<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
UNITED STATES CELLULAR CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
UNITED STATES CELLULAR CORPORATION
8410 West Bryn Mawr Avenue
Suite 700
Chicago, Illinois 60631
Phone: (773) 399-8900
Fax: (773) 399-8936
[LOGO]
April 12, 1999
Dear Fellow Shareholders:
You are cordially invited to attend the Company's 1999 Annual Meeting on
Tuesday, May 11, 1999, at 10:00 a.m., Chicago time, at Harris Trust and Savings
Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, in the Auditorium
(the "Annual Meeting"). At the meeting, we will report on the plans and
accomplishments of United States Cellular Corporation.
The formal notice of the meeting, Board of Directors' Proxy Statement and
1998 Annual Report are enclosed. At the 1999 Annual Meeting, shareholders are
being asked to (i) elect three Class III Directors, (ii) approve the Company's
1999 Employee Stock Purchase Plan, and (iii) ratify the selection of independent
public accountants for the current fiscal year. The Board of Directors
recommends a vote "FOR" the nominees for election as directors and each of the
proposals.
The Board of Directors and members of our management team will be at the
Annual Meeting to meet with shareholders and discuss our record of achievement
and plans for the future. We would like to have as many shareholders as possible
represented at the meeting. Therefore, please sign and return the enclosed proxy
card, 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 (773) 399-8900.
We look forward to visiting with you at the Annual Meeting.
Very truly yours,
[SIGNATURE] [SIGNATURE]
LeRoy T. Carlson, Jr. H. Donald Nelson
Chairman President and Chief Executive Officer
PLEASE HELP US AVOID THE EXPENSE OF FOLLOW-UP
PROXY MAILINGS TO SHAREHOLDERS BY
SIGNING AND RETURNING THE ENCLOSED PROXY CARD PROMPTLY
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
TO THE SHAREHOLDERS OF
UNITED STATES CELLULAR CORPORATION
The 1999 Annual Meeting of the Shareholders of United States Cellular
Corporation (American Stock Exchange: "USM"), a Delaware corporation (the
"Company" or "U.S. Cellular"), will be held at Harris Trust and Savings Bank,
111 West Monroe Street, 8th Floor, Chicago, Illinois, in the Auditorium, on
Tuesday, May 11, 1999, at 10:00 a.m., Chicago time, for the following purposes:
1. to elect three Class III directors;
2. to consider and approve the Company's 1999 Employee Stock Purchase Plan;
3. to ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the current fiscal year; and
4. 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, 1999.
The Board of Directors has fixed the close of business on March 26, 1999, as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting or any adjournments thereof.
The Board of Directors would like to have all shareholders represented at
the Annual Meeting. If you do not expect to be present, please sign and mail
your proxy in the enclosed self-addressed envelope to Harris Trust and Savings
Bank, 311 West Monroe Street, Chicago, Illinois 60606. You have the power to
revoke your proxy at any time before it is voted, and the giving of a proxy will
not affect your right to vote in person if you attend the Annual Meeting.
On March 26, 1999, the Company had outstanding 54,448,287 Common Shares, par
value $1.00 per share (excluding 426 shares held by the Company and 22,534
shares held by a subsidiary of the Company), and 33,005,877 Series A Common
Shares, par value $1.00 per share. As of March 26, 1999, no shares of Preferred
Stock, par value $1.00 per share, of the Company were outstanding. Each holder
of outstanding Common Shares is entitled to one vote for each Common Share held
in such holder's name with respect to all matters on which the holders of Common
Shares are entitled to vote at the Annual Meeting. The holder of Series A Common
Shares is entitled to ten votes for each Series A Common Share held in such
holder's name with respect to all matters on which the holder of Series A Common
Shares is entitled to vote at the Annual Meeting. Accordingly, the voting power
of the Series A Common Shares was 330,058,770 votes, and the total voting power
of all outstanding shares of capital stock was 384,507,057 at March 26, 1999.
Telephone and Data Systems, Inc., a Delaware corporation ("TDS"), is the sole
holder of Series A Common Shares and holds 37,782,826 Common Shares,
representing approximately 69.4% of the Common Shares. By reason of such
holding, TDS has the voting power to elect all of the directors of the Company
and has approximately 95% of the voting power with respect to matters other than
the election of directors. TDS as the holder of Series A Common Shares will
elect two Class III directors and the holders of Common Shares will elect one
Class III director at the Annual Meeting. TDS has advised the Company that it
intends to vote FOR the Company's nominees for election as Class III directors
and FOR each of the other proposals. Proxies are being requested from the
holders of Common Shares in connection with election of one Class III director,
the approval of the Company's 1999 Employee Stock Purchase Plan and the
ratification of the selection of Arthur Andersen LLP.
1
<PAGE>
VOTING INFORMATION
Holders of Common Shares may, with respect to the election of one Class III
director to be elected by the holders of Common Shares, vote FOR the election of
such director nominee or WITHHOLD authority to vote for such director nominee.
The holder of Series A Common Shares may, with respect to the election of the
two Class III directors to be elected by the holder of Series A Common Shares,
vote FOR the election of such director nominees or WITHHOLD authority to vote
for such director nominees. A shareholder may, with respect to the proposal to
approve the 1999 Employee Stock Purchase Plan, (i) vote FOR approval, (ii) vote
AGAINST approval, or (iii) ABSTAIN from voting on the proposal. A shareholder
may, with respect to the proposal to ratify the selection of Arthur Andersen LLP
as the Company's independent public accountants for 1999, (i) vote FOR
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 1999 Annual Meeting will be voted in the
manner directed therein. If no direction is made, a proxy by a holder of Common
Shares will be voted FOR the election of the named director nominee to serve as
a Class III director and a proxy by the holder of Series A Common Shares will be
voted FOR the election of the named director nominees to serve as a Class III
directors, and a proxy by any shareholder will be voted FOR the proposal to
approve the 1999 Employee Stock Purchase Plan and the proposal to ratify the
selection of Arthur Andersen LLP as the Company's independent public accountants
for 1999. 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. The
holders of a majority of the votes of the stock issued and outstanding and
entitled to vote, present in person or represented by proxy, will constitute a
quorum at the Annual Meeting, except that, in the case of matters such as the
election of directors, where a separate vote by a class or classes is required,
the holders of a majority of the votes of the stock of such class or classes,
present in person or represented by proxy, will constitute a quorum entitled to
take action with respect to that vote on that matter.
The election of the Class III directors requires the affirmative vote of a
plurality of the voting power of the shares 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, the person receiving the plurality of
votes of the holders of shares entitled to vote with respect to the election of
such Class III directors will be elected to serve as a Class III director.
Because the election of each Class III director requires only the affirmative
vote of a plurality of the shares 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 III
directors will not affect the outcome of the election of the Class III
directors.
If a quorum is present at the Annual Meeting, the proposal to approve the
1999 Employee Stock Purchase Plan requires the affirmative vote of a majority of
the voting power of the Common Shares and Series A Common Shares voting together
and present in person or represented by proxy and entitled to vote on such
matter at the Annual Meeting. A vote to abstain from voting on such proposal
will be treated as a vote against such proposal. Non-votes with respect to such
proposal will not affect the determination of whether such proposal is approved.
If a quorum is present at the Annual Meeting, the ratification of the
selection of Arthur Andersen LLP as the Company's independent public accountants
for 1999 requires the affirmative vote of a majority of the voting power of the
Common Shares and Series A Common Shares voting together and present in person
or represented by proxy and entitled to vote on such matter at the Annual
Meeting. A vote to abstain from voting on such proposal will be treated as a
vote against such proposal. Non-votes with respect to such proposal will not
affect the determination of whether such proposal is approved.
A complete list of shareholders entitled to vote at the Annual Meeting,
arranged in alphabetical order and by voting group, showing the address of and
number of shares held by each shareholder, will be kept open at the offices of
the Company, 8410 West Bryn Mawr Avenue, Suite 700, Chicago, Illinois 60631, for
examination by any shareholder during normal business hours, for a period of at
least ten days prior to the Annual Meeting.
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<PAGE>
RECENT DEVELOPMENTS
On December 17, 1997, the Company received an offer from TDS to acquire all
of the issued Common Shares of the Company which TDS does not own in exchange
for a TDS tracking stock which would track the performance of the Company (the
"Offer"). The Company's Board of Directors appointed Mr. Paul-Henri Denuit, an
independent director of the Company, to a special committee (the "Special
Committee") of the Board of Directors to consider this offer. TDS was unable to
reach a mutually satisfactory agreement with the Special Committee with respect
to the Offer and, on December 18, 1998, TDS advised U.S. Cellular that it had
withdrawn the Offer. Consequently, U.S. Cellular dissolved the Special
Committee.
PROPOSAL 1
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,
three Class III directors will be elected for terms of three years, or until
their successors are elected and qualified. The nominees for election as Class
III directors are identified in the tables below. In the event any nominee, who
has expressed an intention to serve if elected, fails to stand for election, the
persons named in the proxy presently intend to vote for a substitute nominee
designated by the Board of Directors.
NOMINEES
CLASS III DIRECTORS--TERMS SCHEDULED TO EXPIRE IN 2002
The following persons, if elected at the 1999 Annual Meeting of
Shareholders, will serve as Class III directors for a period of three years, or
until their successors are elected and qualified:
NOMINEE FOR ELECTION BY THE HOLDERS OF COMMON SHARES
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------------------------------------- --- ----------------------------------------------- --------------
<S> <C> <C> <C>
J. Samuel Crowley.............................. 48 Director of the Company and Executive Vice May 1998
President of Operations of CompUSA, Inc.
</TABLE>
J. Samuel Crowley has been Executive Vice President of Operations of
CompUSA, Inc., a national retailer and reseller of personal computers and
related products and services, since 1995. Prior to that time, Mr. Crowley was
Vice President of Operations between 1993 and 1995, and was Regional Manager
between 1989 and 1993, of CompUSA.
Mr. Crowley is currently a Class III director who was elected by the holders
of Common Shares at the 1998 Annual Meeting of Shareholders. Mr. Crowley was
elected as a Class III director with a term expiring in 1999 to fill a vacancy
on the Board of Directors created by the resignation of Allan Z. Loren. Mr.
Crowley is standing for election at the 1999 Annual Meeting due to the
expiration of his term as a Class III director in 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE NOMINEE BY THE
HOLDERS OF COMMON SHARES.
NOMINEES FOR ELECTION BY THE HOLDER OF SERIES A COMMON SHARES
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------------------------------------- --- ----------------------------------------------- ---------------
<S> <C> <C> <C>
LeRoy T. Carlson, Jr........................... 52 Chairman and Director of the Company and 1984
President and Chief Executive Officer of TDS
Walter C. D. Carlson........................... 45 Director of the Company and Partner, Sidley & 1989
Austin, Chicago, Illinois
</TABLE>
LeRoy T. Carlson, Jr., has been the Chairman of the Company, and the
President and Chief Executive Officer of TDS, for more than five years. Mr.
Carlson also serves on the Board of Directors of TDS. He is also a
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<PAGE>
director and Chairman of each of Aerial Communications, Inc. (Nasdaq Stock
Market: AERL), a subsidiary of TDS which offers broadband personal
communications services ("Aerial"), and TDS Telecommunications Corporation ("TDS
Telecom"), a subsidiary of TDS which operates local telephone companies. 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 serves on the Board of Directors of TDS and Aerial.
He is the son of LeRoy T. Carlson and the brother of LeRoy T. Carlson, Jr.
LeRoy T. Carlson, Jr., and Walter C. D. Carlson were previously elected by
TDS as the sole holder of Series A Common Shares.
The law firm of Sidley & Austin provided legal services to the Company and
TDS in 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE NOMINEES BY THE
HOLDER OF SERIES A COMMON SHARES.
OTHER DIRECTORS
CLASS I DIRECTORS-TERMS SCHEDULED TO EXPIRE IN 2000
The following persons are current Class I directors whose terms expire at
the 2000 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------------------------------------- --- ----------------------------------------------- ---------------
<S> <C> <C> <C>
H. Donald Nelson............................... 65 President (chief executive officer) and 1984
Director of the Company
LeRoy T. Carlson............................... 82 Director of the Company and Chairman of TDS 1987
</TABLE>
H. Donald Nelson has been the President (chief 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 also a director of TDS Telecom and
Aerial. He is the father of LeRoy T. Carlson, Jr. and Walter C. D. Carlson.
H. Donald Nelson and LeRoy T. Carlson were elected by TDS as the sole holder
of Series A Common Shares.
CLASS II DIRECTORS-TERMS SCHEDULED TO EXPIRE IN 2001
The following persons are current Class II directors whose terms expire at
the 2001 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------------------------------------- --- ----------------------------------------------- --------------
<S> <C> <C> <C>
Paul-Henri Denuit.............................. 64 Director of the Company and Chief Executive 1988
Officer and Managing Director of S.A. Coditel
Sandra L. Helton............................... 49 Director of the Company and Executive Vice 1998
President- Finance of TDS
Kenneth R. Meyers.............................. 45 Director of the Company and Executive Vice March 1999
President-Finance (Chief Financial Officer) and
Treasurer
</TABLE>
4
<PAGE>
Paul-Henri Denuit has served as Chief Executive Officer and Managing
Director of S.A. Coditel for more than five years. S.A. Coditel is a beneficial
holder of 2,279,583 Common Shares of the Company. Mr. Denuit disclaims
beneficial ownership of such shares.
Sandra L. Helton became Executive Vice President-Finance and chief financial
officer of TDS on August 10, 1998. Prior to that time, Ms. Helton was the Vice
President and Corporate Controller of Compaq Computer Corporation between 1997
and 1998. Prior to that time, Ms. Helton was employed by Corning Incorporated
for more than five years. At Corning Incorporated, Ms. Helton was Senior Vice
President and Treasurer between 1994 and 1997, and was Vice President and
Treasurer between 1991 and 1994. Ms. Helton was elected as a Class II director
of the Company in October 1998 by TDS as the sole holder of Series A Common
Shares to fill a vacancy created by the resignation from the Board of Directors
of Mr. Murray L. Swanson. Ms. Helton is also a member of the Board of Directors
of TDS, Aerial and TDS Telecom.
Kenneth R. Meyers became Executive Vice President-Finance (Chief Financial
Officer) and Treasurer of U.S. Cellular on March 18, 1999. Prior to that time,
Mr. Meyers was Senior Vice President-Finance (Chief Financial Officer) and
Treasurer of the Company from January 1997 to March 1999. Prior to that time, he
was the Vice President-Finance (Chief Financial Officer) and Treasurer of the
Company for more than five years. Mr. Meyers was elected as a Class II Director
of the Company in March 1999 by TDS as the sole holder of Series A Common Shares
to fill a vacancy created by the increase in the number of members of the Board
of Directors from seven to eight.
Paul-Henri Denuit is currently a Class II director who was previously
elected by the holders of Common Shares. Sandra L. Helton and Kenneth R. Meyers
are currently Class II directors who were previously elected by TDS as the sole
holder of Series A Common Shares.
COMMITTEES AND MEETINGS
The Board of Directors of the Company held four meetings during 1998. All of
the directors attended at least 75% of the meetings of the Board of Directors
held in 1998.
The Board of Directors does not presently have a formal nominating
committee.
The Audit Committee of the Board of Directors, among other things,
determines audit policies, reviews external and internal audit reports and
reviews recommendations made by the Company's internal auditing staff and
independent public accountants. The Audit Committee is currently composed of
Messrs. Walter C. D. Carlson (chairman), Paul-Henri Denuit and J. Samuel
Crowley. The Audit Committee held three meetings in 1998. Messrs. Carlson,
Denuit and Crowley attended at least 75% of the meetings held in 1998.
The Stock Option Compensation Committee of the Board of Directors currently
consists of Mr. Paul-Henri Denuit and Mr. J. Samuel Crowley. The principal
functions of the Stock Option Compensation Committee are to consider and approve
long-term compensation for executive officers and to consider and recommend new
long-term compensation plans or changes to long-term compensation plans to the
Board of Directors. The Stock Option Compensation Committee held two meetings in
1998. Messrs. Denuit and Crowley attended at least 75% of the meetings held in
1998.
In early 1998, the Board of Directors established a Special Committee
consisting of Mr. Paul-Henri Denuit to consider a proposal by TDS to acquire all
of the Common Shares of the Company which it did not own in exchange for TDS
tracking stock which would track the performance of the Company. On December 18,
1998, TDS advised the Company that it had withdrawn the proposal and,
consequently, the Company dissolved the Special Committee.
PROPOSAL 2
APPROVAL OF 1999 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has determined that it is in the best interests of
the Company and its shareholders to approve the 1999 Employee Stock Purchase
Plan of the Company (the "Plan").
The purpose of the Plan is to encourage and facilitate the purchase of
Common Shares by eligible employees of the Company and its subsidiaries and to
provide an additional incentive to promote the best
5
<PAGE>
interests of the Company and its subsidiaries and an additional opportunity to
participate in their economic progress. The Plan was adopted by the Board of
Directors of the Company (the "Board") and will become effective July 1, 1999.
The Plan is subject to the approval of the shareholders of the Company within
twelve months before or after its adoption by the Board. The Plan will be
administered by a two-person committee (the "Committee") composed of persons who
are ineligible to participate in the Plan. Subject to the express provisions of
the Plan, the Committee will have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it and to make
all other determinations necessary or advisable for the administration of the
Plan. The Board may at any time, and from time to time, amend the Plan in any
respect, except that, without shareholder approval, no amendment may be made
changing the number of shares to be reserved under the Plan (unless certain
changes occur in the Company's capital structure as described in the Plan), or
that would otherwise require shareholder approval under applicable law.
The Plan will terminate on December 31, 2002 (the "Termination Date"), or,
if earlier, upon the purchase by participants of all shares that may be issued
under the Plan or any earlier time in the discretion of the Board. The Plan is
comprised of two "Offering Periods," the first of which is an 18-month period
beginning on July 1, 1999 and ending on December 31, 2000, and the second of
which is a 24-month period beginning on January 1, 2001 and ending on December
31, 2002. Each Offering Period is comprised of consecutive quarterly "Purchase
Periods," the last day of each of which is a "Purchase Date." In addition, the
date on which the Plan terminates will be treated as a "Purchase Date" under the
Plan and the last day of an "Offering Period."
In general, participation in the Plan is available to any Eligible Employee
(as hereinafter defined) of the Company or any of its subsidiaries that has
adopted the Plan with the prior approval of the Company (a "participating
subsidiary"). For purposes of the preceding sentence, an "Eligible Employee" is
any employee of the Company or a participating subsidiary, other than a leased
employee (within the meaning of section 414(n) of the Code). Each Eligible
Employee can enroll in the Plan as of the first entry date as of which the
Eligible Employee completes the Plan's eligibility service requirement, or can
enroll as of any later date. The Plan's eligibility service requirement is
satisfied if an employee completes at least three months of continuous service
with the Company, TDS or any subsidiary thereof (regardless of whether the
subsidiary is a participating subsidiary). Under the Plan, an entry date occurs
on July 1, 1999 and the first day of each subsequent calendar month. Upon
enrollment, an Eligible Employee will become a "Participant" in the Plan.
Approximately 5,000 employees will be eligible to participate in the Plan as of
January 1, 1999.
For each Offering Period, each Eligible Employee will be granted an option
under the Plan, as of the first day of the Offering Period, or if later, the
first entry date on which the Eligible Employee is eligible to enroll in the
Plan (a "grant date"), to purchase a number of Common Shares equal to (x)
$25,000, multiplied by (y) the number of full or partial calendar years in the
Offering Period (as hereinafter defined), divided by (z) the closing price of a
Common Share on the American Stock Exchange on the grant date (or if such date
is not a trading day, the closing price of such share on the American Stock
Exchange on the next preceding trading day). However, no Eligible Employee will
be granted an option under the Plan to purchase Common Shares if such Eligible
Employee, immediately after the grant of the option, would own stock (including
shares subject to the option) possessing five percent or more of the total
combined voting power or value of all classes of issued and outstanding stock of
the Company, TDS or any of their respective subsidiaries.
The maximum number of shares available for purchase under the Plan will be
110,000, subject to adjustment in the event of certain changes to the Company's
capital structure, as described in the Plan.
As of the entry date on which an Eligible Employee enrolls as a Participant
in the Plan, he will make an election specifying his chosen rate of payroll
deduction contributions in an amount not less than one and not more than 15
percent of the Participant's compensation (as defined in the Plan) for each
payroll period, effective as soon as administratively practicable after such
election is made. A Participant will have the right to elect to increase or
decrease his or her designated rate of payroll deductions under the Plan from
time to time, in the manner prescribed by the Committee. In addition, a
Participant can elect to withdraw from participation in the Plan for the
remainder of an Offering Period, as described below.
The Committee will cause to be established a separate "Employee Stock
Purchase Account" on behalf of each Participant to hold payroll deduction
contributions made under the Plan. Subject to a Participant's right to withdraw
for an Offering Period as described below, the balance of each Participant's
Employee Stock
6
<PAGE>
Purchase Account will be applied on each Purchase Date to purchase the number of
Common Shares determined by dividing the balance of such account as of such date
by the Purchase Price of a Common Share on such date. The "Purchase Price" under
the Plan is 85 percent of the closing price of a Common Share on the American
Stock Exchange on a Purchase Date, or if such date is not a trading day, 85
percent of the closing price of a Common Share on the next preceding trading
day, rounded up to the nearest whole cent. The number of Common Shares to be
purchased on a Purchase Date will be rounded to the nearest one ten-thousandth
of a share (or such other fractional interest determined by the Committee).
Notwithstanding the foregoing, the number of Common Shares to be purchased
by a Participant on a Purchase Date will be limited to the extent necessary so
that the Participant's right to purchase Common Shares under the Plan and shares
under all other employee stock purchase plans maintained by the Company, TDS or
any of their subsidiaries does not accrue at a rate exceeding $25,000 of the
fair market value of such shares (determined at the time such option is granted)
for each calendar year in which the option is outstanding, determined in
accordance with section 423(b)(8) of the Code. If any portion of a Participant's
Employee Stock Purchase Account cannot be applied to purchase Common Shares on a
Purchase Date as a result of this limitation, such amount will remain credited
to such account and will be available to purchase Common Shares as of the next
Purchase Date; provided that, if such Purchase Date is on the last day of an
Offering Period, the balance of such account will promptly be refunded to the
Participant.
If, as of a Purchase Date, the number of Common Shares to be purchased on
behalf of all Participants collectively exceeds the number of Common Shares
available for purchase under the Plan, the number of Common Shares to be
purchased by each Participant on the Purchase Date will be proportionately
reduced in the manner described in the Plan. Amounts credited to a Participant's
Employee Stock Purchase Account that are not applied to purchase Common Shares
as a result of this limitation will promptly be refunded to the Participant.
A Stock Account will be established on behalf of each Participant in the
Plan by a custodian selected by the Company. As of each Purchase Date, each
Participant's Stock Account will be credited with the number of whole and
fractional shares purchased on the Participant's behalf under the Plan on such
date. Shares credited to a Participant's Stock Account will be held by the
custodian as nominee. The custodian will establish procedures pursuant to which
a Participant can elect that shares credited to such account be registered in
the name of the Participant (or jointly in the name of a Participant and one
other person), and that certificates representing such shares be issued to the
Participant.
Prior to the end of any Offering Period, a Participant can elect to withdraw
from the Plan for the remainder of the Offering Period. A Participant's election
to withdraw for an Offering Period will be made in the time and manner
prescribed by the Committee. Upon withdrawal from the Plan, the balance of the
Participant's Employee Stock Purchase Account promptly will be refunded to the
Participant. A Participant who withdraws for an Offering Period will not be
eligible to elect to recommence participation in the Plan until the next
Offering Period.
In the event of a Participant's termination of employment on account of
retirement or death, the balance of the Participant's Employee Stock Purchase
Account will be applied to purchase Common Shares on the next Purchase Date
unless the Participant (or the Participant's estate) elects to withdraw from the
Plan in the time and manner prescribed by the Committee. In the event of the
termination of the Participant's employment for any other reason, the
Participant's participation in the Plan will cease, and the balance of the
Participant's Employee Stock Purchase Account promptly will be refunded to the
Participant. Special rules apply in the event a Participant's employment is
transferred from the Company or a participating subsidiary to a
non-participating subsidiary.
The Company believes that the Plan qualifies under section 423 of the Code
as an employee stock purchase plan. Under section 423 the Participant does not
recognize any taxable income at the time Common Shares are purchased under the
Plan. The following is a brief summary of the federal income tax consequences
under the Plan.
If a Participant disposes of Common Shares purchased under the Plan within
two years of the grant date (as defined above) or within one year after an
applicable Purchase Date, whichever is later (a "disqualifying disposition"),
the Participant will recognize ordinary compensation income in the amount of the
excess of the
7
<PAGE>
fair market value of the Common Shares on such Purchase Date over the Purchase
Price of the shares. The Participant's cost basis in the shares will be
increased by the amount of such ordinary compensation income. If the amount
realized upon such disposition exceeds the Participant's cost basis in the
shares (as so increased), the Participant will recognize capital gain in the
amount of the difference between the amount realized and such adjusted cost
basis. Under current tax law, gain on capital assets held for 12 months or less
is treated as "short-term" capital gain which is not eligible for certain
preferential tax treatment afforded "long-term" capital gain. In the event the
amount realized is less than the cost basis in the Common Shares (as so
increased), the Participant will recognize capital loss in the amount of the
difference between the adjusted cost basis and the amount realized.
If a Participant disposes of Common Shares purchased under the Plan two
years or more after the grant date or one year or more after the applicable
Purchase Date, whichever is later (a "qualifying disposition"), the tax
treatment will be different. The Participant will recognize ordinary
compensation income in the amount of the lesser of (i) the excess of the fair
market value of the Common Shares on the grant date over the option price of the
shares (in this case, 85 percent of the closing price for such shares on the
American Stock Exchange) on the grant date, and (ii) the excess of the amount
realized over the Purchase Price of the Common Shares. The Participant's cost
basis in the shares will be increased by the amount of such ordinary
compensation income. In addition, the Participant will recognize capital gain
equal to the difference (if any) between the amount realized upon such
disposition and the cost basis in the shares (as so increased). In the event the
amount realized is less than the Purchase Price, the Participant will recognize
capital loss in the amount of the difference between the Purchase Price and the
amount realized.
The Company will not be entitled to a deduction for any excess of the fair
market value of the Common Shares over the Purchase Price, except to the extent
the Participant recognizes ordinary compensation income upon a disqualifying
disposition.
The Company has not provided a table of new plan benefits since the benefits
to executive officers is not determinable. The benefits will depend on the
number of Common Shares which the executive officers will subscribe for, if any,
under the plan and the future price of such shares.
This description of the Plan is a summary only and is qualified by the terms
of the Plan itself, a copy of which is attached to this Proxy Statement as
Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMPANY'S
1999 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 3
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors anticipates continuing the services of Arthur
Andersen LLP as independent public accountants for the current fiscal year.
Representatives of Arthur Andersen LLP, who served as independent public
accountants for the last fiscal year, are expected to be present at the Annual
Meeting of Shareholders and will have the opportunity to make a statement and
respond to appropriate questions raised by shareholders at the Annual Meeting or
submitted in writing prior thereto.
Shareholder ratification of the selection of Arthur Andersen LLP as the
Company's independent public accountants is not required by the Bylaws or
otherwise. However, as a matter of good corporate practice, the Board of
Directors has elected to seek such ratification by the affirmative vote of the
holders of a majority of the 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 LLP as independent public accountants, the Board of
Directors will consider whether to retain such firm for the year ending December
31, 1999, subject to the obligations of the Company under the Intercompany
Agreement 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 LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE
CURRENT FISCAL YEAR.
8
<PAGE>
EXECUTIVE OFFICERS
Set forth below is a table identifying other executive officers of the
Company who are not identified in the tables regarding the election of directors
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------ --- ---------------------------------------------
<S> <C> <C>
Joyce V. Gab Kneeland......... 41 Executive Vice President-Chief of Field
Operations
Richard W. Goehring........... 49 Executive Vice President-Chief Technology
Officer
Douglas S. Arnold............. 44 Vice President-Human Resources
Russell F. Arsaga............. 47 Vice President--Engineering
Linda L. Baker................ 38 Vice President-Customer Service
Stephen D. Clark.............. 41 Vice President-Network Operations
David M. Friedman............. 52 Vice President-Marketing
Leon J. Hensen................ 51 Vice President--Central Operations
James D. West................. 46 Vice President-Chief Information Officer
J. Russell Williams........... 46 Vice President-Southwest/West Operations
Eva-Maria Wohn................ 44 Vice President--External Affairs
John T. Quille................ 48 Controller (principal accounting officer)
Stephen P. Fitzell............ 45 Secretary
</TABLE>
Joyce V. Gab Kneeland was appointed Executive Vice President-Chief of Field
Operations of the Company on March 18, 1999. Ms. Gab Kneeland was Senior Vice
President-Operations of the Company from January 1997 to March 1999. Prior to
that, she was Vice President-Operations since January 1994. Prior to that time,
she was the Vice President-Customer Service and Administration of the Company
for more than five years.
Richard W. Goehring was appointed Executive Vice President-Chief Technology
Officer of the Company on March 18, 1999. Mr. Goehring was Senior Vice
President-Engineering of the Company from January 1997 to March 1999. Prior to
that, he was Vice President-Engineering of the Company for more than five years.
Douglas S. Arnold joined the Company and was appointed its Vice
President-Human Resources in 1995. Prior to that time, he was Vice President of
Employee Relations of Pizza Hut International since 1992.
Russell F. Arsaga joined the Company and was appointed Vice
President-Engineering in May 1998. Prior to that time, he was Executive
Director-Switching and Network Design of Pacific Bell Mobile Services from
October 1996 to May 1998. From April 1991 to October 1996 Mr. Arsaga was Network
Strategic Planning Manager for Bell South Telecommunications.
Linda L. Baker joined the Company and was appointed its Vice
President-Customer Service in 1997. Prior to that time, she was Vice
President-Sales & Service of Allegiance Healthcare, Inc. between 1995 and 1997.
Between 1990 and 1995, Ms. Baker was employed at Motorola, Inc. as
Manager-Worldwide Telemarketing between 1993 and 1995, and as Manager-Cellular
Information Center between 1990 and 1993.
Stephen D. Clark was appointed Vice President-Network Operations of the
Company in March 1998. Prior to that time, he was Director of Network Services
with responsibilities for the Company's Network Operations Centers since 1995.
Between 1989 and 1995, Mr. Clark was employed at American Airlines, as Manager
of Network Operations overseeing the operation and management of the SABRE
network.
David M. Friedman joined the Company in 1995 and was appointed its Vice
President-Marketing in 1996. Prior to that time, he was Vice President of
Product Marketing and Customer Support for Covia Technologies, a start up
software company, between 1994 and 1995. Before that, between 1993 and 1994 he
was President and founder of Performance Marketing Group, a consulting firm.
9
<PAGE>
Leon J. Hensen was appointed Vice President-Central Operations of the
Company in March 1999. Prior to that time, he was employed by the Company as
General Manager for the Wisconsin/Northern Illinois cluster from 1997 to 1999.
Prior to that, Mr. Hensen held the position of Senior Vice President and General
Manager of Palmer Wireless, Inc. from 1987 to 1997.
James D. West has been Vice President-Chief Information Officer of the
Company since 1996. Prior to that time, Mr. West was Vice President-Information
Services of the Company from 1992 to 1996.
J. Russell Williams was appointed Vice President-Southwest/West Operations
of the Company in March 1999. Mr. Williams was employed by the Company as Vice
President-Central/West Operations from November 1998 to March 1999. Prior to
that time, he was employed by the Company in various capacities, most recently
as Area General Manager, for more than five years.
Eva-Maria Wohn was appointed Vice President-External Affairs of the Company
in November 1998. From 1994 to 1998, Ms. Wohn was employed by the Company as
Director of Regulatory. Prior to that time, Ms. Wohn was a practicing attorney.
John T. Quille was appointed principal accounting officer of the Company in
November 1998. Prior to that time, he was employed by the Company in various
capacities, most recently as Director of Revenue Assurance, for more than five
years.
Stephen P. Fitzell has been the Secretary of the Company and a partner of
the law firm of Sidley & Austin for more than five years.
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.
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. Stephen P. Fitzell is a practicing attorney.
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth compensation information for the President
and Chief Executive Officer of the Company and the four most highly compensated
executive officers other than the President and Chief Executive Officer for
services rendered during the years ended December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
Annual Compensation(2) ----------------------------------------
------------------------------------- Restricted Securities
Name and Principal Other Annual Stock Underlying All Other
Positions(1) Year Salary(3) Bonus(4) Compensation(5) Awards(6) Options/SARs(7) Compensation(8)
- ------------------------- ---- --------- -------- --------------- ---------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Donald Nelson......... 1998 $ 371,589 $232,000 $ -- $995,300 17,000 $39,788
President (chief 1997 337,709 135,000 8,438 254,837 25,178 34,468
executive officer) 1996 306,672 145,000 -- -- 8,560 26,748
Joyce V. Gab Kneeland.... 1998 $ 219,583 $126,450 $ -- $297,850 9,600 $21,738
Executive Vice 1997 201,708 61,275 -- 162,900 12,346 17,028
President-- Chief of 1996 171,333 58,500 -- -- 3,346 14,927
Field Operations
Richard W. Goehring...... 1998 $ 263,712 $153,988 $44,888 $297,850 9,600 $21,761
Executive Vice 1997 244,708 85,425 -- 162,900 13,990 16,935
President-- Chief 1996 225,167 74,340 -- -- 5,144 19,844
Technology Officer
Kenneth R. Meyers........ 1998 $ 236,970 $144,434 $ 9,027 $297,850 9,600 $22,597
Executive Vice 1997 208,084 68,200 -- 162,900 13,004 17,721
President-- Finance 1996 188,250 64,350 -- -- 3,889 16,606
(chief financial officer)
and Treasurer
LeRoy T. Carlson, Jr..... 1998 $ 241,292 $ -- N/A N/A N/A N/A
Chairman-See Footnote (1) 1997 210,431 131,382 N/A N/A N/A N/A
1996 180,400 122,500 N/A N/A N/A N/A
</TABLE>
- ------------
(1) Includes the chief executive officer and the four most highly compensated
executive officers other than the chief executive officer. Mr. LeRoy T.
Carlson, Jr., Chairman of the Company, receives no compensation directly
from the Company. Mr. Carlson is compensated by TDS in connection with his
services for TDS and TDS subsidiaries, including USM. A portion of Mr.
Carlson's salary and bonus paid by TDS is charged to the Company by TDS
pursuant to the Intercompany Agreement discussed below under "Intercompany
Agreement." Accordingly, pursuant to the requirements of the Securities and
Exchange Commission, such amounts charged to USM by TDS are reported in the
above table in addition to the information presented for the other named
executive officers. The amount of Mr. Carlson's 1998 bonus has not yet been
determined. Mr. Carlson does not receive any long-term compensation awards
or any other compensation from the Company. Mr. Carlson receives long-term
and other compensation from TDS, but this is not charged to USM.
(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
less than the lesser of either $50,000 or 10% of the total of annual salary
and bonus reported for the named executive officers above.
(3) Represents the dollar value of base salary (cash and non-cash) earned by the
named executive officer during the fiscal year identified.
(4) Represents the dollar value of bonus (cash and non-cash) earned by the named
executive officer during the fiscal year identified.
(5) Represents the fair market value of phantom stock units of USM Common Shares
credited to such officer with respect to deferred bonus compensation. See
"Bonus Deferral and Company Match Awards." Mr. Carlson also receives a
credit of phantom stock units with respect to TDS Common Shares but this is
not charged to the Company.
(6) In 1996, the Board of Directors approved the 1996 Senior Executive Stock
Bonus and Restricted Stock Award Plan ("1996 Award Plan"). This plan was
adopted in order to award the senior executive team for attaining one
million customers and to further focus the team on achieving the Company's
growth objectives and retaining the services of such team members through
the achievement of two million customers. Pursuant to such plan, on February
10, 1997, the Stock Option Compensation Committee made awards of bonus stock
and restricted stock to the persons named in the Summary Compensation Table,
as detailed below.
In addition, in 1997, the Board of Directors approved the Special Retention
Restricted Stock Award Plan (the "1997 Special Award Plan") and made awards
of restricted stock to the persons named in the Summary Compensation Table,
as detailed below.
11
<PAGE>
In addition, in 1998, the Board of Directors approved the 1998 Retention
Restricted Stock Award Program (the "1998 Retention Program") and made
awards of restricted stock to the persons named in the Summary Compensation
Table, as detailed below.
Further, in 1998, the Board of Directors approved a grant of performance
share awards (the "Performance Share Awards") to H. Donald Nelson, as
detailed below. The amount reported is a target award. The actual amount
which vests may be more or less than this amount.
<TABLE>
<CAPTION>
H. Donald Joyce V. Gab Richard W. Kenneth R.
Nelson Kneeland Goehring Meyers
--------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
1996 Award Plan:
Bonus Stock which vested
immediately (20%)....................................... 340 240 240 240
Restricted Stock which vested
when USM achieved the 1.5 million customer level
(40%)................................................... 680 480 480 480
Restricted Stock which vested
when USM achieved the 2.0 million customer level
(40%)................................................... 680 480 480 480
--------- ------------ ---------- ----------
Total................................................... 1,700 1,200 1,200 1,200
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
Dollar Value............................................ $ 44,837 $ 31,650 $ 31,650 $ 31,650
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
1997 Special Award Plan:
Vested 1/15/99............................................ 4,000 2,500 2,500 2,500
Vests 1/15/00............................................. 4,000 2,500 2,500 2,500
--------- ------------ ---------- ----------
Total................................................... 8,000 5,000 5,000 5,000
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
Dollar Value............................................ $210,000 $131,250 $131,250 $131,250
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
Total for 1996 Award and
1997 Special Award......................................... $254,837 $162,900 $162,900 $162,900
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
1998 Retention Program:
Vests 12/15/99............................................ 3,966 2,683 2,683 2,683
Vests 12/15/00............................................ 3,967 2,683 2,683 2,683
Vests 12/15/01............................................ 3,967 2,684 2,684 2,684
--------- ------------ ---------- ----------
Total................................................... 11,900 8,050 8,050 8,050
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
Dollar Value............................................ $440,300 $297,850 $297,850 $297,850
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
H. Donald Nelson Performance
Share Awards:
1998 Target Award 7,500 -- -- --
1999 Target Award 7,500 -- -- --
--------- ------------ ---------- ----------
Total (Vests upon
retirement)........................................... 15,000 -- -- --
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
Dollar Value............................................ $555,000 -- -- --
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
Total Dollar Value for 1998
Retention Program and Performance Share Awards........ $995,300 $297,850 $297,850 $297,850
--------- ------------ ---------- ----------
--------- ------------ ---------- ----------
</TABLE>
The Dollar Value of the above awards is calculated using the closing price of
the USM Common Shares on the award date.
(7) 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.
(8) Includes contributions by the Company for the benefit of the named executive
officer under the TDS Tax-Deferred Savings Plan ("TDSP"), the Wireless
Companies' Pension Plan ("Pension Plan") and the TDS Supplemental Executive
Retirement Plan ("SERP"),
12
<PAGE>
and the dollar value of any insurance premiums paid during the covered
fiscal year with respect to life insurance for the benefit of the named
executive ("Life Insurance"), as indicated below for 1998:
<TABLE>
<CAPTION>
H. Donald Joyce V. Gab Richard W. Kenneth R.
Nelson Kneeland Goehring Meyers
---------------- --------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
TDSP..................... $ 4,800 $ 4,800 $ 4,800 $ 4,800
Pension Plan............. 7,548 7,548 7,548 7,548
SERP..................... 22,452 9,044 8,671 9,869
Life Insurance........... 4,988 346 742 380
-------- -------- -------- --------
Total................ $39,788 $21,738 $21,761 $22,597
-------- -------- -------- --------
-------- -------- -------- --------
</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 1998
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates
of Stock Price
Number of % of Total Appreciation
Securities Options/ for Option
Underlying SARs Terms(5)
Options/SARs Granted to Exercise Market Expiration ----------------
Name(1) Granted(2) Employees(3) Price Price(4) Date 5% 10%
- ----------------------------------- ------------ ------------ -------- -------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Donald Nelson
1998 Automatic Options (6)....... 17,000 10.6 % $ 33.94 $ 33.94 3/31/08 $362,860 $919,558
Joyce V. Gab Kneeland
1998 Automatic Options (6)....... 9,600 6.0 % $ 33.94 $ 33.94 3/31/08 $204,909 $519,280
Richard W. Goehring
1998 Automatic Options (6)....... 9,600 6.0 % $ 33.94 $ 33.94 3/31/08 $204,909 $519,280
Kenneth R. Meyers
1998 Automatic Options (6)....... 9,600 6.0 % $ 33.94 $ 33.94 3/31/08 $204,909 $519,280
</TABLE>
- ------------
(1) Mr. LeRoy T. Carlson, Jr., does not receive Options or SARs from USM. Mr.
Carlson receives long-term compensation from TDS, but this is not charged to
USM by TDS.
(2) Represents number of USM shares underlying Options/SARs which were awarded
for the named executive during the fiscal year.
(3) Represents the percent of total USM shares underlying Options/SARs awarded
to employees during the fiscal year.
(4) Represents the fair market value of the Common Shares as of the award date.
(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.
(6) Such options were granted on March 31, 1998, and become exercisable with
respect to 20% of the shares underlying the Options on March 31 of each year
beginning in 1999 and ending in 2003.
13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND
AGGREGATED DECEMBER 31, 1998 OPTION/SAR VALUE
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
--------------------------------------------------------
1998
------------------------ NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS (4) OPTIONS/SARS (5)
ON VALUE ---------------------------- --------------------------
NAME(1) EXERCISE(2) REALIZED(3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ----------- ----------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Donald Nelson
1998 Automatic Options(6)................... -- 17,000 $ -- $ 69,020
1997 Automatic Options(7)................... 3,400 13,600 43,350 173,400
1996 Performance Options(8)................. 8,178 -- 110,567 --
1995 Performance Options(9)................. 7,960 -- 27,064 --
1994 Performance Options(10)................ 9,136 -- 79,209 --
1994 Automatic Options(11).................. 28,200 -- 162,150 --
SARs(12).................................... 24,000 12,000 552,000 276,000
----------- ------- ----------- -------------
Total..................................... 80,874 42,600 $ 974,340 $ 518,420
----------- ------- ----------- -------------
----------- ------- ----------- -------------
Joyce V. Gab Kneeland
1998 Automatic Options(6)................... -- 9,600 $ -- $ 38,976
1997 Automatic Options(7)................... 1,920 $ 21,960 -- 7,680 24,480 97,920
1996 Performance Options(8)................. 2,746 $ 29,574 -- -- -- --
1995 Performance Options(9)................. 2,746 -- 9,336 --
1994 Performance Options(10)................ 3,091 -- 26,799 --
1994 Automatic Options(11).................. 9,600 -- 55,200 --
SARs(12).................................... 6,000 $ 130,920 3,800 -- 87,400 --
----------- ------- ----------- -------------
Total..................................... 21,157 17,280 $ 203,215 $ 136,896
----------- ------- ----------- -------------
----------- ------- ----------- -------------
Richard W. Goehring
1998 Automatic Options(6)................... -- 9,600 $ -- $ 38,976
1997 Automatic Options(7)................... 1,920 7,680 24,480 97,920
1996 Performance Options(8)................. 4,390 -- 59,353 --
1995 Performance Options(9)................. 4,544 -- 15,450 --
1994 Performance Options(10)................ 5,250 -- 45,518 --
1994 Automatic Options(11).................. 15,350 -- 88,262 --
SARs(12).................................... 12,000 $ 261,360 -- -- -- --
----------- ------- ----------- -------------
Total..................................... 31,454 17,280 $ 233,063 $ 136,896
----------- ------- ----------- -------------
----------- ------- ----------- -------------
Kenneth R. Meyers
1998 Automatic Options(6)................... -- 9,600 $ -- $ 38,976
1997 Automatic Options(7)................... 1,920 7,680 24,480 97,920
1996 Performance Options(8)................. 3,404 -- 46,022 --
1995 Performance Options(9)................. 3,289 -- 11,183 --
1994 Performance Options(10)................ 3,818 -- 33,102 --
1994 Automatic Options(11).................. 11,500 -- 66,125 --
SARs(12).................................... 12,000 $ 261,360 -- -- -- --
----------- ------- ----------- -------------
Total..................................... 23,931 17,280 $ 180,912 $ 136,896
----------- ------- ----------- -------------
----------- ------- ----------- -------------
</TABLE>
- ------------
(1) Mr. LeRoy T. Carlson, Jr., does not receive Options or SARs from USM. Mr.
Carlson receives long-term compensation from TDS, but this is not charged to
USM by TDS.
(2) Represents the number of USM Common Shares with respect to which Options or
SARs were exercised.
(3) Represents the aggregate dollar value realized upon exercise, based on the
difference between the fair market value of such shares on the date of
exercise and the aggregate exercise price.
(4) Represents number of shares subject to free-standing Options and/or
free-standing SARs, as indicated, as of December 31, 1998.
(5) Represents the aggregate dollar value of in-the-money, unexercised Options
and/or SARs held at December 31, 1998, based on the difference between the
exercise price and $38.00, the closing price of the Common Shares on
December 31, 1998.
(6) The 1998 Automatic Options become exercisable in annual increments of 20% on
March 31 of each year beginning in 1999 and ending in 2003, and are
exercisable until March 31, 2008 at an exercise price of $33.94.
(7) The 1997 Automatic Options become exercisable in annual increments of 20% on
March 31 of each year beginning in 1998 and ending in 2002, and are
exercisable until May 14, 2007 at the exercise price of $25.25.
14
<PAGE>
(8) The 1996 Performance Options became exercisable on December 15, 1997 and are
exercisable until May 1, 2007 at the exercise price of $24.48 per share.
(9) 1995 Performance Options became exercisable on December 15, 1996 and are
exercisable until May 1, 2006 at the exercise price of $34.60 per share.
(10) The 1994 Performance Options became exercisable on December 15, 1995 and
are exercisable until May 1, 2005 at the exercise price of $29.33 per share.
(11) The 1994 Automatic Options become exercisable in annual increments of 20%
on each of December 15, 1994, and on the first through the fourth
anniversaries of such date, and are exercisable until November 9, 2004 at
the exercise price of $32.25 per share.
(12) The SARs were granted in 1988 and are exercisable at the exercise price of
$15.00 per share until May 4, 2004 by H. Donald Nelson and until May 4, 1999
by Joyce Gab Kneeland.
PENSION PLAN AND SUPPLEMENTAL BENEFIT AGREEMENT
USM has adopted the Wireless Companies' Pension Plan (the "Pension Plan").
The Pension Plan, a qualified noncontributory defined contribution pension plan,
provides pension benefits for USM employees. Under the Pension Plan, pension
costs are calculated separately for each participant and are funded currently.
The amounts of the annual contributions for the benefit of the named executive
officers are included above in the Summary Compensation Table under "All Other
Compensation."
USM has also adopted a Supplemental Executive Retirement Plan ("SERP") to
provide supplemental benefits under the USM Pension Plan. The SERP was
established to offset the reduction of benefits caused by the limitation on
annual employee compensation under the Internal Revenue Code. The SERP is a
nonqualified deferred compensation plan and is intended to be unfunded. The
amounts of the accruals for the benefit of the named executive officers are
included above in the Summary Compensation Table under "All Other Compensation."
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, less any amounts which he is entitled to receive under any
other qualified pension plan (such as the Wireless Companies' Pension Plan). The
Company will pay any such benefit at the same time as Mr. Nelson receives
payments from the TDS Pension Plan. The actual benefits payable to Mr. Nelson
upon retirement will be based upon the facts that exist at the time and will be
determined actuarially 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.
DEFERRED COMPENSATION AGREEMENTS
Messrs. H. Donald Nelson and Richard W. Goehring and Ms. Joyce V. Gab
Kneeland, and certain other officers of the Company, are parties to Executive
Deferred Compensation Agreements pursuant to which the executive will have a
specified percentage of gross compensation deferred and credited to a Deferred
Compensation Account. Each Deferred Compensation Account will be credited with
interest compounded monthly, computed at a rate equal to one-twelfth of the sum
of the average thirty-year Treasury Bond rate plus 1.25 percentage points until
the Deferred Compensation Amount is paid to the executive. The amount of
compensation deferred by such persons is included in and reported with all other
non-deferred compensation in the "Summary Compensation Table." No amount is
included in the Summary Compensation Table for the interest earned on such
deferred compensation since such interest rate is intended to approximate a
market rate.
BONUS DEFERRAL AND COMPANY MATCH AWARDS
The 1998 Long Term Incentive Program (the "Program") permits an employee
selected by the Stock Option Compensation Committee to elect to defer all or a
portion of his or her annual bonus to a deferred compensation account under the
Program. If a selected employee elects to defer all or a portion of his or her
annual bonus under the Program, a Company match award will be allocated to the
employee's deferred
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<PAGE>
compensation account in an amount equal to the sum of (i) 25% of the deferred
bonus amount which is not in excess of one-half of the employee's gross bonus
for the year and (ii) 33 1/3% of the deferred bonus amount which is in excess of
one-half of the employee's gross bonus for the year. The fair market value of
the matched stock units are reported in the Summary Compensation Table under
"Other Annual Compensation." An employee will be fully vested in the deferred
bonus amounts credited to his or her deferred compensation account. One-third of
the Company match award credited to the employee's deferred compensation account
shall become vested on each of the first three anniversaries of the last day of
the year for which the applicable bonus is payable, provided that such employee
is an employee of the Company or an affiliate on such date and the deferred
bonus amount has not been withdrawn or distributed before such date. Amounts
credited to an employee's deferred compensation account will be deemed to be
invested in phantom Common Shares at the time the amounts are credited to the
deferred compensation account. An employee will receive an amount equal to his
or her vested deferred compensation account balance on the earlier of the date
specified by the employee or when he or she terminates employment with the
Company and all of its affiliates, such amounts are credited to the deferred
compensation account. The Board of Directors may determine that all Company
match awards will become fully vested upon certain changes of control of the
Company.
COMPENSATION OF DIRECTORS
On November 1, 1996, the Board of Directors of the Company approved a
compensation plan (the "Non-Employee Director Plan") for non-employee directors
of the Company ("Non-Employee Directors"). A Non-Employee Director is a director
of the Company who is not an employee of the Company, TDS, Aerial or TDS
Telecom. The purpose of the Non-Employee Director Plan is to provide reasonable
compensation to Non-Employee Directors in connection with their services to the
Company in order to induce qualified persons to become and serve as non-employee
members of the Company's Board of Directors.
The Non-Employee Director Plan provides that, effective for the twelve month
period ending at the time of the Company's 1997 annual meeting, each
Non-Employee Director will receive an annual director's fee of $24,000 payable
immediately prior to the Company's Annual Meeting of Shareholders; and that each
Non-Employee Director will continue to receive a fee of $1,000, plus
reimbursement of reasonable out-of-pocket expenses incurred in connection with
travel, for attendance at each regularly scheduled or special meeting of the
Board of Directors. The Non-Employee Director Plan also provides that, effective
as of November 1, 1996, each Non-employee Director will receive a fee of $750,
plus reimbursement of reasonable out-of-pocket expenses incurred in connection
with travel, for attendance at each meeting of the Audit Committee, Stock Option
Compensation Committee, or other committee established by resolution of the
Board of Directors.
The Non-Employee Director Plan further provides that each Non-employee
Director will be entitled to elect to receive up to fifty percent (50%) of the
annual fee by the delivery of Common Shares of the Company having a fair market
value, as hereinafter defined, as of the date of payment equal to such
percentage of the annual fee. Under the Non-Employee Director Plan, each
Non-employee Director will be entitled to elect to receive up to thirty-three
percent (33%) of each committee meeting's fee by the delivery of Common Shares
of the Company having a fair market value as of the date of payment equal to
such percentage of such fee.
Under the Non-Employee Director Plan, for purposes of determining the number
of Common Shares deliverable in connection with any of the foregoing elections,
the fair market value of a Common Share of the Company will be the average
closing price of Common Shares of the Company as reported in the American Stock
Exchange Composite Transactions section of the Wall Street Journal for the
twenty (20) trading days ending on the third trading day before the Annual
Meeting of Shareholders or the date of the committee meeting, as applicable. The
Board of Directors of the Company has reserved 10,000 Common Shares of the
Company for issuance pursuant to the Non-Employee Director Plan.
The Board of Directors also approved a fee of $2,000 per day for service on
the Special Committee, plus reimbursement of out-of-pocket expenses. See "Recent
Developments."
EXECUTIVE OFFICER COMPENSATION REPORT
This report is submitted by LeRoy T. Carlson, Jr., Chairman of the Company,
who in effect functions as the compensation committee of the Board of Directors,
except with respect to long-term compensation, and by
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<PAGE>
the Stock Option Compensation Committee, which approves long-term compensation
for the executive officers of the Company.
The Chairman, who is also the President and Chief Executive Officer of TDS,
is paid by TDS and receives no compensation directly from the Company. (See
Footnote (1) to the Summary Compensation Table.) As the President and Chief
Executive Officer of TDS, the Chairman of the Company represents the controlling
shareholder of the Company.
The Stock Option Compensation Committee of the Company currently consists of
Mr. Paul-Henri Denuit and Mr. J. Samuel Crowley. The Stock Option Compensation
Committee approves long-term compensation for executive officers of the Company.
The Company's Stock Option Compensation Committee is composed of members of the
Board of Directors of USM who are not officers or employees of TDS or USM or
their subsidiaries.
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 grant of stock options
and stock appreciation rights under the 1998 Long Term Incentive Program.
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, 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.
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
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<PAGE>
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. 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.
In addition, the executive officers participate in either the 1998 Bonus
Program for Senior Vice Presidents or the 1998 Bonus Program for Corporate Vice
Presidents (collectively the "1998 Bonus Program"). The objectives of the 1998
Bonus Program for senior corporate staff of USM 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 1998 Bonus Plan.
For target performance on the team and individual categories, the 1998 Bonus
Plan was designed to generate a targeted 1998 bonus pool in an amount equal to
40% of the aggregate of the base salaries of the Company's senior executive
officers other than the President. Under the 1998 Bonus Plan, the size of the
target bonus pool is increased or decreased depending on USM's 1998 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 be an amount equal to 80% of the aggregate base
salaries of the Company's executive officers other than the President.
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
(chief 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
increased to $371,589 in 1998 from $337,709 in 1997, representing an increase of
approximately 10.0%. 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
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<PAGE>
the President. The President's final 1997 bonus was $135,000 and final 1998
bonus was $232,000. The Chairman has approved a base salary of $416,000 for the
President for 1999.
As with the other executive officers, the base salary and compensation
decisions for the 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 1998 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 1998 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 1998,"
the named executive officers (including the Chairman) received automatic option
grants in 1998 based on the achievement of certain levels of corporate and
individual performance for 1997.
SECTION 162(M) OF THE CODE. Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") generally limits to $1 million the amount that a
publicly held corporation is allowed each year to deduct for the compensation
paid to each of the corporation's chief executive officer and the corporation's
four most highly compensated officers other than the chief executive officer,
subject to certain exceptions. The Company does not believe that the $1 million
deduction limitation should have a material effect on the Company in the near
future. If the $1 million deduction limitation is expected to have a material
effect on the Company in the future, the Company will consider ways to maximize
the deductibility of executive compensation, while retaining the discretion the
Company deems necessary to compensate executive officers in a manner
commensurate with performance and the competitive environment for executive
talent.
The above Executive Officer Compensation Report is submitted by the Chairman
of the Board of Directors, Mr. LeRoy T. Carlson, Jr., and by Mr. Paul-Henri
Denuit and Mr. J. Samuel Crowley, who were members of the Stock Option
Compensation Committee during 1998.
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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: AllTel Corp., Centennial Cellular CP (Class A), Rural Cellular Corp.
(Class A), USM and Western Wireless Corp. (Class A). 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.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
USM, S&P 500, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/98)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
USM.............................................. $ 100.00 $ 93.57 $ 96.43 $ 79.64 $ 88.57 $ 108.57
S&P 500.......................................... $ 100.00 $ 101.32 $ 139.70 $ 171.40 $ 228.59 $ 293.91
Peer Group....................................... $ 100.00 $ 101.03 $ 102.88 $ 102.21 $ 132.11 $ 188.13
</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 was revised from the prior year to delete 360 Communications
Co., AirTouch Communications, Inc. and Vanguard Cellular Systems (Class A) due
to acquisition transactions. AllTel Corp., Rural Cellular Corp. (Class A) and
Western Wireless Corp. (Class A) were then added to expand the peer group. For
comparison to the above-reported peer group results, if the Company had not
changed the peer group index from the peer group reported in its 1998 Notice of
Annual Meeting and Proxy Statement, the peer group results would have been as
follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Former Peer Group................................. $ 100.00 $ 113.44 $ 109.53 $ 95.99 $ 137.52 $ 233.43
</TABLE>
20
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
LeRoy T. Carlson, Jr., President and Chief Executive Officer of TDS, makes
annual executive compensation decisions for TDS other than for himself. The
Stock Option Compensation Committee of TDS makes annual executive compensation
decisions for the President of TDS and approves long-term compensation awards
for the executive officers of TDS. The TDS Stock Option Compensation Committee
is composed of members of the TDS Board of Directors who are not officers or
employees of TDS or any of its subsidiaries, and who are not directors of any
TDS subsidiaries. LeRoy T. Carlson, Jr., is a member of the Board of Directors
of TDS and USM. LeRoy T. Carlson, Jr. is also the Chairman of USM and, as such,
approves annual compensation for executive officers of the Company. LeRoy T.
Carlson, Jr. is compensated by TDS for his services to TDS and all of its
subsidiaries. However, TDS is reimbursed by the Company for a portion of Mr.
Carlson's salary and bonus paid by TDS pursuant to the Intercompany Agreement
described below. See Footnote (1) to the Summary Compensation Table above. H.
Donald Nelson, a director and the President of USM, participates in executive
compensation decisions for USM, other than for himself. Long-term compensation
for executive officers of the Company is approved by the Stock Option
Compensation Committee of the Company, which currently consists of Paul-Henri
Denuit and J. Samuel Crowley. The Company's Stock Option Compensation Committee
is composed of members of the Board of Directors of USM who are not officers or
employees of TDS or USM or their subsidiaries.
LeRoy T. Carlson, Jr. and Walter C. D. Carlson, directors of USM, are
trustees and beneficiaries of the voting trust which controls TDS, which
controls the Company, and LeRoy T. Carlson, a director of the Company, is a
beneficiary of such voting trust. See "Security Ownership of Certain Beneficial
Owners and Management." LeRoy T. Carlson, LeRoy T. Carlson, Jr., Walter C. D.
Carlson and Sandra L. Helton, directors of USM, are also directors of TDS. See
"Election of Directors." 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 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. There can be no assurance that such arrangements will continue or
that the terms of such arrangements will not be modified in the future. If
additional transactions occur in the future, there can be no assurance that the
terms of such future transactions will be favorable to the Company or will
continue to provide the Company with the same level of support for the Company's
financing and other needs as TDS has provided in the past. The principal
arrangements that exist between the Company and TDS are summarized below.
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 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
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<PAGE>
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, 1998,
TDS had funded License Costs totaling approximately $67.2 million. TDS is
obligated under the Exchange Agreement to make additional capital contributions
to the Company under certain circumstances. Currently TDS has no obligations
with respect to additional capital contributions.
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.
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, 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.
REVOLVING CREDIT AGREEMENT
Pursuant to the Revolving Credit Agreement, as last amended effective March
31, 1997, during 1998, the Company had the ability to borrow up to an aggregate
of $100 million from TDS, at an interest rate equal to .75% 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 2.75%
above such prime rate on any overdue principal or overdue installment of
interest. USM had no borrowings under the Revolving Credit Agreement during
1998. The Revolving Credit Agreement expired on January 2, 1999 and was not
renewed.
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<PAGE>
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 be compensated (by an offset to amounts the Company would otherwise
be required to reimburse TDS for Federal income taxes) for TDS' 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 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 the
Company becomes a member of another affiliated group in which the Company is not
the common parent or fewer than 500,000 Series A Common Shares are outstanding.
In addition, reimbursement will not 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' 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 totaled $41.1
million in 1998. 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
23
<PAGE>
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 1998.
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 totaled $3.7 million in
1998.
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' gross negligence or willful misconduct);
and (ii) any inaccurate representation or breach of warranty under the
Intercompany Agreement. 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, 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
24
<PAGE>
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
participate in the TDS Tax-Deferred Savings Plan. The Company reimburses 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
issuance of stock under the TDS Employee Stock Purchase Plans to employees of
the Company.
ISSUANCE OF TDS SHARES ON BEHALF OF USM
TDS may occasionally issue 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 1998, the Company issued 45,988 USM Common Shares to TDS, to reimburse
TDS for 29,999 TDS Common Shares issued in such transactions.
OTHER ARRANGEMENTS
Walter C. D. Carlson, a director of TDS and the Company, Michael G. Hron,
the Secretary of TDS and certain subsidiaries of TDS, William S. DeCarlo, the
Assistant Secretary of TDS and certain subsidiaries of TDS, Stephen P. Fitzell,
Secretary of the Company and certain other subsidiaries of TDS, and Sherry S.
Treston, Assistant Secretary of the Company and certain other subsidiaries of
TDS, are partners of Sidley & Austin, the principal law firm of the Company, TDS
and their subsidiaries. Walter C. D. Carlson is also a trustee and beneficiary
of the voting trust which controls TDS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On February 28, 1999, the Company had outstanding 54,397,704 Common Shares,
par value $1.00 per share (excluding 426 shares held by the Company and 22,534
shares held by a subsidiary of the Company), and 33,005,877 Series A Common
Shares, par value $1.00 per share. As of February 28, 1999, no shares of
Preferred Stock, par value $1.00 per share, of the Company were outstanding.
Each holder of outstanding Common Shares is entitled to one vote for each Common
Share held in such holder's name with respect to all matters on which the
holders of Common Shares are entitled to vote at the Annual Meeting. The holder
of Series A Common Shares is entitled to ten votes for each Series A Common
Share held in such holder's name with respect to all matters on which the holder
of Series A Common Shares is entitled to vote at the Annual Meeting.
Accordingly, the voting power of the Series A Common Shares was 330,058,770
votes, and the total voting power of all outstanding shares of capital stock was
384,456,474 at February 28, 1999.
SECURITY OWNERSHIP OF THE COMPANY BY CERTAIN BENEFICIAL OWNERS
The following table sets forth, at February 28, 1999, or the latest
practicable date, information regarding the persons who beneficially own more
than 5% of any class of the voting securities of the Company. The
25
<PAGE>
nature of beneficial ownership in this table is sole voting and investment
power, except as otherwise set forth in the footnotes.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF PERCENT OF
SHARES OF PERCENT OF COMMON VOTING
SHAREHOLDER'S NAME AND ADDRESS TITLE OF CLASS CLASS OWNED CLASS STOCK POWER
- --------------------------------------------- --------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Telephone and Data Systems, Inc.............. Common Shares Series 37,782,826 69.5% 43.2% 9.8%
30 North LaSalle Street A Common Shares(1) 33,005,877 100.0% 37.8% 85.9%
Chicago, Illinois 60603
The Equitable Companies Inc.(2).............. Common Shares 3,902,200 7.2% 4.5% 1.0%
787 Seventh Avenue
New York, New York 10019
</TABLE>
- ------------
(1) The Series A Common Shares are convertible on a share-for-share basis into
Common Shares.
(2) Based on the most recent Schedule 13G (Amendment No. 8) filed with the SEC.
Includes shares held by the following affiliates: The Equitable Life
Assurance Society of the United States 2,345,000 shares; Alliance Capital
Management, L.P. 1,556,900 shares; and Donaldson, Lufkin & Jenrette
Securities Corporation 300 shares. In such Schedule 13G, Equitable reported
sole voting power with respect to 3,118,100 shares, shared voting power with
respect to 780,000 shares, sole dispositive power with respect to 3,901,900
shares and shared dispositive power with respect to 300 shares. Alpha
Assurance I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Unit Europe Assurance
Mutuelle and AXA, corporations organized under the laws of France, are
affiliates of The Equitable Companies Inc.
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" below. In addition, the following executive officers
and directors and all officers and directors as a group of the Company
beneficially owned the following number of the Common Shares of the Company as
of February 28, 1999 or the latest practicable date:
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
BENEFICIAL PERCENT OF COMMON PERCENT OF
NAME TITLE OF CLASS OWNERSHIP(1) CLASS STOCK VOTING POWER
- --------------------------------------------- -------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Peter L. Sereda
and Michael G. Hron(2)..................... Common Shares 53,781 * * *
LeRoy T. Carlson............................. Common Shares 1,243 * * *
LeRoy T. Carlson, Jr......................... -- -- -- -- --
H. Donald Nelson(3)(9)....................... Common Shares 134,063 * * *
Walter C. D. Carlson......................... Common Shares 901 * * *
Sandra L. Helton............................. -- -- -- -- --
Kenneth R. Meyers(4)(9)...................... Common Shares 26,096 * * *
Paul-Henri Denuit(5)......................... -- -- -- -- --
J. Samuel Crowley............................ -- -- -- -- --
Joyce V. Gab Kneeland (6)(9)................. Common Shares 41,400 * * *
Richard W. Goehring(7)(9).................... Common Shares 51,411 * * *
All directors and executive officers as a
group (21 persons)(8)(9)................... Common Shares 434,380 * * *
</TABLE>
- ------------
* Less than 1%
(1) The nature of beneficial ownership is sole voting and investment power
unless otherwise specified.
26
<PAGE>
(2) Represents Common Shares acquired through Company-match contributions by the
persons named as members of the investment management committee of the
Telephone and Data Systems, Inc. Tax Deferred Savings Trust. Does not
include 111,992 Common Shares acquired by such trust with employee
contributions for which voting and investment power is passed through to
plan participants. Such members of the investment management committee
disclaim beneficial ownership of all such shares except for shares held for
their individual benefit in such trust.
(3) Includes 87,674 Common Shares subject to Options or SARs which are currently
exercisable or exercisable within 60 days. Also includes 34,221 shares of
restricted stock which are subject to future vesting.
(4) Includes 9,164 Common Shares subject to Options or SARs which are currently
exercisable or exercisable within 60 days. Also includes 12,422 shares of
restricted stock which are subject to future vesting. Also includes 1,000
Common Shares which are held by a trust for which Mr. Meyers is a trustee.
Mr. Meyers disclaims beneficial ownership of such shares.
(5) Does not include 2,279,583 Common Shares of the Company beneficially owned
by S.A. Coditel and its affiliates. Paul-Henri Denuit is the Chief Executive
Officer and Managing Director of S.A. Coditel, but disclaims beneficial
ownership with respect to such shares.
(6) Includes 23,077 Common Shares subject to Options or SARs which are currently
exercisable or exercisable within 60 days. Also includes 8,050 shares of
restricted stock which are subject to future vesting.
(7) Includes 19,944 Common Shares subject to Options or SARs which are currently
exercisable or exercisable within 60 days. Also includes 8,050 shares of
restricted stock which are subject to future vesting.
(8) Includes 203,677 Common Shares subject to Options or SARs which are
currently exercisable or exercisable within 60 days. Also includes shares of
restricted stock which are subject to future vesting.
(9) Includes shares as to which voting and/or investment power is shared.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder require the Company's directors and officers, and
persons who are deemed to own more than ten percent of the Common Shares
(collectively, the "Reporting Persons"), to file certain reports ("Section 16
Reports") with the SEC with respect to their beneficial ownership of Common
Shares. The Reporting Persons are also required to furnish the Company with
copies of all Section 16 Reports they file.
Based on a review of copies of Section 16 Reports furnished to the Company
by the Reporting Persons and written representations by directors and officers
of the Company, the Company believes that all Section 16 filing requirements
applicable to the Reporting Persons during and with respect to 1998 were
complied with on a timely basis, except for TDS due to an administrative error.
TDS was required to report an acquisition of USM shares on a Form 4 by May 10,
1998. TDS reported such acquisition on a Form 5 filed on February 8, 1999.
DESCRIPTION OF TDS SECURITIES
The authorized capital stock of TDS includes Common Shares, $.01 par value
(the "TDS Common Shares"), Series A Common Shares, $.01 par value, (the "TDS
Series A Common Shares") and Preferred Shares, $.01 par value (the "TDS
Preferred Shares"). As of February 28, 1999, 54,391,873 TDS Common Shares
(excluding Common Shares held by TDS and a subsidiary of TDS), 6,949,904 TDS
Series A Common Shares and 241,772 TDS Preferred Shares were outstanding.
The TDS Series A Common Shares have ten votes per share, and TDS Common
Shares and TDS Preferred Shares have one vote per share. The holders of TDS
Series A Common Shares, TDS Common Shares and TDS Preferred Shares vote as a
single group, except with respect to matters as to which the Delaware General
Corporate Law 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
group, are entitled to elect 25% of the board of directors of TDS, rounded up to
the nearest whole number, plus one director, and the holders of TDS Series A
Common Shares and TDS Preferred Shares issued after October 31, 1981, voting as
a group, are entitled to elect the remaining members of the board of directors
of TDS.
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, by
each executive officer named in the Summary
27
<PAGE>
Compensation Table and by all directors and executive officers of the Company as
a group as of February 28, 1999 or the latest practicable date.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NAME OF INDIVIDUAL OR NATURE OF PERCENT SHARES OF PERCENT
NUMBER BENEFICIAL OF TDS TDS COMMON OF TDS
OF PERSONS IN GROUP TITLE OF TDS CLASS OWNERSHIP(1) CLASS STOCK VOTING POWER
- --------------------------------------- --------------------------- ------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
LeRoy T. Carlson, Jr.,
Walter C. D. Carlson,
Letitia G. C. Carlson,
Donald C. Nebergall and TDS Series A Common
Melanie J. Heald(2).................. Shares 6,351,116 91.4% 10.4% 51.2%
LeRoy T. Carlson, Jr.,
C. Theodore Herbert, TDS Series A Common
Peter L. Sereda and Shares 1,008 * * *
Michael G. Hron(3)................... TDS Common Shares 148,876 * * *
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Peter L. Sereda and
Michael G. Hron(4)................... TDS Common Shares 64,256 * * *
LeRoy T. Carlson(5).................... TDS Series A Common
Shares 51,991 * * *
TDS Common Shares 100,682 * * *
LeRoy T. Carlson, Jr.(6)............... TDS Common Shares 157,570 * * *
TDS Series A Common
Shares 6,410 * * *
Walter C. D. Carlson(7)................ TDS Common Shares 719 * * *
Sandra L. Helton(8).................... TDS Common Shares 15,000 * * *
Kenneth R. Meyers(9)................... TDS Common Shares 301 * * *
Paul-Henri Denuit...................... -- -- -- -- --
H. Donald Nelson(9).................... TDS Common Shares 10,991 * * *
J. Samuel Crowley...................... -- -- -- -- --
Joyce V. Gab Kneeland(9)............... TDS Common Shares 1,992 * * *
Richard W. Goehring(9)................. TDS Common Shares 7,078 * * *
All directors and executive officers as TDS Common Shares
a group TDS Series A Common 508,351 * * *
(21 persons)(9)(10).................. Shares 6,410,525 92.2% 10.5% 51.6%
</TABLE>
- ------------
* Less than 1%
(1) The nature of beneficial ownership for shares in this column is sole voting
and investment power, except as otherwise set forth in these footnotes.
(2) The shares 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 trust 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. C. Carlson (children of LeRoy T. Carlson and Margaret D.
Carlson), and Donald C. Nebergall, as trustee under certain trusts for the
benefit of the heirs of LeRoy T. and Margaret D. Carlson and an educational
institution.
(3) Voting and investment control is shared by the persons named as members of
the investment management committee of the Telephone and Data Systems, Inc.
Employees' Pension Trust I and the Wireless Companies' Pension Plan. Such
members disclaim beneficial ownership of such shares which are held for the
benefit of plan participants.
28
<PAGE>
(4) Includes only shares acquired with Company contributions for the benefit of
plan participants, for which voting and investment control is shared by the
persons named as members of the investment management committee of the
Telephone and Data Systems, Inc. Tax-Deferred Savings Plan. Does not include
126,711 shares acquired by such plan with employee contributions for which
voting and investment control is passed through to plan participants. The
members of the investment management committee disclaim beneficial ownership
of such shares, except for shares held in such plan for their benefit.
(5) Includes 94,208 TDS Common Shares that Mr. LeRoy T. Carlson may purchase
pursuant to stock options which are currently exercisable or exercisable
within 60 days, and 51,991 Series A Common Shares held by Mr. Carlson's
wife. Beneficial ownership is disclaimed as to the shares held by Mr.
Carlson's wife. Does not include 224,995 TDS Series A Common Shares held for
the benefit of Mr. LeRoy T. Carlson, 630,811 TDS Series A Common Shares held
for the benefit of Mr. Carlson's wife or 51,040 TDS Series A Common Shares
held for the benefit of certain grandchildren of Mr. Carlson (an aggregate
of 921,086 shares, or 13.3% of class) in the voting trust described in
footnote (2) above. Beneficial ownership is disclaimed as to TDS Series A
Common Shares held for the benefit of his wife and grandchildren in such
voting trust.
(6) Includes 130,717 TDS Common Shares that Mr. LeRoy T. Carlson, Jr. may
purchase pursuant to stock options which are currently exercisable or
exercisable within 60 days. Does not include 1,071,956 TDS Series A Common
Shares (15.4% of class) held in the voting trust referred to in footnote (2)
above, of which 1,036,751 shares are held for the benefit of Mr. LeRoy T.
Carlson, Jr. Beneficial ownership is disclaimed with respect to an aggregate
of 35,205 TDS Series A Common Shares held for the benefit of his wife, his
children and others in such voting trust.
(7) Does not include 1,097,775 TDS Series A Common Shares (15.8% of class) held
in the voting trust referred to in footnote (2) above, of which 1,064,249
shares are held for the benefit of Mr. Walter C. D. Carlson. Beneficial
ownership is disclaimed with respect to an aggregate of 33,081 TDS Series A
Common Shares held for the benefit of his wife and children in such voting
trust.
(8) Includes 12,000 TDS Common Shares that Ms. Helton may purchase pursuant to
stock options which are currently exercisable or exercisable within 60 days.
(9) Includes shares held as to which voting and/or investment power is shared
through joint ownership or otherwise.
(10) Includes 236,925 shares subject to stock options exercisable on March 26,
1999 or within 60 days thereof.
SECURITY OWNERSHIP OF TDS BY CERTAIN BENEFICIAL OWNERS
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 February 28, 1999, or the latest practicable date, 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>
PERCENT OF
SHARES OF
SHARES OF PERCENT COMMON PERCENT OF
SHAREHOLDER'S NAME AND ADDRESS TITLE OF CLASS CLASS OWNED OF CLASS STOCK VOTING POWER
- --------------------------------------------- ------------------------- ------------ ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Franklin Mutual Advisers, Inc.(1)
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078 TDS Common Shares 7,400,475 13.6% 12.1% 6.0%
Gabelli Funds, Inc.(2)
One Corporate Center
Rye, New York 10580 TDS Common Shares 6,870,655 12.6% 11.2% 5.5%
The Equitable Companies Inc.(3)
787 Seventh Avenue
New York, New York 10019 TDS Common Shares 5,085,257 9.3% 8.3% 4.1%
Van and Janet McDaniel
Salkum, Washington 98582 TDS Preferred Shares 62,500 25.9% N/A *
William and Betty McDaniel
Salkum, Washington 98582 TDS Preferred Shares 46,666 19.3% N/A *
Bennet R. Miller
Lafayette, Indiana 47905 TDS Preferred Shares 30,000 12.4% N/A *
</TABLE>
- ------------
* Less than 1%
(1) Based on the most recent Schedule 13G filed with the SEC (Amendment No. 1).
Such Schedule 13G reports that Franklin Mutual Advisers, Inc. exercised sole
voting and investment power with respect to all such shares. Such Schedule
13G is also filed on behalf of Franklin Resources, Inc., the parent holding
company of Franklin Mutual Advisers, Inc., and by Charles B. Johnson and
Rupert H. Johnson, Jr., principal shareholders of such parent holding
company.
29
<PAGE>
(2) Based upon a Schedule 13D (Amendment No. 7) filed with the SEC. Includes
shares held by the following affiliates: Gabelli Funds, Inc.--2,354,600
shares; ALCE Partners, L.P.--1,000 shares; GAMCO Investors, Inc.--4,455,355
shares; Gabelli International Limited--22,000 shares; Gabelli Multimedia
Partners, L.P.--1,200 shares; Gemini Capital Management Ltd.--20,000 shares;
Gabelli International II Limited--12,000 shares; MJG Associates,
Inc.--2,000; and Mario J. Gabelli--2,500 shares. In such Schedule 13D
filing, such group has reported sole voting power with respect to 6,870,655
shares and sole dispositive power with respect to 6,870,655 shares.
(3) Based on the most recent Schedule 13G (Amendment No. 13) filed with the SEC.
Includes shares held by the following affiliates: The Equitable Life
Assurance Society of the United States--2,930,000 shares; Alliance Capital
Management, L.P.--2,125,176 shares; Wood, Struthers & Winthrop Management
Corp.--27,700 shares; and Donaldson Lufkin & Jenrette Securities
Corporation--2,381 shares. In such Schedule 13G, Equitable reported sole
voting power with respect to 3,931,250 shares, shared voting power with
respect to 1,096,000 shares, sole dispositive power with respect to
5,082,876 shares and shared dispositive power with respect to 2,381 shares.
Alpha Assurance I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Uni Europe
Assurance Mutuelle and AXA, corporations organized under the laws of France,
are affiliates of The Equitable Companies, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation--Compensation Committee Interlocks and Insider
Participation."
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of shareholders intended for inclusion in the Company's proxy
statement and form of proxy relating to the 2000 Annual Meeting of Shareholders
must be received by the Company at its principal executive offices not later
than December 13, 1999.
Proposals by shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Company at its principal
executive offices not earlier than December 13, 1999 and not later than January
12, 2000 for consideration at the 2000 Annual Meeting of Shareholders, except
that if the date of the 2000 Annual Meeting of Shareholders has been changed by
more than 30 calendar days from the date of the 1999 Annual Meeting of
Shareholders, a shareholder proposal must be received by the Company not later
than the close of business on the tenth day following the date of public notice
of the date of the 2000 Annual Meeting of Shareholders.
30
<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 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, 1998, INCLUDING THE FINANCIAL STATEMENTS
AND THE SCHEDULES THERETO, UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER AS OF THE
RECORD DATE, AND WILL PROVIDE COPIES OF THE EXHIBITS TO THE REPORT UPON PAYMENT
OF A REASONABLE FEE THAT WILL NOT EXCEED THE COMPANY'S REASONABLE EXPENSES
INCURRED IN CONNECTION THEREWITH. REQUESTS FOR SUCH MATERIALS SHOULD BE DIRECTED
TO UNITED STATES CELLULAR CORPORATION, 8410 WEST BRYN MAWR AVENUE, SUITE 700,
CHICAGO, ILLINOIS 60631, ATTENTION: EXTERNAL REPORTING DEPARTMENT, TELEPHONE:
(773) 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
[SIGNATURE]
STEPHEN P. FITZELL
SECRETARY
ALL SHAREHOLDERS ARE URGED TO SIGN, DATE
AND MAIL THEIR PROXIES PROMPTLY.
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EXHIBIT A
UNITED STATES CELLULAR CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. ESTABLISHMENT; PURPOSE; SCOPE.
United States Cellular Corporation hereby establishes the United States
Cellular Corporation 1999 Employee Stock Purchase Plan to encourage and
facilitate the purchase of Common Shares of the Company by Employees of the
Company and certain other participating Employers. The Plan is intended to
provide a further incentive for such Employees to promote the best interests of
the Controlled Group and an additional opportunity to participate in its
economic progress. It is the intention of the Company to have the Plan qualify
as an "employee stock purchase plan" within the meaning of section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), and provisions of the
Plan shall be construed in a manner consistent with the Code.
SECTION 2. DEFINITIONS; CONSTRUCTION.
As used in this Plan, as of any time of reference, and unless the context
otherwise requires:
(a) "AFFILIATE" means any trade or business entity which is a member of
the same controlled group (as described in section 414(b) and (c) of the
Code) with the Company, any organization that is a member of an affiliated
service group (as described in section 414(m) of the Code) with the Company
or such a trade or business, or any other entity required to be aggregated
with the Company pursuant to final regulations under section 414(o) of the
Code.
(b) "BENEFITS REPRESENTATIVE" means the Benefits Department of TDS
located in Middleton, Wisconsin, or such other person or persons designated
by the Committee to assist the Committee with the administration of the
Plan.
(c) "BOARD" means the Board of Directors of the Company as from time to
time constituted.
(d) "COMMON SHARES" means shares of common stock of the Company, par
value $1.00 per share.
(e) "COMPANY" means United States Cellular Corporation, a Delaware
corporation, and any successor thereto.
(f) "COMPENSATION" means an employee's "Compensation" as defined in
Section 4.2(a) of the Telephone and Data Systems, Inc. Tax-Deferred Savings
Plan, as amended from time to time, determined without regard to the
limitation on compensation which is taken into account under such plan
pursuant to section 401(a)(17) of the Code.
(g) "CONTROLLED GROUP" means the Company, TDS and their Subsidiaries.
(h) "EFFECTIVE DATE" means July 1, 1999.
(i) "ELIGIBLE EMPLOYEE" means any Employee of an Employer, but
excluding any individual who is a leased employee of an Employer (within the
meaning of section 414(n) of the Code).
(j) "EMPLOYEE" means an individual whose relationship with an Employer
is, under common law, that of an employee.
(k) "EMPLOYEE STOCK PURCHASE ACCOUNT" means the account established
pursuant to Section 6(d) of the Plan to hold a Participant's payroll
deduction contributions.
(l) "EMPLOYER" means the Company and any corporation that is a member
of the Controlled Group that adopts the Plan as of the Effective Date, with
the prior approval of the Company, and each corporation that is or
subsequently becomes a member of the Controlled Group and adopts the Plan as
of any later date, with the prior approval of the Committee.
(m) "ENTRY DATE" means the Effective Date and the first day of each
subsequent calendar month.
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(n) "FAIR MARKET VALUE" means the closing price of a Common Share on the
American Stock Exchange for the date of determination, or if such date is
not a trading day, the closing price of such share on the American Stock
Exchange on the next preceding trading day.
(o) "NOMINEE" means the custodian designated by the Company for the
Stock Accounts established hereunder.
(p) "OFFERING PERIOD" means (i) the 18-month period commencing on the
Effective Date and ending on December 31, 2000 and (ii) the 24-month period
commencing on January 1, 2001 and ending on December 31, 2002; provided that
the date on which the Plan is terminated shall be treated as the last day of
an Offering Period, as described in Section 13.
(q) "PARTICIPANT" means any Eligible Employee of an Employer who meets
the eligibility requirements of Section 5(a), and has elected to participate
in the Plan as described in such Section. An individual shall cease to be a
Participant as of the date he or she terminates employment with his or her
Employer, for whatever reason; PROVIDED, HOWEVER, that the transfer of
employment from an Employer (or any other Affiliate) to an Affiliate shall
not be considered a termination of employment hereunder.
(r) "PLAN" means the United States Cellular Corporation 1999 Employee
Stock Purchase Plan herein set forth, and any amendment or supplement
thereto.
(s) "PURCHASE DATE" means the last day of each calendar quarter in an
Offering Period.
(t) "PURCHASE PERIOD" means a quarterly period ending on a Purchase
Date.
(u) "PURCHASE PRICE" means, with respect to a Purchase Date, 85 percent
of the Fair Market Value of a Common Share determined as of such date;
provided that if such price includes a fraction of a cent, the Purchase
Price shall be rounded up to the next whole cent.
(v) "SUBSIDIARY" means, with respect to an entity, a corporation (other
than the entity) in an unbroken chain of corporations beginning with the
entity if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(w) "TDS" means Telephone and Data Systems, Inc., a Delaware
corporation.
(x) "TERMINATION DATE" means the earliest of (i) December 31, 2002, (ii)
such earlier date on which the Board terminates the Plan and (iii) the
Purchase Date on which all shares available for issuance under the Plan
shall have been purchased by Participants under the Plan.
The masculine gender, when appearing in this Plan, shall be deemed to
include the feminine gender unless the context clearly indicates to the
contrary. The words "hereof," "herein," and "hereunder," and other similar
compounds of the word "here," shall mean and refer to the entire Plan and not to
any particular provision or section of this document.
SECTION 3. ADMINISTRATION.
This Plan shall be administered by the 1999 Employee Stock Purchase Plan
Committee (hereinafter referred to as the "Committee"), the members of which
shall be individuals selected by the Board who do not satisfy the eligibility
requirements of Section 5 hereunder. The Committee shall be comprised of LeRoy
T. Carlson, Jr. and Sandra L. Helton. Subject to the express provisions hereof,
the Committee shall have complete authority to interpret this Plan, to
prescribe, amend and rescind rules and regulations relating to it and to make
all other determinations necessary or advisable for the administration of this
Plan. The Committee's determinations on the matters referred to in this
paragraph shall be conclusive. No member of the Committee shall be personally
liable for any decision or determination made in good faith under the Plan.
SECTION 4. GRANT OF OPTION.
(a) For each Offering Period, each Eligible Employee shall be granted an
option as of the later of (i) the first day of the Offering Period and (ii)
the first Entry Date after the Eligible Employee has completed the
eligibility service requirement for participation herein described in
Section 5(a) hereof (such date referred to herein as the "grant date"), to
purchase a number of Common Shares equal to (x) $25,000,
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multiplied by (y) the number of full and partial calendar years remaining in
the Offering Period, divided by (z) the Fair Market Value of a Common Share
on the grant date.
(b) Notwithstanding the foregoing, no Eligible Employee shall be granted
any option for an Offering Period if, immediately after the grant of such
option, the Eligible Employee would own shares (including shares which may
be purchased under the Plan) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company, TDS or any of
their Subsidiaries actually issued and outstanding immediately after such
grant. For purposes of the foregoing sentence, the rules of stock
attribution set forth in section 424(d) of the Code shall apply in
determining share ownership.
SECTION 5. ELIGIBILITY AND PARTICIPATION.
(a) Any Eligible Employee of an Employer shall be eligible to
participate in the Plan as of the first Entry Date following such Eligible
Employee's satisfaction of the eligibility service requirement, or, if
later, the first Entry Date following the date on which the Eligible
Employee's Employer adopts the Plan. For purposes of this subsection, an
Eligible Employee shall have satisfied the eligibility service requirement
if he or she has completed at least three months of continuous service with
an Employer. For the sole purpose of calculating length of service under the
Plan, Employees shall be credited with service for an Employer, an Affiliate
and any other member of the Controlled Group (even though such service may
have been performed prior to the Company's acquisition of such member or
prior to the time such Affiliate became an Affiliate). No eligibility
provision hereof shall permit or deny participation in the Plan in a manner
contrary to the applicable requirements of the Code and the regulations
promulgated thereunder.
(b) As of the first Entry Date as of which an Eligible Employee is
eligible to participate in the Plan as described in subsection (a) of this
Section, or as of any date thereafter, an Eligible Employee may elect to
become a Participant in the Plan by making an election to enroll herein, in
the time and manner prescribed by the Committee. Such Eligible Employee's
election shall specify his or her chosen rate of payroll deduction
contributions described in Section 6, and shall authorize the Eligible
Employee's Employer to withhold a portion of his or her Compensation in the
amount of any such payroll deduction contributions. The Eligible Employee's
election shall become effective as soon as administratively practicable
after such election is received by the Benefits Representative or its
designee.
(c) If a Participant is transferred from one Employer to another
Employer, such transfer shall not terminate the Participant's participation
in the Plan. Such transferred Participant may continue to make payroll
deduction contributions under the Plan provided such Participant takes such
action as the Committee may require, if any, in the time and manner
prescribed by the Committee. If a Participant is transferred from an
Employer to an Affiliate that is not a participating Employer, such transfer
shall not terminate the Participant's participation in the Plan. However,
such Participant's payroll deduction contributions shall be suspended during
such period of employment with the Affiliate. If such Participant
subsequently is transferred from such Affiliate to a participating Employer,
such Participant can resume making payroll deduction contributions under the
Plan provided such Participant takes such action as the Committee may
require, if any, in the time and manner prescribed by the Committee.
(d) If an individual terminates employment with all Employers and
Affiliates so as to discontinue participation in the Plan, and such
individual is subsequently reemployed by an Employer, such individual shall
not be required again to satisfy the eligibility service requirement
described in subsection (a) of this Section, but rather shall be eligible to
recommence participation as of the first Entry Date after his or her date of
reemployment (or as soon as administratively practicable thereafter).
(e) Notwithstanding anything herein to the contrary, no member of the
Committee shall be eligible to participate in the Plan.
SECTION 6. PARTICIPANT CONTRIBUTIONS.
(a) Upon enrollment in the Plan a Participant shall elect, in the manner
described in Section 5(b), a rate of payroll deduction contributions in an
amount equal to a whole percentage not less than 1% and not more than 15% of
such Participant's Compensation for each payroll period, beginning as soon
as administratively practicable after the Entry Date as of which such
Participant commences participation in the Plan.
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(b) A Participant shall have the right from time to time to increase or
decrease his or her designated rate of payroll deductions under the Plan by
making an election authorizing such increase or decrease, in the time and
manner prescribed by the Committee. Such election shall specify a percentage
rate of payroll deduction contributions not less than 0% and not more than
15%. A Participant also may elect to withdraw from the Plan for an Offering
Period, as described in Section 8. A decrease of a payroll deduction
election hereunder to 0% shall not be treated as a withdrawal from the Plan
for this purpose. A Participant's election to change his or her rate of
payroll deductions hereunder shall become effective as soon as
administratively practicable after such election is received by the Benefits
Representative or its designee.
(c) A Participant's designated rate of payroll deductions as in effect
on the last day of an Offering Period shall continue in effect during the
subsequent Offering Period unless and until the Participant files a change
in the rate of payroll deductions as described in subsection (b) of this
Section, or elects to withdraw from participation for the Offering Period as
described in Section 8.
(d) All payroll deductions in the possession of the Company shall be
segregated from the general funds of the Company. The Committee shall cause
to be established a separate Employee Stock Purchase Account on behalf of
each Participant to which shall be credited his or her payroll deduction
contributions made under the Plan. Such accounts shall be solely for
accounting purposes, and there shall be no segregation of assets among the
separate accounts. Such accounts shall not be credited with interest or
other investment earnings. Each Employee Stock Purchase Account shall be
restricted to the uses provided herein until such time as the Company
applies the amounts credited thereto to purchase Common Shares under the
Plan on behalf of Participants.
SECTION 7. PURCHASE OF COMMON SHARES.
(a) Subject to a Participant's right of withdrawal from the Plan for an
Offering Period as described in Section 8 hereof, the balance of each
Participant's Employee Stock Purchase Account shall be applied on each
Purchase Date to purchase Common Shares by dividing the balance of such
account as of such date by the Purchase Price of a Common Share as of such
date. A Participant's purchase of Common Shares shall be rounded to the
nearest one-ten thousandth of a share (or such other fractional interest
prescribed by the Committee). The Participant's Employee Stock Purchase
Account shall be debited by the amounts applied to purchase such Common
Shares, and the Participant's Stock Account shall be credited with such
Common Shares.
(b) If the employment of an individual who is a Participant in the Plan
is transferred to an Affiliate that is not an Employer, then the
Participant's payroll deductions shall be suspended and the balance of the
Participant's Employee Stock Purchase Account shall be applied to purchase
Common Shares on the Purchase Date next occurring after the effective date
of such transfer, except to the extent the individual withdraws from the
Plan for the remainder of the Offering Period as described in Section 8.
Upon the Participant's transfer from such Affiliate back to an Employer, the
Participant may resume active participation in the Plan, in the time and
manner described in Section 5(c).
(c) Upon termination of employment because of the Participant's
retirement, the balance of the Participant's Employee Stock Purchase Account
shall be applied to purchase Common Shares for the Participant as of the
Purchase Date next occurring after the date of the Participant's termination
of employment, unless the Participant elects, in the manner prescribed by
the Committee, to withdraw from the Plan as described in Section 8 on or
before the earlier of the 15th day (or such shorter period prescribed by the
Committee) prior to the Purchase Date next occurring after the date of the
Participant's termination of employment.
(d) Upon termination of employment because of the Participant's death,
the balance of the Participant's Employee Stock Purchase Account, after
crediting such account with payroll deductions for any Compensation due and
owing, shall be applied to purchase Common Shares for the Participant's
estate as of the Purchase Date next occurring after the Participant's death,
unless the executor or administrator of the Participant's estate elects, in
the manner prescribed by the Committee, to withdraw from the Plan as
described in Section 8 on or before the 15th day (or such shorter period
prescribed by the Committee) prior to the Purchase Date next occurring after
the Participant's death.
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(e) Upon termination of employment for any reason other than transfer to
an Affiliate as described in subsection (b) of this Section, retirement as
described in subsection (c) of this Section, or death as described in
subsection (d) of this Section, the Participant's participation in the Plan
shall cease and the entire balance of the Participant's Employee Stock
Purchase Account shall be refunded to the Participant as soon as
administratively practicable thereafter.
(f) Notwithstanding any provision of this Plan to the contrary, a
Participant's right to purchase Common Shares during any calendar year shall
be limited to the extent necessary so that the Participant's right to
purchase Common Shares under this Plan and under all other employee stock
purchase plans maintained by members of the Controlled Group shall not
accrue at a rate in excess of $25,000 of the Fair Market Value of Common
Shares (determined on the grant date) for any calendar year determined in
accordance with section 423(b)(8) of the Code and regulations promulgated
thereunder. Any portion of the balance of a Participant's Employee Stock
Purchase Account in excess of the amount necessary to purchase shares on a
Purchase Date in accordance with the foregoing limitation shall remain
credited to such account and shall be available for purchase of Common
Shares as of the next Purchase Date; PROVIDED, HOWEVER, that if a balance
remains in a Participant's Employee Stock Purchase Account as of the last
Purchase Date in an Offering Period as a result of the application of the
foregoing limitation, such balance shall be refunded to the Participant as
soon as administratively practicable thereafter.
(g) Notwithstanding any provision of the Plan to the contrary, the
maximum number of shares which shall be available for purchase under the
Plan shall be 110,000 Common Shares, subject to adjustment as provided in
Section 11. The Common Shares to be sold under this Plan may, at the
election of the Company, be treasury shares, shares originally issued for
such purpose or shares purchased by the Company. In the event the amount of
shares to be purchased on behalf of all Participants collectively exceeds
the shares available for purchase under the Plan, the number of Common
Shares to be purchased by each Participant under this Section shall be
determined by multiplying the number of shares which the Participant elected
to purchase on such Purchase Date by the following fraction (or by applying
such other equitable adjustment on a uniform basis as may be determined by
the Committee):
Total number of shares available for purchase on Purchase Date
----------------------------------------------------------------------------
Total number of shares elected to be purchased by all Participants on
Purchase Date
Any portion of the balance of a Participant's Employee Stock Purchase Account
that is not applied to purchase Common Shares on a Purchase Date as a result of
the foregoing adjustment shall be refunded to the Participant as soon as
administratively practicable thereafter.
SECTION 8. PARTICIPANT'S RIGHT TO WITHDRAW FOR AN OFFERING PERIOD.
At any time during an Offering Period, but in no event later than 15 days
(or such shorter period prescribed by the Committee) prior to the last Purchase
Date in the Offering Period, a Participant may elect to withdraw from
participation in the Plan for such Offering Period. A withdrawal election shall
be made in the time and manner prescribed by the Committee. Upon a Participant's
election to withdraw from the Plan for an Offering Period pursuant to this
Section, the amount credited to the Participant's Employee Stock Purchase
Account shall be refunded to the Participant as soon as is administratively
practicable, and such Participant's participation in the Plan for the remainder
of such Offering Period shall be terminated. The Participant shall be eligible
to recommence participation in the Plan as of the next Offering Period.
SECTION 9. SUSPENSION ON ACCOUNT OF EMPLOYEE'S HARDSHIP WITHDRAWAL.
If a Participant makes a hardship withdrawal from the Telephone and Data
Systems, Inc. Tax-Deferred Savings Plan or any other plan with a cash or
deferred arrangement qualified under section 401(k) of the Code which plan is
sponsored, or participated in, by any Employer, such Participant shall be
suspended from making payroll deductions under this Plan for a period of twelve
months from the date of such hardship withdrawal. The balance of such
Participant's Employee Stock Purchase Account shall be applied to purchase
Common Shares on the Purchase Date next occurring after the effective date of
such hardship withdrawal, except to the extent the Participant withdraws from
the Plan for the remainder of the Offering Period as described in Section 8, or
discontinues participation in this Plan on account of the Participant's
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termination of employment. After the expiration of such twelve-month period, the
Participant may resume active participation in the Plan by electing to resume
making payroll deductions hereunder, in the time and manner prescribed by the
Committee, unless the Participant has withdrawn from participation in the Plan
as described in Section 8 for the Offering Period which contains the date of
expiration of such twelve-month period.
SECTION 10. STOCK ACCOUNT; ISSUANCE OF CERTIFICATES.
(a) A Stock Account shall be established on behalf of each Participant
for whom shares are purchased under this Plan (or, if so designated by the
Participant, on behalf of such Participant and one other person as such
Participant may designate as joint tenants with right of survivorship).
(b) As of each Purchase Date, the Common Shares purchased on a
Participant's behalf (including the right to fractional shares) shall be
credited to the Participant's Stock Account and shall be registered in the
name of the Nominee. All rights accruing to an owner of record of such
Common Shares, including dividend, voting and tendering rights, shall belong
to the Participant for whom such Stock Account is established (including any
joint tenant or, in the case of a deceased Participant, the Participant's
estate).
(c) The Nominee shall establish procedures pursuant to which a
Participant (including any joint tenant or, in the case of a deceased
Participant, the executor or administrator of the Participant's estate) can
elect that the shares credited to the Participant's Stock Account shall be
registered in the name of such Participant, or in the names of such
Participant and one other person as the Participant may designate as joint
tenants with right of survivorship, as the case may be. Such a joint tenancy
designation shall not apply to shares registered by the Participant's estate
after the Participant's death. As soon as practicable after such election,
certificates representing such shares shall be issued to the Participant
(including any joint tenant or, in the case of a deceased Participant, to
the Participant's estate). The Nominee shall also establish procedures
pursuant to which a Participant (or the executor or administrator of the
Participant's estate) can receive a cash payment in lieu of any fractional
shares credited to his or her Stock Account.
SECTION 11. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of the Plan shall not affect in any way the right or
power of the Company or its shareholders to make or authorize any
adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, preferred or prior
preference stock that affects any class of Common Shares or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
(b) If, during the term of the Plan, the Company shall effect (i) a
distribution or payment of a dividend on Common Shares in shares of the
Company, (ii) a subdivision of outstanding Common Shares by a stock split or
otherwise, (iii) a combination of the outstanding Common Shares into a
smaller number of shares by a reverse stock split or otherwise, or (iv) an
issuance by reclassification or other reorganization of Common Shares (other
than by merger or consolidation), then each Participant shall be entitled to
receive upon the purchase of shares pursuant to this Plan such shares of the
Company which the Participant would have owned or would have been entitled
to receive after the happening of such event had the Participant purchased
Common Shares pursuant to the Plan immediately prior to the happening of
such event. If any other event shall occur that, in the judgment of the
Board, necessitates adjusting the Purchase Price of Common Shares, the
number of Common Shares offered for purchase hereunder, or other terms of
the Plan, the Board shall take any action that in its judgment shall be
necessary to preserve each Participant's rights substantially proportionate
to the rights existing prior to such event. To the extent that any event or
action pursuant to this paragraph shall entitle Participants to purchase
additional Common Shares or other shares of the Company, the shares
available under this Plan shall be deemed to include such additional Common
Shares or such other shares of the Company.
(c) In the event of a merger of one or more corporations into the
Company, or a consolidation of the Company and one or more corporations in
which the Company shall be the surviving corporation, each Participant in
the Plan shall, at no additional cost, be entitled, upon his or her payment
for all or part of the
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Common Shares purchasable by the Participant under the Plan, to receive
(subject to any required action by shareholders) in lieu of the number of
Common Shares which he or she was entitled to purchase, the number and class
of shares of stock or other securities to which such holder would have been
entitled pursuant to the terms of the agreement of merger or consolidation
if, immediately prior to such merger or consolidation, such holder had been
the holder of record of the number of Common Shares equal to the number of
shares paid for by the Participant.
(d) If the Company is merged into or consolidated with another
corporation under circumstances in which the Company is not the surviving
corporation, or if the Company sells or otherwise disposes of substantially
all of its assets to another corporation during the term of the Plan: (i)
subject to the provisions of clause (ii) below, after the effective date of
such merger, consolidation or sale, as the case may be, each holder of a
right to purchase shall be entitled to receive, upon his or her payment for
all or part of the Common Shares purchasable by the Participant under the
Plan and receive in lieu of such shares, shares of such stock or other
securities as the holders of Common Shares received pursuant to the terms of
the merger, consolidation or sale; and (ii) all outstanding rights to
purchase may be canceled by the Board as of the effective date of any such
merger, consolidation or sale, provided that (A) notice of such cancellation
shall be given to each Participant and (B) each such Participant shall have
the right to purchase, during a 30-day period preceding the effective date
of such merger, consolidation or sale, all or any part of the shares
allocated to the Participant under the terms of the Plan.
(e) Except as hereinbefore expressly provided, the issue by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of Common Shares then available for purchase under the Plan.
SECTION 12. AMENDMENT OF THE PLAN.
The Board may at any time, and from time to time, amend the Plan in any
respect; PROVIDED, HOWEVER, that any amendment that changes the number of shares
to be reserved under the Plan (other than as provided in Section 11), or that
otherwise requires stockholder approval under applicable law, shall not be
effective unless stockholder approval is obtained in the time and manner
prescribed by law.
SECTION 13. TERMINATION OF THE PLAN.
While it is intended that the Plan remain in effect until the Termination
Date, the Board may terminate the Plan at any time in its discretion. Upon
termination of the Plan, the Committee shall terminate payroll deductions and
shall apply the balance of each Participant's Employee Stock Purchase Account to
purchase Common Shares as described in Section 7 as if such termination date
were a Purchase Date under the Plan and were the last day of an Offering Period.
Notwithstanding the foregoing, upon termination of the Plan, a Participant may
elect, in the time and manner prescribed by the Committee, to withdraw from
participation in the Plan. As soon as administratively practicable after the
termination of the Plan, the Committee shall refund to the Participant any
amount in his or her Employee Stock Purchase Account, if any, that has not been
applied to purchase Common Shares as a result of the Participant's election to
withdraw from the Plan or as a result of the application of any limitation
hereunder.
Notwithstanding any provision in the Plan to the contrary, the Plan shall
automatically terminate as of the Purchase Date on which all Common Shares
available for purchase under the Plan shall have been purchased by Participants
under the Plan.
SECTION 14. MISCELLANEOUS.
(a) The Plan is subject to the approval of a majority of the votes cast
on the matter by the stockholders of the Company within twelve months before
or after its adoption by the Board.
(b) The right to purchase Common Shares under this Plan shall not be
transferable by any Participant other than by will or the laws of descent
and distribution, and must be exercisable, during his or her lifetime, only
by the Participant.
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(c) No Participant shall have rights or privileges of a stockholder of
the Company with respect to shares purchasable under this Plan unless and
until the Participant shall become the holder of record of one or more
Common Shares.
(d) The Company is not obligated to repurchase any Common Shares
acquired under the Plan.
(e) The sale and delivery of Common Shares under the Plan shall be in
compliance with relevant statutes and regulations of governmental
authorities, including state securities laws and regulations, and with the
regulations of applicable stock exchanges.
(f) This Plan and all determinations made hereunder and action taken
pursuant hereto shall be governed by the laws of the State of Illinois and
construed in accordance therewith.
(g) Each Employer, by adopting the Plan, appoints the Company and the
Board as its agents to exercise on its behalf all of the powers and
authorities hereby conferred upon the Company and the Board by the terms of
the Plan, including, but not by way of limitation, the power to amend and
terminate the Plan. The authority of the Company and the Board to act as
such agents shall continue for as long as necessary to carry out the
purposes of the Plan.
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PROXY PROXY
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 11, 1999
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 1999 Annual Meeting of
the Shareholders of United States Cellular Corporation, to be held on
Tuesday, May 11, 1999, or at any adjournment thereof, as set forth in the
accompanying Notice of Annual Meeting and Proxy Statement, receipt of which
is hereby acknowledged, as designated on the reverse side hereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE IN PROPOSAL 1
AND "FOR" PROPOSALS 2 AND 3.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE NOMINEE IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3. IF THE NOMINEE
IS UNABLE TO SERVE OR WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY SHALL
HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE NOMINEE DESIGNATED BY
THE BOARD OF DIRECTORS (UNLESS AUTHORITY TO VOTE FOR THE NOMINEE HAS BEEN
WITHHELD).
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
FOLD AND DETACH HERE
Whether or not you are able to attend the Annual Meeting of
Shareholders, it is important that your shares be represented. Accordingly,
please complete and sign the proxy card printed above, tear at the
perforation, and mail the card in the enclosed postage paid envelope
addressed to United States Cellular Corporation, c/o Harris Trust and
Savings Bank.
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UNITED STATES CELLULAR CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE IN PROPOSAL 1 AND
"FOR" PROPOSALS 2 AND 3.
For Withhold
1. ELECTION OF CLASS III DIRECTOR // //
(NOMINEE: J. S. CROWLEY)
For Against Abstain
2. 1999 EMPLOYEE STOCK PURCHASE PLAN // // //
For Against Abstain
3. RATIFY ACCOUNTANTS FOR 1999 // // //
4. In accordance with their discretion, to vote upon all other matters that
may properly come before said Annual Meeting and any adjournment thereof,
including matters incidental to the conduct of the meeting.
Dated: , 1999
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Please Sign Here
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NOTE: Please date this proxy and sign it exactly as your name or names
appear. All joint owners of shares should sign. State full title when
signing as executor, administrator, trustee, guardian, etc. Please
return signed proxy in the enclosed envelope.
FOLD AND DETACH HERE
Whether or not you are able to attend the Annual Meeting of
Shareholders, it is important that your shares be represented.
Accordingly, please complete and sign the proxy card printed above,
tear at the perforation, and mail the card in the enclosed postage
paid envelope addressed to United States Cellular Corporation,
c/o Harris Trust and Savings Bank.
