<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D) (4) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------
AMERICAN PAGING, INC.
(NAME OF SUBJECT COMPANY)
AMERICAN PAGING, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON SHARES, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
02882K10
----------
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------------
Terrence T. Sullivan (612) 623-1027
American Paging, Inc.
1300 Godward Street Northeast, Suite 3100, Minneapolis, Minnesota 55413-1767
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------------
WITH A COPY TO:
Richard L. Williams III Michael G. Hron
Vedder Price Kaufman & Kammholz Sidley & Austin
222 N. LaSalle St. One First National Plaza
Chicago, Illinois 60610 Chicago, Illinois 60603
(312) 609-7588 (312) 853-7000
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is American Paging, Inc. (the "Company").
The address of the principal executive offices of the Company is 1300 Godward
Street NE, Suite 3100, Minneapolis, Minnesota 55413-1767. The title of the class
of equity securities to which this Statement relates is the Company's common
shares, par value $1.00 per share (the "Common Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This Statement relates to the tender offer by API Merger Corp., a Delaware
corporation (the "Purchaser") and a direct, wholly owned subsidiary of Telephone
and Data Systems, Inc., an Iowa corporation ("TDS"), disclosed in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated February 18, 1998, to
purchase all of the issued and outstanding Common Shares held by the Company's
shareholders other than TDS, Purchaser or their affiliates at $2.50 per Common
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in Purchaser's Offer to Purchase dated
February 18, 1998 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto
constitute the "Offer"), copies of which are filed respectively as Exhibits
(a)(1) and (a)(2) of this Schedule 14D-9 and are incorporated herein by
reference. As set forth in the Schedule 14D-1, the address of the principal
executive offices of each of Purchaser and TDS is 30 N. LaSalle Street, Suite
4000, Chicago, Illinois 60602.
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated as of February 11, 1998, among TDS, Purchaser and the Company (the
"Merger Agreement"). A copy of the Merger Agreement is filed as Exhibit (c)(1)
to this Schedule 14D-9 and is incorporated herein by reference. Among other
things, the Merger Agreement provides that as promptly as practicable following
the purchase of Common Shares pursuant to the Offer and the satisfaction or
waiver of the other conditions set forth in the Merger Agreement, in accordance
with the General Corporation Law of the State of Delaware, Purchaser will be
merged with and into the Company (the "Merger") with the Company continuing as
the surviving corporation. At the effective time of the Merger (the "Effective
Time"), subject to the terms and conditions of the Merger Agreement, each Common
Share outstanding immediately prior to the Effective Time (other than Common
Shares held in the treasury of the Company, Common Shares owned by TDS or their
subsidiaries or Common Shares as to which appraisal rights have been exercised)
shall be converted into the right to receive the price per Common Share paid in
the Offer in cash, without interest (the "Merger Consideration").
Upon consummation of such merger, TDS and TSR Paging, Inc., a Delaware
corporation ("TSR"), in accordance with the terms and conditions of an Asset
Contribution Agreement, dated as of December 22, 1997 (the "Asset Contribution
Agreement"), among TDS, TSR and TSR Wireless LLC, a Delaware limited liability
company ("TSR Wireless"), will combine their respective paging businesses, and
TDS will cause the Company to contribute substantially all of the assets and
certain, limited, liabilities of the Company, and TSR Paging will contribute all
of its assets and liabilities into TSR Wireless. TSR Wireless will not assume
debt owed by the Company to TDS pursuant to the Revolving Credit Agreement,
dated as of January 1, 1994, as amended and supplemented to date (approximately
$185 million at January 31, 1998). The Company, which would then be a wholly
owned subsidiary of TDS, will have a 30% interest and TSR Paging will have a 70%
interest in TSR Wireless, subject to adjustment pursuant to the terms of the
Asset Contribution Agreement. A copy of the Asset Contribution Agreement is
filed as Exhibit(c)(2) to this Schedule 14D-9.
Concurrently with the filing of this Schedule 14D-9, Purchaser, TDS and the
Company are jointly filing with the Securities and Exchange Commission a
Transaction Statement on Schedule 13E-3, dated February 18, 1998.
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ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above. All information contained in this
Statement or incorporated herein by reference concerning Purchaser or TDS, or
actions or events with respect to any of them, was provided by Purchaser or TDS,
respectively, and the Company takes no responsibility for such information.
(b) The information contained under the caption "INTRODUCTION", "SPECIAL
FACTORS-- Background of the Offer", "SPECIAL FACTORS--Purpose and Structure of
the Offer and the Merger; Reasons of TDS for the Offer and the Merger", "SPECIAL
FACTORS--The Merger Agreement", "SPECIAL FACTORS--Interests of Certain Persons
in the Offer and the Merger", "SPECIAL FACTORS--Beneficial Ownership of
Securities of the Company", SPECIAL FACTORS--Related Party Transactions", "THE
TENDER OFFER--Certain Information Concerning the Company" and "THE TENDER
OFFER--Certain Information Concerning TDS and Purchaser" of the Offer to
Purchase is incorporated herein by reference.
Reference is also made to the information contained under the captions
"Summary Compensation Table", "General Information Regarding Options and SARs",
"Compensation of Directors" and "Executive Compensation Report" on pages 11-17
of the Company's proxy statement relating to the annual meeting of the Company's
shareholders held on May 5, 1997, a copy of which pages is included as Exhibit
(c)(13) to this Schedule 14D-9 and is incorporated by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a)-(b) THE BOARD OF DIRECTORS, BASED IN PART ON THE UNANIMOUS
RECOMMENDATION OF THE SPECIAL COMMITTEE (COMPRISED OF DIRECTORS WHO ARE NOT
OFFICERS OR EMPLOYEES OF THE COMPANY NOR OFFICERS OR DIRECTORS OF TDS OR ITS
AFFILIATES), HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, DETERMINED THAT EACH
OF THE OFFER AND MERGER IS FAIR TO THE COMPANY'S PUBLIC SHAREHOLDERS AND
RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER. The information contained under the captions "INTRODUCTION",
"SPECIAL FACTORS--Background of the Offer", "SPECIAL FACTORS--Recommendation of
the Special Committee and the Company Board; Fairness of the Offer and the
Merger" and "SPECIAL FACTORS--Opinion of the Financial Advisor to the Special
Committee" of the Offer to Purchase, describing the nature and the reasons for
the recommendation of the Special Committee and the Board with respect to the
Offer, is incorporated herein by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information contained under the caption "SPECIAL FACTORS--Background of
the Offer" and "SPECIAL FACTORS--Opinion of Financial Advisor to the Special
Committee" of the Offer to Purchase, to the extent describing the retention of
PaineWebber Incorporated as financial advisor to the Special Committee and the
compensation to be paid to PaineWebber in such capacity, is incorporated herein
by reference.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any person to make solicitations or recommendations to
shareholders with respect to the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth under the caption "SPECIAL FACTORS--Interests of
Certain Persons in the Offer and the Merger", "THE TENDER OFFER--Certain
Information Concerning the Company", "THE TENDER OFFER--Certain information
Concerning TDS and the Purchaser" of the Offer to Purchase, which is
incorporated herein by reference, no transactions in Common Shares have been
3
<PAGE>
effected during the past 60 days by the Company, or, to the best knowledge of
the Company, by any of its executive officers, directors or affiliates.
(b) The information set forth under the captions "INTRODUCTION" and "SPECIAL
FACTORS-- Interests of Certain Persons in the Offer and the Merger" of the Offer
to Purchase describing the present intent, to the extent known by the Company,
of the executive officers, directors, affiliates or subsidiaries of the Company
to tender pursuant to the Offer any Common Shares which are held of record or
beneficially owned by such person, is incorporated herein reference.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a)-(b) Except as described in Items 3 and 4 above, including as set forth
in the Offer to Purchase, to the knowledge of the Company no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to or would result in (i) any extraordinary transaction, such as a
merger or reorganization, involving the Company or any affiliate or subsidiary
of the Company, (ii) a purchase, sale or transfer of a material amount of assets
by the Company or any subsidiary of the Company, (iii) a tender offer for or
other acquisition of securities by or of the Company or (iv) any material change
in the present capitalization or dividend policy of the Company.
(b) Except as set forth under the captions "SPECIAL FACTORS--Background of
the Offer", "SPECIAL FACTORS--The Merger Agreement", "SPECIAL FACTORS--Interests
of Certain Persons in the Offer and the Merger" and "THE TENDER OFFER--Financing
of the Offer and the Merger" of the Offer to Purchase, which are incorporated
herein by reference, to the best of the Company's knowledge, no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to or would result in (i) an extraordinary transaction such as a merger
or reorganization, involving the Company or any subsidiary of the Company, (ii)
a purchase, sale or transfer of a material subsidiary of the Company, (iii) a
tender offer or other acquisition of securities by or of the Company, or (iv)
any material change in the present capitalization or dividend policy of the
Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Not Applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated February 18, 1998.*
(a)(2) Form of Letter of Transmittal.*
(a)(3) Letter to Company Shareholders, dated February 18, 1998.*
(a)(4) Opinion of PaineWebber Incorporated, dated February 10, 1998
(attached as Schedule III to Exhibit (a)(1)).*
(a)(5) Summary Advertisement as published in the Wall Street Journal on
February 18, 1998.*
(a)(6) Form of Joint Press Release dated February 11, 1998 issued by the
Company and TDS.*
(a)(7) Form of Joint Press Release dated February 18, 1998 issued by the
Company and TDS.*
(c)(1) Agreement and Plan of Merger, dated as of February 11, among TDS,
Purchaser and the Company.*
(c)(2) Asset Contribution Agreement, dated as of December 22, 1997, among
TDS, TSR Paging, Inc. and TSR Wireless LLC, is hereby incorporated herein by
reference to Exhibit 2.1 of the Schedule 13-D relating to the Company filed by
TDS on December 23, 1998.
4
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(c)(3) Option Agreement, dated as of December 22, 1997, between TDS and TSR
Paging, Inc., is hereby incorporated herein by reference to Exhibit 2.2 of the
Schedule 13-D relating to the Company filed by TDS on December 23, 1998.
(c)(4) Restated Certificate of Incorporation, as amended, is hereby
incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
(c)(5) Voting Trust Agreement, dated as of June 30, 1989, with respect to
Common Shares of TDS, is hereby incorporated by reference to Exhibit 9.1(a),
Exhibit 9.1(b) and Exhibit 9.1(c) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
(c)(6) Exchange Agreement, between the Company and TDS, is hereby
incorporated by reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-1 (Registration No. 33-72707).
(c)(7) Revolving Credit Agreement, between the Company and TDS, is hereby
incorporated by reference to Exhibit 10.2 to the Company's Registration
Statement on Form S-1 (Registration No. 33-72707).
(c)(8) Amendment to Revolving Credit Agreement, between the Company and
TDS, dated March 5, 1997 and effective January 1, 1997.*
(c)(9) Amendment to Revolving Credit Agreement, between the Company and
TDS, dated January 13, 1998.*
(c)(10) Intercompany Agreement, between the Company and TDS, is hereby
incorporated by reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-1 (Registration No. 33-72707).
(c)(11) Registration Rights Agreement, between the Company and TDS, as
amended, is hereby incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-1 (Registration No. 33-72707).
(c)(12) Employee Benefit Plans Agreement, between the Company and TDS, is
hereby incorporated by reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-1 (Registration No. 33-72707).
(c)(13) Pages 11 through 17 of the Company's Proxy Statement dated April 7,
1997, relating to the Company's 1997 Annual Meeting of Shareholders.
- ------------------------
* Incorporated by reference to the Statement in Schedule 14D-1 filed by
Purchaser and TDS on February 18, 1998.
5
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
Dated: February 18, 1998 AMERICAN PAGING, INC.
By: /s/ TERRENCE T. SULLIVAN
------------------------------------------
Name: Terrence T. Sullivan
Title: PRESIDENT
</TABLE>
Signature Page for Schedule 14D-9
6
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<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
(c)(13) Pages 11 through 17 of the Company's Proxy Statement dated April 7, 1997, relating to the Company's
1997 Annual Meeting of Shareholders.
</TABLE>
7
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EXHIBIT (C)(13)
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the President
and Chief Executive Officer of the Company and the other named executive
officers for services rendered during the years ended December 31, 1996, 1995
and 1994.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
AWARDS
----------------- PAYOUTS
ANNUAL COMPENSATION(2) SECURITIES -----------
--------------------------------- UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY(3) BONUS(4) OPTIONS/SARS(5) PAYOUTS(6) COMPENSATION(7)
- ------------------------------ --------- --------- ----------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Terrence T. Sullivan (8) 1996 $ 140,243 $ 46,800 12,000 $ -- $ 1,270
President and Chief 1995 -- -- -- -- --
Executive Officer 1994 -- -- -- -- --
John R. Schaaf (9) 1996 $ 266,838 $ 8,175 -- $ -- $ 494
Former President and 1995 218,000 26,596 -- 700,436 8,501
Chief Executive Officer 1994 185,000 32,749 50,000 -- 6,918
Robert A. McClure (10) 1996 $ 131,229 $ -- -- $ -- $ 8,654
Vice President-Operations 1995 125,000 16,250 -- 79,341 8,639
1994 115,000 14,532 20,000 -- 8,581
Malcolm T. Humphrey (11) 1996 $ 119,792 $ 28,800 -- $ -- $ 11,159
Vice President-Information 1995 57,500 15,573 12,000 -- 84
Technology and Chief 1994 -- -- -- -- --
Information Officer
George H. Orr 1996 $ 104,792 $ 6,300 -- $ -- $ 9,612
Vice President-Human 1995 100,000 14,000 -- 113,014 9,024
Resources 1994 90,000 11,529 20,000 -- 8,434
Larry A. Piumbroeck 1996 $ 94,059 $ 22,620 7,500 $ -- $ 7,757
Vice President- 1995 89,675 8,968 -- -- 1,303
Development 1994 65,914 9,375 7,500 -- 1,059
and Engineering
</TABLE>
- ------------------------------
(1) Mr. LeRoy T. Carlson, Jr., Chairman of the Company, receives no
compensation directly from the Company. Mr. Carlson is compensated by TDS
in connection with his services for TDS and all TDS subsidiaries. Although
TDS allocates part of Mr. Carlson's salary and bonus to the Company
pursuant to the Intercompany Agreement described below, such allocation in
the aggregate was less than $100,000 for 1996, 1995 and 1994.
(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. See "Executive
Officer Compensation Report."
(5) Represents the number of Common Shares subject to stock options awarded
during the fiscal year identified. No stock appreciation rights ("SARs")
were awarded, either on a stand-alone basis or in tandem with options,
during any of the identified fiscal years.
(6) Represents payouts under the Company's Long-Term Incentive Plan. Pursuant
to such plan, senior managers of the Company, including certain executive
officers named in the Summary Compensation Table, received appreciation
rights ("ARs") as of January 1, 1988 (or subsequently if the date of hire
was after January 1, 1988). The ARs allowed grantees to receive an amount,
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in TDS Common Shares or cash, equivalent to the difference between the
estimated market value of the ARs on the grant date and the exercise date.
The estimated value of the ARs at the grant date and exercise date was
based on a weighted formula of revenue, operating cash flow and the number
of pagers in service. The ARs became fully vested on December 31, 1994, and
all ARs were exercised in 1995. All ARs under the plan were settled in cash
and the plan expired as of December 31, 1994.
(7) Includes contributions for the benefit of the named executive officer under
the TDS Tax-Deferred Savings Plan ("TDSP") and the Company's Secure and
Future Earnings Plan ("SAFE"), and the cost of insurance premiums paid
during the covered fiscal year with respect to term life insurance for the
benefit of the named executive ("Life Insurance"), as indicated below for
1996:
<TABLE>
<CAPTION>
TERRENCE T. JOHN R. ROBERT A. MALCOLM T. GEORGE H. LARRY A.
SULLIVAN SCHAAF MCCLURE HUMPHREY ORR PIUMBROECK
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
TDSP................................ $ 975 $ -- $ -- $ 1,200 $ 2,376 $ 1,953
SAFE................................ -- -- 8,355 9,687 6,998 5,589
Life Insurance...................... 295 494 299 272 238 215
----------- ----- ----------- ----------- ----------- ------
$ 1,270 $ 494 $ 8,654 $ 11,159 $ 9,612 $ 7,757
----------- ----- ----------- ----------- ----------- ------
----------- ----- ----------- ----------- ----------- ------
</TABLE>
(8) Mr. Sullivan was appointed Vice President-Finance, Chief Financial Officer
and Treasurer of the Company in January 1996, and was appointed President
and Chief Executive Officer of the Company upon the resignation of Mr. John
R. Schaaf in September 1996. See "Compensation and Severance Arrangement
with Terrence T. Sullivan" below.
(9) Mr. Schaaf resigned as President of the Company in September 1996. See
"Severance Arrangement with John R. Schaaf" below.
(10) Mr. McClure resigned as Vice President-Operations of the Company in January
1997.
(11) Mr. Humphrey joined the Company in June 1995.
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 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE
AT
ASSUMED
ANNUAL
RATES
OF STOCK
PRICE
APPRECIATION
NUMBER OF FOR
SECURITIES % OF TOTAL OPTION
UNDERLYING OPTIONS/SARS TERMS(5)
OPTIONS/SARS GRANTED TO EXERCISE MARKET EXPIRATION ---------
NAME(1) GRANTED(2) EMPLOYEES(3) PRICE PRICE(4) DATE 5%
- ------------------------------------------ ------------- ------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Terrence T. Sullivan (6).................. 12,000 36.4% $ 6.62 $ 6.62 2/16/02 $ 27,319
Larry A. Piumbroeck (7)................... 7,500 22.7% $ 6.74 $ 6.74 2/16/02 $ 16,862
<CAPTION>
NAME(1) 10%
- ------------------------------------------ ---------
<S> <C>
Terrence T. Sullivan (6).................. $ 62,073
Larry A. Piumbroeck (7)................... $ 38,153
</TABLE>
- ------------------------------
(1) Mr. LeRoy T. Carlson, Jr., does not receive options or SARs from APP. Mr.
Carlson receives long-term compensation from TDS, but this is not charged
to APP by TDS.
(2) Represents the number of APP Common Shares underlying options/SARs which
were awarded for the named executive during the fiscal year.
(3) Represents the percent of total APP Common 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) On January 26, 1996, Mr. Sullivan was granted an option to purchase 12,000
Common Shares pursuant to the APP 1994 Long-Term Incentive Plan. The
exercise price was equal to the fair market value of the Common Shares on
the date of grant. The option becomes exercisable with respect to 4,000
Common Shares on February 16, 1997, February 16, 1998 and February 16,
1999. See also "Compensation and Severance Arrangement with Terrence T.
Sullivan" below.
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<PAGE>
(7) On April 1, 1996, Mr. Piumbroeck was granted options to purchase 7,500
Common Shares pursuant to the APP 1994 Long-Term Incentive Plan. The
exercise price was equal to the fair market value of the Common Shares on
the date of grant. The option becomes exercisable with respect to 2,500
Common Shares on February 16, 1997, February 16, 1998 and February 16,
1999.
AGGREGATED DECEMBER 31, 1996 OPTION/SAR VALUE(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-
UNEXERCISED OPTIONS/SARS MONEY OPTIONS/SARS AT
AT DECEMBER 31, 1996(2) DECEMBER 31, 1996(3)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Terrence T. Sullivan (4).................................. -- 12,000 -- --
John R. Schaaf (5)........................................ 20,000 -- -- --
Robert A. McClure (6)..................................... 8,000 12,000 -- --
Malcolm T. Humphrey (7)................................... 3,000 9,000 -- --
George H. Orr (8)......................................... 8,000 12,000 -- --
Larry A. Piumbroeck (9)................................... 3,000 4,500 -- --
(10).................................... -- 7,500 -- --
</TABLE>
- ------------------------------
(1) No options were exercised in 1996.
(2) Represents number of shares subject to free-standing options as indicated,
as of December 31, 1996.
(3) The closing price of the Common Shares on December 31, 1996 was $4.6875.
Since the exercise price for all specified options is in excess of $4.6875,
no options were in-the-money at December 31, 1996.
(4) Such options were granted as of January 26, 1996 at an exercise price of
$6.62 per share. The option becomes exercisable with respect to 4,000
Common Shares on February 16, 1997, February 16, 1998 and February 16,
1999, and expires on February 16, 2002. See also "Compensation and
Severance Arrangement with Terrence T. Sullivan" below.
(5) Mr. Schaaf resigned as President of the Company in September 1996.
(6) Mr. McClure resigned as Vice President-Operations of the Company in January
1997.
(7) Such options were granted as of June 19, 1995 at an exercise price of $6.75
per share. The option becomes exercisable with respect to 3,000 shares on
each of February 16, 1996, February 16, 1997, February 16, 1998 and
February 16, 1999, and expires on February 16, 2002.
(8) Such options were granted in connection with the Company's initial public
offering ("IPO") on February 16, 1994 at the IPO price of $14.00 per share.
The option becomes exercisable with respect to 4,000 shares on February 16,
1995 and on each anniversary thereof through February 16, 1999, and expires
on February 16, 2002.
(9) Such options were granted in connection with the Company's IPO on February
16, 1994 at the IPO price of $14.00 per share. The option becomes
exercisable with respect to 1,500 shares on February 16, 1995 and on each
anniversary thereof through February 16, 1999, and expires on February 16,
2002.
(10) Such options were granted as of April 1, 1996 at an exercise price of $6.74
per share. The option becomes exercisable with respect to 2,500 shares on
February 16, 1997, February 16, 1998 and February 16, 1999 and expires on
February 16, 2002.
COMPENSATION AND SEVERANCE ARRANGEMENT WITH TERRENCE T. SULLIVAN
Pursuant to a compensation and severance arrangement approved by the
Chairman of the Company, Mr. Terrence T. Sullivan is entitled to, among other
things, (i) a salary of $195,000 effective September 1, 1996, (ii) a target
bonus opportunity of 15% of such base salary in 1996, (iii) a target bonus
percentage of 40% for 1997 and (iv) a severance allowance of up to one year and
six months of his base salary in the event that a change-in-control of the
Company results in the constructive termination of Mr. Sullivan. In addition,
Mr. Sullivan will be awarded an additional 16,000 automatic stock options for
the remaining years of the current APP Stock Option Program starting in 1997
(for a total of 20,000 stock option shares per year), and an additional
performance-based stock option award of 16,000 stock option shares at target
performance for the remaining years of the current Stock Option Program starting
in 1997 (for a total of
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20,000 stock option shares per year at target performance). Mr. Sullivan will
also receive an additional 6,000 automatic stock options for functioning as
APP's CEO for the last four months of 1996, and an additional performance-based
stock option award for 1996, which at target performance would generate 6,000
stock option shares. Mr. Sullivan will also have a 670 target stock option
opportunity for company performance over the final four months of 1996. How many
stock option shares are earned under this stock option opportunity will depend
on how well APP performs in meeting the target/performance measures to be
approved by the Chairman. This new Stock Option Program is subject to approval
by APP's two outside directors who are members of APP's Stock Option Committee.
SEVERANCE ARRANGEMENT WITH JOHN R. SCHAAF
Pursuant to a severance arrangement approved by the Chairman of the Company,
Mr. Schaaf received a severance package which includes among other things, (i)
the equivalent of 15 months of full pay ($18,167 per month), (ii) up to an
additional three months of full pay ($18,167 per month) if Mr. Schaaf has not
accepted a full-time position after such 15-month period, (iii) an additional
bonus of $10,900 for 1995; (iv) a bonus of $8,175 for 1996; and (v) the payment
by the Company of up to $54,500 of outplacement assistance. In consideration
therefor, Mr. Schaaf agreed, among other things, to provide consulting services
to the Company for up to four full days per month through March 15, 1998 or
until he secures another full-time position, whichever comes first, and to not
compete with the Company for the two-year period ending September 15, 1998.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company, TDS or their subsidiaries or
affiliates receive an annual payment of $12,000 plus $1,000 for attendance at
each regularly scheduled or special meeting of the Board of Directors and $500
for attendance at each Audit Committee meeting. All directors are reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors and meetings of committees thereof.
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 the Stock Option Compensation
Committee, which approves long-term compensation under the Company's 1994
Long-Term Incentive Plan.
The Chairman, who is also the President 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 of TDS, the Chairman of the Company
represents the controlling shareholder of the Company.
The Stock Option Compensation Committee of the Company consists of Edwin L.
Russell and Jean Burhardt Keffeler. The principal functions of the Stock Option
Compensation Committee are to consider and approve long-term compensation under
the Company's 1994 Long-Term Incentive Plan. The Company's Stock Option
Compensation Committee is composed of members of the Board of Directors who are
not officers or employees of TDS or the Company or their subsidiaries, and who
are not eligible to receive options under the Company's 1994 Long-Term Incentive
Plan.
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
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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 currently provided through the Company's 1994
Long-Term Incentive Plan.
The process of determining base salary begins with establishing an
appropriate salary range for each executive 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 wireless messaging
industry. These other companies may include the companies included in the peer
group index described below under "Performance Graph," as well as other
companies to the extent considered appropriate in the judgment of the Chairman.
No written or formal list of specific companies is prepared. Instead, the Vice
President-Human Resources of TDS and the President of the Company 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 Vice President-Human Resources of TDS and the President of the Company with
respect to all officers other than the President. The base salary of each
officer is set within a range considered to be appropriate in the judgment of
the Chairman based on an assessment of the particular responsibilities and
performance of such officer taking into account the performance of the Company
(as discussed below), other comparable companies, the wireless messaging
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-Human Resources of
TDS and the President of the Company, 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 who are employees other than the
President, the President evaluates the information in terms of the personal
objectives given by the President or other direct supervisor to such executive
officer for the performance appraisal period. The President also makes an
assessment of how well the Company did as a whole during the year and the extent
to which the 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 Vice President-Human Resources of TDS and the President of the Company that
determines an executive's base salary based on the total mix of information
rather than on relationships to any specific measures of performance.
With respect to each executive officer other than the President, the Vice
President-Human Resources of TDS and the President of the Company make
recommendations regarding the base salary to the Chairman, who represents the
controlling shareholder and who exercises final approval.
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In addition, the executive officers participate in a bonus program. The
objectives of the 1996 Bonus Program for the Senior Management Staff of American
Paging (the "1996 Bonus Plan") were: (i) to provide suitable incentives for the
senior corporate staff of the Company to extend their best efforts to achieve
superior results in relation to key performance targets, (ii) to suitably reward
the Company's senior corporate staff in relation to their success in meeting and
exceeding these performance targets and (iii) to help the Company attract and
retain talented management personnel in positions of critical importance to the
success of the Company.
For target performance, the 1996 Bonus Plan was designed to generate a 1996
bonus equal to 25% of the executive's base salary (30% for the President). Under
the 1996 Bonus Plan, the size of the actual bonus is increased or decreased
depending on the Company's 1996 achievements with respect to the performance
categories. No bonus is paid under such plan if the minimum performance level is
not achieved in at least one of these categories. The maximum bonus that could
be generated, which would require exceptional performance in all areas, would
equal 50% of the executive's base salary. The performance categories for the
bonus and the weight assigned to each category were: operating cash flow
(EBITDA) (45%), service revenue (40%), and individual objectives (15%). The
minimum performance levels for operating cash flow (EBITDA) and service revenue
were not met in 1996.
In the fourth quarter of 1996, the Chairman approved a 1996 Special Bonus
Opportunity Program which provided an opportunity for the President and the
executive team to earn a special bonus depending upon the achievement of
specific individual projects. Based on the achievement of such projects, the
Chairman approved bonuses as indicated above in the Summary Compensation Table
for certain executive officers for 1996.
Financial personnel prepare calculations for the President and Chairman
which define whether the performance categories discussed above have been met,
exceeded or not met in any fiscal year. The Chairman also has presented to him,
and has access to, numerous performance measures and financial statistics
prepared by Company financial personnel. This financial information includes the
audited financial statements of the Company, as well as internal financial
statements such as budgets and their results, operating statistics and various
analyses. The Chairman will not be limited in his analysis to such information,
and may consider other factual or subjective factors as he deems appropriate in
his compensation decisions.
The base salary and bonus ranges and actual compensation of the President
(principal executive officer) of the Company are determined in a manner similar
to the foregoing, but with some differences. In addition to the factors
described above for all executive officers in general, the Chairman considers
compensation paid to chief executive officers of other comparable companies,
including those which are divisions or subsidiaries of parent companies. No
written or formal list of specific companies is prepared. Instead, the Chairman
is provided with various sources of information about executive compensation at
other companies by the Vice President-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 wireless messaging 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. As discussed above, the Chairman approved a base salary of $195,000
for the President effective September 1, 1996. 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-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
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considers relevant in making his compensation decisions for the President. 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
decisions with respect to executive compensation 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.
The President and each of the other executive officers named in the Summary
Compensation Table are also eligible to participate in the Company's 1994
Long-Term Incentive Plan. The options granted in 1996 to the President and the
other named executive officers are shown in the above tables.
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 to deduct each year 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.
This Executive Officer Compensation Report is submitted by the Chairman of
the Board of Directors, LeRoy T. Carlson, Jr. and by the Stock Option
Compensation Committee, Edwin L. Russell (Chairperson) and Jean Burhardt
Keffeler.
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