<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 Section 240.14a-11(c) or Section
240.14a-12
TELEPHONE AND DATA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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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):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
30 North LaSalle Street
Suite 4000
Chicago, Illinois 60602
Phone: (312) 630-1900
Fax: (312) 630-1908
[TDS LOGO]
April 14, 1999
Dear Fellow Shareholders:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
on Friday, May 14, 1999, at 10:00 a.m., Chicago time, at Harris Trust and
Savings Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, in the
Auditorium (the "Annual Meeting"). At the meeting, we will report on the plans
and accomplishments of Telephone and Data Systems, Inc.
The formal notice of the meeting, the Board of Directors' Proxy Statement
and 1998 Annual Report are enclosed. At the 1999 Annual Meeting, shareholders
are being asked to (i) elect two Class I directors and four Class III directors,
(ii) approve the Company's 1999 Employee Stock Purchase Plan, and (iii) ratify
the selection of independent public accountants for the current fiscal year. The
Board of Directors recommends a vote "FOR" the nominees for election as
directors and each of the proposals.
The Board of Directors and members of our management team will be at the
Annual Meeting to meet with shareholders and discuss our record of achievement
and plans for the future. We would like to have as many shareholders as possible
represented at the meeting. Therefore, please sign and return the enclosed proxy
card(s), whether or not you plan to attend the meeting.
If you have any questions prior to the Annual Meeting, please call Corporate
Relations at (312) 630-1900.
We look forward to visiting with you at the Annual Meeting.
Very truly yours,
[SIGNATURE] [SIGNATURE]
LeRoy T. Carlson LeRoy T. Carlson, Jr.
Chairman President and Chief Executive Officer
PLEASE HELP US AVOID THE EXPENSE OF FOLLOW-UP
PROXY MAILINGS TO SHAREHOLDERS BY
SIGNING AND RETURNING THE ENCLOSED PROXY CARD(S) PROMPTLY
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
TO THE SHAREHOLDERS OF
TELEPHONE AND DATA SYSTEMS, INC.
The 1999 Annual Meeting of Shareholders of Telephone and Data Systems, Inc.,
a Delaware corporation (the "Company" or "TDS"), will be held at Harris Trust
and Savings Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, in the
Auditorium on Friday, May 14, 1999 at 10:00 a.m., Chicago time, for the
following purposes:
1. To elect two Class I members and four Class III members of the Board of
Directors. The Board of Directors recommends that shareholders vote FOR
the Board of Directors' nominees for Class I director and Class III
director.
2. To consider and approve the Company's 1999 Employee Stock Purchase Plan.
The Board of Directors recommends that shareholders vote FOR this
proposal.
3. To consider and vote upon a proposal to ratify the selection of Arthur
Andersen LLP as the Company's independent public accountants for the year
ended December 31, 1999. The Board of Directors recommends that
shareholders vote FOR this proposal.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
This Notice of Annual Meeting and Proxy Statement is first being mailed to
shareholders on or about April 14, 1999. The Board of Directors has fixed the
close of business on March 26, 1999, as the record date for the 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 Harris Trust and Savings
Bank, 311 West Monroe Street, Chicago, Illinois 60606. Proxies given pursuant to
this solicitation may be revoked at any time prior to the closing of polls at
the Annual Meeting (by written notice to the Secretary of the Company or
attendance at the Annual Meeting of Shareholders and notice to the Secretary of
such revocation). Once the polls are closed, however, proxies may not be
retroactively revoked.
If you hold more than one class of the Company's shares, you will find
enclosed a separate proxy card for each holding. To assure that all of your
shares are represented, please return a proxy printed in black ink for Common
Shares, including Common Shares owned through the TDS dividend reinvestment plan
and through the TDS Tax-Deferred Savings Plan; a proxy card printed in green ink
for Series A Common Shares, including Series A Common Shares owned through the
dividend reinvestment plan; a proxy card printed in red ink for Preferred Shares
issued before October 31, 1981 (Series A, B, D, G, H and N); and a proxy card
printed in blue ink for Preferred Shares issued after October 31, 1981 (Series
O, S, U, DD, EE, GG, II, JJ, KK, LL, QQ, SS and TT).
On March 26, 1999, the Company had outstanding and entitled to vote
54,423,142 Common Shares, par value $.01 per share (excluding 619,083 Common
Shares held by the Company and 484,012 Common Shares held by a subsidiary of the
Company); 6,949,904 Series A Common Shares, par value $.01 per share; and
240,286 Preferred Shares, par value $.01 per share. Except as set forth in the
next paragraph, each of the outstanding Common Shares and Preferred Shares is
entitled to one vote on all matters to come before the Annual Meeting and each
of the outstanding Series A Common Shares is entitled to ten votes on all
matters to come before the Annual Meeting. Accordingly, the voting power of all
outstanding Series A Common Shares was 69,499,040 votes, and the total voting
power of all outstanding shares of all classes of capital stock was 124,162,468
votes at March 26, 1999.
With respect to the election of directors at the Annual Meeting, the holders
of Common Shares and holders of the Preferred Shares issued before October 31,
1981 (Series A, B, D, G, H and N), voting as a group (collectively, the "Common
Holders"), will be entitled to elect one Class III director. The holders of
Series A Common Shares and the holders of the Preferred Shares issued after
October 31, 1981 (Series O, S, U, DD, EE, GG, II, JJ, KK, LL, QQ, SS and TT),
voting as a group (collectively, the "Series A Holders"), will be entitled to
elect two Class I directors and three Class III directors. The Voting Trust
under Agreement dated June 30, 1989, as amended, (the "TDS Voting Trust") holds
6,351,116 Series A Common Shares, representing approximately 91.4% of the Series
A Common Shares. By
<PAGE>
reason of such holding, the TDS Voting Trust has the voting power to elect all
of the directors elected by the Series A Holders of the Company and has
approximately 51.2% of the voting power with respect to matters other than the
election of directors. The TDS Voting Trust as a Series A Holder will elect two
Class I directors and three Class III directors at the Annual Meeting. The TDS
Voting Trust has advised the Company that it intends to vote FOR the Company's
nominees for election as Class I directors and Class III directors and FOR each
of the other proposals.
VOTING INFORMATION
The Common Holders may, with respect to the election of the Class III
director to be elected by the Common Holders, vote FOR the election of such
director nominee or WITHHOLD authority to vote for such director nominee. The
Series A Holders may, with respect to the election of the Class I directors and
the Class III directors to be elected by the Series A Holders, vote FOR the
election of such director nominees or WITHHOLD authority to vote for such
director nominees. A shareholder may, with respect to the proposal to approve
the 1999 Employee Stock Purchase Plan, (i) vote FOR approval, (ii) vote AGAINST
approval, or (III) ABSTAIN from voting on the proposal. A shareholder may, with
respect to the proposal to ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for 1999, (i) vote FOR approval, (ii)
vote AGAINST approval or (iii) ABSTAIN from voting on such proposal. The Board
of Directors recommends a vote FOR the Board of Director's nominees for Class I
and Class III directors, FOR the approval of the 1999 Employee Stock Purchase
Plan and FOR the ratification of the selection of Arthur Andersen LLP. All
properly executed and unrevoked proxies received in the accompanying form in
time for the 1999 Annual Meeting of Shareholders will be voted in the manner
directed therein. If no direction is made, a proxy by any shareholder will be
voted FOR the election of the Board of Director's nominees to serve as Class I
and Class III directors, FOR the approval of the 1999 Employee Stock Purchase
Plan and FOR the proposal to ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for 1999.
The election of the Class III director to be elected by the Common Holders
requires the affirmative vote of holders 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 the votes of the Common Holders with respect
to the election of such Class III director will be elected to serve as a Class
III director. A majority of the votes entitled to be cast with respect to the
election of such 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 III director will not affect the outcome of the election
of such director.
The election of the Class I directors and Class III directors to be elected
by the Series A Holders requires the affirmative vote of holders 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 the votes
of the Series A Holders with respect to the election of such Class I director
and each Class III director will be elected to serve as a Class I director or
Class III director, respectively. A majority of the votes entitled to be cast
with respect to the election of such Class I or Class III 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 I or Class III directors
will not affect the outcome of the election of such Class I or Class III
directors.
If a quorum is present at the Annual Meeting, the proposal to approve the
1999 Employee Stock Purchase Plan requires the affirmative vote of a majority of
the voting power of all shares of capital stock of the Company 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.
Assuming a quorum exists, the approval of the proposal to ratify the
selection of Arthur Andersen LLP as the Company's independent public accountants
for 1999 requires that the affirmative vote of a majority of the voting power of
all shares of capital stock of the Company present in person or represented by
proxy and entitled to vote with respect to such matter. A majority of the votes
entitled to be cast on the proposal constitutes a quorum for action on that
proposal. Abstentions will be treated as votes against this proposal. Non-votes
will not affect the determination of whether such proposal is approved for
purposes of such vote.
A complete list of shareholders entitled to vote at the Annual Meeting,
arranged in alphabetical order and by voting group, showing the address of and
number of shares held by each shareholder, will be kept open at the offices of
the Company, 30 North LaSalle Street, 40th Floor, Chicago, Illinois 60602, for
examination by any shareholder during normal business hours, for a period of at
least ten days prior to the Annual Meeting.
-2-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Each year,
one class is elected to serve for three years. At the 1999 Annual Meeting of
Shareholders, four Class III directors will be elected for a term of three years
or until their successors are elected and qualified. In addition, two Class I
directors, who were appointed to the Board of Directors since the 1998 Annual
Meeting, are being submitted for approval by shareholders for the remainder of
their unexpired terms. The Board of Director's nominees for election as Class I
directors and Class III directors are identified in the tables below. In the
event any such nominee, who has expressed an intention to serve if elected,
fails to stand for election, the persons named in the proxy presently intend to
vote for a substitute nominee designated by the Board of Directors.
NOMINEES
CLASS I DIRECTORS-TERMS TO EXPIRE IN 2000
NOMINEES FOR ELECTION BY SERIES A HOLDERS
The following persons, if elected at the 1999 Annual Meeting of
Shareholders, will complete their terms as Class I directors until the 2000
Annual Meeting of Shareholders or until their successors are elected and
qualified:
<TABLE>
<CAPTION>
POSITION WITH TDS SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------ --- ------------------------------------------------------------------ -------------------
<S> <C> <C> <C>
James Barr, III............... 59 Director of the Company and President of TDS Telecommunications 1990
Corporation
Sandra L. Helton.............. 49 Director and Executive Vice President-Finance and Chief Financial November 1998
Officer of the Company
</TABLE>
James Barr, III has been President and Chief Executive Officer and a
director of TDS Telecommunications Corporation ("TDS Telecom"), a subsidiary of
TDS which operates local telephone companies, for more than five years. Mr. Barr
is also a director of Aerial Communications, Inc. (Nasdaq Stock Market: "AERL"),
a subsidiary of the Company which offers broadband personal communications
services ("Aerial"). Mr. Barr was elected as a Class I director by the Board of
Directors on July 10, 1998 to fill a vacancy created by the resignation from the
Board of Directors of Mr. Donald R. Brown. Immediately prior thereto, Mr. Barr's
term as a Class II director had expired at the 1998 Annual Meeting of
Shareholders.
Sandra L. Helton joined the Company as Executive Vice President-Finance and
Chief Financial Officer in August 1998. Prior to joining the Company, Ms. Helton
was the 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. Pursuant to the terms of Ms.
Helton's employment letter agreement, dated August 7, 1998, Ms. Helton was
appointed as a Class I director by the Board of Directors in November 1998 to
fill a vacancy created by the resignation from the Board of Directors of Rudolph
E. Hornacek. Ms. Helton is also a director of United States Cellular Corporation
(AMEX: "USM"), a subsidiary of the Company which operates and invests in
cellular telephone companies and properties ("U.S. Cellular"), TDS Telecom and
Aerial.
CLASS III DIRECTORS-TERMS TO EXPIRE IN 2002
NOMINEE FOR ELECTION BY COMMON HOLDERS
The following person, if elected at the 1999 Annual Meeting of Shareholders,
will serve as a Class III director until the 2002 Annual Meeting of Shareholders
or until his successor is elected and qualified:
<TABLE>
<CAPTION>
POSITION WITH TDS
NAME AGE AND PRINCIPAL OCCUPATION
- ------------------------------ --- -----------------------------------------------------------------------
<S> <C> <C>
Herbert S. Wander............. 64 Director of the Company and Partner, Katten, Muchin & Zavis, Chicago,
Illinois
<CAPTION>
SERVED AS
NAME DIRECTOR SINCE
- ------------------------------ ---------------
<S> <C>
Herbert S. Wander............. 1968
</TABLE>
Mr. Herbert S. Wander has had the principal occupation indicated for more
than five years. Mr. Wander is currently a Class III director and was previously
elected by the Common Holders.
-3-
<PAGE>
The law firm of Katten, Muchin & Zavis from time to time provided legal
services to TDS on a non-regular and insubstantial basis.
NOMINEES FOR ELECTION BY SERIES A HOLDERS
The following persons, if elected at the 1999 Annual Meeting of
Shareholders, will serve as Class III directors until the 2002 Annual Meeting of
Shareholders or until their successors are elected and qualified:
<TABLE>
<CAPTION>
POSITION WITH TDS
NAME AGE AND PRINCIPAL OCCUPATION
- ------------------------------ --- -----------------------------------------------------------------------
<S> <C> <C>
LeRoy T. Carlson.............. 82 Director and Chairman of the Company
Walter C. D. Carlson.......... 45 Director of the Company and Partner, Sidley & Austin, Chicago, Illinois
Letitia G. C. Carlson......... 38 Director of the Company, Medical Doctor and Assistant Professor at
George Washington University Medical Center
<CAPTION>
SERVED AS
NAME DIRECTOR SINCE
- ------------------------------ ---------------
<S> <C>
LeRoy T. Carlson.............. 1968
Walter C. D. Carlson.......... 1981
Letitia G. C. Carlson......... 1996
</TABLE>
Messrs. LeRoy T. Carlson and Walter C. D. Carlson and Dr. Letitia G. C.
Carlson have had the principal occupations indicated for more than five years.
Mr. LeRoy T. Carlson is the father of Messrs. LeRoy T. Carlson, Jr. and
Walter C. D. Carlson and Dr. Letitia G. C. Carlson.
Each of Messrs. LeRoy T. Carlson and Walter C. D. Carlson and Dr. Letitia G.
C. Carlson are currently Class III directors and were previously elected by the
Series A Holders.
The law firm of Sidley & Austin provided legal services to TDS in 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE NOMINEES FOR
DIRECTOR.
OTHER DIRECTORS
CLASS I DIRECTORS-TERMS TO EXPIRE IN 2000
The following persons are current Class I directors whose terms will expire
at the 2000 Annual Meeting:
<TABLE>
<CAPTION>
POSITION WITH TDS
NAME AGE AND PRINCIPAL OCCUPATION
- ------------------------------ --- -----------------------------------------------------------------------
<S> <C> <C>
George W. Off................. 52 Director of the Company and Chairman of the Board of Directors of
Catalina Marketing Corporation
Martin L. Solomon............. 62 Director of the Company and Chairman and Chief Executive Officer of
American Country Holdings, Inc.
<CAPTION>
SERVED AS
NAME DIRECTOR SINCE
- ------------------------------ ---------------
<S> <C>
George W. Off................. 1997
Martin L. Solomon............. 1997
</TABLE>
George W. Off was elected in July 1998 as the Chairman of the Board of
Directors of Catalina Marketing Corporation, a New York Stock Exchange listed
company, which he was instrumental in founding in 1983. Mr. Off served as
President and Chief Executive Officer of Catalina from 1994 to 1998. Prior to
that, Mr. Off was President and Chief Operating Officer between 1992 and 1994,
and its Executive Vice President between 1990 and 1992. Catalina is a leading
supplier of in-store electronic scanner-activated consumer promotions.
Martin L. Solomon has been Chairman and Chief Executive Officer and a
director of American Country Holdings, Inc., an insurance holding company, since
June 1997. Prior to that time, Mr. Solomon had been occupied primarily as a
private investor since 1990. He is the former Vice Chairman and Director of
Great Dane Holdings, Inc. and, in addition to TDS and American Country Holdings,
Inc., is currently the director of three public companies: XTRA Corporation, a
lessor of truck trailers, marine containers and other equipment; Hexcel
Corporation, a manufacturer of composite materials; and MFN Financial Corp., a
finance company.
Messrs. Off and Solomon are currently Class I directors of the Company. Mr.
Off was elected by the Series A Holders. Mr. Solomon was elected by the Common
Holders.
-4-
<PAGE>
CLASS II DIRECTORS-TERMS TO EXPIRE IN 2001
The following persons are current Class II directors whose terms will expire
at the 2001 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
POSITION WITH TDS
NAME AGE AND PRINCIPAL OCCUPATION
- ------------------------------ --- -----------------------------------------------------------------------
<S> <C> <C>
Kevin A. Mundt................ 45 Director of the Company and Director and Vice President of Mercer
Management Consulting
Murray L. Swanson............. 58 Director of the Company and Managing Director and Chief Executive
Officer of Sonera Corporation U.S.
LeRoy T. Carlson, Jr.......... 52 Director and President of the Company (Chief Executive Officer)
Donald C. Nebergall........... 70 Director and Consultant to the Company and other companies
<CAPTION>
SERVED AS
NAME DIRECTOR SINCE
- ------------------------------ ---------------
<S> <C>
Kevin A. Mundt................ 1997
Murray L. Swanson............. 1983
LeRoy T. Carlson, Jr.......... 1968
Donald C. Nebergall........... 1977
</TABLE>
Kevin A. Mundt has been Director and Vice President of Mercer Management
Consulting, a management consulting firm, since 1997. Prior to that time, he was
a co-founder, and had been a director since 1984, of Corporate Decisions, Inc.,
a strategy consulting firm, which merged with Mercer Management Consulting in
1997.
Murray L. Swanson has been the Managing Director and Chief Executive Officer
of Sonera Corporation U.S., a subsidiary of Sonera, Ltd., a telecommunications
company organized under the laws of Finland, since October 1998. Prior to the
appointment of Ms. Helton as the Company's Executive Vice President and Chief
Financial Officer in August 1998, Mr. Swanson was the Company's Executive Vice
President-Finance and Chief Financial Officer for more than five years. Pursuant
to an Employment Agreement, Mr. Swanson continued to be employed by the Company
until December 1998, at which time he retired from the Company. The Employment
Agreement permitted Mr. Swanson to accept employment with Sonera prior to his
retirement date with the Company. Mr. Swanson served as a director of U.S.
Cellular, Aerial and TDS Telecom until his resignation from the Board of
Directors of TDS Telecom in September 1998 and the Board of Directors of each of
U.S. Cellular and Aerial in October 1998.
LeRoy T. Carlson, Jr., has been the Company's President and Chief Executive
Officer for more than five years. Mr. LeRoy T. Carlson, Jr. is also Chairman and
a director of U.S. Cellular, Aerial and TDS Telecom. Mr. LeRoy T. Carlson, Jr.
is the son of Mr. LeRoy T. Carlson, and the brother of Mr. Walter C. D. Carlson
and Dr. Letitia G. C. Carlson.
Donald C. Nebergall has been a consultant to the Company and other companies
since 1988. Mr. Nebergall was Vice President of The Chapman Company, a
registered investment advisory company located in Cedar Rapids, Iowa, from 1986
to 1988. Prior to that, he was the Chairman of Brenton Bank & Trust Company,
Cedar Rapids, Iowa, from 1982 to 1986, and was its President from 1972 to 1982.
Messrs. Mundt, Swanson, Carlson and Nebergall are currently Class II
directors of the Company. Messrs. Mundt and Swanson were previously elected by
the Common Holders. Messrs. Carlson and Nebergall were previously elected by the
Series A Holders.
COMMITTEES AND MEETINGS
The Board of Directors of the Company held 13 meetings during 1998. Each
person who was a director during all of 1998 attended at least 75% of the
meetings.
The Board of Directors does not have a formal 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 current members of the Audit Committee are:
Messrs. Walter C. D. Carlson (Chairman), George W. Off and Herbert S. Wander.
The Audit Committee held 4 meetings in 1998. Each person who was a member of the
Audit Committee during 1998 attended at least 75% of the meetings.
The Stock Option Compensation Committee approves the annual salary, bonus
and other cash compensation for the President, considers and approves long-term
compensation for executive officers and considers and recommends to the Board of
Directors any changes to long-term compensation plans or policies. The current
members of the Stock Option Compensation Committee are: Mr. George W. Off
(Chairman) and Dr. Letitia G. C. Carlson. All meetings and other actions of the
Stock Option Compensation Committee in 1998 were attended or taken by at least
75% of the members.
-5-
<PAGE>
The primary function of the Compensation Committee is to approve the annual
salary, bonus and other cash compensation of officers and key employees of TDS
other than the President. The sole member of the Compensation Committee is LeRoy
T. Carlson, Jr., President of TDS. All actions of the Compensation Committee are
taken by written consent.
In late 1998, the Board of Directors established a Special Committee
consisting of all directors of TDS other than Mr. Murray L. Swanson (the
"Special Committee"). The Special Committee was authorized to consider various
alternatives with respect to TDS's investment in Aerial, including a spin-off of
Aerial, and to make its recommendation to the TDS Board of Directors. The TDS
Board of Directors believed that the consideration of such alternatives may
involve confidential and privileged information relating to TDS's investment in
Aerial, which might involve a conflict of interest with Sonera Ltd. Since Mr.
Swanson is the Managing Director and CEO of Sonera Corporation U.S., a
subsidiary of Sonera Ltd, the Board of Directors determined that it would be
desirable to establish a committee consisting of all directors other than Mr.
Swanson to consider such alternatives. The Special Committee held two meetings
in 1998. All of the members of the Special Committee attended at least 75% of
the meetings held in 1998.
PROPOSAL 2
1999 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has determined that it is in the best interests of
the Company and its shareholders to approve the 1999 Employee Stock Purchase
Plan of the Company (the "Plan").
The purpose of the Plan is to encourage and facilitate the purchase of
Common Shares by eligible employees of the Company and its subsidiaries and to
provide an additional incentive to promote the best interests of the Company and
its subsidiaries and an additional opportunity to participate in their economic
progress. The Plan was adopted by the Board of Directors of the Company (the
"Board") and will become effective July 1, 1999. The Plan is subject to the
approval of the shareholders of the Company within twelve months before or after
its adoption by the Board. The Plan will be administered by a three-person
committee (the "Committee") composed of persons who are ineligible to
participate in the Plan. Subject to the express provisions of the Plan, the
Committee will have complete authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it and to make all other
determinations necessary or advisable for the administration of the Plan. The
Board may at any time, and from time to time, amend the Plan in any respect,
except that, without shareholder approval, no amendment may be made changing the
number of shares to be reserved under the Plan (unless certain changes occur in
the Company's capital structure as described in the Plan), or that would
otherwise require shareholder approval under applicable law.
The Plan will terminate on December 31, 2002 (the "Termination Date"), or,
if earlier, upon the purchase by participants of all shares that may be issued
under the Plan or any earlier time in the discretion of the Board. The Plan is
comprised of two "Offering Periods," the first of which is an 18-month period
beginning on July 1, 1999 and ending on December 31, 2000, and the second of
which is a 24-month period beginning on January 1, 2001 and ending on December
31, 2002. Each Offering Period is comprised of consecutive quarterly "Purchase
Periods," the last day of each of which is a "Purchase Date." In addition, the
date on which the Plan terminates will be treated as a "Purchase Date" under the
Plan and the last day of an "Offering Period."
In general, participation in the Plan is available to any Eligible Employee
(as hereinafter defined) of the Company or any of its subsidiaries that has
adopted the Plan with the prior approval of the Company (a "participating
subsidiary"). For purposes of the preceding sentence, an "Eligible Employee" is
any employee of the Company or a participating subsidiary, other than a leased
employee (within the meaning of section 414(n) of the Code). Each Eligible
Employee can enroll in the Plan as of the first entry date as of which the
Eligible Employee completes the Plan's eligibility service requirement, or can
enroll as of any later date. The Plan's eligibility service requirement is
satisfied if an employee completes at least three months of continuous service
with the Company or any subsidiary thereof (regardless of whether the subsidiary
is a participating subsidiary). Under the Plan, an entry date occurs on July 1,
1999 and the first day of each subsequent calendar month. Upon enrollment, an
Eligible Employee will become a "Participant" in the Plan. Approximately 9,000
employees will be eligible to participate in the Plan as of January 1, 1999.
For each Offering Period, each Eligible Employee will be granted an option
under the Plan, as of the first day of the Offering Period, or if later, the
first entry date on which the Eligible Employee is eligible to enroll in the
Plan (a "grant date"), to purchase a number of Common Shares equal to (x)
$25,000, multiplied by (y) the number of full or partial calendar years in the
Offering Period (as hereinafter defined), divided by (z) the closing price of a
Common
-6-
<PAGE>
Share on the American Stock Exchange on the grant date (or if such date is not a
trading day, the closing price of such share on the American Stock Exchange on
the next preceding trading day). However, no Eligible Employee will be granted
an option under the Plan to purchase Common Shares if such Eligible Employee,
immediately after the grant of the option, would own stock (including shares
subject to the option) possessing five percent or more of the total combined
voting power or value of all classes of issued and outstanding stock of the
Company or any of its subsidiaries.
The maximum number of shares available for purchase under the Plan will be
210,000, subject to adjustment in the event of certain changes to the Company's
capital structure, as described in the Plan.
As of the entry date on which an Eligible Employee enrolls as a Participant
in the Plan, the Participant will make an election specifying his chosen rate of
payroll deduction contributions in an amount not less than one and not more than
15 percent of the Participant's compensation (as defined in the Plan) for each
payroll period, effective as soon as administratively practicable after such
election is made. A Participant will have the right to elect to increase or
decrease his or her designated rate of payroll deductions under the Plan from
time to time, in the manner prescribed by the Committee. In addition, a
Participant can elect to withdraw from participation in the Plan for the
remainder of an Offering Period, as described below.
The Committee will cause to be established a separate "Employee Stock
Purchase Account" on behalf of each Participant to hold payroll deduction
contributions made under the Plan. Subject to a Participant's right to withdraw
for an Offering Period as described below, the balance of each Participant's
Employee Stock Purchase Account will be applied on each Purchase Date to
purchase the number of Common Shares determined by dividing the balance of such
account as of such date by the Purchase Price of a Common Share on such date.
The "Purchase Price" under the Plan on a Purchase Date is 85 percent of the
closing price of a Common Share on the American Stock Exchange on such date, or
if such date is not a trading day, 85 percent of the closing price of a Common
Share on the next preceding trading day, rounded up to the nearest whole cent.
The number of Common Shares to be purchased on a Purchase Date will be rounded
to the nearest one ten-thousandth of a share (or such other fractional interest
determined by the Committee).
Notwithstanding the foregoing, the number of Common Shares to be purchased
by a Participant on a Purchase Date will be limited to the extent necessary so
that the Participant's right to purchase Common Shares under the Plan and shares
under all other employee stock purchase plans maintained by the Company or any
of its subsidiaries does not accrue at a rate exceeding $25,000 of the fair
market value of such shares (determined at the time such option is granted) for
each calendar year in which the option is outstanding, determined in accordance
with section 423(b)(8) of the Code. If any portion of a Participant's Employee
Stock Purchase Account cannot be applied to purchase Common Shares on a Purchase
Date as a result of this limitation, such amount will remain credited to such
account and will be available to purchase Common Shares as of the next Purchase
Date; provided that, if such Purchase Date is on the last day of an Offering
Period, the balance of such account will promptly be refunded to the
Participant.
If, as of a Purchase Date, the number of Common Shares to be purchased on
behalf of all Participants collectively exceeds the number of Common Shares
available for purchase under the Plan, the number of Common Shares to be
purchased by each Participant on the Purchase Date will be proportionately
reduced in the manner described in the Plan. Amounts credited to a Participant's
Employee Stock Purchase Account that are not applied to purchase Common Shares
as a result of this limitation will promptly be refunded to the Participant.
A Stock Account will be established on behalf of each Participant in the
Plan by a custodian selected by the Company. As of each Purchase Date, each
Participant's Stock Account will be credited with the number of whole and
fractional shares purchased on the Participant's behalf under the Plan on such
date. Shares credited to a Participant's Stock Account will be held by the
custodian as nominee. The custodian will establish procedures pursuant to which
a Participant can elect that shares credited to such account be registered in
the name of the Participant (or jointly in the name of a Participant and one
other person), and that certificates representing such shares be issued to the
Participant.
Prior to the end of any Offering Period, a Participant can elect to withdraw
from the Plan for the remainder of the Offering Period. A Participant's election
to withdraw for an Offering Period will be made in the time and manner
prescribed by the Committee. Upon withdrawal from the Plan, the balance of the
Participant's Employee Stock Purchase Account promptly will be refunded to the
Participant. A Participant who withdraws for an Offering Period will not be
eligible to elect to recommence participation in the Plan until the next
Offering Period.
-7-
<PAGE>
In the event of a Participant's termination of employment on account of
retirement or death, the balance of the Participant's Employee Stock Purchase
Account will be applied to purchase Common Shares on the next Purchase Date
unless the Participant (or the Participant's estate) elects to withdraw from the
Plan in the time and manner prescribed by the Committee. In the event of the
termination of the Participant's employment for any other reason, the
Participant's participation in the Plan will cease, and the balance of the
Participant's Employee Stock Purchase Account promptly will be refunded to the
Participant. Special rules apply in the event a Participant's employment is
transferred from the Company or a participating subsidiary to a
non-participating subsidiary.
The Company believes that the Plan qualifies under section 423 of the Code
as an employee stock purchase plan. Under section 423 the Participant does not
recognize any taxable income at the time Common Shares are purchased under the
Plan. The following is a brief summary of the federal income tax consequences
under the Plan.
If a Participant disposes of Common Shares purchased under the Plan within
two years of the grant date (as defined above) or within one year after an
applicable Purchase Date, whichever is later (a "disqualifying disposition"),
the Participant will recognize ordinary compensation income in the amount of the
excess of the fair market value of the Common Shares on such Purchase Date over
the Purchase Price of the shares. The Participant's cost basis in the shares
will be increased by the amount of such ordinary compensation income. If the
amount realized upon such disposition exceeds the Participant's cost basis in
the shares (as so increased), the Participant will recognize capital gain in the
amount of the difference between the amount realized and such adjusted cost
basis. Under current tax law, gain on capital assets held for 12 months or less
is treated as "short-term" capital gain which is not eligible for certain
preferential tax treatment afforded "long-term" capital gain. In the event the
amount realized is less than the cost basis in the Common Shares (as so
increased), the Participant will recognize capital loss in the amount of the
difference between the adjusted cost basis and the amount realized.
If a Participant disposes of Common Shares purchased under the Plan two
years or more after the grant date or one year or more after the applicable
Purchase Date, whichever is later (a "qualifying disposition"), the tax
treatment will be different. The Participant will recognize ordinary
compensation income in the amount of the lesser of (i) the excess of the fair
market value of the Common Shares on the grant date over the option price of the
shares (in this case, 85 percent of the closing price for such shares on the
American Stock Exchange) on the grant date, and (ii) the excess of the amount
realized over the Purchase Price of the Common Shares. The Participant's cost
basis in the shares will be increased by the amount of such ordinary
compensation income. In addition, the Participant will recognize capital gain
equal to the difference (if any) between the amount realized upon such
disposition and the cost basis in the shares (as so increased). In the event the
amount realized is less than the Purchase Price, the Participant will recognize
capital loss in the amount of the difference between the Purchase Price and the
amount realized.
The Company will not be entitled to a deduction for any excess of the fair
market value of the Common Shares over the Purchase Price, except to the extent
the Participant recognizes ordinary compensation income upon a disqualifying
disposition.
The Company has not provided a table of new plan benefits since the benefits
to executive officers is not determinable. The benefits will depend on the
number of Common Shares which the executive officers will subscribe for, if any,
under the plan and the future price of such shares.
This description of the Plan is a summary only and is qualified by the terms
of the Plan itself, a copy of which is attached to this Proxy Statement as
Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMPANY'S
1999 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 3
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors anticipates continuing the services of Arthur
Andersen LLP as independent public accountants for the current 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 of Shareholders and will have the opportunity to make a statement and
respond to appropriate questions raised by shareholders at the Annual Meeting or
submitted in writing prior thereto.
Shareholder ratification of the selection of Arthur Andersen LLP as the
Company's independent public accountants is not required by the Bylaws or
otherwise. However, as a matter of good corporate practice, the Board of
Directors has elected to seek such ratification by the affirmative vote of the
holders of a majority of the votes cast
-8-
<PAGE>
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.
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.
EXECUTIVE OFFICERS
In addition to the executive officers identified in the tables regarding the
election of directors, set forth below is a table identifying current officers
of the Company and its subsidiaries who may be deemed to be executive officers
of the Company for disclosure purposes under the rules of the Securities and
Exchange Commission. Unless otherwise indicated, the position held is an office
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------------------
<S> <C> <C>
H. Donald Nelson.................... 65 President and CEO of United States Cellular Corporation
Donald W. Warkentin................. 43 President and CEO of Aerial Communications, Inc.
Scott H. Williamson................. 48 Senior Vice President-Acquisitions and Corporate Development
Michael K. Chesney.................. 43 Vice President-Corporate Development
George L. Dienes.................... 68 Vice President-Corporate Development
C. Theodore Herbert................. 63 Vice President-Human Resources
Rudolph E. Hornacek................. 71 Vice President-Engineering
Peter L. Sereda..................... 40 Vice President and Treasurer
Mark A. Steinkrauss................. 53 Vice President-Corporate Relations
Edward W. Towers.................... 51 Vice President-Corporate Development & Operations
James W. Twesme..................... 46 Vice President-Corporate Finance
Byron A. Wertz...................... 52 Vice President-Corporate Development
Gregory J. Wilkinson................ 48 Vice President and Controller
Michael G. Hron..................... 54 Secretary
</TABLE>
H. Donald Nelson has served as a director and the President and Chief
Executive Officer of U.S. Cellular for more than five years.
Donald W. Warkentin was appointed a director and President and Chief
Executive Officer of Aerial in 1995. Prior to that time, Mr. Warkentin was Vice
President of Multimedia Marketing for US West Communications from 1994 to 1995.
Before that, Mr. Warkentin was Head of Marketing for Mercury One-2-One in the
United Kingdom, the world's first PCS venture.
Scott H. Williamson was appointed Senior Vice President-Acquisitions and
Corporate Development of the Company in February 1998. Prior to that time, he
was Vice President-Acquisitions of the Company since 1995. Immediately before
joining the Company, Mr. Williamson was Vice President, Corporate Development of
FMC Corporation, a manufacturer of machinery and chemicals, between 1993 and
1995.
Michael K. Chesney was appointed a Vice President-Corporate Development of
the Company in 1994. Prior to that, he was Director of Corporate Development of
the Company for more than five years.
George L. Dienes has been a Vice President-Corporate Development of the
Company for more than five years.
C. Theodore Herbert has been Vice President-Human Resources of the Company
for more than five years.
Rudolph E. Hornacek has been Vice President-Engineering of the Company for
more than five years. He was a director of TDS until his resignation in November
1998. He is currently director emeritus of TDS. Mr. Hornacek is a director of
TDS Telecom and Aerial.
-9-
<PAGE>
Peter L. Sereda joined the Company and was appointed Vice President and
Treasurer of the Company in February 1998. Prior to joining the Company, he was
employed by Specialty Foods Corporation, a privately held company which produces
meat and bakery products, between 1994 and 1998. At Specialty Foods Corporation,
Mr. Sereda was Vice President of Finance-Operations between 1997 and 1998, and
was Vice President and Treasurer between 1994 and 1997. Prior to that time, Mr.
Sereda was employed by Duchossois Industries, Inc., a privately-held diversified
manufacturing company, between 1986 and 1994, and was its Treasurer between 1990
and 1994.
Mark A. Steinkrauss was appointed Vice President-Corporate Relations of the
Company in March 1998. Prior to joining the Company, Mr. Steinkrauss was
employed by Fruit of the Loom, Inc., an international apparel company, for more
than five years. At Fruit of the Loom, Mr. Steinkrauss was Vice President,
Corporate Relations, between 1993 and 1998, and was Vice President, Investor
Relations, between 1992 and 1993.
Edward W. Towers was appointed Vice President-Corporate Development and
Operations of the Company in 1997. Immediately prior thereto, Mr. Towers was
Vice President-Market and Business Development of U.S. Cellular for more than
five years.
James W. Twesme was appointed Vice President-Corporate Finance of the
Company in January 1999. Immediately prior thereto, Mr. Twesme was Assistant
Treasurer of the Company for more than five years.
Byron A. Wertz was appointed a Vice President-Corporate Development of the
Company in 1994. Prior to that, he was Director-Telecommunications Development
of the Company for more than five years. Mr. Wertz is the nephew of LeRoy T.
Carlson and the cousin of each of LeRoy T. Carlson, Jr., Walter C. D. Carlson
and Letitia G. C. Carlson.
Gregory J. Wilkinson was appointed a Vice President of the Company in 1993.
He has been the Controller of the Company for more than five years.
Michael G. Hron has been the Secretary of the Company for more than five
years. He has been a partner at the law firm of Sidley & Austin for more than
five years.
All of TDS' executive officers devote substantially all of their time to the
Company or its subsidiaries, except for Michael G. Hron who is a practicing
attorney.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table summarizes the compensation paid by TDS to the President
and chief executive officer of TDS and certain other executive officers of the
Company and its subsidiaries other than the chief executive officer. Due to the
fact that certain 1998 bonuses have not yet been finalized, the Company is
reporting the four most highly compensated executive officers in addition to the
President and chief executive officer.
-10-
<PAGE>
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------------- PAYOUTS
------------------------------------- RESTRICTED SECURITIES ----------
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY(2) BONUS(3) COMPENSATION(4) AWARD(S)(5) OPTIONS/SARS(6) PAYOUTS(7) COMPENSATION(8)
- ------------------------ ---- --------- -------- --------------- ----------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LeRoy T. Carlson........ 1998 $ 418,000 $ -- -- -- 57,420 -- $70,019
Chairman 1997 381,000 160,000 -- -- 8,295 -- 67,956
1996 347,000 135,000 -- -- 9,367 -- 68,467
LeRoy T. Carlson, Jr.... 1998 $ 570,000 $ -- -- -- 81,900 -- $28,287
President (chief 1997 515,000 270,000 -- -- 11,770 -- 22,894
executive officer) 1996 440,000 250,000 -- -- 13,233 -- 22,047
James Barr III.......... 1998 $ 359,000 $112,500 -- -- -- $ 327,410 $34,108
President of TDS 1997 325,000 183,500 -- -- -- -- 34,777
Telecommunications 1996 295,512 100,000 -- -- -- -- 35,214
Corporation
H. Donald Nelson(9)..... 1998 $ 371,589 $232,000 $-- $995,300 17,000 -- $39,788
President of United 1997 337,709 135,000 8,438 254,837 25,178 -- 34,468
States Cellular 1996 306,672 145,000 -- -- 8,560 -- 26,748
Corporation
Donald W. 1998 $ 300,586 $101,165 -- -- 30,850 -- $27,245
Warkentin(10)......... 1997 283,011 109,313 -- -- 255,112 -- 24,817
President of Aerial 1996 238,996 264,372 -- -- 9,526 -- 12,682
Communications, Inc.
</TABLE>
- ------------
(1) Does not include the discount amount under any dividend reinvestment plan or
any employee stock purchase plan since such plans are generally available to
all eligible shareholders or salaried employees, respectively. 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% of the total of annual salary and bonus
reported for the named executive officers above.
(2) Represents the dollar value of base salary (cash and non-cash) earned by the
named executive officer during the fiscal year identified.
(3) Represents the dollar value of bonus (cash and non-cash) earned (whether
received in cash or deferred) by the named executive officer for 1998, 1997
and 1996. Bonuses for 1998 have not yet been determined for Messrs. LeRoy T.
Carlson and LeRoy T. Carlson, Jr. See "Executive Officer Compensation
Report."
(4) Represents the fair market value of phantom stock units credited to such
officer with respect to deferred bonus compensation. See "Bonus Deferral and
Stock Unit Match." Messrs. LeRoy T. Carlson and LeRoy T. Carlson, Jr. have
deferred 100% of their 1998 bonuses pursuant to the TDS 1998 Long-Term
Incentive Plan. Since the bonuses for 1998 have not yet been determined for
Messrs. LeRoy T. Carlson and LeRoy T. Carlson, Jr., the dollar value of the
Company match phantom stock units cannot be determined at this time for such
persons.
(5) Represents the value of bonus stock and restricted stock (based on the
closing price of USM Common Shares on the date of grant) awarded to Mr.
Nelson in 1998.
(6) Represents the number of shares subject to stock options ("Options") and/or
stock appreciation rights ("SARs") awarded during the fiscal year
identified. Unless otherwise indicated by footnote, the awards represent
Options without tandem SARs and relate to TDS Common Shares. In the case of
H. Donald Nelson, the amounts represent the number of USM shares subject to
Options and/or SARs awarded during the fiscal year identified. In the case
of Donald W. Warkentin, the amount for 1996 represents TDS Common Shares
subject to Options and the amounts in 1997 and 1998 represent AERL Common
Shares subject to Options.
(7) In 1998, Mr. Barr exercised options for an aggregate of 106,960 phantom
stock units for 1995, 1996 and 1997, and received a net cash payment, prior
to withholding taxes, of $327,410. See "TDS Telecom Phantom Incentive Option
Plan."
(8) Includes contributions by the Company for the benefit of the named executive
officer under the TDS Tax-Deferred Savings Plan ("TDSP"), the TDS Employees'
Pension Trust or the TDS Wireless Companies' Pension Plan ("Pension Plan"),
including earnings accrued under a related supplemental benefit agreement,
and the TDS Supplemental Executive Retirement Plan ("SERP"), the dollar
value of any insurance
-11-
<PAGE>
premiums paid during the covered fiscal year with respect to life insurance
for the benefit of the named executive ("Life Insurance"), as indicated
below for 1998:
<TABLE>
<CAPTION>
LEROY T. CARLSON, JAMES BARR
LEROY T. CARLSON JR. III H. DONALD NELSON DONALD W. WARKENTIN
---------------- ------------------- ------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
TDSP................................ $ 2,880 $ 2,880 $ 969 $ 4,800 $ 4,800
Pension Plan........................ 25,000 7,539 15,827 7,548 7,548
SERP................................ 30,000 14,916 14,173 22,452 14,400
Life Insurance...................... 12,139 2,952 3,139 4,988 497
-------- -------- ------------- -------- --------
Total........................... $ 70,019 $ 28,287 $ 34,108 $ 39,788 $ 27,245
-------- -------- ------------- -------- --------
-------- -------- ------------- -------- --------
</TABLE>
(9) All of Mr. Nelson's compensation is paid by USM. Mr. Nelson's annual
compensation is approved by LeRoy T. Carlson, Jr., the Chairman of USM, and
Mr. Nelson's long-term compensation is approved by the stock option
compensation committee of USM.
(10) Mr. Warkentin was originally hired by TDS in 1995 but is now an employee of
AERL. As an employee of AERL, Mr. Warkentin's annual compensation is
approved by LeRoy T. Carlson, Jr., the Chairman of AERL, and Mr. Warkentin's
long-term compensation is approved by the stock option compensation
committee of AERL. Mr. Warkentin's 1996 bonus includes a $150,000 signing
bonus on his one-year anniversary date of his employment by AERL.
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 OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS/SARS OPTION TERMS(4)
OPTIONS/SARS GRANTED TO EXERCISE MARKET EXPIRATION ----------------------
NAME GRANTED(1) EMPLOYEES(2) PRICE PRICE(3) DATE 5% 10%
- ---------------------------------------- ------------ ------------ -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LeRoy T. Carlson(5)..................... 17,820 $ 39.75 $ 39.75 06/22/08 $ 445,474 $1,128,920
(6)...................... 39,600 $ 43.75 $ 43.75 11/05/07 1,089,560 2,761,159
------------ ---------- ----------
Total............................... 57,420 12.4% $1,535,034 $3,890,079
------------ ---------- ----------
------------ ---------- ----------
LeRoy T. Carlson, Jr.(5)................ 27,300 $ 39.75 $ 39.75 06/24/08 $ 682,461 $1,729,489
(6)................... 54,600 $ 43.75 $ 43.75 11/05/07 1,502,272 3,807,052
------------ ---------- ----------
Total............................... 81,900 17.7% $2,184,733 $5,536,541
------------ ---------- ----------
------------ ---------- ----------
H. Donald Nelson(7)..................... 17,000 10.6% $ 33.94 $ 33.94 3/31/08 $ 362,860 $ 919,558
Donald W. Warkentin(8).................. 30,850 4.5% $ 7.36 $ 7.19 12/15/08 $ 144,687 $ 381,615
</TABLE>
- ------------
(1) Represents the number of TDS shares underlying Options awarded during the
year, except in the case of H. Donald Nelson, in which case the amount
represents the number of USM shares underlying Options/SARs awarded during
the fiscal year, and in the case of Donald W. Warkentin, in which case the
amount represents the number of AERL shares underlying Options/SARs awarded
during the fiscal year.
(2) Represents the percent of total TDS shares underlying Options awarded to all
TDS employees during the fiscal year, except for H. Donald Nelson, in which
case the percentage represents the percent of total USM shares underlying
the total Options awarded to all USM employees during the fiscal year, and
in the case of Donald W. Warkentin, in which case the percentage represents
the percent of total AERL shares underlying the total Options awarded to all
AERL employees during the fiscal year.
(3) Represents the fair market value of shares as of the award date.
(4) Represents the potential realizable value of each grant of Options, assuming
that the market price of the shares underlying the Options appreciates in
value from the award date to the end of the Option term at the indicated
annualized rates.
(5) Pursuant to the TDS Long-Term Incentive Plan, on June 24, 1998, such named
executive officers were granted options (the "1997 Performance Options") to
purchase TDS Common Shares based on the achievement of certain levels of
corporate and individual performance in 1997 as contemplated by the TDS
Long-Term Incentive Plan. The purchase price per TDS Common Share subject to
the 1997 Performance Options is the average of the closing price of the TDS
Common Shares on the American Stock Exchange for the 20 trading days ended
on the trading day immediately preceding June 24, 1998. The 1997 Performance
Options became exercisable on December 15, 1998.
(6) Pursuant to the TDS Long-Term Incentive Plan, on November 10, 1998, such
named executive officers were granted options (the "1998 Automatic Options")
to purchase TDS Common Shares. The purchase price per TDS Common Share
subject to 1998 Automatic Options is the closing price of the TDS Common
Shares on the American Stock Exchange on November 5, 1997. The 1998
Automatic Options became
-12-
<PAGE>
exercisable one-third on December 15, 1998, and will become exercisable with
respect to one-third on each of December 15, 1999 and December 15, 2000.
(7) Such USM Options become exercisable in annual increments of 20% on March 31
of each year beginning in 1999 and ending in 2003, at the exercise price of
$33.94 per share.
(8) Such AERL Options became exercisable on December 15, 1998, and are
exercisable until December 15, 2008, at the exercise price of $7.36 per
share.
Mr. Barr did not receive any option grants in 1998. See "TDS Telecom Phantom
Incentive Option Plan."
AGGREGATED OPTION/SAR EXERCISES IN 1998, AND DECEMBER 31, 1998 OPTION/SAR VALUE
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------------------
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
1998 UNDERLYING UNEXERCISED IN-THE-MONEY
------------------------------ OPTIONS/SARS(3) OPTIONS/SARS(4)
SHARES ACQUIRED VALUE ---------------------------- -----------
NAME ON EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE
- -------------------------------------------- ----------------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
LeRoy T. Carlson
1998 Automatic Options(5)................. 13,200 26,400 $ 15,708
1997 Performance Options(6)............... 17,820 -- 92,486
1996 Performance Options(7)............... 8,295 -- 59,475
1995 Performance Options(8)............... 9,367 -- --
1994 Performance Options(9)............... 9,476 -- 64,626
1994 Automatic Options(10)................ 36,050 -- --
----------- ------- -----------
Total................................... 94,208 26,400 $ 232,295
----------- ------- -----------
----------- ------- -----------
LeRoy T. Carlson, Jr.
1998 Automatic Options(5)................. 18,200 36,400 $ 21,658
1997 Performance Options(6)............... 27,300 -- 141,687
1996 Performance Options(7)............... 11,770 -- 84,391
1995 Performance Options(8)............... 13,233 -- --
1994 Performance Options(9)............... 13,114 -- 89,437
1994 Automatic Options(10)................ 47,100 -- --
1988 Options(11).......................... 8,371 $ 238,961 80,879 -- 2,453,060
----------- ------- -----------
Total................................... 211,596 36,400 $2,790,233
----------- ------- -----------
----------- ------- -----------
James Barr III
1990 Options(12).......................... 18,000 2,000 $ 88,920
----------- ------- -----------
----------- ------- -----------
H. Donald Nelson
USM 1998 Automatic Options(13)............ -- 17,000 $ --
USM 1997 Automatic Options(14)............ 3,400 13,600 43,350
USM 1996 Performance Options(15).......... 8,178 -- 110,567
USM 1995 Performance Options(16).......... 7,960 -- 27,064
USM 1994 Performance Options(17).......... 9,136 -- 79,209
USM 1994 Automatic Options(18)............ 28,200 -- 162,150
USM SARs(19).............................. 24,000 12,000 552,000
----------- ------- -----------
Total................................... 80,874 42,600 $ 974,340
----------- ------- -----------
----------- ------- -----------
Donald W. Warkentin
TDS 1995 Performance Options(8)........... 9,526 -- $ --
TDS 1995 Automatic Options(20)............ 19,500 -- 150,930
----------- ------- -----------
Total TDS Options....................... 29,026 -- $ 150,930
----------- ------- -----------
----------- ------- -----------
AERL IPO Options(21)...................... 64,129 42,754 $ --
AERL Supplemental Options(22)............. 62,700 41,800 --
AERL 1997 Performance Options(23)......... 30,850 -- --
AERL 1996 Performance Options(24)......... 43,729 -- 35,420
----------- ------- -----------
Total AERL Options...................... 201,408 84,554 $ 35,420
----------- ------- -----------
----------- ------- -----------
<CAPTION>
NAME UNEXERCISABLE
- -------------------------------------------- -------------
<S> <C>
LeRoy T. Carlson
1998 Automatic Options(5)................. $ 31,416
1997 Performance Options(6)............... --
1996 Performance Options(7)............... --
1995 Performance Options(8)............... --
1994 Performance Options(9)............... --
1994 Automatic Options(10)................ --
-------------
Total................................... $ 31,416
-------------
-------------
LeRoy T. Carlson, Jr.
1998 Automatic Options(5)................. $ 43,316
1997 Performance Options(6)............... --
1996 Performance Options(7)............... --
1995 Performance Options(8)............... --
1994 Performance Options(9)............... --
1994 Automatic Options(10)................ --
1988 Options(11).......................... --
-------------
Total................................... $ 43,316
-------------
-------------
James Barr III
1990 Options(12).......................... $ 9,880
-------------
-------------
H. Donald Nelson
USM 1998 Automatic Options(13)............ $ 69,020
USM 1997 Automatic Options(14)............ 173,400
USM 1996 Performance Options(15).......... --
USM 1995 Performance Options(16).......... --
USM 1994 Performance Options(17).......... --
USM 1994 Automatic Options(18)............ --
USM SARs(19).............................. 276,000
-------------
Total................................... $ 518,420
-------------
-------------
Donald W. Warkentin
TDS 1995 Performance Options(8)........... $ --
TDS 1995 Automatic Options(20)............ --
-------------
Total TDS Options....................... $ --
-------------
-------------
AERL IPO Options(21)...................... $ --
AERL Supplemental Options(22)............. --
AERL 1997 Performance Options(23)......... --
AERL 1996 Performance Options(24)......... --
-------------
Total AERL Options...................... $ --
-------------
-------------
</TABLE>
- ------------
(1) Represents the number of TDS Common Shares with respect to which the Options
or SARs were exercised.
(2) Represents the aggregate dollar value realized upon exercise, based on the
difference between the exercise price and the average of the high and low
price of the shares on the date of exercise.
-13-
<PAGE>
(3) Represents the number of TDS Common Shares subject to Options and/or SARs,
except for H. Donald Nelson, in which case the information is presented with
respect to USM shares, and for Donald W. Warkentin, in which case the
information is presented with respect to TDS shares and AERL shares, as
indicated.
(4) Represents the aggregate dollar value of in-the-money, unexercised Options
and SARs held at the end of the fiscal year, based on the difference between
the exercise price and $44.94, the market value of TDS Common Shares on
December 31, 1998 or, with respect to Options for USM shares, $38.00, the
market value of USM Common Shares on December 31, 1998 or, with respect to
Options for AERL shares, $5.75, the market value of AERL Common Shares on
December 31, 1998.
(5) Such options became exercisable with respect to one-third of the shares on
December 15, 1998, and will become exercisable with respect to one third of
the shares on each of December 15, 1999 and December 15, 2000, and are
exercisable until November 5, 2007 at the exercise price of $43.75 per
share.
(6) Such options became exercisable on December 15, 1998 and are exercisable
until June 22, 2008 at the exercise price of $39.75 per share.
(7) Such options became exercisable on December 15, 1997 and are exercisable
until December 15, 2007 at the exercise price of $37.77 per share.
(8) Such options became exercisable on December 15, 1996 and are exercisable
until December 15, 2006 at the exercise price of $47.60 per share.
(9) Such options became exercisable on December 15, 1995, and are exercisable
until May 1, 2005 at the exercise price of $38.12 per share.
(10) Such options become exercisable in annual increments of 20% on each of
December 15, 1995 and on the first through the fourth anniversaries of such
date, and are exercisable until November 4, 2004 at the exercise price of
$47.59 per share.
(11) Options for a total of 127,500 shares were granted on March 14, 1988 to
become exercisable with respect to 12,750 shares on March 14 of each year
between 1989 through 1998. Options for a total of 38,250 shares have been
exercised prior to 1996. The unexercised 1988 Options are exercisable until
March 14, 1999 at the exercise price of $14.61 per share.
(12) The 1990 Options were granted on January 15, 1990 to become exercisable
with respect to 2,000 shares on January 15 of each year between 1991 through
1999, and are exercisable until January 15, 2001 at the exercise price of
$40.00 per share.
(13) The USM 1998 Automatic Options become exercisable in annual increments of
20% on March 31 of each year beginning in 1999 and ending in 2003, and are
exercisable until March 31, 2008 at an exercise price of $33.94 per share.
(14) The USM 1997 Automatic Options become exercisable in annual increments of
20% on March 31 of each year beginning in 1998 and ending in 2002, and are
exercisable until May 14, 2007 at the exercise price of $25.25 per share.
(15) USM 1996 Performance Options became exercisable on December 15, 1997 and
are exercisable until May 1, 2007 at the exercise price of $24.48 per share.
(16) The USM 1995 Performance Options became exercisable on December 15, 1996
and are exercisable until May 1, 2006 at the exercise price of $34.60 per
share.
(17) The USM 1994 Performance Options became exercisable on December 15, 1995
and are exercisable until May 1, 2005 at the exercise price of $29.33 per
share.
(18) The USM 1994 Automatic Options become exercisable in annual increments of
20% on each of December 15, 1994, and on the first through the fourth
anniversaries of such date, and are exercisable until November 9, 2004 at
the exercise price of $32.25 per share.
(19) The USM SARs were granted in 1988 and are exercisable at the exercise price
of $15.00 per share.
(20) In 1995, Mr. Warkentin was awarded options for 32,500 TDS Common Shares at
an exercise price of $37.20. Such options were originally scheduled to
become exercisable with respect to 6,500 TDS Common Shares on December 15 of
1995, 1996, 1997, 1998 and 1999. However, in February 1997, in partial
consideration for the grant of options for 106,883 AERL Common Shares at an
exercise price equal to AERL's initial public offering price of $17.00 per
share, Mr. Warkentin agreed to the cancellation of options with respect to a
total of 13,000 TDS Common Shares which would have become exercisable on
December 15, 1998 and 1999.
(21) As discussed in note (20) above, the AERL IPO Options were granted at
AERL's initial public offering price of $17.00 per share. They are
immediately exercisable with respect to 21,377 AERL Common Shares, and
become exercisable with respect to an additional 21,377 AERL Common Shares
on each of December 15, 1997, 1998, 1999 and 2000, and expire on April 18,
2006.
(22) The AERL Supplemental Options were granted at an exercise price of $9.74
per share. Such options became immediately exercisable with respect to
20,900 AERL Common Shares on January 23, 1997, and become exercisable with
respect to an additional 20,900 AERL Common Shares on each of December 15,
1997, 1998, 1999 and 2000, and expire on April 18, 2006.
(23) The AERL 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.
(24) The AERL 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.
TDS TELECOM PHANTOM INCENTIVE OPTION PLAN
Mr. James Barr III participates in the TDS Telecommunications Corporation
Phantom Stock Incentive Plan (the "TDS Telecom Plan"). The TDS Telecom Plan was
adopted by TDS Telecom in 1997 and relates to the five-year
-14-
<PAGE>
period beginning on January 1, 1995. Under the TDS Telecom Plan, Mr. Barr was
awarded certain phantom stock units by the Chairman of TDS Telecom. The award
consists of automatic awards and performance awards. The automatic awards vest
in five equal annual installments beginning on December 15, 1995. The
performance awards include a corporate performance award and an individual
performance award. The performance awards vest on December 15 of the year
following the performance year to which they relate. When vested, the phantom
stock option units may be exercised at an exercise price determined in
accordance with the terms of the plan. All phantom stock unit options expire on
July 1, 2003. Upon exercise of the phantom stock units, Mr. Barr will receive a
cash payment equal to the difference between the exercise price and the implied
value of the phantom stock unit as provided in the TDS Telecom Plan. In 1998,
Mr. Barr exercised options for an aggregate of 106,960 phantom stock units for
1995, 1996, 1997 and 1998, and received a net cash payment, prior to withholding
taxes, of $327,410. See "Summary Compensation Table."
The following table summarizes the award of options for phantom stock units
to Mr. Barr in 1998:
TDS TELECOM PHANTOM STOCK PLAN-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK
PRICE-BASED PLANS(3)
NUMBER OF SHARES, UNITS PERFORMANCE OR OTHER PERIOD ------------------------------
NAME OR OTHER RIGHTS(1) UNTIL MATURATION OR PAYOUT(2) THRESHOLD (#) TARGET (#)
- ------------------------------ ----------------------- ----------------------------- ----------------- -----------
<S> <C> <C> <C> <C>
James Barr III................ 40,636 1997 -0- 22,558
<CAPTION>
NAME MAXIMUM (#)
- ------------------------------ -------------
<S> <C>
James Barr III................ 45,116
</TABLE>
- ------------
(1) Represents the number of performance phantom stock option units which were
granted with respect to 1997.
(2) Represents the fiscal year to which such phantom stock units relate.
(3) The minimum threshold number is zero since no performance options may be
granted if threshold performance is not achieved. The target and maximum
numbers represent the additional units which may be awarded at target or
maximum performance, respectively.
PENSION PLANS AND SUPPLEMENTAL BENEFIT AGREEMENTS
The Telephone and Data Systems, Inc. Employees' Pension Trust (the "TDS
Pension Plan") is a defined contribution plan designed to provide retirement
benefits for eligible employees of the Company and certain of its affiliates
which adopt the TDS Pension Plan. Annual employer contributions based upon
actuarial assumptions are made under a formula designed to fund a target pension
benefit for each participant commencing generally upon the participant's
attainment of retirement age. The amounts of the annual contributions are
included above in the Summary Compensation Table under "All Other Compensation."
USM and AERL have adopted the Telephone and Data Systems, Inc. Wireless
Companies' Pension Plan (the "Wireless Pension Plan"). The Wireless Pension
Plan, a qualified non-contributory defined contribution pension plan, provides
pension benefits for USM and AERL employees. Under the Wireless Pension Plan,
pension costs are calculated separately for each participant and are funded
currently. The amounts of the annual contributions for Messrs. H. Donald Nelson
and Donald W. Warkentin are included above in the Summary Compensation Table
under "All Other Compensation."
The TDS Supplemental Executive Retirement Plan ("SERP") provides
supplemental benefits under the TDS Pension Plan and the Wireless Pension Plan.
The SERP was established to offset the reduction of benefits caused by the
limitation on annual employee compensation under the Code. The SERP is a
non-qualified deferred compensation plan and is intended to be unfunded. The
amounts of the accruals for the benefit of the named executive officers are
included above in the Summary Compensation Table under "All Other Compensation."
In 1980, TDS entered into a non-qualified supplemental benefit agreement
with LeRoy T. Carlson which, as amended, requires TDS to pay a supplemental
retirement benefit to Mr. Carlson, in the amount of $47,567 plus interest at a
rate equal to 1/4% under the prime rate for the period from May 15, 1981 (the
date of Mr. Carlson's 65th birthday) to May 31, 1992, in five annual
installments beginning June 1, 2001, plus interest at 9 1/2% compounded
semi-annually from June 1, 1992. The agreement was entered into because certain
amendments made to the TDS Pension Plan in 1974 had the effect of reducing the
amount of retirement benefits which Mr. Carlson would receive under the TDS
Pension Plan. The payments to be made under the agreement, together with the
retirement benefits under the TDS Pension Plan, were designed to permit Mr.
Carlson to receive approximately the same retirement benefits he would have
received if the TDS Pension Plan had not been amended. All of the interest
accrued under this agreement is included above in the Summary Compensation Table
under "All Other Compensation" and identified in footnote 6 thereto as
contributions under the TDS Pension Plan.
-15-
<PAGE>
In 1988, USM entered into a non-qualified supplemental benefit agreement
with H. Donald Nelson which requires USM to pay a supplemental retirement
benefit to Mr. Nelson. The agreement was entered into because Mr. Nelson's
employment with TDS was terminated upon the completion of the initial public
offering of USM Common Shares in 1988 and, as a result, he was no longer
eligible to participate in the TDS Pension Plan. Under the supplemental benefit
agreement, USM is obligated to pay Mr. Nelson an amount equal to the difference
between the retirement benefit he will receive from the TDS 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 pension plan
(such as the Wireless Pension Plan). USM will pay any such benefit at the same
time as Mr. Nelson receives payments from the TDS Pension Plan. The actual
benefits payable to Mr. Nelson 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.
In 1996, AERL entered into a non-qualified supplemental benefit agreement
with Donald W. Warkentin which requires AERL to pay a supplemental retirement
benefit to Mr. Warkentin. The agreement was entered into because Mr. Warkentin's
employment with TDS was terminated as a result of the completion of the initial
public offering of AERL 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, AERL is obligated to pay Mr. Warkentin an amount equal to the
difference between the retirement benefit he will receive from the TDS 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). AERL will pay any such benefit at the same time as Mr. Warkentin receives
payments from the TDS 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.
DEFERRED COMPENSATION AGREEMENTS
Mr. H. Donald Nelson and Mr. James Barr III are parties to Executive
Deferred Compensation Agreements, pursuant to which such persons will have a
specified percentage of gross compensation deferred and credited to a Deferred
Compensation Account. The Deferred Compensation Account will be credited with
interest compounded monthly, computed at a rate equal to one-twelfth of the sum
of the average thirty-year Treasury Bond rate plus 1.25 percentage points until
the Deferred Compensation Amount is paid to such persons. The amount of
compensation deferred by such persons is included in and reported with all other
non-deferred compensation in the "Summary Compensation Table." No amount is
included in the Summary Compensation Table for the interest earned on such
deferred compensation since such interest rate is intended to approximate a
market rate.
BONUS DEFERRAL AND STOCK UNIT MATCH PROGRAM
The 1998 Long-Term Incentive Plan (the "1998 Plan") provides the opportunity
for those who are employed by TDS at the position of Vice President or above, to
defer receipt of a portion of their bonuses and receive TDS matching stock unit
credits. Executives may elect to defer receipt of all or a portion of their
annual bonuses and to receive stock unit matches on the amount deferred.
Deferred compensation will be deemed invested in phantom TDS Common Shares. TDS
match amounts will depend on the amount of annual bonus that is deferred into
stock units. Participants receive a 25% stock unit match for amounts deferred
under 50% of their total annual bonus and a 33% match for amounts that exceed
50% of their total annual bonus. The matched stock units vest ratably at a rate
of one-third per year over three years. The fair market value of the matched
stock units are reported in the Summary Compensation Table under "Other Annual
Compensation."
LeRoy T. Carlson and LeRoy T. Carlson, Jr., each elected to defer 100% of
their 1998 bonus under the 1998 Plan. Accordingly, each of LeRoy T. Carlson and
LeRoy T. Carlson, Jr. will receive a 25% stock unit match for 50% of their 1998
bonuses and a 33% match for 50% of their bonuses under the 1998 Plan. The
bonuses for 1998 have not yet been determined for Messrs. LeRoy T. Carlson and
LeRoy T. Carlson, Jr. and, therefore, the dollar value of the company match
phantom stock units cannot be determined at this time for such persons. See the
"Summary Compensation Table."
In addition, USM has a similar plan pursuant to which H. Donald Nelson has
deferred compensation and receives stock unit matches with respect to USM Common
Shares, as reported in the Summary Compensation Table under "Other Annual
Compensation."
-16-
<PAGE>
SALARY CONTINUATION AND CONSULTING AGREEMENT
The Company has entered into an agreement with LeRoy T. Carlson whereby it
will employ Mr. Carlson until he elects to retire. Mr. Carlson is to be paid at
least $60,000 per annum until his retirement. The agreement also provides that
upon his retirement, Mr. Carlson will be retained by the Company as a part-time
consultant (for not more than 60 hours in any month) until his death or
disability. Upon his retirement, Mr. Carlson will receive $75,000 per annum as a
consultant, plus increments beginning in 1985 equal to the greater of three
percent of his consulting fee or two-thirds of the percentage increase in the
consumer price index for the Chicago metropolitan area. If Mr. Carlson becomes
disabled before retiring, the Company can elect to discontinue his employment
and retain him in accordance with the consulting arrangement described above.
Upon Mr. Carlson's death (unless his death follows his voluntary termination of
his employment or the consulting arrangement), his widow will receive until her
death an amount equal to that which Mr. Carlson would have received as a
consultant. The Company may terminate payments under the agreement if Mr.
Carlson becomes the owner of more than 21% of the stock, or becomes an officer,
director, employee or paid agent of any competitor of the Company within the
continental United States. No amounts were paid or payable under this agreement
in 1998, 1997 or 1996, and no amounts related thereto are included above in the
Summary Compensation Table.
COMPENSATION OF DIRECTORS
Effective July 23, 1996, the Board of Directors adopted a Compensation Plan
(the "Non-Employee Directors' Plan") for non-employee directors ("Non-Employee
Directors"). A Non-Employee Director is a director of the Company who is not an
employee of the Company, USM, AERL or TDS Telecom ("Affiliates"). The purpose of
the Non-Employee Directors' Plan is to provide for 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 members of
the Board of Directors.
The Non-Employee Directors' Plan provides that, effective for the twelve
month period ending at the time of the Company's 1997 annual meeting, each
Non-Employee Director will receive an annual director's fee of $24,000; and each
director of the Company who is not an employee of any Affiliate will continue to
receive a fee of $1,000, plus reimbursement of reasonable out-of-pocket expenses
incurred in connection with travel, for attendance at each regularly scheduled
or special meeting of the Board of Directors. The Non-Employee Directors' Plan
also provides that, effective as of July 23, 1996, each director of the Company
who is not an employee of any Affiliate will receive a fee of $750, plus
reimbursement of reasonable out-of-pocket expenses incurred in connection with
travel, for attendance at each meeting of the Audit Committee, Stock Option
Compensation Committee, or other committee established by resolution of the
Board of Directors.
Under the Non-Employee Directors' Plan, an amount equal to 50% of the annual
director's fee will 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 of the date of payment equal to such percentage of the annual
fee. In addition, under the Non-Employee Directors' Plan, an amount equal to 33%
of each committee meeting fee will be accumulated and 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 of the date of payment equal to such
percentage of such fee. The Company has reserved 15,000 Common Shares of the
Company for issuance pursuant to the Non-Employer Director's Plan.
Donald C. Nebergall, a director of the Company, also received $24,000 as a
bonus and $178,000 for consulting services provided to the Company and was
reimbursed for out-of-pocket expenses incurred in connection with such services
in 1998.
In addition, the Company pays life insurance premiums on behalf of
directors. Except for such life insurance premiums, directors who are also
employees of the Company or any Affiliate do not receive any additional
compensation for services rendered as directors.
EXECUTIVE OFFICER COMPENSATION REPORT
This report is submitted by LeRoy T. Carlson, Jr., President, who serves as
the Compensation Committee of the Board of Directors for all executive officers
of the Company other than the President, and by the TDS Stock Option
Compensation Committee of the Board of Directors, which approves all
compensation for the President and approves long-term compensation to executive
officers who are employees of the Company. Long-term compensation for H. Donald
Nelson is approved by the stock option compensation committee of USM (as
described in its
-17-
<PAGE>
report in the proxy statement of USM), and long-term compensation for Donald W.
Warkentin is approved by the stock option compensation committee of AERL (as
described in its report in the proxy statement of AERL).
The Company's compensation policies for executive officers are intended to
provide incentives for the achievement of corporate and individual performance
goals and to provide compensation consistent with the financial performance of
the Company. The Company's policies are based on the belief that the incentive
compensation performance goals for executive officers should be based on factors
over which such officers have control and which are important to the Company's
long-term success. It is also 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 compensation consists of both annual and long-term compensation.
Annual compensation consists of a base salary and an annual bonus. The Company
evaluates the annual compensation of each executive officer on an aggregate
basis by combining the base salary and bonus, and also evaluates the level of
the base salary and the bonus separately. Annual compensation decisions are
based partly on individual and corporate short-term performance and partly on
the individual and corporate cumulative long-term performance during the
executive's tenure in his position, particularly with regard to the President
(chief executive officer). Long-term compensation is intended to compensate
executives primarily for their contributions to long-term increases in
shareholder value. Long-term compensation is generally provided through the
grant of stock options.
The process of determining base salary begins with establishing an
appropriate salary range for each officer. Each officer's range is based upon
the particular duties and responsibilities of the officer, as well as salaries
for comparable positions with other companies. These other companies include the
companies included in the peer group index described below under "Stock
Performance Chart", as well as other companies in the telecommunications
industry and other industries with similar characteristics, to the extent
considered appropriate in the judgment of the President, based on similar size,
function, geography or otherwise. No written or formal list of specific
companies is prepared. Instead, as discussed below, the President is provided
with various sources of information about executive compensation at other
companies, such as compensation reported in proxy statements of comparable
companies and salary surveys published by various organizations. The President
uses these sources and makes a personal determination of appropriate sources,
companies and ranges for each executive officer. The base salary of each officer
is set within a range considered appropriate in the judgment of the President
based on an assessment of the particular responsibilities and performance of
such officer, taking into account the performance of the Company and/or its
business units or divisions, other comparable companies, the industry and the
economy in general during the immediately preceding year. The President makes a
personal determination of the appropriate range based on the total mix of
information available to him. The range considered to be relevant by the
President is based on his informed judgment, using the information provided to
him by the Vice President of Human Resources, as discussed below. The range is
not based on any formal analysis nor is there any documentation of the range
which the President considers relevant in making his compensation decisions. The
salary of the executive officers is believed to be at slightly above the median
of the range considered to be relevant in the judgment of the President.
Annually, the nature and extent of each executive officer's major
accomplishments and contributions for the year are determined through written
information prepared by the executive and by others familiar with his
performance, including the executive's direct supervisor. With regard to all
executive officers other than the President, the President evaluates the
information in terms of the personal objectives given by the President or other
direct supervisor to such executive officer for the performance appraisal
period. The President also makes an assessment of how well the Company did as a
whole during the year and the extent to which the President believes the
executive officer contributed to the results. With respect to executive officers
having primary responsibility over a certain business unit or division of the
Company, the President considers the performance of the business unit or
division and makes an assessment of the contribution of the executive officer
thereto. No specific measures of performance are considered determinative in the
compensation of executive officers. Instead, all of the facts and circumstances
are taken into consideration by the President in his executive compensation
decisions. Ultimately, it is the informed judgment of the President that
determines an executive's salary and bonus, this being based on the total mix of
information rather than on any specific measures of performance.
The primary focus of the Company is increasing long-term shareholder value
through growth, measured primarily in such terms as revenues, customer units in
service, operating cash flow (operating income plus depreciation and
amortization) and operating income. However, there is no quantifiable or direct
relationship between compensation and such or any other measures of performance.
Instead, such compensation decisions
-18-
<PAGE>
are made subjectively considering such performance measures, as well as all
other facts and circumstances in general terms.
Other than for the President of TDS, the President of TDS approves annual
compensation for executive officers of TDS and each of its business units or
divisions. The Vice President-Human Resources accumulates and prepares various
materials, including relevant base pay and bonus information, for the annual
compensation reviews of executive officers. These materials are reviewed by the
President along with various performance evaluation information. The President
will determine the bonus for 1998 and base salary for 1999 for all executives
other than himself. The Company has no written or formal corporate bonus plan.
The bonuses for corporate executive officers are determined by the President
based on his evaluation of each executive's contribution to the Company, the
achievement of individual objectives, the performance of the Company and/or its
business units and divisions and all other facts and circumstances considered
relevant in his judgment. The President has not yet taken action to approve the
final 1998 bonuses and/or the 1999 base salaries for certain of these
executives. Due to the fact that certain 1998 bonuses had not been determined as
of the end of 1998, the President approved advance bonus payments for 1998 to
certain executive officers, other than the President of TDS. The final amounts
or partial advances approved for the named executives are listed above in the
Summary Compensation Table.
The annual compensation of the President (chief executive officer) of the
Company is proposed by the President to the Stock Option Compensation Committee
of the Board of Directors, and approved or adjusted by the Stock Option
Compensation Committee. In addition to the factors described above for all
executive officers in general, the Vice President-Human Resources prepares an
analysis of compensation paid to chief executive officers of other comparable
companies. These other companies include the companies included in the peer
group index described below under "Stock Performance Chart", as well as other
companies in the telecommunications industry and other industries with similar
characteristics, to the extent considered appropriate in the judgment of the
President, based on similar size, function, geography or otherwise. This
information is presented to the President who recommends a base salary and bonus
wlevel for himself. The Stock Option Compensation Committee approves the final
base salary and bonus of the President based on the recommendation of the
President. The Stock Option Compensation Committee approved a 1997 bonus of
$270,000 for the President, and increased his 1998 base salary to $570,000,
representing an increase of $55,000 or 10.7% over his base salary of $515,000 in
1997. The Stock Option Compensation Committee has not yet approved the
President's bonus for 1998, or the President's base salary for 1999.
As with the other executive officers, the compensation of the President is
based on all facts and circumstances and the total mix of information rather
than related to any specific measures of performance. The Stock Option
Compensation Committee has access to numerous performance measures and financial
statistics prepared by the Company's financial personnel. This financial
information includes the audited financial statements of the Company, as well as
internal financial statements such as budgets and their results, operating
statistics and various analyses. The Stock Option Compensation Committee is not
limited in its analysis to the information presented to it by the President or
available from financial personnel, and may consider other factual or subjective
factors as the members of such committee deem appropriate in their compensation
decisions. No specific measures of performance are considered determinative in
the compensation of the President. Instead, all of the facts and circumstances
are taken into consideration by the Stock Option Compensation Committee in its
executive compensation decisions. Ultimately, it is the informed judgment of the
Stock Option Compensation Committee, based on the recommendation of the
President, that determines the salary and bonus for the President, this being
based on the total mix of information rather than on any specific measures of
performance.
As discussed above for the other executive officers, the primary focus of
the Company is increasing long-term shareholder value through growth, measured
primarily in such terms as revenues, customer units in service, operating cash
flow (operating income plus depreciation and amortization) and operating income.
However, as discussed above, there is no quantifiable or direct relationship
between compensation and such or any other measures of performance. Instead,
such compensation decisions are made subjectively considering such performance
measurers, as well as all other facts and circumstances in general terms.
The Stock Option Compensation Committee believes that the annual total base
salary and bonus compensation of the President has been set at a level less than
an average level for equally responsible executives at companies which it
considers comparable. The members of the Stock Option Compensation Committee
base this belief on their personal assessment and judgment of the President's
responsibilities in comparison to the chief executive officers and chief
operating officers of the companies included in the peer group index described
below under "Stock Performance Chart", as well as other companies in the
telecommunications industry and other industries with similar characteristics,
based on the information prepared by the Vice President of Human
-19-
<PAGE>
Resources, as discussed above. The President has a substantial beneficial
interest in the Company, as described below under "Security Ownership of
Management", and will benefit together with other shareholders based on the
performance of the Company. The Stock Option Compensation Committee considers
this an important fact in connection with its review and approval or adjustment
of the salary and bonus recommended by the President for himself.
At such time as the President approves the 1998 bonuses and 1999 salaries
for executive officers, and recommends the 1998 bonus and 1999 salary for
himself, he may also recommend to the Stock Option Compensation Committee
long-term compensation in the form of additional stock option grants, stock
appreciation rights or otherwise for executive officers and himself. The
long-term compensation decisions for executive officers will be made by the
Stock Option Compensation Committee in a manner similar to that described for
annual base salary and bonus decisions, except that the stock options will
generally vest over several years in a manner which will reflect the goal of
relating the long-term compensation of the executive officers, including the
President, to increases in shareholder value over the same period.
The performance of the Company also bears upon the number of stock options
which will become awarded and exercisable with respect to the executive
officers. As indicated under the table "Individual Option/SAR Grants in 1998",
certain named executive officers received an award in 1998 of Performance
Options based on the achievement of certain levels of corporate and individual
performance in 1997.
SECTION 162(M) OF THE CODE. Section 162(m) of the Code generally limits to
$1 million 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. For various reasons,
the Company does not believe that the $1 million deduction limitation should
have a material effect on the Company in the immediate future. If the $1 million
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.
This Executive Officer Compensation Report is submitted by LeRoy T. Carlson,
Jr., sole member of the Compensation Committee; and by the Stock Option
Compensation Committee: George W. Off (Chairman) and Letitia G. C. Carlson.
STOCK PERFORMANCE CHART
The following chart graphs the performance of the cumulative total return to
shareholders (stock price appreciation plus dividends) during the previous five
years in comparison to returns of the Standard & Poor's 500 Composite Stock
Price Index and a peer group index. The peer group index was constructed
specifically for the Company and includes the following companies: AllTel Corp.,
Centennial Cellular CP (Class A), Century Telephone Enterprise, Citizen
Utilities (Ser. B), Frontier Corp., Rural Cellular Corp (Class A), Western
Wireless Corp. (Class A) and TDS. In calculating the peer group index, the
returns of each company in the group have been weighted according to such
company's market capitalization at the beginning of the period.
-20-
<PAGE>
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
TDS, S&P 500, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/98)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
TDS............................................................. $ 100.00 $ 89.26 $ 77.19 $ 71.52 $ 92.79 $ 90.52
S&P 500......................................................... $ 100.00 $ 101.32 $ 139.40 $ 171.40 $ 228.59 $ 293.91
Peer Group...................................................... $ 100.00 $ 94.75 $ 100.18 $ 94.02 $ 118.58 $ 168.38
</TABLE>
Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in TDS Common Shares,
S&P 500, and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
The peer group has been revised from the prior year to delete 360
Communications Co., Airtouch Communications, Inc., Aliant Communications Inc.
and Vanguard Cellular Systems (Class A) due to acquisition transactions.
Citizens Utilities (Ser. B), Rural Cellular Corp. (Class A) and Western Wireless
Corp. (Class A) were then added to expand the peer group. For comparison to the
above-reported peer group results, if the Company had not changed the peer group
index from the peer group reported in its 1998 Notice of Annual Meeting and
Proxy Statement, the peer group results would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Former Peer Group............................................... $ 100.00 $ 109.74 $ 109.92 $ 100.65 $ 142.36 $ 232.45
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The sole member of the Compensation Committee is LeRoy T. Carlson, Jr.,
President of TDS. The primary function of the Compensation Committee is to
approve the annual salary, bonus and other cash compensation of officers and key
employees of TDS other than the President. LeRoy T. Carlson, Jr. is a member of
the Board of Directors of TDS, USM, AERL and TDS Telecom. LeRoy T. Carlson, Jr.
is also the Chairman of USM, AERL and TDS Telecom and, as such, approves the
executive officer annual compensation decisions for USM, AERL and TDS Telecom.
LeRoy T. Carlson, Jr. is compensated by TDS for his services to TDS and all of
its subsidiaries. However, USM and AERL reimburse TDS for a portion of such
compensation pursuant to intercompany agreements between TDS and such
subsidiaries. The Stock Option Compensation Committee of the Board of Directors
of TDS makes annual compensation decisions for the President of TDS and makes
long-term compensation decisions for all executive officers who are employees of
TDS. The members of the Stock Option Compensation Committee are George W. Off
(Chairman) and Letitia G. C. Carlson. The members of the Stock Option
Compensation Committee
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<PAGE>
are neither officers or employees of the Company or any of its subsidiaries nor
directors of any of the Company's subsidiaries. Long-term compensation for
executive officers who are employees of USM or AERL are approved by the stock
option compensation committees of USM and AERL respectively. The stock option
compensation committees of USM and AERL are composed of directors of such
subsidiaries who are neither officers or employees of TDS or any of its
subsidiaries nor directors of TDS.
In addition to such compensation committee interlocks and insider
participation in compensation decisions, the Company and certain related parties
are involved in the following relationships and transactions.
ISSUANCE OF TDS SHARES IN CONNECTION WITH CERTAIN ACQUISITIONS. The Company
may issue TDS securities in connection with the acquisition of cellular
interests on behalf of USM. At the time such acquisitions are closed, the
acquired cellular interests are generally transferred to USM, which has
reimbursed TDS by issuing USM securities to TDS or by increasing the balance due
to TDS under a revolving credit agreement between TDS and USM. The fair market
value of the USM securities issued to TDS in connection with these transactions
is calculated in the same manner and over the same time period as the fair
market value of the TDS securities issued to the sellers in such acquisitions.
During 1998, USM issued 45,988 USM Common Shares to TDS to reimburse TDS for
29,999 TDS Common Shares issued for such cellular interests.
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS. Walter C. D. Carlson, a
director of TDS, USM and AERL, Michael G. Hron, Secretary of TDS and certain TDS
subsidiaries, William S. DeCarlo, the Assistant Secretary of TDS and certain TDS
subsidiaries, Stephen P. Fitzell, the Secretary of certain TDS subsidiaries, and
Sherry S. Treston, the Assistant Secretary of certain TDS subsidiaries, are
partners of Sidley & Austin, the principal law firm of TDS and its subsidiaries.
Walter C. D. Carlson is a trustee and beneficiary of a voting trust which
controls TDS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On February 28, 1999, the Company had outstanding and entitled to vote
54,391,873 Common Shares, par value $.01 per share (excluding 643,952 Common
Shares held by the Company and 484,012 Common Shares held by a subsidiary of the
Company); 6,949,904 Series A Common Shares, par value $.01 per share; and
241,772 Preferred Shares, par value $.01 per share. Each of the outstanding
Common Shares and Preferred Shares is entitled to one vote and each of the
outstanding Series A Common Shares is entitled to ten votes. Accordingly, the
voting power of all outstanding Series A Common Shares was 69,499,040 votes, and
the total voting power of all outstanding shares of all classes of capital stock
was 124,132,685 votes at February 28, 1999, with respect to matters other than
the election of directors.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth at February 28, 1999, or the latest
practicable date, the number of Common Shares and Series A Common Shares
beneficially owned, and the percentage of the outstanding shares of each such
class so owned by each director and nominee for director of the Company, by each
of the executive officers named in the Summary Compensation Table and by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF PERCENT
NATURE OF SHARES OF OF
NAME OF INDIVIDUAL OR BENEFICIAL PERCENT COMMON VOTING
NUMBER OF PERSONS IN GROUP TITLE OF CLASS OWNERSHIP(1) OF CLASS STOCK POWER
- ------------------------------------ ----------------------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
LeRoy T. Carlson, Jr.,
Walter C. D. Carlson,
Letitia G. C. Carlson,
Donald C. Nebergall and
Melanie J. Heald(2)................. Series A Common Shares 6,351,116 91.4% 10.4% 51.2%
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Peter L. Sereda, Common Shares 148,876 * * *
and Michael G. Hron(3).............. Series A Common Shares 1,008 * * *
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Peter L. Sereda,
and Michael G. Hron(4).............. Common Shares 64,256 * * *
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF PERCENT
NATURE OF SHARES OF OF
NAME OF INDIVIDUAL OR BENEFICIAL PERCENT COMMON VOTING
NUMBER OF PERSONS IN GROUP TITLE OF CLASS OWNERSHIP(1) OF CLASS STOCK POWER
- ------------------------------------ ----------------------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
LeRoy T. Carlson (5)(12)............ Common Shares 100,682 * * *
Series A Common Shares 51,991 * * *
LeRoy T. Carlson, Jr.(6)(12)........ Common Shares 157,570 * * *
Series A Common Shares 6,410 * * *
Walter C. D. Carlson(7)............. Common Shares 719 * * *
Letitia G. C. Carlson(8)............ Common Shares 773 * * *
Sandra L. Helton(12)................ Common Shares 15,000 * * *
Rudolph E. Hornacek(9)(12).......... Common Shares 34,988 * * *
Series A Common Shares 1,669 * * *
James Barr III(12).................. Common Shares 22,040 * * *
Murray L. Swanson(10)(12)........... Common Shares 678 * * *
Series A Common Shares 2,515 * * *
Donald C. Nebergall(11)............. Common Shares 1,771 * * *
Herbert S. Wander................... Common Shares 635 * * *
George W. Off....................... Common Shares 1,440 * * *
Martin L. Solomon................... Common Shares 15,289 * * *
Kevin A. Mundt...................... -- -- -- -- --
H. Donald Nelson(10)................ Common Shares 10,991 * * *
Donald W. Warkentin(12)............. Common Shares 14,566 * * *
All directors, director nominees and
executive officers as a group (26 Common Shares 870,978 1.6% 1.4% *
persons)(12) Series A Common Shares 6,436,897 92.6% 10.5% 51.9%
</TABLE>
- ------------
* Less than 1%
(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% 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.
(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 Mr. 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% 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% 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.
-23-
<PAGE>
(7) Does not include 1,097,775 Series A Common Shares (15.8% 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 1,074,120 Series A Common Shares (15.5% of class) held in
the voting trust described in footnote (2), of which 1,061,763 shares are
held for the benefit of Letitia G. C. Carlson. Beneficial ownership is
disclaimed with respect to an aggregate of 12,357 Series A Common Shares
held for the benefit of her husband and child in such voting trust.
(9) Does not include Series A Common Shares held as custodian for his children,
for which beneficial ownership is disclaimed.
(10) Includes shares as to which voting and/or investment power is shared,
and/or shares held by spouse and/or children.
(11) Does not include 645,422 Series A Common Shares (9.3% of class) held as
trustee under trusts for the benefit of the heirs of LeRoy T. and Margaret
D. Carlson and an educational institution, or 57 Series A Common Shares held
for the benefit of Donald C. Nebergall, which are included in the voting
trust described in footnote (2).
(12) 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 60 days: Mr. LeRoy T. Carlson,
94,208 shares; Mr. LeRoy T. Carlson, Jr., 130,717 shares; Ms. Helton, 12,000
shares (plus 3,000 shares of restricted stock subject to future vesting);
Mr. Barr, 18,000 shares; Mr. Hornacek, 26,528 shares; Mr. Warkentin, 14,026
shares; all other executive officers, 228,022 shares; and all directors and
officers as a group, 526,501 shares.
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% 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....... Common Shares 7,400,475 13.6% 12.1% 6.0%
Gabelli Funds, Inc.(2)
One Corporate Center
Rye, New York 10580................. Common Shares 6,870,655 12.6% 11.2% 5.5%
The Equitable Companies Inc.(3)
787 Seventh Avenue
New York, New York 10019............ Common Shares 5,085,257 9.3% 8.3% 4.1%
Van and Janet McDaniel
Salkum, Washington 98582............ Preferred Shares 62,500 25.9% N/A *
William and Betty McDaniel
Salkum, Washington 98582............ Preferred Shares 46,666 19.3% N/A *
Bennet R. Miller
Lafayette, Indiana 47905............ Preferred Shares 30,000 12.4% N/A *
</TABLE>
- ------------
* Less than 1%
(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,
-24-
<PAGE>
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder require the Company's directors and officers, and
persons who are deemed to own more than ten percent of the Common Shares
(collectively, the "Reporting Persons"), to file certain reports ("Section 16
Reports") with the SEC with respect to their beneficial ownership of Common
Shares. The Reporting Persons are also 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 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation-Compensation Committee Interlocks and Insider
Participation."
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of shareholders intended for inclusion in the Company's proxy
statement and form of proxy relating to the 2000 Annual Meeting of Shareholders
must be received by the Company at its principal executive offices not later
than December 15, 1999.
Proposals by shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Company at its principal
executive offices not earlier than December 15, 1999 and not later than January
14, 2000 for consideration at the 2000 Annual Meeting of Shareholders, except if
the date of the 2000 Annual Meeting of Shareholders is changed by more than
thirty calendar days from the date of the 1999 Annual Meeting of Shareholders,
shareholder proposals must be received by the Company not later than the close
of business on the tenth day following the date of public notice of the date of
the 2000 Annual Meeting of Shareholders.
SOLICITATION OF PROXIES
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
regular employees of the Company, acting on its behalf, may also solicit proxies
by mail, advertisement, telephone, telegraph, in person or other methods. None
of such persons will receive additional compensation for such solicitations. The
Company has also retained MacKenzie Partners, Inc. to assist in the solicitation
of proxies for a fee of $7,500 plus reimbursement of out-of-pocket expenses. 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 held of record by such persons.
FINANCIAL INFORMATION
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 OR ORAL REQUEST OF ANY SHAREHOLDER
AS OF THE RECORD DATE, AND WILL PROVIDE COPIES OF THE EXHIBITS TO ANY SUCH
DOCUMENTS UPON PAYMENT OF A REASONABLE FEE WHICH SHALL NOT EXCEED THE COMPANY'S
REASONABLE EXPENSES INCURRED THEREWITH. REQUESTS FOR SUCH MATERIALS SHOULD BE
DIRECTED TO INVESTOR RELATIONS, TELEPHONE AND DATA SYSTEMS, INC., 30 NORTH
LASALLE STREET, 40TH FLOOR, CHICAGO, ILLINOIS 60602, TELEPHONE (312) 630-1900.
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<PAGE>
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 properly are brought
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.
-26-
<PAGE>
EXHIBIT A
TELEPHONE AND DATA SYSTEMS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. ESTABLISHMENT; PURPOSE; SCOPE.
Telephone and Data Systems, Inc. hereby establishes the Telephone and Data
Systems, Inc. 1999 Employee Stock Purchase Plan to encourage and facilitate the
purchase of Common Shares of the Company by Employees of the Company and certain
other participating Employers. The Plan is intended to provide a further
incentive for such Employees to promote the best interests of the Controlled
Group and an additional opportunity to participate in its economic progress. It
is the intention of the Company to have the Plan qualify as an "employee stock
purchase plan" within the meaning of section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), and provisions of the Plan shall be construed in
a manner consistent with the Code.
SECTION 2. DEFINITIONS; CONSTRUCTION.
As used in this Plan, as of any time of reference, and unless the context
otherwise requires:
(a) "AFFILIATE" means any trade or business entity which is a member of the
same controlled group (as described in section 414(b) and (c) of the Code) with
the Company, any organization that is a member of an affiliated service group
(as described in section 414(m) of the Code) with the Company or such a trade or
business, or any other entity required to be aggregated with the Company
pursuant to final regulations under section 414(o) of the Code.
(b) "BENEFITS REPRESENTATIVE" means the Benefits Department of the Company
located in Middleton, Wisconsin, or such other person or persons designated by
the Committee to assist the Committee with the administration of the Plan.
(c) "BOARD" means the Board of Directors of the Company as from time to time
constituted.
(d) "COMMON SHARES" means shares of common stock of the Company, par value
$0.01 per share.
(e) "COMPANY" means Telephone and Data Systems, Inc., a Delaware
corporation, and any successor thereto.
(f) "COMPENSATION" means an employee's "Compensation" as defined in Section
4.2(a) of the Telephone and Data Systems, Inc. Tax-Deferred Savings Plan, as
amended from time to time, determined without regard to the limitation on
compensation which is taken into account under such plan pursuant to section
401(a)(17) of the Code.
(g) "CONTROLLED GROUP" means the Company and its Subsidiaries.
(h) "EFFECTIVE DATE" means July 1, 1999.
(i) "ELIGIBLE EMPLOYEE" means any Employee, but excluding any individual who
is a leased employee of an Employer (within the meaning of section 414(n) of the
Code).
(j) "EMPLOYEE" means an individual whose relationship with an Employer is,
under common law, that of an employee.
(k) "EMPLOYEE STOCK PURCHASE ACCOUNT" means the account established pursuant
to Section 6(d) of the Plan to hold a Participant's payroll deduction
contributions.
(l) "EMPLOYER" means the Company and any corporation that is a member of the
Controlled Group that adopts the Plan as of the Effective Date, with the prior
approval of the Company, and each corporation that is or subsequently becomes a
member of the Controlled Group and adopts the Plan as of any later date, with
the prior approval of the Committee.
(m) "ENTRY DATE" means the Effective Date and the first day of each
subsequent calendar month.
(n) "FAIR MARKET VALUE" means the closing price of a Common Share on the
American Stock Exchange for the date of determination, or if such date is not a
trading day, the closing price of such share on the American Stock Exchange on
the next preceding trading day.
(o) "NOMINEE" means the custodian designated by the Company for the Stock
Accounts established hereunder.
<PAGE>
(p) "OFFERING PERIOD" means (i) the 18-month period commencing on the
Effective Date and ending on December 31, 2000 and (ii) the 24-month period
commencing on January 1, 2001 and ending on December 31, 2002; provided that the
date on which the Plan is terminated shall be treated as the last day of an
Offering Period, as described in Section 13.
(q) "PARTICIPANT" means any Eligible Employee of an Employer who meets the
eligibility requirements of Section 5(a), and has elected to participate in the
Plan as described in such Section. An individual shall cease to be a Participant
as of the date he or she terminates employment with his or her Employer, for
whatever reason; provided, however, that the transfer of employment from an
Employer (or any other Affiliate) to an Affiliate shall not be considered a
termination of employment hereunder.
(r) "PLAN" means the Telephone and Data Systems, Inc. 1999 Employee Stock
Purchase Plan herein set forth, and any amendment or supplement thereto.
(s) "PURCHASE DATE" means the last day of each calendar quarter in an
Offering Period.
(t) "PURCHASE PERIOD" means a quarterly period ending on a Purchase Date.
(u) "PURCHASE PRICE" means, with respect to a Purchase Date, 85 percent of
the Fair Market Value of a Common Share determined as of such date; provided
that if such price includes a fraction of a cent, the Purchase Price shall be
rounded up to the next whole cent.
(v) "SUBSIDIARY" means, with respect to an entity, a corporation (other than
the entity) in an unbroken chain of corporations beginning with the entity if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing 50 percent or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
(w) "TERMINATION DATE" means the earliest of (i) December 31, 2002, (ii)
such earlier date on which the Board terminates the Plan and (iii) the Purchase
Date on which all shares available for issuance under the Plan shall have been
purchased by Participants under the Plan.
The masculine gender, when appearing in this Plan, shall be deemed to include
the feminine gender unless the context clearly indicates to the contrary. The
words "hereof," "herein," and "hereunder," and other similar compounds of the
word "here," shall mean and refer to the entire Plan and not to any particular
provision or section of this document.
SECTION 3. ADMINISTRATION.
This Plan shall be administered by the 1999 Employee Stock Purchase Plan
Committee (hereinafter referred to as the "Committee"), the members of which
shall be individuals selected by the Board who do not satisfy the eligibility
requirements of Section 5 hereunder. The Committee shall be comprised of LeRoy
T. Carlson, Jr., Herbert S. Wander and Donald C. Nebergall. Subject to the
express provisions hereof, the Committee shall have complete authority to
interpret this Plan, to prescribe, amend and rescind rules and regulations
relating to it and to make all other determinations necessary or advisable for
the administration of this Plan. The Committee's determinations on the matters
referred to in this paragraph shall be conclusive. No member of the Committee
shall be personally liable for any decision or determination made in good faith
under the Plan.
SECTION 4. GRANT OF OPTION.
(a) For each Offering Period, each Eligible Employee shall be granted an
option as of the later of (i) the first day of the Offering Period and (ii) the
first Entry Date after the Eligible Employee has completed the eligibility
service requirement for participation herein described in Section 5(a) hereof
(such date referred to herein as the "grant date"), to purchase a number of
Common Shares equal to (x) $25,000, multiplied by (y) the number of full and
partial calendar years remaining in the Offering Period, divided by (z) the Fair
Market Value of a Common Share on the grant date.
(b) Notwithstanding the foregoing, no Eligible Employee shall be granted any
option for an Offering Period if, immediately after the grant of such option,
the Eligible Employee would own shares (including shares which may be purchased
under the Plan) possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company or any of its Subsidiaries actually
issued and outstanding immediately after such grant. For purposes of the
foregoing sentence, the rules of stock attribution set forth in section 424(d)
of the Code shall apply in determining share ownership.
A-2
<PAGE>
SECTION 5. ELIGIBILITY AND PARTICIPATION.
(a) Any Eligible Employee of an Employer shall be eligible to participate in
the Plan as of the first Entry Date following such Eligible Employee's
satisfaction of the eligibility service requirement, or, if later, the first
Entry Date following the date on which the Eligible Employee's Employer adopts
the Plan. For purposes of this subsection, an Eligible Employee shall have
satisfied the eligibility service requirement if he or she has completed at
least three months of continuous service with an Employer. For the sole purpose
of calculating length of service under the Plan, Employees shall be credited
with service for an Employer, an Affiliate and any other member of the
Controlled Group (even though such service may have been performed prior to the
Company's acquisition of such member or prior to the time such Affiliate became
an Affiliate). No eligibility provision hereof shall permit or deny
participation in the Plan in a manner contrary to the applicable requirements of
the Code and the regulations promulgated thereunder.
(b) As of the first Entry Date as of which an Eligible Employee is eligible
to participate in the Plan as described in subsection (a) of this Section, or as
of any date thereafter, an Eligible Employee may elect to become a Participant
in the Plan by making an election to enroll herein, in the time and manner
prescribed by the Committee. Such Eligible Employee's election shall specify his
or her chosen rate of payroll deduction contributions described in Section 6,
and shall authorize the Eligible Employee's Employer to withhold a portion of
his or her Compensation in the amount of any such payroll deduction
contributions. The Eligible Employee's election shall become effective as soon
as administratively practicable after such election is received by the Benefits
Representative or its designee.
(c) If a Participant is transferred from one Employer to another Employer,
such transfer shall not terminate the Participant's participation in the Plan.
Such transferred Participant may continue to make payroll deduction
contributions under the Plan provided such Participant takes such action as the
Committee may require, if any, in the time and manner prescribed by the
Committee. If a Participant is transferred from an Employer to an Affiliate that
is not a participating Employer, such transfer shall not terminate the
Participant's participation in the Plan. However, such Participant's payroll
deduction contributions shall be suspended during such period of employment with
the Affiliate. If such Participant subsequently is transferred from such
Affiliate to a participating Employer, such Participant can resume making
payroll deduction contributions under the Plan provided such Participant takes
such action as the Committee may require, if any, in the time and manner
prescribed by the Committee.
(d) If an individual terminates employment with all Employers and Affiliates
so as to discontinue participation in the Plan, and such individual is
subsequently reemployed by an Employer, such individual shall not be required
again to satisfy the eligibility service requirement described in subsection (a)
of this Section, but rather shall be eligible to recommence participation as of
the first Entry Date after his or her date of reemployment (or as soon as
administratively practicable thereafter).
(e) Notwithstanding anything herein to the contrary, no member of the
Committee shall be eligible to participate in the Plan.
SECTION 6. PARTICIPANT CONTRIBUTIONS.
(a) Upon enrollment in the Plan a Participant shall elect, in the manner
described in Section 5(b), a rate of payroll deduction contributions in an
amount equal to a whole percentage not less than 1% and not more than 15% of
such Participant's Compensation for each payroll period, beginning as soon as
administratively practicable after the Entry Date as of which such Participant
commences participation in the Plan.
(b) A Participant shall have the right from time to time to increase or
decrease his or her designated rate of payroll deductions under the Plan by
making an election authorizing such increase or decrease, in the time and manner
prescribed by the Committee. Such election shall specify a percentage rate of
payroll deduction contributions not less than 0% and not more than 15%. A
Participant also may elect to withdraw from the Plan for an Offering Period, as
described in Section 8. A decrease of a payroll deduction election hereunder to
0% shall not be treated as a withdrawal from the Plan for this purpose. A
Participant's election to change his or her rate of payroll deductions hereunder
shall become effective as soon as administratively practicable after such
election is received by the Benefits Representative or its designee.
(c) A Participant's designated rate of payroll deductions as in effect on
the last day of an Offering Period shall continue in effect during the
subsequent Offering Period unless and until the Participant files a change in
the rate of payroll deductions as described in subsection (b) of this Section,
or elects to withdraw from participation for the Offering Period as described in
Section 8.
A-3
<PAGE>
(d) All payroll deductions in the possession of the Company shall be
segregated from the general funds of the Company. The Committee shall cause to
be established a separate Employee Stock Purchase Account on behalf of each
Participant to which shall be credited his or her payroll deduction
contributions made under the Plan. Such accounts shall be solely for accounting
purposes, and there shall be no segregation of assets among the separate
accounts. Such accounts shall not be credited with interest or other investment
earnings. Each Employee Stock Purchase Account shall be restricted to the uses
provided herein until such time as the Company applies the amounts credited
thereto to purchase Common Shares under the Plan on behalf of Participants.
SECTION 7. PURCHASE OF COMMON SHARES.
(a) Subject to a Participant's right of withdrawal from the Plan for an
Offering Period as described in Section 8 hereof, the balance of each
Participant's Employee Stock Purchase Account shall be applied on each Purchase
Date to purchase Common Shares by dividing the balance of such account as of
such date by the Purchase Price of a Common Share as of such date. A
Participant's purchase of Common Shares shall be rounded to the nearest one-ten
thousandth of a share (or such other fractional interest prescribed by the
Committee). The Participant's Employee Stock Purchase Account shall be debited
by the amounts applied to purchase such Common Shares, and the Participant's
Stock Account shall be credited with such Common Shares.
(b) If the employment of an individual who is a Participant in the Plan is
transferred to an Affiliate that is not an Employer, then the Participant's
payroll deductions shall be suspended and the balance of the Participant's
Employee Stock Purchase Account shall be applied to purchase Common Shares on
the Purchase Date next occurring after the effective date of such transfer,
except to the extent the individual withdraws from the Plan for the remainder of
the Offering Period as described in Section 8. Upon the Participant's transfer
from such Affiliate back to an Employer, the Participant may resume active
participation in the Plan in the time and manner described in Section 5(c).
(c) Upon termination of employment because of the Participant's retirement,
the balance of the Participant's Employee Stock Purchase Account shall be
applied to purchase Common Shares for the Participant as of the Purchase Date
next occurring after the date of the Participant's termination of employment,
unless the Participant elects, in the manner prescribed by the Committee, to
withdraw from the Plan as described in Section 8 on or before the earlier of the
15th day (or such shorter period prescribed by the Committee) prior to the
Purchase Date next occurring after the date of the Participant's termination of
employment.
(d) Upon termination of employment because of the Participant's death, the
balance of the Participant's Employee Stock Purchase Account, after crediting
such account with payroll deductions for any Compensation due and owing, shall
be applied to purchase Common Shares for the Participant's estate as of the
Purchase Date next occurring after the Participant's death, unless the executor
or administrator of the Participant's estate elects, in the manner prescribed by
the Committee, to withdraw from the Plan as described in Section 8 on or before
the 15th day (or such shorter period prescribed by the Committee) prior to the
Purchase Date next occurring after the Participant's death.
(e) Upon termination of employment for any reason other than transfer to an
Affiliate as described in subsection (b) of this Section, retirement as
described in subsection (c) of this Section, or death as described in subsection
(d) of this Section, the Participant's participation in the Plan shall cease and
the entire balance of the Participant's Employee Stock Purchase Account shall be
refunded to the Participant as soon as administratively practicable thereafter.
(f) Notwithstanding any provision of this Plan to the contrary, a
Participant's right to purchase Common Shares during any calendar year shall be
limited to the extent necessary so that the Participant's right to purchase
Common Shares under this Plan and under all other employee stock purchase plans
maintained by members of the Controlled Group shall not accrue at a rate in
excess of $25,000 of the Fair Market Value of Common Shares (determined on the
grant date) for any calendar year determined in accordance with section
423(b)(8) of the Code and regulations promulgated thereunder. Any portion of the
balance of a Participant's Employee Stock Purchase Account in excess of the
amount necessary to purchase shares on a Purchase Date in accordance with the
foregoing limitation shall remain credited to such account and shall be
available for purchase of Common Shares as of the next Purchase Date; PROVIDED,
HOWEVER, that if a balance remains in a Participant's Employee Stock Purchase
Account as of the last Purchase Date in an Offering Period as a result of the
application of the foregoing limitation, such balance shall be refunded to the
Participant as soon as administratively practicable thereafter.
(g) Notwithstanding any provision of the Plan to the contrary, the maximum
number of shares which shall be available for purchase under the Plan shall be
210,000 Common Shares, subject to adjustment as provided in
A-4
<PAGE>
Section 11. The Common Shares to be sold under this Plan may, at the election of
the Company, be treasury shares, shares originally issued for such purpose or
shares purchased by the Company. In the event the amount of shares to be
purchased on behalf of all Participants collectively exceeds the shares
available for purchase under the Plan, the number of Common Shares to be
purchased by each Participant under this Section shall be determined by
multiplying the number of shares which the Participant elected to purchase on
such Purchase Date by the following fraction (or by applying such other
equitable adjustment on a uniform basis as may be determined by the Committee):
Total number of shares available for purchase on Purchase Date
----------------------------------------------------------------------------
Total number of shares elected to be purchased by all Participants on Purchase
Date
Any portion of the balance of a Participant's Employee Stock Purchase Account
that is not applied to purchase Common Shares on a Purchase Date as a result of
the foregoing adjustment shall be refunded to the Participant as soon as
administratively practicable thereafter.
SECTION 8. PARTICIPANT'S RIGHT TO WITHDRAW FOR AN OFFERING PERIOD.
At any time during an Offering Period, but in no event later than 15 days
(or such shorter period prescribed by the Committee) prior to the last Purchase
Date in the Offering Period, a Participant may elect to withdraw from
participation in the Plan for such Offering Period. A withdrawal election shall
be made in the time and manner prescribed by the Committee. Upon a Participant's
election to withdraw from the Plan for an Offering Period pursuant to this
Section, the amount credited to the Participant's Employee Stock Purchase
Account shall be refunded to the Participant as soon as is administratively
practicable, and such Participant's participation in the Plan for the remainder
of such Offering Period shall be terminated. The Participant shall be eligible
to recommence participation in the Plan as of the next Offering Period.
SECTION 9. SUSPENSION ON ACCOUNT OF EMPLOYEE'S HARDSHIP WITHDRAWAL.
If a Participant makes a hardship withdrawal from the Telephone and Data
Systems, Inc. Tax-Deferred Savings Plan or any other plan with a cash or
deferred arrangement qualified under section 401(k) of the Code which plan is
sponsored, or participated in, by any Employer, such Participant shall be
suspended from making payroll deductions under this Plan for a period of twelve
months from the date of such hardship withdrawal. The balance of such
Participant's Employee Stock Purchase Account shall be applied to purchase
Common Shares on the Purchase Date next occurring after the effective date of
such hardship withdrawal, except to the extent the Participant withdraws from
the Plan for the remainder of the Offering Period as described in Section 8, or
discontinues participation in this Plan on account of the Participant's
termination of employment. After the expiration of such twelve-month period, the
Participant may resume active participation in the Plan by electing to resume
making payroll deductions hereunder, in the time and manner prescribed by the
Committee, unless the Participant has withdrawn from participation in the Plan
as described in Section 8 for the Offering Period which contains the date of
expiration of such twelve-month period.
SECTION 10. STOCK ACCOUNT; ISSUANCE OF CERTIFICATES.
(a) A Stock Account shall be established on behalf of each Participant for
whom shares are purchased under this Plan (or, if so designated by the
Participant, on behalf of such Participant and one other person as such
Participant may designate as joint tenants with right of survivorship).
(b) As of each Purchase Date, the Common Shares purchased on a Participant's
behalf (including the right to fractional shares) shall be credited to the
Participant's Stock Account and shall be registered in the name of the Nominee.
All rights accruing to an owner of record of such Common Shares, including
dividend, voting and tendering rights, shall belong to the Participant for whom
such Stock Account is established (including any joint tenant or, in the case of
a deceased Participant, the Participant's estate).
(c) The Nominee shall establish procedures pursuant to which a Participant
(including any joint tenant or, in the case of a deceased Participant, the
executor or administrator of the Participant's estate) can elect that the shares
credited to the Participant's Stock Account shall be registered in the name of
such Participant, or in the names of such Participant and one other person as
the Participant may designate as joint tenants with right of survivorship, as
the case may be. Such a joint tenancy designation shall not apply to shares
registered by the Participant's estate after the Participant's death. As soon as
practicable after such election, certificates representing such shares shall be
issued to the Participant (including any joint tenant or, in the case of a
deceased Participant, to
A-5
<PAGE>
the Participant's estate). The Nominee shall also establish procedures pursuant
to which a Participant (or the executor or administrator of the Participant's
estate) can receive a cash payment in lieu of any fractional shares credited to
his or her Stock Account.
SECTION 11. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of the Plan shall not affect in any way the right or power
of the Company or its shareholders to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock that affects any
class of Common Shares or the rights thereof, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) If, during the term of the Plan, the Company shall effect (i) a
distribution or payment of a dividend on Common Shares in shares of the Company,
(ii) a subdivision of outstanding Common Shares by a stock split or otherwise,
(iii) a combination of the outstanding Common Shares into a smaller number of
shares by a reverse stock split or otherwise, or (iv) an issuance by
reclassification or other reorganization of Common Shares (other than by merger
or consolidation), then each Participant shall be entitled to receive upon the
purchase of shares pursuant to this Plan such shares of the Company which the
Participant would have owned or would have been entitled to receive after the
happening of such event had the Participant purchased Common Shares pursuant to
the Plan immediately prior to the happening of such event. If any other event
shall occur that, in the judgment of the Board, necessitates adjusting the
Purchase Price of Common Shares, the number of Common Shares offered for
purchase hereunder, or other terms of the Plan, the Board shall take any action
that in its judgment shall be necessary to preserve each Participant's rights
substantially proportionate to the rights existing prior to such event. To the
extent that any event or action pursuant to this paragraph shall entitle
Participants to purchase additional Common Shares or other shares of the
Company, the shares available under this Plan shall be deemed to include such
additional Common Shares or such other shares of the Company.
(c) In the event of a merger of one or more corporations into the Company,
or a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Participant in the Plan shall,
at no additional cost, be entitled, upon his or her payment for all or part of
the Common Shares purchasable by the Participant under the Plan, to receive
(subject to any required action by shareholders) in lieu of the number of Common
Shares which he or she was entitled to purchase, the number and class of shares
of stock or other securities to which such holder would have been entitled
pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, such holder had been the
holder of record of the number of Common Shares equal to the number of shares
paid for by the Participant.
(d) If the Company is merged into or consolidated with another corporation
under circumstances in which the Company is not the surviving corporation, or if
the Company sells or otherwise disposes of substantially all of its assets to
another corporation during the term of the Plan: (i) subject to the provisions
of clause (ii) below, after the effective date of such merger, consolidation or
sale, as the case may be, each holder of a right to purchase shall be entitled
to receive, upon his or her payment for all or part of the Common Shares
purchasable by the Participant under the Plan and receive in lieu of such
shares, shares of such stock or other securities as the holders of Common Shares
received pursuant to the terms of the merger, consolidation or sale; and (ii)
all outstanding rights to purchase may be canceled by the Board as of the
effective date of any such merger, consolidation or sale, provided that (A)
notice of such cancellation shall be given to each Participant and (B) each such
Participant shall have the right to purchase, during a 30-day period preceding
the effective date of such merger, consolidation or sale, all or any part of the
shares allocated to the Participant under the terms of the Plan.
(e) Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Common Shares then available for
purchase under the Plan.
A-6
<PAGE>
SECTION 12. AMENDMENT OF THE PLAN.
The Board may at any time, and from time to time, amend the Plan in any
respect; PROVIDED, HOWEVER, that any amendment that changes the number of shares
to be reserved under the Plan (other than as provided in Section 11), or that
otherwise requires stockholder approval under applicable law, shall not be
effective unless stockholder approval is obtained in the time and manner
prescribed by law.
SECTION 13. TERMINATION OF THE PLAN.
While it is intended that the Plan remain in effect until the Termination
Date, the Board may terminate the Plan at any time in its discretion. Upon
termination of the Plan, the Committee shall terminate payroll deductions and
shall apply the balance of each Participant's Employee Stock Purchase Account to
purchase Common Shares as described in Section 7 as if such termination date
were a Purchase Date under the Plan and were the last day of an Offering Period.
Notwithstanding the foregoing, upon termination of the Plan, a Participant may
elect, in the time and manner prescribed by the Committee, to withdraw from
participation in the Plan. As soon as administratively practicable after the
termination of the Plan, the Committee shall refund to the Participant any
amount in his or her Employee Stock Purchase Account, if any, that has not been
applied to purchase Common Shares as a result of the Participant's election to
withdraw from the Plan or as a result of the application of any limitation
hereunder.
Notwithstanding any provision in the Plan to the contrary, the Plan shall
automatically terminate as of the Purchase Date on which all Common Shares
available for purchase under the Plan shall have been purchased by Participants
under the Plan.
SECTION 14. MISCELLANEOUS.
(a) The Plan is subject to the approval of a majority of the votes cast on
the matter by the stockholders of the Company within twelve months before or
after its adoption by the Board.
(b) The right to purchase Common Shares under this Plan shall not be
transferable by any Participant other than by will or the laws of descent and
distribution, and must be exercisable, during his or her lifetime, only by the
Participant.
(c) No Participant shall have rights or privileges of a stockholder of the
Company with respect to shares purchasable under this Plan unless and until the
Participant shall become the holder of record of one or more Common Shares.
(d) The Company is not obligated to repurchase any Common Shares acquired
under the Plan.
(e) The sale and delivery of Common Shares under the Plan shall be in
compliance with relevant statutes and regulations of governmental authorities,
including state securities laws and regulations, and with the regulations of
applicable stock exchanges.
(f) This Plan and all determinations made hereunder and action taken
pursuant hereto shall be governed by the laws of the State of Illinois and
construed in accordance therewith.
(g) Each Employer, by adopting the Plan, appoints the Company and the Board
as its agents to exercise on its behalf all of the powers and authorities hereby
conferred upon the Company and the Board by the terms of the Plan, including,
but not by way of limitation, the power to amend and terminate the Plan. The
authority of the Company and the Board to act as such agents shall continue for
as long as necessary to carry out the purposes of the Plan.
A-7
<PAGE>
PROXY PROXY
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF THE SHAREHOLDERS OF
TELEPHONE AND DATE SYSTEMS, INC.
TO BE HELD ON MAY 14, 1999
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, 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 Preferred Shares that the undersigned would
be entitled to vote if then personally present at the 1999 Annual Meeting of the
Shareholders of Telephone and Data Systems, Inc., to be held on Friday, May 14,
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.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE
REVERSE SIDE HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3. IF A NOMINEE IS UNABLE TO
SERVE OR WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY SHALL
HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE NOMINEE DESIGNATED BY THE
BOARD OF DIRECTORS (UNLESS AUTHORITY TO VOTE FOR NOMINEES HAS BEEN
WITHHELD).
(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
Telephone and Data Systems, Inc., c/o Harris Trust and
Savings Bank.
[Common Stock - Black Ink]
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE IN PROPOSAL 1 AND
"FOR" PROPOSALS 2 AND 3.
<TABLE>
<S> <C> <C> <C>
FOR WITHHOLD
1. Election of Class III Director / / / /
(Nominee: H. Wander)
FOR AGAINST ABSTAIN
2. 1999 Employee Stock Purchase Plan / / / / / /
FOR AGAINST ABSTAIN
3. Ratify Accountants for 1999 / / / / / /
</TABLE>
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
Telephone and Data Systems, Inc., c/o Harris Trust and
Savings Bank.
[Common Stock - Black Ink]
<PAGE>
PROXY PROXY
PROXY FOR SERIES A COMMON SHARES SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF
TELEPHONE AND DATA SYSTEMS, INC.
TO BE HELD ON MAY 14, 1999
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, 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 Series A Common Shares that the undersigned
would be entitled to vote if then personally present at the 1999 Annual Meeting
of the Shareholders of Telephone and Data Systems, Inc., to be held on Friday,
May 14, 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.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE
REVERSE SIDE HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3. IF A NOMINEE IS UNABLE TO
SERVE OR WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY SHALL
HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE NOMINEE DESIGNATED BY THE
BOARD OF DIRECTORS (UNLESS AUTHORITY TO VOTE FOR NOMINEES HAS BEEN WITHHELD).
(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 Telephone and Data
Systems, Inc., c/o Harris Trust and Savings Bank.
[Series A Common Stock - Green Ink]
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.//
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IN PROPOSAL 1 AND
"FOR" PROPOSALS 2 AND 3.
<TABLE>
<CAPTION>
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C> <C>
1a. Election of Class I Directors // // //
(Nominees: J. Barr III and S. Helton)
---------------------------------
(Except nominee(s) written above)
<CAPTION>
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C> <C>
1b. Election of Class III Directors // // //
(Nominees: LeRoy Carlson, Sr.,
Walter Carlson and Letitia Carlson)
---------------------------------
(Except nominee(s) written above)
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. 1999 Employee Stock Purchase Plan // // //
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3. Ratify Accountants for 1999 // // //
</TABLE>
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 Telephone and Data
Systems, Inc., c/o Harris Trust and Savings Bank.
[Series A Common Stock - Green Ink]
<PAGE>
PROXY PROXY
PROXY FOR PREFERRED SHARES ISSUED PRIOR TO OCTOBER 31, 1981
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF
TELEPHONE AND DATA SYSTEMS, INC.
TO BE HELD ON MAY 14, 1999
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, 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 Preferred Shares that the undersigned would
be entitled to vote if then personally present at the 1999 Annual Meeting of the
Shareholders of Telephone and Data Systems, Inc., to be held on Friday, May 14,
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 NOMINEE IN PROPOSAL 1 AND
"FOR" PROPOSALS 2 AND 3.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON
THE REVERSE SIDE HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE NOMINEE IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3. IF THE NOMINEE
IS UNABLE TO SERVE OR WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY SHALL
HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE NOMINEE DESIGNATED BY
THE BOARD OF DIRECTORS (UNLESS AUTHORITY TO VOTE FOR THE NOMINEE HAS BEEN
WITHHELD).
(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 Telephone and Data
Systems, Inc., c/o Harris Trust and Savings Bank.
[PREFERRED PRIOR TO 10/31 - RED INK]
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.//
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE IN PROPOSAL 1 AND
"FOR" PROPOSALS 2 AND 3.
<TABLE>
<CAPTION>
FOR WITHHOLD
<S> <C> <C> <C>
1. Election of Class III Director // //
(Nominee: H. Wander)
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
2. 1999 Employee Stock Purchase Plan // // //
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
3. Ratify Accountants for 1999 // // //
</TABLE>
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 Telephone and Data
Systems, Inc., c/o Harris Trust and Savings Bank.
[PREFERRED PRIOR TO 10/31 - RED INK]
<PAGE>
PROXY PROXY
PROXY FOR PREFERRED SHARES ISSUED AFTER OCTOBER 31, 1981
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF
TELEPHONE AND DATA SYSTEMS, INC.
TO BE HELD ON MAY 14, 1999
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, 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 Preferred Shares that the undersigned would
be entitled to vote if then personally present at the 1999 Annual Meeting of the
Shareholders of Telephone and Data Systems, Inc., to be held on Friday, May 14,
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.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE
REVERSE SIDE HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3. IF A NOMINEE IS UNABLE TO
SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY SHALL
HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE NOMINEE DESIGNATED BY THE
BOARD OF DIRECTORS (UNLESS AUTHORITY TO VOTE FOR NOMINEES HAS BEEN WITHHELD).
(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 Telephone and Data
Systems, Inc., c/o Harris Trust and Savings Bank.
[Preferred After 10/31 - Blue Ink]
<PAGE>
TELEPHONE AND DATA SYSTEMS, 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.
<TABLE>
<CAPTION>
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C> <C>
1a. Election of Class I Directors // // //
(Nominees: J. Barr III and S. Helton) ---------------------------------
(Except nominee(s) written above)
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1b. Election of Class II Directors // // //
(Nominees: LeRoy Carlson, Sr.,
Walter Carlson and Letitia Carlson) ---------------------------------
(Except nominee(s) written above)
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. 1999 Employee Stock Purchase Plan // // //
<CAPTION>
FOR AGAINST ABSTAIN
<C> <C> <C>
3. Ratify Accountants for 1999 // // //
</TABLE>
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 Telephone and Data
Systems, Inc., c/o Harris Trust and Savings Bank.
