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.

 

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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 331/3%.

 

(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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