annual Director's fee of $20,000 and that each
Non-Employee Director will continue to receive a fee of $1,000, plus
reimbursement of reasonable out-of-pocket travel expenses, for attendance at
each regularly scheduled or special meeting of the Board of Directors. The
Non-Employee Director Plan also provides that each Non-Employee Director will
receive a fee of $500, plus reimbursement of reasonable out-of-pocket travel
17
<PAGE>
expenses, for attendance at each meeting of the Audit Committee, Stock Option
Compensation Committee, or other committee established by resolution of the
Board of Directors.
The Non-Employee Director Plan further provides that 50 percent of the
annual Director's fee shall be paid immediately prior to the Company's Annual
Meeting of Shareholders by the delivery of Common Shares of the Company having a
fair market value, as herein defined, as of the date of payment equal to such
percentage of the annual Director's fee.
Under the Non-Employee Director Plan, for the purposes of determining the
number of Common Shares deliverable pursuant to the preceding paragraph, the
fair market value of a Common Share of the Company will be the average closing
price of Common Shares of the Company as reported on the NASDAQ National Market
for the twenty trading days ending on the third trading day before the Annual
Meeting of Shareholders. The Board of Directors has reserved 20,000 Common
Shares of the Company for issuance pursuant to the Non-Employee Director Plan.
The Board of Directors also approved a fee of $2,000 per day for service on
the Spin-Off Special Committee, plus reimbursement of out-of-pocket travel
expenses.
EXECUTIVE OFFICER COMPENSATION REPORT
This report is submitted by LeRoy T. Carlson, Jr., Chairman of the Company,
who in effect functions as the compensation committee of the Board of Directors,
except with respect to long-term compensation, and by the Stock Option
Compensation Committee, which approves long-term compensation for the Executive
Officers of the Company.
The Chairman, as President and Chief Executive Officer of TDS, is paid by
TDS and receives no compensation directly from the Company. As the President and
Chief Executive Officer of TDS, the Chairman of the Company represents the
controlling shareholder of the Company.
The Stock Option Compensation Committee of the Company consists of Thomas W.
Wilson, Jr. (Chairman) and John D. Foster. The Stock Option Compensation
Committee approves long-term compensation for Executive Officers of the Company.
The Company's Stock Option Compensation Committee is composed of members of the
Board of Directors who are not officers or employees of TDS or any of its
subsidiaries or affiliates, including the Company.
The Company's compensation policy for Executive Officers is intended to
provide incentives for the achievement of corporate and individual performance
goals and to provide compensation consistent with the operational and financial
performance of the Company. The Company's policy is based on the belief that the
incentive compensation performance goals for Executive Officers should be based
on factors over which such Executive Officers have significant control and which
are important to the Company's long-term success. It also is believed that
compensation paid should be appropriate in relation to the financial performance
of the Company and should be sufficient to enable the Company to attract and
retain individuals possessing the talents required for the Company's long-term
successful performance.
Executive Officers' compensation consists of both annual and long-term
compensation. Annual compensation consists of a base salary and bonus. The
Company evaluates the base salary and bonus of each Executive Officer on an
annual basis. Annual compensation decisions are based partly on annual
performance measures, as described below. Long-term compensation is intended to
compensate Executive Officers primarily for their contributions to long-term
increases in shareholder value. Long-term compensation generally is provided
through the grant of Options.
The process of determining base salary begins with obtaining appropriate
comparative data for each Executive Officer's position. Sources for comparative
data include surveys of General Industry, such as the Cooper & Lybrand
Compensation Study of 55 companies from the following industries:
18
<PAGE>
Business Services, Utilities, Non-durable Manufacturing, and Durable
Manufacturing ranging up to one billion dollars in revenue. Also included are
telecommunications industry figures taken from the Wyatt Compensation Study of
twelve hundred companies that range up to one billion dollars in revenue.
Using this data, the Company's President and Chief Executive Officer
provides a recommendation of the appropriate base salary amount for each
Executive Officer, excluding himself. The Chairman uses these surveys, as well
as the recommendation of the Company's President and Chief Executive Officer and
the counsel of the Vice President Human Resources of TDS, to make a personal
determination of the appropriate salary level for each Executive Officer. The
base salary level of the Company's President and Chief Executive Officer is
based on data from the above sources combined with the counsel of the Vice
President Human Resources of TDS and the personal evaluation of the Chairman.
Targeted compensation for the Executive Officers (base salary plus bonus)
approximates the 50th to 75th percentile of the surveyed positions.
Annually, the nature and extent of each Executive Officer's personal
accomplishments and contributions for the year are evaluated by the Company's
President and Chief Executive Officer. This evaluation is based on the
attainment of specific, mutually agreed upon individual objectives, as well as
the extent to which each Executive Officer contributed to the overall results of
the Company. These facts and circumstances are taken into consideration by the
Company's President and Chief Executive Officer and by the Chairman in their
Executive Officers' compensation decisions. Ultimately, it is the judgment of
the Chairman that determines an Executive Officer's base salary.
In addition, the Executive Officers participate in a bonus program. For
1998, the program was built on the Company attaining specific business
milestones as well as achieving specific critical financial, operational and
customer rating measurements and individual performance results. The program
measured and paid bonuses based on specific criteria established for the Company
and individual performances for each half of the 1998 calendar year. During the
first half of the year, the program weighted Company results at 30 percent and
individual results at 15 percent for a total 45 percent of the total 1998
program. The second half of the year, the program weighted Company results at 40
percent and individual results at 15 percent of for the remaining 55 percent of
the 1998 program. At target performance, the President and Chief Executive
Officer would be compensated at 45 percent of base salary, certain Vice
Presidents would be compensated at 40 percent of base salary, the Vice
President-Finance and Administration and Chief Technical Officer would be
compensated at 35 percent and all other Officers at 30 percent of base salary.
Overall 1998 Company results were evaluated at 79 percent of target during the
first half year and 40 percent of target during the second half of year. Named
Executive Officers' performance results ranged from 87 percent to 122 percent of
target during the first half of the year and 116 percent to 140 percent of
target during the second half.
The salary and bonus for the President and Chief Executive Officer is
established in a manner similar to that described for the Executive Officers. In
addition to survey data, the Chairman also considers compensation paid to chief
executive officers of comparable companies, including those that are divisions
or subsidiaries of parent companies. The base salary of the President and Chief
Executive Officer increased by approximately 10 percent between 1997 and 1998.
The President and Chief Executive Officer's 1998 bonus, under the 1998 Incentive
Pay Plan, was $101,165. The Chairman has approved a base salary of $333,000 and
target incentive bonus of $149,850 for the President and Chief Executive Officer
for 1999.
SECTION 162(M) OF THE CODE. Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") generally limits to one million dollars the amount
that a publicly held corporation is allowed each year to deduct for the
compensation paid to each of the corporation's chief executive officer and the
corporation's four most highly compensated officers other than the chief
executive officer, subject to certain exceptions. One such exception is
"qualified performance-based" compensation. Compensation paid under stock option
plans is "qualified performance-based" compensation if all of the following
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<PAGE>
conditions are satisfied: (i) options are granted by a compensation committee
consisting solely of two or more "outside directors" (ii) the stock option plan
states the maximum number of shares with respect to which options may be granted
during a specified period to any individual; (iii) under the term of the option,
the amount of compensation the optionee could receive is based solely upon an
increase in the value of the stock after the grant date; and (iv) the material
terms of the stock option plan must be disclosed to the publicly held
corporation's shareholders and approved by them before any compensation under
the plan is paid. The Stock Option Compensation Committee consists solely of
"outside directors" as defined for purposes of Section 162(m) of the Code. Due
to these and other reasons, the Company does not believe that the one million
dollar deduction limitation should have a material effect on the Company in the
near future. If the one million dollar deduction limitation is expected to have
a material effect on the Company in the future, the Company will consider ways
to maximize the deductibility of executive compensation, while retaining the
discretion the Company deems necessary to compensate Executive Officers in a
manner commensurate with performance and the competitive environment for
executive talent.
The above Executive Officer Compensation Report is submitted by the Chairman
of the Board of Directors: LeRoy T. Carlson, Jr., and by the Stock Option
Compensation Committee: Thomas W. Wilson, Jr. (Chairman), and John D. Foster.
STOCK PERFORMANCE CHART
The following chart graphs the performance of the cumulative total return to
shareholders (stock price appreciation plus dividends) for a period from April
25, 1996, to December 31, 1998, in comparison to returns of the NASDAQ Stock
Market-U.S. Index and the NASDAQ Telecommunications Index for the 33 months
ended December 31, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURNS
NASDAQ STOCK MARKET-U.S. INDEX,
NASDAQ TELECOMMUNICATIONS INDEX PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/98)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AERIAL NASDAQ US NASDAQ - TELECOM
<S> <C> <C> <C>
4/25/96 $100.00 $100.00 $100.00
93.75 100.55 77.40
82.81 105.17 79.27
6/28/96 67.19 100.43 76.92
57.03 91.48 67.02
59.38 96.61 70.24
9/30/96 63.28 104.00 72.39
47.66 102.85 69.39
53.13 109.21 70.51
12/31/96 50.78 109.11 72.48
42.19 116.86 74.24
35.16 110.40 72.19
3/31/97 34.38 103.20 67.37
30.47 106.42 69.93
55.47 118.49 78.59
6/30/97 53.13 122.11 84.57
50.78 135.00 89.89
54.30 134.80 86.86
9/30/97 55.86 142.77 98.17
53.13 135.35 101.03
56.64 136.02 101.73
12/31/97 44.53 133.89 107.06
48.44 137.87 114.10
53.13 150.82 124.04
3/1/98 48.44 156.39 135.80
45.31 159.05 134.21
37.89 150.32 131.93
6/1/98 39.06 160.92 144.96
33.99 159.22 151.16
21.49 128.00 114.66
9/1/98 23.05 145.68 128.91
35.16 151.63 139.33
24.81 166.57 146.66
12/1/98 36.72 187.89 175.20
</TABLE>
Assumes $100 invested at the close of trading April 25, 1996 in Aerial
Communications, Inc. Common Stock, the NASDAQ Stock Market-U.S. Index and the
NASDAQ Telecommunications Index.
20
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, LeRoy T. Carlson, Jr., President and Chief Executive Officer
of TDS, makes annual executive compensation decisions for TDS, other than for
himself. The Stock Option Compensation Committee of TDS makes annual executive
compensation decisions for the President and Chief Executive Officer of TDS and
approves long-term compensation awards for the Executive Officers of TDS. The
TDS Stock Option Compensation Committee is composed of members of the TDS Board
of Directors who are not officers or employees of TDS or any of its subsidiaries
and who are not Directors of any TDS subsidiaries. LeRoy T. Carlson, Jr., is a
member of the Board of Directors of TDS and the Company. LeRoy T. Carlson, Jr.
is also the Chairman of the Company and, as such, approves the Executive Officer
compensation decisions for the Company. LeRoy T. Carlson, Jr. is compensated by
TDS for his services to TDS and all of its subsidiaries. TDS is reimbursed,
however, by the Company for a portion of LeRoy T. Carlson Jr.'s salary and bonus
paid by TDS pursuant to the Intercompany Agreement described below. See Footnote
(1) to the Summary Compensation Table, above.
Donald W. Warkentin, a Director and the President and Chief Executive
Officer of the Company, participates in Executive Officers compensation
decisions for the Company, other than for himself. Long-term compensation for
Executive Officers of the Company is approved by the Stock Option Compensation
Committee of the Company, which consists of Company Directors Thomas W. Wilson,
Jr. (Chairman) and John D. Foster. The Company's Stock Option Compensation
Committee is composed of members of the Board of Directors of the Company who
are not Executive Officers of the Company or its corporate affiliates.
LeRoy T. Carlson, Jr. and Walter C.D. Carlson, Directors of the Company, are
trustees and beneficiaries of the voting trust that controls TDS, which controls
the Company, and LeRoy T. Carlson, Jr., a Director of the Company, also is a
beneficiary of such voting trust. See "Security Ownership of Certain Beneficial
Owners and Management." LeRoy T. Carlson, LeRoy T. Carlson, Jr., Walter C.D.
Carlson, Sandra L. Helton and James Barr III, Directors of the Company, are also
Directors of TDS, and Rudolph E. Hornacek, a Director of the Company, is an
executive officer of TDS. See "Election of Directors."
ARRANGEMENTS AND TRANSACTIONS WITH TDS
The Company has entered into a number of arrangements and transactions with
TDS. Some of these arrangements were established prior to the Company's IPO when
TDS owned more than 90 percent of the Company's outstanding capital stock and
were not the result of arms-length negotiations. There can be no assurance that
such arrangements will continue or that the terms of such arrangements will not
be modified in the future. If additional transactions occur in the future, there
can be no assurance that the terms of such future transactions will be favorable
to the Company or will continue to provide the Company with the same level of
support for the Company's financing and other needs as TDS has provided in the
past. The principal arrangements that exist between the Company and TDS are
summarized below. It is anticipated that such arrangements may be amended,
assigned or terminated in connection with the Spin-Off. The amendment,
assignment or termination of such arrangements will be negotiated between TDS
and the Spin-Off Special Committee. TDS has advised the Company that it would
agree to continue certain arrangements for a reasonable transition period
following the Spin-Off.
EXCHANGE AGREEMENT
The Company and TDS are parties to an Exchange Agreement dated as of January
1, 1996 (the "Exchange Agreement").
COMMON SHARE PURCHASE RIGHTS; POTENTIAL DILUTION. The Exchange Agreement
grants TDS the right to subscribe to any issuance of Common Shares or any other
voting securities of the Company, or of any securities convertible into or
exchangeable for, or carrying a right to subscribe to or acquire, Common Shares
or any voting securities of the Company, other than the Common Shares issued in
the
21
<PAGE>
IPO, to the extent necessary for TDS to maintain its proportionate interest in
the Common Shares. To the extent an issuance of Common Shares or other
securities by the Company is to be made for consideration other than cash, the
fair market value of the non-cash consideration will be determined by the
Company's Board of Directors. For purposes of calculating TDS's proportionate
interest in the Common Shares, the Series A Common Shares will be treated as if
converted into Common Shares. Upon notice to the Company, TDS will be entitled
to subscribe to each issuance in full or in part at its discretion. If TDS
decides to waive, in whole or in part, one or more of its purchase
opportunities, the number of Common Shares subject to purchase as a result of
subsequent issuances will be reduced.
If TDS elects to exercise its purchase rights, it will be required to pay
for all Common Shares issued to it by the Company with cash, cancellation of
indebtedness owed by the Company to TDS, or such other consideration as is
reasonably acceptable to the Company. Depending on the price per Common Share
paid by TDS upon exercise of these rights, the issuance of Common Shares by the
Company pursuant thereto could have a dilutive effect on other shareholders of
the Company. The purchase rights described above will be in addition to the
preemptive rights held by TDS as a holder of Series A Common Shares under the
Company's Restated Certificate of Incorporation.
The Exchange Agreement also contains provisions that contemplate that the
Company will issue to TDS from time-to-time additional Series A Common Shares.
Any such issuance could have the effect of maintaining or increasing TDS's
relative ownership of capital stock and voting power in the Company.
CORPORATE OPPORTUNITY ARRANGEMENTS. The Company's Restated Certificate of
Incorporation provides that the Company may not, directly or indirectly, without
the written consent of TDS, own, invest or otherwise have an interest in, lease,
operate or manage any business other than a business engaged solely in the
construction, ownership or management and operation of a Personal Communications
Service ("PCS") telecommunications business and related services. Company
management has been informed that TDS anticipates that it would be willing to
consent to the Company engaging in the provision of other telecommunications
services in addition to PCS. There can be no commitment that TDS will give such
consent with respect to the aforementioned or other business opportunities. In
addition, TDS could impose conditions on any such consent.
The Restated Certificate of Incorporation and the Exchange Agreement also
restrict the circumstances under which the Company is entitled to claim that an
opportunity, transaction, agreement or other arrangement to which TDS or any
person in which TDS, or any person in which TDS has or acquires a financial
interest, is or shall become a party, should be the property of the Company or
its subsidiaries. TDS or one of its corporate affiliates, other than the
Company, may acquire a Federal Communications Commission ("FCC") license to
provide PCS services or acquire control of any entity that has such a license.
So long as at least 500,000 Series A Common Shares are outstanding, TDS would be
obligated to offer to the Company the opportunity to negotiate regarding the
purchase by the Company or one of its subsidiaries of such license or business
entity if the relevant FCC license is for (a) a Major Trading Area ("MTA") or
(b) a Basic Trading Area ("BTA") which is located, in whole or in part, in an
MTA in which the Company or one of its subsidiaries has a direct or indirect
interest.
The Board of Directors of the Company is aware of the foregoing provisions
of the Restated Certificate of Incorporation and the Exchange Agreement and is
obligated to act in accordance therewith. In addition, the Board of Directors
recognizes that it has, under Delaware law, certain duties and responsibilities
to the Company and its shareholders. The Board of Directors has served, and
expects to continue to serve the Company and all of its shareholders, including
persons who purchase Common Shares hereunder, by seeking to introduce new and
improved services, whether developed by the Company or others, in a manner that
is in accordance with the Board's obligations and duties and which will permit
the Company to compete successfully as a provider of telecommunications
services.
22
<PAGE>
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT. All of the outstanding financial obligations of
the Company and its subsidiaries to TDS are incorporated under the Revolving
Credit Agreement between TDS and AOC, as amended. The Company has guaranteed the
obligations of AOC to TDS. Under the Revolving Credit Agreement, AOC may borrow
up to a maximum amount (the "Maximum Amount"), less the amount of any debt or
equity financing obtained by AOC or the Company, including the amount of any
borrowings under a Credit Agreement between the Company and Nokia
Telecommunications, Inc. The Maximum Amount under the Revolving Credit Agreement
increased to $650 million in February 1999 and no further increases are
available thereunder. On March 15, 1999, TDS paid the Company $114.5 million as
a settlement for tax losses incurred by the Company. The Company used the funds
to repay a portion of the existing AOC indebtedness to TDS, thereby increasing
the amount available under the Revolving Credit Agreement. Accordingly, $114.5
million became available to be borrowed under the Revolving Credit Agreement as
of that date. See "Tax Allocation Agreement." The interest rate under the
Revolving Credit Agreement is equal to the Prime Rate announced from time to
time by the LaSalle National Bank of Chicago plus 3 percent. Interest on the
balance due under the amended Revolving Credit Agreement is payable quarterly
and no principal will be payable until April 2, 2000, subject to acceleration
under certain circumstances, at which time the entire principal balance due
under the Revolving Credit Agreement then outstanding is due and payable.
Interest payable on demand at a rate equal to 3 1/2 percent above such Prime
Rate on any overdue principal or overdue installment of interest. The advances
made by TDS under the Revolving Credit Agreement are unsecured. AOC may prepay
the balance due under the Revolving Credit Agreement at any time, in whole or in
part, without premium. Any principal so repaid is available for AOC to borrow
during the remaining term of the Revolving Credit Agreement, subject to the
satisfaction of certain conditions.
The Revolving Credit Agreement provides that AOC will not, without the prior
written consent of TDS: (i) purchase or redeem (except in limited circumstances
set forth in such Agreement) any shares of its stock or declare or pay any
dividends thereon or make any other distribution to its shareholders, except to
the extent of the cumulative consolidated net income, if any, of AOC; (ii) incur
or guarantee any indebtedness that is senior to the Revolving Credit Agreement;
(iii) with certain exceptions, create any lien on any of AOC's assets; or (iv)
enter into certain contracts for the purchase of materials, supplies or other
property or services.
The Revolving Credit Agreement provides that, if certain "events of default"
occur, TDS may immediately declare the amount under the Revolving Credit
Agreement due and payable and terminate the Revolving Credit Agreement. Events
of default under the Revolving Credit Agreement include the failure to pay
interest or principal, the breach of specified covenants (including the
covenants specified in the immediately preceding paragraph and covenants to
furnish to TDS specified financial information, permit TDS to visit and inspect
AOC's properties, maintain customary levels of insurance, and pay all taxes and
other liabilities of AOC), any default under certain other indebtedness, and
certain judgments, defaults and events of bankruptcy or insolvency.
In connection with the Spin-Off, all or a portion of the amount outstanding
under the Revolving Credit Agreement may be replaced with equity of the Company
and/or repaid, and the Revolving Credit Agreement may be terminated. However,
such actions and any other changes to the Revolving Credit Agreement are subject
to negotiation between TDS and the Spin-Off Special Committee.
TAX ALLOCATION AGREEMENT
On September 8, 1998, the Company, AOC and TDS entered into a Tax Allocation
Agreement with terms and conditions substantially similar to those of the
previous Tax Allocation Agreement, dated January 1, 1996, between the Company
and TDS. Under the terms of the September 8, 1998 Tax Allocation Agreement (the
"Tax Allocation Agreement"), the Company and its subsidiaries will continue
23
<PAGE>
to join in filing consolidated federal income tax returns with TDS and certain
affiliates unless TDS's equity interest in the Company falls below 80 percent.
For tax years ended prior to January 1, 1996, TDS has reimbursed the Company for
the reduction in the provision for federal income taxes reflected in TDS's
consolidated statements of income resulting from the inclusion of the Company
and its subsidiaries in the TDS affiliated group. TDS has also reimbursed the
Company with respect to certain post January 1, 1996 obligations as described
below. For tax years beginning after December 31, 1995, the Tax Allocation
Agreement provides that the Company will be compensated (by an offset to amounts
the Company would otherwise be required to pay to TDS for federal income taxes)
for TDS's use of tax benefits at such time as the Company could utilize such
benefits on a separate return basis. Under the Tax Allocation Agreement, the
Company will be required to pay to TDS an amount equal to the greater of the
federal income tax liability of the Company, calculated as if it were a separate
affiliated group (including any minimum tax liability, notwithstanding the
absence of consolidated group liability for minimum tax) or the tax calculated
using the highest marginal tax rate (before taking into account tax credits) of
the TDS affiliated group. Under the Tax Allocation Agreement, any deficiency in
tax thereafter proposed by the Internal Revenue Service for any consolidated
return year (whether before or after the IPO) that involves income, deductions
or credits of the Company or its subsidiaries, and any claim for refund of tax
for any consolidated return year that involves such items, will be contested or
prosecuted at the sole discretion of TDS and at the expense of the Company.
Under the Tax Allocation Agreement, to the extent that any deficiency in tax or
refund of tax is finally determined to be attributable to the income, deductions
or credits of the Company, such deficiency or refund will be payable by or to
the Company.
The Tax Allocation Agreement states that, if the Company and its
subsidiaries cease to be members of the TDS affiliated group and, for a
subsequent year, the Company or its subsidiaries are required to pay a greater
amount of federal income tax than they would have paid if they had not been
members of the TDS affiliated group after December 31, 1995, TDS will reimburse
the Company for the excess amount of tax, without interest. In determining the
amount of reimbursement, the Tax Allocation Agreement states that any profits or
losses from new business activities acquired by the Company or its subsidiaries
after the Company leaves the TDS affiliated group will be disregarded. In
addition, the Tax Allocation Agreement states that reimbursement will not be
required if at any time in the future the Company becomes a member of another
affiliated group in which the Company is not the common parent or fewer than
500,000 Series A Common Shares are outstanding. The Tax Allocation Agreement
also states that reimbursement will not be required on account of the income of
any subsidiary of the Company if more than 50 percent of the voting power or
assets of such subsidiary is held by a person or group other than a person or
group owning more than 50 percent of the voting power of TDS. Payments under the
Tax Allocation Agreement by one party to the other are required to be increased
by an amount sufficient so that after deduction of any federal, state or local
taxes payable in respect of the receipt of such payments, the net amount
received will equal the amount that would have been payable had no deduction
been made.
Rules similar to those described above have been applied to any state or
local franchise or income tax liabilities to which TDS and the Company and its
subsidiaries are subject and which are required to be determined on a unitary,
combined or consolidated basis.
On March 12, 1999, the Company and TDS entered into a Tax Settlement
Agreement pursuant to which TDS made a payment to the Company of $114.5 million
on March 15, 1999. This payment represents a settlement of amounts that were
anticipated to be due from TDS to the Company in the future under the Tax
Allocation Agreement for the period commencing January 1, 1996 and ending with
the date of the proposed Spin-Off, currently planned for the third quarter of
1999. The settlement payment is subject to adjustment under certain
circumstances. The March 15, 1999 tax settlement payment to the Company was used
to repay a portion of the existing AOC indebtedness to TDS under the Revolving
Credit Agreement, which facilitates the Company's interim financing plans. See
"Recent Developments" and "Revolving Credit Agreement."
24
<PAGE>
Under the Tax Settlement Agreement, TDS has also agreed that it will not,
without the consent of a majority of the Independent Directors of Aerial, (i)
sell or agree to sell the stock of Aerial and join or agree to join in making an
election under section 338(h)(10) of the Internal Revenue Code of 1986, as
amended (the "Code"), with respect to such sale or (ii) cause or permit Aerial
or its subsidiaries (the "Aerial Group"), while its members are members of a
group of corporations which files a consolidated tax return with TDS as the
common parent (the "TDS Group"), to dispose of or agree to dispose of assets
constituting 50 percent or more of the assets of the Aerial Group in a
transaction, or in a series of transactions pursuant to a plan, in which the
Aerial Group recognizes all or substantially all of the gain with respect to
such assets. In connection with the Tax Settlement Agreement, the Spin-Off
Special Committee was also authorized to consider any proposal relating to
certain alternative transactions.
The Company will continue to be included in the consolidated federal income
tax returns of TDS through and including the date of the Spin-Off. After the
Spin-Off, the Company will no longer be a member of the TDS Group which files a
consolidated federal income tax return. In connection with the Spin-Off, TDS and
the Company expect to enter into an amended and restated Tax Allocation
Agreement which would (i) define their respective rights and obligations with
respect to federal, state, local and all other taxes, including the conduct of
audits and other tax controversies, for all periods prior to or including the
Spin-Off and (ii) include certain other agreements relating to, among other
things, the mutual indemnification by TDS and the Company of each other and
certain other matters.
CASH MANAGEMENT AGREEMENT
The Company has entered into a Cash Management Agreement (the "Cash
Management Agreement") with TDS pursuant to which it deposits its excess cash
with TDS for investment under TDS's cash management programs. To the extent of
the Company's normal working capital requirements, such cash is deposited into
an account (which may include cash from other participants in TDS's cash
management programs) and then invested in the name of a nominee for each
participant in such account. The Company is credited with, and may withdraw on
demand, its pro rata share of investment income from such account minus its pro
rata share of costs attributable to such investment income. Funds in excess of
the Company's normal working capital requirements that are deposited under the
Cash Management Agreement are available to the Company on demand and bear
interest each month at the thirty-day Commercial Paper Rate reported in THE WALL
STREET JOURNAL on the last business day of the preceding month, plus 1/4
percent, or such higher rate as TDS may in its discretion offer on such demand
deposits. The Company may elect to place funds for a longer period than on
demand, in which event, if such funds are placed with TDS, they will bear
interest at the Commercial Paper Rate for investments of similar maturity, plus
1/4 percent, or at such higher rate as TDS may in its discretion offer on such
investments.
INTERCOMPANY AGREEMENT
In order to provide for certain transactions and relationships between the
parties, the Company and TDS have agreed under an Intercompany Agreement (the
"Intercompany Agreement"), among other things, as follows:
25
<PAGE>
SERVICES. TDS, either directly or through one or more subsidiaries, makes
available to the Company from time-to-time management and consulting services
such as general management oversight; marketing and customer support, counsel
and advice; financial services including general accounting, business planning
and budgeting counsel and support, financial reporting, income and other tax
consulting and return preparation services, internal auditing, financial
information systems support, and treasury services; and human resources support.
The Company from time-to-time participates in standing committees, councils, and
other activities within the TDS family of companies focused on matters such as
improving service to customers, re-engineering business processes and systems,
and more generally creating and enhancing synergies within each of TDS's
strategic business units and across those units. Unless otherwise specified by
written agreement, services provided by TDS or any of its subsidiaries to
another member of the consolidated group are charged on the basis of time
reports. The costs of such services and any other expenses incurred on behalf of
a specific subsidiary will be charged directly to that subsidiary, except, that
in the case of services provided to TDS, the Company receives payment for the
salaries of its employees and agents assigned to render such services (plus 40
percent of the cost of such salaries in respect of overhead) for the time spent
rendering such services, plus out-of-pocket expenses. The costs of services and
any other expenses incurred jointly on behalf of a number of subsidiaries are
charged to those subsidiaries on the basis of the subsidiaries' relative
operating revenues and total assets. Although there can be no assurance that the
terms and rates charged by TDS for services to the Company are as favorable to
the Company as those the Company could have obtained from unaffiliated third
parties, the Company believes that such terms and rates are no less favorable
than those available from unaffiliated third parties. Payments by the Company to
TDS for such services totaled $8.6 million in 1998.
MATERIALS AND EQUIPMENT. The Company and its subsidiaries will purchase
materials and equipment from TDS and its subsidiaries at cost. In the event
items of materials and equipment are not available from TDS and its other
subsidiaries, the Company and its subsidiaries would purchase such items from
such alternative vendors and on such terms as the Company shall deem
appropriate. The Company purchased from TDS in 1998 $6.1 million in software and
other equipment related to the implementation of new payroll and inventory
systems.
GUARANTEES. The Company is obligated to use its best efforts to have TDS
removed as guarantor or obligor in connection with any indebtedness, lease,
contract or other obligation relating to the business of the Company or its
subsidiaries. Until TDS is removed as guarantor or obligor, the Company is
required to pay TDS semi-annually on June 30 and December 31 in advance 1 1/2
percent (3 percent on an annual basis) of the present value of the amounts that
TDS could be required to pay on account of acting as guarantor or obligor,
computed by discounting such amounts at a rate per annum equal to the Prime Rate
(as defined in the Revolving Credit Agreement) in effect on the June 15 or
December 15 preceding the applicable June 30 or December 31, compounded
annually. In addition, until TDS is removed as guarantor or obligor, the Company
must indemnify TDS with respect to such obligations. As of December 31, 1998,
TDS is not obligated as guarantor or obligor under any material Company
agreements, with the exception of the Company's Series A and Series B Zero
Coupon Notes and the Credit Agreement with Nokia Telecommunications Inc. dated
June 30, 1998. Guarantee fees incurred by the Company (including amounts
capitalized) totaled $6.7 million for the year ended December 31, 1998.
ACCOUNTANTS AND LEGAL COUNSEL. The Company has agreed to engage the firm of
independent public accountants, selected by TDS, or selected by the Audit
Committee of the Company and acceptable to TDS, for purposes of auditing the
financial statements of the Company, including the financial statements of its
direct and indirect subsidiaries, and providing tax, data processing and all
other accounting services and advice. The Company also has agreed that, in any
case where legal counsel is to be engaged to represent the parties for any
purpose, TDS has the right to select or approve the counsel to be engaged, which
may be the same counsel selected to represent TDS unless there should
26
<PAGE>
be a conflict of interest. If TDS and the Company use the same counsel, each is
responsible for its portion of the fees and expenses of such counsel.
INDEMNIFICATION. The Company will indemnify TDS and its subsidiaries
against certain losses, claims, damages or liabilities including those arising
out of: (i) the conduct by the Company and its subsidiaries of their respective
businesses (except where the loss, claim, damage or liability arises from TDS's
gross negligence or willful misconduct); (ii) any inaccurate representation or
breach of material warranty under the Intercompany Agreement; and (iii) any
indebtedness, lease, contract or other obligation referred to under "Guarantees"
above. TDS similarly will indemnify the Company and its subsidiaries with
respect: (i) to the conduct by TDS and its subsidiaries of their respective
businesses before the date of such agreement (except where the loss, claim,
damage or liability arises from the Company's gross negligence or willful
misconduct) and (ii) to any inaccurate material representation or breach of
material warranty under the Intercompany Agreement.
DISPOSAL OF COMPANY SECURITIES. TDS will not dispose of any securities of
the Company held by it if such disposition would result in the loss of any
license or other authorization held by the Company or its subsidiaries and such
loss would have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
TRANSFER OF ASSETS. Without the prior written consent of TDS, the Company
or any of its subsidiaries may not transfer (by sale, merger or otherwise) more
than 15 percent of its consolidated assets unless the transferee agrees to
become subject to the Intercompany Agreement.
REGISTRATION RIGHTS AGREEMENT
Under a Registration Rights Agreement (the "Registration Rights Agreement"),
the Company has agreed, upon the request of TDS, to file one or more
registration statements under the Securities Act or take other appropriate
action under the laws of foreign jurisdictions in order to permit TDS to offer
and sell, domestically or abroad, any debt or equity securities of the Company
that TDS may hold at any time. TDS will pay all costs relating thereto and all
underwriting discounts and commissions relating to any such offering, except
that the Company will pay the fees and expenses of its counsel and accountants
and all trustees, transfer agents or other agents appointed in connection
therewith. TDS has the right to select or approve the counsel the Company
retains to assist it in fulfilling any of its obligations under the Registration
Rights Agreement.
There is no limitation on the number or frequency of the occasions on which
TDS may exercise its registration rights, except that the Company will not be
required to comply with any registration request unless, in the case of a class
of equity securities, the request involves at least the lesser of one million
shares or 1 percent of the total number of shares of such class then outstanding
or, in the case of debt securities, the principal amount of debt securities
covered by the request is at least five million dollars. The Company also has
granted TDS the right to include its securities in certain registration
statements covering offerings by the Company and will pay all costs of such
offerings other than incremental costs attributable to the inclusion of
securities of the Company owned by TDS in such registration statements and TDS
will pay the fees and expenses of its counsel and all underwriting discounts and
commissions.
The Company will indemnify TDS, its officers and directors and each
underwriter, if any, and controlling persons of TDS or any such underwriter
against certain liabilities arising under the laws of any country in respect of
any registration or other offering covered by the Registration Rights Agreement.
The Company has the right to require TDS to delay any exercise by TDS of its
rights to require registration and other actions for a period of up to ninety
days if, in the judgment of the Company, any underwritten offering by the
Company for its account then being conducted or about to be conducted would be
materially and adversely affected. TDS has further agreed that it will not
include any securities of the Company in any registration statement of the
Company that, in the judgment of the managing
27
<PAGE>
underwriters, would materially and adversely affect any offering by the Company.
The rights of TDS under the Registration Rights Agreement are transferable to
non-affiliates of TDS.
INSURANCE COST SHARING AGREEMENT
Pursuant to an Insurance Cost Sharing Agreement (the "Insurance Cost Sharing
Agreement"), the Company and its subsidiaries, and their officers, directors and
employees, are afforded coverage under certain insurance policies purchased by
TDS. A portion of the premiums payable under each such policy is allocated by
TDS to the Company on the same basis as premiums were allocated before the
Insurance Cost Sharing Agreement was entered into or on such other reasonable
basis as TDS may select from time to time. If TDS decides to change the
allocation of premiums at any time, TDS will consult with the Company before the
change is made, but the decision as to whether to make the change will be in the
reasonable discretion of TDS. Management of the Company believes that the
amounts payable by the Company under the Insurance Cost Sharing Agreement are
generally more favorable than the premiums the Company would pay if it were to
obtain coverage under separate policies.
EMPLOYEE BENEFIT PLANS AGREEMENT
Under an Employee Benefit Plans Agreement, in connection with the purchase
by employees of the Company of TDS Common Shares under the TDS Employee Stock
Purchase Plan or pursuant to the exercise of non-qualified stock options granted
by TDS, the Company has agreed to reimburse TDS in an amount equal to the excess
of the fair market value of the TDS Common Shares on the date of purchase over
the amount paid for such shares plus amounts paid or to be paid by TDS for
taxes, less any amounts paid by the Company's employees for withholding taxes.
ARRANGEMENTS AND TRANSACTIONS WITH SONERA
Following the initial public offering by Aerial in 1996, TDS and Aerial
began to seek a strategic equity investor for Aerial to provide further equity
financing toward the development, construction and operation of Aerial's
business. In 1997, TDS and Aerial became aware that Sonera was seeking to make
an investment in wireless technology in the United States. Thereafter,
representatives of Sonera, Aerial and TDS met on numerous occasions with the
goal of negotiating an agreement pursuant to which Sonera would make an equity
investment in Aerial or its subsidiaries. Following extensive negotiations,
Aerial, AOC and Sonera entered into a Purchase Agreement (the "Purchase
Agreement") pursuant to which Sonera agreed to purchase from AOC 2,410,482
shares of common stock of AOC (the "Purchased Shares") for an aggregate purchase
price of $200 million, resulting in a purchase price of approximately $82.971
per common share of AOC ("AOC Common Shares") and representing a 19.423 percent
equity interest in AOC. This transaction was consummated on September 8, 1998
(the "Sonera Closing Date").
The number of Purchased Shares is subject to adjustment if the Aerial
Average (as defined herein) for any twenty consecutive trading day period during
the first three years after the Sonera Closing Date exceeds certain threshold
prices, as follows:
<TABLE>
<CAPTION>
PURCHASED EQUIVALENT
AERIAL SHARES RESULTING % RESULTING %
THRESHOLD EQUIVALENT SUBJECT TO EQUITY INTEREST EQUITY INTEREST
PRICE SHARE PRICE CANCELLATION IN AOC IN AERIAL
- ----------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
$ 9.50 $ 13.78 256,375 17.723% 16.837%
10.50 15.23 207,082 16.297% 15.482%
11.50 16.68 170,759 15.083% 14.329%
</TABLE>
The Aerial Average refers to the daily means of the high and low sales
prices for Aerial Common Shares.
28
<PAGE>
On the Sonera Closing Date, Aerial, AOC, TDS and Sonera entered into an
Investment Agreement. Under this agreement, Sonera will have the right under
certain circumstances (described below) to exchange each AOC Common Share which
it owns for 6.72919 Aerial Common Shares, subject to adjustment. Upon the
exchange of all of such AOC Common Shares, Sonera would own an 18.452 percent
equity interest in Aerial (reflecting a purchase price equivalent to $12.33 per
Aerial Common Share) (the "Equivalent Purchase Price").
The Investment Agreement also provides for the following:
(1.) APPOINTMENT OF DIRECTORS. Aerial agreed to increase the number of
members of the Aerial Board to at least twelve and add two directors
designated by Sonera. In addition, Aerial agreed to add one of such
designees to the Audit Committee.
Pursuant to the Investment Agreement, two representatives of Sonera
have been appointed to the Board of Directors of Aerial and one of such
representatives was appointed to the Audit Committee of the Board of
Directors. See "Election of Directors."
(2.) SUBSCRIPTION RIGHTS FOR AOC COMMON SHARES. Each of Aerial and
Sonera has subscription rights, exercisable upon the issuance by AOC of AOC
Common Shares or certain convertible securities, permitting each of Aerial
and Sonera to purchase that proportion of each such issuance equal to the
proportion of AOC Common Shares owned by Aerial or Sonera, respectively,
immediately prior to such issuance.
(3.) OPTION TO ACQUIRE ADDITIONAL AOC COMMON SHARES. Prior to the tenth
anniversary of the Sonera Closing Date, Sonera has the option to purchase
additional AOC Common Shares to increase its percentage equity interest in
AOC to 20 percent at various prices (subject to certain minimum prices)
implying a premium of at least 30 percent of the twenty-day Aerial Average
at the time of exercise of such option, except that there will be no premium
to the extent that such purchase either (a) is in lieu of the purchase by
Sonera of New Issue Securities (as defined below) or (b) results from the
conversion by Sonera of New Issue Securities purchased and so converted
during the first three years after the Sonera Closing Date.
(4.) SUBSCRIPTION RIGHTS FOR AERIAL COMMON SHARES. Prior to the tenth
anniversary of the Sonera Closing Date, Sonera has subscription rights,
exercisable upon the issuance for cash by Aerial of Aerial Common Shares
(subject to certain exceptions) or certain convertible securities, to
purchase 100 percent of such Aerial Common Shares or convertible securities,
subject to the subscription rights of TDS with respect thereto, such
subscription rights being subject to an overall limitation on Sonera's
maximum percentage equity interest of approximately 33 percent.
(5.) RESTRICTIONS ON TRANSFER OF AOC COMMON SHARES. Except with respect
to transfers to permitted affiliate transferees and in certain other limited
circumstances, Sonera is prohibited from transferring AOC Common Shares (a)
prior to the fifth anniversary of the Sonera Closing Date without the
consent of TDS and Aerial and (b) after the fifth anniversary of the Sonera
Closing Date without first engaging in good faith negotiations with Aerial
for the transfer of the AOC Common Shares to Aerial.
(6.) EQUITY EXCHANGES.
(a) Prior to the fifth anniversary of the Sonera Closing Date,
Sonera does not have the right to exchange the AOC Common Shares owned by
Sonera except in the event of (i) a change of control of TDS, (ii) a
going private transaction involving TDS or (iii) a sale of all or
substantially all of the assets of AOC and its subsidiaries.
(b) At any time after the ninth anniversary of the Sonera Closing
Date, Sonera will have the right to require Aerial to purchase all of the
AOC Common Shares owned by Sonera in exchange for, at Aerial's option,
(i) Aerial Common Shares, (ii) TDS Common Shares, (iii) cash
29
<PAGE>
or (iv) any combination of the foregoing. Sonera will have the right to
exercise such right in cumulative 20 percent increments during the thirty
days following each of the fifth, sixth, seventh and eighth anniversaries
of the Sonera Closing Date.
(c) At any time after the tenth anniversary of the Sonera Closing
Date, Sonera will have the right to exchange AOC Common Shares for Aerial
Common Shares.
(7.) ISSUANCE OF DERIVATIVE SECURITY. After the fifth anniversary of the
Sonera Closing Date (or prior to such fifth anniversary in certain limited
circumstances) and prior to the tenth anniversary thereof, Sonera will have
the right to issue a derivative security which becomes exchangeable after
the tenth anniversary for AOC Common Shares owned by Sonera. At any time
after the tenth anniversary of the Sonera Closing Date, Aerial will have the
right to repurchase all of such AOC Common Shares in exchange for, at
Aerial's option, (a) Aerial Common Shares, (b) TDS Common Shares, (c) cash
or (d) any combination of the foregoing.
(8.) RESTRICTIONS ON ACQUISITION OF AERIAL COMMON SHARES. Prior to the
tenth anniversary of the Sonera Closing Date, Sonera is prohibited from
acquiring any Aerial Common Shares except as set forth above.
(9.) RESTRICTION ON CERTAIN DISPOSITION TRANSACTIONS. TDS and Aerial are
prohibited from entering into certain transactions (not including certain
spin-off or similar transactions) resulting in the disposition of Aerial or
AOC, respectively, without first engaging in exclusive good faith
negotiations with Sonera regarding such disposition transaction, subject to
certain "tag-along" rights of Sonera and certain "drag-along" rights of TDS
and Aerial.
(10.) CERTAIN TRANSACTIONS INVOLVING SONERA. In the event that Sonera
enters into a transaction providing for a reorganization, merger,
consolidation or other combination, or for the disposition of all or
substantially all of the assets of Sonera, and such transaction involves a
material competitor of TDS or Aerial, then TDS and Aerial will have the
right to require Sonera to use its reasonable best efforts to negotiate a
transfer of all of the AOC Common Shares to a person reasonably acceptable
to TDS and Aerial. If Sonera does not effect such a transfer of the AOC
Common Shares within six months after the closing of such transaction, then
Sonera must exchange such AOC Common Shares for, at Aerial's option, (a)
Aerial Common Shares, (b) TDS Common Shares, (c) cash or (d) any combination
of the foregoing.
Certain of the foregoing rights are subject to termination upon the
occurrence of certain events, such as the failure of Sonera to maintain a
specified percentage equity interest, the transfer by Sonera of AOC Common
Shares, the issuance by Sonera of a derivative security, the failure of Sonera
to exercise its subscription rights or the passage of time.
On the Sonera Closing Date, Aerial and Sonera entered into a Registration
Rights Agreement which provides Sonera with three demand registrations and five
piggyback registrations with respect to Aerial Common Shares during the period
commencing on the fifth anniversary of the Sonera Closing Date and terminating
on the twentieth anniversary of the Sonera Closing Date (subject to earlier
termination under certain circumstances).
On the Sonera Closing Date, Aerial, AOC, Sonera and Sonera Corporation U.S.,
a wholly-owned subsidiary of Sonera ("Sonera U.S."), also entered into a Joint
Venture Agreement which, subject to certain exceptions and limitations set forth
therein, will serve during the Exclusivity Period (as defined below) as the
exclusive vehicle through which the parties will (i) acquire licenses issued by
the FCC to provide broadband Personal Communication Services ("PCS") in the
United States and (ii) build and operate systems with respect to such licenses
utilizing Global Systems For Mobile Communications Technology ("GSM"), subject
to such changes resulting from the evolution of such technology or the
development of subsequent technologies based thereon or derived therefrom. It is
contemplated by the Joint Venture Agreement that AOC and Sonera U.S. will form a
separate limited liability company (each
30
<PAGE>
an "LLC"), which may include additional investors, to operate each market in
which a broadband PCS license is acquired and that AOC (or an affiliate thereof)
will manage the system with respect to each such broadband PCS license so
acquired. In consideration of performance of such management services with
respect to each LLC, AOC will receive a 15 percent carried interest in such LLC,
which carried interest will be subject to partial divestiture under certain
circumstances during the first five years after the formation of such LLC. The
Exclusivity Period will commence on the Sonera Closing Date and terminate on the
earlier to occur of (i) the fifth anniversary of the Sonera Closing Date or (ii)
the date upon which Sonera U.S. has invested an aggregate of $400 million in the
equity of one or more LLCs formed pursuant to the Joint Venture Agreement.
On the Closing Date, TDS, Aerial and Sonera entered into a letter agreement
(the "Management Side Letter"), which sets forth various rights of Sonera in
connection with its participation in the operations and management of Aerial.
These rights are in addition to Sonera's right to representation on the Aerial
Board of Directors granted pursuant to the Investment Agreement. The Management
Side Letter entitles Sonera to participate in the following meetings and
activities: (i) TDS's monthly management reviews of Aerial's operations; (ii)
Aerial's budget development and TDS's management review of Aerial's budget;
(iii) Aerial's strategic planning sessions; and (iv) Aerial's product (new
service) planning and technology decisions.
In addition, the Management Side Letter grants Sonera the right to appoint,
subject to Aerial's reasonable disapproval, the Vice President Product
Management of Aerial, as well as other individuals with specific operational or
technical expertise who will be tasked by mutual agreement to assist Aerial for
up to 36 man-months per year (collectively, the "Sonera Designees"). Moreover,
Sonera will provide consulting services from time to time to assist Aerial with
technical or operational issues or projects as mutually agreed between the
parties, with payment based on the direct and indirect cost incurred by Sonera.
Also, Aerial and Sonera will negotiate separate agreements setting forth the
terms for any wireless products or other services to be provided by Sonera.
Finally, the parties generally will share information and expertise and may
request the establishment of a Strategy Committee to review periodically their
relationship or an annual meeting of TDS's Presidents Council and Sonera's
executive management.
Pursuant to the Management Side Letter, Aerial is required to pay 115
percent of the direct cost of the Sonera Designees at a rate (including
applicable taxes and benefits) corresponding to the actual total of the direct
expatriate employee cost to Sonera, including salary, housing, vehicle, travel
and other necessary costs incurred by Sonera consistent with the standard Sonera
expatriate employment policies. Aerial's reimbursement liability to Sonera for
1998 such expenses have not been determined pursuant to such requirement.
Following the announcement by TDS on December 18, 1998, that it intended to
distribute to its shareholders all of the capital stock of the Company that it
owns, and that the Company would seek additional financing from sources other
than TDS in connection therewith, Sonera contacted TDS to express certain
concerns about the announcement. Sonera has asserted, among other things, that
the TDS announcement reflects a change in circumstances that warrants the
renegotiation of certain matters related to Sonera's investment in AOC,
including an adjustment in the Equivalent Purchase Price, and has raised the
possibility of litigation in connection therewith. TDS and the Company intend to
attempt to reach a mutually acceptable resolution of the concerns raised by
Sonera. However, there can be no assurance that this matter will not lead to
litigation, or that it will not have a material adverse effect on the Company or
on the plans relating to the Spin-Off and the refinancing of the Company. See
"Recent Developments."
31
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On February 28, 1999, the Company had 31,794,240 outstanding Common Shares,
par value $1.00 per share, and 40,000,000 Series A Common Shares, par value
$1.00 per share. As of February 28, 1999, there were no outstanding Series B
Common Shares, par value $1.00 per share, or Preferred Shares, par value $1.00
per share, of the Company. Each holder of outstanding Common Shares, as of
February 28, 1999, is entitled to one vote for each Common Share held in such
holder's name with respect to all matters on which holders of Common Shares are
entitled to vote at the Annual Meeting. The holder of Series A Common Shares is
entitled to fifteen votes for each Series A Common Share held in such holder's
name with respect to all matters on which the holder of Series A Common Shares
is entitled to vote at the Annual Meeting. Accordingly, the voting power of the
Series A Common Shares was 600,000,000 votes, and the total voting power of all
outstanding shares of capital stock was 631,794,240 votes at February 28, 1999.
SECURITY OWNERSHIP OF THE COMPANY BY CERTAIN BENEFICIAL OWNERS
The following Table sets forth certain information regarding the beneficial
ownership by TDS of the Common Shares and Series A Common Shares of the Company
as of February 28, 1999, or as of the most recent practicable date. TDS has sole
voting and investment power with respect to all shares indicated as beneficially
owned by TDS.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF PERCENT OF PERCENT OF VOTING
NAME AND ADDRESS TITLE OF CLASS(1) CLASS OWNED CLASS COMMON STOCK POWER(2)
- ------------------------------------------- ---------------------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Telephone and Data Systems Inc. Common Shares 19,086,000 60.0% 26.6% 3.0%
30 N. LaSalle Street Series A Common Shares 40,000,000 100.0% 55.7% 95.0%
Chicago, IL 60602
Strong Capital Management, Inc.(3) Common Shares 1,850,000 5.8% 2.6% *
100 Heritage Reserve
Menomonee Falls, WI 53051
</TABLE>
- --------------------------
* Less than 1 percent
(1) Series A Common Shares are convertible on a share-for-shares basis at any
time into Common Shares.
(2) The Series A Common Shares have fifteen votes per share and the Common
Shares have one vote per share.
(3) Based on Amendment No. 1 to Schedule 13G filed with the SEC and dated
February 11, 1999. Such Schedule 13G is filed jointly by Strong Capital
Management, Inc. ("Strong") and Richard S. Strong, Chairman of the board and
principal shareholder of Strong ("RSS"). Strong and RSS each have sole
voting power with respect to 1,850,000 shares and sole investment power with
respect to 1,850,000 shares.
SECURITY OWNERSHIP OF THE COMPANY BY MANAGEMENT
Several Executive Officers and Directors of the Company hold substantial
ownership interests indirectly in the Company by virtue of their ownership of
the capital stock of TDS. See "Security Ownership of TDS by Management of the
Company." In addition, the following members of the Board of
32
<PAGE>
Directors and Executive Officers beneficially owned the following number of the
Common Shares of the Company as of February 28, 1999 or as of the most recent
practicable date:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL PERCENT OF PERCENT OF VOTING
NAME TITLE OF CLASS OWNERSHIP(1) CLASS COMMON STOCK POWER
- ---------------------------------- ---------------- ------------- --------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Peter L. Sereda,
and Michael G. Hron(2)........... Common Shares 50,209 * * *
LeRoy T. Carlson.................. Common Shares 1,000 * * *
LeRoy T. Carlson, Jr.(3).......... Common Shares 8,400 * * *
Donald W. Warkentin(4)............ Common Shares 207,270 * * *
Walter C. D. Carlson.............. Common Shares 3,373 * * *
Sandra L. Helton.................. -- -- -- -- --
James Barr III.................... -- -- -- -- --
Rudolph E. Hornacek............... -- -- -- -- --
Thomas W. Wilson, Jr.............. Common Shares 3,373 * * *
John D. Foster(5)................. Common Shares 4,373 * * *
Matti Makkonen.................... -- -- -- -- --
Pertti Miettunen.................. -- -- -- -- --
J. Clarke Smith(6)................ Common Shares 103,755 * * *
Carol J. Ogren(7)................. Common Shares 47,675 * * *
Gary F. Ballard(8)................ Common Shares 19,800 * * *
David B. Lowry(9)................. Common Shares 107,066 * * *
All members of the Board of
Directors and Executive Officers
as a group (17 persons)(10)...... Common Shares 581,593 1.8% * *
</TABLE>
- ------------------------------
* Less than 1 percent
(1) The nature of beneficial ownership is sole voting and investment power
unless otherwise specified.
(2) Voting and investment control with respect to Company-match shares is shared
by the persons named as members of the investment management committee of
the Telephone and Data Systems, Inc. Tax Deferred Savings Trust. Does not
include 411,728 Common Shares acquired by trust employee contributions for
which voting and investment control is passed-through to plan participants.
Such members disclaim beneficial ownership of such shares, which are held
for the benefit of plan participants. Information is presented as of
December 31, 1998.
(3) Mr. Carlson's wife owns such Common Shares. Mr. Carlson disclaims beneficial
ownership of such shares.
(4) Includes 201,408 Common Shares subject to Options or SARs that are currently
exercisable or exercisable within sixty days.
(5) Includes 1,000 Common Shares that are owned by Mr. Foster's wife.
(6) Includes 94,203 Common Shares subject to Options or SARs that are currently
exercisable or exercisable within sixty days.
(7) Includes 43,584 Common Shares subject to Options or SARs that are currently
exercisable or exercisable within sixty days.
(8) Includes 16,464 Common Shares subject to Options or SARs that are currently
exercisable or exercisable within sixty days.
(9) Includes 65,710 Common Shares subject to Options or SARs that are currently
exercisable or exercisable within sixty days.
(10) Includes 445,712 Common Shares subject to Options or SARs which are
currently exercisable or exercisable within sixty days.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act and the rules and regulations thereunder
require the Company's Executive Officers and members of its Board of Directors,
and persons who are deemed to own more than 1 percent of the Common Shares
(collectively, the "Reporting Persons"), to file certain reports
33
<PAGE>
("Section 16 Reports") with the SEC with respect to their beneficial ownership
of Common Shares. The Reporting Persons also are required to furnish the Company
with copies of all Section 16 Reports they file.
Based on a review of copies of Section 16 Reports furnished to the Company
by the Reporting Persons and written representations by Directors and Executive
Officers of the Company, the Company believes that all Section 16 filing
requirements applicable to the Reporting Persons during and with respect to 1998
were complied with on a timely basis.
DESCRIPTION OF TDS SECURITIES
The authorized capital stock of TDS includes Common Shares, $0.01 par value
(the "TDS Common Shares"), Series A Common Shares, $0.01 par value, (the "TDS
Series A Common Shares") and Preferred Shares, $0.01 par value (the "TDS
Preferred Shares"). As of February 28, 1998, 54,391,873 TDS Common Shares
(excluding Common Shares held by TDS and a subsidiary of TDS), 6,949,904 TDS
Series A Common Shares and 241,772 TDS Preferred Shares were outstanding.
The TDS Series A Common Shares have ten votes per share, and TDS Common
Shares and TDS Preferred Shares have one vote per share. The holders of TDS
Series A Common Shares, TDS Common Shares and TDS Preferred Shares vote as a
single group, except with respect to matters as to which the Delaware General
Corporation Law or the TDS Restated Certificate of Incorporation grants class
voting rights. With respect to the election of Directors, the holders of TDS
Common Shares and the TDS Preferred Shares issued before October 31, 1981,
voting as a group, are entitled to elect 25 percent of the Board of Directors of
TDS, rounded up to the nearest whole number plus one Director, and the holders
of TDS Series A Common Shares and TDS Preferred Shares issued after October 31,
1981, voting as a group, are entitled to elect the remaining members of the
Board of Directors of TDS.
SECURITY OWNERSHIP OF TDS BY MANAGEMENT OF THE COMPANY
The following Table sets forth the number of TDS Common Shares and TDS
Series A Common Shares beneficially owned by each Director of the Company, by
each Executive Officer named in the Summary Compensation Table and by all
Executive Officers and all members of the Board of Directors and Executive
Officers of the Company, as a group, as of February 28, 1999 or as of the most
recent practicable date.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF TDS
NAME OF INDIVIDUAL OR NUMBER BENEFICIAL PERCENT OF COMMON
OF PERSONS IN GROUP TITLE OF TDS CLASS OWNERSHIP(1) TDS CLASS STOCK
- ----------------------------------------- ------------------------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
LeRoy T. Carlson, Jr., TDS Series A Common Shares 6,351,116 91.4% 10.4%
Walter C. D. Carlson,
Letitia G. C. Carlson,
Donald C. Nebergall and
Melanie J. Heald(2).....................
LeRoy T. Carlson, Jr. TDS Common Shares 148,876 * *
C. Theodore Herbert,
Peter L. Sereda,
and Michael G. Hron(3)..................
TDS Series A Common Shares 1,008 * *
LeRoy T. Carlson, Jr. TDS Common Shares 64,256 * *
C. Theodore Herbert,
Peter L. Sereda,
and Michael G. Hron(4)..................
LeRoy T. Carlson(5)(9)................... TDS Common Shares 100,682 * *
TDS Series A Common Shares 51,991 * *
LeRoy T. Carlson, Jr.(6)(9).............. TDS Common Shares 157,570 * *
TDS Series A Common Shares 6,410 * *
Walter C. D. Carlson(7).................. TDS Common Shares 719 * *
Sandra L. Helton(9)...................... TDS Common Shares 15,000 * *
<CAPTION>
PERCENT OF
NAME OF INDIVIDUAL OR NUMBER TDS
OF PERSONS IN GROUP VOTING POWER
- ----------------------------------------- -------------
<S> <C>
LeRoy T. Carlson, Jr., 51.2%
Walter C. D. Carlson,
Letitia G. C. Carlson,
Donald C. Nebergall and
Melanie J. Heald(2).....................
LeRoy T. Carlson, Jr. *
C. Theodore Herbert,
Peter L. Sereda,
and Michael G. Hron(3)..................
*
LeRoy T. Carlson, Jr. *
C. Theodore Herbert,
Peter L. Sereda,
and Michael G. Hron(4)..................
LeRoy T. Carlson(5)(9)................... *
*
LeRoy T. Carlson, Jr.(6)(9).............. *
*
Walter C. D. Carlson(7).................. *
Sandra L. Helton(9)...................... *
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF TDS
NAME OF INDIVIDUAL OR NUMBER BENEFICIAL PERCENT OF COMMON
OF PERSONS IN GROUP TITLE OF TDS CLASS OWNERSHIP(1) TDS CLASS STOCK
- ----------------------------------------- ------------------------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Rudolph E. Hornacek(8)(9)................ TDS Common Shares 34,988 * *
TDS Series A Common Shares 1,669 * *
James Barr III(9)........................ TDS Common Shares 22,040 * *
Thomas W. Wilson, Jr..................... TDS Common Shares -- -- --
John D. Foster........................... TDS Common Shares -- -- --
Matti Makkonen........................... TDS Common Shares -- -- --
Pertti Miettunen......................... TDS Common Shares -- -- --
Donald W. Warkentin(9)................... TDS Common Shares 14,566 * *
J. Clarke Smith.......................... TDS Common Shares -- -- --
Carol J. Ogren(9)........................ TDS Common Shares 520 * *
David B. Lowry........................... TDS Common Shares -- -- --
Gary F. Ballard.......................... TDS Common Shares -- -- --
All members of the Board of Directors and TDS Common Shares 559,217 1.0% *
Executive Officers as a Group
(17 persons)(9).........................
TDS Series A Common Shares 6,414,709 92.3% 10.5%
<CAPTION>
PERCENT OF
NAME OF INDIVIDUAL OR NUMBER TDS
OF PERSONS IN GROUP VOTING POWER
- ----------------------------------------- -------------
<S> <C>
Rudolph E. Hornacek(8)(9)................ *
*
James Barr III(9)........................ *
Thomas W. Wilson, Jr..................... --
John D. Foster........................... --
Matti Makkonen........................... --
Pertti Miettunen......................... --
Donald W. Warkentin(9)................... *
J. Clarke Smith.......................... --
Carol J. Ogren(9)........................ *
David B. Lowry........................... --
Gary F. Ballard.......................... --
All members of the Board of Directors and *
Executive Officers as a Group
(17 persons)(9).........................
51.7%
</TABLE>
- ------------------------------
* Less than 1 percent
(1) The nature of beneficial ownership for shares in this column is sole voting
and investment power, except as otherwise set forth in these footnotes.
(2) The shares listed are held by the persons named as trustees under a voting
trust which expires June 30, 2009, created to facilitate longstanding
relationships among the trust certificate holders. Under the terms of the
voting trust, the trustees hold and vote the Series A Common Shares held in
the trust. If the voting trust were terminated, the following persons would
each be deemed to own beneficially more than 5 percent of the outstanding
Series A Common Shares: Margaret D. Carlson (wife of LeRoy T. Carlson),
LeRoy T. Carlson, Jr., Walter C. D. Carlson, Prudence E. Carlson, Letitia G.
C. Carlson (children of LeRoy T. Carlson and Margaret D. Carlson) and Donald
C. Nebergall, as trustee under certain trusts for the benefit of the heirs
of LeRoy T. and Margaret D. Carlson and an educational institution.
(3) Voting and investment control is shared by the persons named as members of
the investment management committee of the Telephone and Data Systems, Inc.
Employees' Pension Trust I and the Wireless Companies' Pension Plan. Such
members disclaim beneficial ownership of such shares, which are held for the
benefit of plan participants. Information is presented as of December 31,
1998.
(4) Voting and investment control with respect to Company-match shares is shared
by the persons named as members of the investment management committee of
the Telephone and Data Systems, Inc. Tax-Deferred Savings Trust. Does not
include 126,711 shares acquired by trust employee contributions for which
voting and investment control is passed-through to plan participants.
(5) Includes 51,991 Series A Common Shares held by LeRoy Carlson's wife. Mr.
Carlson disclaims beneficial ownership of such shares. Does not include
224,995 Series A Common Shares held for the benefit of LeRoy T. Carlson,
630,811 Series A Common Shares held for the benefit of Mr. Carlson's wife or
51,040 Series A Common Shares held for the benefit of certain grandchildren
of Mr. Carlson (an aggregate of 921,086 shares, or 13.3 percent of class) in
the voting trust described in footnote (2). Beneficial ownership is
disclaimed as to Series A Common Shares held for the benefit of his wife and
grandchildren in such voting trust.
(6) Does not include 1,071,956 Series A Common Shares (15.4 percent of class)
held in the voting trust described in footnote (2), of which 1,036,751
shares are held for the benefit of LeRoy T. Carlson, Jr. Beneficial
ownership is disclaimed with respect to an aggregate of 35,205 Series A
Common Shares held for the benefit of his wife, his children and others in
such voting trust.
(7) Does not include 1,097,775 Series A Common Shares (15.8 percent of class)
held in the voting trust described in footnote (2), of which 1,064,694
shares are held for the benefit of Walter C. D. Carlson. Beneficial
ownership is disclaimed with respect to an aggregate of 33,081 Series A
Common Shares held for the benefit of his wife and children in such voting
trust.
(8) Does not include Series A Common Shares held as custodian for his children,
for which benefical ownership is disclaimed.
(9) Includes the following number of Common Shares that may be purchased
pursuant to stock options and/or stock appreciation rights which are
currently exercisable or exercisable within sixty days: LeRoy T. Carlson,
94,208 shares; LeRoy T. Carlson, Jr., 130,717 shares;
Sandra L. Helton, 12,000 shares (plus 3,000 shares of restricted stock
subject to future vesting); James Barr III, 18,000 shares; Rudolph E.
Hornacek, 26,528 shares; Donald W. Warkentin, 14,026 shares; Carol J. Ogren,
520 shares; all other Executive Officers, 0 shares; and all directors and
officers as a group, 298,999 shares.
35
<PAGE>
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
In addition to persons listed in the preceding table and the footnotes
thereto, the following table sets forth as of February 28, 1999, or the latest
practicable date, information regarding each person who is known to the Company
to beneficially own more than 5 percent of any class of voting securities of
TDS, based on publicly available information and the Company's stock records as
of such date. The nature of beneficial ownership in this table is sole voting
and investment power except as otherwise set forth in footnotes thereto.
<TABLE>
<CAPTION>
PERCENT OF PERCENT
SHARES OF OF
SHARES OF PERCENT COMMON VOTING
SHAREHOLDER'S NAME AND ADDRESS TITLE OF CLASS CLASS OWNED OF CLASS STOCK POWER
- ------------------------------------ ----------------------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Franklin Mutual Advisers, Inc.(1)
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078 TDS Common Shares 7,400,475 13.6% 12.1% 6.0%
Gabelli Funds, Inc.(2)
One Corporate Center
Rye, New York 10580 TDS Common Shares 6,870,655 12.6% 11.2% 5.5%
The Equitable Companies Inc.(3)
787 Seventh Avenue
New York, New York 10019 TDS Common Shares 5,085,257 9.3% 8.2% 4.1%
Van and Janet McDaniel
Salkum, Washington 98582 TDS Preferred Shares 62,500 25.9% N/A *
William and Betty McDaniel
Salkum, Washington 98582 TDS Preferred Shares 46,666 19.3% N/A *
Bennet R. Miller
Lafayette, Indiana 47905 TDS Preferred Shares 30,000 12.4% N/A *
</TABLE>
- ------------------------------
* Less than 1 percent
(1) Based on the most recent Schedule 13G filed with the SEC (Amendment No. 1).
Such Schedule 13G reports that Franklin Mutual Advisers, Inc. exercised sole
voting and investment power with respect to all such shares. Such Schedule
13G is also filed on behalf of Franklin Resources, Inc., the parent holding
company of Franklin Mutual Advisers, Inc., and by Charles B. Johnson and
Rupert H. Johnson, Jr., principal shareholders of such parent holding
company.
(2) Based upon a Schedule 13D (Amendment No. 7) filed with the SEC. Includes
shares held by the following affiliates: Gabelli Funds, Inc.-2,354,600
shares; ALCE Partners, L.P.-1,000 shares; GAMCO Investors, Inc.-4,455,355
shares; Gabelli International Limited-22,000 shares; Gabelli Multimedia
Partners, L.P.-1,200 shares; Gemini Capital Management Ltd.-20,000 shares;
Gabelli International II Limited-12,000 shares; MJG Associates, Inc.-2,000;
and Mario J. Gabelli-2,500 shares. In such Schedule 13D filing, such group
has reported sole voting power with respect to 6,870,655 shares, and sole
dispositive power with respect to 6,870,655 shares.
(3) Based on the most recent Schedule 13G (Amendment No. 13) filed with the SEC.
Includes shares held by the following affiliates: The Equitable Life
Assurance Society of the United States-2,930,000 shares; Alliance Capital
Management, L.P.-2,125,176 shares; Wood, Struthers & Winthrop Management
Corp.-27,700 shares; and Donaldson Lufkin & Jenrette Securities
Corporation-2,381 shares. In such Schedule 13G, Equitable reported sole
voting power with respect to 3,931,250 shares, shared voting power with
respect to 1,096,000 shares, sole dispositive power with respect to
5,082,876 shares and shared dispositive power with respect to 2,381 shares.
Alpha Assurance I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Uni Europe
Assurance Mutuelle and AXA, corporations organized under the laws of France,
are affiliates of The Equitable Companies, Inc.
36
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation-Compensation Committee Interlocks and Insider
Participation."
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy materials for
the 2000 Annual Meeting of Shareholders, any shareholder proposal must be
addressed to Aerial Communications Inc., 8410 W. Bryn Mawr Avenue, Suite 1100,
Chicago, Illinois 60631, Attention: Assistant Secretary, and must be received no
later than December 21, 1999.
Proposals by shareholders intended to be presented at the 2000 Annual
Meeting must be received by the Company at its principal executive offices not
less than twenty days nor more than fifty days prior to the date of the 2000
Annual Meeting, PROVIDED, HOWEVER, that if less than thirty days' notice or
prior public disclosure of the date of the 2000 Annual Meeting is made or given
to shareholders, notice by the shareholder to be timely must be received not
later than the close of business on the tenth day following the earlier of (i)
the day on which such notice of the date of the meeting was mailed or (ii) the
day on which such public disclosure was made. The proxy solicited by the Board
of Directors for the 2000 Annual Meeting will confer discretionary authority to
vote on any shareholder proposal presented at that meeting unless the Company
receives notice of such proposal on or before March 5, 2000.
GENERAL
Your proxy is solicited by the Board of Directors and its agents and the
cost of solicitation will be paid by the Company. Officers, Directors and other
employees of the Company, acting on its behalf, may also solicit proxies by
telephone, facsimile transmission or personal interview. The Company will, at
its expense, request brokers and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of shares of record
by such persons. The Company has retained Kissel-Blake Inc. to aid in
solicitation of proxies for a fee of $1,500, plus out-of-pocket expenses.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, INCLUDING THE FINANCIAL STATEMENTS
AND THE SCHEDULES THERETO UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER AS OF THE
RECORD DATE AND WILL PROVIDE COPIES OF THE EXHIBITS TO THE REPORT UPON PAYMENT
OF A REASONABLE FEE THAT WILL NOT EXCEED THE COMPANY'S REASONABLE EXPENSES
INCURRED IN CONNECTION THEREWITH. REQUESTS FOR SUCH MATERIALS SHOULD BE DIRECTED
TO AERIAL COMMUNICATIONS, INC., 8410 W. BRYN MAWR AVENUE, SUITE 1100, CHICAGO,
ILLINOIS 60631, ATTENTION: INVESTOR RELATIONS.
OTHER BUSINESS
It is not anticipated that any action will be asked of the shareholders
other than that set forth above, but if other matters are brought properly
before the Annual Meeting, the persons named in the proxy will vote in
accordance with their best judgment.
By order of the Board of Directors
[SIGNATURE]
Michael G. Hron
Secretary
ALL SHAREHOLDERS ARE URGED TO SIGN, DATE AND MAIL THEIR PROXIES PROMPTLY.
37
<PAGE>
EXHIBIT A
AERIAL COMMUNICATIONS, INC.
RETENTION RESTRICTED STOCK UNIT PLAN
1. PURPOSES
The purposes of the Aerial Communications, Inc. Retention Restricted Stock
Unit Plan (the "Plan") are (i) to further align the interests of Aerial
Communications, Inc. (the "Company") and the recipients of awards under the Plan
through awards of Stock Units, the value of which is related to the appreciation
in the value of Common Shares of the Company, (ii) to advance the interests of
the Company by retaining key employees and (iii) to motivate such persons to act
in the long-term best interests of the shareholders of the Company.
2. DEFINITIONS
(a) "Affiliate" shall mean (i) a corporation which owns directly or
indirectly at least 50 percent of the outstanding stock of the Company or the
combined voting power of such outstanding stock, (ii) a corporation at least 50
percent of whose outstanding stock or the combined voting power of such
outstanding stock is owned directly or indirectly by a corporation described in
subclause (i) or (iii) a corporation at least 50 percent of whose outstanding
stock or the combined voting power of such outstanding stock is owned directly
or indirectly by the Company.
(b) "Agreement" shall mean the written agreement evidencing a Stock Unit
award hereunder between the Company and the recipient of such award.
(c) "Base Price" shall mean the Fair Market Value of a share of Stock on the
date a Stock Unit is granted.
(d) "Board" shall mean the Board of Directors of the Company or any duly
authorized committee thereof.
(e) "Company" shall mean Aerial Communications, Inc.
(f) "Committee" shall mean the Stock Option Compensation Committee of the
Company.
(g) "Disability" shall mean a total physical disability, which in the
judgment of the Committee and concurrence of the Board, prevents a Participant
from performing substantially such Participant's employment duties and
responsibilities for a continuous period of at least six months.
(h) "Effective Date" shall mean February 1, 1999.
(i) "Employer" shall mean the Company and any Affiliate of the Company whose
employees are granted awards under the Plan.
(j) "Fair Market Value" of a share of Stock shall mean its closing sale
price on the principal national stock exchange or quotation service bureau on
which the Stock is traded on the date as of which such value is being
determined, or, if there shall be no reported sale for such date, on the next
preceding date for which a sale was reported; provided that if Fair Market Value
for any date cannot be so determined, Fair Market Value shall be determined by
the Board by whatever means or method as the Board, in the good faith exercise
of its discretion, shall at such time deem appropriate.
(k) "Legal Representative" shall mean a Participant's executor,
administrator, legal representative, guardian or similar person.
(l) "Participant" shall mean an employee of the Company or an Affiliate of
the Company who is awarded Stock Units hereunder.
A-1
<PAGE>
(m) "Plan" shall mean the Aerial Communications, Inc. Retention Restricted
Stock Unit Plan.
(n) "Stock" shall mean the class of shares of the Company designated as
"Common Shares" in its Certificate of Incorporation, as may be amended or
restated from time to time.
(o) "Stock Unit" shall mean a stock unit right awarded pursuant to Section
5.
3. ELIGIBILITY
Key employees of the Company who are eligible to receive Stock Units are
those executive employees who as of the Effective Date hold a position with the
Company or an Affiliate of Vice President or a more senior position and those
employees who are selected by the President of the Company from time to time who
hold a position with the Company or an Affiliate of Manager or Director or a
more senior position.
4. ADMINISTRATION
a. GENERAL. Except as otherwise provided herein, the Plan shall be
administered on behalf of the Company by the Committee. The Committee shall
interpret the Plan and the application thereof, establish rules and guidelines
as it deems necessary or desirable for the administration of the Plan and may
impose, incidental to the grant of a Stock Unit award, conditions with respect
to the award, such as limiting competitive employment or other activities. All
such interpretations, rules, guidelines and conditions shall be final, binding
and conclusive.
b. DELEGATION. The Committee may delegate some or all of its power and
authority hereunder to the Chairman of the Board or to an executive officer of
the Company, as the Committee deems appropriate.
c. SHARES AVAILABLE. Subject to adjustment as provided in Section 10, a
total of 456,000 shares of Stock shall initially be available under the Plan.
Such shares of Stock shall be reduced by the sum of the aggregate number of
shares of such Stock then subject to outstanding Stock Unit awards under the
Plan. To the extent that the Company elects to pay a Participant the value of
his vested Stock Units in cash instead of Stock and to the extent a Stock Unit
award is canceled or forfeited, the shares of Stock subject to the vested Stock
Units paid in cash and the canceled or forfeited portion of a Stock Unit award
shall again be available under the Plan. Shares of Stock to be delivered under
the Plan shall be made available from authorized and unissued shares of Stock,
or authorized and issued shares of Stock reacquired and held as treasury shares
or otherwise or a combination thereof.
5. GRANT OF STOCK UNITS
a. INITIAL AWARDS. Subject to the approval of the Plan by the Board, all
executive employees of the Company and the Company's subsidiary, Aerial
Operating Company, Inc., holding a position of Vice President or a more senior
position shall receive an award of Stock Units as determined by the Committee.
b. OTHER AWARDS. Subject to the provisions of the Plan and to guidelines
established from time to time by the Committee, the Committee or the President
of the Company shall have power to grant other Stock Unit awards to other
eligible key employees of the Company or an Affiliate, to determine the number
of Stock Units to be granted to each such key employee selected and to determine
the time or times when Stock Units will be granted; provided, however that the
President of the Company may not grant Stock Unit awards to any employee who is
an officer of the Company or an Affiliate or any other person subject to the
Securities Exchange Act of 1934, or who is employed by the Company or an
Affiliate in any other position which is senior to that of a director. Any grant
of a Stock Unit award by the President pursuant to this Section shall be subject
to the review and concurrence of the Chairman of the Board. In addition to the
terms and conditions set forth in the Plan, Stock Unit awards granted pursuant
A-2
<PAGE>
to this Section shall be subject to such terms and conditions as the President
of the Company may determine, subject to the review and concurrence of the
Chairman of the Board. The selection of a person to participate in the Plan at
any time shall not require the selection of such person to participate in the
Plan at any other time.
c. AGREEMENTS. Each Stock Unit award under the Plan to a Participant shall
be set forth in an Agreement and such Agreement shall state the Base Price of
the Stock Units as of the date of grant. Nothing in the Plan shall be deemed to
grant to a Participant any right in, or any right to purchase or otherwise
acquire, any shares of Stock (or any securities convertible into Stock).
6. VESTING OF STOCK UNITS
As of the date a Stock Unit award granted to a Participant becomes fully
vested, in accordance with the terms of the applicable Agreement, the
Participant shall be entitled to receive from the Company a payment in an amount
equal to the Fair Market Value of one share of Stock determined on the vesting
date, multiplied by the number of the Participant's Stock Units that become
vested on such date (as adjusted pursuant to Section 10). Such payment shall be
made in cash or in shares of Stock, as determined in the sole discretion of the
Chairman of the Board.
7. TRANSFER OR TERMINATION OF EMPLOYMENT
a. TRANSFER OF EMPLOYMENT. If a Participant's employment is transferred to
an Affiliate which is not an Employer before May 1, 1999, then the Participant
shall forfeit his Stock Unit award. If a Participant's employment is transferred
to an Affiliate which is not an Employer after such date but before May 1, 2000
and such Participant remains continuously employed by an Affiliate or the
Company until February 1, 2000, then the Participant shall receive payment of
the portion of his Stock Unit award that vests on or before February 1, 2000,
and shall forfeit any remaining Stock Units subject to the award. If a
Participant's employment is transferred to an Affiliate which is not an Employer
on or after May 1, 2000 and such Participant remains continuously employed by an
Affiliate or the Company until February 1, 2001, then such Participant shall
receive payment of that portion of his Stock Unit award that vests as of
February 1, 2001.
b. DEATH OR DISABILITY. If a Participant's employment with the Company or
an Affiliate terminates by reason of death or Disability, each unvested Stock
Unit subject to an outstanding award granted to such Participant shall become
fully vested on the vesting date(s) set forth in the Participant's Agreement.
c. OTHER TERMINATION. If a Participant's employment with the Company or an
Affiliate terminates for any reason other than as set forth in Section 7(a) or
(b), each unvested Stock Unit subject to an outstanding award granted to such
Participant shall be forfeited by the Participant on the effective date of such
Participant's termination of employment, unless the Chairman of the Board
determines otherwise.
8. CHANGE IN CONTROL
a. Notwithstanding any other provision of the Plan or any provision of any
Agreement, in the event of (i) a Change in Control (as defined in Section 8(b))
or (ii) a "change in control" within the meaning of the Telephone and Data
Systems, Inc. 1994 Long-Term Incentive Plan, at a time when Telephone and Data
Systems, Inc. owns directly or indirectly at least 50 percent of either the
outstanding stock of the Company or the combined voting power of such stock, all
outstanding Stock Units shall become fully vested. In the event of a Change in
Control pursuant to Section 8(b)(3) below, there may be substituted for each
Stock Unit the number and class of shares into which each outstanding share of
such Stock shall be converted pursuant to such Change in Control.
b. For purposes of the Plan, "Change in Control" shall mean:
A-3
<PAGE>
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act of 25 percent or more of the combined voting
power of the then outstanding securities of the Company entitled to vote
generally on matters (without regard to the election of directors) (the
"Outstanding Voting Securities"), excluding, however, the following: (i) any
acquisition directly from the Company, or an Affiliate (excluding any
acquisition resulting from the exercise of an exercise, conversion or exchange
privilege, unless the security being so exercised, converted or exchanged was
acquired directly from the Company or an Affiliate), (ii) any acquisition by the
Company or an Affiliate, (iii) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or an Affiliate, (iv) any
acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this Section 8(b), or (v) any
acquisition by the following persons: (A) LeRoy T. Carlson or his spouse, (B)
any child of LeRoy T. Carlson or the spouse of any such child, (C) any
grandchild of LeRoy T. Carlson, including any child adopted by any child of
LeRoy T. Carlson, or the spouse of any such grandchild, (D) the estate of any of
the persons described in clauses (A)-(C), (E) any trust or similar arrangement
(including any acquisition on behalf of such trust or similar arrangement by the
trustees or similar persons) provided that all of the current beneficiaries of
such trust or similar arrangement are persons described in clauses (A)-(C) or
their lineal descendants, or (F) the voting trust which expires on June 30,
2009, or any successor to such voting trust, including the trustees of such
voting trust on behalf of such voting trust (all such persons, collectively, the
"Exempted Persons");
(2) individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided that any individual who becomes a director of the Company
subsequent to the Effective Date whose election, or nomination for election by
the Company's stockholders, was approved by the vote of at least a majority of
the directors then comprising the Incumbent Board shall be deemed a member of
the Incumbent Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or threatened
election contest, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall not be deemed a member of the Incumbent Board;
(3) approval by the stockholders of the Company of a reorganization, merger
or consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Corporate Transaction"), excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners of the Outstanding Voting
Securities immediately prior to such Corporate Transaction will beneficially
own, directly or indirectly, more than 51 percent of the combined voting power
of the outstanding securities of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result of
such transaction owns, either directly or indirectly, the Company or all or
substantially all of the Company's assets) which are entitled to vote generally
on matters (without regard to the election of directors), in substantially the
same proportions relative to each other as the shares of Outstanding Voting
Securities are owned immediately prior to such Corporate Transaction; (ii) no
Person (other than the following Persons: (v) the Company or an Affiliate, (w)
any employee benefit plan (or related trust) sponsored or maintained by the
Company or an Affiliate, (x) the corporation resulting from such Corporate
Transaction, (y) the Exempted Persons, (z) and any Person which beneficially
owned, immediately prior to such Corporate Transaction, directly or indirectly,
25 percent or more of the Outstanding Voting Securities) will beneficially own,
directly or indirectly, 25 percent or more of the combined voting power of the
outstanding securities of such corporation entitled to vote generally on matters
(without regard to the election of directors); and (iii) individuals who were
members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from such
Corporate Transaction; or
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(4) approval by the Company's stockholders of a plan of complete liquidation
or dissolution of the Company.
9. FORFEITURE OF STOCK UNIT AWARD UPON COMPETITION WITH THE COMPANY OR ANY
AFFILIATE OR MISAPPROPRIATION OF CONFIDENTIAL INFORMATION.
Notwithstanding any other provision herein, any unvested Stock Unit award
granted to a Participant under the Plan shall be forfeited as of any date on
which the Participant (a) enters into competition with the Company or an
Affiliate, or (b) misappropriates confidential information of the Company or an
Affiliate, as determined by the Committee or the Board in its sole discretion.
For purposes of the preceding sentence, a Participant shall be treated as
entering into competition with the Company or an Affiliate if such Participant
(i) directly or indirectly, individually or in conjunction with any person, firm
or corporation, has contact with any customer of the Company or an Affiliate or
any prospective customer which has been contacted or solicited by or on behalf
of the Company or an Affiliate for the purpose of soliciting or selling to such
customer or prospective customer any product or service, except to the extent
such contact is made on behalf of the Company or an Affiliate, or (ii) otherwise
competes with the Company or an Affiliate in any manner or otherwise engages in
the business of the Company or an Affiliate.
A Participant shall be treated as misappropriating confidential information
of the Company or an Affiliate if such Participant (i) uses confidential
information (as described below) for the benefit of anyone other than the
Company or such Affiliate, as the case may be, or discloses the confidential
information to anyone not authorized by the Company or such Affiliate, as the
case may be, to receive such information, (ii) upon termination of employment,
makes any summaries of, takes any notes with respect to, or memorizes any
information or takes any confidential information or reproductions thereof from
the facilities of the Company or an Affiliate, or (iii) upon termination of
employment or upon the request of the Company or an Affiliate, fails to return
all confidential information then in the Participant's possession. "Confidential
information" shall mean any confidential and proprietary drawings, reports,
sales and training manuals, customer lists, computer programs, and other
material embodying trade secrets or confidential technical, business, personnel
or financial information of the Company or an Affiliate.
10. CHANGES IN CAPITAL AND CORPORATE STRUCTURE
In the event of any stock split, stock dividend, recapitalization,
reclassification, reorganization, merger, consolidation, combination of shares
in a reverse stock split, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to holders of
shares of Stock other than a regular cash dividend, the terms of each
outstanding Stock Unit award may be adjusted by the Committee in its sole
discretion, subject to final approval by the Board. If any other event shall
occur which in the judgment of the Committee would warrant an adjustment to the
Stock Units subject to an Agreement, the adjustments may be authorized at the
discretion of the Board and made by the Committee upon such terms and conditions
as the Committee may deem equitable and appropriate. Any determination by the
Board or the Committee regarding any such adjustment shall be final, binding and
conclusive.
11. NONTRANSFERABILITY
No Stock Unit or Stock Unit Agreement shall be transferable other than by
will, the laws of descent and distribution or pursuant to beneficiary
designation procedures established by the Committee. Except to the extent
permitted by the preceding sentence, no Stock Unit or Stock Unit award may be
sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any
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attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise
dispose of any such Stock Unit or Stock Unit award, all rights thereunder shall
immediately become null and void.
12. TAX WITHHOLDING
(a) Cash Payment of Award. If the amount paid pursuant to a Stock Unit award
is made in the form of cash, then the Company shall have the right to deduct
from all such amounts any taxes required by law to be withheld with respect to
such award.
(b) Payment of Award in Stock. If the amount paid pursuant to a Stock Unit
award is paid in the form of shares of Stock, as a condition precedent to any
delivery to the Participant of any shares of Stock the Participant shall, upon
request by the Company, pay to the Company such amount of cash as the Company
may be required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over as income or other withholding taxes (the
"Required Tax Payments") with respect to such shares. If the Participant shall
fail to advance the Required Tax Payments after request by the Company, the
Company may, in its discretion, deduct any Required Tax Payments from any amount
then or thereafter payable by the Company to the Participant. The Participant
may elect to satisfy his or her obligation to advance the Required Tax Payments
by any of the following means: (1) a cash payment to the Company, (2) delivery
to the Company of previously owned whole shares of Stock (for which the Employee
has good title, free and clear of all liens and encumbrances) having a fair
market value determined as of the date the obligation to withhold or pay taxes
first arises in connection with the Stock Unit award (the "Tax Date") which is
equal to the Required Tax Payments, (3) authorizing the Company to withhold from
the shares of Stock which would otherwise be delivered to the Participant
pursuant to the Stock Unit award a number of whole shares of Stock having a fair
market value determined as of the Tax Date which is equal to the Required Tax
Payments, (4) a cash payment by a broker-dealer acceptable to the Company
through whom the Participant has sold the shares with respect to which the
Required Tax Payments have arisen or (5) any combination of (1), (2) and (3).
The Company shall have sole discretion to disapprove of an election pursuant to
any of clauses (2)-(5). Whole shares of Stock to be so delivered or withheld may
not have an aggregate fair market value in excess of the minimum amount of the
Required Tax Payments. Any fraction of a share of Stock which would be required
to pay the Required Tax Payments in full shall be disregarded and the remaining
amount due shall be paid in cash by the Participant.
13. NO DIVIDEND RIGHTS
Except as provided under Section 10, no Participant shall be entitled to
have his or her Stock Units increased as a result of any dividends or other
distribution with respect to the shares of Stock.
14. COMPLIANCE WITH APPLICABLE LAW
Each Stock Unit award granted hereunder shall be subject to the requirement
that if at any time the Company determines that the listing, registration or
qualification of the shares of Stock subject to such Stock Unit award upon any
securities exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of shares pursuant to a
Stock Unit award thereunder, such shares shall not be delivered unless such
listing, registration, qualification, consent, approval or other action shall
have been effected or obtained, free of any conditions not acceptable to the
Company. The Company may require that certificates evidencing shares of Stock
delivered pursuant to any Stock Unit award made hereunder bear a legend
indicating that the sale, transfer or other disposition thereof by the holder is
prohibited except in compliance with the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
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15. MISCELLANEOUS PROVISIONS
a. Each Stock Unit award under the Plan shall be evidenced by an Agreement
setting forth the terms and conditions applicable to such award. No award shall
be valid until an Agreement is executed by the President of the Company, on
behalf of the Company, and the recipient of such award and, upon execution by
each party and delivery of the Agreement to the Vice President of Human
Resources of the Company, such award shall be effective as of the effective date
set forth in the Agreement.
b. No person shall have any right to participate in this Plan. Neither this
Plan nor any Stock Unit award made hereunder shall confer upon any person any
right to continued employment by the Company or any affiliate of the Company or
affect in any manner the right of the Company or any affiliate of the Company to
terminate the employment of any person at any time without liability hereunder.
c. The Plan, each Stock Unit award, and all determinations made and actions
taken pursuant thereto, to the extent not otherwise governed by the laws of the
United States, shall be governed by the laws of the State of Illinois and
construed in accordance therewith without giving effect to principles of
conflicts of laws.
d. The Plan shall at all times be entirely unfunded and no provision shall
at any time be made with respect to segregating assets of the Company for
payment of any benefits hereunder. No Participant or other person shall have any
interest in any particular assets of the Company by reason of the right to
receive a benefit under the Plan and any such Participant or other person shall
have only the rights of a general unsecured creditor of the Company with respect
to any rights under the Plan.
e. If a provision of the Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included in the Plan.
f. Except when otherwise required by the context, any masculine terminology
in this document shall include the feminine, and any singular terminology shall
include the plural.
16. AMENDMENT OF THE PLAN
The Board may amend the Plan from time to time. Except as provided in
Section 10, no amendment may impair the rights of the holder of a Stock Unit
award without the consent of such holder.
17. EFFECTIVENESS AND TERMS OF PLAN
The Plan shall be effective as of February 1, 1999, subject to the approval
of the Plan by the Board and the shareholders of the Company. The Company may at
any time terminate the Plan and unless sooner terminated by the Board, the Plan
shall terminate on February 2, 2001. No Stock Unit award shall be granted
pursuant to the Plan after the date of termination of the Plan, although after
such date payments may be made with respect to Stock Unit awards granted prior
to the date of termination.
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<TABLE>
<S><C>
AERIAL COMMUNICATIONS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3.
For Withhold For Against Abstain
1. ELECTION OF CLASS II DIRECTOR / / / / 2. RATIFY ACCOUNTANTS FOR 1999 / / / / / /
(NOMINEE: M. MAKKONEN)
For Withhold 3. RESTRICTED STOCK PLAN / / / / / /
ELECTION OF CLASS III DIRECTOR / / / /
(NOMINEE: P. MIETTUNEN) 4. In accordance with their discretion, to vote upon all other
matters that may properly come before said Annual Meeting and any
adjournment thereof, including matters incidental to the conduct of
the meeting.
Dated: , 1999
---------------------------------------------
Please Sign Here
-------------------------------------------
NOTE: Please date this proxy and sign it exactly as your
name or names appear. All joint owners of shares should
sign. State full title when signing as executor,
administrator, trustee, guardian, etc. Please return
signed proxy in the enclosed envelope.
- FOLD AND DETACH HERE -
Whether or not you are able to attend the Annual Meeting of
Shareholders, it is important that your shares be represented. Accordingly,
please complete and sign the proxy card printed above, tear at the
perforation, and mail the card in the enclosed postage paid envelope
addressed to Aerial Communications, Inc., c/o Harris Trust and Savings
Bank.
</TABLE>
<PAGE>
PROXY PROXY
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF
HE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF
AERIAL COMMUNICATIONS, INC.
TO BE HELD ON MAY 7, 1999
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald W.
Warkentin, or either of them acting in the absence of the other, with power
of substitution, attorneys and proxies for and in the name and place of the
undersigned, to vote the number of Common Shares that the undersigned would
be entitled to vote if then personally present at the 1999 Annual Meeting of
the Shareholders of Aerial Communications, Inc., to be held on Monday, May 7,
1999, or at any adjournment thereof, as set forth in the accompanying Notice
of Annual Meeting and Proxy Statement, receipt of which is hereby
acknowledged, as designated on the reverse side hereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IN PROPOSAL
1 AND "FOR" PROPOSALS 2 AND 3.
IF NO DIRECTION IS MADE, PROXIES WILL BE VOTED "FOR" THE NOMINEES IN
PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- FOLD AND DETACH HERE -
Whether or not you are able to attend the Annual Meeting of
Shareholders, it is important that your shares be represented. Accordingly,
please complete and sign the proxy card printed above, tear at the
perforation, and mail the card in the enclosed postage paid envelope
addressed to Aerial Communications, Inc., c/o Harris Trust and Savings
Bank.
