<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TELEPHONE AND DATA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid:
N/A
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
N/A
2) Form, Schedule or Registration Statement No.:
N/A
3) Filing Party:
N/A
4) Date Filed:
N/A
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
30 North LaSalle Street
Suite 4000
Chicago, Illinois 60602
Phone: (312) 630-1900
Fax: (312) 630-1908
[LOGO]
April , 1997
Dear Fellow Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
on Friday, May 16, 1997, at 10:00 a.m. Chicago time, at Harris Trust and Savings
Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois. The formal notice of
the meeting, the Board of Directors' Proxy Statement and the Company's 1996
Annual Report are enclosed. The Proxy Statement contains information about the
Board of Directors' nominees for the Board. Class I directors are being elected
at the 1997 Annual Meeting.
The holders of (i) Preferred Shares issued before October 31, 1981 and (ii)
Common Shares (the "Common Share Group") will be entitled to elect one director
at the meeting. The Board's nominee for this position is Mr. George W. Off, who
was recently appointed to fill a vacancy on the Company's Board of Directors.
After an extensive search by a search firm, we were pleased to add Mr. Off as a
member of the Board in January. Mr. Off is the President and Chief Executive
Officer of Catalina Marketing Corporation, a technology-oriented marketing
company which is listed on the New York Stock Exchange. The Board of Directors
believes that Mr. Off brings eminent qualifications to the Company's Board of
Directors.
As described in the Proxy Statement, a shareholder of the Company has
indicated its intention to nominate an alternate candidate for the Class I
director to be elected by the Common Share Group, to run in opposition to the
Board of Directors' nominee, Mr. Off. You may receive a proxy statement and BLUE
proxy card from such shareholder asking you to vote in favor of such
shareholder's nominee. For the reasons discussed in the Proxy Statement, the
Board of Directors unanimously recommends that you vote FOR the election of Mr.
Off as the Class I director to be elected by the Common Share Group by returning
the enclosed WHITE proxy card(s) and urges you NOT to deliver a BLUE proxy card
to, and NOT to vote in favor of the candidate to be nominated by, such
shareholder.
In addition, holders of (i) Preferred Shares issued after October 31, 1981
and (ii) Series A Common Shares (the "Series A Group") will be entitled to elect
two directors at the meeting. The Board's nominees are Mr. Donald R. Brown and
Mr. Rudolph E. Hornacek, who have served on the Company's Board for more than 17
and 28 years, respectively. The Board unanimously recommends that Messrs. Brown
and Hornacek be reelected as directors by the Series A Group.
As usual, shareholders are also being asked to ratify the selection of
Arthur Andersen LLP as independent public accountants for the current fiscal
year.
In addition, as required by the rules of the Securities and Exchange
Commission, the Proxy Statement includes proposals from two shareholders, each
of whom holds 200 Common Shares of the Company, for presentation at the Annual
Meeting. The Board of Directors does not believe that such shareholder proposals
are in the best interests of the Company or its shareholders and unanimously
recommends that shareholders vote AGAINST such proposals.
We would like to have as many shareholders as possible represented at the
meeting. Please sign and return the enclosed WHITE proxy cards, whether or not
you plan to attend. If you have any questions prior to the Annual Meeting,
please call Investor Relations at (312) 630-1900. We look forward with pleasure
to visiting with you at the Annual Meeting.
Very truly yours,
[SIGNATURE] [SIGNATURE]
LeRoy T. Carlson LeRoy T. Carlson, Jr.
Chairman President and Chief Executive Officer
PLEASE HELP US AVOID THE EXPENSE OF FOLLOW-UP
PROXY MAILINGS TO SHAREHOLDERS BY
SIGNING AND RETURNING THE ENCLOSED WHITE PROXY CARD(S) PROMPTLY
<PAGE>
IMPORTANT
Your vote is important. No matter how many shares you own, please return
your proxy FOR the election of the Board of Directors' Nominees by taking three
steps:
1. SIGNING the enclosed WHITE proxy card(s),
2. DATING the enclosed WHITE proxy card(s), and
3. MAILING the enclosed WHITE proxy card(s) TODAY in the envelope provided
(no postage is requried if mailed in the United States) or FAXING BOTH
SIDES of the enclosed WHITE proxy card(s) TODAY to MacKenzie Partners,
Inc. at the number provided below.
If any of your shares are held in the name of a brokerage firm, bank, bank
nominee or other institution, only it can vote such shares and only upon receipt
of your specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the WHITE proxy
card(s) representing your shares. The Company's Board of Directors urges you to
confirm in writing your instructions to the Company in care of MacKenzie
Partners, Inc. at the address provided below so that the Board of Directors will
be aware of all instructions given and can attempt to ensure that such
instructions are followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact, MacKenzie Partners, Inc. at the address
set forth below.
[LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 322-2885
FAX: (212) 929-0308
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
To the Shareholders of
TELEPHONE AND DATA SYSTEMS, INC.
The 1997 Annual Meeting of Shareholders of Telephone and Data Systems, Inc.,
an Iowa corporation (the "Company" or "TDS"), will be held at Harris Trust and
Savings Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, on Friday,
May 16, 1997, at 10:00 a.m. Chicago time, for the following purposes:
1. To elect three Class I members of the Board of Directors. The Board of
Directors unanimously recommends that shareholders vote FOR the Board of
Directors' nominees for Class I directors.
2. To consider and vote upon a proposal to ratify the selection of Arthur
Andersen LLP as the Company's independent public accountants for the year
ended December 31, 1997. The Board of Directors unanimously recommends
that shareholders vote FOR the ratification of Arthur Andersen LLP.
3. If properly presented at the Annual Meeting, to consider and vote upon a
shareholder proposal to request the Board to eliminate the election of
directors by class. The Board of Directors unanimously recommends that
shareholders vote AGAINST this shareholder proposal.
4. If properly presented at the Annual Meeting, to consider and vote upon a
shareholder proposal to request the Board to require that a majority of
the directors do not have certain relationships as outlined by the
shareholder. The Board of Directors unanimously recommends that
shareholders vote AGAINST this shareholder proposal.
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
This Notice of Annual Meeting and Proxy Statement is first being mailed to
shareholders on or about April , 1997.
The Board of Directors has fixed the close of business on March 27, 1997, as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting or any adjournments thereof.
The Board of Directors would like to have all shareholders represented at
the Annual Meeting. If you do not expect to be present, please sign and mail
your proxy in the enclosed self-addressed envelope to Harris Trust and Savings
Bank, 311 West Monroe Street, Chicago, Illinois 60606. Proxies given pursuant to
this solicitation may be revoked at any time prior to the closing of the polls
at the Annual Meeting (by written notice to the Secretary of the Company or
attendance at the Annual Meeting of Shareholders and notice to the Secretary of
such revocation). Once the polls are closed, however, proxies may not be
retroactively revoked.
If you hold more than one class of the Company's shares, you will find
enclosed a separate WHITE proxy card for each holding. To assure that all of
your shares are represented, please return a WHITE proxy card printed in black
ink for Common Shares, including Common Shares owned through the TDS dividend
reinvestment plan and through the TDS Tax-Deferred Savings Plan; a WHITE proxy
card printed in green ink for Series A Common Shares, including Series A Common
Shares owned through the TDS dividend reinvestment plan; a WHITE proxy card
printed in red ink for Preferred Shares issued before October 31, 1981 (Series
A, B, D, G, H and N); and a WHITE proxy card printed in brown ink for Preferred
Shares issued after October 31, 1981 (Series O, S, U, V, BB, DD, EE, GG, HH, II,
JJ, KK, LL, QQ, RR and SS).
On February 28, 1997, the Company had outstanding and entitled to vote
54,145,158 Common Shares, par value $1.00 per share (excluding Common Shares
held by the Company and a subsidiary of the Company); 6,916,546 Series A Common
Shares, par value $1.00 per share; and 308,019 Preferred Shares, without par
value. Except as set forth in the next paragraph, each of the outstanding Common
Shares and
-1-
<PAGE>
Preferred Shares is entitled to one vote on all matters to come before the
Annual Meeting and each of the outstanding Series A Common Shares is entitled to
ten votes on all matters to come before the Annual Meeting. Accordingly, the
voting power of all outstanding Series A Common Shares was 69,165,460 votes, and
the total voting power of all outstanding shares of all classes of capital stock
was 123,618,637 votes at February 28, 1997.
With respect to the election of directors at the Annual Meeting, the holders
of Common Shares and the holders of the 9,686 Preferred Shares issued before
October 31, 1981 (Series A, B, D, G, H and N), voting as a group (collectively,
the "Common Share Group"), will be entitled to elect one Class I director. The
holders of Series A Common Shares and the holders of the 298,333 Preferred
Shares issued after October 31, 1981 (Series O, S, U, V, BB, DD, EE, GG, HH, II,
JJ, KK, LL, QQ, RR and SS), voting as a group (collectively, the "Series A
Group"), will be entitled to elect two Class I directors.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ASSISTANCE,
PLEASE CONTACT:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(800) 322-2885 (Toll Free)
VOTING INFORMATION
The Common Share Group may, with respect to the election of the Class I
director to be elected by the Common Shares Group, vote FOR the election of such
director nominee or WITHHOLD authority to vote for such director nominee. The
Series A Group may, with respect to the election of the Class I directors to be
elected by the Series A Group, vote FOR the election of such director nominees
or WITHHOLD authority to vote for such director nominees. A shareholder may,
with respect to the proposal to ratify the selection of Arthur Andersen LLP as
the Company's independent public accountants for 1997 and each of the
shareholder proposals, (i) vote FOR approval, (ii) vote AGAINST approval or
(iii) ABSTAIN from voting on such proposal. The Board of Directors recommends a
vote FOR the Board of Directors' nominees for Class I directors, FOR the
ratification of the selection of Arthur Andersen LLP and AGAINST both
shareholder proposals. All properly executed and unrevoked proxies received in
the accompanying form in time for the 1997 Annual Meeting will be voted in the
manner directed therein. If no direction is made, a proxy by any shareholder
will be voted FOR the election of the Board of Directors' nominees to serve as
Class I directors, FOR the proposal to ratify the selection of Arthur Andersen
LLP as the Company's independent public accountants for 1997 and AGAINST both
shareholder proposals. If a proxy indicates that all or a portion of the votes
represented by such proxy are not being voted with respect to a particular
matter, such non-votes will not be considered to be votes cast by shares
entitled to vote on such matter, although such votes may be considered to be
votes cast by shares entitled to vote on other matters and will count for
purposes of determining the presence of a quorum.
The election of the Class I director to be elected by the Common Share Group
requires the affirmative vote of holders of a majority of the votes cast by the
shares entitled to vote with respect to such matter at the Annual Meeting.
Accordingly, if a quorum exists, the person receiving a majority of votes cast
by the Common Share Group with respect to the election of such Class I director
will be elected to serve as a Class I director. A majority of the votes entitled
to be cast with respect to the election of such Class I director by such voting
group constitutes a quorum for action on such proposal. Withheld votes and
non-votes with respect to the election of such Class I director will not be
considered to be votes cast by shareholders entitled to vote in the election of
directors and will not affect the outcome of the election of such Class I
director.
-2-
<PAGE>
The election of the Class I directors to be elected by the Series A Group
requires the affirmative vote of holders of a majority of the votes cast by the
shares entitled to vote with respect to such matter at the Annual Meeting.
Accordingly, if a quorum exists, each person receiving a majority of the votes
cast by the Series A Group with respect to the election of such Class I director
will be elected to serve as such Class I director. A majority of the votes
entitled to be cast with respect to the election of such Class I directors by
such voting group constitutes a quorum for action on such proposal. Withheld
votes and non-votes with respect to the election of such Class I directors will
not be considered to be votes cast by shares entitled to vote in the election of
directors and will not affect the outcome of the election of such Class I
directors.
The approval of the proposal to ratify the selection of Arthur Andersen LLP
as the Company's independent public accountants for 1997 requires that votes
cast favoring the proposal exceed the votes cast opposing such proposal,
assuming a quorum exists. A majority of the votes entitled to be cast on the
proposal constitutes a quorum for action on that proposal. Abstentions and
non-votes will not be considered to be votes cast in favor of or opposing such
matter and will not affect the determination of whether such proposal is
approved for purposes of such vote.
The approval of each shareholder proposal would require that votes cast
favoring such proposal exceed the votes cast opposing such proposal, assuming a
quorum exists. A majority of the votes entitled to be cast on the proposal
constitutes a quorum for action on that proposal. Abstentions and non-votes will
not be considered to be votes cast in favor of or opposing such matter and will
not affect the determination of whether such proposal is approved for purposes
of such vote.
A complete list of shareholders entitled to vote at the Annual Meeting,
arranged in alphabetical order and by voting group, showing the address of and
number of shares held by each shareholder, will be kept open at the offices of
the Company, 30 North LaSalle Street, 40th Floor, Chicago, Illinois 60602, for
examination by any shareholder, beginning at least two business days after this
notice of meeting and continuing through the Annual Meeting.
BACKGROUND OF RECENT EVENTS
In 1996, in anticipation of a future vacancy on the Board, the Board of
Directors determined to seek an eminently qualified independent director for the
Board. In connection therewith, the Company's President, Mr. LeRoy T. Carlson,
Jr., was asked to conduct the search. The President identified certain
requirements for such director. These requirements included that, if possible,
the candidate be the chief executive officer of a successful, growth-oriented
public company or, in the case of a very large company, its chief operating
officer or the chief executive officer responsible for a major division thereof,
and that such candidate possess significant experience in marketing and, in
particular, consumer marketing. The Company provided these requirements to a
leading, nationally recognized executive search firm specializing in board of
director searches, and engaged this firm to identify potential candidates for
such position. The search firm identified several possible candidates and
presented its results to the President. After considering the qualifications of
these candidates, the President interviewed four potential candidates for the
Board. Following this process, the President recommended one of the candidates,
Mr. George W. Off, to the Board of Directors because Mr. Off met or exceeded all
of the requirements established by the President and was available to serve as a
director. Based on the President's recommendation, the Board of Directors
extended an invitation to Mr. Off to serve as a director of the Company and Mr.
Off accepted the invitation. Mr. Off was thereupon appointed to the Company's
Board of Directors in January 1997 to fill the vacancy on the Board created by
the resignation of Mr. Robert J. Collins, who had retired. Mr. Off was also
appointed as a member of the Audit Committee and was appointed Chairperson of
the Stock Option Compensation Committee. In January 1997, the Board of Directors
selected Mr. Off to be nominated for election as a Class I director by the
Common Share Group at the 1997 Annual Meeting of Shareholders.
Mr. Off is the President and Chief Executive Officer and a member of the
Board of Directors of Catalina Marketing Corporation ("Catalina"), a New York
Stock Exchange listed company, which he was instrumental in founding in 1983.
Mr. Off became President and Chief Executive Officer of Catalina in 1994. Prior
to that, Mr. Off was its President and Chief Operating Officer between 1992 and
1994, and its Executive Vice President
-3-
<PAGE>
between 1990 and 1992. Catalina is a leading supplier of in-store electronic
scanner-activated consumer promotions. Mr. Off has nearly 30 years experience in
the retail marketing industry, and has previously held operations and executive
positions at two major supermarket chains and has worked as a consultant.
Following Mr. Off's appointment to the Board of Directors and his selection
as the Board's nominee for election as a Class I director by the Common Share
Group, in the latter part of February 1997, the Company received a Schedule 13D
that was filed with the Securities and Exchange Commission by Franklin Mutual
Advisers, Inc. ("Franklin"), which reported that Franklin was considering
whether it should nominate a person for election to the Company's Board of
Directors. Franklin's Schedule 13D reports that Franklin is an investment
advisor which exercises voting and investment power over securities of its
advisory clients and that Franklin may be deemed to beneficially own
approximately 9.8% of the Common Shares of the Company. See "Beneficial
Ownership of Certain Beneficial Owners and Management."
In early March 1997, representatives of the Company discussed Franklin's
Schedule 13D with representatives of Franklin. Representatives of the Company
described to Franklin the extensive process which the Company went through to
identify a qualified candidate for the Board and the qualifications of Mr. Off,
and indicated to Franklin that management continued to support the nomination of
Mr. Off as the Class I director to be elected by the Common Share Group.
At the request of Franklin, however, representatives of the Company had also
considered the qualifications of Mr. Martin L. Solomon, then being considered by
Franklin as a possible alternate candidate for the Class I director to be
elected by the Common Share Group. After considering the background and
qualifications of Mr. Solomon, management informed Franklin that it intended to
continue to support the nomination of Mr. Off as the Class I director to be
elected by the Common Share Group. Subsequent to the discussions between the
Company and Franklin in early March 1997, Franklin filed an amendment to its
Schedule 13D which indicated that Franklin intends to nominate Mr. Solomon for
election as a Class I director at the 1997 Annual Meeting of Shareholders. On
April 4, 1997, the Company received a notice from Franklin pursuant to the
Company's Bylaws indicating that Franklin proposes to nominate Mr. Solomon for
election as a Class I director at the 1997 Annual Meeting of Shareholders by the
Common Share Group. Such notice indicates that Mr. Solomon has been occupied
primarily as a private investor since 1992, is the former Vice Chairman of Great
Dane Holdings, Inc., and is currently the director of three public companies:
XTRA Corporation, Hexcel Corporation and DLB Oil and Gas, Inc. Such notice, also
reports that Mr. Solomon is a United States citizen whose business address is
P.O. Box 70, Coconut Grove, Florida 33233, and that Mr. Solomon is the owner of
10,000 Common Shares of the Company.
Considering the background and qualifications of Mr. Solomon and Mr. Off,
and Mr. Off's accomplishments and existing service as a director of the Company,
the Board of Directors of the Company believes that Mr. Off is more qualified to
serve as a director of the Company, particularly when considering the fact that
Mr. Off meets or exceeds the qualifications for an independent director
established by the President. Accordingly, the Board of Directors unanimously
recommends that shareholders vote FOR Mr. Off as the Class I director to be
elected by the Common Share Group by returning the enclosed WHITE proxy card(s)
and urges shareholders NOT to deliver a BLUE proxy card to Franklin and NOT to
vote in favor of Mr. Solomon as a Class I director of the Company.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN. PLEASE
SIGN AND DATE THE ENCLOSED WHITE PROXY CARD(S) AND MAIL SUCH CARDS IN THE
ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. PROPERLY VOTING THE ENCLOSED WHITE
PROXY CARD(S) AUTOMATICALLY REVOKES ANY PROXY PREVIOUSLY SIGNED BY YOU.
DO NOT RETURN ANY BLUE PROXY CARD SENT TO YOU BY FRANKLIN. Even if you may
previously have voted on Franklin's BLUE proxy card, you have every legal right
to change your vote by signing, dating and mailing the enclosed WHITE proxy
card(s). REMEMBER, ONLY YOUR LATEST DATED PROXY CARD WILL COUNT AT THE MEETING.
-4-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Each year,
one class is elected to serve for three years. At the 1997 Annual Meeting of
Shareholders, three Class I directors will be elected for a term of three years
or until their successors are elected and qualified. The Board of Directors'
nominees for election as Class I directors are identified in the tables below.
In the event any such nominee, who has expressed an intention to serve if
elected, fails to stand for election, the persons named in the proxy presently
intend to vote for a substitute nominee designated by the Board of Directors.
NOMINEES
CLASS I DIRECTORS--TERMS TO EXPIRE IN 2000
The following persons, if elected at the 1997 Annual Meeting of
Shareholders, will serve as Class I directors for three years or until their
successors are elected and qualified:
NOMINEE FOR ELECTION BY THE COMMON SHARE GROUP
<TABLE>
<CAPTION>
POSITION WITH TDS SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
------------------------------ --- --------------------------------------------- --------------
<S> <C> <C> <C>
George W. Off................. 50 Director of the Company and President and January 1997
Chief Executive Officer of Catalina
Marketing Corporation
</TABLE>
George W. Off is the President and Chief Executive Officer and a member of
the Board of Directors of Catalina Marketing Corporation, a New York Stock
Exchange listed company, which he was instrumental in founding in 1983. Mr. Off
became President and Chief Executive Officer of Catalina in 1994. Prior to that,
Mr. Off was its President and Chief Operating Officer between 1992 and 1994, and
its Executive Vice President between 1990 and 1992. Catalina is a leading
supplier of in-store electronic scanner-activated consumer promotions. Mr. Off
has nearly 30 years experience in the retail marketing industry, and has
previously held operations and executive positions at two major supermarket
chains and has worked as a consultant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" MR. GEORGE W. OFF BY THE COMMON
SHARE GROUP.
NOMINEES FOR ELECTION BY THE SERIES A GROUP
<TABLE>
<CAPTION>
POSITION WITH TDS SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
------------------------------ --- --------------------------------------------- --------------
<S> <C> <C> <C>
Donald R. Brown............... 66 Director of the Company and Senior Vice 1979
President of TDS Telecommunications
Corporation and President of its Wholesale
Markets Group
Rudolph E. Hornacek........... 69 Director and Vice President-Engineering of 1968
the Company
</TABLE>
Donald R. Brown has been a director since 1979. Mr. Brown was appointed
President of the Wholesale Markets Group of TDS Telecommunications Corporation
("TDS Telecom"), a subsidiary of the Company which operates local telephone
companies, in 1995. He has been Senior Vice President of TDS Telecom since 1992.
Mr. Brown was a Vice President of TDS Telecom between 1990 and 1992.
Rudolph E. Hornacek has been Vice President-Engineering of the Company for
more than five years. He is a director of TDS Telecom and Aerial Communications,
Inc. [Nasdaq: "AERL"], a subsidiary of the Company which is developing
"broadband" personal communications services ("PCS").
-5-
<PAGE>
All the nominees are current Class I directors. Mr. Off was appointed to the
Board of Directors in January 1997 to fill the vacancy created by the
resignation of Mr. Robert Collins. Mr. Brown was previously elected by the
Common Share Group and Mr. Hornacek was previously elected by the Series A
Group.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE NOMINEES BY THE SERIES
A GROUP.
OTHER DIRECTORS
CLASS II DIRECTORS--TERMS TO EXPIRE IN 1998
The following persons were elected at the Annual Meeting of Shareholders on
May 19, 1995, to serve as Class II directors for three years or until their
successors are elected and qualified:
<TABLE>
<CAPTION>
POSITION WITH TDS SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
------------------------------ --- --------------------------------------------- --------------
<S> <C> <C> <C>
LeRoy T. Carlson, Jr.......... 50 Director and President of the Company (chief 1968
executive officer)
Donald C. Nebergall........... 68 Director and Consultant to the Company and 1977
other companies
Murray L. Swanson............. 55 Director and Executive Vice President-Finance 1983
of the Company (chief financial officer)
James Barr III................ 57 Director of the Company and President of TDS 1990
Telecommunications Corporation
</TABLE>
LeRoy T. Carlson, Jr., has been the Company's President and chief executive
officer for more than five years. Mr. LeRoy T. Carlson, Jr. is also Chairman and
a director of AERL, TDS Telecom, United States Cellular Corporation [AMEX:
"USM"], a subsidiary of the Company which operates and invests in cellular
telephone companies and properties, and American Paging, Inc. [AMEX: "APP"], a
subsidiary of the Company which provides radio paging services. Mr. LeRoy T.
Carlson, Jr. is the son of Mr. LeRoy T. Carlson, and the brother of Mr. Walter
C.D. Carlson and Dr. Letitia G.C. Carlson.
Donald C. Nebergall has been a consultant to the Company and other companies
since 1988. Mr. Nebergall was Vice President of The Chapman Company, a
registered investment advisory company located in Cedar Rapids, Iowa, from 1986
to 1988. Prior to that, he was the Chairman of Brenton Bank & Trust Company,
Cedar Rapids, Iowa, from 1982 to 1986, and was its President from 1972 to 1982.
Murray L. Swanson has been the Company's Executive Vice President-Finance
and chief financial officer for more than five years. Mr. Swanson is also a
director of USM, AERL, APP and TDS Telecom.
James Barr III has been the President and chief executive officer of TDS
Telecom for more than five years. Mr. Barr is also a director of AERL and APP.
Messrs. Carlson, Nebergall and Swanson were elected by the Series A Group.
Mr. Barr was elected by the Common Share Group.
CLASS III DIRECTORS--TERMS TO EXPIRE IN 1999
The following persons were elected at the Annual Meeting of Shareholders on
May 17, 1996, to serve as Class III directors for three years or until their
successors are elected and qualified:
<TABLE>
<CAPTION>
POSITION WITH TDS SERVED AS
NAME AGE AND PRINCIPAL OCCUPATION DIRECTOR SINCE
------------------------------ --- --------------------------------------------- --------------
<S> <C> <C> <C>
LeRoy T. Carlson.............. 80 Director and Chairman of the Company 1968
Walter C.D. Carlson........... 43 Director of the Company and Partner, Sidley & 1981
Austin, Chicago, Illinois
Letitia G.C. Carlson.......... 36 Director of the Company, Medical Doctor and 1996
Assistant Professor, George Washington
University Medical Center
Herbert S. Wander............. 62 Director of the Company and Partner, Katten, 1968
Muchin & Zavis, Chicago, Illinois
</TABLE>
-6-
<PAGE>
Messrs. LeRoy T. Carlson, Walter C.D. Carlson and Herbert S. Wander have had
the principal occupations indicated for more than five years. Dr. Letitia G.C.
Carlson has been an Assistant Professor at George Washington University Medical
Center since 1992. Between 1990 and 1992, she was a Primary Care Fellow at
George Washington University Medical Center.
Mr. LeRoy T. Carlson is the father of Messrs. LeRoy T. Carlson, Jr. and
Walter C.D. Carlson and Dr. Letitia G.C. Carlson.
Messrs. LeRoy T. Carlson and Walter C.D. Carlson and Dr. Letitia G.C.
Carlson were elected by the Series A Group. Mr. Wander was elected by the Common
Share Group.
The law firms of Sidley & Austin and Katten, Muchin & Zavis provided legal
services to TDS in 1996.
COMMITTEES AND MEETINGS
The Board of Directors of the Company held nine meetings during 1996. Each
person who was a director during all of 1996 attended at least 75% of the
meetings of the Board of Directors.
The Board of Directors does not have a formal nominating committee.
The Audit Committee of the Board of Directors, among other things,
determines audit policies, reviews external and internal audit reports and
reviews recommendations made by the Company's internal auditing staff and
independent public accountants. The current members of the Audit Committee are:
Messrs. Walter C.D. Carlson (Chairman), George W. Off and Herbert S. Wander. The
committee met three times during 1996. Each person who was a committee member
during all of 1996 attended all of the meetings of the Audit Committee in 1996,
except Mr. Wander, who attended two of the meetings.
The Stock Option Compensation Committee approves the annual salary, bonus
and other cash compensation for the President, considers and approves long-term
compensation for executive officers and considers and recommends to the Board of
Directors any changes to long-term compensation plans or policies. The current
members of the Stock Option Compensation Committee are: Mr. George W. Off
(Chairman) and Dr. Letitia G.C. Carlson. The Committee had one meeting in 1996,
which was attended by all members of such committee. All other actions in 1996
by the Stock Option Compensation Committee were taken by unanimous written
consent.
The primary function of the Compensation Committee is to approve the annual
salary, bonus and other cash compensation of officers and key employees of TDS
other than the President. The sole member of the Compensation Committee is LeRoy
T. Carlson, Jr., President of TDS. All actions of the Compensation Committee are
taken by written consent.
EXECUTIVE OFFICERS
In addition to the executive officers identified in the tables regarding the
election of directors, set forth below is a table identifying current officers
of the Company and its subsidiaries who may be deemed to be executive officers
of the Company for disclosure purposes under the rules of the Securities and
Exchange Commission. Unless otherwise indicated, the position held is an office
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------------------------------- --- -----------------------------------------------
<S> <C> <C>
H. Donald Nelson........................................................... 63 President of United States Cellular Corporation
Donald W. Warkentin........................................................ 41 President of Aerial Communications, Inc.
Terrence T. Sullivan....................................................... 52 President of American Paging, Inc.
Michael K. Chesney......................................................... 41 Vice President-Corporate Development
George L. Dienes........................................................... 66 Vice President-Corporate Development
C. Theodore Herbert........................................................ 61 Vice President-Human Resources
Karen M. Stewart........................................................... 39 Vice President-Investor Relations
Ronald D. Webster.......................................................... 47 Vice President and Treasurer
Byron A. Wertz............................................................. 50 Vice President-Corporate Development
Gregory J. Wilkinson....................................................... 46 Vice President and Controller
Scott H. Williamson........................................................ 45 Vice President-Acquisitions
Michael G. Hron............................................................ 52 Secretary
</TABLE>
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<PAGE>
H. Donald Nelson has served as a director and the President and Chief
Executive Officer of USM for more than five years.
Donald W. Warkentin was appointed a director and President of AERL in 1995.
Prior to that time Mr. Warkentin was Vice President of Multimedia Marketing for
US West Communications from 1994 to 1995. Before that, Mr. Warkentin was Head of
Marketing for Mercury One-2-One in the United Kingdom, the world's first major
market PCS venture.
Terrence T. Sullivan was appointed a director and President of APP in
September 1996. Prior to that, Mr. Sullivan was Vice President - Finance (CFO) &
Treasurer of APP since January 1996. Prior to that time, Mr. Sullivan was Vice
President of Finance and Administration, CFO and Treasurer of Microelectronics
and Computer Technology Corporation, a consortium which conducts research and
development, from February 1995 to January 1996. Before that, Mr. Sullivan was
Vice President of Finance, Administration and Contract Programs of Minnesota
Supercomputer Center, Inc., which provides remote supercomputing services and
software, for more than five years.
Michael K. Chesney was appointed a Vice President-Corporate Development of
the Company in 1994. Prior to that he was Director of Corporate Development of
the Company for more than five years.
George L. Dienes has been a Vice President-Corporate Development of the
Company for more than five years.
C. Theodore Herbert has been Vice President-Human Resources of the Company
for more than five years.
Karen M. Stewart was appointed Vice President-Investor Relations in July
1995. Prior to that, she was Assistant Controller-External Reporting of the
Company between November 1994 and July 1995. Before that, Ms. Stewart was
Director-Financial Reporting of the Company between January 1991 and November
1994.
Ronald D. Webster was appointed a Vice President of the Company in 1993. He
has been the Treasurer of the Company for more than five years.
Byron A. Wertz was appointed a Vice President-Corporate Development of the
Company in 1994. Prior to that he was Director-Telecommunications Development of
the Company for more than five years. Mr. Wertz is the nephew of LeRoy T.
Carlson and the cousin of each of LeRoy T. Carlson, Jr., Walter C.D. Carlson and
Letitia G.C. Carlson.
Gregory J. Wilkinson was appointed a Vice President of the Company in 1993.
He has been the Controller of the Company for more than five years.
Scott H. Williamson was appointed Vice President-Acquisitions of the Company
in November 1995. Prior to that time he was Vice President, Corporate
Development, of FMC Corporation, a manufacturer of machinery and chemicals,
between 1993 and 1995. Before that, Mr. Williamson was Vice President of
Acquisitions and Development of Itel Corporation, a diversified holding company,
for more than five years.
Michael G. Hron has been the Secretary of the Company for more than five
years. He has been a partner at the law firm of Sidley & Austin for more than
five years.
All of TDS's executive officers devote substantially all of their time to
the Company or its subsidiaries, except for Michael G. Hron, who is a practicing
attorney.
-8-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table summarizes the compensation paid by TDS to the President
and chief executive officer of TDS and certain other executive officers of the
Company and its subsidiaries other than the chief executive officer. Due to the
fact that certain 1996 bonuses have not yet been finalized, the Company is
reporting the five most highly compensated executive officers in addition to the
President and chief executive officer.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
--------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) OPTIONS/SARS(4) COMPENSATION(5)
- ------------------------------ ---- --------- --------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
LeRoy T. Carlson ............. 1996 $347,000 $ 71,250 9,367 $68,467
Chairman 1995 $317,000 $120,000 9,476 $65,215
1994 $290,000 $ 95,000 36,050 $62,848
LeRoy T. Carlson, Jr ......... 1996 $440,000 $ -- 13,233 $22,047
President (chief executive 1995 $390,000 $140,000 13,114 $20,883
officer) 1994 $350,000 $115,000 47,100 $18,877
Murray L. Swanson ............
Executive Vice President- 1996 $293,000 $ 82,500 4,899 $35,378
Finance (chief financial 1995 $269,000 $110,000 4,563 $30,327
officer) 1994 $241,000 $ 82,000 18,500 $23,995
James Barr III ...............
President of TDS 1996 $295,512 $ 77,572 -- $35,214
Telecommunications 1995 $267,500 $100,000 -- $33,274
Corporation 1994 $242,500 $103,100 -- $28,656
H. Donald Nelson(6) .......... 1996 $306,672 $ 83,000 8,560 $26,748
President of United States 1995 $274,712 $140,180 9,736 $31,803
Cellular Corporation 1994 $245,726 $110,000 28,414 $21,615
Donald W. Warkentin(7) ....... 1996 $238,996 $264,372 -- $12,682
President of Aerial 1995 $103,788 $ 56,000 19,500 $95,411
Communications, Inc. 1994 -- -- -- --
</TABLE>
- ------------
(1) Does not include the discount amount under any dividend reinvestment plan or
any employee stock purchase plan since such plans are generally available to
all eligible shareholders or salaried employees, respectively. Does not
include the value of any perquisites and other personal benefits, securities
or property, since the aggregate amount of such compensation is less than
the lesser of either $50,000 or 10% of the total of annual salary and bonus
reported for the named executive officers above.
(2) Represents the dollar value of base salary (cash and non-cash) earned by the
named executive officer during the fiscal year identified.
(3) Represents the dollar value of bonus (cash and non-cash) earned by the named
executive officer for 1995 and 1994. Final bonuses for 1996 have not yet
been determined for all executive officers. The amounts listed above for
Messrs. LeRoy T. Carlson, Swanson, Barr and Nelson represent partial
advances of the 1996 bonus. See "Executive Officer Compensation Report."
(4) Represents the number of TDS Common Shares subject to stock options
("Options") and/or stock appreciation rights ("SARs") awarded during the
fiscal year identified, except for H. Donald Nelson, in which case the
amount represents the number of USM shares subject to Options and/or SARs
awarded during the fiscal year identified. Unless otherwise indicated by
footnote, the awards represent Options without tandem SARs. Mr. Warkentin
was originally granted Options with respect to 32,500 TDS Common Shares in
1995. However, in February 1997, he agreed to the cancellation of Options
with respect to 13,000 TDS Common Shares in partial consideration for
Options with respect to 106,883 AERL Common Shares.
(5) Includes contributions by the Company for the benefit of the named executive
officer under the TDS Tax-Deferred Savings Plan ("TDSP"), the TDS Employees'
Pension Trust or the TDS Wireless Companies' Pension Plan ("Pension Plan"),
including earnings
-9-
<PAGE>
accrued under a related supplemental benefit agreement, and the TDS
Supplemental Executive Retirement Plan ("SERP"), and the taxable dollar
value of any insurance premiums paid during the covered fiscal year with
respect to term life insurance for the benefit of the named executive ("Life
Insurance"), as indicated below for 1996:
<TABLE>
<CAPTION>
LEROY T. CARLSON LEROY T. CARLSON, JR. MURRAY L. SWANSON JAMES BARR III H. DONALD NELSON DONALD W. WARKENTIN
---------------- --------------------- ----------------- -------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
TDSP....... $ 1,800 $ 1,800 $ 1,800 $ 1,800 $ 3,000 $ 3,000
Pension
Plan...... 20,319 7,539 11,984 13,061 7,119 7,119
SERP....... 30,000 10,429 18,016 16,939 13,340 2,157
Life
Insurance... 16,348 2,279 3,578 3,414 3,289 406
-------- -------- -------- -------------- -------- --------
Total... $68,467 $22,047 $35,378 $ 35,214 $26,748 $12,682
-------- -------- -------- -------------- -------- --------
-------- -------- -------- -------------- -------- --------
</TABLE>
(6) All of Mr. Nelson's compensation is paid by USM. Mr. Nelson's annual
compensation is approved by LeRoy T. Carlson, Jr., the Chairman of USM, and
Mr. Nelson's long-term compensation is approved by the stock option
compensation committee of USM.
(7) Mr. Warkentin was originally hired by TDS in 1995 but is now an employee of
AERL. As an employee of AERL, Mr. Warkentin's annual compensation will be
approved by LeRoy T. Carlson, Jr., the Chairman of AERL, and Mr. Warkentin's
long-term compensation will be approved by the stock option compensation
committee of AERL. Mr. Warkentin's 1996 bonus includes a $150,000 signing
bonus on the one-year anniversary date of his employment by AERL. "All Other
Compensation" for Mr. Warkentin in 1995 includes the reimbursement of moving
expenses of $95,411, related to his relocation to Chicago to serve as
President of AERL.
GENERAL INFORMATION REGARDING OPTIONS AND SARS
The following tables show, as to the executive officers who are named in the
Summary Compensation Table, information regarding Options and/or SARs.
INDIVIDUAL OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS/SARS FOR OPTION TERMS(4)
OPTIONS/SARS GRANTED TO EXERCISE MARKET EXPIRATION --------------------------
NAME GRANTED(1) EMPLOYEES(2) PRICE PRICE(3) DATE 0% 5% 10%
- ---------------------------- ------------- --------------- -------- -------- ----------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LeRoy T. Carlson(5)......... 9,367 12.7% $ 47.60 $ 47.60 12/15/06 -- $298,340 $767,047
LeRoy T. Carlson, Jr.(5).... 13,233 18.0% $ 47.60 $ 47.60 12/15/06 -- $421,473 $1,083,626
Murray L. Swanson(5)........ 4,899 6.7% $ 47.60 $ 47.60 12/15/06 -- $156,034 $401,170
James Barr.................. -- -- -- -- -- -- -- --
H. Donald Nelson
USM 1995 Performance
Options(6)............... 7,960 $ 34.60 $ 34.60 5/1/06 $ -- $173,208 $438,942
USM 1991 Options(7)....... 600 $ 15.67 $ 27.03 11/1/97 6,816 8,262 9,760
------------- ------ -------- --------
Total................... 8,560 12.0% $6,816 $181,470 $448,702
------------- ------ -------- --------
------------- ------ -------- --------
Donald W. Warkentin(5)...... 8,713 11.9% $ 47.60 $ 47.60 12/15/06 -- $277,510 $713,492
</TABLE>
- ------------
(1) Represents the number of TDS shares underlying Options awarded during the
year, except in the case of H. Donald Nelson, in which case the amount
represents the number of USM Shares underlying Options/SARs awarded during
the fiscal year.
(2) Represents the percent of total TDS shares underlying Options awarded to all
TDS employees during the fiscal year, except for H. Donald Nelson, in which
case the percentage represents the percent of total USM shares underlying
the total Options awarded to all USM employees during the fiscal year.
(3) Represents the fair market value of shares as of the award date.
(4) Represents the potential realizable value of each grant of Options, assuming
that the market price of the shares underlying the Options appreciates in
value from the award date to the end of the Option term at the indicated
annualized rates.
(5) Pursuant to the Company's 1994 Long-Term Incentive Plan, on May 1, 1996,
such named executive officers were granted options (the "Performance
Options") to purchase Common Shares based on the achievement of certain
levels of corporate and individual performance in 1995 as contemplated by
the 1994 Long-Term Incentive Plan. The purchase price per Common Share
subject to the Performance Options is the average of the closing price of
the Common Shares on the American Stock Exchange for the 20 trading days
ended on the trading day immediately preceding April 30, 1996. The
Performance Options became exercisable on December 15, 1996.
(6) The USM 1995 Performance Options were awarded to Mr. Nelson under the USM
1994 Long-Term Incentive Plan as of May 1, 1996 and became exercisable on
December 15, 1996.
-10-
<PAGE>
(7) On February 1, 1991, H. Donald Nelson received an award of Options for USM
shares which could vary, based on performance, between 80% and 120% of a
targeted amount. The minimum amount scheduled to become exercisable is 1,200
USM shares in each year on February 1, 1992 through February 1, 1997. Each
year during such period an additional number of USM shares, up to an
additional 600 shares, may be awarded based on performance for the prior
year. The exercise price of the Options is equal to the average market price
of USM Common Shares for the 20 consecutive trading days ending on the
original grant date of February 1, 1991.
AGGREGATED OPTION/SAR EXERCISES IN 1996, AND DECEMBER 31, 1996 OPTION/SAR VALUE
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------------
1996 NUMBER OF SECURITIES VALUE OF UNEXERCISED
------------------------- UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS(3) OPTIONS/SARS(4)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
LeRoy T. 1995 Performance
Carlson........ Options(5) 9,367 -- $ -- $ --
1994 Performance
Options(6) 9,476 -- -- --
1994 Automatic
Options(7) 21,630 14,420 -- --
----------- ------------- ----------- -------------
Total 40,473 14,420 $ -- $ --
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
LeRoy T. 1995 Performance
Carlson, Jr.... Options(5) 13,233 -- $ -- $ --
1994 Performance
Options(6) 13,114 -- -- --
1994 Automatic
Options(7) 28,260 18,840 -- --
1988 Options(8) 63,750 25,500 1,379,550 551,820
----------- ------------- ----------- -------------
Total 118,357 44,340 $1,379,550 $551,820
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
Murray L. 1995 Performance
Swanson........ Options(5) 4,899 -- $ -- $ --
1994 Automatic
Options(6) 4,563 -- -- --
1994 Performance
Options(7) 11,100 7,400 -- --
1987 Options(9) 3,375 $133,110 -- 3,375 -- 94,298
----------- ------------- ----------- -------------
Total 20,562 10,775 $ -- $ 94,298
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
James Barr 1990 Options(10) 12,000 8,000 $ -- $ --
III............
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
H. Donald USM 1995 Performance
Nelson......... Options(11) 7,960 -- $ -- $ --
USM 1994 Performance
Options(12) 9,136 -- -- --
USM 1994 Automatic
Options(13) 16,920 11,280 -- --
USM 1991 Options(14) 8,438 1,800 102,986 21,969
USM SARs(15) 19,200 16,800 247,200 216,300
----------- ------------- ----------- -------------
Total 61,654 24,880 $ 350,186 $238,269
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
Donald W. 1995 Performance
Warkentin...... Options(5) 8,713 -- $ -- $ --
1995 Automatic
Options(16) 13,000 6,500 -- --
----------- ------------- ----------- -------------
Total 21,713 6,500 $ -- $ --
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
- ------------
(1) Represents the number of TDS Common Shares with respect to which the
Options or SARs were exercised.
(2) Represents the aggregate dollar value realized upon exercise, based on the
difference between the exercise price and the average of the high and low
price of the shares on the date of exercise.
(3) Represents the number of TDS Common Shares subject to Options and/or SARs,
except for H. Donald Nelson, in which case the information is presented with
respect to USM shares.
(4) Represents the aggregate dollar value of in-the-money, unexercised Options
and SARs held at the end of the fiscal year, based on the difference between
the exercise price and $36.25, the closing price of TDS Common Shares or,
with respect to H. Donald Nelson, $27.875, the closing price of USM Common
Shares, on December 31, 1996.
(5) Such Options became exercisable on December 15, 1996 and are exercisable
until December 15, 2006 at the exercise price of $47.60 per share.
(6) Such Options became exercisable on December 15, 1995, and are exercisable
until May 1, 2005 at the exercise price of $38.12 per share.
-11-
<PAGE>
(7) Such Options become exercisable in annual increments of 20% on each of
December 15, 1994 and on the first through the fourth anniversaries of such
date, and are exercisable until November 4, 2004 at the exercise price of
$47.59 per share.
(8) Options for a total of 127,500 shares were granted on March 14, 1988 to
become exercisable with respect to 12,750 shares on March 14 of each year
between 1989 through 1998. Options for a total of 38,250 shares have been
exercised prior to 1996. The unexercised 1988 Options are exercisable until
March 14, 1999 at the exercise price of $14.61 per share.
(9) Options for a total of 33,750 shares were granted on February 15, 1987, to
become exercisable with respect to 3,375 shares on February 25 of each year
between 1988 through 1997. Options for a total of 27,000 shares were
exercised prior to 1996. Options for 3,375 shares were exercised in 1996.
The value realized is equal to the product of the number of shares exercised
and the difference between the exercise price of $8.31 and $47.75, the fair
market value of the Common Shares on April 8, 1996, the exercise date. The
remaining Options with respect to 3,375 shares became exercisable on
February 25, 1997, and expire on February 25, 1998.
(10) The 1990 Options were granted on January 15, 1990 to become exercisable
with respect to 2,000 shares on January 15 of each year between 1991 through
2000, and are exercisable until January 15, 2001 at the exercise price of
$40.00 per share.
(11) The USM 1995 Performance Options became exercisable on December 15, 1996
and are exercisable until May 1, 2006 at the exercise price of $34.60 per
share.
(12) The USM 1994 Performance Options became exercisable on December 15, 1995
and are exercisable until May 1, 2005 at the exercise price of $29.33 per
share.
(13) The USM 1994 Automatic Options become exercisable in annual increments of
20% on each of December 15, 1994, and on the first through the fourth
anniversaries of such date, and are exercisable until November 9, 2004 at
the exercise price of $32.25 per share.
(14) The USM 1991 Options are exercisable until November 1, 1997 at the exercise
price of $15.67 per share.
(15) The USM SARs were granted in 1988 and are exercisable at the exercise price
of $15.00 per share.
(16) In 1995, Mr. Warkentin was awarded Options for 32,500 TDS Common Shares at
an exercise price of $37.20. Such Options were originally scheduled to
become exercisable with respect to 6,500 TDS Common Shares on December 15 of
1995, 1996, 1997, 1998 and 1999. However, in February 1997, in partial
consideration for the grant of Options for 106,883 AERL Common Shares at an
exercise price equal to AERL's initial public offering price of $17.00 per
share, Mr. Warkentin agreed to the cancellation of Options with respect to a
total of 13,000 TDS Common Shares which would have become exercisable on
December 15, 1998 and 1999.
PENSION PLANS AND SUPPLEMENTAL BENEFIT AGREEMENTS
The Telephone and Data Systems, Inc. Employees' Pension Trust (the "TDS
Pension Plan") is a defined contribution plan designed to provide retirement
benefits for eligible employees of the Company and certain of its affiliates
which adopt the TDS Pension Plan. Annual employer contributions based upon
actuarial assumptions are made under a formula designed to fund a target pension
benefit for each participant commencing generally upon the participant's
attainment of retirement age. The amounts of the annual contributions are
included above in the Summary Compensation Table under "All Other Compensation."
USM and AERL have adopted the Telephone and Data Systems, Inc. Wireless
Companies' Pension Plan (the "Wireless Pension Plan"). The Wireless Pension
Plan, a qualified noncontributory defined contribution pension plan, provides
pension benefits for USM and AERL employees. Under the Wireless Pension Plan,
pension costs are calculated separately for each participant and are funded
currently. The amounts of the annual contributions for Messrs. H. Donald Nelson
and Donald W. Warkentin are included above in the Summary Compensation Table
under "All Other Compensation."
The TDS Supplemental Executive Retirement Plan ("SERP") provides
supplemental benefits under the TDS Pension Plan and the Wireless Pension Plan.
The SERP was established to offset the reduction of benefits caused by the
limitation on annual employee compensation under the Internal Revenue Code. The
SERP is a nonqualified deferred compensation plan and is intended to be
unfunded. The amounts of the accruals for the benefit of the named executive
officers are included above in the Summary Compensation Table under "All Other
Compensation."
-12-
<PAGE>
In 1980, TDS entered into a nonqualified supplemental benefit agreement with
LeRoy T. Carlson which, as amended, requires TDS to pay a supplemental
retirement benefit to Mr. Carlson, in the amount of $47,567 plus interest at a
rate equal to 1/4% under the prime rate for the period from May 15, 1981 (the
date of Mr. Carlson's 65th birthday) to May 31, 1992, in five annual
installments beginning June 1, 2001, plus interest at 9 1/2% compounded
semi-annually from June 1, 1992. The agreement was entered into because certain
amendments made to the TDS Pension Plan in 1974 had the effect of reducing the
amount of retirement benefits which Mr. Carlson would receive under the TDS
Pension Plan. The payments to be made under the agreement, together with the
retirement benefits under the TDS Pension Plan, were designed to permit Mr.
Carlson to receive approximately the same retirement benefits he would have
received if the TDS Pension Plan had not been amended. All of the interest
accrued under this agreement is included above in the Summary Compensation Table
under "All Other Compensation" and identified in footnote 5 thereto as
contributions under the TDS Pension Plan.
In 1988, USM entered into a nonqualified supplemental benefit agreement with
H. Donald Nelson which requires USM to pay a supplemental retirement benefit to
Mr. Nelson. The agreement was entered into because Mr. Nelson's employment with
TDS was terminated upon the completion of the initial public offering of USM
Common Shares in 1988 and, as a result, he was no longer eligible to participate
in the TDS Pension Plan. Under the supplemental benefit agreement, USM is
obligated to pay Mr. Nelson an amount equal to the difference between the
retirement benefit he will receive from the TDS Pension Plan and that which he
would have received had he continued to work for TDS, less any amounts which he
is entitled to receive under any other qualified pension plan (such as the
Wireless Pension Plan). USM will pay any such benefit at the same time as Mr.
Nelson receives payments from the TDS Pension Plan. The actual benefits payable
to Mr. Nelson upon retirement will be based upon the facts that exist at the
time and will be determined actuarially. Since the nature of this agreement is a
defined benefit arrangement, no amounts related thereto are included above in
the Summary Compensation Table.
In 1996, AERL entered into a nonqualified supplemental benefit agreement
with Donald W. Warkentin which requires AERL to pay a supplemental retirement
benefit to Mr. Warkentin. The agreement was entered into because Mr. Warkentin's
employment with TDS was terminated as a result of the completion of the initial
public offering of AERL Common Shares in 1996 and, as a result, he was no longer
eligible to participate in the TDS Pension Plan. Under the supplemental benefit
agreement, AERL is obligated to pay Mr. Warkentin an amount equal to the
difference between the retirement benefit he will receive from the TDS Pension
Plan and that which he would have received had he continued to work for TDS,
less any amounts which he is entitled to receive under any other qualified
defined benefit or money purchase pension plan (such as the Wireless Pension
Plan). AERL will pay any such benefit at the same time as Mr. Warkentin receives
payments from the TDS Pension Plan. The actual benefits payable to Mr. Warkentin
upon retirement will be based upon the facts that exist at the time and will be
determined actuarially. Since the nature of this agreement is a defined benefit
arrangement, no amounts related thereto are included above in the Summary
Compensation Table.
DEFERRED COMPENSATION AGREEMENTS
Mr. H. Donald Nelson is a party to an Executive Deferred Compensation
Agreement, pursuant to which Mr. Nelson will have a specified percentage of
gross compensation deferred and credited to a Deferred Compensation Account. The
Deferred Compensation Account will be credited with interest compounded monthly,
computed at a rate equal to one-twelfth of the sum of the average thirty-year
Treasury Bond rate plus 1.25 percentage points until the Deferred Compensation
Amount is paid to Mr. Nelson.
SALARY CONTINUATION AND CONSULTING AGREEMENT
The Company has entered into an agreement with LeRoy T. Carlson whereby it
will employ Mr. Carlson until he elects to retire. Mr. Carlson is to be paid at
least $60,000 per annum until his retirement. The agreement also provides that
upon his retirement, Mr. Carlson will be retained by the Company as a part-time
consultant (for not more than 60 hours in any month) until his death or
disability. Upon his retirement, Mr. Carlson will receive $75,000 per annum as a
consultant, plus increments beginning in 1985 equal to the greater of three
percent of his consulting fee or two-thirds of the percentage increase in the
consumer price index for the Chicago metropolitan area. If Mr. Carlson becomes
disabled before retiring, the Company can elect to discontinue his employment
and retain him in accordance with the consulting arrangement described above.
-13-
<PAGE>
Upon Mr. Carlson's death (unless his death follows his voluntary termination of
his employment or the consulting arrangement), his widow will receive until her
death an amount equal to that which Mr. Carlson would have received as a
consultant. The Company may terminate payments under the agreement if Mr.
Carlson becomes the owner of more than 21% of the stock, or becomes an officer,
director, employee or paid agent of any competitor of the Company within the
continental United States. No amounts were paid or payable under this agreement
in 1996, 1995 or 1994, and no amounts related thereto are included above in the
Summary Compensation Table.
SIGNING LETTER AGREEMENT WITH DONALD W. WARKENTIN
Pursuant to a signing letter agreement with Donald W. Warkentin, the Company
has agreed, among other things, to pay Mr. Warkentin (i) an annual salary of
$200,000 in 1995, with an increase to $220,000 effective January 1, 1996; (ii) a
$150,000 signing bonus payable on his first anniversary date; (iii) a 1995
guaranteed bonus of $40,000 and a maximum bonus of $60,000; and (iv) a target
bonus opportunity of 35% of base salary, starting in 1996.
COMPENSATION OF DIRECTORS
Prior to July 23, 1996, non-employee directors of the Company received an
annual fee of $12,000 plus $1,000 for attendance at each meeting of the Board of
Directors and $500 for attendance at each audit committee meeting. All directors
were also reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors and meetings of committees of
the Board of Directors.
Effective July 23, 1996, the Board of Directors adopted a Compensation Plan
(the "Non-Employee Directors' Plan") for non-employee directors ("Non-Employee
Directors"). A Non-Employee Director is a director of the Company who is not an
employee of the Company, USM, AERL, APP or TDS Telecom ("Affiliates"). The
purpose of the Non-Employee Directors' Plan is to provide for reasonable
compensation to non-employee directors in connection with their services to the
Company, in order to induce qualified persons to become and serve as
non-employee members of the Board of Directors.
The Non-Employee Directors' Plan provides that, effective for the twelve
month period ending at the time of the Company's 1997 annual meeting, each
Non-Employee Director will receive an annual director's fee of $24,000; and each
director of the Company who is not an employee of any Affiliate will continue to
receive a fee of $1,000, plus reimbursement of reasonable out-of-pocket expenses
incurred in connection with travel, for attendance at each regularly scheduled
or special meeting of the Board of Directors. The Non-Employee Directors' Plan
also provides that, effective as of July 23, 1996, each director of the Company
who is not an employee of any Affiliate will receive a fee of $750, plus
reimbursement of reasonable out-of-pocket expenses incurred in connection with
travel, for attendance at each meeting of the Audit Committee, Compensation
Committee, or other committee established by resolution of the Board of
Directors.
Under the Non-Employee Directors' Plan, an amount equal to 50% of the annual
director's fee will be paid immediately prior to the Company's Annual Meeting of
Shareholders by the delivery of Common Shares of the Company having a fair
market value as of the date of payment equal to such percentage of the annual
fee. In addition, under the Non-Employee Directors' Plan, an amount equal to 33%
of each committee meeting's fee will be accumulated and paid immediately prior
to the Company's Annual Meeting of Shareholders by the delivery of Common Shares
of the Company having a fair market value as of the date of payment equal to
such percentage of such fee. The Company has reserved 15,000 Common Shares of
the Company for issuance pursuant to the Non-Employee Directors' Plan.
Donald C. Nebergall, a director of the Company, also received $20,000 as a
bonus for services in 1995 and $133,800 for consulting services provided to the
Company in 1996 and was reimbursed for out-of-pocket expenses incurred in
connection with such services.
In addition, the Company pays life insurance premiums on behalf of
directors. Except for such life insurance premiums, directors who are also
employees of the Company or any Affiliate do not receive any additional
compensation for services rendered as directors.
-14-
<PAGE>
EXECUTIVE OFFICER COMPENSATION REPORT
This report is submitted by LeRoy T. Carlson, Jr., President, who serves as
the Compensation Committee of the Board of Directors for all executive officers
of the Company other than the President, and by the TDS Stock Option
Compensation Committee of the Board of Directors, which approves all
compensation for the President and approves long-term compensation to executive
officers who are employees of the Company. Long-term compensation for H. Donald
Nelson is approved by the stock option compensation committee of USM (as
described in its report in the proxy statement of USM), and long-term
compensation for Donald W. Warkentin is approved by the stock option
compensation committee of AERL (as described in its report in the proxy
statement of AERL).
The Company's compensation policies for executive officers are intended to
provide incentives for the achievement of corporate and individual performance
goals and to provide compensation consistent with the financial performance of
the Company. The Company's policies are based on the belief that the incentive
compensation performance goals for executive officers should be based on factors
over which such officers have control and which are important to the Company's
long-term success. It is also believed that compensation paid should be
appropriate in relation to the financial performance of the Company and should
be sufficient to enable the Company to attract and retain individuals possessing
the talents required for the Company's long-term successful performance.
Executive compensation consists of both annual and long-term compensation.
Annual compensation consists of a base salary and an annual bonus. The Company
evaluates the annual compensation of each executive officer on an aggregate
basis by combining the base salary and bonus, and also evaluates the level of
the base salary and the bonus separately. Annual compensation decisions are
based partly on individual and corporate short-term performance and partly on
the individual and corporate cumulative long-term performance during the
executive's tenure in his position, particularly with regard to the President
(chief executive officer). Long-term compensation is intended to compensate
executives primarily for their contributions to long-term increases in
shareholder value. Long-term compensation is generally provided through the
grant of stock options.
The process of determining base salary begins with establishing an
appropriate salary range for each officer. Each officer's range is based upon
the particular duties and responsibilities of the officer, as well as salaries
for comparable positions with other companies. These other companies include the
companies included in the peer group index described below under "Stock
Performance Chart," as well as other companies in the telecommunications
industry and other industries with similar characteristics, to the extent
considered appropriate in the judgment of the President, based on similar size,
function, geography or otherwise. No written or formal list of specific
companies is prepared. Instead, as discussed below, the President is provided
with various sources of information about executive compensation at other
companies, such as compensation reported in proxy statements of comparable
companies and salary surveys published by various organizations. The President
uses these sources and makes a personal determination of appropriate sources,
companies and ranges for each executive officer. The base salary of each officer
is set within a range considered appropriate in the judgment of the President
based on an assessment of the particular responsibilities and performance of
such officer, taking into account the performance of the Company and/or its
business units or divisions, other comparable companies, the industry and the
economy in general during the immediately preceding year. The President makes a
personal determination of the appropriate range based on the total mix of
information available to him. The range considered to be relevant by the
President is based on his informed judgment, using the information provided to
him by the Vice President of Human Resources, as discussed below. The range is
not based on any formal analysis nor is there any documentation of the range
which the President considers relevant in making his compensation decisions. The
salary of the executive officers is believed to be at slightly above the median
of the range considered to be relevant in the judgment of the President.
Annually, the nature and extent of each executive officer's major
accomplishments and contributions for the year are determined through written
information prepared by the executive and by others familiar with his
performance, including the executive's direct supervisor. With regard to all
executive officers other than the President, the President evaluates the
information in terms of the personal objectives given by the President or other
direct supervisor to such executive officer for the performance appraisal
period. The President also
-15-
<PAGE>
makes an assessment of how well the Company did as a whole during the year and
the extent to which the President believes the executive officer contributed to
the results. With respect to executive officers having primary responsibility
over a certain business unit or division of the Company, the President considers
the performance of the business unit or division and makes an assessment of the
contribution of the executive officer thereto. No specific measures of
performance are considered determinative in the compensation of executive
officers. Instead, all of the facts and circumstances are taken into
consideration by the President in his executive compensation decisions.
Ultimately, it is the informed judgment of the President that determines an
executive's salary and bonus, this being based on the total mix of information
rather than on any specific measures of performance.
The primary focus of the Company is increasing long-term shareholder value
through growth, measured primarily in such terms as revenues, customer units in
service, operating cash flow (operating income plus depreciation and
amortization) and operating income. In 1996, revenues increased 27%, customer
units in service increased 22%, operating cash flow increased 19% and operating
income increased 17%. Although the increases in 1996 in such measures of
performance are commendable and sufficient to warrant commensurate increases in
compensation of executive officers, as discussed above, there is no quantifiable
or direct relationship between compensation and such or any other measures of
performance. Instead, such compensation decisions are made subjectively
considering such performance measures, as well as all other facts and
circumstances in general terms.
Other than for the President of TDS, the President of TDS approves annual
compensation for executive officers of TDS and each of its business units or
divisions. The Vice President-Human Resources accumulates and prepares various
materials, including relevant base pay and bonus information, for the annual
compensation reviews of executive officers. These materials are reviewed by the
President along with various performance evaluation information. The President
will determine the bonus for 1996 and base salary for 1997 for all executives
other than himself. The Company has no written or formal corporate bonus plan.
The bonuses for corporate executive officers are determined by the President
based on his evaluation of each executive's contribution to the Company, the
achievement of individual objectives, the performance of the Company and/ or its
business units and divisions and all other facts and circumstances considered
relevant in his judgment. The President has not yet taken action to approve the
final 1996 bonuses or the 1997 base salaries for these executives. Due to the
fact that certain 1996 bonuses had not been determined as of the end of 1996,
the President approved advance bonus payments for 1996 to certain executive
officers, other than the President of TDS. The amounts approved for the named
executives are listed above in the Summary Compensation Table.
The annual compensation of the President (chief executive officer) of the
Company, is proposed by the President to the Stock Option Compensation Committee
of the Board of Directors, and approved or adjusted by the Stock Option
Compensation Committee. In addition to the factors described above for all
executive officers in general, the Vice President-Human Resources prepares an
analysis of compensation paid to chief executive officers of other comparable
companies. These other companies include the companies included in the peer
group index described below under "Stock Performance Chart," as well as other
companies in the telecommunications industry and other industries with similar
characteristics, to the extent considered appropriate in the judgment of the
President, based on similar size, function, geography or otherwise. This
information is presented to the President who recommends a base salary and bonus
level for himself. The Stock Option Compensation Committee approves the final
base salary and bonus of the President based on the recommendation of the
President. The Stock Option Compensation Committee approved a 1995 bonus of
$140,000 for the President, representing 36% of his base salary, and increased
his 1996 base salary to $440,000, representing an increase of $50,000 or 12.8%
over his base salary of $390,000 in 1995. The Stock Option Compensation
Committee has not yet approved the President's bonus for 1996, or the
President's base salary for 1997.
As with the other executive officers, the compensation of the President is
based on all facts and circumstances and the total mix of information rather
than related to any specific measures of performance. The Stock Option
Compensation Committee has access to numerous performance measures and financial
statistics prepared by the Company's financial personnel. This financial
information includes the audited financial statements of the Company, as well as
internal financial statements such as budgets and their results, operating
statistics and various analyses. The Stock Option Compensation Committee is not
limited in
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<PAGE>
its analysis to the information presented to it by the President or available
from financial personnel, and may consider other factual or subjective factors
as the members of such committee deem appropriate in their compensation
decisions. No specific measures of performance are considered determinative in
the compensation of the President. Instead, all of the facts and circumstances
are taken into consideration by the Stock Option Compensation Committee in its
executive compensation decisions. Ultimately, it is the informed judgment of the
Stock Option Compensation Committee, based on the recommendation of the
President, that determines the salary and bonus for the President, this being
based on the total mix of information rather than on any specific measures of
performance.
As discussed above for the other executive officers the primary focus of the
Company is increasing long-term shareholder value through growth, measured
primarily in such terms as revenues, customer units in service, operating cash
flow (operating income plus depreciation and amortization) and operating income.
In 1996, revenues increased 27%, customer units in service increased 22%,
operating cash flow increased 19% and operating income increased 17%. Although
the increases in 1996 in such measures of performance are commendable and
sufficient to warrant commensurate increases in compensation of the President,
as discussed above, there is no quantifiable or direct relationship between
compensation and such or any other measures of performance. Instead, such
compensation decisions are made subjectively considering such performance
measures, as well as all other facts and circumstances in general terms.
The Stock Option Compensation Committee believes that the annual total base
salary and bonus compensation of the President has been set at a level less than
an average level for equally responsible executives at companies which it
considers comparable. The members of the Stock Option Compensation Committee
base this belief on their personal assessment and judgment of the President's
responsibilities in comparison to the chief executive officers and chief
operating officers of the companies included in the peer group index described
below under "Stock Performance Chart," as well as other companies in the
telecommunications industry and other industries with similar characteristics,
based on the information prepared by the Vice President of Human Resources, as
discussed above. The President has a substantial beneficial interest in the
Company, as described below under "Security Ownership of Management," and will
benefit together with other shareholders based on the performance of the
Company. The Stock Option Compensation Committee considers this an important
fact in connection with its review and approval or adjustment of the salary and
bonus recommended by the President for himself.
At such time as the President approves the 1996 bonuses and 1997 salaries
for executive officers, and recommends the 1996 bonus and 1997 salary for
himself, he may also recommend to the Stock Option Compensation Committee
long-term compensation in the form of additional stock option grants, stock
appreciation rights or otherwise for executive officers and himself. The
long-term compensation decisions for executive officers will be made by the
Stock Option Compensation Committee in a manner similar to that described for
annual base salary and bonus decisions, except that the stock options will
generally vest over several years in a manner which will reflect the goal of
relating the long-term compensation of the executive officers, including the
President, to increases in shareholder value over the same period.
The performance of the Company also bears upon the number of stock options
which will be awarded and become exercisable with respect to the executive
officers. As indicated under the table "Individual Option/SAR Grants in 1996,"
certain named executive officers received an award in 1996 of Performance
Options based on the achievement of certain levels of corporate and individual
performance in 1995.
SECTION 162(M) OF THE CODE. Section 162(m) of the Code generally limits to
$1 million the amount that a publicly held corporation is allowed each year to
deduct for the compensation paid to each of the corporation's chief executive
officer and the corporation's four most highly compensated officers other than
the chief executive officer, subject to certain exceptions. For various reasons,
the Company does not believe that the $1 million deduction limitation should
have a material effect on the Company in the immediate future. If the $1 million
deduction limitation is expected to have a material effect on the Company in the
future, the Company will consider ways to maximize the deductibility of
executive compensation, while retaining the discretion the Company deems
necessary to compensate executive officers in a manner commensurate with
performance and the competitive environment for executive talent.
This Executive Officer Compensation Report is submitted by LeRoy T. Carlson,
Jr., sole member of the Compensation Committee; and by the Stock Option
Compensation Committee, George W. Off (Chairman) and Letitia G.C. Carlson.
-17-
<PAGE>
STOCK PERFORMANCE CHART
The following chart graphs the performance of the cumulative total return to
shareholders (stock price appreciation plus dividends) during the previous five
years in comparison to returns of the Standard & Poor's 500 Composite Stock
Price Index and a peer group index. The peer group index was constructed
specifically for the Company and includes the following non-Bell telephone
companies: Aliant Communications, Inc. (f/k/a Lincoln Telecommunications, Inc.),
ALLTEL Corp., C-TEC Corp., Century Telephone Enterprises, Inc., Cincinnati Bell,
Inc., Citizens Utilities Co. (Class A), Frontier Corp., Southern New England
Telecommunications Corp. and TDS. In calculating the peer group index, the
returns of each company in the group have been weighted according to such
company's market capitalization at the beginning of the period.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
TDS, S&P 500, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/96)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TDS S&P 500 PEER GROUP
<S> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 $115.49 $107.62 $120.43
1993 $149.28 $118.46 $147.53
1994 $133.25 $120.03 $140.21
1995 $115.22 $165.13 $164.41
1996 $106.77 $203.05 $168.49
</TABLE>
Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in TDS Common Shares,
S&P 500, and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
-18-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The sole member of the Compensation Committee is LeRoy T. Carlson, Jr.,
President of TDS. The primary function of the Compensation Committee is to
approve the annual salary, bonus and other cash compensation of officers and key
employees of TDS other than the President. LeRoy T. Carlson, Jr., is a member of
the Board of Directors of TDS, USM, AERL, APP and TDS Telecom. LeRoy T. Carlson,
Jr., is also the Chairman of USM, AERL, APP and TDS Telecom and, as such,
approves the executive officer annual compensation decisions for USM, AERL, APP
and TDS Telecom. LeRoy T. Carlson, Jr. is compensated by TDS for his services to
TDS and all of its subsidiaries. However, USM, AERL and APP reimburse TDS for a
portion of such compensation pursuant to intercompany agreements between TDS and
such subsidiaries. The Stock Option Compensation Committee of the Board of
Directors of TDS makes annual compensation decisions for the President of TDS
and makes long-term compensation decisions for all executive officers who are
employees of TDS. The members of the Stock Option Compensation Committee are
George W. Off (Chairman) and Letitia G.C. Carlson. The members of the Stock
Option Compensation Committee are neither officers or employees of the Company
or any of its subsidiaries nor directors of any of the Company's subsidiaries.
Long-term compensation for executive officers who are employees of USM, AERL or
APP are approved by the stock option compensation committees of USM, AERL and
APP, respectively. The stock option compensation committees of USM, AERL and APP
are composed of directors of such subsidiaries who are neither officers or
employees of TDS or any of its subsidiaries nor directors of TDS.
In addition to such compensation committee interlocks and insider
participation in compensation decisions, the Company and certain related parties
are involved in the following relationships and transactions.
ISSUANCE OF TDS SHARES IN CONNECTION WITH CERTAIN ACQUISITIONS. The Company
may issue TDS securities in connection with the acquisition of cellular
interests on behalf of USM. At the time such acquisitions are closed, the
acquired cellular interests are generally transferred to USM, which reimburses
TDS by issuing USM securities to TDS or by increasing the balance due to TDS
under a revolving credit agreement between TDS and USM (the "Revolving Credit
Agreement"). The fair market value of the USM securities issued to TDS in
connection with these transactions is calculated in the same manner and over the
same time period as the fair market value of the TDS securities issued to the
sellers in such acquisitions. During 1996, USM issued 1.3 million USM Common
Shares to TDS to reimburse TDS for 1.1 million TDS Common Shares issued for such
cellular interests.
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS. Walter C.D. Carlson, a
director of TDS, Michael G. Hron, Secretary of TDS and certain TDS subsidiaries,
William S. DeCarlo, the Assistant Secretary of TDS and certain TDS subsidiaries,
Stephen P. Fitzell, the Secretary of certain TDS subsidiaries, and Sherry S.
Treston, the Assistant Secretary of certain TDS subsidiaries, are partners of
Sidley & Austin, the principal law firm of TDS and its subsidiaries. Walter C.D.
Carlson is a trustee and beneficiary of a voting trust which controls TDS and is
the husband of Debora M. de Hoyos, a director of APP.
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<PAGE>
BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, at February 28, 1997, the number of Common
Shares and Series A Common Shares beneficially owned, and the percentage of the
outstanding shares of each such class so owned by each director and nominee for
director of the Company, by each of the executive officers named in the Summary
Compensation Table and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF INDIVIDUAL OR BENEFICIAL PERCENT OF VOTING
NUMBER OF PERSONS IN GROUP TITLE OF CLASS OWNERSHIP(1) OF CLASS POWER
- ------------------------------------------ ------------------------------ ---------------------- --------- ---------
<S> <C> <C> <C> <C>
LeRoy T. Carlson, Jr.,
Walter C.D. Carlson,
Letitia G.C. Carlson,
Donald C. Nebergall and
Melanie J. Heald(2)...................... Series A Common Shares 6,318,335 91.4% 51.1%
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Ronald D. Webster and
Michael G. Hron(3)....................... Common Shares 1,008 * *
Series A Common Shares 146,576 2.1% 1.2%
LeRoy T. Carlson, Jr.,
C. Theodore Herbert,
Ronald D. Webster and
Michael G. Hron(4)....................... Common Shares 59,957 * *
LeRoy T. Carlson(5)(12)................... Common Shares 46,539 * *
Series A Common Shares 51,553 * *
LeRoy T. Carlson, Jr.(6)(12).............. Common Shares 135,976 * *
Walter C.D. Carlson(7).................... Common Shares 68 * *
Letitia G.C. Carlson(8)................... Common Shares 138 * *
Murray L. Swanson(9)(12).................. Common Shares 42,846 * *
Series A Common Shares 2,485 * *
Rudolph E. Hornacek(10)(12)............... Common Shares 29,566 * *
Series A Common Shares 2,355 * *
James Barr III(12)........................ Common Shares 17,213 * *
Donald C. Nebergall(11)................... Common Shares 1,121 * *
Donald R. Brown(9)........................ Common Shares 7,668 * *
Series A Common Shares 4,686 * *
Herbert S. Wander......................... -- -- -- --
George W. Off............................. -- -- -- --
H. Donald Nelson.......................... Common Shares 3,566 * *
Series A Common Shares 5,253 * *
Donald W. Warkentin(12)................... Common Shares 22,253 * *
All directors and executive officers as a
group (23 persons)(12)................... Common Shares 549,574 1.0% *
Series A Common Shares 6,531,986 94.4% 52.8%
</TABLE>
- ------------
* Less than 1%
(1) The nature of beneficial ownership for shares in this column is sole voting
and investment power, except as otherwise set forth in these footnotes.
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<PAGE>
(2) The shares listed are held by the persons named as trustees under a voting
trust which expires June 30, 2009, created to facilitate long-standing
relationships among the trust certificate holders. Under the terms of the
voting trust, the trustees hold and vote the Series A Common Shares held in
the trust. If the voting trust were terminated, the following persons would
each be deemed to own beneficially more than 5% of the outstanding Series A
Common Shares: Margaret D. Carlson (wife of LeRoy T. Carlson), LeRoy T.
Carlson, Jr., Walter C.D. Carlson, Prudence E. Carlson, Letitia G.C. Carlson
(children of LeRoy T. Carlson and Margaret D. Carlson) and Donald C.
Nebergall, as trustee under certain trusts for the benefit of the heirs of
LeRoy T. and Margaret D. Carlson and an educational institution.
(3) Voting and investment control is shared by the persons named as trustees of
the Telephone and Data Systems, Inc. Employees' Pension Trust I.
(4) Voting and investment control with respect to Company-match shares is
shared by the persons named as trustees of the Telephone and Data Systems,
Inc. Tax-Deferred Savings Trust. Does not include 169,628 shares acquired by
trust employee contributions which are voted by plan participants.
(5) Includes 51,553 Series A Common Shares held by Mr. Carlson's wife. Mr.
Carlson disclaims beneficial ownership of such shares. Does not include
248,975 Series A Common Shares held for the benefit of LeRoy T. Carlson,
625,392 Series A Common Shares held for the benefit of Mr. Carlson's wife or
50,000 Series A Common Shares held for the benefit of certain grandchildren
of Mr. Carlson (an aggregate of 924,367 shares, or 13.4% of class) in the
voting trust described in footnote (2). Beneficial ownership is disclaimed
as to Series A Common Shares held for the benefit of his wife and
grandchildren in such voting trust.
(6) Does not include 1,074,959 Series A Common Shares (15.5% of class) held in
the voting trust described in footnote (2), of which 1,037,019 shares are
held for the benefit of LeRoy T. Carlson, Jr. Beneficial ownership is
disclaimed with respect to an aggregate of 37,940 Series A Common Shares
held for the benefit of his wife, his children and others in such voting
trust.
(7) Does not include 1,082,278 Series A Common Shares (15.6% of class) held in
the voting trust described in footnote (2), of which 1,053,122 shares are
held for the benefit of Walter C.D. Carlson. Beneficial ownership is
disclaimed with respect to an aggregate of 29,156 Series A Common Shares
held for the benefit of his wife and children in such voting trust.
(8) Does not include 1,069,939 Series A Common Shares (15.5% of class) held in
the voting trust described in footnote (2), of which 1,062,371 shares are
held for the benefit of Letitia G.C. Carlson. Beneficial ownership is
disclaimed with respect to an aggregate of 7,568 Series A Common Shares held
for the benefit of her husband and child in such voting trust.
(9) Includes shares as to which voting and/or investment power is shared,
and/or shares held by spouse and/or children.
(10) Includes Series A Common Shares held as custodian for his children.
(11) Does not include 631,777 Series A Common Shares (9.1% of class) held as
trustee under trusts for the benefit of the heirs of LeRoy T. and Margaret
D. Carlson and an educational institution, or 31 Series A Common Shares held
for the benefit of Donald C. Nebergall, which are included in the voting
trust described in footnote (2).
(12) Includes the following number of Common Shares that may be purchased
pursuant to stock options and/or stock appreciation rights which are
currently exercisable or exercisable within 60 days: Mr. LeRoy T. Carlson,
40,473 shares; Mr. LeRoy T. Carlson, Jr., 131,107 shares; Mr. Swanson,
23,937 shares; Mr. Barr, 14,000 shares; Mr. Hornacek, 24,484 shares; Mr.
Warkentin, 21,713 shares; all other executive officers, 133,345 shares; and
all directors and officers as a group, 392,059 shares.
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<PAGE>
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
In addition to persons listed in the preceding table and the footnotes
thereto, the following table sets forth, as of February 28, 1997, information
regarding each person who beneficially owns more than 5% of any class of voting
securities of TDS. The nature of beneficial ownership in this table is sole
voting and investment power except as otherwise set forth in footnotes thereto.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF PERCENT OF
SHAREHOLDER'S NAME AND ADDRESS TITLE OF CLASS CLASS OWNED CLASS VOTING POWER
- -------------------------------------------------- -------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
The Equitable Companies Inc.(1) .................. Common Shares 11,977,785 22.1% 9.7%
787 Seventh Avenue
New York, New York 10019
Franklin Mutual Advisers, Inc.(2) ................ Common Shares 5,308,600 9.8% 4.3%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
The Capital Group Companies, Inc.(3) ............. Common Shares 3,589,750 6.6% 2.9%
333 South Hope Street
Los Angeles, California 90071
Massachusetts Financial Services Company(4) ...... Common Shares 2,731,030 5.0% 2.2%
500 Boylston Street
Boston, Massachusetts 02116
Merrill, Lynch, Pierce, Fenner & Smith, Inc. Preferred Shares 63,532 20.6% *
Post Office Box 2658
Jersey City, New Jersey 07303
William and Betty McDaniel ....................... Preferred Shares 46,666 15.2% *
160 Stowell Road
Salkum, Washington 98582
Roland G. and Bette B. Nehring ................... Preferred Shares 23,030 7.5% *
5253 North Dromedary Road
Phoenix, Arizona 85018
The Peterson Revocable Living Trust .............. Preferred Shares 20,637 6.7% *
Kenneth M. & Audrey M. Peterson,
Trustees
108 Avocado Lane
Weslaco, Texas 78596
Regional Operations Group, Inc. .................. Preferred Shares 15,807 5.1% *
312 South 3rd Street
Minneapolis, Minnesota 55440
</TABLE>
- ------------
* Less than 1%
(1) Based on the most recent Schedule 13G (Amendment No. 10) filed with the SEC.
Includes shares held by the following affiliates: The Equitable Life
Assurance Society of the United States -- 4,976,200 shares; Alliance Capital
Management, L.P. -- 6,974,884 shares; Wood, Struthers & Winthrop Management
Corp. -- 26,200 shares; and Donaldson Lufkin & Jenrette Securities
Corporation -- 501 shares. In such Schedule 13G, The Equitable Companies
Inc. reported sole voting power with respect to 11,757,743 shares, shared
voting power with respect to 84,600 shares, sole dispositive power with
respect to 11,977,284 shares and shared dispositive power with respect to
501 shares. Alpha Assurance I.A.R.D. Mutuelle, Alpha Assurances Vie
Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Uni
Europe Assurance Mutuelle and AXA, corporations organized under the laws of
France, are affiliates of The Equitable Companies Inc.
(2) Based on a Schedule 13D filed with the SEC. Such Schedule 13D reported that
Franklin Mutual Advisers, Inc. exercised sole voting and investment power
with respect to all such shares. Such Schedule 13D is also filed on behalf
of Franklin Resources, Inc., the parent holding company of Franklin Mutual
Advisers, Inc., and by Charles B. Johnson and Rupert H. Johnson, Jr.,
principal shareholders of such parent holding company. Subsequent to
February 28, 1997, Franklin Mutual Advisers, Inc. filed an amendment to such
Schedule 13D to report, among other things, that an advisory contract with
one of its advisory clients who owned 29,400 Common Shares terminated as of
March 10, 1997. See also "Background of Recent Events."
-22-
<PAGE>
(3) Based on a Schedule 13G filed with the SEC. Such Schedule 13G reported that
Capital Guardian Trust Company, Capital Research and Management Company and
Capital International S.A., subsidiaries of The Capital Group, Inc.,
exercised sole voting and investment discretion with respect to 1,794,150
and 3,589,750 shares, respectively. Beneficial ownership was disclaimed with
respect to all such shares.
(4) Based on a Schedule 13G filed with the SEC. Such Schedule 13G reported that
Massachusetts Financial Services Company exercised sole voting and
investment power with respect to all such shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder require the Company's directors and officers, and
persons who are deemed to own more than ten percent of the Common Shares
(collectively, the "Reporting Persons"), to file certain reports ("Section 16
Reports") with the SEC with respect to their beneficial ownership of Common
Shares. The Reporting Persons are also required to furnish the Company with
copies of all Section 16 Reports they file.
Based on a review of copies of Section 16 Reports furnished to the Company
by the Reporting Persons and written representations by directors and officers
of the Company, the Company believes that all Section 16 filing requirements
applicable to the Reporting Persons during and with respect to 1996 were
complied with on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation -- Compensation Committee Interlocks and Insider
Participation."
------------------------
PROPOSAL 2
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors anticipates continuing the services of Arthur
Andersen LLP as independent public accountants for the current fiscal year.
Representatives of Arthur Andersen LLP, who served as independent public
accountants for the last fiscal year, are expected to be present at the Annual
Meeting of Shareholders and will have the opportunity to make a statement and
respond to questions at the Annual Meeting.
Shareholder ratification of the selection of Arthur Andersen LLP as the
Company's independent public accountants is not required by the Bylaws or
otherwise. However, as a matter of good corporate practice, the Board of
Directors has elected to seek such ratification by the affirmative vote of the
holders of a majority of the votes cast by shares entitled to vote with respect
to such matter at the Annual Meeting. Should the shareholders fail to ratify the
selection of Arthur Andersen LLP as independent public accountants, the Board of
Directors will consider whether to retain such firm for the year ending December
31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE
CURRENT FISCAL YEAR.
------------------------
PROPOSAL 3
SHAREHOLDER PROPOSAL WHICH IS OPPOSED BY THE BOARD OF DIRECTORS
The following proposal, including a supporting statement, was submitted by a
holder of 200 Common Shares of the Company, and is required to be included in
the Company's proxy statement under the rules of the Securities and Exchange
Commission. The Company will provide the name and address of the proponent to
any person orally or in writing, as requested, promptly upon the receipt of an
oral or written request therefor. The Company has included the text of the
proposal and supporting statement below exactly as received from the proponent.
The Company does not support and disclaims all responsibility for the content of
the following proposal and its supporting statement. For the reasons set forth
below the material submitted by the proponent, the Board of Directors of the
Company does not believe the following shareholder proposal is in the best
interests of the Company and its shareholders, and unanimously recommends that
shareholders vote "AGAINST" the following proposal:
-23-
<PAGE>
ELIMINATE CLASSIFIED BOARD OF DIRECTORS RESOLUTION
"RESOLVED, that the stockholders of the Company request that the
Board of Directors take the necessary steps, in accordance with
state law, to declassify the Board of Directors so that all
directors are elected annually, such declassification to be
effected in a manner that does not affect the unexpired terms of
directors previously elected"
SUPPORTING STATEMENT
The election of directors is the primary avenue for stockholder to
influence corporate governance policies and to hold management
accountable for implementation of those policies. I believe that
the classification of the Board of Directors, which results in
only a portion of the Board being elected annually, is not in the
best interests of the Company and its stockholders.
The Board of Directors of the Company is divided into three
classes serving staggered three-year terms. I believe that a
Company's classified Board of Directors maintains the incumbency
of the current Board and therefore of current management, which in
turn limits management's accountability to shareholders.
The elimination of the Company's classified board would require
each new director to stand for election annually and allow the
stockholders an opportunity to register their views on the
performance of the Board collectively and each director
individually. I believe that this is one of the best methods
available to the stockholder to insure that the Company will be
managed in a manner that is in the best interests of the
stockholders.
A classified board might also be seen as an impediment to a
potential takeover of the Company's stock at a premium price. With
the inability to replace the majority of the Board at one annual
meeting, an outside suitor might be reluctant to make an offer in
the first place.
I am a founding member of the Investors Rights Association of
America and I believe that the concerns expressed by companies
with classified boards that the annual election of directors could
leave companies without experienced directors in the even that all
incumbents are voted out by stockholders, are unfounded. In my
view, in the unlikely event that the stockholders vote to replace
all directors, this decision would express stockholder
dissatisfaction with the incumbent directors and reflect the need
for change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION.
-------
-------
-------
STATEMENT BY THE BOARD OF DIRECTORS IN OPPOSITION TO THE PROPOSAL
Under Article VI of the Company's Articles of Incorporation, as amended,
directors are divided into three classes, each class is as nearly equal in
number as possible and one of the three classes is elected each year.
Accordingly, directors serve staggered, three-year terms. The staggered election
of directors is a common practice which has been adopted by the shareholders of
many major corporations. It is expressly permitted by the laws of many states,
including the State of Iowa, the state in which the Company is incorporated, and
comports with the rules of the American Stock Exchange, as well as the rules of
the other two major United States securities markets, the New York Stock
Exchange and the Nasdaq National Market.
The Board believes that there are advantages to a classified board which the
proposal and supporting statement fail to address. A classified Board of
Directors can promote continuity of the Company's long-term policies and
stability of leadership by assuring that a majority of the Board of Directors at
any given time will have experience with the business affairs and operations of
the Company. A classified Board of Directors is intended to prevent precipitous
changes in the composition of the Board of Directors by preventing the election
of an entirely new Board of Directors in a single year. Preventing such a
precipitous change in control serves to moderate changes in corporate policies,
business strategies and operations because a majority of the directors at all
times will have had prior experience in the management of the Company's
business.
-24-
<PAGE>
A classified Board also can help the Company attract and retain
well-qualified individuals to serve as directors by providing such individuals
with sufficient time to understand the Company and to formulate and implement
the policies that they believe will benefit the Company. The Board believes that
the resulting continuity of experience among directors and the resulting
opportunities for farsighted strategic planning promote long-term success for
the Company.
The Board further believes that the interests of long-term shareholders of
the Company can be better protected by a classified board. With a classified
board, a majority of the Board generally cannot be replaced over less than two
annual shareholders' meetings. Accordingly, a classified Board reduces the
ability of third parties and short-term investors to interrupt the long-term
strategies of the Company.
The Board believes that stability in management of the Company also promotes
the interests of shareholders by helping the Company to attract qualified
employees and helping the Company to build long-term relationships with
customers, business partners and other constituencies. Given the increasingly
competitive nature of the Company's business, the Board believes that these
relationships are essential to the success of the Company.
Contrary to the proponent's assertion that a classified board has the effect
of limiting "management's accountability to shareholders," the directors elected
to the Board are not less accountable to shareholders merely because they are
not elected annually. The Company's directors are subject to the same standards
of performance and duties regardless of the term of their service. In addition,
because the Board nominates nominees for the Board of Directors at each annual
meeting, shareholders have an effective means to communicate their views on the
performance of the Board annually, regardless of whether all or less than all of
the seats on the Board are open for election.
Under the corporation law of the State of Iowa, the action requested in the
proposal could be taken only if the Board of Directors recommends an amendment
to Article VI of the Company's Articles of Incorporation, as amended, and
directs that such an amendment be submitted to a vote of the Company's
shareholders. Under the terms of the Company's amended Articles of
Incorporation, an affirmative vote of a majority of the voting power of the
outstanding shares of capital stock entitled to vote on such proposal would be
required at a future meeting of the Company's shareholders in order to eliminate
the classification of directors. The Board of Directors has not recommended, and
does not recommend, such an amendment.
THE BOARD OF DIRECTORS OPPOSES THIS SHAREHOLDER PROPOSAL AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "AGAINST" THIS PROPOSAL.
------------------------
PROPOSAL 4
SHAREHOLDER PROPOSAL WHICH IS OPPOSED BY THE BOARD OF DIRECTORS
The following proposal, including a supporting statement, was submitted by a
holder of 200 Common Shares of the Company, and is required to be included in
the Company's proxy statement under the rules of the Securities and Exchange
Commission. The Company will provide the name and address of the proponent to
any person orally or in writing, as requested, promptly upon the receipt of an
oral or written request therefor. The Company has included the text of the
proposal and supporting statement below exactly as received from the proponent.
The Company does not support and disclaims all responsibility for the content of
the following proposal and its supporting statement. For the reasons set forth
below the material submitted by the proponent, the Board of Directors of the
Company does not believe the following shareholder proposal is in the best
interests of the Company and its shareholders, and unanimously recommends that
shareholders vote "AGAINST" the following proposal:
INDEPENDENT BOARD
Whereas the Board of Directors is meant to be an independent body
elected by shareholders charged by law and shareholders with the
duty, authority and responsibility to formulate and direct
corporate policies and is to be held to the highest standards of
fiduciary care, duty and loyalty.
-25-
<PAGE>
Now therefore be it "resolved that the shareholders request that
the Company's Board of Directors be comprised of a majority of
independent directors, meaning that the majority of the board will
be non-family members and individuals who do not currently work or
consult with the Company, have been employed by the Company or
have consulted with the Company in the past. This is meant to be
applied only to nominees for directors at meetings subsequent to
the 1997 annual meeting"
SUPPORTING STATEMENT
I believe that shareholders will be better served when the
majority of the board is truly independent. Such independent
individuals hopefully will bring true objectivity to serious
issues facing our company.
As matter stand today, the majority of the members of the Board of
Directors are either family members, individuals who either are
employed by, do work for, or have been employed by the Company in
the past. There is an apparent conflict of interest each time
matters concerning executive compensation policies, possible
takeover offers and corporate governance issues arise.
I am a founding member of the Investors Rights Association of
America and I believe this is a matter that is urgent and must be
presented to the shareholders for action.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION
-------
-------
-------
STATEMENT BY THE BOARD OF DIRECTORS IN OPPOSITION TO THE PROPOSAL
The Company has consistently sought to add to its Board of Directors
eminently qualified individuals whom the Company believes would provide
substantial benefit and guidance to the Company. The Company believes that
substantial judgment, diligence and care are required to identify and select
qualified persons as directors and, accordingly, finds this shareholder proposal
to be unduly restrictive and wholly inappropriate.
The proposal seeks to impose "independence" requirements that are broad,
arbitrary and unwarranted. The Company's directors are subject to the same
fiduciary duties to the Company and its shareholders regardless of whether or
not they are now or have been previously employees of or consultants to the
Company, or are related to other members of management. To restrict the election
of individuals who have been employed by or provided consulting services to the
Company in the past is excessively broad. An individual who has been previously
employed or engaged as a consultant by the Company will not necessarily possess
any lesser degree of independence and objectivity than someone who has not
previously worked or consulted for the Company. Similarly, it cannot be assumed
that a director who is currently employed by or consults for the Company will
not act with objectivity or in the best interest of the shareholders.
Furthermore, the proposal would place limitations on the election of individuals
who have familial ties with members of the Company's management, even though
such ties would not necessarily interfere with a person's independence,
objectivity or competence to serve as a director.
The Company's Board of Directors includes several persons who have a
significant equity or financial interest in the Company. Individuals who have a
significant equity or financial interest in the Company may be the most
qualified persons to protect and advance the interests of the Company and its
shareholders. If the Board of Directors were to adopt the narrow definition of
"independence" set forth in this shareholder proposal, the Company could be
precluded from nominating as directors persons who have a significant equity or
financial interest in the Company because of a familial or employment
relationship. Thus, the proposal would unnecessarily restrict the ability of the
Company to nominate for election as directors persons who are often the most
knowledgeable and familiar with the Company and its operations, or are otherwise
in the best position to further the interests of the Company and its
shareholders.
Contrary to the implications in the proponent's statement, the Board of
Directors does not believe that a great majority of the decisions of the Board
of Directors involve any conflict of interest. Certain decisions, which may
involve a potential conflict of interest, may be considered and made by outside
directors. From time to time, in accordance with Iowa law, the Company may
appoint a special committee of independent
-26-
<PAGE>
directors to consider matters in which other directors may have a conflict of
interest. The Stock Option Compensation Committee, which administers the
Company's stock option and long-term incentive compensation plans, consists
solely of directors who qualify as "outside directors" under Section 162(m) of
the Internal Revenue Code and as "non-employee directors" under Section 16 of
the Securities Exchange Act of 1934. In addition, the Audit Committee, which
oversees the Company's financial reporting and the Company's internal accounting
control system, includes a majority of directors who qualify as independent
directors under the rules of the American Stock Exchange.
The rules of the American Stock Exchange require that the Company have at
least two independent directors, and the Company is in compliance with such
rules. The Board has nominated for election this year a new independent
director, Mr. George W. Off. Mr. Off is not an employee or a consultant of the
Company and has no familial relationship to any Board member. While the Board
recognizes the important role of independent directors, it believes that the
imposition of additional constraints on the director selection process beyond
the standards embraced by the American Stock Exchange and applicable law would
be both undesirable and unwarranted.
The Board feels that this proposal too narrowly defines the concept of
"independence" as it applies to directors. The Company believes that it would be
imprudent to adopt and apply the criteria as set forth in the proposal without
evaluating the substance of each relationship in question and the overall
qualifications of a Board nominee. This proposal restricts rather than enhances
the Company's ability to locate the most qualified individuals to serve as
directors. Shareholders ultimately decide on the composition of the Board.
Holders of Series A Common Shares and certain Preferred Shares are entitled to
cast or withhold their votes with respect to nominees for election as directors
by such group of holders, and holders of Common Shares and certain Preferred
Shares are entitled to cast or withhold their votes with respect to nominees for
election as directors by such group of holders. Any shareholder who feels that a
particular nominee to be elected by such shareholder's voting group is not
qualified to serve as a director by reason of lack of independence or otherwise
is free to withhold his or her vote from such director. The shareholder
proposal, if implemented, would merely limit the freedom of choice presently
enjoyed by the Company's shareholders. Accordingly, the Board of Directors does
not recommend that this shareholder proposal be adopted.
THE BOARD OF DIRECTORS OPPOSES THIS SHAREHOLDER PROPOSAL AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "AGAINST" THIS PROPOSAL.
------------------------
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company at its principal
executive offices not later than , 1997 for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
SOLICITATION OF PROXIES
Your proxy is solicited by the Board of Directors and its agents and the
cost of solicitation will be paid by the Company. Officers, directors and
regular employees of the Company, acting on its behalf, may also solicit proxies
by mail, advertisement, telephone, telegraph, in person or other methods. None
of such persons will receive additional compensation for such solicitations. The
Company has also retained MacKenzie Partners, Inc. to assist in the solicitation
of proxies for a fee of $ plus reimbursement of out-of-pocket expenses. It
is anticipated that MacKenzie Partners, Inc. will employ approximately persons
to solicit proxies for the Annual Meeting. The Company will, at its expense,
request brokers and other custodians, nominees and fiduciaries to forward proxy
soliciting material to the beneficial owners of shares held of record by such
persons.
In addition to the fees of MacKenzie Partners, Inc., the Company estimates
that costs incidental to the solicitation of proxies by the Board of Directors,
including expenditures for printing, legal, accounting, public relations,
soliciting, advertising and related expenses, are expected to be approximately
$ , excluding amounts which would normally be expended by the Company for
the solicitation of proxies at an annual meeting. The total of such costs
incurred to date is approximately $ .
-27-
<PAGE>
Certain information about the directors and executive officers of the
Company and certain employees of the Company who may also solicit proxies is set
forth in the attached Schedule I, which is incorporated by reference herein.
Schedule II attached hereto sets forth certain additional information with
respect to such persons and is also incorporated by reference herein.
FINANCIAL INFORMATION
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, INCLUDING THE FINANCIAL STATEMENTS
AND THE SCHEDULES THERETO, UPON THE WRITTEN OR ORAL REQUEST OF ANY SHAREHOLDER
AS OF THE RECORD DATE, AND WILL PROVIDE COPIES OF THE EXHIBITS TO ANY SUCH
DOCUMENTS UPON PAYMENT OF A REASONABLE FEE WHICH SHALL NOT EXCEED THE COMPANY'S
REASONABLE EXPENSES INCURRED THEREWITH. REQUESTS FOR SUCH MATERIALS SHOULD BE
DIRECTED TO INVESTOR RELATIONS, TELEPHONE AND DATA SYSTEMS, INC., 30 NORTH
LASALLE STREET, 40TH FLOOR, CHICAGO, ILLINOIS 60602, TELEPHONE (312) 630-1900.
THE 1996 ANNUAL REPORT WILL BE FURNISHED TO ALL PERSONS BEING SOLICITED AT LEAST
20 CALENDAR DAYS BEFORE THE DATE OF THE ANNUAL MEETING.
OTHER BUSINESS
It is not anticipated that any action will be asked of the shareholders
other than that set forth above, but if other matters properly are brought
before the Annual Meeting, the persons named in the proxy will vote in
accordance with their best judgment.
By order of the Board of Directors
[SIGNATURE]
Michael G. Hron
SECRETARY
ALL SHAREHOLDERS ARE URGED TO SIGN, DATE AND MAIL THEIR PROXIES PROMPTLY.
-28-
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS, EXECUTIVE
OFFICERS AND CERTAIN EMPLOYEES OF THE COMPANY
The following table sets forth the name and the present principal occupation
or employment, and the name, principal business and address of any corporation
or other organization in which such employment is carried on, of (1) the
directors and executive officers of the Company and (2) certain employees of the
Company who may assist in soliciting proxies from shareholders of the Company.
In addition, certain additional information with respect to directors and
executive officers of the Company is set forth in the Proxy Statement. Unless
otherwise indicated below, the principal business address of each such person is
30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name and Principal Present Office or Other Principal
Business Address Occupation or Employment
- ---------------------------------- ------------------------------------------------------------
<S> <C>
James Barr III.................... Director of the Company and President of TDS
Telecommunications Corporation
Donald R. Brown................... Director of the Company and Senior Vice President of TDS
Telecommunications Corporation and President of its
Wholesale Markets Group
LeRoy T. Carlson.................. Director and Chairman of the Company
LeRoy T. Carlson, Jr.............. Director and President (Chief Executive Officer) of the
Company
Letitia G. C. Carlson ............ Director of the Company, Medical Doctor, and Assistant
George Washington University Professor, George Washington University Medical Center
Medical Center
2150 Pennsylvania Ave. N.W.
Washington, D.C. 20037
Walter C. D. Carlson ............. Director of the Company and Partner, Sidley & Austin,
Suite 5400 Chicago, Illinois
One First National Plaza
Chicago, IL 60603
Michael K. Chesney................ Vice President--Corporate Development of the Company
George L. Dienes.................. Vice President--Corporate Development of the Company
C. Theodore Herbert............... Vice President--Human Resources of the Company
Rudolph E. Hornacek............... Director and Vice President--Engineering of the Company
Michael G. Hron .................. Secretary of the Company and Partner, Sidley & Austin,
Suite 4200 Chicago, Illinois
One First National Plaza
Chicago, IL 60603
H. Donald Nelson ................. President of United States Cellular Corporation
Suite 700
8410 West Bryn Mawr
Chicago, IL 60631
Donald C. Nebergall............... Director and Consultant to the Company and to other
companies
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Present Office or Other Principal
Business Address Occupation or Employment
- ---------------------------------- ------------------------------------------------------------
<S> <C>
George W. Off .................... Director of the Company and President and Chief Executive
Catalina Marketing Corporation Officer of Catalina Marketing Corporation
11300 Ninth Street, North
St. Petersburg, FL 33716
Karen M. Stewart.................. Vice President--Investor Relations of the Company
Terrence T. Sullivan ............. President of American Paging, Inc.
Suite 3100
1300 Godward Street N.E.
Minneapolis, MN 55413
Murray L. Swanson................. Director and Executive Vice President--Finance (Chief
Financial Officer) of the Company
Herbert S. Wander ................ Director of the Company and Partner, Katten, Muchin & Zavis,
Suite 1600 Chicago, Illinois
525 West Monroe
Chicago, IL 60661-3693
Donald W. Warkentin .............. President of Aerial Communications, Inc.
Suite 1100
8410 West Bryn Mawr
Chicago, IL 60631
Ronald D. Webster................. Vice President and Treasurer of the Company
Byron A. Wertz.................... Vice President--Corporate Development of the Company
Gregory J. Wilkinson.............. Vice President and Controller of the Company
Scott H. Williamson............... Vice President--Acquisitions of the Company
</TABLE>
CERTAIN EMPLOYEES OF THE
COMPANY WHO MAY ALSO SOLICIT PROXIES
<TABLE>
<CAPTION>
Name and Principal Present Office or Other Principal
Business Address Occupation or Employment
- ---------------------------------- ------------------------------------------------------------
<S> <C>
Julie D. Mathews.................. Senior Investor Relations Coordinator of the Company
</TABLE>
I-2
<PAGE>
SCHEDULE II
A. SHARES HELD BY DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN EMPLOYEES OF THE COMPANY
The Common Shares and Series A Common Shares held by, the Company, executive
officers who are directors, other directors, H. Donald Nelson, Donald W.
Warkentin and the trustees of certain employee benefit plans are set forth in
the Proxy Statement. In addition, the following executive officers and/or
employees of the Company beneficially own the following shares as of February
28, 1997:
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares Beneficially Owned
- --------------------------------------------- --------------------------------------------------------
<S> <C>
Michael K. Chesney........................... 13,054 Common Shares
George L. Dienes............................. 61,658 Common Shares
C. Theodore Herbert.......................... 35,303 Common Shares(1)
Karen M. Stewart............................. 7,439 Common Shares
Terrence T. Sullivan......................... No Beneficial Ownership Interest
Ronald D. Webster............................ 29,344 Common Shares(2)
Byron A. Wertz............................... 15,899 Common Shares
Gregory J. Wilkinson......................... 15,166 Common Shares
723 Series A Common Shares
Scott H. Williamson.......................... 3,792 Common Shares
Julie D. Mathews............................. 307 Common Shares
</TABLE>
- ------------
(1) In addition to the shares listed herein, Mr. Herbert may also be deemed to
be the beneficial owner of certain shares as a trustee of the Telephone and
Data Systems, Inc. Employees' Pension Trust I and the Telephone and Data
Systems, Inc. Tax-Deferred Savings Trust. These interests are disclosed in
further detail in the Proxy Statement.
(2) In addition to the shares listed herein, Mr. Webster may also be deemed to
be the beneficial owner of certain shares as a trustee of the Telephone and
Data Systems, Inc. Employees' Pension Trust I and the Telephone and Data
Systems, Inc. Tax-Deferred Savings Trust. These interests are disclosed in
further detail in the Proxy Statement.
II-1
<PAGE>
B. SHARES OF THE COMPANY'S SUBSIDIARIES HELD BY DIRECTORS,
EXECUTIVE OFFICERS AND CERTAIN EMPLOYEES OF THE COMPANY
For purposes of disclosure required under Item 5(b)(1)(x) of Schedule 14A of
the Securities Exchange Act of 1934, as amended, the Company is the ultimate
parent corporation in the Company's corporate family. The following companies
are the subsidiaries of the Company in which certain directors, executive
officers and employees of the Company have beneficial interests: (1) Aerial
Communications, Inc., (2) American Paging, Inc. and (3) United States Cellular
Corporation. The following directors, executive officers and employees of the
Company beneficially own the shares indicated as of February 28, 1997:
<TABLE>
<CAPTION>
Shares of such Subsidiary
Name of Subsidiary Name of Beneficial Owner Beneficially Owned by Class
- ------------------------------------------ ------------------------------------------ ------------------------------
<S> <C> <C>
Aerial Communications, Inc. LeRoy T. Carlson, Jr., C. Theodore 8,001 Common Shares
Herbert, Ronald D. Webster and Michael G.
Hron(3)
Aerial Communications, Inc. Donald R. Brown 1,000 Common Shares
Aerial Communications, Inc. LeRoy T. Carlson 1,000 Common Shares
Aerial Communications, Inc. LeRoy T. Carlson, Jr.(4) 2,600 Common Shares
Aerial Communications, Inc. C. Theodore Herbert 4,478 Common Shares
Aerial Communications, Inc. Julie D. Mathews 100 Common Shares
Aerial Communications, Inc. Karen M. Stewart 1,000 Common Shares
Aerial Communications, Inc. Murray L. Swanson 3,000 Common Shares
Aerial Communications, Inc. Donald W. Warkentin(5) 47,277 Common Shares
Aerial Communications, Inc. Byron A. Wertz 300 Common Shares
Aerial Communications, Inc. Gregory J. Wilkinson 200 Common Shares
Aerial Communications, Inc. Scott H. Williamson 1,000 Common Shares
American Paging, Inc. LeRoy T. Carlson, Jr., 31,283 Common Shares
C. Theodore Herbert,
Ronald D. Webster and
Michael G. Hron(6)
American Paging, Inc. LeRoy T. Carlson, Jr.(4) 1,000 Common Shares
American Paging, Inc. Michael K. Chesney 1,000 Common Shares
American Paging, Inc. C. Theodore Herbert 1,000 Common Shares
American Paging, Inc. Michael G. Hron 400 Common Shares
American Paging, Inc. Julie D. Mathews 100 Common Shares
American Paging, Inc. Donald C. Nebergall 2,000 Common Shares
</TABLE>
- ---------
(3) Represents shares of Aerial Communications, Inc. acquired through
company-match contributions by the persons named as trustees of the
Telephone and Data Systems, Inc. Tax Deferred Savings Trust. The 8,001
shares do not include 25,812 Common Shares of Aerial Communications, Inc.
acquired by such trust with employee contributions which are voted by plan
participants. Such trustees disclaim beneficial ownership of all such shares
except for shares held for their individual benefit in such trust. This
information is presented as of December 31, 1996.
(4) Such Common Shares are held by such person's spouse.
(5) Mr. Warkentin's 47,277 shares include 42,277 Common Shares of Aerial
Communications, Inc. subject to Options or SARs which are currently
exercisable or exercisable within 60 days.
(6) Voting and investment control is shared by the persons named as trustees of
the Telephone and Data Systems, Inc. Tax-Deferred Savings Trust. The 31,283
shares do not include 35,579 shares of American Paging, Inc. as to which
voting power is passed through to plan participants.
II-2
<PAGE>
<TABLE>
<CAPTION>
Shares of such Subsidiary
Name of Subsidiary Name of Beneficial Owner Beneficially Owned by Class
- ------------------------------------------ ------------------------------------------ ------------------------------
<S> <C> <C>
American Paging, Inc. Gregory J. Wilkinson(7) 500 Common Shares
United States Cellular Corporation LeRoy T. Carlson, Jr., 33,749 Common Shares
C. Theodore Herbert,
Ronald D. Webster and
Michael G. Hron(8)
United States Cellular Corporation LeRoy T. Carlson 1,243 Common Shares
United States Cellular Corporation C. Theodore Herbert 706 Common Shares
United States Cellular Corporation Donald C. Nebergall 500 Common Shares
United States Cellular Corporation H. Donald Nelson(9) 67,745 Common Shares
United States Cellular Corporation Karen M. Stewart 175 Common Shares
United States Cellular Corporation Byron A. Wertz 100 Common Shares
United States Cellular Corporation Gregory J. Wilkinson 1,052 Common Shares
</TABLE>
- ------------
(7) Such Common Shares are held by such person's spouse.
(8) Represents Common Shares of United States Cellular Corporation acquired
through company-match contributions by the persons named as trustees of the
Telephone and Data Systems, Inc. Tax Deferred Savings Trust. The 33,749
shares do not include 157,651 Common Shares of United States Cellular
Corporation acquired by such trust with employee contributions which are
voted by plan participants. Such trustees disclaim beneficial ownership of
all such shares except for shares held for their individual benefit in such
trust.
(9) Mr. Nelson's 67,745 shares include 63,454 Common Shares of United States
Cellular Corporation subject to Options or SARs which are currently
exercisable or exercisable within 60 days. Mr. Nelson's shares also include
1,360 shares of restricted stock which are subject to future vesting.
Furthermore, Mr. Nelson's shares also include shares as to which voting
and/or investment power is shared.
II-3
<PAGE>
C. PURCHASES AND SALES OF SECURITIES
The following table sets forth information concerning all purchases and
sales of Common Shares ("Common Shares") and Series A Common Shares ("Series A
Shares") of the Company by directors, officers and certain employees since
February 28, 1995:
<TABLE>
<CAPTION>
Name Date of Transaction Nature of Transaction(10) Number of Shares(11)
- ------------------------------ ------------------------- ------------------------- ---------------------------------
<S> <C> <C> <C>
DIRECTORS:
James Barr III March 31, 1995 (1) 5 Common Shares
June 30, 1995 (1) 5 Common Shares
Sept. 29, 1995 (1) 5 Common Shares
Dec. 29, 1995 (1) 5 Common Shares
Dec. 29, 1995 (4) 475 Common Shares
1995 (2) 63 Common Shares
Sept. 30, 1996 (4) 412 Common Shares
1996 (1) 26 Common Shares
1996 (2) 70 Common Shares
Donald R. Brown March 31, 1995 (1) 36 Common Shares
March 31, 1995 (1) 12 Series A Shares
June 30, 1995 (1) 38 Common Shares
June 30, 1995 (1) 12 Series A Shares
Sept. 29, 1995 (1) 23 Common Shares
Sept. 29, 1995 (1) 11 Series A Shares
Dec. 29, 1995 (1) 4 Common Shares
Dec. 29, 1995 (1) 12 Series A Shares
1995 (2) 1 Common Share
Feb. 12, 1996 (7) 2,875 Common Shares
Sept. 30, 1996 (4) 125 Common Shares
1996 (1) 16 Common Shares
1996 (1) 47 Series A Shares
1996 (2) 45 Common Shares
Donald R. Brown(12) March 31, 1995 (1) 3 Common Shares
June 30, 1995 (1) 4 Common Shares
Sept. 29, 1995 (1) 14 Common Shares
Dec. 29, 1995 (1) 15 Common Shares
1996 (1) 59 Common Shares
LeRoy T. Carlson Jan. 3, 1995 (8) 4,900 Common Shares
March 31, 1995 (1) 24 Common Shares
</TABLE>
- ------------
(10) KEY:
(1) Acquisition of shares pursuant to a dividend reinvestment program.
(2) Acquisition of shares pursuant to the Telephone and Data System's, Inc.
401(k) Plan.
(3) Disposition of shares previously acquired pursuant to the Telephone and
Data System's, Inc. 401(k) Plan.
(4) Acquisition of shares pursuant to the Telephone and Data Systems, Inc.
Employee Stock Purchase Plan.
(5) Acquisition of shares upon exercise of Telephone and Data Systems, Inc.
stock option.
(6) Open market or private purchase.
(7) Open market or private sale.
(8) Disposition of shares by gift.
(9) Acquisition of shares by gift.
(10) Exchange of Common Shares into Series A Shares.
(11) Disposition of shares to the Company.
(11) For purposes of this chart, unless otherwise indicated, any acquisitions or
dispositions of fractional interests in the securities of the Company have
been rounded to the nearest whole share.
(12) Mr. Brown disclaims beneficial ownership of these shares. The shares are
owned by Mr. Brown's wife.
II-4
<PAGE>
<TABLE>
<CAPTION>
Name Date of Transaction Nature of Transaction Number of Shares
- ------------------------------ ------------------------- ------------------------- ---------------------------------
<S> <C> <C> <C>
March 31, 1995 (1) 56 Series A Shares
May 31, 1995 (10) 4,050 Common Shares
June 30, 1995 (1) 14 Common Shares
June 30, 1995 (1) 70 Series A Shares
Sept. 29, 1995 (1) 13 Common Shares
Sept. 29, 1995 (1) 62 Series A Shares
Dec. 29, 1995 (1) 14 Common Shares
Dec. 29, 1995 (1) 69 Series A Shares
1995 (2) 163 Common Shares
Jan. 3, 1996 (8) 2,393 Common Shares
1996 (1) 29 Common Shares
1996 (2) 181 Common Shares
LeRoy T. Carlson(13) March 31, 1995 (1) 130 Series A Shares
May 31, 1995 (10) 4,050 Series A Shares
June 30, 1995 (1) 137 Series A Shares
Sept. 29, 1995 (1) 121 Series A Shares
Dec. 29, 1995 (1) 136 Series A Shares
1996 (1) 517 Series A Shares
LeRoy T. Carlson(14) Jan. 3, 1995 (8) 11,220 Series A Shares
March 31, 1995 (1) 2,324 Series A Shares
June 30, 1995 (1) 2,462 Series A Shares
July 12, 1995 (6) 500 Series A Series
Sept. 29, 1995 (1) 2,171 Series A Shares
Dec. 29, 1995 (1) 2,429 Series A Shares
Jan. 3, 1996 (8) 13,244 Series A Shares
1996 (1) 9,209 Series A Shares
1996 (1) 186 Series A Shares
Jan. 9, 1997 (8) 12,548 Series A Shares
LeRoy T. Carlson, Jr. 1995 (2) 263 Common Shares
1996 (2) 300 Common Shares
LeRoy T. Carlson, Jr.(15) Jan. 3, 1995 (9) 1,760 Series A Shares
March 31, 1995 (1) 88 Series A Shares
June 30, 1995 (1) 93 Series A Shares
Sept. 29, 1995 (1) 82 Series A Shares
Dec. 29, 1995 (1) 92 Series A Shares
Jan. 3, 1996 (9) 2,000 Series A Shares
Jan. 9, 1997 (9) 1,140 Series A Shares
1996 (1) 365 Series A Shares
Letitia G.C. Carlson 1996 (1) 128 Common Shares
Letitia G.C. Carlson(16) 1995 (1) 111 Series A Shares
Jan. 3, 1995 (9) 1,320 Series A Shares
Jan. 3, 1996 (9) 1,500 Series A Shares
Jan. 9, 1997 (9) 1,710 Series A Shares
1996 (1) 5,911 Series A Shares
Walter C.D. Carlson 1995 (1) 1 Common Share
</TABLE>
- ------------
(13) Mr. Carlson disclaims beneficial ownership of these shares. The shares are
owned by Mr. Carlson's wife.
(14) Beneficial ownership of shares held in a voting trust. A more detailed
description of this voting trust is set forth in the Proxy Statement.
(15) Beneficial ownership of shares held in a voting trust. Mr. Carlson is one
of five trustees of the voting trust which is the record owner of the
referenced shares. A more detailed description of this voting trust is set
forth in the Proxy Statement.
(16) Beneficial ownership of shares held in a voting trust. Dr. Carlson is one
of five trustees of such voting trust which is the record owner of the
referenced shares. A more detailed description of this voting trust is set
forth in the Proxy Statement.
II-5
<PAGE>
<TABLE>
<CAPTION>
Name Date of Transaction Nature of Transaction Number of Shares
- ------------------------------ ------------------------- ------------------------- ---------------------------------
<S> <C> <C> <C>
1996 (1) 1 Common Share
Walter C.D. Carlson(17) Jan. 3, 1995 (9) 2,200 Series A Shares
March 31, 1995 (1) 1,534 Series A Shares
June 30, 1995 (1) 1,625 Series A Shares
Sept. 29, 1995 (1) 1,432 Series A Shares
Dec. 29, 1995 (1) 1,602 Series A Shares
Jan. 3, 1996 (9) 2,500 Series A Shares
Jan. 9, 1997 (9) 1,140 Series A Shares
1996 (1) 6,110 Series A Shares
Rudolph E. Hornacek Dec. 29, 1995 (4) 475 Common Shares
1995 (2) 63 Common Shares
May 2, 1996 (8) 400 Common Shares
Sept. 30, 1996 (4) 421 Common Shares
Oct. 1, 1996 (3) 268 Common Shares
1996 (2) 103 Common Shares
Donald C. Nebergall March 31, 1995 (1) 1 Common Share
June 30, 1995 (1) 1 Common Share
Sept. 29, 1995 (1) 1 Common Share
Dec. 29, 1995 (1) 1 Common Share
1996 (1) 4 Common Shares
Donald C. Nebergall(18) March 31, 1995 (1) 2 Common Shares
June 30, 1995 (1) 2 Common Shares
Sept. 29, 1995 (1) 2 Common Shares
Dec. 29, 1995 (1) 2 Common Shares
1996 (1) 7 Common Shares
George W. Off No reportable stock transactions for the prior two years by this individual.
Murray L. Swanson March 31, 1995 (1) 18 Common Shares
March 31, 1995 (1) 5 Series A Shares
May 31, 1995 (7) 500 Common Shares
June 30, 1995 (1) 19 Common Shares
June 30, 1995 (1) 5 Series A Shares
Aug. 2, 1995 (5) 3,375 Common Shares
Aug. 15, 1995 (7) 1,000 Common Shares
Sept. 29, 1995 (1) 22 Common Shares
Sept. 29, 1995 (1) 5 Series A Shares
Oct. 26, 1995 (7) 5,200 Common Shares
Dec. 29, 1995 (1) 25 Common Shares
Dec. 29, 1995 (1) 5 Series A Shares
Dec. 29, 1995 (4) 250 Common Shares
1995 (2) 78 Common Shares
April 8, 1996 (5) 3,375 Common Shares
1996 (1) 123 Common Shares
1996 (1) 20 Series A Shares
1996 (2) 239 Common Shares
Feb. 26, 1997 (7) 1,412 Common Shares
March 12, 1997 (7) 2,000 Common Shares
March 24, 1997 (5) 3,375 Common Shares
March 24, 1997 (11) 1,375 Common Shares
</TABLE>
- ------------
(17) Beneficial ownership of shares held in a voting trust. Mr. Carlson is one
of five trustees of a voting trust which is the record owner of the
referenced shares. A more detailed description of this voting trust is set
forth in the Proxy Statement.
(18) These shares are held by Mr. Nebergall as trustee. Mr. Nebergall disclaims
beneficial ownership of these shares.
II-6
<PAGE>
<TABLE>
<CAPTION>
Name Date of Transaction Nature of Transaction Number of Shares
- ------------------------------ ------------------------- ------------------------- ---------------------------------
<S> <C> <C> <C>
Herbert S. Wander No reportable stock transactions for the prior two years by this individual.
CERTAIN OFFICERS:
Michael K. Chesney 1995 (2) 3 Common Shares
1996 (2) 45 Common Shares
George L. Dienes March 31, 1995 (1) 17 Common Shares
June 30, 1995 (1) 18 Common Shares
Sept. 29, 1995 (1) 16 Common Shares
Dec. 29, 1995 (1) 18 Common Shares
1995 (2) 151 Common Shares
Sept. 30, 1996 (4) 281 Common Shares
1996 (1) 68 Common Shares
1996 (2) 239 Common Shares
C. Theodore Herbert July 24, 1995 (5) 5,500 Common Shares
Dec. 29, 1995 (4) 350 Common Shares
1995 (3) 77 Common Shares
1995 (2) 137 Common Shares
Sept. 30, 1996 (4) 49 Common Shares
Oct. 1, 1996 (3) 332 Common Shares
Michael G. Hron March 15, 1995 (6) 400 Common Shares
H. Donald Nelson March 31, 1995 (1) 13 Series A Shares
June 30, 1995 (1) 14 Series A Shares
Sept. 29, 1995 (1) 12 Series A Shares
Nov. 27, 1995 (1) 1 Common Share
Nov. 27, 1995 (8) 1 Common Share
Dec. 29, 1995 (1) 14 Series A Shares
Dec. 29, 1995 (4) 475 Common Shares
1995 (2) 202 Common Shares
1996 (1) 53 Series A Shares
1996 (3) 616 Common Shares
January 1, 1997 (2) 111 Common Shares
Karen M. Stewart March 31, 1995 (1) 2 Common Shares
June 30, 1995 (1) 2 Common Shares
Sept. 29, 1995 (1) 2 Common Shares
Dec. 1, 1995 (1) 125 Common Shares
Dec. 29, 1995 (1) 2 Common Shares
1995 (2) 54 Common Shares
Sept. 30, 1996 (4) 114 Common Shares
1996 (1) 8 Common Shares
1996 (2) 170 Common Shares
Terrence T. Sullivan No reportable stock transactions for the prior two years by this individual.
Donald W. Warkentin September 30, 1996 (4) 540 Common Shares
Ronald D. Webster March 31, 1995 (1) 10 Common Shares
June 30, 1995 (1) 10 Common Shares
Sept. 29, 1995 (1) 9 Common Shares
Dec. 29, 1995 (1) 10 Common Shares
1995 (2) 263 Common Shares
1996 (1) 38 Common Shares
1996 (2) 60 Common Shares
Byron A. Wertz 1995 (2) 2 Common Shares
Sept. 30, 1996 (4) 384 Common Shares
1996 (2) 45 Common Shares
Jan. 24, 1997 (5) 4,465 Common Shares
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Name Date of Transaction Nature of Transaction Number of Shares
- ------------------------------ ------------------------- ------------------------- ---------------------------------
<S> <C> <C> <C>
Byron A. Wertz(19) 1995 (1) 1 Common Share
1996 (1) 1 Common Share
Byron A. Wertz(20) Jan. 3, 1995 (9) 1,320 Series A Shares
March 31, 1995 (1) 6 Series A Shares
June 30, 1995 (1) 6 Series A Shares
Sept. 29, 1995 (1) 5 Series A Shares
Dec. 29, 1995 (1) 6 Series A Shares
Jan. 3, 1996 (9) 1,500 Series A Shares
Dec. 30, 1996 (9) 367 Series A Shares
Jan. 9, 1997 (9) 1,710 Series A Shares
1996 (1) 28 Series A Shares
Gregory J. Wilkinson March 31, 1995 (1) 2 Common Shares
March 31, 1995 (1) 2 Series A Shares
May 12, 1995 (5) 4,725 Common Shares
June 30, 1995 (1) 15 Common Shares
June 30, 1995 (1) 2 Series A Shares
Sept. 29, 1995 (1) 13 Common Shares
Sept. 29, 1995 (1) 2 Series A Shares
Dec. 29, 1995 (1) 15 Common Shares
Dec. 29, 1995 (1) 2 Series A Shares
1995 (2) 62 Common Shares
Jan. 19, 1996 (8) 500 Common Shares
Sept. 30, 1996 (4) 85 Common Shares
1996 (1) 52 Common Shares
1996 (1) 7 Series A Shares
1996 (2) 126 Common Shares
Gregory J. Wilkinson(21) 1995 (1) 1 Common Share
1995 (1) 1 Series A Share
1996 (1) 1 Common Share
1996 (1) 1 Series A Share
Scott Williamson 1996 (2) 31 Common Shares
CERTAIN EMPLOYEES:
Julie D. Mathews Dec. 31, 1995 (1) 1 Common Share
Dec. 31, 1995 (4) 100 Common Shares
1995 (2) 131 Common Shares
Dec. 31, 1996 (1) 1 Common Share
Dec. 31, 1996 (4) 31 Common Shares
1996 (2) 43 Common Shares
</TABLE>
- ------------
(19) These shares are held by Mr. Wertz as custodian for his children.
(20) A portion of these shares are held by a voting trust. Another portion of
these shares are held by Mr. Wertz as custodian for his children.
(21) Mr. Wilkinson disclaims beneficial ownership of these shares. Mr.
Wilkinson's wife owns these shares.
II-8
<PAGE>
D. TRANSACTIONS BY OR BETWEEN THE COMPANY AND ITS DIRECTORS,
EXECUTIVE OFFICERS AND CERTAIN EMPLOYEES
LeRoy T. Carlson, Jr. and Donald C. Nebergall have agreed to serve as the
proxies on the Company's Annual Meeting proxy cards.
Except as disclosed in these Schedules or in the Proxy Statement, none of
the directors, executive officers or the employees of the Company named in
Schedule I owns any securities of the Company, beneficially or of record, has
purchased or sold any of such securities within the past two years or is or was
within the past year a party to any contract, arrangement or understanding with
any person with respect to any such securities (other than pursuant to
compensation and benefit arrangements entered into in the ordinary course of
business). Except as disclosed in these Schedules or in the Proxy Statement,
none of the Company's directors, executive officers or employees named in
Schedule I beneficially owns, directly or indirectly, any securities of any
subsidiary of the Company. Further, except as disclosed in these Schedules or in
the Proxy Statement, to the best knowledge of the Company, its directors,
executive officers or the employees of the Company named in Schedule I, none of
their associates beneficially owns, directly or indirectly, any securities of
the Company.
Other than as disclosed in these Schedules or in the Proxy Statement, to the
knowledge of the Company, none of the directors, executive officers or the
employees of the Company named in Schedule I has any substantial interest,
direct or indirect, by security holdings or otherwise, in any matter to be acted
upon at the Annual Meeting.
Other than as disclosed in these Schedules or in the Proxy Statement, to the
knowledge of the Company, none of the directors, executive officers or the
employees of the Company named in Schedule I is, or has been within the past
year, a party to any contract, arrangement or understanding with any person with
respect to any securities of the Company, including but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies (other than pursuant to compensation and benefit
arrangements entered into in the ordinary course of business).
Other than as disclosed in these Schedules or in the Proxy Statement, to the
knowledge of the Company, none of the directors, executive officers or the
employees of the Company names in Schedule I, or any of their associates, has
had or will have a direct or indirect material interest in any transaction or
series of similar transactions since the beginning of the Company's last fiscal
year or any currently proposed transactions, or series of similar transactions,
to which the Company or any of its subsidiaries was or is to be a party, in
which the amount involved exceeds $60,000 (other than pursuant to compensation
and benefit arrangements entered into in the ordinary course of business).
Other than as disclosed in these Schedules or in the Proxy Statement, to the
knowledge of the Company, none of the directors, executive officers or the
employees of the Company named in Schedule I, or any of their associates, has
any arrangements or understandings with any person with respect to any future
employment by the Company or its affiliates or with respect to any future
transactions to which the Company or any of its affiliates or with respect to
any future transactions to which the Company or any of its affiliates will or
may be a party (other than pursuant to compensation and benefit arrangements
entered into in the ordinary course of business).
To the knowledge of the Company, no person, other than a director or
executive officer of the Company acting solely in that capacity, is a party to
any arrangement or understanding pursuant to which a nominee for election as
director is proposed to be elected.
II-9
<PAGE>
IMPORTANT
DO NOT DELAY!
VOTE THE ENCLOSED WHITE PROXY CARD(S) TODAY.
If you have any questions or need assistance
in completing the WHITE proxy card(s) please contact:
[LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
<PAGE>
PROXY PROXY
TELEPHONE AND DATA SYSTEMS, INC.
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING OF THE SHAREHOLDERS
May 16, 1997
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, or either of them acting in the absence of the other, with power
of substitution, attorneys and proxies for and in the name and place of the
undersigned, to vote the number of Common Shares that the undersigned would
be entitled to vote if then personally present at the 1997 Annual Meeting of
the Shareholders of Telephone and Data Systems, Inc., or at any adjournment
thereof, as set forth in the accompanying Notice of Annual Meeting and Proxy
Statement, receipt of which is hereby acknowledged, as designated on the
reverse side hereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE IN PROPOSAL 1,
"FOR" PROPOSAL 2, AND "AGAINST" PROPOSALS 3 AND 4. THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE HEREOF. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE NOMINEE IN PROPOSAL 1,
"FOR" PROPOSAL 2, AND "AGAINST" PROPOSALS 3 AND 4. IF A NOMINEE IS UNABLE
TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY
SHALL HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE NOMINEE
DESIGNATED BY THE BOARD OF DIRECTORS (UNLESS AUTHORITY TO VOTE FOR THE
NOMINEE HAS BEEN WITHHELD).
PLEASE SIGN, DATE AND MAIL THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE OR FAX BOTH SIDES TO (212) 929-0308. IF YOU HAVE ANY QUESTIONS OR
NEED ASSISTANCE, PLEASE CALL MACKENZIE PARTNERS, INC. AT (800) 322-2885.
(CONTINUED ON REVERSE SIDE)
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
Vote FOR 1 and 2
WITHHOLD
AUTHORITY
FOR the to vote for
nominee the nominee
1. ELECTION OF DIRECTORS
GEORGE W. OFF / / / /
FOR AGAINST ABSTAIN
2. RATIFY ACCOUNTANTS FOR 1997 / / / / / /
Vote AGAINST 3 and 4
FOR AGAINST ABSTAIN
3. SHAREHOLDER PROPOSAL
RE: CLASSIFIED BOARD / / / / / /
FOR AGAINST ABSTAIN
4. SHAREHOLDER PROPOSAL
RE: DIRECTOR INDEPENDENCE / / / / / /
5. In accordance with their discretion, to
vote for a substitute nominee as indicated
on the reverse side and upon all other
matters that may properly come before said
Annual Meeting and any adjournment thereof,
including matters incidental to the conduct
of the meeting.
Dated: ________________________________, 1997
Please Sign Here ____________________________
Title________________________________________
NOTE: Please date this proxy and sign it
exactly as your name or names appear. All
joint owners of shares should sign. State
full title when signing as executor,
administrator, trustee, guardian, etc.
Please return signed proxy in the enclosed
envelope.
<PAGE>
PROXY PROXY
TELEPHONE AND DATA SYSTEMS, INC.
PROXY FOR PREFERRED SHARES ISSUED AFTER OCTOBER 31, 1981 SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS FOR THE 1997
ANNUAL MEETING OF THE SHAREHOLDERS
MAY 16, 1997
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, or either of them acting in the absence of the other, with power
of substitution, attorneys and proxies for and in the name and place of the
undersigned, to vote the number of Preferred Shares that the undersigned
would be entitled to vote if then personally present at the 1997 Annual
Meeting of the Shareholders of Telephone and Data Systems, Inc., or at any
adjournment thereof, as set forth in the accompanying Notice of Annual
Meeting and Proxy Statement, receipt of which is hereby acknowledged, as
designated on the reverse side hereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IN PROPOSAL 1,
"FOR" PROPOSAL 2, AND "AGAINST" PROPOSALS 3 AND 4. THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE
HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES
IN PROPOSAL 1, "FOR" PROPOSAL 2, AND "AGAINST" PROPOSALS 3 AND 4. IF A
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PERSONS
NAMED IN THIS PROXY SHALL HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A
SUBSTITUTE NOMINEE DESIGNATED BY THE BOARD OF DIRECTORS (UNLESS AUTHORITY TO
VOTE FOR NOMINEES HAS BEEN WITHHELD).
PLEASE SIGN, DATE AND MAIL THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE OR FAX BOTH SIDES TO (212) 929-0308. IF YOU HAVE ANY QUESTIONS OR
NEED ASSISTANCE, PLEASE CALL MACKENZIE PARTNERS, INC. AT (800) 322-2885.
(CONTINUED ON REVERSE SIDE)
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
Vote FOR 1 and 2
Withhold
Authority
FOR the to vote for
nominees the nominees
1. ELECTION OF DIRECTORS
DONALD R. BROWN
RUDOLPH E. HORNACEK
(INSTRUCTION: TO WITHHOLD AUTHORITY
FOR ANY NOMINEE, STRIKE THROUGH THAT
NOMINEE'S NAME ABOVE.) / / / /
FOR AGAINST ABSTAIN
2. RATIFY ACCOUNTANTS FOR 1997 / / / / / /
Vote AGAINST 3 and 4
FOR AGAINST ABSTAIN
3. SHAREHOLDER PROPOSAL
RE: CLASSIFIED BOARD / / / / / /
FOR AGAINST ABSTAIN
4. SHAREHOLDER PROPOSAL
RE: DIRECTOR INDEPENDENCE / / / / / /
5. In accordance with their discretion, to
vote for a substitute nominee as indicated
on the reverse side and upon all other
matters that may properly come before said
Annual Meeting and any adjournment thereof,
including matters incidental to the conduct
of the meeting.
Dated: _________________________________, 1997
Please Sign Here _____________________________
Title ________________________________________
NOTE: Please date this proxy and sign it
exactly as your name or names appear. All
joint owners of shares should sign. State
full title when signing as executor,
administrator, trustee, guardian, etc.
Please return signed proxy in the enclosed
envelope.
<PAGE>
PROXY PROXY
TELEPHONE AND DATA SYSTEMS, INC.
PROXY FOR PREFERRED SHARES ISSUED PRIOR TO OCTOBER 31, 1981 SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING
OF THE SHAREHOLDERS
May 16, 1997
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, or either of them acting in the absence of the other, with power
of substitution, attorneys and proxies for and in the name and place of the
undersigned, to vote the number of Preferred Shares that the undersigned
would be entitled to vote if then personally present at the 1997 Annual
Meeting of the Shareholders of Telephone and Data Systems, Inc., or at any
adjournment thereof, as set forth in the accompanying Notice of Annual
Meeting and Proxy Statement, receipt of which is hereby acknowledged, as
designated on the reverse side hereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE IN PROPOSAL 1,
"FOR" PROPOSAL 2, AND "AGAINST" PROPOSALS 3 AND 4. THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE HEREOF. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE NOMINEE IN PROPOSAL 1,
"FOR" PROPOSAL 2, AND "AGAINST" PROPOSALS 3 AND 4. IF A NOMINEE IS UNABLE
TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY
SHALL HAVE DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE NOMINEE
DESIGNATED BY THE BOARD OF DIRECTORS (UNLESS AUTHORITY TO VOTE FOR THE
NOMINEE HAS BEEN WITHHELD).
PLEASE SIGN, DATE AND MAIL THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE OR FAX BOTH SIDES TO (212) 929-0308. IF YOU HAVE ANY QUESTIONS OR
NEED ASSISTANCE, PLEASE CALL MACKENZIE PARTNERS, INC. AT (800) 322-2885.
(CONTINUED ON REVERSE SIDE)
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
Vote FOR 1 and 2
WITHHOLD
AUTHORITY
FOR the to vote for
nominee the nominee
1. ELECTION OF DIRECTORS
GEORGE W. OFF / / / /
For Against Abstain
2. RATIFY ACCOUNTANTS FOR 1997 / / / / / /
Vote AGAINST 3 and 4
For Against Abstain
3. SHAREHOLDER PROPOSAL
RE: CLASSIFIED BOARD / / / / / /
For Against Abstain
4. SHAREHOLDER PROPOSAL
RE: DIRECTOR INDEPENDENCE / / / / / /
5. In accordance with their discretion, to
vote for a substitute nominee as indicated
on the reverse side and upon all other
matters that may properly come before said
Annual Meeting and any adjournment thereof,
including matters incidental to the conduct
of the meeting.
Dated: ________________________________, 1997
Please Sign Here ____________________________
Title________________________________________
Note: Please date this proxy and sign it
exactly as your name or names appear. All
joint owners of shares should sign. State
full title when signing as executor,
administrator, trustee, guardian, etc.
Please return signed proxy in the enclosed
envelope.
<PAGE>
PROXY PROXY
TELEPHONE AND DATA SYSTEMS, INC.
PROXY FOR SERIES A COMMON SHARES SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING OF THE SHAREHOLDERS
May 16, 1997
The undersigned hereby appoints LeRoy T. Carlson, Jr., and Donald C.
Nebergall, or either of them acting in the absence of the other, with power
of substitution, attorneys and proxies for and in the name and place of the
undersigned, to vote the number of Series A Common Shares that the
undersigned would be entitled to vote if then personally present at the 1997
Annual Meeting of the Shareholders of Telephone and Data Systems, Inc., or at
any adjournment thereof, as set forth in the accompanying Notice of Annual
Meeting and Proxy Statement, receipt of which is hereby acknowledged, as
designated on the reverse side hereof.
The Board of Directors recommends a vote "FOR" the Nominees in Proposal 1,
"FOR" Proposal 2, and "AGAINST" Proposals 3 and 4. This Proxy, when
properly executed, will be voted in the manner directed on the reverse side
hereof. If no direction is made, this Proxy will be voted "FOR" the Nominees
in Proposal 1, "FOR" Proposal 2, and "AGAINST" Proposals 3 and 4. If a
nominee is unable to serve or for good cause will not serve, the persons
named in this proxy shall have discretionary authority to vote for a
substitute nominee designated by the Board of Directors (unless authority to
vote for nominees has been withheld).
PLEASE SIGN, DATE AND MAIL THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE
OR FAX BOTH SIDES TO (212) 929-0308. IF YOU HAVE ANY QUESTIONS OR NEED
ASSISTANCE, PLEASE CALL MACKENZIE PARTNERS, INC. AT (800) 322-2885.
(CONTINUED ON REVERSE SIDE)
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
Vote FOR 1 and 2
WITHHOLD AUTHORITY to vote
FOR the nominees for the nominees
1. ELECTION OF DIRECTORS
DONALD R. BROWN / / / /
RUDOLPH E. HORNACEK
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY NOMINEE, STRIKE THROUGH THAT
NOMINEE'S NAME ABOVE.)
2. RATIFY ACCOUNTANTS FOR 1997 FOR / / AGAINST / / ABSTAIN / /
Vote AGAINST 3 and 4
3. SHAREHOLDER PROPOSAL RE: CLASSIFIED BOARD FOR / / AGAINST / / ABSTAIN / /
4. SHAREHOLDER PROPOSAL RE: DIRECTOR
INDEPENDENCE FOR / / AGAINST / / ABSTAIN / /
5. In accordance with their discretion, to vote for a substitute nominee as
indicated on the reverse side and upon all other matters that may properly
come before said Annual Meeting and any adjournment thereof, including
matters incidental to the conduct of the meeting.
Dated: ________________, 1997 Please Sign Here ______________________________
Title______________________________
Note: Please date this proxy and sign it exactly as your name or names
appear. All joint owners of shares should sign. State full title when signing
as executor, administrator, trustee, guardian, etc. Please return signed
proxy in the enclosed envelope.
