Exhibit 10.1

 

THIRD AMENDMENT

TO THE

TELEPHONE AND DATA SYSTEMS, INC.

2004 LONG-TERM INCENTIVE PLAN

 

WHEREAS, Telephone and Data Systems, Inc., a Delaware corporation (the “Corporation”) has adopted and maintains the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan (the “Plan”) for the benefit of certain employees;

 

WHEREAS, pursuant to Section 8.2 of the Plan, the Board of Directors of the Corporation (the “Board”) may amend the Plan as it deems advisable, subject to any requirement of shareholder approval;

 

WHEREAS, the Board desires to amend the Plan (i) to comply with requirements of section 409A of the Internal Revenue Code of 1986, as amended, which governs the taxation of nonqualified deferred compensation arrangements and (ii) in certain other minor respects; and

 

WHEREAS, such amendments to the Plan are not material and are not required to be submitted for approval by shareholders of the Corporation.

 

NOW, THEREFORE, BE IT RESOLVED, that effective as of January 1, 2009, the Plan hereby is amended as follows:

 

1.              Article II hereby is amended to insert the following new Section 2.1 therein, and to renumber the Plan’s sections and section references accordingly:

 

2.1            “Account Balance Plan” shall mean an “account balance plan” within the meaning of Treasury Regulation §1.409A-1(c)(2)(i)(A) (whether elective or non-elective in nature) maintained by an Employer or any affiliate thereof.  “Affiliate” for this purpose shall mean (i) a corporation that is a member of the same controlled group of corporations (within the meaning of section 414(b) of the Code) as an Employer or (ii) a trade or business (whether or not incorporated) under common control (within the meaning of section 414(c) of the Code) with an Employer.  An Account Balance Plan shall include, without limitation, (i) the deferral program set forth in Article VII, (ii) the interest-bearing deferral arrangements maintained by the Company and TDS Telecommunications Corporation; (iii) the Company’s Supplemental Executive Retirement Plan; (iv) the United States Cellular Corporation Executive Deferred Compensation Interest Account Plan and (v) the deferral arrangement maintained by United States Cellular Corporation under its Long-Term Incentive Plan.

 

2.              Section 2.15 (as renumbered by this Third Amendment) hereby is amended in its entirety to read as follows:

 

2.15          “Distributable Balance” shall mean the portion of an employee’s Deferred Compensation Account that is nonforfeitable.

 

 

3.              Article II hereby is amended to insert the following new Section 2.24 therein, and to renumber the Plan’s sections and section references accordingly:

 

2.24          “Newly Eligible Employee” shall mean an employee who (i) newly is eligible to participate in the deferral program set forth in Article VII and (ii) was not, at any time during the 24-month period ending on the date on which he or she became eligible to participate in such deferral program, eligible to participate in an Account Balance Plan (irrespective of whether such employee in fact elected to participate in such plan).  For this purpose, an employee is not eligible to participate in an Account Balance Plan solely on account of the accrual of interest or earnings on amounts previously deferred thereunder.

 

4.              Section 2.26 (as renumbered by this Third Amendment) hereby is amended to add the phrase “or by the By-Laws of the Employer” at the end thereof.

 

5.              The last sentence of Section 2.27 (as renumbered by this Third Amendment) hereby is amended to read as follows:

 

Subject to (i) section 162(m) of the Code with respect to an award that is intended to be qualified performance-based compensation and (ii) section 409A of the Code with respect to an award that is subject thereto, the Committee, in its sole discretion, may amend or adjust the Performance Measures or other terms and conditions of an outstanding award in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in law or accounting principles.

 

6.              Section 2.36 (as renumbered by this Third Amendment) hereby is amended to read as follows:

 

2.36          “Restricted Stock Unit” shall mean a right which entitles the holder thereof to receive, upon termination of the Restriction Period, a share of Stock or cash equal to the Fair Market Value of a share of Stock on the date that the Restriction Period terminates.

 

7.              Section 2.40 (as renumbered by this Third Amendment) hereby is amended to delete therefrom the parenthetical “(which may be Restricted Stock)”.

 

8.              Article II hereby is amended to insert the following new Section 2.41 therein, and to renumber the Plan’s sections and section references accordingly:

 

2.41          “Separation from Service” shall mean a termination of employment with the Employers and their affiliates within the meaning of Treasury Regulation §1.409A-1(h) (without regard to any permissible alternative definition thereunder).  “Affiliate” for this purpose shall mean (i) a corporation that is a member of the same controlled group of corporations (within the meaning of section 414(b) of the Code) as an Employer or (ii) a trade or business (whether or not incorporated) under common control (within the meaning of section 414(c) of the Code) with an Employer, but in each case substituting a 50% ownership level for the 80% ownership level specified therein.

 

9.              Article II hereby is amended to insert the following new Section 2.44 therein, and to renumber the Plan’s sections and section references accordingly:

 

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2.44          “Specified Employee” shall have the meaning set forth in the “Section 409A Specified Employee Policy of Telephone and Data Systems, Inc. and its Affiliates,” which policy hereby is incorporated herein by reference.

 

10.            Section 2.45 (as renumbered by this Third Amendment) hereby is amended (i) to replace the phrase “equity security” set forth therein with the phrase “capital stock of any class”, (ii) to delete the phrase “Stock Option” set forth therein and (iii) to insert the phrase “Special Common Stock,” immediately prior to the phrase “Cellular Group Stock” the second time that it appears therein.

 

11.            Article II hereby is amended to insert the following new Section 2.49, and to renumber the Plan’s sections and section references accordingly:

 

2.49          “Unforeseeable Emergency” shall mean a severe financial hardship to an employee resulting from (i) an illness or accident of the employee, the employee’s spouse, or the employee’s dependent (as defined in section 152 of the Code, without regard to sections 152(b)(1), (b)(2) and (d)(1)(B)), (ii) the loss of the employee’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, irrespective of whether caused by a natural disaster), or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the employee.  Examples of what may be considered to be “Unforeseeable Emergencies” include (a) the imminent foreclosure of or eviction from an employee’s primary residence, (b) the need to pay for medical expenses, including non-refundable deductibles and the cost of prescription drug medication and (c) the need to pay for funeral expenses of the employee’s spouse or dependent.  With limited exception, an “Unforeseeable Emergency” does not include the need to send an employee’s child to college or the desire to purchase a home.

 

12.            The first sentence of the second paragraph of Section 3.2(a) hereby is amended to add the phrase “and to the extent permitted under section 409A of the Code and regulations promulgated thereunder in the case of an award that is “deferred compensation” within the meaning thereof,” immediately after the phrase “subject to the requirements imposed under section 162(m) of the Code and regulations promulgated thereunder in the case of an award intended to be qualified performance-based compensation,”.

 

13.            The first sentence of Section 4.1(a) hereby is amended to read as follows:

 

The Committee may, in its discretion, grant options to purchase shares of Stock to such employees as may be selected by the Committee; provided , however , that an employee of an Affiliate may be granted an option to purchase shares of Stock only if the Stock qualifies, with respect to the employee, as “service recipient stock” within the meaning set forth in section 409A of the Code.

 

14.            The first sentence of Section 4.1(b) hereby is amended to replace the phrase “an Incentive Stock Option” the first time that it appears therein with the phrase “a Stock Option”.

 

15.            The first sentence of Section 4.2(a) hereby is amended to read as follows:

 

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The Committee may, in its discretion, grant SARs to such employees as may be selected by the Committee; provided , however , that an employee of an Affiliate may be granted an SAR only if the underlying Stock qualifies, with respect to the employee, as “service recipient stock” within the meaning set forth in section 409A of the Code.

 

16.            Section 4.2(c) hereby is amended (i) to delete the parenthetical “(including shares of Restricted Stock)” set forth in the first sentence thereof, (ii) to delete the sixth sentence thereof in its entirety and (iii) to delete the phrase “including Restricted Stock,” set forth in the last sentence thereof.

 

17.            The last sentence of Section 5.3 hereby is amended to replace the phrase “Company’s right to require” set forth therein with the phrase “employee’s timely”.

 

18.            Sections 7.1 and 7.2 hereby are amended in their entirety to read as follows:

 

7.1            Annual Bonus Deferral .  The Committee may, in its discretion, permit an employee selected by the Committee to make an irrevocable election (i) not to receive currently any whole percentage of his gross annual bonus payment and (ii) to have an amount equal to such percentage credited to the employee’s Deferred Compensation Account (such election, a “deferral election”); provided, however, that the amount subject to such deferral election with respect to any Bonus Year shall not exceed $400,000.  An employee’s deferral election shall be made on or before the last day of the calendar year immediately preceding the Bonus Year.  Notwithstanding the preceding sentence, if permitted by the Company, a Newly Eligible Employee may make a deferral election with respect to a Bonus Year within thirty (30) days following the date that the employee becomes eligible to make the deferral; provided , however , that such deferral election shall apply solely to that portion of the Newly Eligible Employee’s annual bonus equal to the total annual bonus multiplied by the ratio of the number of days remaining in the Bonus Year after the date of the deferral election over the total number of days in the Bonus Year.  Annual bonus amounts credited to the employee’s Deferred Compensation Account pursuant to this Section 7.1 (as adjusted for deemed investment returns pursuant to Section 7.3) shall be 100% vested at all times.

 

7.2            Employer Match Awards .  (a)  In General .  At the time the Committee selects an employee for participation in the Plan pursuant to Section 7.1, the Committee may also decide that such an employee is eligible for an Employer Match Award.  Employer Match Awards shall be subject to the terms and conditions set forth in this Section 7.2 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem advisable.  As of the date on which an amount (the “deferred amount”) is credited to an employee’s Deferred Compensation Account pursuant to Section 7.1, there also shall be credited to the employee’s Deferred Compensation Account an Employer Match Award equal to a percentage of such deferred amount specified by the Committee not in excess of 33 1 / 3 %.

 

(b)  Vesting of Employer Match Award .  One-third of the Employer Match Award so credited to the employee’s Deferred Compensation Account pursuant to this Section 7.2 (as adjusted for deemed investment returns pursuant to Section 7.3) shall become nonforfeitable on each of the first three anniversaries of the last day of the Bonus Year,

 

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provided that the employee remains continuously employed by an Employer or an Affiliate until such date and the related annual bonus amount credited to his Deferred Compensation Account has not been withdrawn or distributed before such date; provided further , however , that if the employee experiences a Separation from Service by reason of his Disability or death, all Employer Match Awards (as adjusted for deemed investment returns pursuant to Section 7.3) credited to the employee’s Deferred Compensation Account, to the extent not forfeited previously, shall become nonforfeitable as of the date of such Separation from Service.  Any Employer Match Award that is forfeitable as of the date that the employees experiences a Separation from Service, or as of the date that the related annual bonus amount is withdrawn or distributed, shall be forfeited as of the date of such Separation from Service, withdrawal or distribution.  Notwithstanding the foregoing provisions of this Section 7.2(b) or any other provision herein to the contrary, if an employee experiences a Separation from Service on account of such employee’s negligence, willful misconduct, competition with the Company or an Affiliate or misappropriation of confidential information of the Company or an Affiliate, as determined by the Company in its sole discretion, then any Employer Match Award shall be forfeited on the date that the employee experiences a Separation from Service, unless such Employer Match Award is forfeited earlier pursuant to Section 8.10.  Any Employer Match Awards and any deemed investment returns credited to an employee’s Deferred Compensation Account shall be an expense allocated to the employee’s Employer for the related Bonus Year.

 

19.            Sections 7.4 and 7.5 hereby are amended in their entirety to read as follows:

 

7.4            Payment of Deferred Compensation Account .  An employee’s Distributable Balance shall be paid in a lump sum during the seventh calendar month following the calendar month during which the employee experiences a Separation from Service; provided , however , that an employee may irrevocably elect, at the time that the employee makes the deferral election pursuant to Section 7.1, to receive the employee’s Distributable Balance in a lump sum at an earlier date specified by the employee that is at least three calendar years after the calendar year during which the employee’s deferral election is made.  All payments of deferred compensation hereunder will be made in whole shares of Stock, and cash equal to the Fair Market Value of any fractional share.  Notwithstanding the foregoing, if an employee dies before the employee’s entire Distributable Balance has been paid, then within sixty (60) days following the employee’s death the Company shall pay the remainder of the Distributable Balance to the employee’s beneficiary designated pursuant to Section 8.4.

 

7.5            Unforeseeable Emergency Withdrawals .  Upon written request by an employee (other than an employee who has experienced a Separation from Service) whom the Committee determines has suffered an Unforeseeable Emergency, the Committee may direct payment to the employee of all or any portion of the employee’s Distributable Balance.  An employee who has experienced a Separation from Service shall not be eligible to receive a withdrawal hereunder due to Unforeseeable Emergency.  The circumstances that shall constitute an Unforeseeable Emergency will depend upon the facts of each case, but, in any event, payment shall not exceed an amount reasonably necessary to satisfy such emergency plus amounts necessary to pay taxes and penalties

 

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reasonably anticipated as a result of such payment after taking into account the extent to which such emergency is or may be relieved (i) through reimbursement or compensation by insurance or otherwise; (ii) by liquidation of the employee’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (iii) by cessation of deferrals under any Account Balance Plan.  In the event that the Committee approves a withdrawal of all or a portion of the employee’s Distributable Balance due to an Unforeseeable Emergency, payment shall be made to the employee in a lump sum as soon as practicable following such approval, but in no event later than sixty (60) days after the occurrence of the Unforeseeable Emergency.

 

If an employee receives, either hereunder or from any other nonqualified deferred compensation arrangement maintained by an Employer or Affiliate, a withdrawal on account of the employee’s Unforeseeable Emergency, any deferral election by the employee in effect under this Article VII shall be cancelled, effective as of the date of such withdrawal.

 

20.            Article VII hereby is amended to add the following new section 7.6 thereto:

 

7.6            Application .  The provisions of this Article VII shall apply solely with respect to the portion of an employee’s Deferred Compensation Account that is subject to section 409A of the Code.  The portion of an employee’s Deferred Compensation Account that is not subject to section 409A of the Code shall not be subject to the provisions of this Article VII and instead shall be subject to the terms of the Plan as in effect at the time of the deferral of the compensation and the Agreement applicable thereto.

 

21.            The first sentence of Section 8.2 hereby is amended to read as follows:

 

The Board may amend the Plan as it shall deem advisable, subject to any requirement of stockholder approval under applicable law; provided, however, that no amendment shall be made without stockholder approval if such amendment would (a) increase the maximum number of shares of any class of Stock available for issuance under the Plan (except as provided in Section 8.8) or (b) with respect to any Incentive Stock Option which shall have been granted under the Plan, effect any change inconsistent with section 422 of the Code.

 

22.            Section 8.5 hereby is amended in its entirety to read as follows:

 

8.5            Transferability .  No Incentive Stock Option shall be transferable other than to a beneficiary determined pursuant to Section 8.4.  No Restricted Stock Unit Award, Performance Share Award or Deferred Compensation Account shall be transferable other than (a) to a beneficiary determined pursuant to Section 8.4 or (b) pursuant to a court order entered in connection with a dissolution of marriage or child support.  No other award under the Plan shall be transferable other than (a) to a beneficiary determined pursuant to Section 8.4, (b) pursuant to a court order entered in connection with a dissolution of marriage or child support, or (c) to the extent permitted under (i) securities laws relating to the registration of securities subject to employee benefit plans and (ii) the Agreement evidencing the grant of such award, by transfer to a Permitted Transferee.

 

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Except as permitted by the preceding provisions of this Section 8.5, no award under the Plan or Deferred Compensation Account balance may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process.  Upon any such attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any award or Deferred Compensation Account balance, such award and all rights thereunder shall immediately become null and void and any Employer Match Awards credited to such Deferred Compensation Account shall be forfeited.

 

23.            Section 8.8 hereby is amended (i) to delete from the last sentence thereof the phrase “vesting, exercise or” the first time that it appears therein, (ii) to replace the phrase “settlement date” set forth in the last sentence thereof with the phrase “other date that the award becomes payable,” and (iii) to add the following new sentence at the end thereof:

 

Any adjustment pursuant to this Section 8.8 shall be made in compliance with the requirements of section 409A of the Code (to the extent applicable thereto), including without limitation, with respect to Stock Options and SARs, the requirements of Treasury Regulation §1.409A-1(b)(5)(v)(D).

 

24.            The first sentence of Section 8.9(a) hereby is amended to read as follows:

 

Notwithstanding any other provision of the Plan or any provision of any agreement, in the event of a Change in Control, (i) any outstanding Restricted Stock Awards shall become nonforfeitable and the Restriction Periods applicable thereto shall lapse, (ii) any outstanding Restricted Stock Unit Awards and Performance Share Awards shall become nonforfeitable, (iii) to the extent permissible under section 409A of the Code, any Restriction Periods applicable to outstanding Restricted Stock Unit Awards shall lapse; (iv) to the extent permissible under section 409A of the Code, any Performance Periods applicable to outstanding Performance Share Awards shall lapse; (v) any Performance Measures applicable to outstanding Performance Share Awards, Restricted Stock Awards or Restricted Stock Unit Awards (if any) shall be deemed to be satisfied at the target level, (vi) all outstanding options or SARs shall become immediately exercisable in full and (vii) all amounts deemed to be held in Deferred Compensation Accounts shall become nonforfeitable.

 

25.            Section 8.9(a) hereby is amended further to add the following new sentence at the end thereof:

 

Any substitution with respect to an outstanding award hereunder upon a Change in Control shall be undertaken in compliance with the requirements of section 409A of the Code, to the extent applicable to such award.

 

26.            Article VIII hereby is amended to add the following new Section 8.16 thereto:

 

8.16          Compliance with Section 409A of the Code .  It is intended that the Plan comply with the provisions of section 409A of the Code, to the extent applicable thereto.  The Plan shall be administered and interpreted in a manner consistent with this intent.  Notwithstanding the foregoing, no particular tax result for an employee with respect to any income recognized by the employee in connection with the Plan is guaranteed under

 

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the Plan, and the employee solely shall be responsible for any taxes, interest, penalties or other amounts imposed on the employee in connection with the Plan.

 

* * * * * *

 

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IN WITNESS WHEREOF, the undersigned has executed this Third Amendment as of this                      day of December, 2008.

 

 

	TELEPHONE AND DATA SYSTEMS, INC.
	By:
	Its:

 

SIGNATURE PAGE TO

THIRD AMENDMENT TO

TELEPHONE AND DATA SYSTEMS, INC.

2004 LONG-TERM INCENTIVE PLAN

 

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Exhibit 10.2

 

TELEPHONE AND DATA SYSTEMS, INC.

2004 LONG-TERM INCENTIVE PLAN

 

<<YEAR>> RESTRICTED STOCK UNIT AWARD AGREEMENT

 

Telephone and Data Systems, Inc., a Delaware corporation (the “Company”), hereby grants to <<NAME>> (the “Employee”) as of <<DATE>> , pursuant to the provisions of the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan (As Amended and Restated) (the “Plan”), a Restricted Stock Unit Award (the “Award”) with respect to <<NUMBER>> shares of Special Common Stock, upon and subject to the restrictions, terms and conditions set forth below.  Capitalized terms not defined herein shall have the meanings specified in the Plan.

 

1.              Award Subject to Acceptance .

 

The Award shall become null and void unless the Employee accepts this Award Agreement.  The Employee shall be deemed to have accepted this Award Agreement unless the Employee returns this Award Agreement to the Vice President—Human Resources of the Company within thirty (30) days of the Employee’s receipt of this Award Agreement, accompanied by a written statement that the Employee does not accept this Award Agreement.

 

2.              Restriction Period and Forfeiture .

 

(a)  In General .  Except as otherwise provided in this Award Agreement, the Award shall become nonforfeitable and the Restriction Period with respect to the Award shall terminate on December 15, <<SECOND CALENDAR YEAR COMMENCING AFTER GRANT DATE>> (the “Release Date”), provided that the Employee remains continuously employed by or of service to the Employers and Affiliates until the Release Date.  Within sixty (60) days following the Release Date, the Company shall issue to the Employee in a single payment the shares of Special Common Stock subject to the Award on the Release Date.

 

 

(b)  Death .  If the Employee has a Separation from Service prior to the Release Date by reason of death, then on the date of the Employee’s death the Award shall become nonforfeitable and the Restriction Period with respect to the Award shall terminate.  Within sixty (60) days following the date of the Employee’s death, the Company shall issue to the Employee’s designated beneficiary in a single payment the shares of Special Common Stock subject to the Award.

 

(c)  Disability .  If the Employee has a Separation from Service prior to the Release Date by reason of Disability, then on the date of the Employee’s Separation from Service the Award shall become nonforfeitable and the Restriction Period with respect to the Award shall terminate.  The Company shall issue the shares of Special Common Stock subject to the Award in a single payment within sixty (60) days following the date of the Employee’s Separation from Service; provided , however , that if the Employee is a Specified Employee as of the date of his or her Separation from Service, then such payment shall be delayed until and made during the seventh calendar month following the calendar month during which the Employee’s Separation from Service occurs (or, if earlier, the calendar month following the calendar month of the Employee’s death).

 

(d)  Retirement at or after Attainment of Age 66 .  If the Employee has a Separation from Service on or after January 1, <<CALENDAR YEAR COMMENCING AFTER GRANT DATE>> but prior to the Release Date by reason of retirement at or after attainment of age 66, then on the date of the Employee’s Separation from Service the Award shall become nonforfeitable and the Restriction Period with respect to the Award shall terminate .  The Company shall issue the shares of Special Common Stock subject to the Award in a single payment within sixty (60) days following the date of the Employee’s Separation from Service; provided , however , that if the

 

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Employee is a Specified Employee as of the date of his or her Separation from Service, then such payment shall be delayed until and made during the seventh calendar month following the calendar month during which the Employee’s Separation from Service occurs (or, if earlier, the calendar month following the calendar month of the Employee’s death).  If the Employee has a Separation from Service prior to January 1, <<CALENDAR YEAR COMMENCING AFTER GRANT DATE>> by reason of retirement at or after attainment of age 66, then on the date of the Employee’s Separation from Service the Award shall be forfeited and shall be canceled by the Company.

 

(e)  Other Separation from Service .  If the Employee has a Separation from Service prior to the Release Date for any reason other than death, Disability or retirement at or after attainment of age 66 (including if the Employee has a Separation from Service prior to the Release Date by reason of the Employee’s negligence or willful misconduct, as determined by the Company in its sole discretion, irrespective of whether such separation occurs on or after the Employee attains age 66), then on the date of the Employee’s Separation from Service the Award shall be forfeited and shall be canceled by the Company.

 

(f)  Forfeiture of Award upon Competition or Misappropriation of Confidential Information .  Notwithstanding any other provision herein, if the Employee (i) enters into competition with an Employer or other Affiliate or (ii) misappropriates confidential information of an Employer or other Affiliate, as determined by the Company in its sole discretion, then on the date of such competition or misappropriation the Award shall be forfeited and shall be canceled by the Company.  For purposes of the preceding sentence, the Employee shall be treated as entering into competition with an Employer or other Affiliate if the Employee (i) directly or indirectly, individually or in conjunction with any person, firm or corporation, has contact with any customer of an Employer or other Affiliate or any prospective customer which has been contacted or

 

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solicited by or on behalf of an Employer or other Affiliate for the purpose of soliciting or selling to such customer or prospective customer any product or service, except to the extent such contact is made on behalf of an Employer or other Affiliate; (ii) directly or indirectly, individually or in conjunction with any person, firm or corporation, becomes employed in the business or engages in the business of providing wireless, telephone or broadband products or services in any geographic territory in which an Employer or other Affiliate offers such products or services or has plans to do so within the next twelve months or (iii) otherwise competes with an Employer or other Affiliate in any manner or otherwise engages in the business of an Employer or other Affiliate.  The Employee shall be treated as misappropriating confidential information of an Employer or other Affiliate if the Employee (i) uses confidential information (as described below) for the benefit of anyone other than an Employer or such Affiliate, as the case may be, or discloses the confidential information to anyone not authorized by an Employer or such Affiliate, as the case may be, to receive such information, (ii) upon termination of employment or service, makes any summaries of, takes any notes with respect to or memorizes any confidential information or takes any confidential information or reproductions thereof from the facilities of an Employer or other Affiliate or (iii) upon termination of employment or service or upon the request of an Employer or other Affiliate, fails to return all confidential information then in the Employee’s possession.  “Confidential information” shall mean any confidential and proprietary drawings, reports, sales and training manuals, customer lists, computer programs and other material embodying trade secrets or confidential technical, business, or financial information of an Employer or other Affiliate.

 

The Employee acknowledges and agrees that the Award, by encouraging stock ownership and thereby increasing an employee’s proprietary interest in the Company’s success, is intended as an incentive to participating employees to remain in the employ of an Employer or

 

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other Affiliate.  The Employee acknowledges and agrees that this Section 2(f) is therefore fair and reasonable, and not a penalty.

 

3.              Change in Control .

 

(a)  Immediate Vesting of Award .  Notwithstanding any provision in the Plan or any other provision in this Award Agreement, in the event of a Change in Control, the Award immediately shall become nonforfeitable.

 

(b)  Time of Payment .  Notwithstanding any provision in the Plan or any other provision in this Award Agreement, in the event of a Change in Control, then the Restriction Period with respect to the Award immediately shall terminate i f (i) the Award is not “deferred compensation” within the meaning of section 409A of the Code or (ii) the Award is “deferred compensation” within the meaning of section 409A of the Code and the Change in Control qualifies as a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5).  In such event, payment of the Award shall occur in a lump sum within sixty (60) days following the occurrence of the Change in Control.  If the Award is “deferred compensation” within the meaning of section 409A of the Code and the Change of Control does not qualify as a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5), then the Award shall continue to be subject to the Restriction Period until the earlier of (i) the Release Date and (ii) the date that the Employee has a Separation from Service.  In such event, payment of the Award shall occur within sixty (60) days following the date that the Restriction Period terminates; provided , however , that if the Restriction Period terminates by reason of the Employee’s Separation from Service, and the Employee is a Specified Employee as of the date of his or her Separation from Service, then payment of the Award shall be delayed until and made during the seventh calendar month following the calendar month during which the Employee’s Separation

 

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from Service occurs (or, if earlier, the calendar month following the calendar month of the Employee’s death).

 

(c)  Substitution .  In the event of a Change in Control pursuant to Section (d)(3) below, there may be substituted for each share of Stock subject to the Award, the number and class of shares into which each outstanding share of Stock shall be converted pursuant to such Change in Control.

 

(d)  Definition of Change in Control .  For purposes of the Plan and this Award Agreement, a “Change in Control” shall mean:

 

(1)  the acquisition by any Person, including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 25% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally on matters (without regard to the election of directors) (the “Outstanding Voting Securities”), excluding, however, the following:  (i) any acquisition directly from the Company or an Affiliate (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege, unless the security being so exercised, converted or exchanged was acquired directly from the Company or an Affiliate), (ii) any acquisition by the Company or an Affiliate, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 3(d), or (v) any acquisition by the following persons:  (A) LeRoy T. Carlson or his spouse, (B) any child of LeRoy T. Carlson or the spouse of any such child, (C) any grandchild of LeRoy T. Carlson, including any child adopted by any child of LeRoy T. Carlson, or the spouse of any such grandchild, (D) the estate of any of the persons described in clauses (A)-(C), (E) any trust or similar arrangement (including any acquisition on behalf of such

 

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trust or similar arrangement by the trustees or similar persons) provided that all of the current beneficiaries of such trust or similar arrangement are persons described in clauses (A)-(C) or their lineal descendants, or (F) the voting trust which expires on June 30, 2035, or any successor to such voting trust, including the trustees of such voting trust on behalf of such voting trust (all such persons, collectively, the “Exempted Persons”);

 

(2)  individuals who, as of February 27, 2004, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company after February 27, 2004, whose election or nomination for election by the Company’s stockholders was approved by the vote of at least a majority of the directors then comprising the Incumbent Board, shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board;

 

(3)  consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”), excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners of the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding securities of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns, either directly or indirectly, the Company or all or substantially all of the Company’s assets) which are entitled to vote generally on matters (without regard to the election of

 

7

 

directors), in substantially the same proportions relative to each other as the shares of Outstanding Voting Securities are owned immediately prior to such Corporate Transaction, (ii) no Person (other than the following Persons:  (v) the Company or an Affiliate, (w) any employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, (x) the corporation resulting from such Corporate Transaction, (y) the Exempted Persons, and (z) any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Voting Securities) will beneficially own, directly or indirectly, 25% or more of the combined voting power of the outstanding securities of such corporation entitled to vote generally on matters (without regard to the election of directors) and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or

 

(4)  approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company.

 

4.              Additional Terms and Conditions of Award .

 

4.1.           Nontransferability of Award .  Except (i) to a beneficiary upon the Employee’s death (as designated on the form attached hereto or under the terms of the Plan) or (ii) pursuant to a court order entered in connection with a dissolution of marriage or child support, the Award may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process.  Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Award, the Award and all rights hereunder shall immediately become null and void.

 

By accepting the Award, the Employee agrees that if all beneficiaries designated on a beneficiary designation form predecease the Employee or, in the case of corporations,

 

8

 

partnerships, trusts or other entities which are designated beneficiaries, are terminated, dissolved, become insolvent or are adjudicated bankrupt prior to the date of the Employee’s death, or if the Employee fails to designate a beneficiary on a beneficiary designation form, then the Employee hereby designates the following persons in the order set forth herein as the Employee’s beneficiary or beneficiaries: (i) the Employee’s spouse, if living, or if none, (ii) the Employee’s then living descendants, per stirpes, or if none, (iii) the Employee’s estate.

 

4.2.           Investment Representation .  The Employee hereby represents and covenants that (a) any shares of Stock acquired upon the lapse of restrictions with respect to the Award will be acquired for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), unless such acquisition has been registered under the Securities Act and any applicable state securities law; (b) any subsequent sale of any such shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Employee shall submit a written statement, in a form satisfactory to the Company, to the effect that such representation is true and correct as of the date of acquisition of any shares hereunder or is true and correct as of the date of sale of any such shares, as applicable.  As a condition precedent to the issuance or delivery to the Employee of any shares subject to the Award, the Employee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the shares and, in connection therewith, shall execute any documents which the Committee shall in its sole discretion deem necessary or advisable.

 

4.3.           Tax Withholding .  (a)  The Employee timely shall pay to the Company such amount as the Company may be required, under all applicable federal, state, local or other laws or

 

9

 

regulations, to withhold and pay over as income or other withholding taxes (the “Required Tax Payments”) with respect to the Award.  If the Employee shall fail to timely advance the Required Tax Payments, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Employee.

 

(b)  T he Employee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means:  (1) a cash payment to the Company, (2) delivery to the Company of whole shares of Stock, the Fair Market Value of which shall be determined as of the date the obligation to withhold or pay taxes first arises in connection with the Award (the “Tax Date”), (3) authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the Employee pursuant to the Award, the Fair Market Value of which shall be determined as of the Tax Date or (4) any combination of (1), (2) and (3).  Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments.  Any fraction of a share of Stock which would be required to pay the Required Tax Payments shall be disregarded and the remaining amount due shall be paid in cash by the Employee.  The Employee agrees that if by the pay period that immediately follows the date that the Restriction Period with respect to the Award terminates, no cash payment attributable to any such fractional share shall have been received by the Company, then the Employee hereby authorizes the Company to deduct such cash payment from any amount payable by the Company or any Affiliate to the Employee, including without limitation any amount payable to the Employee as salary or wages.  The Employee agrees that this authorization may be reauthorized via electronic means determined by the Company.  The Employee may revoke this authorization by written notice to the Company prior to any such deduction.

 

4.4.           Award Confers No Rights as a Stockholder .  The Employee shall not be entitled to any privileges of ownership with respect to the shares of Stock subject to the Award

 

10

 

unless and until the restrictions on the Award lapse and the Employee becomes a stockholder of record with respect to such shares.

 

4.5.           Adjustment .  In the event of any conversion, stock split, stock dividend, recapitalization, reclassification, reorganization, merger, consolidation, spin-off, combination of

 

shares in a reverse stock split, exchange of shares, liquidation or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of shares of Stock subject to the Award shall be appropriately and equitably adjusted by the Committee.  Such adjustment shall be final, binding and conclusive.  If such adjustment would result in a fractional share being subject to the Award, the Company shall pay the holder, on the date that the shares with respect to the Award are issued, an amount in cash determined by multiplying (i) the fraction of such share (rounded to the nearest hundredth) by (ii) the Fair Market Value of a share on the date that the Restriction Period with respect to the Award terminates.

 

4.6.           Compliance with Applicable Law .  The Award is subject to the condition that if the listing, registration or qualification of the shares of Stock subject to the Award upon any securities exchange or under any law, the consent or approval of any governmental body or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of shares, such shares will not be issued or delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company.  The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.

 

4.7.           Delivery of Certificates .  On the date of payment of the Award, the Company shall deliver or cause to be delivered to the Employee one or more certificates

 

11

 

representing the number of shares of Stock subject to the Award.  The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Sections 4.3 and 5.4.

 

4.8.           Award Confers No Rights to Continued Employment or Service .  In no event shall the granting of the Award or the acceptance of this Award Agreement and the Award by the Employee give or be deemed to give the Employee any right to continued employment by or service with any Employer or any subsidiary or affiliate of an Employer.

 

4.9.           Decisions of Committee .  The Committee or its delegate shall have the right to resolve all questions which may arise in connection with the Award.  Any interpretation, determination or other action made or taken by the Committee or its delegate regarding the Plan or this Award Agreement shall be final, binding and conclusive.

 

4.10.         Company to Reserve Shares .  The Company shall at all times prior to the cancellation of the Award reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Award from time to time.

 

4.11.         Award Agreement Subject to the Plan .  This Award Agreement is subject to the provisions of the Plan, as it may be amended from time to time, and shall be interpreted in accordance therewith.  The Employee hereby acknowledges receipt of a copy of the Plan.

 

5.              Miscellaneous Provisions .

 

5.1.           Successors .  This Award Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Agreement or the Plan.

 

5.2.           Notices .  All notices, requests or other communications provided for in this Award Agreement shall be made in writing either (a) by actual delivery to the party entitled thereto, (b) by mailing in the United States mails to the last known address of the party entitled

 

12

 

thereto, via certified or registered mail, postage prepaid and return receipt requested, (c) by telecopy with confirmation of receipt or (d) by electronic mail, utilizing notice of undelivered electronic mail features.  The notice, request or other communication shall be deemed to be received (a) in case of delivery, on the date of its actual receipt by the party entitled thereto, (b) in case of mailing by certified or registered mail, five days following the date of such mailing, (c) in case of telecopy, on the date of confirmation of receipt and (d) in case of electronic mail, on the date of mailing, but only if a notice of undelivered electronic mail is not received.

 

5.3.           Governing Law .  The Award, this Award Agreement and all determinations made and actions taken pursuant thereto, to the extent otherwise not governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without regard to principles of conflicts of laws.

 

5.4            Compliance with Section 409A of the Code .  It is intended that this Award Agreement and the Plan comply with the provisions of section 409A of the Code (to the extent applicable thereto).  This Award Agreement and the Plan shall be administered and interpreted in a manner consistent with this intent.  In the event that this Award Agreement or the Plan does not comply with section 409A of the Code, the Company shall have the authority to amend the terms of this Award Agreement or the Plan (which amendment may be retroactive to the extent permitted by section 409A of the Code and may be made by the Company without the consent of the Employee) to avoid excise taxes and other penalties under section 409A of the Code, to the extent possible.  Notwithstanding the foregoing, no particular tax result for the Employee with respect to any income recognized by the Employee in connection with this Award Agreement is guaranteed, and the Employee solely shall be responsible for any taxes, penalties, interest or other losses or expenses incurred by the Employee under section 409A of the Code in connection with this Award Agreement.

 

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5.5            Counterparts .  This Award Agreement may be executed in counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.

 

	TELEPHONE AND DATA SYSTEMS, INC.
	By:
			<<NAME>>
			<<TITLE>>

 

Accepted this              day of

 

                                            , 20      .

 

Employee

 

14

Exhibit 10.3

 

AMENDMENT TO

RETENTION AGREEMENT FOR KENNETH R. MEYERS

 

THIS AMENDMENT TO RETENTION AGREEMENT is made and entered into this                      day of December, 2008, by and between TELEPHONE AND DATA SYSTEMS, INC., a Delaware corporation (the “Corporation”) and KENNETH R. MEYERS (the “Executive”).

 

W I T N E S S E T H

 

WHEREAS, the Corporation and the Executive heretofore have entered into a Retention Agreement, dated as of December 4, 2006 (the “Agreement”);

 

WHEREAS, section 409A of the Internal Revenue Code of 1986, as amended (“section 409A”) sets forth restrictions with respect to certain nonqualified deferred compensation arrangements, which for this purpose may include the Agreement; and

 

WHEREAS, the Corporation and the Executive desire to amend the Agreement to cause it to comply with the requirements of section 409A, to the extent applicable thereto.

 

NOW, THEREFORE, it hereby is agreed that the Agreement be amended, effective as of January 1, 2009, as follows:

 

1.  Section 1(b) hereby is amended (i) to replace the period at the end of clause (ii) thereof with  “; or” and (ii) to add thereto the following new clause (iii):

 

(iii)          the failure by the Company, as required by Section 8(b), to cause any successor or transferee unconditionally to assume this Agreement prior to the effectiveness of any merger, consolidation or transfer of assets referenced in Section 8(a).

 

2.  Section 1(c) hereby is amended in its entirety to read as follows:

 

(c)           “Qualifying Termination” shall mean the Executive’s separation from service with the Company and its affiliates by the Company without Cause or by the Executive for Good Reason.  For all purposes of this Agreement, “separation from service” shall have the meaning set forth in Section 409A of the Internal Revenue Code of 1986, as amended, and guidance provided by the Treasury with respect thereto.

 

 

3.  The third sentence of Section 2(a) hereby is amended in its entirety to read as follows:

 

In recognition of the possibility of such cancellation, the Company hereby agrees that if the Executive’s employment with the Company is separated in a Qualifying Termination, and if as a result of such separation any of the options identified in Exhibit A to this Agreement are canceled (the “Canceled Options”), within thirty (30) days after such Qualifying Termination (unless the delay required by Section 12 applies), the Company shall pay the Executive a lump sum cash payment equal to the difference between (i) the Fair Market Value (as defined in the Plan) on the date of the Qualifying Termination of the Common Stock subject to the Canceled Options and (ii) the exercise price with respect to such Canceled Options provided in the award agreement or agreements evidencing the option grant.

 

4.  The third sentence of Section 2(b) hereby is amended in its entirety to read as follows:

 

In recognition of the possibility of such forfeiture, the Company hereby agrees that if the Executive’s employment with the Company is separated in a Qualifying Termination, and if as a result of such separation any of the Restricted Stock Units identified in Exhibit B to this Agreement are forfeited (the “Forfeited Restricted Stock Units”), within thirty (30) days after April 3, 2009 (unless the delay required by Section 12 applies), the Company shall pay the Executive a lump sum cash payment equal to the Fair Market Value (as defined in the Plan) on April 3, 2009 (the “Vesting Date”) of the Common Stock of USCC subject to the Restricted Stock Units that would have become vested on such date had the Restricted Stock Units not been forfeited.

 

5.  Section 4 hereby is amended to add the parenthetical “(unless the delay required by Section 12 applies)” immediately following the clause “on a current basis” set forth therein.

 

6.  Section 8(b) hereby is amended to delete the second and third sentences thereof.

 

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7.  The second sentence of Section 12 hereby is replaced in its entirety by the following two sentences:

 

Notwithstanding any other provision of this Agreement, to the extent any payment under the Agreement is considered deferred compensation subject to Section 409A, such payment shall not be made earlier than the date that is six (6) months and one (1) day following the date of the Executive’s separation from service, or, if earlier, the date of the Executive’s death, if the earlier making of such payment would result in tax penalties being imposed on the Executive under Section 409A.  The amount of any payment delayed pursuant to the immediately preceding sentence shall be paid to the Executive on the first business day coincident with or next following the date that is six (6) months and one (1) day following the date of the Executive’s separation from service or, if earlier, within thirty (30) days following the date of the Executive’s death.

 

FURTHER AGREED, that in all other respects, the provisions of the Agreement hereby are affirmed.

 

* * * * * *

 

3

 

IN WITNESS WHEREOF, the Corporation and the Executive have executed this Amendment to Retention Agreement as of the day and year first above written.

 

	TELEPHONE AND DATA SYSTEMS, INC.
	By:
		C. Theodore Herbert
		Vice President—Human Resources
	EXECUTIVE
	Kenneth R. Meyers

 

SIGNATURE PAGE TO

AMENDMENT TO RETENTION AGREEMENT

 

4

Exhibit 10.4

 

AMENDMENT TO

DEFERRED COMPENSATION AGREEMENT

FOR KENNETH R. MEYERS

 

THIS AMENDMENT TO DEFERRED COMPENSATION AGREEMENT is made and entered into as of this                      day of December, 2008, by and between TELEPHONE AND DATA SYSTEMS, INC., a Delaware corporation (the “Corporation”) and KENNETH R. MEYERS (the “Executive”).

 

W I T N E S S E T H

 

WHEREAS, the Corporation and the Executive heretofore have entered into a Deferred Compensation Agreement, dated as of December 26, 2006 (the “Agreement”);

 

WHEREAS, section 409A of the Internal Revenue Code of 1986, as amended (“section 409A”) sets forth restrictions with respect to certain nonqualified deferred compensation arrangements, which for this purpose includes the Agreement; and

 

WHEREAS, the Corporation and the Executive desire to amend the Agreement to cause it to comply with the requirements of section 409A.

 

NOW, THEREFORE, it hereby is agreed that the Agreement be amended, effective as of January 1, 2009, as follows:

 

1.  Paragraph 1(e) hereby is amended to add the following new sentence at the end thereof:

 

Base pay payable after the last day of a calendar year solely for services performed during the final payroll period containing the last day of the calendar year shall be treated as base pay for services performed in the calendar year in which the payroll period commenced (as opposed to the calendar year in which the base pay is payable).

 

2.  Paragraph 2(a) hereby is amended (i) to delete the second sentence thereof and (ii) to amend the first sentence thereof to read as follows:

 

At the earlier of the date that the Executive suffers a disability or terminates his employment for whatever reason, the Executive’s Deferred Compensation Account shall become payable in accordance with the payment method elected by the Executive in paragraph 2(e).

 

 

3.  Paragraph 2(b) hereby is amended in its entirety to read as follows:

 

The Executive will elect the payment method for receiving his Deferred Compensation Account either in a lump sum or in an indicated number of installments.  This determination will be made at the time of execution of the Agreement in paragraph 2(e) and shall be irrevocable.  In the event the Executive elects payment of his Deferred Compensation Account in a lump sum, such lump sum payment shall be made, subject to paragraph 2(f) below, within thirty (30) days following the date that the Executive suffers a disability or terminates employment, as applicable.

 

4.  Paragraph 2(c) hereby is amended (i) to replace the phrase “Executive’s service with the Company terminates” set forth in the second sentence thereof with the phrase “Executive suffers a disability or terminates employment, as applicable” and (ii) to replace the phrase “Ending Balance and all accrued interest” set forth in the last sentence thereof with the phrase “Deferred Compensation Account”

 

5.  Paragraph 2(d) hereby is amended in its entirety to read as follows:

 

If the Executive dies prior to the total distribution of the Deferred Compensation Account, the Company shall pay an amount equal to the then current balance including accrued interest in the Deferred Compensation Account.  Such payment shall be made in a lump sum within 30 days following the Executive’s death to the Executive’s Designated Beneficiary (as hereinafter defined).  However, if the Executive elected payment in the form of installments, the Executive may designate (at the time of entering this Agreement) that the installment payments be paid or continue to be paid to the Executive’s Designated Beneficiary.  If such Designated Beneficiary dies before all payments are made, payments shall be made to the beneficiary designated by the Designated Beneficiary in accordance with the procedures in paragraphs 3(a) and 3(b).

 

6.  Paragraph 2(e) hereby is amended in its entirety to read as follows:

 

e)  Payment of Deferred Compensation Election ( Executive should choose one option ):

 

i) o Lump sum distribution; or

ii) x Installment Method.  The amount of each installment shall be equal to one-twentieth (cannot be less than one-twentieth) of the Deferred Compensation Account immediately preceding the first installment payment, plus accrued interest compounded monthly for the preceding calendar quarter.

 

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Installment payments (to be completed only if item ii) — Installment Method is selected above) :

 

x  shall

o  shall not

 

be paid or continue to be paid to the Executive’s Designated Beneficiary after the death of the Executive.

 

7.  Paragraph 2(f) hereby is amended in its entirety to read as follows:

 

Notwithstanding any provision within this Agreement to the contrary, if the Executive is entitled to payment of his Deferred Compensation Account because of his termination of employment for a reason other than his death, no such payment shall be made before the date which is six (6) months and one (1) day after the date of the Executive’s termination of employment (or if earlier, the date of the Executive’s death).  The aggregate amount of any payment of the Deferred Compensation Account delayed pursuant to the immediately preceding sentence shall be paid on the first business day coincident with or next following the date that is six (6) months and one (1) day after the date of the Executive’s termination of employment or if earlier, within thirty (30) days after the date of the Executive’s death.

 

8.  Paragraph 2(g) hereby is amended to replace the phrase “only if such termination is a “separation from service” within the meaning of Section 409A of the Internal Revenue Code (the “Code”)” as it appears therein with the phrase “upon the Executive’s “separation from service” within the meaning of Section 409A of the Internal Revenue Code (the “Code”)”.

 

FURTHER AGREED, that in all other respects, the provisions of the Agreement hereby are affirmed.

 

* * * * * *

 

3

 

IN WITNESS WHEREOF, the Corporation and the Executive have executed this Amendment to Deferred Compensation Agreement as of the day and year first above written.

 

	TELEPHONE AND DATA SYSTEMS, INC.
	By:
		C. Theodore Herbert
		Vice President—Human Resources
	EXECUTIVE
	Kenneth R. Meyers

 

SIGNATURE PAGE TO

AMENDMENT TO DEFERRED COMPENSATION AGREEMENT

 

4

Exhibit 10.5

 

TDS BONUS DEFERRAL AND

STOCK UNIT MATCH PROGRAM

[YEAR] BONUS YEAR

 

Purpose

 

The TDS Bonus Deferral and Stock Unit Match Program (the “Program”) is designed to provide TDS Corporate executives with a significant incentive to acquire additional shares of TDS stock.  This document sets forth the terms and conditions of the Program as offered for the [YEAR] bonus year.

 

Eligibility

 

Executives who hold TDS Vice Presidential and above positions are eligible to participate.

 

Program Overview

 

Eligible executives may defer up to 100% of their annual bonus up to a maximum of $400,000 and receive Company Stock Unit Matches on the amount deferred.  Company Stock Unit Match amounts will depend on the amount of annual bonus that the executive deferred into stock units and the price of TDS Special Common Stock on the date his/her bonus was determined by TDS.  Executives will receive a 25% Company Stock Unit Match for amounts deferred up to 50% of their total annual bonus and a 33% match for any amounts that they elect to defer that exceed 50% of their total annual bonus award.  The Company Stock Unit Matches will vest ratably over three years.

 

TDS will establish bookkeeping accounts that reflect the executive’s deferral amount, Company Stock Unit Match and any earned dividends.  The value of the executive’s accounts will change in direct proportion to the performance of TDS Special Common Stock.  However, the amounts credited to an executive’s accounts will not actually be invested in TDS Special Common Stock.  The amounts credited to the executive’s accounts will be distributed in TDS Special Common Stock during the earlier of (i) the seventh calendar month following the calendar month during which the executive separates from service and (ii) the calendar month and year elected by the executive that is at least three years following the calendar year during which the executive makes the deferral election.  Distribution will be in the form of a single lump sum payment.  If the executive separates from service earlier than January 1 ^st of the fourth calendar year following the calendar year during which the bonus is earned (the “Performance Year”), and such separation from service is for a reason other than death or “Disability,” or if the executive elects a distribution date that is earlier than January 1 ^st of the fourth calendar year following the Performance Year, all or a portion of the Company match will be forfeited upon such separation or distribution.

 

For purposes hereof, “Disability” shall mean a total physical disability which, in the TDS Compensation Committee’s judgment, prevents an executive from performing substantially such executive’s employment duties and responsibilities for a continuous period of at least six months.

 

 

The executive is considered to be a general unsecured creditor of TDS with regard to the deferred compensation amounts to which the Program pertains.

 

The Program is subject to the provisions of the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan, as it may be amended from time to time (the “LTIP”), and shall be interpreted in accordance therewith.  In the event of any inconsistency between the terms of the Program and the terms of the LTIP, the terms of the LTIP shall govern.  The TDS Compensation Committee shall have the right to resolve all questions which may arise in connection with the Program.  Any interpretation, determination or other action made or taken by the TDS Compensation Committee regarding the Program shall be final, binding and conclusive.  Amounts will be paid under the Program only if the TDS Compensation Committee decides, in its sole discretion, that the executive or beneficiary is entitled to them.

 

Administrative Overview

 

In November or December of each year, the Corporate Vice President of Human Resources will send a Bonus Deferral Form similar to Attachment I for the upcoming Performance Year to all eligible TDS executives.  Executives wishing to take advantage of this bonus deferral opportunity must fill out this Form and return it (delivered or faxed with signature) to the Corporate Vice President of Human Resources no later than the date specified by TDS (which in no event will be later than December 31 ^st ) (see Administrative Ground Rules – Taxes).  Except in the event that an executive experiences an “Unforeseeable Emergency” (as defined below), the elections made by the executive on the Bonus Deferral Form shall be irrevocable upon the commencement of the Performance Year.

 

Before the first of each year, the Corporate Vice President of Human Resources will confirm all election deferral decisions with the executives making them, as well as advise the administrative personnel who need to be aware of the specifics of these bonus deferral election decisions.

 

After a participating executive’s bonus award has been determined and the amount he/she has deferred is known, two separate accounts will be established for each participating executive:  (i) the “Deferred Compensation Stock Account”, which will be credited with the bonus monies that the executive has deferred under the Program, and (ii) the “Stock Unit Match Account”, which will be credited with the Company Stock Unit Match awards.

 

The value of an executive’s accounts for the [YEAR] Performance Year will rise or fall in direct proportion to the price of TDS Special Common Stock.*  All participating executives will receive statements of the number of vested and unvested share units they have in their accounts as of each December 31 ^st (see Attachment II for the information that will be included in each account statement).  These statements will be sent out annually as early in the first quarter as possible.

 

*               Please note that if an executive participated in the Program for Performance Years prior to the 2005 Performance Year, the value of the executive’s accounts for such years will rise or fall in direct proportion to the price of TDS Special Common Stock and TDS Common Stock.  Accounts for Performance Years prior to the 2005 Performance Year are deemed to be invested in an equal number of shares of TDS Special Common Stock and TDS Common Stock.  Accounts for the 2005 Performance Year and any Performance Year thereafter are deemed to be invested solely in shares of TDS Special Common Stock.

 

2

 

Administrative Ground Rules

 

This [YEAR] Program will be administered in accordance with the following ground rules:

 

·       Vesting:

 

The executive is always 100% vested in all bonus amounts that have been deferred under the Program and any dividends credited under the Program.  Provided that the executive does not separate from service or receive a distribution of his/her accounts for the [YEAR] Performance Year prior to the vesting date, the Company Stock Unit Matches will vest ratably over three years in accordance with the following schedule:

 

·       33% on December 31 ^st of the year following the Performance Year,

 

·       an additional 33% on December 31 ^st of the second year following the Performance Year, and

 

·       the remaining 34% on December 31 ^st of the third year following the Performance Year.

 

·       Taxes:

 

Since all bonus deferral decisions under the Program will be made in accordance with IRS requirements, income taxes on all Bonus Deferrals and Company Stock Unit Match awards will be deferred until the proceeds from the executive’s Deferred Compensation Stock Account and Stock Unit Match Account are distributed.  The IRS has taken the position that the executive must make his/her deferral election prior to the beginning of the Performance Year in order that the deferred monies not be considered immediately taxable and to avoid other adverse tax consequences.

 

Please note, however, that Bonus Deferrals and Company Stock Unit Match awards will be subject to social security and unemployment tax prior to the date they are distributed.  Bonus Deferrals will be subject to social security and unemployment tax at the time of the deferral and Company Stock Unit Match awards will be subject to social security and unemployment tax at the time they become vested.

 

Appropriate amounts shall be withheld from any distributions under the Program or from an executive’s compensation as may be required for purposes of complying with federal, state, local or other tax withholding requirements applicable to the Program.

 

·       Separation from Service:

 

If the executive separates from service prior to the completion of the vesting schedule, as previously described, all unvested share units credited to the executive’s Stock Unit Match Account will be forfeited, except if the executive separates from service as a result of his/her Disability or death.  If the executive separates from service as a result of his/her Disability or death, the executive or his/her beneficiary/beneficiaries, as applicable, will be 100% vested in all share units credited at such time to the executive’s Stock Unit Match Account.

 

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Notwithstanding the foregoing, if the executive separates from service as a result of his/her negligence, willful misconduct, competition with TDS or an affiliate thereof or misappropriation of confidential information of TDS or an affiliate thereof, as determined by TDS in its sole discretion, then the executive’s Stock Unit Match Account, whether vested or nonvested (including any dividend share units credited thereto), automatically will be forfeited as of the date of such separation.

 

·       Beneficiaries:

 

An executive who defers any portion of his/her annual bonus under the Program should complete a “Bonus Deferral and Stock Unit Match Program Beneficiary Designation Form” (see Attachment III) and return it to the Corporate Vice President of Human Resources as soon as possible.  In the event of the executive’s death, this Form will govern distribution of the executive’s unpaid vested accounts for the [YEAR] Performance Year and all other Performance Years with respect to which the executive participated in the Program.  The Form does not have to be completed again unless the executive wishes to make some change to the previous Beneficiary Designation Form.  If an executive is married and names someone other than his/her spouse as a primary beneficiary, the designation is invalid unless the spouse consents by signing the Beneficiary Designation Form in the presence of a Notary Public.  If an executive fails to complete such a form, the executive’s spouse, if any, will be the beneficiary.  Otherwise, the executive’s beneficiary will be determined by the terms of the LTIP document.

 

Notwithstanding any provision within the Program to the contrary, in the event of the executive’s death, his/her unpaid vested accounts will be distributed in their entirety at the time determined by TDS within 60 days following the executive’s death.

 

·       Initial Value of the Executive’s Deferred Compensation Stock and Stock Unit Match Accounts:

 

After verification of the executive’s bonus, and the amount that was deferred, the amount credited to the executive’s accounts for the [YEAR] Performance Year will be determined as follows:

 

·       The initial value of the bonus deferral amount will be determined by dividing the bonus deferral by the closing price of TDS Special Common Stock on the date that the bonus was determined.  Share units will be calculated to three decimal places and fractional share units will accumulate.

 

For example, if the executive elected to defer 75% of his/her bonus for a year and his/her bonus was $40,000 for that year, the executive would have deferred $30,000.  If the closing price of a share of TDS Special Common Stock on the day this bonus was approved was $100, then 300 share units will be credited to the executive’s Deferred Compensation Stock Account.

 

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·       The initial value of the Stock Unit Match Account will be determined the same way.  Using the above example, the initial dollar value of share units credited to his/her Stock Unit Match Account is $8,300, calculated as follows:

 

·       25% of $20,000 (50% of the executive’s total bonus) = $5,000

 

·       33% of $10,000 (the deferral amount over 50% of the executive’s total bonus) = $3,300

 

·       Total = $8,300

 

Since the closing price of TDS Special Common Stock on the date the bonus award was approved was assumed to be $100, the executive’s Stock Unit Match Account would be credited 83.00 share units, which would vest in accordance with the following schedule:

 

·       27.39(1) share units – vests on December 31 ^st of the year following the Performance Year.

·       27.39(1) share units – vests on December 31 ^st two years after the Performance Year.

·       28.22(2) share units – vests on December 31 ^st three years after the Performance Year.

·       83.00   share units – Total Stock Unit Match

 

·       Value of an Executive’s Deferred Compensation Stock Account and Stock Unit Match Account:

 

The value of an executive’s accounts for the [YEAR] Performance Year will increase or decrease in an amount equal to the gains or losses that would have been realized if assets in an amount equal to the balance in the executive’s accounts were actually invested in TDS Special Common Stock.  Hence, if the price of TDS Special Common Stock rises by $1, each share unit credited in the executive’s accounts will be worth an additional $1.

 

·       Dividends:

 

The executive’s Deferred Compensation Stock Account and Stock Unit Match Account will be credited with dividend share units as follows:

 

·       On Bonus Deferral Share Units: Dividend share units on the executive’s share units in his/her Deferred Compensation Stock Account will be credited on an annual basis and based on the number of share units credited to the executive’s Deferred Compensation Stock Account as of the record date for each quarter of the year.

 

This will be done by totaling up the quarterly dividend dollar amounts as per the above (as if the share units actually were outstanding shares of TDS), and dividing this sum by the closing price of TDS Special Common Stock on December 31 ^st of that year.  The result is the number of dividend share units that will be credited as of December 31 ^st to the executive’s account for that year.  No dividend share units will be credited to the executive’s account for a year if as of December 31 ^st of such year the executive’s account has been distributed.

 

(1) 33% of the total Company Stock Unit Match.

(2) 34% of the total Company Stock Unit Match.

 

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·       On Match Share Units:  For all vested share units credited in the executive’s Stock Unit Match Account, the procedure for determining the dividend share units to be credited to this account is the same as for the Deferred Compensation Stock Account.  Unvested share units credited to a Stock Unit Match Account will not be credited with dividend share units.

 

·       Unforeseeable Emergency Withdrawals:

 

In the event that an executive experiences an Unforeseeable Emergency, the executive may request in writing a payment of all or a portion of the share units credited to his/her Deferred Compensation Stock Account and the vested share units credited to his/her Stock Unit Match Account.  Withdrawals will first come from the vested Stock Unit Match Account.  For this purpose, “Unforeseeable Emergency” shall mean a severe financial hardship to an executive resulting from (i) an illness or accident of the executive, the executive’s spouse or the executive’s dependent; (ii) the loss of the executive’s property due to casualty; or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the executive.  Payment may not exceed an amount reasonably necessary to satisfy such emergency plus amounts necessary to pay taxes and penalties reasonably anticipated as a result of such payment after taking into account the extent to which the hardship may be relieved (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the executive’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or (c) by cancellation of any deferral election hereunder or under any other nonqualified deferral program for the year of the hardship. College expenses and expenses incurred in purchasing a residence generally do not qualify as Unforeseeable Emergencies.  The following may be considered Unforeseeable Emergencies:  (i) the imminent foreclosure of or eviction from the executive’s primary residence, (ii) the need to pay for medical expenses, including non-refundable deductibles and the cost of prescription drug medication and (iii) the need to pay for funeral expenses of the executive’s spouse or dependent.  In the event an executive’s Unforeseeable Emergency withdrawal request is approved, such payment shall be made to the executive in a lump sum as soon as practicable following such approval, but in no event later than 60 days after the occurrence of the Unforeseeable Emergency.  No Unforeseeable Emergency withdrawal request will be approved with respect to an employee who has separated from service.

 

In addition, in the event that an executive receives an Unforeseeable Emergency withdrawal, whether under this Program or any other nonqualified deferred compensation plan maintained by TDS or its affiliates, then any deferral election made by the executive under this Program or such other plan with respect to the calendar year during which the withdrawal occurs shall be cancelled for the remainder of such year.

 

·       Distributions:

 

Except in the event of the executive’s death, the executive will receive the distributable balance credited to his/her accounts for the [YEAR] Performance Year at the earlier of (i) the seventh calendar month following the calendar month during which he or she separates from service, or (ii) the distribution date that he/she selected on the [YEAR] Bonus Deferral Form (which must be a month and calendar year at least three years following the calendar year during which the executive makes the deferral election).  In the event of the executive’s death, the executive’s

 

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designated beneficiary will receive such balance at the time determined by TDS within 60 days following the executive’s death.  All distributions for the [YEAR] Performance Year will be made in TDS Special Common Stock, except that the value of any partial share unit credited to an executive’s accounts will be paid in cash.

 

The total distributable balance in an executive’s accounts will be determined by adding:

 

·       The sum of all share units credited to his/her Deferred Compensation Stock Account (including any credited dividend share units) reduced by any Unforeseeable Emergency or other withdrawals made prior to the distribution date, and

 

·       The sum of vested share units credited to his/her Stock Unit Match Account (including any credited dividend share units) reduced by any Unforeseeable Emergency or other withdrawals made prior to the distribution date.

 

If, for example, the total vested share units credited to the executive’s accounts is 500 share units on the distribution date, the executive will receive 500 shares of TDS Special Common Stock less any taxes TDS is required to withhold (taxes may be withheld in the form of shares).  In this example, the dollar value, which is taxable income, would be calculated by multiplying the closing price of TDS Special Common Stock on the distribution date by 500.

 

Compliance with Law

 

This [YEAR] Program is intended to comply with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder and shall be interpreted and construed accordingly.  TDS shall have sole discretion and authority to amend this Program, unilaterally, at any time in the future to satisfy any requirements of Section 409A (irrespective of whether such amendment has retroactive or prospective effect).  Notwithstanding the foregoing, under no circumstance shall TDS be responsible for any taxes, penalties, interest or other losses or expenses incurred by an executive or other person due to any failure to comply with Section 409A.

 

Questions

 

Questions on the Program should be directed to the Corporate Vice President of Human Resources.

 

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Attachment I

 

TELEPHONE AND DATA SYSTEMS, INC.

[YEAR] BONUS DEFERRAL FORM

 

NAME			SOCIAL SECURITY NUMBER
			DATE OF BIRTH

 

Deferral election with respect to my annual Bonus earned in [YEAR] :

 

o             I hereby elect to defer, under the terms and conditions of the TDS Bonus Deferral and Stock Unit Match Program for the [YEAR] Bonus Year  (the “ [YEAR] Program”) and the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan (the “LTIP”), as each may be amended from time to time, the following whole percentage of my [YEAR] Bonus that would otherwise be paid to me in [YEAR +1] (deferral not to exceed $400,000).

 

%

 

DISTRIBUTION DATE ELECTION:   I understand that my deferred [YEAR] Bonus and the stock unit matches thereon will be paid upon the earlier of (i) the seventh calendar month following the calendar month during which I separate from service and (ii) the date that I elect herein.  I elect that such deferrals and match be paid as follows ( select one ):                  I elect to receive my deferred [YEAR] Bonus and the stock unit matches thereon in a single lump sum payment in the seventh calendar month following the calendar month during which I separate from service. - OR -                I elect to receive my deferred [YEAR] Bonus and the stock unit matches thereon in a single lump sum payment in the following month and year (which year may not be earlier than three years after the year this election is made).  If such date is earlier than January, [YEAR + 4] , I recognize that a portion of the company match will be lost.
Month and Year:

 

·       I understand that my elections set forth herein are irrevocable.

 

·       I understand that my deferred [YEAR] Bonus and the stock unit matches thereon will be recorded in accounts established in my name on TDS’s books and records and that these accounts will be governed by the terms of the [YEAR] Program and the LTIP, as each may be amended from time to time.

 

·       I acknowledge that my accounts under the [YEAR] Program will rise or decline in value equal to the earnings or losses that would have been realized if assets in an amount equal to the balances in my accounts were actually invested in TDS Special Common Stock.

 

·       I acknowledge that the [YEAR] Program is intended to comply with provisions of Section 409A of the Internal Revenue Code and shall be interpreted and construed accordingly.  I agree that TDS shall have sole discretion and authority to amend such program or this [YEAR] Bonus Deferral Form, unilaterally, at any time to satisfy any requirements of Section 409A of the Internal Revenue Code or applicable guidance provided by the Treasury.

 

Signature		Date

 

Note:  This Form must be returned to the Corporate Vice President of Human Resources on or before [December     , [YEAR – 1]] .