PROSPECTUS Filed Pursuant to Rule 424(b)(3)
Registration No. 33-8857
TELEPHONE AND DATA SYSTEMS, INC.
SERIES A COMMON SHARE
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Series A Common Shares
($1.00 Par Value)
The Series A Common Share Automatic Dividend
Reinvestment Plan, as amended (the "Plan"), of Telephone and
Data Systems, Inc. (the "Company" or "TDS") provides holders
of the Company's Series A Common Shares with a systematic,
economic and convenient method of investing cash dividends
from such shares in newly issued Series A Common Shares
without payment of any brokerage commission or service charge
and at a 5% discount from market value (as determined below).
The Company's Common Shares have less voting power
than its Series A Common Shares. The Series A Common Shares,
which have effective control of the Company, are being offered
by this Plan only to the holders of the Company's Series A
Common Shares. The holders of the Company's Common Shares and
Preferred Shares have their own Automatic Dividend
Reinvestment and Stock Purchase Plan.
Participants in the Plan may:
(1) have cash dividends on all of the Series A
Common Shares automatically reinvested, or
(2) have cash dividends on less than all of their
Series A Common Shares automatically invested while
continuing to receive the remainder of their cash
dividends.
The price for the Series A Common Shares purchased
with reinvested dividends will be 95% of the average daily
high and low sales prices for the Company's Common Shares on
the American Stock Exchange, as reported in The Wall Street
Journal, for a period of ten (10) consecutive trading days
ending on the trading day immediately preceding the day on
which the purchase is made (the "Investment Date"). The
Investment Dates for reinvested dividends will be the dividend
payment dates.
This Prospectus relates to 337,500 Series A Common
Shares (as adjusted for stock-splits), of which 232,139 shares
remain unissued as of the date of this Prospectus, registered
under Registration Statement No. 33-8857. It is suggested
that this Prospectus be retained for future reference.
Shareholders who do not wish to participate in the Plan will
continue to receive cash dividends, as declared, in the usual
manner.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 9, 1995
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the
Securities Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be
inspected and copied at the offices of the Commission, at 450
Fifth Street, N.W., Judiciary Plaza, Washington D.C. 20549;
Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661; and New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's
Common Shares are listed on the American Stock Exchange, and
reports, proxy materials and other information concerning the
Company may be inspected at the office of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by
the Company are incorporated as of their respective dates in
this Prospectus by reference:
(a) The Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.
(b) The Company's Current Report on Form 8-K, dated
March 15, 1995.
(c) The Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995.
(d) The description of the Company's Capital Stock
included in the Company's Report on Form 8-A/A-2, dated
December 20, 1994.
All documents filed by TDS pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of the
offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any
statements contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained
herein (or in any other subsequently filed document which also
is incorporated by reference herein) modifies or supersedes
such statement. Any statement so modified or superseded shall
not be deemed to constitute a part hereof except as so
modified or superseded. All information appearing in this
Prospectus is qualified in its entirety by the information and
financial statements (including notes thereto) appearing in
the documents incorporated herein by reference.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH
PERSON TO WHOM THE PROSPECTUS IS DELIVERED, UPON HIS OR HER
WRITTEN OR ORAL REQUEST, A COPY OF ANY OR ALL OF THE DOCUMENTS
DESCRIBED ABOVE UNDER "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO:
Telephone and Data Systems, Inc.
30 N. LaSalle, Suite 4000
Chicago, Illinois 60602
Attention: Investor Relations Coordinator
(telephone: 312/630-1900)
NO PERSON HAS BEEN AUTHORIZED BY THE COMPANY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS, AND ANY INFORMATION, DATA,
OR REPRESENTATIONS NOT CONTAINED HEREIN MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, SECURITIES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL.
-2-
<PAGE>
THE COMPANY
TDS is a diversified telecommunications service
company with cellular telephone, local telephone and radio
paging operations. The Company's business development
strategy is to expand its existing operations through internal
growth and acquisitions and to explore and develop other
telecommunications businesses that management believes will
utilize the Company's expertise in customer-based
telecommunications services.
The Company was incorporated in 1968 under the laws
of the State of Iowa. Its corporate headquarters are located
at 30 N. LaSalle, Suite 4000, Chicago, Illinois 60602, and
its telephone number is (312) 630-1900. Except where the
context otherwise indicates, the term "Company" and "TDS"
include Telephone and Data Systems, Inc., an Iowa corporation,
and its subsidiaries.
USE OF PROCEEDS
The number of Series A Common Shares that will be
sold under the Plan and the prices at which such shares will
be sold cannot now be determined. The net proceeds from the
sale of such shares will be used by the Company for general
corporate purposes. Until the proceeds are used for these
purposes, the Company may deposit them in interest-bearing
accounts or invest them in certificates of deposit, United
States Government securities or prime commercial paper.
SERIES A COMMON SHARE AUTOMATIC DIVIDEND REINVESTMENT PLAN
(the "Plan")
The following is a question and answer statement of
the provisions of the Company's Series A Common Share
Automatic Dividend Reinvestment Plan. Questions and Answers 1
through 31 both explain and constitute the Plan.
PURPOSE
1. What Is The Purpose Of The Plan?
The purpose of the Plan is to provide holders of the
Company's Series A Common Shares with a systematic, economic
and convenient method of investing cash dividends from such
shares in newly issued Series A Common Shares of the Company
without payment of any brokerage commission or service charge,
and at a 5% discount from market value (as determined below).
Since the additional Series A Common Shares will be purchased
directly from the Company, the Plan will provide the Company
with additional capital funds.
ADVANTAGES
2. What Are The Advantages Of The Plan?
Participants may purchase Series A Common Shares of
the Company with cash dividends on all or less than all of the
Company's Series A Common Shares registered in their names.
The price of Series A Common Shares purchased with cash
dividends will be 95% of market value as set forth in the
Answer to Question 13.
-3-
<PAGE>
No commission or service charge is paid by
participants in connection with purchases under the Plan.
Full investment of funds is possible under the Plan because
the Plan permits fractions of shares, as well as full shares,
to be credited to participants' accounts. In addition,
dividends in respect of such fractions, as well as in respect
of full shares, will be credited to participants' accounts and
reinvested in the Company's Series A Common Shares under the
Plan. The safekeeping of Series A Common Shares credited to a
participant's account is assured since certificates for such
shares are not issued unless requested by the participant.
Regular statements of account will provide simplified record
keeping.
ADMINISTRATION
3. Who Administers The Plan?
Harris Trust and Savings Bank (the "Agent") acts as
an agent for participants in the Plan. The Agent keeps a
continuing record of each participant's account, sends
periodic statements of account to each participant with
respect to each month in which a transaction takes place and
performs other duties relating to the Plan. Series A Common
Shares of the Company purchased under the Plan will be
registered in the name of the Agent or its nominee, as Agent
for each participant in the Plan, and will be credited to the
accounts of the respective participants. Should Harris Trust
and Savings Bank resign, another bank will be asked to serve
as the Agent. All communications regarding the Plan should be
sent to the Agent addressed as follows:
Telephone and Data Systems, Inc.
Series A Common Share Automatic Dividend Reinvestment Plan
c/o Harris Trust and Savings Bank
P.O. Box 755
Chicago, Illinois 60690
(telephone: 312/461-3310)
Harris Trust and Savings Bank also acts as dividend disbursing
and transfer agent for the Company's Series A Common Shares.
PARTICIPATION
4. Who Is Eligible To Participate?
All holders of record of at least one whole Series A
Common Share are eligible to participate in the Plan.
Beneficial owners of Series A Common Shares which currently
are registered in names other than their own (for example, in
the name of a broker or bank nominee) who wish to participate
in the Plan must either make appropriate arrangements for
their nominee to do so or must become security owners of
record of Series A Common Shares.
All holders of record of at least one whole Series A
Common Share are eligible to participate in the Plan, unless
they are citizens of a state or foreign jurisdiction in which
it would be unlawful for the Company to allow such
participation. The Company is not aware of any jurisdiction
in which the making of the offer is not in compliance with
valid applicable law. If the Company becomes aware of any
jurisdiction in which the making of the offer would not be in
compliance with valid applicable law, the Company will make a
good faith effort to comply with any such law. If, after such
good faith effort, the Company cannot comply with any such
law, the offer will not be made to holders of shares residing
in any such jurisdiction. In those jurisdictions whose
securities or blue sky laws require the offer to be made by a
licensed broker or dealer, the offer shall not be deemed to be
-4-
<PAGE>
made unless it is made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the
laws of such jurisdiction, as may be designated by the
Company.
5. How Does A Series A Common Shareholder Participate?
A holder of Series A Common Shares may join the Plan
at any time by signing an "Authorization Form" and returning
it to the Agent. An Authorization Form and postage paid
envelope may be obtained by written request addressed to the
Agent at the above address or by writing or calling the
Company as follows:
Telephone and Data Systems, Inc.
Series A Common Shares Automatic Dividend Reinvestment Plan
Suite 4000
30 North LaSalle Street
Chicago, Illinois 60602
Attn: Investor Relations Coordinator
(telephone: 312/630-1900)
6. When Does A Series A Common Shareholder's Participation
Start?
Series A Common Shareholders
If an Authorization Form directing dividend
reinvestment is received from a Series A Common Shareholder by
the Agent on or before the last business day of the month
preceding the next dividend payment, that dividend will be
applied to the purchase of Series A Common Shares under the
Plan. If the Authorization Form directing dividend
reinvestment is received after that date, dividend
reinvestment will begin with the next succeeding payment.
Cash dividends on the Series A Common Shares are ordinarily
paid in March, June, September and December.
For example, if the Company's Board of Directors
establishes June 30 as the payment date for a Series A Common
Share cash dividend, then in order to reinvest the dividends
payable on June 30 in new Common Shares under the Plan, a
Series A Common Shareholder's Authorization Form must be
received by the Agent no later than the last business day in
May. If the Authorization Form is received after the last
business day in May, the dividends payable on June 30 will be
paid in cash and the Common Shareholder's participation in the
Plan will commence with the next Series A Common Share cash
dividend payment date.
7. Will a Series A Common Shareholder Presently Enrolled In
The Series A Common Share Automatic Dividend Reinvestment
Plan, as originally adopted ("Original Plan"), Continue
to be Enrolled In the Plan, as amended?
Yes. A Series A Common Shareholder enrolled in the
Original Plan will continue to be enrolled in the Plan in
accordance with the participation option chosen under the
Original Plan, provided he or she is a holder of record of at
least one whole Series A Common Share.
If a holder of Series A Common Shares enrolled in
the Original Plan does not wish to participate in the Plan, he
or she should withdraw from the Plan in the manner described
in the Answers to Questions 20 and 21. If a holder of Series
A Common Shares wishes to change the nature of his or her
participation from that in the Original Plan, he or she should
return an Authorization Form as described herein. If a holder
of Series A Common Shares enrolled in the Original Plan does
not wish to withdraw or change the nature of his or her
participation, he or she will be continued in the Plan and the
cash dividends on those Series A Common Shares owned of record
by that shareholder and designated for reinvestment under the
Original Plan
<PAGE>
will be used to purchase Series A Common Shares under the Plan
at the 5% discount.
8. What Does The Authorization Form Provide?
The Authorization Form provides for the purchase of
new Series A Common Shares through the following investment
options offered under the Plan:
Full Reinvestment - Cash dividends Series A Common
Shares held of record by a holder of Series A Common
Shares will be invested at 95% of market value (see
the Answer to Question 13).
Partial Reinvestment - Cash dividends on less than
all of the shares held of record by a holder of
Series A Common Shares will be invested at 95% of
market value (see the Answer to Question 13) and the
shareholder will continue to receive cash dividends
on the other shares.
Cash dividends on Series A Common Shares credited to
the participant's account under the Plan (including fractional
shares) are automatically reinvested to purchase additional
Series A Common Shares no matter which option is chosen. The
Authorization Form also serves to appoint Harris Trust and
Savings Bank as Agent for the participant.
If a holder of Series A Common Shares has more than
one stock account pursuant to which he or she is eligible to
participate in the Plan, a separate Authorization Form is
required for each account that he or she wishes included in
the Plan.
9. Is Partial Participation Possible Under The Plan?
Yes. An eligible shareholder who desires the
dividends on only some of his or her full Series A Common
Shares to be invested under the Plan may indicate such number
of shares upon the applicable Authorization Form(s) under
"Partial Dividend Reinvestment."
10. May A Participant Change His Or Her Method Of
Participation After Enrollment?
Yes. If a shareholder elects to participate through
the reinvestment of dividends but later decides to change the
number Series A Common Shares for which dividends are being
reinvested, a new Authorization Form may be executed and
returned to the Agent.
COSTS
11. Are There Any Expenses To Participants In Connection With
Purchases Under The Plan?
No. Participants will incur no costs. There are no
brokerage fees because Series A Common Shares are purchased
directly from the Company. All costs of administration of the
Plan will be paid by the Company.
-6-
<PAGE>
PURCHASES
12. When Are The Investment Dates?
The Investment Dates for Series A Common Shares
purchased under the Plan with cash dividends on Series A
Common Shares are the cash dividend payment dates. The
Company usually pays cash dividends on its Series A Common
Shares in March, June, September and December.
13. How Will The Purchase Price Of Series A Common Shares Be
Determined?
No market exists for the Series A Common Shares.
Therefore, the Company is assuming for purposes hereof that
each Series A Common Share has a fair market value equal to
one of the Company's Common Shares because the Series A Common
Shares were initially issued by the Company in exchange for
its Common Shares on a one-for-one basis and are presently
convertible into Common Shares on a one-for-one basis.
Accordingly, the price of Series A Common Shares purchased
with reinvested cash dividends will be 95% of the average
daily high and low sales prices for the Company's Common
Shares on the American Stock Exchange, as reported in The Wall
Street Journal, for a period of ten (10) consecutive trading
days ending on the trading day immediately preceding the
Investment Date. If there is no trading in the Common Shares
reported on the American Stock Exchange for a substantial
amount of time during any such trading period, the purchase
price per share shall be determined by the Company on the
basis of such market quotations as it shall deem appropriate.
No Series A Common Shares will be sold by the Company at less
than the par value of such shares.
14. How Many Series A Common Shares Will Be Purchased For
Participants?
The number of Series A Common Shares to be purchased
on an Investment Date will be determined by the amount of each
participant's dividends (including dividends on Series A
Common Shares purchased under the Plan) and the applicable
price of the Company's Common Shares. Each participant's
account in the Plan will be credited with the number of Series
A Common Shares, including fractional shares computed to four
decimal places, equal to the amount of the dividends being
invested divided by 95% of the applicable purchase price.
REPORTS TO PARTICIPANTS
15. What Reports Will Be Sent To Participants In The Plan?
Each participant in the Plan will receive a
statement of his or her account with respect to each month in
which a transaction takes place. These statements are a
participant's continuing record of the cost of his or her
purchases. Participants should retain these statements for
income tax purposes. Each statement will set forth the
following information when applicable:
(1) The total number of Series A Common Shares
registered in the name of the participant which is
participating in the Plan.
(2) The total number of Series A Common Shares
which have been accumulated under the Plan by the Participant
but for which certificates have not been issued (See Answer to
Question 17).
-7-
<PAGE>
(3) The following information for each transaction
during the month and all transactions to date during the
current year:
(a) the amount of dividends invested;
(b) the price per share for each transaction;
(c) the number of shares purchased; and
(d) certain tax information.
In addition, each participant will receive copies of
communications sent to every other holder of the Company's
Series A Common Shares, including the Annual Report to
Shareholders, Notice of Annual Meeting of Shareholders and
Proxy Statement, and Internal Revenue Service ("IRS")
information on Form 1099 for reporting dividend income.
DIVIDENDS
16. Will Participants Be Credited With Dividends On Fractions
Of Shares?
Yes. Participants will be credited with the amount
of dividends attributable to fractions of shares in their
accounts under the Plan and such dividends will be reinvested.
CERTIFICATES FOR SHARES
17. Will Certificates Be Issued For Shares Of Series A Common
Shares Purchased Under The Plan?
Normally, certificates for the Company's Series A
Common Shares purchased under the Plan will not be issued to
participants. The number of Series A Common Shares credited
to a participant's account under the Plan will be shown on
each statement of account mailed to the participant. This
convenience protects against loss, theft, or destruction of
stock certificates.
Certificates for any number of whole Series A Common
Shares credited to an account under the Plan will be issued
upon the written request of the participant to the Agent and
issuance of such certificates will not terminate participation
in the Plan. Any remaining full shares and fraction of a
share will continue to be credited to the participant's Plan
account.
Dividends on Plan Series A Common Shares for which a
participant requests and receives a certificate will be
reinvested in the Company's Series A Common Shares at the 5%
discount under the Plan and the Series A Common Shares
purchased therewith will be credited to the Participant's Plan
if the participant continues to own these Series A Common
Shares and has elected full dividend reinvestment of Series A
Common Shares on his or her current Series A Common Share
Authorization Form. A participant who continues to own the
Series A Common Shares in question and desires to have the
dividends on these shares reinvested in the Company's Series A
Common Shares but who does not have an existing Authorization
Form for Series A Common Shares or has elected only partial
reinvestment of his or her Series A Common Share dividends on
the current Authorization Form will have to execute a new
Authorization Form and return it to the Agent as set forth in
the Answer to Question 10. Otherwise, dividends on these
Series A Common Shares will not be reinvested in the Company's
Series A Common Shares at the 5% discount as they were when
they were held for the participant in the Plan. Rather, the
dividends on the Series A Common Shares in question will be
paid to the Shareholder in cash.
-8-
<PAGE>
Series A Common Shares credited to the account of a
participant under the Plan may not be pledged as collateral
otherwise transferred. A participant who wishes to pledge or
transfer such shares must request that certificates for such
shares be issued in his or her name.
Certificates for fractional Series A Common Shares
will not be issued under any circumstances.
An institution that is required by law to maintain
physical possession of certificates may request a special
arrangement regarding the issuance of certificates for Series
A Common Shares purchased under the Plan. This request should
be sent to the Agent (see Answer to Question 3).
18. In Whose Name Will Certificates Be Issued?
Accounts under the Plan are maintained in the names
in which certificates of the participants were registered at
the time they entered the Plan. Consequently, certificates
for whole shares issued upon the request of participants will
be similarly registered.
SAFEKEEPING OF SHARES
19. May participants transfer Series A Common Shares which
are designated for participation in the Plan to the Agent
for safekeeping?
Yes. Participants may transfer to the Agent for
safekeeping certificates representing Series A Common Shares
registered in their name. These shares will be credited to
the participants' accounts under the Plan along with shares
purchased for them under the Plan. There is no charge for
this service. The stock certificates should be sent by
registered mail, return receipt requested and properly
insured, to the Agent. Certificates should not be endorsed.
Dividends will be reinvested in shares represented
by the certificates transferred to the Agent.
WITHDRAWAL
20. When May A Participant Withdraw From The Plan?
A participant may withdraw from the Plan at any time
by notifying the Agent in writing. If the notice of
termination is received by the Agent prior to the record date
for the next Series A Common Share cash dividend, the amount
of that dividend will be paid to the withdrawing participant.
If the notice of termination is received by the Agent on or
after the record date for the next Series A Common Share cash
dividend, the next dividend will be reinvested and subsequent
dividends will be paid in cash.
Dividends paid after withdrawal from the Plan will
be paid in cash directly to the shareholder unless he or she
elects to rejoin the Plan, which the shareholder may do as set
forth in the Answer to Question 22.
21. What Happens When A Participant Withdraws From The Plan
Or The Plan Is Terminated?
When a participant withdraws from the Plan, or
ceases to be a shareholder of record, or ceases to be an
eligible shareholder, or upon termination of the Plan by the
Company, a certificate for the whole Series A Common Shares
credited to his or her account under the Plan will be issued
and
-9-
<PAGE>
a cash payment will be made for any fractional share. This
cash payment will be based on the closing price of the
Company's Common Shares on the American Stock Exchange as of
the date the written request for withdrawal is received, or
the participant ceases to be a shareholder of record, or the
participant ceases to be an eligible shareholder, or the Plan
is terminated, whichever is applicable, or if no trading
occurs on such date, the next day on which the Common Shares
are traded.
OTHER INFORMATION
22. When May A Shareholder Rejoin The Plan?
Generally, a shareholder may rejoin the Plan at any
time, provided he or she is an eligible shareholder, by
submitting a new Authorization Form. However, the Company
reserves the right to reject any Authorization Form from a
previous participant on the grounds of repeated joinings and
withdrawals from Plan participation. Such reservation is
intended to minimize administrative expenses and to encourage
use of the Plan as a long-term investment service.
23. What Happens If A Participant Sells Or Transfers All Of
His Or Her Series A Common Shares?
If a participant ceases to be a shareholder of
record holding at least one whole Series A Common Share, a
cash payment will be made for any fractional share remaining
in the Plan. Thereafter, the shareholder may rejoin the Plan
as set forth in the Answer to Question 22 if he or she is or
becomes a holder of at least one whole Series A Common Share.
24. What Happens When A Participant Who Is Reinvesting
Dividends On All Or Less Than All Of The Shares
Registered In His Or Her Name Sells Or Transfers A
Portion Of Such Shares?
If a participant who is reinvesting dividends on all
or only a portion of Series A Common Shares registered in his
or her name disposes of a portion of such shares, the Company
will continue to reinvest dividends on the remainder of the
Series A Common Shares registered in the participant's name up
to the number indicated on the participant's Authorization
Form as the number of Series A Common Shares for which
dividends are to be reinvested, provided the participant
continues to hold at least one whole Series A Common Share.
For example, if a participant authorized the Company to
reinvest dividends on 50 Series A Common Shares of a total of
100 Series A Common Shares registered in his or her name, and
then disposes of 25 Series A Common Shares, the Company would
continue to reinvest dividends on 50 of the remaining 75
shares.
25. Does Participation In The Plan Involve Risk?
The Plan itself creates no risk. The risk to
participants is the same as with any other investment in the
Company's Series A Common Shares. It should be recognized
that since investment prices are determined as an average of
the daily high and low sales prices for a period of ten (10)
consecutive trading dates on which the Company's Common Shares
are traded (see Answer to Question 13), a participant loses
any advantage otherwise available from being able to select
the timing of his or her investment. PARTICIPANTS MUST
RECOGNIZE THAT NEITHER THE COMPANY NOR THE AGENT CAN ASSURE A
PROFIT OR PROTECT AGAINST A LOSS ON THE SHARES PURCHASED UNDER
THE PLAN.
26. What Happens If The Company Issues A Stock Dividend,
Declares A Stock Split Or Has A Rights Offering?
Any Series A Common Shares distributed by the
Company as a stock dividend on shares credited to a
participant's Plan account, or upon any split of such shares,
will be credited to the
-10-
<PAGE>
participant's Plan account. Stock dividends distributed on
Series A Common Shares in shares of any other class of capital
stock will be mailed directly to the shareholder in the same
manner as to shareholders not participating in the Plan.
However, if a dividend reinvestment plan is established for
the shares of such other capital stock distributed as a
dividend, the participant will automatically become a
participant of such dividend reinvestment plan and the shares
distributed to such participant will instead be credited to
the participant's plan account. In a rights offering, a
participant's entitlement will be based upon his or her total
holdings, including shares credited to the participant's
account under the Plan. Rights certificates will be issued
for the number of whole Series A Common Shares only, however,
and rights based on a fraction of a Series A Common Share held
in a participant's Plan account will be sold for the
participant's account and the net proceeds will be forwarded
to the participant.
27. How Will A Participant's Shares Be Voted At Shareholders'
Meetings?
All Series A Common Shares held in the Plan for a
participant will be voted as the participant directs on a
proxy or voting instruction form which will be furnished to
the participant. If the participant does not return the proxy
or form to the Agent, the Agent will not vote the
participant's Plan shares.
28. What Are The Federal Income Tax Consequences Of
Participation In The Plan?
The following discussion sets forth the general
Federal income tax consequences for participants in the Plan.
However, the discussion is not intended to be an exhaustive
treatment of such tax consequences. For example, the
discussion does not address the treatment of stock dividends,
stock splits or a rights offering to participants in the Plan.
It also does not address differences in tax treatment with
respect to participants who do not hold the Series A Common
Shares as capital assets. Because the tax laws are complex
and constantly changing, participants are urged to consult
their own tax advisors regarding the tax consequences of
participating in the Plan (including the effects of any
applicable state, local or foreign tax laws) and for rules
regarding the tax basis in special cases such as the death of
a participant or a gift of Series A Common Shares held under
the Plan and for other tax consequences. Future legislative
changes or changes in administrative or judicial
interpretation, some or all of which may be retroactive, could
significantly alter the Federal income tax treatment discussed
herein.
In general, participants in the Plan who elect to
reinvest cash dividends will be treated, for Federal income
tax purposes, as having received, on the dividend payment
date, a distribution in an amount equal to the fair market
value on the dividend payment date of the Series A Common
Shares purchased with reinvested dividends (rather than a
distribution in the amount of cash otherwise payable to the
participant). It should be noted that the fair market value
of the Series A Common Shares on the dividend payment date is
likely to differ from the price paid for the Series A Common
Shares under the Plan because the price paid for such shares
will be only 95% of the market value described in Question 13.
Moreover, as described in Question 13, such market value is
based on the average of the high and low sales prices for the
Company's Common Shares over a ten-day period preceding the
dividend payment date, rather than the reported sales prices
on the dividend payment date itself. Furthermore, such market
value is based on the assumption that each Series A Common
Share has a fair market value equal to one of the Company's
Common Shares, and there can be no assurance that the Internal
Revenue Service ("IRS") will agree with that assumption.
Participants should not be treated as receiving an additional
distribution based upon their pro rata share of the Plan
-11-
<PAGE>
administration costs paid by the Company; however, there can
be no assurance that the IRS will agree with this position.
The Company has no present plans to seek formal advice from
the IRS on this issue.
Generally, the distribution described above (the
fair market value, on the dividend payment date, of the Series
A Common Shares purchased with reinvested dividends) will be
taxable to participants as ordinary dividend income to the
extent of the Company's current or accumulated earnings and
profits for Federal income tax purposes. The amount of the
distribution in excess of such earnings and profits will
reduce a participant's tax basis in the Series A Common Shares
with respect to which such distribution was received, and, to
the extent in excess of such basis, result in capital gain.
Certain corporate participants may be entitled to a dividends
received deduction with respect to amounts treated as ordinary
dividend income. Corporate participants should consult their
own tax advisors regarding their eligibility for and the
extent of such deduction.
Tax information will be shown on the statements of
account sent to participants which participants should retain
for tax purposes. These statements are important for
computing the tax basis of Series A Common Shares acquired
under the Plan. The Form 1099 which each participant will
receive annually will include the income which (based on the
Company's determination of the fair market value of the Series
A Common Shares on the dividend payment date, assuming each
Series A Common Share has a fair market value on the dividend
payment date equal to one of the Company's Common Shares on
that date) is deemed to result from the receipt of the Series
A Common Shares under the Plan.
As a general rule, the tax basis of shares (or any
fraction of a share) purchased with reinvested dividends will
equal the fair market value of such shares (or fractional
share) on the dividend payment date.
The holding period for Series A Common Shares (or a
fraction thereof) received as a result of reinvestment of
dividends under the Plan will begin on the day following the
purchase date.
Participants will generally not realize any taxable
income when they receive certificates for whole Series A
Common Shares credited to their accounts under the Plan,
either upon their request for certificates for certain of
those shares, upon ceasing to be a shareholder of record, upon
ceasing to be an eligible shareholder, or upon withdrawal from
or termination of the Plan. However, a participant may
realize a gain or loss when Series A Common Shares acquired
under the Plan are subsequently sold. In addition,
participants may realize gain or loss when they receive a cash
adjustment for fractional shares credited to their accounts
upon withdrawal from or termination of the Plan. The amount
of such gain or loss will be the difference between the amount
which the participant receives for his or her shares or
fractional share, and his or her tax basis therefor (with
special rules applying to determine the basis allocable to
shares that are not specifically identified when the
Participant sells less than all of his or her shares). Such
gain or loss will generally be capital gain or loss, and will
be long-term capital gain or loss if the holding period for
such shares or fractional shares exceeds one year. The excess
of net long-term capital gains over net short-term capital
losses is taxed at a lower rate than ordinary income for
certain taxpayers. The distinction between capital gain or
loss and ordinary income and loss is also relevant for
purposes of, among other things, limitations on the
deductibility of capital losses. Any loss may be disallowed
under the "wash sale" rules to the extent the shares disposed
of are replaced (through the Plan or otherwise) during the 61-
day period beginning 30 days before and ending 30 days after
the date of disposition.
-12-
<PAGE>
I. What Provision Is Made For Shareholders (Foreign And
Domestic) Whose Dividends Are Subject To Income Tax
Withholding?
In the case of foreign shareholders who elect to
have their dividends reinvested and whose dividends are
subject to United States income tax withholding, the Agent
will invest in the Company's Series A Common Shares an amount
equal to the dividends of such foreign participants less the
amount of tax required to be withheld.
Under certain circumstances, the Company may be
required to backup-withhold income tax on the dividends of
participating domestic shareholders, including those domestic
shareholders who do not accurately report their dividend
income, fail to provide the Company with their taxpayer
identification number, provide the Company with an incorrect
taxpayer identification number or fail to provide the Company
with a certificate setting forth that they are not subject to
backup withholding. If this should occur, thirty-one percent
(31%) of the dividend income, or such other percentage as may
be required from time to time, will be withheld.
The statements of account sent to participants will
indicate the amount of any income tax withheld. The Company
cannot refund amounts withheld. Participants subject to
withholding should contact their tax advisors or the IRS for
additional information.
30. What Are The Responsibilities Of The Shareholders' Agent
And The Company Under The Plan?
In performing their duties under the Plan, the Agent
and the Company will at all times act in the best interests of
the participants. However, they will not be liable for any
act performed in good faith, or for any good faith omission to
act, including, without limitation, any claims of liability
arising out of failure to terminate a participant's account
upon such participant's death prior to receipt of notice in
writing of such death.
Although the Plan contemplates the continuation of
quarterly Series A Common Share dividend payments, the payment
of future Series A Common Share dividends will depend upon
future earnings, the financial condition of the Company and
other factors.
TERMINATION BY COMPANY
31. May The Plan Be Changed Or Discontinued?
The Company reserves the right to suspend, modify or
terminate the Plan at any time. All participants will receive
notice of such suspension, modification or termination.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Telephone and Data
Systems, Inc. ("TDS") consists of 100,000,000 Common Shares,
$1.00 par value ("Common Shares"), 25,000,000 Series A Common
Shares, $1.00 par value ("Series A Common Shares"), and
5,000,000 Preferred Shares, without par value ("Preferred
Shares"). Only the Series A Common Shares are being offered
by this Prospectus. However, considering the relationships
and interdependence of all classes of stock, this description
discusses the rights of all classes.
-13-
<PAGE>
Voting Trust
A substantial majority of TDS's outstanding Series A
Common Shares are held in a voting trust which expires on June
30, 2009. The voting trust was created to facilitate the
long standing relationships among the trustees' certificate
holders. By virtue of the number of shares held by them, the
voting trustees have the power to elect 75% of the Directors
and control a majority of the voting power of TDS in matters
other than the election of directors. The trustees of the
voting trust are LeRoy T. Carlson, Jr., a director and the
President of TDS, Walter C.D. Carlson, a director of TDS,
Letitia G. Carlson, Melanie J. Heald and Donald C. Nebergall,
a director of TDS.
Preferred Shares
The Board of Directors of TDS is authorized by the
Articles of Incorporation of TDS to issue Preferred Shares
from time to time in series and to establish as to each series
the designation and number of shares to be issued, the
dividend rate, the redemption price and terms, if any, the
amount payable upon voluntary or involuntary dissolution of
TDS, sinking fund provisions, if any, voting rights, if any,
and the terms of conversion into Common Shares, if provided
for.
Voting Rights
With respect to the election of directors, the
holders of Common Shares, and the holders of 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. The holders of Series
A Common Shares, and the holders of 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.
The Board of Directors currently consists of eleven directors.
Accordingly, the holders of Common Shares and the holders of
Preferred Shares issued before October 31, 1981, are entitled
to elect three directors, and the holders of Series A Common
Shares and the holders of Preferred Shares issued after
October 31, 1981, are entitled to elect eight directors.
The holders of Common Shares are entitled to one
vote per share and the holders of Series A Common Shares are
entitled to ten votes per share. The holders of each series
of Preferred Shares are entitled to such votes as may be
specified in the certificate of designation for such series.
The holders of Common Shares, Series A Common Shares and
Preferred Shares vote as a single group, except with respect
to the election of directors as discussed above and with
respect to certain amendments to the Articles of Incorporation
(e.g., amendments which are adverse to the holders of a
class), as to which the Iowa Business Corporation Act grants
class voting rights.
If the number of Series A Common Shares issued and
outstanding at any time falls below 500,000 (because of the
conversion of Series A Common Shares or otherwise), the
holders of Series A Common Shares would lose the right to vote
as a separate group (with the holders of Preferred Shares
issued after October 31, 1981) in the election of
approximately 75% of the directors, and thereafter the holders
of Series A Common Shares (with ten votes per share) would
vote with the holders of Common Shares (with one vote per
share) and all holders of Preferred Shares which have voting
rights as a single group in the election of all directors.
Management of TDS believes it is unlikely that the number of
outstanding Series A Common Shares will fall below 500,000,
because more than 6,000,000 Series A Common Shares are held in
the voting trust described above, and the trustees of the
voting trust have indicated that they have no present
intention of converting Series A Common Shares into Common
Shares.
-14-
<PAGE>
Dividends and Other Distributions
Subject to the satisfaction of all Preferred Share
dividend preference and redemption provisions, holders of
Common Shares are entitled to receive such dividends as may be
declared from time to time by the Board of Directors. Unless
the same, or greater, dividends, on a per share basis, are
declared and paid at the same time on the Common Shares, no
dividends may be declared or paid on the Series A Common
Shares.
In the case of stock dividends, the Articles of
Incorporation provide that Common Shares may be paid to
holders of Common Shares and proportionately to holders of
Series A Common Shares; Series A Common Shares may be paid to
holders of Common Shares and proportionately to holders of
Series A Common Shares; and Common Shares may be paid to
holders of Common Shares and Series A Common Shares may be
paid proportionately to holders of Series A Common Shares.
The Board of Directors is authorized to permit both the
holders of Common Shares and Series A Common Shares to elect
to receive cash in lieu of stock.
Upon liquidation, holders of Common Shares and
Series A Common Shares are entitled to receive a pro rata
share of all assets available to shareholders after payment to
holders of the Preferred Shares of the liquidation value
thereof, plus a sum equal to the amount of all accumulated and
unpaid dividends thereon at the dividend rate fixed for each
series of cumulative Preferred Shares by the Board of
Directors.
The Articles of Incorporation provide that if a TDS
subsidiary has classes of capital stock with relative rights,
preferences and limitations vis-a-vis each other that, in the
judgment of the Board of Directors, are similar in all
material respects to the relative rights, preferences and
limitations of the Common Shares vis-a-vis the Series A Common
Shares, except for certain limited matters, then the Board of
Directors will distribute the subsidiary shares in a dividend
or upon liquidation to the extent practicable by distributing
the subsidiary shares which correspond to the Common Shares,
to the holders of Common Shares, and the subsidiary shares
which correspond to the Series A Common Shares, to the holders
of Series A Common Shares, provided that the same number of
shares of subsidiary common stock on a combined basis must be
distributed per Series A Common Share and Common Share.
Preemptive Rights
The holders of Series A Common Shares have a
preemptive right to purchase any additional Series A Common
Shares sold for cash, including treasury shares. Holders of
Common Shares and Preferred Shares have no preemptive rights
under the Articles of Incorporation.
Conversion Rights
The Common Shares have no conversion rights. The
Series A Common Shares are convertible, on a share for share
basis, into Common Shares. Certain series of Preferred Shares
are convertible into Common Shares or other securities.
Other Rights
The Common Shares and Series A Common Shares have no
redemption or sinking fund provisions. Certain series of
Preferred Shares have mandatory redemption features and
certain series of Preferred Shares are redeemable at the
option of TDS.
-15-
<PAGE>
Provisions of Articles of Incorporation Having a Potential
Anti-Takeover Effect
As discussed above, the voting trust has the power
to elect 75% of the directors and controls a majority of the
voting power of TDS.
The Articles of Incorporation of TDS provide for the
Board of Directors to be divided into three classes. Each
class is elected for a three year term.
The Articles of Incorporation of TDS also
explicitly permit the Board of Directors to consider a variety
of factors in exercising its business judgment in determining
what action is in the best interests of TDS and its
shareholders in responding to any tender offer for any equity
security of TDS and certain other proposed transactions.
The existence of the voting trust and the provisions
of the Articles of Incorporation summarized above may tend to
deter any potential unsolicited or hostile takeover attempts
or other efforts to effect a change in control of TDS and may
make it more difficult for some shareholders to sell shares of
TDS at higher than market prices.
General
The Common Shares are listed for trading on the
American Stock Exchange. There is no market for the Series A
Common Shares. However, Series A Common Shares are
convertible on a share-for-share basis into Common Shares.
All issued and outstanding Common Shares, Series A
Common Shares and Preferred Shares are fully paid and
nonassessable.
The Transfer Agent and Registrar for the Common
Shares, Series A Common Shares and Preferred Shares is Harris
Trust and Savings Bank, Chicago, Illinois.
LEGAL MATTERS
Certain legal matters relating to the securities
offered hereby will be passed upon for the Company by Sidley &
Austin, Chicago, Illinois. The Company is controlled by a
voting trust. Walter C.D. Carlson, a trustee and beneficiary
of such voting trust and a director of the Company and certain
subsidiaries of the Company, Michael G. Hron, Secretary of the
Company and certain subsidiaries of the Company, William S.
DeCarlo, the Assistant Secretary of the Company, Stephen P.
Fitzell, the Secretary of certain subsidiaries of the Company,
and Sherry S. Treston, the Assistant Secretary of certain
subsidiaries of the Company, are partners of Sidley & Austin.
EXPERTS
The audited consolidated financial statements of
Telephone and Data Systems, Inc. and Subsidiaries incorporated
by reference in this Prospectus have been audited by Arthur
Andersen LLP independent public accountants, as indicated in
their reports with respect thereto, and have been so
incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing
in giving said reports.
Future consolidated financial statements of
Telephone and Data Systems, Inc. and Subsidiaries and the
reports thereon of Arthur Andersen LLP also will be
incorporated by reference in this Prospectus in reliance upon
the authority of that firm as experts in giving those reports
to the
-16-
<PAGE>
extent that such firm has examined those financial statements
and consented to the use of their reports thereon.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Iowa Business Corporation Act, as amended,
provides for indemnification of directors and officers in a
variety of circumstances, which may include liabilities under
the Securities Act of 1933, as amended (the "1933 Act"). The
Company's Bylaws provide for indemnification of the Company's
directors and officers (and those serving in such capacity
with a consolidated subsidiary or other entity at the request
of the Board of Directors of the Company) in the circumstances
and to the extent permitted by the Iowa Business Corporation
Act, as amended.
The Company has directors' and officers' liability
insurance which provides, subject to certain policy limits,
deductible amounts and exclusions, coverage for all persons
who have been, are or may in the future be, directors or
officers of the Company, against amounts which such persons
must pay resulting from claims against them by reason of their
being such directors or officers during the policy period for
certain breaches of duty, omissions or other acts done or
wrongfully attempted or alleged.
Insofar as indemnification for liabilities arising
under the 1933 Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Company
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of
such issue.
-17-
<PAGE>
