<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
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
United States Cellular Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
United States Cellular Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
N/A
- ------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions apply:
N/A
- ------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction completed
pursuant to Exchange Act Rule 0-11 (1):
N/A
- ------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- ------------------------------------------------------------------------
/ / 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:
N/A
- ------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
N/A
- ------------------------------------------------------------------------
(3) Filing party:
N/A
- ------------------------------------------------------------------------
(4) Date filed:
N/A
- ------------------------------------------------------------------------
- ------------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
UNITED STATES CELLULAR CORPORATION
8410 West Bryn Mawr Avenue
Suite 700
Chicago, Illinois 60631
[LOGO]
April 12, 1994
Dear Shareholders:
You are cordially invited to attend the Company's Annual Meeting on
Thursday, May 5, 1994, at 10:00 a.m., Chicago time, at Harris Trust and Savings
Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, in the Auditorium.
At the meeting, we will report on the plans and accomplishments of United States
Cellular Corporation.
The formal notice of the meeting, Proxy Statement and 1993 Annual Report are
enclosed. The Proxy Statement contains information about the nominees for the
Board of Directors. Class I directors are being elected at the 1994 annual
meeting by the holder of Series A Common Shares and shares of Preferred Stock.
In addition, all shareholders are being asked to ratify the selection of
independent public accountants for the current fiscal year. The Board of
Directors recommends a vote "FOR" the nominees and the proposal to ratify the
selection of the independent public accountants.
The Board of Directors and members of our management team will be at the
Annual Meeting to 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, whether or not you plan to
attend the meeting.
If you have any questions prior to the Annual Meeting, please call the
External Reporting Department at (312) 399-8900.
We look forward with pleasure to visiting with you at the Annual Meeting.
With very best regards,
/s/ LeRoy T. Carlson, Jr. /s/ H. Donald Nelson
LeRoy T. Carlson, Jr. H. Donald Nelson
Chairman President and
Principal Executive
Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
To the Shareholders of
UNITED STATES CELLULAR CORPORATION
The Annual Meeting of the Shareholders of United States Cellular
Corporation, a Delaware corporation (the "Company" or "USM"), will be held at
Harris Trust and Savings Bank, 111 West Monroe Street, 8th Floor, Chicago,
Illinois, in the Auditorium, on Thursday, May 5, 1994, at 10:00 a.m., Chicago
time, for the following purposes:
1. to elect two Class I directors;
2. to ratify the selection of Arthur Andersen & Co. as the Company's
independent public accountants for the current fiscal year; and
3. to transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
This Notice of Annual Meeting of Shareholders and Proxy Statement is first
being sent to shareholders on or about April 12, 1994.
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. You have the power to
revoke your proxy at any time before it is voted, and the giving of a proxy will
not affect your right to vote in person if you attend the Annual Meeting.
The Board of Directors has fixed the close of business on March 7, 1994, as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting. On March 7, 1994, the Company had outstanding
43,739,215 Common Shares, par value $1.00 per share (excluding 426 shares held
by the Company), 33,005,877 Series A Common Shares, par value $1.00 per share,
and 188,284 shares of Preferred Stock, par value $1.00 per share. Except with
respect to the election of the two Class I directors, each of the outstanding
Common Shares is entitled to one vote on all matters to come before the Annual
Meeting. Each of the outstanding Series A Common Shares is entitled to ten votes
and each share of Preferred Stock is entitled to one vote on all matters to come
before the Annual Meeting. On the record date, Telephone and Data Systems, Inc.,
an Iowa corporation ("TDS"), was the sole holder of Series A Common Shares and
shares of Preferred Stock and will elect both Class I directors at the Annual
Meeting. Therefore, proxies are being requested from the holders of Common
Shares only in connection with the ratification of the selection of Arthur
Andersen & Co.
VOTING INFORMATION
The holder of Series A Common Shares and shares of Preferred Stock may, with
respect to the election of the Class I directors to be elected by the Series A
Common Shares and shares of Preferred Stock, 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 ratify the selection of Arthur
Andersen & Co. as the Company's independent public accountants for 1994, (i)
vote FOR ratification, (ii) vote AGAINST ratification or (iii) ABSTAIN from
voting on the proposal. All properly executed and unrevoked proxies received in
the accompanying form in time for the 1994 Annual Meeting will be voted in the
manner directed therein. If no direction is made, a proxy by the holder of
Series A Common Shares and shares of Preferred Stock will be voted FOR the
election of the named director nominees to serve as Class I directors and a
proxy by any shareholder will be voted FOR the proposal to ratify the selection
of Arthur Andersen & Co. as the Company's independent public accountants for
1994. If a proxy indicates that all or a portion of the votes represented by
such proxy are not being voted with respect to a particular matter, such
non-votes will not be considered present and entitled to vote on such matter,
although such votes may be considered present and entitled to vote on other
matters and will count for purposes of determining the presence of a quorum.
1
<PAGE>
The election of the Class I directors to be elected by the holder of Series
A Common Shares and shares of Preferred Stock requires the affirmative vote of a
plurality of the voting power of the Series A Common Shares and shares of
Preferred Stock present in person or represented by proxy and entitled to vote
on such matter at the Annual Meeting. Accordingly, if a quorum is present at the
Annual Meeting, each person receiving the greatest number of votes by the holder
of Series A Common Shares and shares of Preferred Stock with respect to the
election of such Class I director will be elected to serve as a Class I
director. Since the election of each Class I director requires only the
affirmative vote of a plurality of the voting power of the Series A Common
Shares and shares of Preferred Stock present in person or represented by proxy
and entitled to vote with respect to such matter, withholding authority to vote
for the nominee and non-votes with respect to the election of the Class I
directors will not affect the outcome of the election of the Class I directors.
If a quorum is present at the Annual Meeting, the ratification of the
selection of Arthur Andersen & Co. as the Company's independent public
accountants for 1994 requires the affirmative vote of a majority of the voting
power of the Common Shares, Series A Common Shares and shares of Preferred Stock
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.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Every year,
one of the classes is elected to serve for three years. At the Annual Meeting,
two Class I directors will be elected for terms of three years, or until their
successors are elected and qualified. The nominees for election as Class I
directors are identified in the table below. In the event any nominee, who has
expressed an intention to serve if elected, fails to stand for election, the
persons named in the proxy presently intend to vote for a substitute nominee
designated by the Board of Directors.
NOMINEES
CLASS I DIRECTORS--TERMS SCHEDULED TO EXPIRE IN 1997
The following persons, if elected at the Annual Meeting of Shareholders on
May 5, 1994, will serve as Class I directors for a period of three years, or
until their successors are elected and qualified.
NOMINEES FOR ELECTION BY HOLDER OF SERIES A COMMON SHARES
AND SHARES OF PREFERRED STOCK
<TABLE>
<CAPTION>
SERVED AS
POSITION WITH THE COMPANY DIRECTOR
NAME AGE AND PRINCIPAL OCCUPATION SINCE
- --------------------------------------- --- ---------------------------------------------- -------------
<S> <C> <C> <C>
H. Donald Nelson....................... 60 President (principal executive 1984
officer) and Director of the Company
LeRoy T. Carlson....................... 77 Director of the Company 1987
and Chairman of TDS
</TABLE>
H. Donald Nelson has been the President (principal executive officer) of the
Company for more than five years.
LeRoy T. Carlson has been the Chairman of TDS for more than five years and
is a member of its Board of Directors. He is the father of LeRoy T. Carlson,
Jr., and Walter C.D. Carlson.
Mr. Nelson and Mr. Carlson are both currently Class I directors and were
previously elected by TDS as the sole holder of Series A Common Shares.
OTHER DIRECTORS
The following persons are currently directors of the Company whose terms
will continue following the Annual Meeting.
2
<PAGE>
CLASS II DIRECTORS--TERMS SCHEDULED TO EXPIRE IN 1995
The following persons were elected at the Annual Meeting of Shareholders on
May 22, 1992, to serve as Class II directors for a period of three years, or
until their successors are elected and qualified.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------------------------------- --- ---------------------------------------------- ---------------
<S> <C> <C> <C>
Murray L. Swanson...................... 51 Director of the Company and Executive Vice 1987
President-Finance of TDS
Paul-Henri Denuit...................... 59 Director of the Company and Chief Executive 1988
Officer and Managing Director of S.A.
Coditel
</TABLE>
Murray L. Swanson has been Executive Vice President-Finance and chief
financial officer of TDS for more than five years. Mr. Swanson also serves on
the Board of Directors of TDS and American Paging, Inc. ("APP"), a subsidiary of
TDS which provides radio paging services.
Paul-Henri Denuit was appointed a director of the Company in 1988. Since
1971, he has served as Chief Executive Officer and Managing Director of S.A.
Coditel, which is a principal shareholder of the Company. See "Security
Ownership of Certain Beneficial Owners and Management." Mr. Denuit was appointed
as a director of the Company pursuant to the terms of a Common Stock Purchase
Agreement dated April 24, 1987, between the Company and S.A. Coditel.
Mr. Swanson was elected by TDS as the sole holder of Series A Common Shares
and shares of Preferred Stock and Mr. Denuit was elected by the holders of
Common Shares.
CLASS III DIRECTORS--TERMS SCHEDULED TO EXPIRE IN 1996
The following persons were elected at the Annual Meeting of Shareholders on
May 13, 1993, to serve as Class III directors for a period of three years, or
until their successors are elected and qualified.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------------------------------- --- ---------------------------------------------- ---------------
<S> <C> <C> <C>
LeRoy T. Carlson, Jr................... 47 Chairman and Director of the Company and 1984
President of TDS
Walter C. D. Carlson................... 40 Director of the Company and Partner, Sidley & 1989
Austin, Chicago, Illinois
Allan Z. Loren......................... 55 Director of the Company and President and CEO 1992
of Galileo International
</TABLE>
LeRoy T. Carlson, Jr., was appointed Chairman of the Company in 1989. He has
been the President of TDS for more than five years. Mr. Carlson also serves on
the Board of Directors of TDS and of APP, and is the Chairman of APP. He is the
son of LeRoy T. Carlson and the brother of Walter C.D. Carlson.
Walter C.D. Carlson has been a partner of the law firm of Sidley & Austin
for more than five years. He also serves on the Board of Directors of TDS. He is
the son of LeRoy T. Carlson and the brother of LeRoy T. Carlson, Jr.
On April 6, 1994, it was announced that Mr. Allan Z. Loren resigned as
President and Chief Executive Officer of Galileo International and that he will
be joining American Express Company as Executive Vice President and Chief
Information Officer. Prior to his assignment at Galileo International, Mr. Loren
was President and CEO of Covia Partnership, which combined with Galileo
International in 1993 to become the world's largest global computer reservation
system. Before that, Mr. Loren was President of Apple USA with responsibility
for Apple's domestic marketing, sales, customer service and distribution. Mr.
Loren also previously held a number of senior executive, technical and
operational positions with CIGNA, a major insurance company.
Mr. Loren was elected by the holders of Common Shares. LeRoy T. Carlson,
Jr., and Walter C.D. Carlson were elected by TDS as the sole holder of Series A
Common Shares and shares of Preferred Stock.
3
<PAGE>
COMMITTEES AND MEETINGS
The Board of Directors of the Company held six meetings during 1993. All of
the directors attended at least 75% of the meetings of the Board of Directors
held in 1993.
The Board of Directors does not presently have a formal nominating or
compensation committee. The audit committee of the Board of Directors, among
other things, determines audit policies, reviews external and internal audit
reports and reviews recommendations made by the Company's internal auditing
staff and independent public accountants. The audit committee is composed of
Messrs. Walter C.D. Carlson (chairman), Paul-Henri Denuit and Allan Z. Loren.
The audit committee held four meetings in 1993. All of the committee members
attended at least 75% of the meetings of the audit committee.
EXECUTIVE OFFICERS
Set forth below is a table identifying other executive officers of the
Company who are not identified in the tables regarding the election of directors
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------------------ --------- -----------------------------------------------------------
<S> <C> <C>
Daniel R. Croft........................... 39 Vice President-Marketing
Joyce V. Gab Kneeland..................... 36 Vice President-Central Operations
Geoffrey D. Gieske........................ 50 Vice President-Human Resources
Richard W. Goehring....................... 44 Vice President-Engineering
Kenneth R. Meyers......................... 40 Vice President-Finance and Treasurer
David P. Rivoira.......................... 52 Vice President-Customer Service
Edward W. Towers.......................... 46 Vice President-Market and Business Development
James D. West............................. 41 Vice President-Information Services
Phillip A. Lorenzini...................... 42 Controller
Stephen P. Fitzell........................ 40 Secretary
</TABLE>
Daniel R. Croft joined the Company as Director of Marketing and Sales
Operations in 1990 and was appointed Vice President-Marketing Operations in
1991. Effective January 1, 1994, Mr. Croft was appointed as Vice
President-Marketing. Prior to joining the Company, he was Vice President of
Centel Cellular Company for over five years.
Joyce V. Gab Kneeland was appointed as Vice President-Central Operations,
effective January 1, 1994. Prior to that she was the Vice President-Customer
Service and Administration of the Company for more than five years.
Geoffrey D. Gieske joined the Company and was appointed Vice President-Human
Resources in 1993. Prior to joining the Company, Mr. Gieske was Vice President
of Human Resources of Ecolab, Inc. since 1988, and before that he was employed
at Tenneco, Inc. for over five years in various capacities, most recently as
Vice President of Human Resources of the automotive division.
Richard W. Goehring has been Vice President-Engineering of the Company for
more than five years.
Kenneth R. Meyers has been the Vice President-Finance and Treasurer of the
Company for more than five years.
David P. Rivoira was appointed Vice President-Customer Service effective
January 1, 1994. Prior to that, he was General Manager of the Southeast Region
of the Company since 1989.
Edward W. Towers has been Vice President-Market and Business Development of
the Company for more than five years.
James D. West was appointed Vice President-Information Services in 1992.
Prior to that he was employed at Andersen Consulting for over five years in
various capacities, most recently as an associate partner.
Phillip A. Lorenzini was appointed principal accounting officer in 1993. He
has been the Controller since 1989. Prior to that, he was the Director of
Financial Administration in the Western Region Product Division of United States
Gypsum Co.
4
<PAGE>
Stephen P. Fitzell has been the Secretary of the Company for more than five
years. He joined the law firm of Sidley & Austin as counsel in 1989 and was
named a partner of that firm in 1990. Prior to joining Sidley & Austin, Mr.
Fitzell was an associate and later a director with the law firm of Pope,
Ballard, Shepard & Fowle, Ltd., from 1982 to 1989.
All of the Company's executive officers devote all of their time to the
affairs of the Company, except for LeRoy T. Carlson, Jr., and Stephen P.
Fitzell. Edward W. Towers is employed by TDS, but devotes all of his time to the
affairs of the Company. LeRoy T. Carlson, Jr., who is employed by TDS as its
President and chief executive officer, devotes a portion of his time in that
capacity to the affairs of the Company. Mr. Fitzell is a practicing attorney.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth compensation information for the President
and Principal Executive Officer of the Company and the four most highly
compensated executive officers other than the President and Principal Executive
Officer for services rendered during the year ended December 31, 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION(2) -----------------------------------
--------------------------------- AWARDS OF ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY(3) BONUS(4) OPTIONS/SARS(5) COMPENSATION(6)
- -------------------------------------------------- --------- ----------- --------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
H. Donald Nelson 1993 $ 206,375 $ 35,360 600 $ 4,714
President (principal executive officer) 1992 $ 191,375 $ 62,500 600 $ 3,072
1991 $ 176,167 $ 58,000 7,624 $ 2,585
Daniel R. Croft 1993 $ 145,566 $ 25,281 800 $ 2,343
Vice President - Marketing Operations 1992 $ 137,667 $ 41,890 800 $ 705
1991 $ 126,417 $ 40,000 10,165 $ --
Joyce V. Gab Kneeland 1993 $ 124,141 $ 22,207 600 $ 2,193
Vice President - Customer Service and 1992 $ 114,667 $ 39,270 600 $ 830
Administration 1991 $ 102,333 $ 36,000 7,624 $ 552
Richard W. Goehring 1993 $ 149,625 $ 28,185 600 $ 1,799
Vice President - Engineering 1992 $ 138,583 $ 49,680 600 $ 894
1991 $ 126,417 $ 48,000 7,624 $ 516
Kenneth R. Meyers 1993 $ 126,310 $ 22,207 600 $ 2,217
Vice President - Finance and Treasurer 1992 $ 118,667 $ 40,590 600 $ 854
1991 $ 109,583 $ 36,000 7,624 $ 622
<FN>
- ----------
(1) Mr. LeRoy T. Carlson, Jr., Chairman of the Company, receives no
compensation from the Company. Mr. Carlson is compensated by TDS in
connection with his services for TDS and all TDS subsidiaries. The titles
of Daniel R. Croft and Joyce V. Gab Kneeland were changed effective January
1, 1994, as indicated above under "Executive Officers."
(2) Does not include the discount amount of any employee stock purchase plan
since such plans are generally available to all eligible salaried
employees. Does not include the value of any perquisites and other personal
benefits, securities or property, since the aggregate amount of such
compensation is the lesser of either $50,000 or 10% of the total of annual
salary and bonus reported for the named executive officers above.
(3) Represents the dollar value of base salary (cash and non-cash) earned by
the named executive officer during the fiscal year identified.
(4) Represents the dollar value of bonus (cash and non-cash) earned by the
named executive officer during the fiscal year identified. The bonuses for
1993 have not yet been determined. The dollar amounts in 1993 represent
advance payments which were authorized by the Chairman to all named
executive officers of up to 75% of the bonus expected to be paid for 1993.
See "Executive Officer Compensation Report by the Chairman."
(5) Represents the number of shares of common stock of the Company subject to
stock options ("Options") awarded during the fiscal year identified. No
stock appreciation rights ("SARs") were awarded, either on a stand-alone
basis or in tandem with Options, during any of the identified fiscal years.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
(6) Includes contributions for the benefit of the named executive officer under
the TDS Tax-Deferred Savings Plan ("TDSP") and the taxable dollar value of
any insurance premiums paid during the covered fiscal year with respect to
term life insurance for the benefit of the named executive ("Life
Insurance"), as indicated below for 1993:
</TABLE>
<TABLE>
<CAPTION>
H. DONALD NELSON DANIEL R. CROFT JOYCE V. GAB KNEELAND RICHARD W. GOEHRING KENNETH R. MEYERS
----------------- --------------- ----------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
TDSP $ 1,542 $ 2,216 $ 2,093 $ 1,799 $ 2,115
Life Insurance 3,172 127 100 -- 102
------- ------- ------- ------- -------
$ 4,714 $ 2,343 $ 2,193 $ 1,799 $ 2,217
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
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 1993
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS/ APPRECIATION
OPTIONS/ SARS GRANTED FOR OPTION TERM(5)
SARS TO EXERCISE MARKET EXPIRATION -----------------------
NAME GRANTED(1) EMPLOYEES(2) PRICE(3) PRICE(4) DATE 0% 5% 10%
- -------------------------------- --------- ------------ ------- ------- --------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H. Donald Nelson................ 600 4.1% $ 15.67 $ 21.25 11/1/97 $3,350 $6,675 $10,650
Daniel R. Croft................. 800 5.5% $ 15.67 $ 21.25 11/1/97 $4,450 $8,900 $14,200
Joyce V. Gab Kneeland........... 600 4.1% $ 15.67 $ 21.25 11/1/97 $3,350 $6,675 $10,650
Richard W. Goehring............. 600 4.1% $ 15.67 $ 21.25 11/1/97 $3,350 $6,675 $10,650
Kenneth R. Meyers............... 600 4.1% $ 15.67 $ 21.25 11/1/97 $3,350 $6,675 $10,650
<FN>
- ------------
(1) Represents number of USM shares underlying Options/SARs which were awarded
for the named executive during the fiscal year. No SARs were granted or
awarded in 1993. On February 1, 1991, the named officers received awards of
Options for shares which could vary between 80% and 120% of a targeted
amount based on performance. Therefore, 80% of the targeted amount was
awarded on the grant date, and each year for six years an additional number
of shares, up to 40% of the targeted amount, may be awarded based on
performance for the prior year. The minimum amount scheduled to become
exercisable each year is 1,600 shares for Mr. Croft and 1,200 shares for
all other named executive officers. Any amount over such minimum amount
which is awarded based on performance in any year is shown above as a grant
in that year.
(2) Represents the percent of total USM shares underlying Options/SARs awarded
to employees during the fiscal year.
(3) Represents the exercise price of the Options which is equal to the average
market price of Common Shares for the 20 consecutive trading days ended on
the grant date of February 1, 1991.
(4) Represents the fair market value of the Common Shares on the award date,
based on the closing price on the American Stock Exchange.
(5) Represents the potential realizable value of each grant of Options,
assuming that the market price of Common Shares appreciates in value from
the award date to the end of the Option term at the indicated annualized
rates.
</TABLE>
6
<PAGE>
AGGREGATED DECEMBER 31, 1993 OPTION/SAR VALUE(1)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1993
----------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS(2) OPTIONS/SARS(3)
------------------------------ --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
H. Donald Nelson..................................... Options 3,424 5,400 $ 64,688 $ 102,020
SARs 12,000 24,000 234,750 469,500
------------- ------- ----------- -------------
TOTAL 15,424 29,400 $ 299,438 $ 571,520
------------- ------- ----------- -------------
------------- ------- ----------- -------------
Daniel R. Croft...................................... Options 4,565 7,200 $ 86,244 $ 136,026
SARs -- -- -- --
------------- ------- ----------- -------------
TOTAL 4,565 7,200 $ 86,244 $ 136,026
------------- ------- ----------- -------------
------------- ------- ----------- -------------
Joyce V. Gab Kneeland................................ Options 3,424 5,400 $ 64,688 $ 102,020
SARs 6,000 6,000 117,375 117,375
------------- ------- ----------- -------------
TOTAL 9,424 11,400 $ 182,063 $ 219,395
------------- ------- ----------- -------------
------------- ------- ----------- -------------
Richard W. Goehring.................................. Options 3,424 5,400 $ 64,688 $ 102,020
SARs 6,000 6,000 117,375 117,375
------------- ------- ----------- -------------
TOTAL 9,424 11,400 $ 182,063 $ 219,395
------------- ------- ----------- -------------
------------- ------- ----------- -------------
Kenneth R. Meyers.................................... Options 3,424 5,400 $ 64,688 $ 102,020
SARs 6,000 6,000 117,375 117,375
------------- ------- ----------- -------------
TOTAL 9,424 11,400 $ 182,063 $ 219,395
------------- ------- ----------- -------------
------------- ------- ----------- -------------
<FN>
- ------------
(1) In 1993, no Options or SARs were exercised by the named executive officers.
(2) Represents number of shares subject to free-standing Options and/or
free-standing SARs, as indicated, as of December 31, 1993.
(3) Represents the aggregate dollar value of in-the-money, unexercised Options
and/or SARs held at December 31, 1993, based on the difference between the
exercise price and $34.5625, the average of the high and low price of the
Common Shares on December 31, 1993, as reported in the American Stock
Exchange Composite Transactions by THE WALL STREET JOURNAL.
</TABLE>
SUPPLEMENTAL BENEFIT AGREEMENT
The Company has entered into a supplemental benefit agreement with H. Donald
Nelson that requires the Company 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 Common
Shares of the Company in May 1988 (the "Initial Public Offering"). As a result
thereof, he no longer is an active participant in the TDS Pension Plan. Under
the supplemental benefit agreement, the Company is obligated to pay Mr. Nelson
an amount equal to the difference between the retirement benefit he receives
from the TDS Pension Plan and that which he would have received had he continued
to work for TDS. The Company will pay any such benefit at the same time as Mr.
Nelson receives payments from the TDS Pension Plan. At the time of Mr. Nelson's
withdrawal from the TDS Pension Plan, he had 5 years of credited service. If he
had continued as an active participant, he would have received credit for 16
years of service upon retirement at age 65. If Mr. Nelson had continued to be
employed by TDS, and remained employed through age 65, he would have been
eligible to receive an estimated annual benefit upon retirement of approximately
$50,000 under the TDS Pension Plan. Mr. Nelson is expected to receive an annual
benefit of approximately $15,000 under the TDS Pension Plan. Accordingly, Mr.
Nelson is expected to receive an estimated annual benefit of approximately
$35,000 under the supplemental benefit agreement. Such estimates are based on
Mr. Nelson's base salary, which is included in the summary compensation table
above, and calculations of certain projections to age 65. 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 pursuant to the TDS Pension Plan.
Since the nature of this agreement is a defined benefit arrangement, no amounts
related thereto are included in the Summary Compensation Table.
7
<PAGE>
COMPENSATION OF DIRECTORS
Pursuant to a Company policy adopted in 1992, directors of the Company who
are not employees receive fees in the amount of $1,000 for attendance at each
meeting of the Board of Directors and $500 for attendance at each meeting of the
Audit Committee, and an annual fee of $12,000 per year. In 1993, each of Walter
C.D. Carlson, Paul-Henri Denuit, and Allan Z. Loren earned an aggregate of
$20,000 pursuant to such policy. In addition Mr. Denuit received $15,270 in
reimbursement of travel expenses. Directors who are also employees of the
Company do not receive any additional compensation for services rendered as
directors.
EXECUTIVE OFFICER COMPENSATION REPORT BY THE CHAIRMAN
This report is submitted by LeRoy T. Carlson, Jr., Chairman of the Company,
who in effect functions as the compensation committee of the Board of Directors.
The Chairman, who is also the president of TDS, receives no compensation from
USM. As the President of TDS, the Chairman of the Company represents the
controlling shareholder of the Company.
The Company's compensation policy for executive officers is intended to
provide incentives for the achievement of corporate and individual performance
goals and to provide compensation consistent with the financial performance of
the Company. The Company's policy is based on the belief that the incentive
compensation performance goals for executive officers should be based on factors
over which such officers have significant 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 bonus. The Company evaluates
the base salary and bonus of each executive officer on an annual basis. Annual
compensation decisions are based partly on annual performance measures, as
described below. Long-term compensation is intended to compensate executives
primarily for their contributions to long-term increases in shareholder value.
Long-term compensation is generally provided through the Company's Stock Option
and Stock Appreciation Rights Plan.
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 in the cellular telephone and
similar industries. These other companies may 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 Chairman, based on similarities of size, function, geography or otherwise.
No written or formal list of specific companies is prepared. Instead, the Vice
President of Human Resources of TDS and the President of USM provide the
Chairman 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 Chairman
uses these sources and makes a personal determination of appropriate sources,
companies and ranges for each executive officer, based on the recommendations of
the President of USM with respect to all officers other than the President of
USM. The base salary of each officer is set within a range considered to be
appropriate in the judgment of the Chairman based on an assessment of the
particular responsibilities and performance of such officer taking into account
the performance of the Company (as discussed below), other comparable companies,
the industry, and the economy in general during the immediately preceding year.
No written or formal salary survey is prepared nor is there formal documentation
of the ranges considered appropriate in the judgment of the Chairman. Instead,
the Chairman makes the determination of the appropriate ranges based on the
total mix of information available to him. The salaries of the President and the
other executive officers are believed to be at or slightly higher than the
median of the ranges considered to be relevant in the judgment of the Chairman.
The ranges considered to be relevant by the Chairman are based on his informed
judgment, using the information provided to him by the Vice President of Human
Resources of TDS and the President of USM, as discussed above. The ranges are
not based on any formal analysis nor is there any documentation of the ranges
which the Chairman considers relevant in making his compensation decisions.
8
<PAGE>
Annually, the nature and extent of each executive officer's personal
accomplishments and contributions for the year are evaluated by the President.
With regard to all executive officers other than the Chairman and 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
executive officer contributed to the results. The primary focus of the Company
is increasing shareholder value through growth, measured in terms such as
service revenues, cellular telephones, operating cash flow and operating income
(loss). In general, the Company believes that it has come close to meeting or
has met its objectives of growth while it has managed to balance the effects of
the costs of such growth. In 1993, service revenues increased 53%, consolidated
cellular telephone customer units increased 73%, operating cash flow increased
115% and operating loss before minority share decreased by 32%. Except as
discussed below for the bonus program, no specific measures of performance are
considered determinative in the base salary compensation decisions of executive
officers. Instead, all of the facts and circumstances are taken into
consideration by the President and the Chairman in their executive compensation
decisions. Ultimately, it is the judgment of the Chairman based on the
recommendation of the President that determines an executive's base salary based
on the total mix of information rather than on relationships to any specific
measures of performance.
With respect to each officer other than the Chairman and President, the
President will make recommendations regarding the 1994 base salary to the
Chairman, who represents the controlling shareholder and who exercises final
approval. Decisions regarding 1994 base salaries will be made sometime in 1994
and are anticipated to be effective for the twelve months following May 1, 1994
for all executive officers other than the President, whose base salary is
anticipated to be effective retroactively as of January 1, 1994 for twelve
months.
In addition, the executive officers participate in a bonus program. The
objectives of the 1993 Bonus Program for Senior Corporate Staff of USM (the
"1993 Bonus Plan") are: (i) to provide suitable incentives for the senior
corporate management of USM to extend their best efforts to achieve superior
results in relation to key performance targets, (ii) to suitably reward USM's
senior corporate management team in relation to their success in meeting and
exceeding these performance targets, and (iii) to help USM attract and retain
talented management personnel in positions of critical importance to the success
of the Company. A team performance award and an individual performance award are
available under the 1993 Bonus Plan.
For target performance on the team and individual categories, the 1993 Bonus
Plan was designed to generate a targeted 1993 bonus pool equal to the total of
25% of the aggregate of the base salaries of the Company's executive officers
other than the President. Under the 1993 Bonus Plan, the size of the target
bonus pool is increased or decreased depending on USM's 1993 achievements with
respect to the performance categories. No bonus pool is paid under such plan if
minimum performance levels are not achieved in these categories. The maximum
bonus pool that could be generated, which would require exceptional performance
in all areas, would equal the total of 40% of the aggregate base salaries of the
Company's executive officers. At target performance, the bonus pool would be
equal to 25% of the aggregate salaries of the Company's executive officers other
than the President. Of this percentage, 7.5% represents a targeted individual
performance award and a total of 17.5% represents a targeted team bonus award.
The targeted team award includes a discretionary team award of 3.5% and an
objective award which represents 14% of the targeted award of 25%. The objective
performance categories include (i) the increase in net revenue subscribers
(4.375% of the targeted award), (ii) the increase in earnings before interest
and taxes (7.0% of the targeted award) and (iii) the increase in net service
revenues (2.625% of the targeted award). Achievement of these objective
performance categories was slightly under target in 1993, resulting in an
objective performance category bonus which would be approximately 13% compared
to the target of 14%.
The discretionary team performance category, representing 3.5% of the
targeted award of 25%, permits the participants to earn bonus dollars through
USM's performance and their individual performance in areas not measured or not
adequately measured by objective team performance categories. The President of
USM determines a bonus percentage to award for discretionary team performance
and presents his recommendation to the Chairman for his approval. This decision
is made in a similar manner to that described above for the
9
<PAGE>
base salary decision and is based primarily on an assessment of the team
performance in general, considering all facts and circumstances. This award may
range from 40% of the targeted award for adequate performance on a team level to
160% of the targeted award for outstanding performance on a team level. The
discretionary team bonus award has not yet been determined for 1993.
The 1993 Bonus Plan also provides a discretionary individual performance
category, representing 7.5% of the targeted percentage of 25%, to permit the
participants to earn bonus dollars through USM's performance and their
individual performance in areas not measured or not adequately measured by team
performance categories. The President of USM determines a bonus percentage to
award for discretionary individual performance and presents his recommendation
to the Chairman for his approval. This decision is made in a similar manner to
that described above for the base salary decision and is based primarily on an
assessment of the executive's personal performance. This award may range from
40% of the targeted award for adequate performance on an individual basis to
160% of the targeted award for outstanding performance on an individual basis.
The discretionary individual bonus awards have not yet been determined for 1993.
Although the President and Chairman have not yet taken action to establish
the 1993 bonus, the Chairman has approved an advance payment of a portion of the
1993 bonus to all executive officers, including the President, in an amount up
to 75% of the bonus expected to be paid for 1993. As a result, executive
officers, including the President, received an advance bonus payment in 1993 of
75% of an amount representing approximately 23% of their base salaries compared
to the target bonus of 25%.
The Chairman, in effect, serves as the compensation committee. The President
of USM accumulates and prepares various materials, including recommended base
salary and bonus, for the annual compensation reviews of executive officers
other than himself for review by the Chairman. The President's recommendations
are reviewed, adjusted if necessary, and approved by the Chairman.
Financial personnel prepare calculations for the President and Chairman
which define whether the objective performance categories discussed above have
been met, exceeded or not met in any fiscal year. The Chairman also has
presented to him, and has access to, numerous performance measures and financial
statistics prepared by Company 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 Chairman will not be limited in his analysis to such
information, and may consider other factual or subjective factors as he deems
appropriate in his compensation decisions.
The base salary and bonus ranges and actual compensation of the President
(principal executive officer) of the Company are determined in a manner similar
to the foregoing, but with some differences. In addition to the factors
described above for all executive officers in general, the Chairman considers
compensation paid to chief executive officers of other comparable companies,
including those which are divisions or subsidiaries of parent companies. No
written or formal list of specific companies is prepared. Instead, the Chairman
is provided with various sources of information about executive compensation at
other companies by the Vice President of Human Resources of TDS. These sources
include compensation reported in proxy statements of comparable companies and
salary surveys published by various organizations. The Chairman uses these
sources and makes a personal determination of appropriate sources, companies and
ranges for the President. The base salary of the President is set within a range
considered to be appropriate in the judgment of the Chairman based on an
assessment of the particular responsibilities and performance of such officer
taking into account the performance of the Company (as discussed above), other
comparable companies, the industry, and the economy in general during the
period. No written or formal salary survey is prepared nor is the range
considered appropriate in the judgment of the Chairman formally documented. The
base salary of the President was increased from $191,375 in 1992 to $207,000 in
1993, representing an increase of approximately 8%. The salary of the President
is believed to be at or slightly higher than the median of the range considered
to be relevant in the judgment of the Chairman. The range considered to be
relevant by the Chairman is based on his informed judgment, using the
information provided to him by the Vice President of Human Resources of TDS, as
discussed above. The range is not based on any formal analysis nor is there any
documentation of the range which the Chairman considers relevant in making his
compensation decisions for the President. The President's 1992 bonus was $62,500
and 75% of the expected 1993 bonus, or $35,360, was paid to the President for
1993. The Chairman has not yet taken action to establish the 1993 bonus and the
1994 base salary. As with the other executive officers, the base salary and
compensation decisions for the
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<PAGE>
President are based on all facts and circumstances rather than related to any
specific measures of performance. 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 Chairman in his
executive compensation decisions for the President. Ultimately, it is the
informed judgment of the Chairman 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. With respect to the President's bonus, the
Chairman does consider the results of the 1993 Bonus Program and bases the
amount of the bonus to a large degree upon the results of the Company as
measured by the performance objectives set by the 1993 Bonus Program. However,
with respect to the President, the relationship of the bonus to such performance
measures is not applied mechanically and involves a substantial amount of
judgment on the part of the Chairman based on the total mix of information.
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 1993,"
the executive officers received an award of Options for USM shares which could
vary between 80% and 120% of a targeted amount based on performance. Each year
during the term of such options, 80% of the targeted award becomes exercisable
and up to an additional 40% of the targeted award scheduled to become
exercisable in each year may be awarded based on the Company's performance. This
decision is made in a manner similar to that described above for the objective
performance categories under the 1993 Bonus Plan. In 1992, the performance of
the objective categories under the 1992 Bonus Plan were above target, therefore,
the 1992 stock option award for executive officers, including the President, was
set at 120% of the targeted option award. As a result, in 1993, each of the
named executive officers, including the President, received an award of options
for 600 USM shares, except for Daniel Croft, who received an award of options
for 800 USM shares, based on 1992 performance. See Footnote 1 to "Individual
Option/SAR Grants in 1993." The stock option award based on 1993 performance has
not yet been determined.
TAX LAW CHANGES. In 1993, the federal income tax laws were amended to limit
the deduction a publicly-held company is allowed for compensation paid in 1994
and thereafter to the chief executive officer and to the four most highly
compensated executive officers other than the chief executive officer.
Generally, compensation in excess of $1 million in any year to a covered
executive, other than specified performance-based compensation, cannot be
deducted for federal income tax purposes. The Company does not believe that
these tax law changes will have any effect on the Company in the near future. If
the tax law changes have any potential effect in the future, the Company will
consider ways to maximize the deductibilty 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.
By the Chairman of the Board of Directors: LeRoy T. Carlson, Jr.
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 cellular telephone
companies: Cellular, Inc., Centennial Cellular Corp., Contel Cellular, Inc., LIN
Broadcasting Corp., USM, and Vanguard Cellular Systems, Inc.; and, beginning in
1994, will include AirTouch Communications, Inc. (formerly PacTel Corp.). 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.
11
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COMPARATIVE FIVE-YEAR TOTAL RETURNS*
USM, S&P 500, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/93)
[Line Graph of Data Points]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
USM.............................................. $ 100.00 $ 151.83 $ 92.68 $ 102.44 $ 106.71 $ 175.54
S&P 500.......................................... $ 100.00 $ 131.49 $ 127.32 $ 166.21 $ 179.30 $ 197.23
Peer Group....................................... $ 100.00 $ 175.26 $ 139.60 $ 160.66 $ 156.86 $ 206.85
</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 USM common stock, S&P 500,
and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
The peer group index was revised from the prior year to delete Celutel, Inc.
and McCaw Cellular Communications, Inc. due to the fact that both such companies
were the subjects of acquisition transactions in 1993. As a result, the Company
believes that the Stock Performance Chart above, which excludes such companies,
more accurately reflects a comparable peer group index. 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 1993 Notice of Annual Meeting and
Proxy Statement, the peer group results would have been as follows.
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peer Group....................................... $ 100.00 $ 168.26 $ 117.98 $ 165.38 $ 163.47 $ 229.86
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
LeRoy T. Carlson and LeRoy T. Carlson, Jr., make all executive compensation
decisions for TDS, and LeRoy T. Carlson, Jr., approves all executive
compensation decisions for the Company, based on the recommendation of H. Donald
Nelson, a director and the President of USM. LeRoy T. Carlson, Jr., also
approves compensation decisions for APP.
LeRoy T. Carlson, a director of the Company is the Chairman of TDS and is a
member of its Board of Directors. LeRoy T. Carlson, Jr., Chairman of the
Company, is the President (chief executive officer) of TDS and the Chairman of
APP. LeRoy T. Carlson, Jr., is also a member of the Board of Directors of TDS
and serves as a director and officer of numerous direct or indirect subsidiaries
of TDS. LeRoy T. Carlson, Jr., is also a trustee and beneficiary of the voting
trust which controls TDS, which controls USM and APP. See "Security Ownership of
Certain Beneficial Owners and Management." The Company has entered into a number
of arrangements and transactions with TDS. Some of these arrangements were
established at a time prior to the Company's
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Initial Public Offering when TDS owned more than 90% of the Company's
outstanding capital stock and were not the result of arm's-length negotiations.
It is anticipated that such arrangements will continue and that additional
transactions will occur in the future. The principal arrangements that exist
between the Company and TDS are summarized below.
EXCHANGE AGREEMENT. The Company and TDS are parties to an Exchange
Agreement dated July 1, 1987, as amended as of April 7, 1988 (collectively, the
"Exchange Agreement").
COMMON SHARE PURCHASE RIGHTS; POTENTIAL DILUTION. The Exchange Agreement
granted TDS the right to purchase additional Common Shares of the Company sold
after the Initial Public Offering, to the extent necessary for TDS to maintain
its proportionate interest in such Common Shares. For purposes of calculating
TDS's proportionate interest in the Common Shares of the Company, the Series A
Common Shares are treated as if converted into Common Shares. Upon notice to the
Company, TDS is entitled to subscribe to each issuance in full or in part at its
discretion. If TDS decides to waive, in whole or in part, one or more of its
purchase opportunities, the number of Common Shares subject to purchase as a
result of subsequent issuances will be further reduced.
If TDS elects to exercise its purchase rights, it is required to pay cash
for all Common Shares issued to it by the Company, unless otherwise agreed. In
the case of sales by the Company of Common Shares for cash, TDS is required to
pay the same price per Common Share as the other buyers thereof. In the case of
sales for a consideration other than cash, TDS is required to pay cash equal to
the fair market value of such other consideration as determined by the Company's
Board of Directors. Depending on the price per Common Share paid by TDS upon
exercise of these rights, the issuance of Common Shares by the Company pursuant
thereto could have a dilutive effect on other shareholders of the Company. The
purchase rights described above are in addition to the preemptive rights granted
to TDS as a holder of Series A Common Shares under the Company's Restated
Certificate of Incorporation.
FUNDING OF LICENSE COSTS. Through the date of the Company's Initial Public
Offering, TDS had funded or made provisions to fund all of the legal,
engineering and consulting expenses incurred in connection with the wireline
application and settlement process and that portion of the price of cellular
interests acquired by purchase that represented the cost of cellular licenses
(collectively, the "License Costs"). Pursuant to the Exchange Agreement, as
amended, TDS has agreed to fund as an additional capital contribution, without
the issuance of additional stock or the payment of any other consideration to
TDS, additional License Costs associated with the acquisition of the additional
cellular interests that the Company had a right to acquire at the time of the
Initial Public Offering. Through December 31, 1993, TDS had funded License Costs
totalling approximately $67.2 million. TDS is obligated under the Exchange
Agreement to make additional capital contributions to the Company under certain
circumstances. Currently such amounts are estimated to total approximately
$690,000.
RSA RIGHTS. Under the Exchange Agreement: (a) TDS retained all its rights
to file applications for and obtain the wireline licenses to operate cellular
systems in Rural Service Areas ("RSAs"); (b) TDS retained the right to exchange
these RSA rights for additional interests in cellular systems in which the
Company has an interest or interests in cellular systems within the same or
other Metropolitan Statistical Areas ("MSAs") or in RSAs; (c) TDS retained the
right to acquire telephone, paging or other non-cellular companies with
interests in cellular systems; (d) TDS retained the right to acquire interests
in RSAs in which the Company indicated it did not desire to participate; and (e)
the rights referred to in (a), (b), (c) and (d) above were to remain the
property of TDS unless transferred to the Company for appropriate consideration.
RIGHT OF NEGOTIATION. For certain interests, if TDS desires to sell its
interest in any RSA, TDS is required to give the Company the opportunity to
negotiate for such interest, subject to TDS being legally able to transfer the
interest free of any restrictions on its sale or transfer. If the Company
desires to purchase any interest so offered, TDS is required to negotiate with
the Company concerning the terms and conditions of the transaction, including
the price and the method of payment. If the Company and TDS are unable to agree
on the terms and conditions of the transaction during a 60-day negotiation
period, TDS would thereafter be under no obligation to offer the interest to the
Company, except if TDS proposed to sell the interest within a year after the end
of the negotiation period at a price equal to or lower than the highest written
offer of the Company during the negotiation period. In such case, the Company
would have the right to purchase the interest at that price.
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<PAGE>
RSA TRANSFER AGREEMENT. In the Exchange Agreement, TDS agreed that the
Company would have (i) the right to purchase at TDS's cost any cellular
interests obtained as a result of joint ventures (the "Cost RSA Interests"), and
(ii) the first right to negotiate for the purchase of any other cellular
interests obtained by TDS in the licensing process that TDS decided to sell,
subject to TDS being legally able to transfer the interests free of any
restrictions on their sale or transfer (the "RSA Interests").
On April 25, 1990, the Board of Directors of the Company approved an
agreement regarding the transfer of the Cost RSA Interests to the Company by
TDS. That agreement called for TDS to transfer the Cost RSA Interests, which
represented an aggregate of approximately 760,000 population equivalents based
on 1989 estimates, to the Company in exchange for an aggregate of approximately
$2.1 million, representing the amount spent by TDS to prepare and file
applications with the FCC for the wireline licenses in the RSAs where TDS was
eligible to file applications, and to negotiate settlement agreements with other
applicants, including the expenses of applications and negotiations that failed
to produce any cellular interest. The Company paid this amount through the
issuance of approximately 91,000 Common Shares to TDS. In addition, the Company
paid TDS approximately $3.0 million in cash to reimburse TDS for the amount TDS
had invested in development and construction related to the 20 joint venture
RSAs.
On November 16, 1990, TDS and the Company reached an agreement regarding the
transfer of certain RSA Interests (the "Transferable RSA Interests"). As of
November 16, 1990, the Company executed an RSA Transfer Agreement (the "RSA
Transfer Agreement") pursuant to which, subject to the conditions therein, TDS
agreed to sell, transfer and assign the Transferable RSA Interests, representing
approximately 2,649,000 population equivalents based on 1989 estimates, to the
Company in exchange for 7,056,790 Series A Common Shares and 2,943,210 Common
Shares (the "Exchange"). In addition, pursuant to the RSA Transfer Agreement,
the Company agreed to deliver to TDS 41,158 Series A Common Shares and 17,166
Common Shares in reimbursement for certain development, construction and
operation costs incurred by TDS in connection with the RSA Interests. Based on
the closing price per Common Share on November 14, 1990 of $18.375 for both the
Common Shares and the Series A Common Shares, the value of the shares to be
delivered was approximately $185 million. For financial reporting purposes,
however, the shares were recorded by the Company at TDS's book value of the RSA
Interests transferred of $8,251,370, or $.82 per share. Generally accepted
accounting principles require that transactions between a parent and subsidiary
be recorded at historical cost.
The Board of Directors of the Company approved the Exchange based on
numerous factors, including the recommendation of a Special Committee of the
Board of Directors consisting of Paul-Henri Denuit, an independent director of
the Company. The financial advisor retained by the Special Committee delivered
an opinion dated November 15, 1990 to the Special Committee to the effect that
the consideration to be paid by the Company to TDS for the Transferable RSA
Interests was fair from a financial point of view to the shareholders of the
Company. TDS also approved the Exchange as holder of over 97% of the voting
shares of the Company.
Through March 7, 1994, the Company had issued to TDS 2,960,376 Common Shares
and 7,097,948 Series A Common Shares under the RSA Transfer Agreement in
connection with the transfer of Transferable RSA Interests thereunder. All
transfers under the RSA Transfer Agreement have been completed as of December
31, 1993.
Any Transferable RSA Interests not transferred by TDS to the Company under
the RSA Transfer Agreement continue to be subject to the right of first
negotiation under the Exchange Agreement.
CORPORATE OPPORTUNITY ARRANGEMENTS. The Company's Restated Certificate of
Incorporation, as amended, provides that, so long as at least 500,000 Series A
Common Shares are outstanding, the Company may not, without the written consent
of TDS, engage in any non-cellular activities. Management has been informed that
TDS intends to give its consent to the acquisition of any non-cellular interest
that is incidental to the acquisition of a cellular interest. However, TDS could
impose conditions on any such consent, including a requirement that the Company
resell any non-cellular interest to TDS or that the Company give TDS the right
of first refusal with respect to such sale.
The Restated Certificate of Incorporation, as amended, also restricts the
circumstances under which the Company is entitled to claim that an opportunity,
transaction, agreement or other arrangement to which TDS,
14
<PAGE>
or any person in which TDS has or acquires a financial interest, is or should be
the property of the Company or its subsidiaries. In general, so long as at least
500,000 Series A Common Shares are outstanding, the Company will not be entitled
to any such "corporate opportunity" unless it relates solely to the construction
of, the ownership of interests in, and/or the management of, cellular telephone
systems, and then only if such corporate opportunity did not arise in any way as
a result of the rights otherwise retained by TDS. The Restated Certificate of
Incorporation allows the Company to pursue future opportunities to provide
cellular service and design, consulting, engineering and construction management
services for cellular telecommunications systems located outside the United
States.
FINANCIAL ARRANGEMENTS AND TRANSACTIONS. The following describes the
financial arrangements and transactions between TDS and the Company.
RIGHTS OFFERING; DEBT REDUCTION AND STANDBY AGREEMENT. The Company
completed a rights offering to its shareholders on November 15, 1993 (the
"Rights Offering"). Pursuant to a Debt Reduction and Standby Agreement between
TDS and USM dated October 22, 1993, in the Rights Offering, TDS acquired
4,822,003 USM Common Shares and 5,500,980 USM Series A Common Shares at a
purchase price of $33.00 per share, for an aggregate purchase price of
approximately $341 million and paid for such shares by reducing the amount of
debt the Company owed TDS under the Revolving Credit Agreement. Following the
Rights Offering, the line of credit available under the Revolving Credit
Agreement was amended to $250 million.
REVOLVING CREDIT AGREEMENT. As of July 1, 1987, all of the outstanding
obligations of the Company to TDS were incorporated under the Revolving Credit
Agreement. Pursuant to the Revolving Credit Agreement, as amended effective
November 15, 1993, the Company may borrow up to an aggregate of $250 million
from TDS, at an interest rate equal to 1 1/2% above the prime rate announced
from time to time by the LaSalle National Bank of Chicago on the unpaid
principal amount and to pay on demand an interest rate equal to 3 1/2% above
such prime rate on any overdue principal or overdue installment of interest. The
advances made by TDS under the Revolving Credit Agreement are unsecured.
Interest on the balance due under the Revolving Credit Agreement is payable
quarterly and no principal is payable until March 31, 1996, subject to
acceleration under certain circumstances, at which time the entire principal
balance due under the Revolving Credit Agreement then outstanding is scheduled
to become due and payable. The Company may prepay the balance due under the
Revolving Credit Agreement at any time, in whole or in part, without premium.
Any principal so repaid is available for the Company to borrow during the
remaining term of the Revolving Credit Agreement, subject to the satisfaction of
certain conditions. Interest expense incurred by the Company to TDS totaled
$29.1 million for the year ended December 31, 1993, and borrowings in an
aggregate amount of $141.5 million were outstanding as of such date.
The Revolving Credit Agreement provides that the Company will not, without
the prior written consent of TDS: (i) purchase or redeem any shares of its
capital stock or declare or pay any dividends thereon, except to the extent of
one-half of the cumulative consolidated net income, if any, for the period after
July 1, 1989, or make any other distribution to its shareholders other than
normal dividends payable with respect to Preferred Stock which may be issued;
(ii) permit its consolidated equity to be less than 30% of consolidated
liabilities; (iii) incur or guarantee any indebtedness that is senior to the
Revolving Credit Agreement; (iv) with certain exceptions, create any lien on any
of the Company's assets; or (v) enter into certain contracts for the purchase of
materials, supplies or services.
The Revolving Credit Agreement provides that if certain "events of default"
occur, TDS may immediately declare the amount under the Revolving Credit
Agreement due and payable and terminate the Revolving Credit Agreement. Events
of default under the Revolving Credit Agreement include the failure to pay
interest or principal, the breach of specified covenants, any default under
certain other indebtedness, and certain judgments, defaults and events of
bankruptcy or insolvency.
TAX ALLOCATION AGREEMENT. The Company has entered into a Tax Allocation
Agreement with TDS under which the Company will continue to join in filing
consolidated Federal income tax returns with the TDS affiliated group unless TDS
requests otherwise. For tax years and periods ended prior to July 1, 1987, TDS
reimbursed the Company for the reduction in the provision for Federal income
taxes reflected in TDS's consolidated statements of income resulting from the
inclusion of the Company and its subsidiaries in the TDS affiliated group. For
tax years and periods beginning after June 30, 1987, TDS no longer reimburses
the Company on a current basis for losses or credits used by the TDS affiliated
group. Instead, the Company will
15
<PAGE>
be compensated (by an offset to amounts the Company would otherwise be required
to reimburse TDS for Federal income taxes) for TDS's use of tax benefits at such
time as the Company could utilize such benefits as a stand-alone entity. After
all loss and credit carryforwards have either been utilized or their statutory
periods have expired, the Company will be required to reimburse TDS for Federal
income taxes paid by the TDS affiliated group in an amount equal to the greater
of the Federal income tax liability of the Company, calculated as if it were a
separate affiliated group, or the tax calculated using the average tax rate
(before taking into account tax credits) of the TDS affiliated group. Any
deficiency in tax thereafter proposed by the Internal Revenue Service for any
consolidated return year (whether before or after the Initial Public Offering)
that involves income, deductions or credits of the Company or its subsidiaries,
and any claim for refund of tax for any consolidated return year that involves
such items, will be contested or prosecuted at the sole discretion of TDS and at
the expense of the Company. To the extent that any deficiency in tax or refund
of tax is finally determined to be attributable to the income, deductions or
credits of the Company, such deficiency or refund will be payable by or to the
Company.
If the Company ceases to be a member of the TDS affiliated group, and for a
subsequent year the Company or its subsidiaries are required to pay a greater
amount of Federal income tax than they would have paid if they had not been
members of the TDS group after June 30, 1987, TDS will reimburse the Company for
the excess amount of tax, without interest. In determining the amount of
reimbursement, any profits or losses from new business activities acquired by
the Company or its subsidiaries after the Company leaves the TDS group will be
disregarded. No reimbursement will be required if at any time in the future
fewer than 500,000 Series A Common Shares are outstanding. Nor will
reimbursement be required on account of the income of any subsidiary of the
Company if more than 50% of the voting power of such subsidiary is held by a
person or group other than a person or group owning more than 50% of the voting
power of TDS. Rules similar to those described above will be applied to any
state or local franchise or income tax liabilities to which TDS and the Company
and its subsidiaries are subject and which are required to be determined on a
unitary, combined or consolidated basis.
CASH MANAGEMENT AGREEMENT. The Company has from time to time deposited its
excess cash with TDS for investment under TDS's cash management program pursuant
to the terms of a Cash Management Agreement. Such deposits are available to the
Company on demand and bear interest each month at the 30-day Commercial Paper
Rate reported in THE WALL STREET JOURNAL on the last business day of the
preceding month, plus 1/4%, or such higher rate as TDS may in its discretion
offer on such demand deposits. The Company may elect to place funds for a longer
period than on demand in which event, if such funds are placed with TDS, they
will bear interest at the Commercial Paper Rate for investments of similar
maturity plus 1/4%, or at such higher rate as TDS may in its discretion offer on
such investments.
INTERCOMPANY AGREEMENT. In order to provide for certain transactions and
relationships between the parties, the Company and TDS have agreed under an
Intercompany Agreement, among other things, as follows:
SERVICES. The Company and TDS make available to each other from time to
time services relating to operations, marketing, human resources, accounting,
customer services, customer billing, finance, and general administration, among
others. Unless otherwise provided by written agreement, services provided by TDS
or any of its subsidiaries are charged and paid for in conformity with the
customary practices of TDS for charging TDS's non-telephone company
subsidiaries. Payments by the Company to TDS for such services totalled $22.9
million in 1993. For services provided to TDS, the Company receives payment for
the salaries of its employees and agents assigned to render such services (plus
40% of the cost of such salaries in respect of overhead) for the time spent
rendering such services, plus out-of-pocket expenses. Payments by TDS to the
Company for such services were nominal in 1993.
EQUIPMENT AND MATERIALS. The Company and its subsidiaries purchase
materials and equipment from TDS and its subsidiaries on the same basis as
materials and equipment are purchased by any TDS affiliate from another TDS
affiliate. Purchases by the Company from TDS affiliates totalled $574,000 in
1993.
GUARANTEES. The Company is obligated to use its best efforts to have TDS
removed as guarantor or obligor in connection with any indebtedness, lease,
contract or other obligation relating to the business of the Company or a
subsidiary of the Company. Until TDS is removed as guarantor or obligor, the
Company is required to pay TDS annually in advance 1% of the present value of
the amounts as of the beginning of each
16
<PAGE>
year that TDS could be required to pay on account of acting as guarantor or
obligor, computed by discounting such amounts at a rate per annum equal to the
prime rate in effect on the December 15 preceding the applicable December 31,
compounded annually. In addition, until TDS is removed as guarantor or obligor,
the Company must indemnify TDS with respect to such obligations. At December 31,
1993, TDS is not obligated as guarantor or obligor under any USM agreements.
ACCOUNTANTS AND LEGAL COUNSEL. The Company has agreed to engage the firm of
independent public accountants selected by TDS for purposes of auditing the
financial statements of the Company, including the financial statements of its
direct and indirect subsidiaries, and providing tax, data processing and all
other accounting services and advice. The Company also has agreed that, in any
case where legal counsel is to be engaged to represent the parties for any
purpose, TDS has the right to select the counsel to be engaged, which may be the
same counsel selected to represent TDS unless such counsel deems there to be a
conflict. If TDS and the Company use the same counsel, each is responsible for
the portion of the fees and expenses of such counsel determined by such counsel
to be allocable to each.
INDEMNIFICATION. The Company will indemnify TDS against certain losses,
claims, damages or liabilities including those arising out of: (i) the conduct
by the Company of its business (except where the loss, claim, damage or
liability arises principally from TDS's gross negligence or willful misconduct);
(ii) any inaccurate representation or breach of warranty under the Intercompany
Agreement; and (iii) any indebtedness, lease, contract or other obligation
referred to under "Guarantees" above. The Company will also indemnify TDS, as a
controlling person, against any loss, claim, damage or liability arising out of
the Initial Public Offering, except for losses, claims, damages or liabilities
arising from information supplied in writing by TDS for inclusion in the
prospectus for the Initial Public Offering. TDS will similarly indemnify the
Company with respect to: (i) the conduct by TDS of its non-cellular businesses
before July 1, 1987 (except where the loss, claim, damage or liability arises
principally from the Company's gross negligence or willful misconduct); and (ii)
any inaccurate representation or breach of warranty under the Intercompany
Agreement.
DISPOSAL OF COMPANY SECURITIES. TDS will not dispose of any securities of
the Company held by it if such disposition would result in the loss of any
license or other authorization held by the Company and such loss would have a
material adverse effect on the Company.
TRANSFER OF ASSETS. Without the prior written consent of TDS, the Company
may not transfer (by sale, merger or otherwise) more than 15% of its
consolidated assets unless the transferee agrees to become subject to the
Intercompany Agreement.
REGISTRATION RIGHTS AGREEMENT; OTHER SALES OF COMMON SHARES. Under a
Registration Rights Agreement, the Company has agreed, upon the request of TDS,
to file one or more registration statements under the Securities Act of 1933 or
take other appropriate action under the laws of foreign jurisdictions in order
to permit TDS to offer and sell, domestically or abroad, any debt or equity
securities of the Company that TDS may hold at any time. TDS will pay all costs
relating thereto and any underwriting discounts and commissions relating to any
such offering, except that the Company will pay the fees of any counsel,
accountants, trustees, transfer agents or other agents retained by the Company
in connection therewith. TDS has the right to select the counsel the Company
retains to assist it in fulfilling any of its obligations under the Registration
Rights Agreement.
There is no limitation on the number or frequency of the occasions on which
TDS may exercise its registration rights, except that the Company will not be
required to comply with any registration request unless, in the case of a class
of equity securities, the request involves at least the lesser of 1,000,000
shares or 1% of the total number of shares of such class then outstanding, or,
in the case of a class of debt securities, the principal amount of debt
securities covered by the request is at least $5,000,000. The Company has also
granted TDS the right to include its securities in certain registration
statements covering offerings by the Company and will pay all costs of such
offerings other than incremental costs attributable to the inclusion of
securities of the Company owned by TDS in such registration statements.
The Company will indemnify TDS and its officers, directors and controlling
persons against certain liabilities arising under the laws of any country in
respect of any registration or other offering covered by the Registration Rights
Agreement. The Company has the right to require TDS to delay any exercise by TDS
of its rights to require registration and other actions for a period of up to 90
days if, in the judgment of the Company,
17
<PAGE>
any offering by the Company then being conducted or about to be conducted would
be materially adversely affected. TDS has further agreed that it will not
include any securities of the Company in any registration statement of the
Company which, in the judgment of the managing underwriters, would materially
adversely affect any offering by the Company. The rights of TDS under the
Registration Rights Agreement are transferable to non-affiliates of TDS.
INSURANCE COST SHARING AGREEMENT. Pursuant to an Insurance Cost Sharing
Agreement, the Company and its officers, directors and employees are afforded
coverage under certain insurance policies purchased by TDS. A portion of the
premiums payable under each such policy is allocated by TDS to the Company on
the same basis as premiums were allocated before the Insurance Cost Sharing
Agreement was entered into, if the policies are the same as or similar to the
policies in effect before the Insurance Cost Sharing Agreement was entered into,
or on such other reasonable basis as TDS may select from time to time. If TDS
decides to change the allocation of premiums at any time, TDS will consult with
the Company before the change is made, but the decision as to whether to make
the change will be in the reasonable discretion of TDS. Management of the
Company believes that the amounts payable by the Company under the Insurance
Cost Sharing Agreement are generally more favorable than the premiums the
Company would pay if it were to obtain coverage under separate policies.
EMPLOYEE BENEFIT PLANS AGREEMENT. Under an Employee Benefit Plans
Agreement, employees of the Company continue to participate in the TDS
Tax-Deferred Savings Plan. The Company will reimburse TDS for the costs
associated with such participation. In addition, the Company has agreed to
reimburse TDS for certain costs incurred by TDS in connection with the exercise
by certain employees of the Company of outstanding TDS stock options and for
certain costs incurred in connection with the issuance of stock under the TDS
Employee Stock Purchase Plans to employees of the Company.
ISSUANCE OF TDS SHARES ON BEHALF OF USM. TDS issues TDS securities in
connection with the acquisition of cellular interests on behalf of the Company.
At the time such acquisitions are closed, the acquired cellular interests are
generally transferred to the Company, which reimburses TDS by issuing USM
securities to TDS or by increasing the balance due to TDS under the Revolving
Credit Agreement. 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 1993, the Company issued 5.5 million USM
Common Shares to TDS and became indebted to TDS for an additional $101.5 million
under the Revolving Credit Agreement, to reimburse TDS for 6.1 million TDS
Common Shares issued in such transactions.
In addition to the shares described in the preceding paragraph, additional
securities of TDS and USM were authorized for issuance in connection with
acquisitions of cellular interests that were pending at December 31, 1993. In
connection with these acquisitions, TDS expects to issue in 1994 or later years
approximately 2.4 million TDS Common Shares, for which the Company will
reimburse TDS by issuing approximately 3.7 million USM Common Shares and
increasing the amount of debt under the Revolving Credit Agreement in an amount
estimated to be approximately $400,000.
OTHER ARRANGEMENTS. Walter C.D. Carlson, a director of the Company, Stephen
P. Fitzell, Secretary of the Company, and Sherry S. Treston, Assistant Secretary
of the Company, are partners of Sidley & Austin, the principal law firm of the
Company, TDS and their subsidiaries. Walter C.D. Carlson is also a director of
TDS and a trustee and beneficiary of the voting trust which controls the Company
and TDS. He is the husband of Debora de Hoyas, a director of APP. Michael G.
Hron, the Secretary of TDS and APP, is a partner of Sidley & Austin.
18
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF THE COMPANY BY CERTAIN BENEFICIAL OWNERS
The following table sets forth, at March 7, 1994, information regarding the
persons who beneficially own more than 5% of any class of the voting securities
of the Company. The nature of beneficial ownership in this table is sole voting
and investment power, except as otherwise set forth in the footnotes.
<TABLE>
<CAPTION>
SHAREHOLDER'S SHARES OF CLASS PERCENT OF PERCENT OF
NAME AND ADDRESS TITLE OF CLASS OWNED CLASS VOTING POWER
- ------------------------------------------- ------------------------------ ---------------- ------------ ---------------
<S> <C> <C> <C> <C>
Telephone and Data Systems, Inc. Common Shares 29,364,003 67.1% 7.9%
30 North LaSalle Street Series A Common Shares 33,005,877(1) 100.0% 88.3%
Chicago, Illinois 60602 Preferred Stock 188,284 100.0% *
S.A. Coditel (2) Common Shares 2,279,583 5.2% *
Rue des Deux Eglises 26
Brussels, Belgium 1040
<FN>
- ----------
* Less than 1%
(1) The Series A Common Shares are convertible on a share-for-share basis into
Common Shares.
(2) Paul-Henri Denuit, a director of the Company, is the Chief Executive
Officer and Managing Director of S.A. Coditel. Pursuant to a Common Stock
Purchase Agreement dated April 24, 1987, Coditel obtained certain
preemptive rights which enable it to retain its percentage interest in the
Company's Common Shares for a period of ten years, and registration rights
for a period of five years beginning at the end of such ten-year period.
Pursuant to a letter agreement between TDS and Coditel dated April 24,
1987, Coditel may not sell certain USM Common Shares for a period of ten
years without the consent of TDS and without first giving TDS an
opportunity to purchase such shares before they are sold to a third party
by Coditel. Pursuant to a letter agreement among TDS, USM and Coditel dated
October 21, 1993, TDS agreed to release such restrictions with respect to
such number of shares restricted by the April 24, 1987 letter agreement
which are equivalent to the number of shares which Coditel purchased in
connection with the Rights Offering. Coditel acquired 379,931 Common Shares
in the Rights Offering. As a result, 379,931 additional Common Shares were
released from the restrictions of the April 24, 1987 letter agreement. As
of March 7, 1994, 1,151,728 Common Shares remain restricted under the April
24, 1987 letter agreement.
</TABLE>
SECURITY OWNERSHIP OF THE COMPANY BY MANAGEMENT
Several officers and directors of the Company hold substantial ownership
interests indirectly in the Company by virtue of their ownership of the capital
stock of TDS. See "Beneficial Ownership of TDS by Directors and Executive
Officers of the Company." In addition, the following executive officers and
directors and all officers and directors as a group of the Company beneficially
owned the following number, representing less than 1% of the shares and the
voting power, individually and in total, of the Common Shares of the Company
outstanding as of March 7, 1994:
LeRoy T. Carlson, 1,243 shares;
H. Donald Nelson, 24,190 shares, including 19,624 shares under Options and
SARs;
Daniel R. Croft, 7,837 shares, including 6,965 shares under Options and
SARs;
Joyce V. Gab Kneeland, 14,954 shares, including 12,424 shares under Options
and SARs;
Richard W. Goehring, 14,704 shares, including 12,424 shares under Options
and SARs;
Kenneth R. Meyers, 16,254 shares, including 12,424 shares under Options and
SARs;
Other executive officers as a group, 7,775 shares, including 4,800 shares
under Options and SARs; and
All executive officers and directors as a group (17 persons), 86,957 shares,
including 68,661 shares under Options and SARs.
In addition to the foregoing, Mr. Meyers is deemed to beneficially own 1,000
Common Shares of the Company which are held by a trust for which he is the
trustee. Mr. Meyers disclaims beneficial ownership of such shares. LeRoy T.
Carlson, Jr., shares voting and investment power with respect to 4,051 Common
Shares of the Company, excluding 86,450 shares as to which voting and investment
power is passed through to plan participants, with C. Theodore Herbert, Ronald
D. Webster and Michael G. Hron, the persons named as
19
<PAGE>
trustees of the Telephone and Data Systems, Inc. Tax Deferred Savings Trust.
Paul-Henri Denuit is the Chief Executive Officer and Managing Director of S.A.
Coditel, which is a principal shareholder of the Company. See "Security
Ownership of the Company by Certain Beneficial Owners."
DESCRIPTION OF TDS SECURITIES
The authorized capital stock of TDS consists of 100,000,000 Common Shares,
$1.00 par value (the "TDS Common Shares"), 25,000,000 Series A Common Shares,
$1.00 par value, (the "TDS Series A Common Shares") and 5,000,000 Preferred
Shares, without par value (the "TDS Preferred Shares"). As of March 7, 1994,
45,669,568 TDS Common Shares (excluding 484,012 Common Shares held by a
subsidiary of TDS), 6,881,001 TDS Series A Common Shares and 433,153 TDS
Preferred Shares were outstanding.
The TDS Series A Common Shares have ten votes per share, and TDS Common
Shares and TDS Preferred Shares have one vote per share. The holders of TDS
Series A Common Shares, TDS Common Shares and TDS Preferred Shares vote as a
single class, except with respect to matters as to which the Iowa Business
Corporation Act grants class voting rights and with respect to the election of
directors. With respect to the election of directors, the holders of TDS Common
Shares and the TDS Preferred Shares issued before October 31, 1981, voting as a
class, are entitled to elect 25% of the board of directors of TDS, rounded up to
the nearest whole number, and the holders of TDS Series A Common Shares and TDS
Preferred Shares issued after October 31, 1981, voting as a class, are entitled
to elect the remaining members of the board of directors of TDS.
PRINCIPAL SHAREHOLDERS OF TDS
In addition to the persons listed under "Beneficial Ownership of TDS by
Directors and Executive Officers of the Company," the following table sets
forth, as of March 7, 1994, information regarding the persons who beneficially
own more than 5% of any class of the voting securities of TDS. The nature of
beneficial ownership in this table is sole voting and investment power, except
as otherwise set forth in the footnotes.
<TABLE>
<CAPTION>
SHAREHOLDER'S SHARES OF TDS PERCENT OF PERCENT OF
NAME AND ADDRESS TITLE OF CLASS CLASS OWNED TDS CLASS VOTING POWER
- -------------------------------------------- ---------------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Eagle Asset Management Inc. TDS Common Shares 3,255,980(1) 7.1% 2.8%
880 Carillon Parkway
St. Petersburg, Florida 33733
Putnam Investments, Inc., et al. TDS Common Shares 2,478,405(2) 5.4% 2.2%
One Post Office Square
Boston, Massachusetts 02109
Goldman Sachs & Co. TDS Preferred Shares 50,860 11.7% *
85 Broad Street
New York, New York 10004
Roland G. and Bette B. Nehring TDS Preferred Shares 23,030 5.3% *
5253 North Dromedary Road
Phoenix, Arizona 85018
Regional Operations Group Inc. TDS Preferred Shares 24,297 5.6% *
312 South Third Street
Minneapolis, Minnesota 55440
<FN>
- ------------
* Less than 1%.
(1) Based on the most recent Schedule 13G (Amendment No. 3) filed with the
Securities and Exchange Commission ("SEC"). In such Schedule 13G filing,
Eagle Asset Management, Inc. has reported sole investment power and sole
voting power with respect to all such shares.
(2) Based on a Schedule 13G filed with the SEC. The Schedule 13G reports that
Putnam Investments, Inc. and The Putnam Advisory Company, Inc. share
voting power with respect to 241,257 Common Shares, that Putnam
Investments, Inc. and Putnam Investment Management, Inc. share dispositive
power with respect to 2,128,285 Common Shares, and that Putnam
Investments, Inc. and The Putnam Advisory Company, Inc. share dispositive
power with respect to 350,120 Common Shares. The Schedule 13G reports that
Marsh & McLennan Companies, Inc. is the direct or indirect parent
corporation of each of such entities.
</TABLE>
20
<PAGE>
BENEFICIAL OWNERSHIP OF TDS BY DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the number of TDS Common Shares and TDS
Series A Common Shares beneficially owned by each director of the Company and by
all directors and executive officers of the Company as a group as of March 7,
1994.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF INDIVIDUAL OR NUMBER BENEFICIAL PERCENT OF PERCENT OF
OF PERSONS IN GROUP TITLE OF TDS CLASS OWNERSHIP(1) TDS CLASS VOTING POWER
- ---------------------------------------- ------------------------------------ ------------ ---------- -------------
<S> <C> <C> <C> <C>
LeRoy T. Carlson, Jr.,
Walter C.D. Carlson,
Letitia G. Carlson,
Donald C. Nebergall and
Melanie J. Heald(2)................... TDS Series A Common Shares 6,238,555 90.7% 54.3%
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Ronald D. Webster and
Michael G. Hron(3).................... TDS Common Shares 945 * *
TDS Series A Common Shares 146,576 2.1% 1.3%
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Ronald D. Webster and
Michael G. Hron(4).................... TDS Common Shares 22,252 * *
LeRoy T. Carlson(5)..................... TDS Common Shares 38,610 * *
TDS Series A Common Shares 50,398 * *
LeRoy T. Carlson, Jr.(6)................ TDS Common Shares 42,332 * *
Walter C.D. Carlson(7).................. TDS Common Shares 66 * *
Murray L. Swanson(8)(9)................. TDS Common Shares 23,293 * *
TDS Series A Common Shares 2,427 * *
H. Donald Nelson(9)..................... TDS Common Shares 4,888 * *
TDS Series A Common Shares 5,101 * *
Daniel R. Croft(9)...................... TDS Common Shares 135 * *
Joyce V. Gab Kneeland(9)................ TDS Common Shares 2,801 * *
Richard W. Goehring(9).................. TDS Common Shares 8,278 * *
Kenneth R. Meyers(9).................... TDS Common Shares 1,901 * *
All other executive officers
(6 persons)(9)........................ TDS Common Shares 4,851 * *
All directors and executive officers as
a group (17 persons)(9)............... TDS Common Shares 150,352 * *
TDS Series A Common Shares 6,443,057 93.6% 56.1%
<FN>
- ------------
* 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 of TDS listed are held by the persons named as trustees under a
voting trust which expires June 30, 2009, created to facilitate
long-standing relationships among the trustees' certificate holders. Under
the terms of the voting trust, the trustees hold and vote the Series A
Common Shares of TDS held in the trust. If the voting trust were
terminated, the following persons would each be deemed to own beneficially
over 5% of the outstanding TDS 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. Carlson (children of LeRoy T. Carlson and
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
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. In addition, Margaret D. Carlson owns
50,398 TDS Series A Common Shares directly and Prudence E. Carlson owns
194,148 TDS Series A Common Shares directly.
(3) Voting and investment control is shared by the persons named as trustees
of the Telephone and Data Systems, Inc. Employees' Pension Trust I.
(4) Voting and investment control is shared by the persons named as trustees
of the Telephone and Data Systems, Inc. Tax-Deferred Savings Trust. Does
not include 165,245 shares as to which the voting and investment power is
passed through to plan participants.
(5) Does not include 278,647 TDS Series A Common Shares (4.0% of class) held
for the benefit of Mr. LeRoy T. Carlson in the voting trust described in
footnote (2) above. Beneficial ownership is disclaimed as to 635,767 TDS
Series A Common Shares held for the benefit of his wife in such voting
trust and as to 50,398 TDS Series A Common Shares shown in the table held
directly by his wife (an aggregate of 10% of the class).
(6) Includes 38,250 TDS Common Shares that Mr. Carlson may purchase pursuant
to stock options and/or stock appreciation rights which are currently
exercisable or exercisable within 60 days. Does not include 1,064,593 TDS
Series A Common Shares (15.5% of class) held in the voting trust referred
to in footnote (2) above, of which 1,038,214 shares are held for the
benefit of Mr. LeRoy T. Carlson, Jr. Beneficial ownership is disclaimed as
to 26,379 TDS Series A Common Shares held for the benefit of his wife, his
children and others in such voting trust.
(7) Does not include 1,064,430 TDS Series A Common Shares (15.5% of class)
held in the voting trust referred to in footnote (2) above, of which
1,039,774 shares are held for the benefit of Mr. Walter C.D. Carlson.
Beneficial ownership is disclaimed with respect to 24,656 TDS Series A
Common Shares held for the benefit of his wife and children in such voting
trust.
(8) Includes 3,375 TDS Common Shares that Mr. Swanson may purchase pursuant to
stock options and/or stock appreciation rights which are currently
exercisable or exercisable within 60 days.
(9) Includes shares held by and/or in joint tenancy with spouse or children.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation -- Compensation Committee Interlocks and Insider
Participation."
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The directors anticipate continuing the services of Arthur Andersen & Co. as
independent public accountants for the current fiscal year. Representatives of
Arthur Andersen & Co., 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 & Co. 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 voting power of all classes of capital stock
present in person or represented by proxy and entitled to vote with respect to
such matter at the Annual Meeting. Should the shareholders fail to ratify the
selection of Arthur Andersen & Co. as independent public accountants, the Board
of Directors will consider whether to retain such firm for the year ending
December 31, 1994, subject to the obligations of the Company under the
Intercompany Agreement to engage the same firm of independent public accountants
selected by TDS. See "Executive Compensation -- Compensation Committee
Interlocks and Insider Participation -- Intercompany Agreement -- Accountants
and Legal Counsel."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN & CO. AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR
THE CURRENT FISCAL YEAR.
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy materials for
the 1995 Annual Meeting of Shareholders, any shareholder proposal must be
addressed to United States Cellular Corporation, 8410 W. Bryn Mawr Ave., Suite
700, Chicago, Illinois 60631, Attention: Secretary, and must be received no
later than December 13, 1994.
22
<PAGE>
GENERAL
Your proxy is solicited by the Board of Directors and its agents and the
cost of solicitation will be paid by the Company. Officers, directors and
regular employees of the Company, acting on its behalf, may also solicit proxies
by telephone, facsimile transmission or personal interview. The Company will, at
its expense, request brokers and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of shares of record
by such persons. The Company has retained Kissel-Blake Inc. to aid in
solicitation of proxies for a fee of $2,500, plus out-of-pocket expenses.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993, INCLUDING THE FINANCIAL STATEMENTS
AND THE SCHEDULES THERETO, UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER AS OF THE
RECORD DATE, AND WILL PROVIDE COPIES OF THE EXHIBITS TO THE REPORT UPON PAYMENT
OF A REASONABLE FEE THAT WILL NOT EXCEED THE COMPANY'S REASONABLE EXPENSES
INCURRED IN CONNECTION THEREWITH. REQUESTS FOR SUCH MATERIALS SHOULD BE DIRECTED
TO UNITED STATES CELLULAR CORPORATION, 8410 WEST BRYN MAWR AVENUE, SUITE 700,
CHICAGO, ILLINOIS 60631, ATTENTION: EXTERNAL REPORTING DEPARTMENT, TELEPHONE:
(312) 399-8900.
OTHER BUSINESS
It is not anticipated that any action will be asked of the shareholders
other than that set forth above, but if other matters are properly 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
/s/ STEPHEN P. FITZELL
STEPHEN P. FITZELL
SECRETARY
ALL SHAREHOLDERS ARE URGED TO SIGN, DATE
AND MAIL THEIR PROXIES PROMPTLY.
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<PAGE>
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF UNITED
STATES CELLULAR CORPORATION
TO BE HELD ON MAY 5, 1994
The undersigned hereby appoints LeRoy T. Carlson, Jr., and H. Donald Nelson,
or either of them acting in the absence of the other, with power of
substitution, attorneys and proxies for and in the name and place of the
undersigned, to vote the number of Common Shares that the undersigned would
be entitled to vote if then personally present at the 1994 Annual Meeting of the
Shareholders of United States Cellular Corporation, or at any adjournment
thereof, upon the matters as set forth in the 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 Proposal
to ratify the selection of Arthur Andersen & Co. as independent public
accountants for 1994.
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
PROPOSAL 1.
(Continued on Reverse Side)
<PAGE>
PLEASE MARK IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
<TABLE>
<S> <C>
1. TO RATIFY THE SELECTION OF ARTHUR For Against Abstain
ANDERSEN & CO. AS INDEPENDENT PUBLIC / / / / / /
ACCOUNTANTS FOR 1994.
2. In accordance with their discretion, upon all other Dated:__________________________________, 1994
matters that may properly come before said Annual
Meeting and any adjournment thereof. Please Sign Here _____________________________
_____________________________
Note: Please date this proxy and sign it exactly
as your name or names appear hereon. 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.
</TABLE>
