EXHIBIT 99
INCORPORATED PORTIONS OF ITEMS
AS EXPECTED TO BE INCLUDED IN THE
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT OF
TELEPHONE AND DATA SYSTEMS, INC.
("TDS" OR THE "COMPANY")
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 1995 Annual Meeting
of Shareholders, four Class II directors will be elected for a term of three
years or until their successors are elected and qualified. The nominees for
election as Class II directors are identified in the tables below. In the event
any nominee, who has expressed an intention to serve if elected, fails to stand
for election, the persons named in the proxy presently intend to vote for a
substitute nominee designated by the Board of Directors.
NOMINEES
CLASS II DIRECTORS--TERMS TO EXPIRE IN 1998
The following persons, if elected at the 1995 Annual Meeting of
Shareholders, will serve as Class II directors for three years or until their
successors are elected and qualified:
NOMINEE FOR ELECTION BY HOLDERS OF
COMMON SHARES AND HOLDERS OF PREFERRED SHARES
(SERIES A, B, D, G, H AND N)
POSITION WITH TDS SERVED AS DIRECTOR
NAME AGE AND PRINCIPAL OCCUPATION SINCE
---- --- ------------------------ -----
James Barr III.... 55 Director of the Company and President 1990
of TDS Telecommunications Corporation
NOMINEES FOR ELECTION BY HOLDERS OF SERIES A
COMMON SHARES AND HOLDERS OF PREFERRED SHARES
(SERIES O, S, U, V, X, BB, DD, EE, GG, HH, II, JJ,
KK, LL, MM, NN, OO, PP, QQ, RR AND SS)
POSITION WITH TDS SERVED AS DIRECTOR
NAME AGE AND PRINCIPAL OCCUPATION SINCE
---- --- ------------------------ -----
LeRoy T. Carlson, Jr... 48 President and Director of the 1968
Company (chief executive officer)
Donald C. Nebergall... 66 Director and Consultant to the 1977
Company and other companies
Murray L. Swanson..... 53 Executive Vice President-Finance 1983
and Director of the Company
(chief financial officer)
James Barr III was appointed President and chief executive officer of
TDS Telecommunications Corporation ("TDS Telecom"), a subsidiary of the Company
which operates local telephone companies, in 1990. Prior
1
to that, Mr. Barr served as a Sales Vice President for American Telephone and
Telegraph Company from 1985 through 1989. Mr. Barr is also a director of
American Paging, Inc. (AMEX Symbol "APP"), a subsidiary of the Company which
provides radio paging services.
LeRoy T. Carlson, Jr., has been the President and chief executive
officer for more than five years. Mr. Carlson is also Chairman and a director
of TDS Telecom, APP and United States Cellular Corporation (AMEX symbol "USM"),
a subsidiary of the Company which operates and invests in cellular telephone
companies and properties. Mr. Carlson is the son of LeRoy T. Carlson and the
brother of Walter C.D. Carlson.
Donald C. Nebergall served as the 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. He has been a consultant to the Company and other companies since
1988.
Murray L. Swanson has been Executive Vice President-Finance and chief
financial officer for more than five years. Mr. Swanson is also a director of
TDS Telecom, USM and APP.
All of the nominees are current Class II directors. Mr. Barr was
elected by the holders of Common Shares and Preferred Shares issued before
October 31, 1981. Messrs. Carlson, Nebergall and Swanson were elected by the
holders of Series A Common Shares and Preferred Shares issued after October 31,
1981.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
OTHER DIRECTORS
CLASS III DIRECTORS--TERMS EXPIRE IN 1996
The following persons were elected at the Annual Meeting of
Shareholders on May 14, 1993, to serve as Class III directors for three years or
until their successors are elected and qualified:
POSITION WITH TDS SERVED AS DIRECTOR
NAME AGE AND PRINCIPAL OCCUPATION SINCE
---- --- ------------------------ -----
Lester O. Johnson... 82 Director of the Company,
Architect in private practice 1968
LeRoy T. Carlson.... 78 Chairman and Director of the Company 1968
Walter C.D. Carlson. 41 Director of the Company, Partner,
Sidley & Austin, Chicago, Illinois 1981
Herbert S. Wander... 60 Director of the Company, Partner, Katten,
Muchin & Zavis, Chicago, Illinois 1968
All of the Class III Directors have had the principal occupations
indicated for more than five years. LeRoy T. Carlson is the father of Walter
C.D. Carlson and LeRoy T. Carlson, Jr. Messrs. LeRoy T. Carlson and Walter
C.D. Carlson are also directors of USM. The law firm of Katten, Muchin & Zavis
provided legal services to TDS in 1994.
Mr. Johnson was elected by the holders of Common Shares and the
holders of Preferred Shares issued before October 31, 1981. Messrs. L. Carlson,
W. Carlson and Wander were elected by the holders of Series A Common Shares and
holders of Preferred Shares issued after October 31, 1981.
2
CLASS I DIRECTORS--TERMS EXPIRE IN 1997
The following persons were elected at the Annual Meeting of
Shareholders on May 6, 1994, to serve as Class I directors for three years or
until their successors are elected and qualified:
POSITION WITH TDS SERVED AS DIRECTOR
NAME AGE AND PRINCIPAL OCCUPATION SINCE
---- --- ------------------------ -----
Donald R. Brown . . . 64 Director of the Company and Senior Vice 1979
President-Southeast Region of TDS
Telecommunications Corporation
Robert J. Collins . . 59 Director of the Company and Vice 1974
President-Northeast Region of TDS
Telecommunication Corporation
Rudolph E. Hornacek. . 67 Vice President-Engineering and Director 1968
of the Company
Donald R. Brown was a Vice President of the Company between 1974 and
1992. In 1990, Mr Brown resigned as a Vice President of the Company and was
appointed as a director and Vice President of TDS Telecom. In 1992,
Mr. Brown was appointed Senior Vice President-Southeast Region.
Robert J. Collins was a Vice President of the Company between 1971
and 1990, and between 1974 and 1990 was the Northeast Region Manager. In 1990,
Mr. Collins resigned as Vice President of the Company and was appointed as
director and Vice President of TDS Telecom. Mr. Collins has notified the
Company of his intention to resign from TDS Telcom in December 1995.
Rudolph E. Hornacek has been Vice President-Engineering of the Company
for more than five years. He is a director of TDS Telecom.
Mr. Brown was elected by the holders of Common Shares and holders of
Preferred Shares issued before October 31, 1981. Messrs. Collins and Hornacek
were elected by the holders of Series A Common Shares and the holders of
Preferred Shares issued after October 31, 1981.
COMMITTEES AND MEETINGS
The Board of Directors of the Company held four meetings during 1994.
Each of the directors 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 members of the Audit Committee are: Donald
C. Nebergall (Chairman), Walter C.D. Carlson, Lester O. Johnson and Herbert S.
Wander. The committee met three times during 1994. Each committee member
attended at least 75% of the meetings of the Audit Committee in 1994, except for
Donald C. Nebergall, who attended two meetings during 1994.
In 1995, the Board of Directors established a Compensation Committee,
consisting of LeRoy T. Carlson, Jr., President of TDS, and a Stock Option
Compensation Committee, consisting of Herbert S. Wander (chairman), Lester O.
Johnson and Donald C. Nebergall. The primary function of the Compensation
Committee is to approve the annual salary, bonus and other cash compensation of
officers and key employees other than the President. The principal functions of
the Stock Option Compensation Committee are to approve the annual salary, bonus
and other cash compensation for the President, to consider and approve long-term
compensation for executive officers and to consider and recommend to the Board
of Directors any changes to long-term compensation plans or policies.
3
1994 LONG-TERM INCENTIVE PLAN
The Board of Directors has determined that it is in the best
interests of the Company and its shareholders to approve the 1994 Long-Term
Incentive Plan of the Company (the "Plan"). The purposes of the Plan are (i) to
align the interests of the shareholders of the Company and the key executive and
management employees of the Company who receive options under the Plan by
increasing the proprietary interest of such employees in the Company's growth
and success, (ii) to advance the interests of the Company by attracting and
retaining key executive and management employees of the Company, and (iii) to
motivate such employees to act in the long-term best interests of the Company's
shareholders. The Plan was adopted by an ad hoc committee of the Board of
Directors composed of disinterested persons within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
was ratified by the Board of Directors on November 4, 1994. The Plan will
terminate ten years thereafter unless terminated earlier by the Board.
The Plan will be administered by a Committee (the "Committee")
designated by the Board of Directors of the Company, consisting of two or more
members of the Board, each of whom are "outside directors" within the meaning of
section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Committee will select those eligible key executive and management employees
for participation in the Plan as the Committee determines and will determine the
form and timing of each grant of an option and the number of Common Shares
subject to each option, the purchase price per Common Share purchasable upon
exercise of the option, the time and conditions of exercise of the option and
all other terms and conditions of the option, including, without limitation, the
form of the award evidencing the option.
Participants in the Plan may consist of such key executive and
management employees of the Company as the Committee may select from time to
time. The Committee may grant incentive stock options which meet the
requirements of section 422 of the Code ("ISOs") or non-qualified stock options
which are not ISOs ("NSOs"). In the event that the Plan is not approved by
shareholders, no ISOs will be granted under the Plan. Each ISO must be granted
within ten years of the effective date of the Plan. Options will be subject to
the terms and conditions set forth in the Plan and will contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee deems advisable, except that the Committee may not grant an option or
options to any eligible employee which, in the aggregate, give in any calendar
year such employee an option to purchase more than 50,000 Common Shares (as may
be adjusted pursuant to the Plan due to changes in the capital structure of the
Company).
The number of Common Shares subject to an option and the purchase
price per Common Share purchasable upon exercise of the option will be
determined by the Committee in its discretion. However, the Plan provides that
the purchase price per Common Share purchasable upon exercise of either an ISO
or a NSO will generally be the average fair market value of a Common Share
during the 20 trading days immediately preceding the date the option is granted,
but in the case of an ISO, will not be less than 100% of the fair market value
of a Common Share on the date of grant of such option and that if an ISO is
granted to an employee who owns capital stock possessing more than 10% of the
total combined voting power of all classes of capital stock of the Company or
any of its subsidiaries (a "Ten Percent Holder"), the purchase price per Common
Share must be at least 110% of its fair market value.
The period during which an option may be exercised will be determined
by the Committee. However, the Plan provides that no ISO may be exercised later
than ten years after its date of grant and that, if an ISO is granted to a Ten
Percent Holder, such option must be exercised within five years of its date of
grant. The Committee may establish performance measures which must be satisfied
during a performance period as a condition either to a grant of an option or to
the exercisability of all or a portion of an option. Notwithstanding any other
provision of the Plan or any provision of any award, in the event of a change in
control (as defined in the Plan) of the Company, all outstanding options will
become immediately exercisable in full.
The maximum number of shares available to be offered to approximately
50 eligible employees will initially be 800,000 Common Shares, subject to
adjustment in the event of certain changes in the capital structure of the
Company. To the extent that any such event entitles a holder of an option to
purchase additional Common Shares or other securities, the securities available
under the Plan will be deemed to include such additional Common Shares or other
securities.
4
The Board may amend the Plan as it deems advisable, subject to any
requirement of shareholder approval under applicable law, including Rule 16b-3
under the Exchange Act and section 162(m) of the Code, except that, subject to
adjustment for certain changes in the capital structure of the Company, no
amendment may be made without shareholder approval if such amendment (a) would
increase the maximum number of Common Shares available for issuance under the
Plan or (b) would reduce the minimum purchase price in the case of an option,
and no amendment may extend the term of the Plan or effect any change
inconsistent with section 422 of the Code with respect to any ISO granted under
the Plan.
There are no tax consequences to the Company or a participant upon the
grant of an option pursuant to the Plan. A participant who is granted an NSO
will generally recognize income at the time such option is exercised in an
amount equal to the difference between the exercise price of the Common Shares
with respect to which the option is exercised and the market value of the shares
on the date of exercise. The Company will be entitled to a tax deduction for
the amount of income recognized by a participant. A participant who is granted
an ISO will not recognize any taxable income at the time of its exercise. If
the holder of an ISO does not dispose of the Common Shares acquired upon the
exercise of the option before the later of two years from the date of grant of
the option and one year from the date of exercise, any gain or loss realized on
a subsequent disposition of the shares will be treated as a long-term capital
gain or loss, and the Company will not be entitled to any deduction for federal
income tax purposes. If the holder sells or disposes of the Common Shares
acquired upon the exercise of an Incentive Stock Option within two years from
the date of the grant or one year from the date of exercise (a "disqualifying
disposition") and the amount realized upon such disposition is greater than the
exercise price, then the holder will recognize ordinary income at the time of
the disqualifying disposition in an amount equal to the excess of the lesser of
(i) the amount realized upon the disposition and (ii) the fair market value of
the shares disposed of, determined on the date such shares were transferred to
the holder pursuant to the exercise of the option, over the exercise price. The
Company generally will be entitled to a deduction corresponding to the amount of
recognized ordinary income.
On November 4, 1994, the aforementioned ad hoc committee of the Board
of Directors of the Company approved, and the full Board of Directors ratified,
the grant of options (the "Automatic Options") to purchase an aggregate of
220,150 Common Shares of the Company to 32 eligible employees, including
Automatic Options for an aggregate of 165,050 Common Shares to ten executive
officers of the Company, pursuant to the Plan. The purchase price per Common
Share subject to the Automatic Options is $47.59, representing the average of
the closing prices of the Common Shares on the American Stock Exchange for the
twenty trading days ended on November 3, 1994. Each Automatic Option becomes
exercisable in annual increments of 20% each on December 15, 1994, and on the
first through the fourth anniversaries of such date, but no Automatic Option is
exercisable for a period of more than ten years after the grant date.
In addition, on each of December 15, 1995 and on the first through
fourth anniversaries of such date (collectively, the "Anniversary Dates"), each
optionee may also become eligible to exercise options (the "Performance
Options") to purchase an additional number of Common Shares equal to a
percentage (not in excess of 200%) of the number of Common Shares subject to
Automatic Options which shall have become exercisable with respect to such
person in the year immediately preceding the year of such Anniversary Date.
Such percentage will be based on the achievement of certain levels of corporate
and individual performance as contemplated by the Plan. The purchase price per
Common Share subject to the Performance Options will be the average of the
closing prices of the Common Shares on the American Stock Exchange for the
twenty trading days ended on the trading day immediately preceding April 30 of
the year in which the Performance Options become exercisable. The Performance
Options will become exercisable in full on the Anniversary Date on which they
are granted and will remain exercisable for a period of ten years.
The following table specifies the number of Common Shares which are
subject to options granted under the Plan to the named executive or group:
5
New Plan Benefits
1994 Long-Term Incentive Plan(1)
Number of
Name(2) Common Shares
------- -------------
LeRoy T. Carlson . . . . . . . . . . . . . . . . . . . . . . . 36,050
LeRoy T. Carlson, Jr. . . . . . . . . . . . . . . . . . . . . 47,100
Murray L. Swanson . . . . . . . . . . . . . . . . . . . . . . 18,500
Other Executives . . . . . . . . . . . . . . . . . . . . . . . 63,400
-------
Executive Group . . . . . . . . . . . . . . . . . . . . . . . 165,050
Non-Executive Director Group . . . . . . . . . . . . . . . . . -0-
Non-Executive Employee Group . . . . . . . . . . . . . . . . . 55,100
-------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 220,150
-------
-------
-------------
(1) Since the option exercise price of $47.59 is equal to the fair market value
of the Common Shares as of the date of grant, no dollar value was assigned
to the options for purposes of the above table.
(2) Neither James Barr III nor H. Donald Nelson is eligible to participate in
the 1994 Long-Term Incentive Plan.
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.
NAME AGE POSITION
---- --- --------
H. Donald Nelson . . . . 61 President of United States Cellular Corporation
John R. Schaaf . . . . . 49 President of American Paging, Inc.
Michael K. Chesney . . . 39 Vice President-Corporate Development
George L. Dienes . . . . 64 Vice President-Corporate Development
C. Theodore Herbert . . 59 Vice President-Human Resources
Ronald D. Webster . . . 45 Vice President and Treasurer
Byron A. Wertz . . . . . 48 Vice President-Corporate Development
Gregory J. Wilkinson . . 44 Vice President and Controller
Michael G. Hron . . . . 50 Secretary
H. Donald Nelson is a director of and has served as the President and
chief executive officer of USM for more than five years.
John R. Schaaf is a director of and was appointed President of APP in
1991. Prior to that, Mr. Schaaf was Vice President-Operations of APP for more
than five years.
Michael K. Chesney was appointed Vice President-Corporate Development
in 1994. Prior to that he was Director - Corporate Development of the Company
for more than five years.
George L. Dienes has been Vice President-Corporate Development of the
Company for more than five years.
6
C. Theodore Herbert has been Vice President-Human Resources of the
Company for more than five years.
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 in
1994. Prior to that he was Director - Telecommunications Development of the
Company for more than five years.
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.
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.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table summarizes the compensation paid by TDS during
1994 to the chief executive officer of TDS and the four most highly compensated
executive officers of the Company and its subsidiaries other than the chief
executive officer for services rendered during the year ended December 31, 1994.
7
SUMMARY COMPENSATION TABLE(1)
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- -------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) OPTIONS/SARs(4) COMPENSATION(5)
--------------------------- ---- --------- -------- -------------- ---------------
LeRoy T. Carlson 1994 $ 290,000 $ 45,000 36,050 $ 32,848
Chairman 1993 $ 265,000 $ 80,000 -- $ 23,875
1992 $ 245,000 $ 60,000 -- $ 28,218
Leroy T. Carlson, Jr. 1994 $ 350,000 $ 95,000 47,100 $ 10,485
President 1993 $ 316,000 $ 95,000 -- $ 15,461
(chief executive officer) 1992 $ 290,000 $ 75,000 -- $ 12,072
Murray L. Swanson 1994 $ 241,000 $ 42,750 18,500 $ 16,351
Executive Vice President- 1993 $ 224,000 $ 74,000 -- $ 28,553
Finance (chief financial 1992 $ 207,000 $ 57,000 -- $ 21,967
officer)
James Barr III 1994 $ 242,500 $ 54,563 -- $ 15,541
President of TDS 1993 $ 227,500 $ 66,500 -- $ 24,704
Telecommunications 1992 $ 202,500 $ 55,200 -- $ 17,804
Corporation
H. Donald Nelson (6) 1994 $ 245,726 $ 49,500 28,414 $ 3,703
President of United States 1993 $ 206,375 $ 66,500 600 $ 4,714
Cellular Corporation 1992 $ 191,375 $ 62,500 600 $ 3,072
--------------------
<FN>
(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 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 1993 and 1992. Except for LeRoy T.
Carlson, Jr., the final bonuses for 1994 have not yet been determined,
but the amounts listed above for 1994 were approved for payment as a
partial advance of the 1994 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.
(5) Includes contributions by the Company for the benefit of the named
executive officer under the Employees' Pension Trust ("EPT"),
including earnings accrued under a related supplemental benefit
agreement, the TDS Tax-Deferred Savings Plan ("TDSP") and the taxable
dollar value of any insurance premiums paid during the covered fiscal
year with respect to term life insurance for the benefit of the named
executive ("Life Insurance"), as indicated below:
LEROY T. CARLSON LEROY T. CARLSON, JR. MURRAY L. SWANSON JAMES BARR III H. DONALD NELSON
---------------- --------------------- ----------------- -------------- ----------------
EPT $17,192 $ 7,539 $11,984 $11,599 $ --
TDSP 1,800 1,800 1,800 1,800 1,232
Life Insurance 13,856 1,146 2,567 2,142 2,471
------- ------- ------- ------- -------
$32,848 $10,485 $16,351 $15,541 $3,703
------- ------- ------- ------- -------
------- ------- ------- ------- -------
<FN>
(6) All of Mr. Nelson's compensation is paid by USM and is approved by the
Chairman of the Board of Directors of USM.
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.
The number of shares subject to the Options and/or SARs and the exercise prices
have been adjusted for stock splits in 1988.
8
INDIVIDUAL OPTION/SAR GRANTS IN 1994
Number of Potential Realizable Value at
Securities % of Total Assumed Annual Rates of
Underlying Options/SARs Stock Price Appreciation
Options/SARs Granted to Exercise Market Expiration for Option Terms(4)
-----------------------------
Name Granted(1) Employees(2) Price Price(3) Date 0% 5% 10%
---- ------------- ------------ ------- -------- --------- -- -- ---
LeRoy T. Carlson 36,050 16% $47.59 $47.59 11/04/04 $ -0- $1,078,944 $2,734,256
LeRoy T. Carlson, Jr. 47,100 21% $47.59 $47.59 11/04/04 $ -0- $1,409,660 $3,572,356
Murray L. Swanson 18,500 8% $47.59 $47.59 11/04/04 $ -0- $ 553,688 $1,403,155
H. Donald Nelson(5)
1994 Options 28,200 15% $32.25 $32.25 11/09/04 $ -0- $ 571,948 $1,449,429
1991 Options 214 15% $15.67 $28.25 11/01/97 $2,692 $ 3,906 $ 5,289
------ --- ------ ---------- ----------
TOTAL 28,414 15% $2,692 $ 575,854 $1,454,718
------------------
<FN>
(1) For the terms of the Options granted in 1994 by TDS, see "1994
Long-Term Incentive Plan" above.
(2) Represents the percent of total TDS shares underlying Options/SARS
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 options/SARs 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) On November 9, 1994, Mr. Nelson was granted an Option to purchase
28,200 USM Common Shares which becomes exercisable in annual
increments of 20% on December 15, 1994 and on the first through fourth
anniversaries of such date. 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 the targeted amount of 9,000
shares. Therefore, options for 7,200 shares or 80% of the targeted
amount were deemed to be awarded on the grant date. 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 amount over 1,200 shares per year which is awarded based on
performance is shown above as a grant in that year. Since 1,414
shares were awarded in 1994 to become exercisable in 1995, 214 shares
are shown as a grant in 1994. 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.
9
AGGREGATED OPTION/SAR EXERCISES IN 1994, AND DECEMBER 31, 1994 OPTION/SAR VALUE
1994 As of December 31, 1994
---- -----------------------
Number of Securities
Underlying Value of Unexercised In-
Shares Unexercised Options/SARs(3) the-Money Options/SARs(4)
Acquired on Value --------------------------- -------------------------
Name Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
---- ---------- ----------- ----------- ------------- ----------- ------------
LeRoy T. Carlson 1994 Options -- -- 7,210 28,840 $ -0- $ -0-
----- ------ ----------- ------------
----- ------ ----------- ------------
LeRoy T. Carlson, Jr. 1994 Options -- -- 9,420 37,680 $ -0- $ -0-
1988 Options -- -- 38,350 51,000 1,205,449 1,607,265
------ ------ --------- ---------
Total -- -- 47,770 88,680 $ 1,205,449 $ 1,607,265
------ ------ --------- ---------
------ ------ --------- ---------
Murray L. Swanson 1994 Options -0- -0- 3,700 14,800 $ -0- $ -0-
1987 Options 3,375(5) $102,102 -0- 10,125 -0- 382,877
------ -------- ----- ----- --------- --------
Total 3,375 $102,102 3,700 24,925 $ -0- $382,877
------ -------- ----- ------ --------- --------
------ -------- ----- ------ --------- --------
James Barr III 1994 Options -- -- 8,000 12,000 $ 49,000 $ 73,500
----- ------ --------- --------
----- ------ --------- --------
H. Donald Nelson 1994 Options -- -- 5,640 22,560 $ 2,820 $ 11,280
1991 Options -- -- 5,224 3,814 89,226 65,143
SARs -- -- 14,400 21,600 255,600 383,400
------ ------ ---------- ----------
Total -- -- 25,264 47,974 $ 347,646 $ 459,823
------ ------ ---------- ----------
------ ------ ---------- ----------
------------------------
<FN>
(1) Represents the number of TDS Common Shares received upon exercise or,
if no shares were received, the number of TDS Common Shares with
respect to which the Options or SARs were exercised, except for H.
Donald Nelson, in which case the information is presented with respect
to USM shares.
(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 as reported in the
American Stock Exchange ("AMEX") Composite Transactions by THE WALL
STREET JOURNAL.
(3) Represents 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 $46.125, the closing price
of TDS Common Shares or, with respect to H. Donald Nelson, $32.75, the
closing price of USM Common Shares, on December 30, 1994, as reported
in the AMEX Composite Transactions by THE WALL STREET JOURNAL.
(5) Options for a total of 3,375 Common Shares were exercised. A total of
700 Common Shares received upon exercise were used to pay the exercise
price and 940 Common Shares were used to pay withholding taxes.
SUPPLEMENTAL BENEFIT AGREEMENTS
The Telephone and Data Systems, Inc. Employees' Pension Trust (the
"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 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."
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, 1991, in five
annual installments beginning June 1, 2001, plus interest at 9 1/2%
compounded semi-annually from June 1, 1991. The agreement was entered into
because certain amendments made to the Pension Plan in 1974 had the effect of
reducing the amount of retirement benefits which Mr. Carlson would receive under
the Pension Plan. The payments to be made under the agreement, together with
the retirement benefits under the Pension Plan, were designed to permit
Mr. Carlson to receive approximately the same retirement benefits he would have
received if the Pension Plan had not been amended. All of the interest
10
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 Employees' Pension Trust (EPT).
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 May 1988 and, as a result, he
was no longer eligible to participate in the 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
Pension Plan and that which he would have received had he continued to work for
TDS. USM will pay any such benefit at the same time as Mr. Nelson receives
payments from the Pension Plan. At the time of Mr. Nelson's withdrawal from the
TDS Pension Plan, he had 5 years of credited service. If he had continued as an
active participant, he would have received credit for 16 years of service upon
retirement at age 65. If Mr. Nelson had continued to be employed by TDS, and
had remained employed through age 65, he would have been eligible to receive an
estimated annual benefit upon retirement of approximately $50,000 under the TDS
Pension Plan. Currently, Mr. Nelson's annual benefit under the TDS Pension Plan
is expected to be approximately $15,000. Accordingly, Mr. Nelson is expected to
receive an estimated annual benefit of approximately $35,000 under the
supplemental benefit agreement. Such estimates are based on Mr. Nelson's base
salary, which is included in the cash compensation table above, and calculations
of certain projections to age 65. The actual benefits payable to Mr. Nelson
upon retirement will be based upon the facts that exist at the time and will be
determined actuarially pursuant to the TDS Pension Plan. Since the nature of
this agreement is a defined benefit arrangement, no amounts related thereto are
included above in the Summary Compensation Table.
SALARY CONTINUATION 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. 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 accrued or
payable under this agreement in 1994, 1993 or 1992, and no amounts related
thereto are included above in the Summary Compensation Table.
11
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers or employees of TDS or
any subsidiary of TDS receive 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. Pursuant to such policy, in 1994, each of Walter
C.D. Carlson, Lester O. Johnson, Donald C. Nebergall and Herbert S. Wander
earned $16,000 in director's fees, each of Walter C.D. Carlson, Lester O.
Johnson and Herbert S. Wander earned $1,500 for services on the audit committee,
and Donald C. Nebergall earned $1,000 for services on the audit committee.
Donald C. Nebergall also received $9,250 as a bonus for services in 1993 and
$112,000 for consulting services provided to the Company in 1994. In addition,
the Company paid directors' life insurance premiums in 1994 on behalf of each of
the following directors in the indicated amounts: James Barr III ($525);
Donald R. Brown ($1,888); LeRoy T. Carlson ($4,155); LeRoy T. Carlson, Jr.
($220); Walter C.D. Carlson ($159); Robert J. Collins ($483); Rudolph E.
Hornacek ($2,198); Donald C. Nebergall ($869); Murray L. Swanson ($1,589); and
Herbert S. Wander ($873). Except for such life insurance premiums, directors
who are also employees of the Company do not receive any compensation for
services rendered as directors.
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 officers
other than the President, and by the Stock Option Compensation Committee of the
Board of Directors, which approves all compensation for the President and
approves long-term compensation to executive officers of the Company.
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
(as discussed below), 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
12
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 or 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 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. The primary focus of the Company is increasing shareholder value
through growth, measured in terms such as: revenues; cellular telephones,
landline telephone access lines, and pagers in service; operating cash flow;
and income. In general, the Company believes it has met or exceeded its
objectives of growth while managing to balance the effects of the costs of such
growth. In 1994, revenues increased 31.0%, consolidated cellular telephone
customer units increased 61.3%, telephone access lines increased 10.2%, pagers
in service increased 41.6%, operating cash flow increased 38.7% and operating
income increased 56.1%. However, 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.
Other than for the President, the President serves as the Compensation
Committee. 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 1994 and base salary for 1995 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 Company's performance and all other
facts and circumstances considered relevant in his judgment. The President has
not yet taken action to approve the 1994 bonus or the 1995 base salary for these
executives. Due to the fact that the 1994 bonus had not been determined as of
the end of 1994, the President approved advance bonus payments for 1994 to all
executive officers of TDS, excluding the President. The amounts approved for
the named executives are listed above in the Summary Compensation Table.
The 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 an increase in the
base salary of the President from $316,000 in 1993 to $350,000 for 1994,
representing an increase of approximately 10.8%. The Stock Option Compensation
Committee also approved the President's bonus of $95,000 for 1993 and $95,000
for 1994.
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
13
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 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. 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 1994 bonuses and 1995
salaries for executive officers and recommends a 1995 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.
In 1994, prior to the establishment of the Stock Option Compensation
Committee, an ad-hoc committee of outside directors approved the 1994 Long-Term
Incentive Plan and granted options thereunder, as indicated in the above tables
and as discussed above under "1994 Long-Term Incentive Plan."
TAX LAW CHANGES. For tax years beginning on and after January 1,
1994, the federal income tax laws were amended to limit to $1 million the
deduction a publicly held corporation may take for certain compensation paid to
each of its chief executive officer and four most highly compensated executive
officers (other than the chief executive officer). Generally,
"performance-based" compensation, including stock options and stock appreciation
rights, are not subject to the $1 million deduction limitation if certain
requirements are satisfied. Under transition rules provided in proposed
Treasury regulations, stock option plans that meet certain requirements are
deemed to meet the performance-based compensation exception until the 1996
annual shareholders' meeting. The 1994 Incentive Plan has been prepared to
comply with the performance-based compensation exception to the $1 million
deduction limitation, as set forth in the proposed Treasury regulations.
Due to these and other reasons, the Company does not believe the $1 million
deduction limitation should have any effect on the Company in the near future.
The Company will continue to 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.
By LeRoy T. Carlson, Jr., President; and
By the Stock Option Compensation Committee:
Herbert S. Wander (Chairman); Lester O. Johnson; and Donald C. Nebergall
14
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: ALLTEL Corp., C-TEC Corp., Century Telephone
Enterprises, Inc., Cincinnati Bell, Inc., Citizens Utilities Co., Frontier Corp.
(formerly Rochester Telephone Corp.), Lincoln Telecommunications, Inc., 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 12/31/94)
[LINE GRAPH OF DATA POINTS]
1989 1990 1991 1992 1993 1994
TDS $100.00 $74.50 $ 77.93 $ 89.99 $116.36 $103.84
S&P 500 $100.00 $96.90 $126.42 $136.05 $149.76 $151.48
Peer Group $100.00 $79.04 $ 86.06 $102.85 $124.01 $117.82
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 stock, S&P 500,
and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
The peer group index was revised from the prior year to add Citizens
Utilities Co. because it acquired substantial telephone properties from GTE
Corp. in 1994. For comparison to the above-reported peer group results, if the
Company had not changed the peer group index from the peer group reported in its
1994 Notice of Annual Meeting and Proxy Statement, the peer group results would
have been as follows:
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
Peer Group $100.00 $82.14 $85.91 $101.74 $121.88 $120.78
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
LeRoy T. Carlson, Jr., President (chief executive officer) of TDS,
makes annual compensation decisions for TDS executives other than for himself.
LeRoy T. Carlson, Jr., is a member of the Board of Directors of TDS, USM, TDS
Telecom and APP. LeRoy T. Carlson, Jr., is also the Chairman of TDS Telecom,
USM and APP and, as such, approves the executive officer compensation decisions
for TDS Telecom, USM and APP. 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.
The members of the Stock Option Compensation Committee are Herbert S. Wander
(Chairman), Lester O. Johnson and Donald C. Nebergall, all of whom are directors
of TDS.
ISSUANCE OF TDS SHARES IN CONNECTION WITH CERTAIN ACQUISITIONS
The Company issues 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 1994, USM issued 4.2 million USM
Common Shares to TDS and became indebted to TDS for an
15
additional $309,000 under the Revolving Credit Agreement, to reimburse TDS for
2.2 million TDS Common Shares issued for such cellular interests.
In addition to the shares described in the preceding paragraph,
additional securities of TDS and USM were authorized for issuance in connection
with acquisitions of cellular interests that were pending at December 31, 1994.
In connection with these acquisitions, TDS expects to issue in 1995 or later
years approximately 1.9 million TDS Common Shares, for which USM will reimburse
TDS by issuing approximately 2.7 million USM Common Shares and increasing the
amount of debt under the Revolving Credit Agreement in an amount estimated to be
approximately $11.2 million.
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS.
Walter C.D. Carlson, a director of the Company, Michael G. Hron,
Secretary of the Company, TDS Telecom and APP, William S. DeCarlo, the Assistant
Secretary of TDS, Stephen P. Fitzell, the Secretary of USM and Sherry S.
Treston, the Assistant Secretary of USM, are partners of Sidley & Austin, the
principal law firm of the Company 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.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, at February 28, 1995, 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.
Name of Percent
Individual or Number of Amount and Nature of Percent of Voting
Persons in Group Title of Class Beneficial Ownership(1) of Class Power
----------------------- -------------- ----------------------- -------- ---------
LeRoy T. Carlson, Jr.,
Walter C.D. Carlson,
Letitia G. Carlson,
Donald C. Nebergall and
Melanie J. Heald(2) Series A Common Shares 6,252,336 90.9% 52.4%
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 19,148 * *
LeRoy T. Carlson(5) Common Shares 19,793 * *
Series A Common Shares 72,174 1.0% *
LeRoy T. Carlson, Jr.(6)(12) Common Shares 64,912 * *
Murray L. Swanson(7)(12) Common Shares 28,426 * *
Series A Common Shares 2,445 * *
James Barr III(12) Common Shares 12,229 * *
H. Donald Nelson(7) Common Shares 3,576 * *
Series A Common Shares 5,147 * *
Rudolph E. Hornacek(8) Common Shares 16,666 * *
Series A Common Shares 2,350 * *
Lester O. Johnson(9) Common Shares 2,041 * *
16
Series A Common Shares 70,262 1.0% *
Donald C. Nebergall(10) Common Shares 1,098 * *
Walter C.D. Carlson(11) Common Shares 67 * *
Donald R. Brown(12) Common Shares 16,749 * *
Series A Common Shares 4,592 * *
Robert J. Collins(12) Common Shares 3,998 * *
Series A Common Shares 498 * *
Other executive officers Common Shares 117,244 * *
(8 persons)(12)(13) Series A Common Shares 710 * *
All directors and executive officers Common Shares 306,955 * *
as a group (20 persons)(12) Series A Common Shares 6,557,090 95.4% 54.9%
-----------------------
<FN>
* Less than 1%
(1) The nature of beneficial ownership for shares in this column is sole voting
and investment power, except as otherwise set forth in these footnotes.
(2) The shares listed are held by the persons named as trustees under a voting
trust which expires June 30, 2009, created to facilitate long-standing
relationships among the trustees' certificate holders. Under the terms of
the voting trust, the trustees hold and vote the Series A Common Shares
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. 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. In addition, Margaret D. Carlson owns 50,512 Series A Common
Shares directly and Prudence E. Carlson owns 194,148 Series A Common Shares
directly.
(3) Voting and investment control is shared by the persons named as trustees of
the Telephone and Data Systems, Inc. Employees' Pension Trust I.
(4) Voting and investment control is shared by the persons named as trustees of
the Telephone and Data Systems, Inc. Tax-Deferred Savings Trust. Does not
include 185,870 shares as to which the voting and investment power is
passed through to plan participants or 1,278 shares voted by such trustees
which are reported as being beneficially owned by the other persons in this
table.
(5) Does not include 267,648 Series A Common Shares (3.9% of class) held for
the benefit of LeRoy T. Carlson in the voting trust described in footnote
(2). Beneficial ownership is disclaimed as to 637,261 Series A Common
Shares held for the benefit of his wife in such voting trust and as to
50,512 Series A Common Shares included in the table which are held directly
by his wife (an aggregate of 10.0% of class).
(6) Does not include 1,067,970 Series A Common Shares (15.5% of class) held in
the voting trust described in footnote (2), of which 1,038,734 shares are
held for the benefit of LeRoy T. Carlson, Jr. Beneficial ownership is
disclaimed with respect to an aggregate of 29,236 Series A Common Shares
held for the benefit of his wife, his children and others in such voting
trust.
(7) Includes shares held by and/or in joint tenancy with spouse or children.
(8) Includes 681 Series A Common Shares held as custodian for his children.
(9) Does not include 244,622 Series A Common Shares (3.6% of class) held for
the benefit of Lester O. Johnson and his wife in the voting trust described
in footnote (2).
17
(10) Does not include 1,007,828 Series A Common Shares (14.6% 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 30 Series A Common Shares
held for the benefit of Donald C. Nebergall, which are included in the
voting trust described in footnote (2).
(11) Does not include 1,069,341 Series A Common Shares (15.5% of class) held in
the voting trust described in footnote (2), of which 1,042,878 shares are
held for the benefit of Walter C.D. Carlson. Beneficial ownership is
disclaimed with respect to an aggregate of 26,463 Series A Common Shares
held for the benefit of his wife and children in such voting trust.
(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,
7,210 shares; Mr. LeRoy T. Carlson, Jr., 60,420 shares; Mr. Swanson, 7,075
shares; Mr. Barr, 10,000 shares; Mr. Hornacek, 11,890 shares; Mr. Brown,
1,430 shares; Mr. Collins, -0- shares; and all other executive officers,
80,975 shares.
(13) Does not include 58,569 Series A Common Shares held in the voting trust
described in footnote (2).
PRINCIPAL SHAREHOLDERS
In addition to persons listed in the preceding table and the footnotes
thereto, the following table sets forth, as of February 28, 1995, 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.
Shares of Percent Percent
Shareholder's TDS Class of TDS of Voting
Name and Address Title of Class Owned Class Power
---------------- -------------- --------- ------- --------
Putnam Investments, Inc., et al.(1) Common Shares 3,578,933 7.1% 3.0%
One Post Office Square
Boston, Massachusetts 02109
Eagle Asset Management Inc.(2) Common Shares 3,513,634 7.0% 2.9%
880 Carillon Parkway
St. Petersburg, Florida 33733
The Equitable Companies Inc.(3) Common Shares 2,810,190 5.6% 2.4%
787 Seventh Avenue
New York, New York 10019
William and Betty McDaniel Preferred Shares 62,500 13.8% *
160 Stowell Road
Salkum, Washington 98582
Van and Janet McDaniel Preferred Shares 62,500 13.8% *
160 Stowell Road
Salkum, Washington 98582
Goldman Sachs & Co. Preferred Shares 51,290 11.3% *
85 Broad Street
New York, New York 10004
Roland G. and Bette B. Nehring Preferred Shares 23,030 5.1% *
5253 North Dromedary Road
Phoenix, Arizona 85018
____________________
<FN>
* Less than 1%
(1) Based on a Schedule 13G filed with the Securities and Exchange Commission
("SEC"). The Schedule 13G reports that Putnam Investments, Inc. and The
Putnam Advisory Company, Inc. share voting power with respect to 342,331
Common Shares,
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that Putnam Investments, Inc. and Putnam Investment Management, Inc. share
dispositive power with respect to 3,096,605 Common Shares, and that Putnam
Investments, Inc. and The Putnam Advisory Company, Inc. share dispositive
power with respect to 482,328 Common Shares. The Schedule 13G reports that
Marsh & McLennan Companies, Inc. is the direct or indirect parent
corporation of each of such entities.
(2) Based on the most recent Schedule 13G (Amendment No. 4) filed with the
SEC. In such Schedule 13G filing, Eagle Asset Management, Inc. has
reported sole investment power and sole voting power with respect to all
such shares.
(3) Based on the most recent Schedule 13G (Amendment No. 6) filed with the SEC.
Includes shares held by the following affiliates: The Equitable Life
Assurance Society of the United States - 1,507,900 shares; Alliance Capital
Management, L.P. - 1,290,090 shares; and Wood, Struthers & Winthrop
Management Corp. - 12,200 shares. Equitable reports sole voting power with
respect to 2,653,350 shares, shared voting power with respect to 53,500
shares and sole dispositive power with respect to 2,810,190 shares. Alpha
Assurance I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Uni Europe Assurance
Mutuelle and AXA, corporations organized under the laws of France, are
affiliates of The Equitable Companies Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation - Compensation Committee Interlocks and
Insider Participation."
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