EXHIBIT 10.1


 


TELEPHONE AND
DATA SYSTEMS, INC. (TDS)


2015 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
Finance and Chief Accounting Officer


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 2015 Bonus Plan, which will
be aligned with the metrics in this program, but may contain additional
performance measures.


 


Ø 
COMPANY
PERFORMANCE COMPONENT:


 


Ÿ 
Weighting:   70%


 


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 (including U.S. Cellular Equipment Revenue).   


 


û 
Consolidated
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA):  Adjusted
EBITDA 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 Adjusted EBITDA will align with the methodology used for
external reporting purposes, which is currently defined as income before income
taxes, depreciation, amortization and accretion, loss on impairment of assets,
gain or loss on sale of business and other exit costs, gain or loss on sale of
licenses and exchanges, gain or loss on investment, gain or loss on asset
disposals and interest expense.  Adjusted EBITDA includes interest income, the
majority of which is revenue related to equipment installment plans at U.S.
Cellular.


 






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û  Consolidated
Simple Free Cash Flow (Simple FCF):  Simple  FCF,
defined as Adjusted EBITDA 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 Adjusted EBITDA 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).


 


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 adjustments or major business
decisions that, without their adjustment, would cause the calculated bonus
results to differ materially from the unadjusted calculation and therefore not
reflect the true performance delivered in the year.  Bonus expense will be included
in the Adjusted EBITDA 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 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.






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  PERFORMANCE MEASURE

  	
  MINIMUM

  	
  TARGET

  	
  MAXIMUM

  
	
  Consolidated
  Operating Revenue Growth

  	
  1.0%

  	
  13.0%

  	
  25.1%

  
	
  Consolidated Adjusted EBITDA

  	
  $820M

  	
  $955M

  	
  $1,090M

  
	
  Consolidated Simple FCF

  	
  $33M

  	
  $123M

  	
  $213M

  








 


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


 




	
  PERFORMANCE MEASURE

  	
  MINIMUM

  	
  TARGET

  	
  MAXIMUM

  
	
  Consolidated
  Operating Revenue Growth

  	
  50%

  	
  100%

  	
  200%

  
	
  Consolidated Adjusted EBITDA

  	
  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 Adjusted EBITDA

  	
  40%

  
	
  Consolidated Simple FCF

  	
  20%

  
	
   

  	
  100%

  








 


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:   30%


 


Ÿ 
Segment
Weighting:


 


û 
Key
Objectives:      
            50% 


û 
Overall
Performance:        
50%


100%


 






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Ÿ 
Level
of Performance and Percent Payout of Target:








	
  INDIVIDUAL
  PERFORMANCE

  	
  % PAYOUT OF

  TARGET

  
	
  Far
  Exceeded Expectations:  Performance greatly exceeded that
  which was planned and expected.

  	
  140% - 160%

  
	
  Significantly
  Exceeded Expectations: Performance significantly exceeded
  that which was planned and expected.

  	
  115% - 135%

  
	
  Successfully
  Met Expectations:  Performance was close to that which was planned
  and expected.

  	
  85% - 110%

  
	
  Partially
  Met Expectations: Performance was sufficient to merit a partial
  bonus.

  	
  60% - 80%

  
	
  Did
  Not Meet Expectations:  Performance was not sufficient to
  merit a 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 initiatives 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 objectives 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.


 


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.


 






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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
administratively 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.





 






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  Appendix A: 2015 Payout Grids - Company
  Performance Component

  
	
    

  	
    

  	
    

  	
    

  	
    

  	
    

  
	
  CONSOLIDATED REVENUE GROWTH ($ in
  Millions)

  
	
  Target Total Revenue

  	
  YoY 

  Growth ($)

  	
  Target YoY 

  Growth %

  	
  Results ($) as a 

  % of Target

  	
  Total Bonus 

  Points Earned

  	
  % of Bonus 

  Points Earned

  
	
  <$5,060

  	
  N/A

  	
  N/A

  	
  N/A

  	
  <200

  	
  0%

  
	
  $5,060

  	
  $50

  	
  1.0%

  	
  89%

  	
  200 

  	
  50%

  
	
  $5,180

  	
  $171

  	
  3.4%

  	
  91%

  	
  240 

  	
  60%

  
	
  $5,301

  	
  $291

  	
  5.8%

  	
  94%

  	
  280 

  	
  70%

  
	
  $5,421

  	
  $412

  	
  8.2%

  	
  96%

  	
  320 

  	
  80%

  
	
  $5,542

  	
  $533

  	
  10.6%

  	
  98%

  	
  360 

  	
  90%

  
	
  $5,663

  	
  $653

  	
  13.0%

  	
  100%

  	
  400 

  	
  100%

  
	
  $5,783

  	
  $774

  	
  15.4%

  	
  102%

  	
  480 

  	
  120%

  
	
  $5,904

  	
  $894

  	
  17.9%

  	
  104%

  	
  560 

  	
  140%

  
	
  $6,024

  	
  $1,015

  	
  20.3%

  	
  106%

  	
  640 

  	
  160%

  
	
  $6,145

  	
  $1,136

  	
  22.7%

  	
  109%

  	
  720 

  	
  180%

  
	
  $6,266

  	
  $1,256

  	
  25.1%

  	
  111%

  	
  800 

  	
  200%

  
	
  >$6,266

  	
  N/A

  	
  N/A

  	
  N/A

  	
  >800

  	
  200%

  






 


	
  CONSOLIDATED ADJUSTED EBITDA ($ in
  Millions)

  
	
  Target Total 

  Adj. EBITDA

  	
  YoY 

  Growth ($)

  	
  YoY 

  Growth %

  	
  Bonus Results as a 

  % of Target

  	
  Total Bonus 

  Points Earned

  	
  % of Bonus 

  Points Earned

  
	
  <$820

  	
  N/A

  	
  N/A

  	
  N/A

  	
  <200

  	
  0%

  
	
  $820

  	
  $39

  	
  5.0%

  	
  86%

  	
  200 

  	
  50%

  
	
  $847

  	
  $66

  	
  8.4%

  	
  89%

  	
  240 

  	
  60%

  
	
  $874

  	
  $93

  	
  11.9%

  	
  92%

  	
  280 

  	
  70%

  
	
  $901

  	
  $120

  	
  15.3%

  	
  94%

  	
  320 

  	
  80%

  
	
  $928

  	
  $147

  	
  18.8%

  	
  97%

  	
  360 

  	
  90%

  
	
  $955

  	
  $174

  	
  22.2%

  	
  100%

  	
  400 

  	
  100%

  
	
  $982

  	
  $201

  	
  25.7%

  	
  103%

  	
  480 

  	
  120%

  
	
  $1,009

  	
  $228

  	
  29.1%

  	
  106%

  	
  560 

  	
  140%

  
	
  $1,036

  	
  $254

  	
  32.6%

  	
  108%

  	
  640 

  	
  160%

  
	
  $1,063

  	
  $281

  	
  36.0%

  	
  111%

  	
  720 

  	
  180%

  
	
  $1,090

  	
  $308

  	
  39.5%

  	
  114%

  	
  800 

  	
  200%

  
	
  >$1,090

  	
  N/A

  	
  N/A

  	
  N/A

  	
  >800

  	
  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

  
	
  <$33

  	
  N/A

  	
  N/A

  	
  N/A

  	
  <100

  	
  0%

  
	
  $33

  	
  $23

  	
  >100%

  	
  27%

  	
  100 

  	
  50%

  
	
  $51

  	
  $41

  	
  >100%

  	
  42%

  	
  120 

  	
  60%

  
	
  $69

  	
  $59

  	
  >100%

  	
  56%

  	
  140 

  	
  70%

  
	
  $87

  	
  $77

  	
  >100%

  	
  71%

  	
  160 

  	
  80%

  
	
  $105

  	
  $95

  	
  >100%

  	
  85%

  	
  180 

  	
  90%

  
	
  $123

  	
  $113

  	
  >100%

  	
  100%

  	
  200 

  	
  100%

  
	
  $141

  	
  $131

  	
  >100%

  	
  115%

  	
  240 

  	
  120%

  
	
  $159

  	
  $149

  	
  >100%

  	
  129%

  	
  280 

  	
  140%

  
	
  $177

  	
  $167

  	
  >100%

  	
  144%

  	
  320 

  	
  160%

  
	
  $195

  	
  $185

  	
  >100%

  	
  158%

  	
  360 

  	
  180%

  
	
  $213

  	
  $203

  	
  >100%

  	
  173%

  	
  400 

  	
  200%

  
	
  >$213

  	
  N/A

  	
  N/A

  	
  N/A

  	
  >400

  	
  200%

  









 






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  Appendix B: Financial Metrics Detail

  
	
    

  	
    

  	
    

  	
    

  	
    

  
	
  2015 Bonus -
  Financial Metrics

  	
  2014

  Actual

  	
    

  	
  2015 

  Bonus Targets (1)

  
	
  $ in
  Millions

  	
    

  
	
    

  	
    

  	
    

  	
    

  	
    

  
	
  TDS
  Consolidated Operating Revenue

  	
    

  	
    

  	
    

  
	
    

  	
  U.S. Cellular
  Total Revenue

  	
  $3,893

  	
    

  	
  $4,481

  
	
    

  	
  Wireline
  Segment

  	
  $715

  	
    

  	
  $692

  
	
    

  	
  HMS Segment

  	
  $259

  	
    

  	
  $288

  
	
    

  	
  Cable Segment

  	
  $117

  	
    

  	
  $187

  
	
    

  	
  TDS Telecom
  Eliminations

  	
  ($3)

  	
    

  	
  ($1)

  
	
    

  	
  TDS Parent and
  Eliminations

  	
  $28

  	
    

  	
  $17

  
	
  Total TDS
  Cons. Operating Revenue

  	
  $5,009

  	
    

  	
  $5,663

  
	
    

  	
  Growth

  	
    

  	
    

  	
  13.0%

  
	
  Adjusted
  EBITDA

  	
    

  	
    

  	
    

  
	
    

  	
  U.S. Cellular

  	
  $480

  	
    

  	
  $650

  
	
    

  	
  TDS Telecom

  	
  $298

  	
    

  	
  $298

  
	
    

  	
  Parent and
  Other

  	
  $3

  	
    

  	
  $8

  
	
    

  	
  TDS
  Consolidated

  	
  $781

  	
    

  	
  $955

  
	
  Capex

  	
    

  	
    

  	
    

  
	
    

  	
  U.S. Cellular

  	
  ($558)

  	
    

  	
  ($604)

  
	
    

  	
  TDS Telecom

  	
  ($208)

  	
    

  	
  ($220)

  
	
    

  	
  Parent and
  Other

  	
  ($5)

  	
    

  	
  ($8)

  
	
    

  	
  TDS Consolidated

  	
  ($771)

  	
    

  	
  ($832)

  
	
  Free Cash
  Flow (Adj. EBITDA less Capex)

  	
    

  	
    

  	
    

  
	
    

  	
  U.S. Cellular

  	
  ($77)

  	
    

  	
  $46

  
	
    

  	
  TDS Telecom

  	
  $90

  	
    

  	
  $77

  
	
    

  	
  Parent and
  Other

  	
  ($2)

  	
    

  	
  $0

  
	
    

  	
  TDS
  Consolidated

  	
  $10

  	
    

  	
  $123

  
	
  (1) 2015 bonus
  targets represent the 2015 budget approved by the Board of Directors in
  December 2014

  






 








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