Exhibit 10.14

 

TELEPHONE AND DATA SYSTEMS, INC. (TDS)

2014 OFFICER BONUS PROGRAM

                                                                 

 

This bonus program covers all TDS officers other than the President and CEO of
TDS and the Chairman Emeritus of TDS.  Payments under this program to the TDS
Telecom President and CEO and the below listed executive officers require
specific approval of the TDS Compensation Committee.  Bonuses for other officers
covered by this program require the approval of the President and CEO of TDS. 
This program does not apply to any officer of a TDS subsidiary other than the
President and CEO of TDS Telecom. 

 

Ø  TDS EXECUTIVE OFFICER PARTICIPANTS:

 

Ÿ  SVP Technology, Services and Strategy

Ÿ  SVP Finance and Treasurer

Ÿ  SVP and Controller

Ÿ  SVP and CIO

Ÿ  SVP, Acquisitions and Corporate Development

Ÿ  VP Human Resources

 

The TDS Telecom President and CEO (Dave Wittwer) will have the same company and
individual performance weightings as the TDS executive officers.  However, this
officer’s company performance bonus opportunity will be based on TDS Telecom’s
approved 2014 Bonus Plan, which will be aligned with the metrics in this
program, but may contain additional performance measures.

 

Ø  COMPANY PERFORMANCE COMPONENT:

 

Ÿ  Weighting:   60%

 

Ÿ  Performance Measures:  The following performance measures are primary
indicators of progress against the TDS Portfolio goal to create increasing
results to shareholders and other stakeholders.

 

û  Consolidated Operating Revenue Growth:  Revenue growth is the primary driver
to long-term growth in profitability and returns.  It is also an indicator of
the success of past investments. 

 

ü  Consolidated Operating Revenue Growth will be calculated as year-over-year
growth in TDS Consolidated revenue excluding U.S. Cellular Equipment Revenue. 
For 2014, year-over-year growth will be calculated using U.S. Cellular Core
market results pro forma for 2013.

 

û  Consolidated Adjusted Income Before Income Taxes (AIBIT): AIBIT is a direct
measure of the cash generated from the operations of the TDS businesses in a
given year and the overall profitability of the company. 

 

ü  The calculation of AIBIT will align with the methodology used for external
reporting purposes, which is currently defined as income before income taxes,
depreciation, amortization and accretion, net gain or loss on sale of business
and other exit costs, net gain or loss on sale of licenses and exchanges, gain
or loss on investment and interest expense. 

 

û  Consolidated Simple Free Cash Flow (Simple FCF):  Simple  FCF, defined as
AIBIT less capital expenditures, is an indicator of TDS’s success in delivering
shareholder value.  As TDS’s major business units are capital intensive
businesses, the simple FCF measure is an indicator of how efficiently the
business is managing its capital expenditures and the level of cash the company
has available to invest in future growth opportunities or create returns for
shareholders. 

 

ü  The calculation of AIBIT will follow the methodology described above.  The
calculation of capital expenditures will focus on cash outflows and therefore
exclude capitalized interest, which is a non-cash accounting adjustment.

 

Adjustments to Company Performance component calculations:

 

Ÿ  Acquisitions: 

 

û  Acquisitions that occur in the second half of the fiscal year will be
excluded from bonus calculations (target and actual).

 

 

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û  Adjustment will be made for acquisitions that occur in the first half of the
fiscal year, with performance judged against the valuation model and adjusted
for any timing differences between expected and actual closing.  To the extent
that the acquisition is not included in the targets, the targets will be
adjusted at the time of the acquisition closing date to reflect the valuation
model (as approved by the Board) and any known timing differences.

 

û  Transaction costs related to the acquisition will be excluded from both the
target and actual results.

 

Ÿ  Divestitures: 

 

û  Divestitures or discontinued operations that occur in the first half of the
fiscal year will be excluded from the bonus calculations (target and actual).

 

û  Divestitures or discontinued operations that occur in the second half of the
fiscal year will be included in the bonus calculation.  If a divestiture or
discontinued operation was not included in the targets, the targets will be
adjusted at the time of the closing date to reflect the impact of the period of
time that the divesture is not owned.  In addition, significant shifts in
strategy will be taken into consideration when determining the appropriate
treatment of divestitures in the bonus calculation.

û  Transaction costs related to the divestiture will be excluded from both the
target and actual results.

 

Ÿ  Other Adjustments:  Any adjustments to the target or actual bonus
calculations will be presented to the Compensation Committee for review and
approval.  Adjustment recommendations should be limited to material accounting
adjust-ments or major business decisions that, without their adjustment, would
cause the calculated bonus results to differ materially from unadjusted
calculation and therefore not reflect the true performance delivered in the
year.  Bonus expense will be included in the AIBIT and Simple FCF metrics.      

 

Ÿ  Bonus Ranges:

The bonus ranges were set to reinforce the Company’s pay for performance
culture.  The minimum performance level for a performance measure needs to be
achieved before any bonus for that performance measure is earned.  The narrow
ranges result in substantial reductions in bonuses when targets are not
achieved, and greater rewards for above target performance.  See Appendix A for
payout grids.

 

PERFORMANCE MEASURE

MINIMUM

TARGET

MAXIMUM

Consolidated Operating Revenues Growth

1.0%

6.5%

11.9%

Consolidated AIBIT

$677M

$797M

$917M

Consolidated Simple FCF

-$156M

-$55M

$46M

 

Ÿ  Bonus Payouts As A Percent Of Target At Minimum And Maximum Performance
Levels:

 

PERFORMANCE MEASURE

MINIMUM

TARGET

MAXIMUM

Consolidated Operating Revenues Growth

50%

100%

200%

Consolidated AIBIT

50%

100%

200%

Consolidated Simple FCF

50%

100%

200%

 

Bonus payouts between the minimum and target and between target and maximum
performance level for each performance measure will be computed by
interpolation.

 

Any bonus for performance below the minimum percentage for a performance measure
will be at the discretion of the Compensation Committee.

 

 

Ÿ  Weighting Of Performance Measures:

 

PERFORMANCE MEASURE

WEIGHTING

Consolidated Operating Revenues Growth

40%

Consolidated AIBIT

30%

Consolidated Simple FCF

30%

 

100%

 

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Ø  THE PERFORMANCE TARGETS:

 

They will be set by the Compensation Committee each year based on the plans and
objectives of the business. 

 

Ø  INDIVIDUAL PERFORMANCE COMPONENT:

 

Ÿ  Weighting:   40%

 

Ÿ  Segment Weighting:

 

û  Key Objectives:                             50% 

û  Overall Performance:                   50%

100%

 

Ÿ  Level of Performance and Percent Payout of Target:

PERFORMANCE

% PAYOUT OF

TARGET

Far exceeds target performance:  Performance greatly exceeded that which was
planned and expected.

150% - 200%

Significantly exceeds target performance: Performance substantially exceeded
that which was planned and expected.

120% - 150%

Somewhat exceeds/fully meets/almost fully meets target performance:  Performance
was close to that which was planned and expected.

80% - 120%

Partially meets target performance: Given the conditions that prevailed,
performance was sufficient to merit a partial bonus.

Up to 80%

Well below target performance:  Given the conditions that prevailed, performance
was not sufficient to merit any bonus.

0%

 

Ÿ  Key Objectives:

 

With regard to this bonus opportunity, the TDS President and CEO will, with
input from the executive officer, assign the executive officer 2 to 5 or so
major initia-tives to be carried out during the year, and decide how each will
be weighted.  As appropriate, these objectives will include that executive
officer’s expected individual contribution(s) toward executing the Company’s
Portfolio Management Strategy. 

 

With the approval of the TDS President and CEO, an executive officer’s
objec-tives and weightings may be revised during the performance year if
important new initiatives arise or circumstances with respect to an objective
have materially changed.  Performance on each selected objective will be based
on the TDS President and CEO’s assessment of the results the executive/the
executive’s team achieved in meeting the assigned objectives.

 

Ÿ  Overall Performance:

 

Each officer’s overall performance for the year will be assessed by the TDS
President and CEO based on his effectiveness/success with regard to:

 

û  Carrying out his/her ongoing responsibilities and significant initiatives
during the performance year (other than his/her above discussed key objectives).

 

û  Recommending/making decisions; taking actions; and providing support,
assistance and counsel to the business units, and to help achieve TDS Corporate
Portfolio Strategy agreed upon metrics and milestones.

 

û  Providing support, assistance and counsel to corporate senior leaders and
management.

 

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In making these assessments, the TDS President and CEO will take into
consideration:

 

û  His/her evaluation of the officer’s performance in the above areas.

 

û  The annual written performance feedback he/she receives on the executive
officer from his/her peers.

 

û  The every-other-year written performance input he receives from the executive
officer’s direct reports and other key associates.

 

û  The executive officer’s report on his/her activities/accomplishments for the
performance year.

 

û  Such other creditable input as he/she may receive during the year about an
officer’s performance.

 

Ø  DETERMINATION OF BONUS AWARDS:

 

Once the Company performance bonus percentage is known, the TDS President and
CEO will recommend to the Compensation Committee for each participating
executive officer:

Ÿ  His/her company performance bonus.  This will be the amount calculated in
accordance with the terms of this program (unless the TDS President and CEO
feels that there is a compelling rationale to recommend an adjustment to this
amount, which he would provide to the Committee).

 

Ÿ  His/her recommended individual performance bonus, and his/her total
recommended bonus.

 

The Compensation Committee will review these proposed bonus awards and either
approve them as submitted or revise some or all of them, as they deem
appropriate.  Once the Committee and TDS President and CEO finalize the
officers’ bonus awards, they may be paid. 

 

Approved bonus awards shall be paid during the period commencing on the January
1st immediately following the performance year and ending on March 15th
immediately following the performance year.  Notwithstanding the foregoing, in
the event that payment by such March 15th is administratively impracticable and
such impracticability was unforeseeable, payment will be made as soon as
administra-tively practicable after such March 15th, but in no event later than
December 31st following the performance year.  Payment will be made in the form
of a lump sum.

 

Notwithstanding any provision of this bonus program to the contrary, a
participating officer does not have a legally binding right to a bonus unless
and until the bonus amount, if any, is paid and no bonus shall be paid unless
the officer remains employed through the actual bonus payout date unless
otherwise approved at the discretion of the Compensation Committee or President
and CEO of TDS, as applicable.

 

Ø  REVISIONS TO THE OFFICER BONUS PROGRAM:

 

The TDS Officer Bonus Program may be revised or discontinued at any time and for
any reason.  If and when either the Compensation Committee and/or management
determines that the TDS Officer Bonus Program should be revised, the parties
will discuss the proposed change(s) and the rationale for them, following which
the Committee will determine what, if any, changes will be made.

 

Ø  BONUS CLAWBACK:

 

Any bonus paid pursuant to this program is subject to recovery by TDS or any
other action pursuant to any clawback or recoupment policy which TDS may adopt
from time to time, including without limitation any such policy which TDS may be
required to adopt under the Dodd-Frank Wall Street Reform and Consumer
Protection Act and implementing rules and regulations thereunder, or as
otherwise required by law.

 

Appendix A: 2014 Payout Grids - Company Performance Component

  

  

  

  

  

  

  

Target Total Revenue

YoY Growth  ($)

YoY Growth (%)

Results ($) as a % of Target

Total Bonus Points Earned

% of Bonus Points Earned

$4,438

$44

1.00%

95%

200 

50%

$4,486

$92

2.10%

96%

240 

60%

$4,534

$140

3.20%

97%

280 

70%

$4,582

$188

4.30%

98%

320 

80%

$4,630

$236

5.40%

99%

360 

90%

$4,678

$284

6.50%

100%

400 

100%

$4,726

$332

7.60%

101%

480 

120%

$4,774

$380

8.60%

102%

560 

140%

$4,822

$428

9.70%

103%

640 

160%

$4,870

$476

10.80%

104%

720 

180%

$4,918

$524

11.90%

105%

800 

200%

>$4918

N/A

N/A

N/A

>800

200%

  

  

  

  

  

  

CONSOLIDATED AIBIT ($ in millions)

Target Total AIBIT

YoY Growth  ($)

YoY Growth (%)

Bonus Results as a % of Target

Total Bonus Points Earned

% of Bonus Points Earned

$677

($162)

-19.3%

85%

150 

50%

$701

($138)

-16.4%

88%

180 

60%

$725

($114)

-13.6%

91%

210 

70%

$749

($90)

-10.7%

94%

240 

80%

$773

($66)

-7.9%

97%

270 

90%

$797

($42)

-5.0%

100%

300 

100%

$821

($18)

-2.1%

103%

360 

120%

$845

$6 

0.7%

106%

420 

140%

$869

$30 

3.6%

109%

480 

160%

$893

$54 

6.4%

112%

540 

180%

$917

$78 

9.3%

115%

600 

200%

>$917

N/A

N/A

N/A

>600

200%

  

  

  

  

  

  

CONSOLIDATED FCF ($ in millions)

Target Total FCF

YoY Growth  ($)

YoY Growth (%)

Bonus Results as a % of Target

Total Bonus Points Earned

% of Bonus Points Earned

($156)

($85)

-120%

284%

150 

50%

$135 

($64)

-92%

245%

180 

60%

($115)

($44)

-63%

209%

210 

70%

($95)

($24)

-35%

173%

240 

80%

($75)

($4)

-6%

136%

270 

90%

($55)

$16 

22%

100%

300 

100%

($35)

$36 

51%

64%

360 

120%

($15)

$56 

79%

27%

420 

140%

$6 

$76 

108%

-9%

480 

160%

$26 

$97 

137%

-47%

540 

180%

$46 

$117 

165%

-84%

600 

200%

>$46

N/A

N/A

N/A

>600

200%

 

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Appendix B: Financial Metrics Detail

  

  

  

  

  

  

2014 Bonus - Financial Metrics

2013 Actual

2014 Budget

2014 Bonus Targets

Variance - Bonus Targets vs. Budget

$ in Millions

  

  

  

  

  

  

TDS Consolidated Operating Revenue

  

  

  

  

  

U.S. Cellular CORE Service Revenue

$3,411 

$3,641 

$3,562 

($79)

  

Wireline Segment

$720 

$701 

$701 

$0

  

HMS Segment

$187 

$303 

$303 

$0

  

Cable Segment

$36 

$92 

$92 

$0

  

TDS Telecom Eliminations

$4 

($1)

($1)

$0

  

TDS Parent and Eliminations

$35 

$22 

$22 

$0

Total TDS Cons. Operating Revenue

$4,394 

$4,756 

$4,678 

($78)

  

Growth

  

8%

6%

-2%

AIBT

  

  

  

  

  

U.S. Cellular

$585 

$594 

$529 

($66)

  

TDS Telecom

$249 

$272 

$272 

$0

  

Parent and Other

$5 

($3)

($3)

$0

  

TDS Consolidated

$839 

$863 

$797 

($66)

Capex

  

  

  

  

  

U.S. Cellular

($738)

($642)

($642)

$0

  

TDS Telecom

($165)

($202)

($202)

$0

  

Parent and Other

($7)

($8)

($8)

$0

  

TDS Consolidated

($910)

($851)

($851)

$0

Free Cash Flow

  

  

  

  

  

U.S. Cellular

($153)

($47)

($113)

($66)

  

TDS Telecom

$84 

$70 

$70 

$0

  

Parent and Other

($2)

($11)

($11)

$0

  

TDS Consolidated

($71)

$11 

($55)

($66)

 

 

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