8-K

FORM 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 17, 2004

TELEPHONE AND DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other
jurisdiction of
incorporation) 001-14157
(Commission
File Number) 36-2669023
(IRS Employer
Identification No.)

     30 North LaSalle Street, Suite 4000, Chicago, Illinois     
         (Address of principal executive offices)    60602   
(Zip Code)

Registrant's telephone number, including area code: (312) 630-1900

  Not Applicable  
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

        On December 17, 2004, Telephone and Data Systems, Inc. (“TDS”) entered into a bonus deferral and stock unit match agreement with LeRoy T. Carlson, Jr. related to his 2005 bonus. LeRoy T. Carlson Jr. is a director of and the President and Chief Executive Officer of TDS.

        On December 22, 2004, TDS entered into a bonus deferral and stock unit match agreement with LeRoy T. Carlson, related to his 2005 bonus. LeRoy T. Carlson is a director of and Chairman Emeritus of TDS.

        LeRoy T. Carlson, Jr.’s and LeRoy T. Carlson’s bonus deferral and stock unit match agreements attached hereto as exhibits are incorporated by reference herein. The following is a brief summary of the agreements which is qualified by reference to the complete agreements attached as exhibits. Certain capitalized terms are used as defined in the agreements attached as exhibits.

        LeRoy T. Carlson, Jr. has elected to defer 20% of his annual bonus for 2005 into the TDS Bonus Deferral and Stock Unit Match Program. LeRoy T. Carlson has elected to defer 100% of his annual bonus for 2005 into the TDS Bonus Deferral and Stock Unit Match Program. The program allows eligible executives to defer up to 100% of their annual bonus up to a maximum of $400,000 and receive a TDS Common Stock Unit Match on the amount deferred. TDS will credit to the each executive enrolled in the TDS Bonus Deferral and Stock Unit Match Program, a company match amount equal to the sum of (i) 25% of the amount credited to the executive’s TDS Bonus Deferral and Stock Unit Match Account up to 50% of their total annual bonus and (ii) 33% of the amount credited to executive’s TDS Bonus Deferral and Stock Unit Match Account for any amounts that they elect to defer that exceed 50% of their total annual bonus award, subject to the $400,000 limitation. The executive is always 100% vested in all bonus amounts that have been deferred under this Program and any dividends credited under this Program. The Company Stock Unit Matches will vest ratably over three years following the year in which the bonus was earned.

        LeRoy T. Carlson, Jr. has elected to receive his distributable balance in a lump sum payment in January 2019. LeRoy T. Carlson has elected to receive his distributable balance in a lump sum payment upon separation from service.

        The Agreements in the TDS Bonus Deferral and Stock Unit Match Program are subject to the provisions of TDS’s 2004 Long-Term Incentive Program and shall be interpreted in accordance therewith.

        On December 17, 2004, TDS’s subsidiary, United States Cellular Corporation (“USCC”) entered into three deferred compensation agreements with John E. Rooney. Mr. Rooney is a director of and the President and Chief Executive Officer of USCC and is deemed to be an executive officer of TDS under SEC rules. Two of the agreements call for the deferral of Mr. Rooney’s 2004 and 2005 annual bonus into a Phantom Stock Account in accordance with USCC’s 2003 Long-term Incentive Plan (“LTIP”). The remaining agreement calls for a partial deferral of Mr. Rooney’s 2005 gross salary into an Interest Account.

        Mr. Rooney’s deferred compensation agreements attached hereto as exhibits are incorporated by reference herein. The following is a brief summary of the two types of agreements which is qualified by reference to the complete agreements attached as exhibits. Certain capitalized terms are used as defined in the agreements attached as exhibits.

        Phantom Stock Account: Mr. Rooney has elected to defer 100% of his annual bonus for 2004 and 2005 into the Deferred Compensation Account as of the date the bonus check is issued at which point it will be 100% vested. USCC will credit to the Deferred Compensation Account a company match amount equal to the sum of (i) 25% of the amount credited to the Deferred Compensation Account as of

2

such date which is not in excess of one-half of Mr. Rooney’s total gross bonus for the Bonus Year and (ii) 33 1/3% of the amount credited to the Deferred Compensation Account as of such date which is in excess of one-half of Mr. Rooney’s total gross bonus for the Bonus Year. One-third of the amount credited to Mr. Rooney’s Deferred Compensation Account (as adjusted for deemed investment returns under the deferred compensation agreement) shall become vested on each of the first three annual anniversary dates of the end of the Bonus Year, provided that Mr. Rooney is an employee of USCC (or a parent or subsidiary of USCC) on such date and the amount credited to the Deferred Compensation Account has not been withdrawn or distributed before such date.

        An amount credited to the Deferred Compensation Account shall be deemed to be invested in whole and fractional USCC Common Shares at the closing sale price on the principal national stock exchange on which such stock is traded on the date as of which the amount is credited to the Deferred Compensation Account or, if there is no reported sale for such date, on the next preceding date for which a sale was reported.

        Mr. Rooney has elected to receive his distributable balance in a lump sum payment upon separation of service.

        Mr. Rooney’s Agreements in the phantom stock account are subject to the provisions of USCC’s LTIP and shall be interpreted in accordance therewith.

        Interest Account: Mr. Rooney has elected to defer 20% of his gross semi-monthly payroll check for services performed in 2005 into the Deferred Compensation Account. The percentage deferral shall be in effect for the entire calendar year.

        Commencing on February 28^th 2005, and on the last day of each month thereafter until all of the Deferred Compensation Account has been paid, there shall be credited to such Account (before any amount is credited for the month then ending), interest compounded monthly computed at a rate equal to one-twelfth (1/12) of the sum of (a) the average twenty (20) year Treasury Bond rate of interest (as published in the Wall Street Journal for the last day of the preceding month) plus (b) 1.25 percentage points.

        Mr. Rooney has elected to receive his distributable balance in a lump sum payment upon separation of service.

Item 9.01. Financial Statements and Exhibits

(c) Exhibits:

        In accordance with the provisions of Item 601 of Regulation S-K, any Exhibits filed herewith are set forth on the Exhibit Index attached hereto.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

Telephone and Data Systems, Inc.
(Registrant)

Date: December 22, 2004

By:	/s/ D. Michael Jack
	D. Michael Jack
	Senior Vice President and Corporate Controller (Principal Accounting Officer)

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EXHIBIT INDEX

The following exhibits are filed herewith as noted below.

Exhibit Number	Description of Exhibit
10.1	Summary of the TDS Bonus Deferral and Stock Unit Match Program.
10.2	TDS 2005 Bonus Deferral Agreement between LeRoy T. Carlson, Jr. and TDS dated December 17, 2004.
10.3	TDS 2005 Bonus Deferral Agreement between LeRoy T. Carlson and TDS dated December 22, 2004.
10.4	Executive Deferred Compensation Agreement - Phantom Stock Account for 2004 bonus year between John E. Rooney and U.S. Cellular dated December 17, 2004 is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular Corporation's Current Report on Form 8-K filed on December 22, 2004.
10.5	Executive Deferred Compensation Agreement - Phantom Stock Account for 2005 bonus year between John E. Rooney and U.S. Cellular dated December 17, 2004 is hereby incorporated by reference to Exhibit 10.2 to U.S. Cellular Corporation's Current Report on Form 8-K filed on December 22, 2004.
10.6	Executive Deferred Compensation Agreement - Interest Account for 2005 between John E. Rooney and U.S. Cellular dated December 17, 2004 is hereby incorporated by reference to Exhibit 10.3 to U.S. Cellular Corporation's Current Report on Form 8-K filed on December 22, 2004.

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EX-10

Exhibit 10.1

TDS BONUS DEFERRAL AND
STOCK UNIT MATCH PROGRAM

Purpose

The TDS Bonus Deferral and Stock Unit Match Program is designed to provide TDS Corporate executives with a significant incentive to acquire additional shares of TDS stock.

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 TDS Common Stock Unit Matches on the amounts 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 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(s), Company Stock Unit Match(es) and any earned dividends. The value of the executive’s accounts will change in direct proportion to the performance of TDS Common Stock. However, the amounts credited to an executive’s accounts will not actually be invested in TDS stock. The amounts credited to the executive’s accounts will be distributed in stock to him/her when 6 months after he/she separates from service or on such earlier date as the executive may elect that is at least two years after the election date. If the executive separates from service earlier than January 1^st of the fourth year following the performance year, and such separation from service is for a reason other than death or “Disability”, a portion of the Company match will be lost.

For purposes of this Program, the term “Key Employee” has the meaning set forth in section 416(i) of the Internal Revenue Code.

For purposes of this Program, “Disabled” or “Disability” shall mean an executive’s (i) inability to engage in any substantial gainful activity or (ii) receipt of income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of TDS, in each case as a result of a medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

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

This Program is subject to the provisions of the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan and shall be interpreted in accordance therewith.

Administrative Overview

In November or December of each year, the Corporate Vice President of Human Resources will send a Bonus Deferral Election Form 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, post marked or faxed with signature) to the Corporate Vice President of Human Resources no later than December 30^th (see Administrative Ground Rules – Taxes). Upon commencement of the performance year, the elections made by the executive on the Bonus Deferral Election Form shall be irrevocable.

Shortly 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. Those executives who elect to defer all or part of a bonus under this Program will not be able to receive an advance on that bonus unless the executive is experiencing an “Unforeseeable Emergency” as defined on page 5.

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 Stock Unit Match awards.

The value of each of these Accounts will rise or fall in direct proportion to the price of TDS 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. These statements will be sent out annually as early in the first quarter as possible.

Administrative Ground Rules

The TDS Bonus Deferral and Stock Unit Match 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 this Program and any dividends credited under this Program. Provided that the executive does not separate from service or receive a distribution of his/her Accounts, 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 year in which the bonus was earned (the performance year).

• an additional 33% on December 31st of the second year following the year in which the bonus was earned, and

• the remaining 34% on December 31st of the third year following the year in which the bonus was earned.

• Taxes:

Since all bonus deferral decisions under this Program will be made prior to the performance year, income taxes on all Bonus Deferrals and 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 to be considered in “constructive receipt”, and therefore taxable income in the year they would have been paid to the executive.

Please note, however, that Bonus Deferrals and 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 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 this 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 this 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 becomes Disabled or dies before separation.

If either of the latter two events occur, the executive, or his/her beneficiary/beneficiaries will be 100% vested in all share units credited to the executive’s Stock Unit Match Account.

• Beneficiaries:

An executive, who defers any portion of his/her annual bonus under this Program, should complete a “Bonus Deferral and Stock Unit Match Program Beneficiary Designation Form” and return it to the Corporate Vice President of Human Resources as soon as possible. This 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 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 Plan document.

• Initial Value of the Executive's Deferred Compensation Stock and Company Stock Unit Match Accounts:

After verification of the executive’s bonus, and the amount that was deferred, the amount credited to executive’s Accounts 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 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 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.

• The initial value of the Company 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 Company 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 stock on the date the bonus award was approved was assumed to be $100, the executive’s Company Stock Unit Match Account would be credited 83.00 of TDS share units, which would vest in accordance with the following schedule:

• 27.39¹ share units - vests on December 31st of the year following the performance year.

• 27.39¹ share units - vests on December 31st two years after the performance year.

• 28.22² share units - vests on December 31st three years after the performance year.

• 83.00 share units - Total Stock Unit Match

• Value Of An Executive’s Deferred Compensation Stock Account And Company Stock Unit Match Account:

The value of an executive’s Compensation Accounts 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 stock. Hence, if the price of TDS 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 Company 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 stock on December 31^st of that year. The result is the number of dividend share units that will be credited to the executive’s account for that year.

¹  33% of the total Company Stock Unit Match.

²  34% of the total Company Stock Unit Match.

• On Stock Unit Match Share Units: For all 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 of an Unforeseeable Emergency, an executive may request 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 purposes of this Program, “Unforeseeable Emergency” shall mean a severe financial hardship to an executive resulting from (i) an illness or accident of the executive or the executive’s spouse or dependent (as defined in section 152(a) of the Internal Revenue Code); (ii) 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 necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such payment after taking into account the extent to which the hardship may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the executive’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). College expenses and expenses incurred in purchasing a residence do not qualify as an Unforeseeable Emergency.

• Distributions:

The executive will receive the distributable balance credited to his/her Accounts as of the earlier of (i) 6 months after his or her separation from service, or (ii) the distribution date that he/she selected on the Bonus Deferral Election Form. He/she will receive distribution as soon after that date as is administratively feasible. All distributions will be made in TDS stock, except that the value of any partial share units credited to an executive’s Accounts will be paid in cash.

The total distributable balance in an executive’s Account 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 distributions 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 distributions 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 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 stock on the distribution date of his/her distribution by 500.

Compliance with Law

This Program is intended to comply with provisions of Section 409A of the Internal Revenue Code, as enacted by the American Jobs Creation Act of 2004, and this Program shall be interpreted and construed accordingly. TDS shall have sole discretion and authority to amend or terminate this Program, unilaterally, at any time in the future to satisfy any requirements of Section 409A of the Code or applicable guidance provided by the Treasury

Questions

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

EX-10

Exhibit 10.2

TELEPHONE AND DATA SYSTEMS, INC.
2005 BONUS DEFERRAL FORM

NAME	LeRoy T. Carlson, Jr.	SOCIAL SECURITY NUMBER
		DATE OF BIRTH	27 September 1946

Deferral election with respect to my 2005 Bonus:

I hereby elect to defer, under the terms and conditions of the TDS Bonus Deferral and Stock Unit Match Program and the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan, the following whole percentage of my 2005 Bonus that would otherwise be paid to me in 2006.

   20%   

DEFERRAL DATE ELECTION: I request that my deferral of my 2005 Bonus and any stock unit matches thereon be paid as follows:

I elect to receive my deferred 2005 Bonus and any stock unit matches thereon in a single lump sum payment after my separation from service.

- OR -

I elect to receive my deferred 2005 Bonus and any stock unit matches thereon in a single lump sum payment in the following year (which may not be earlier than two years after the date this election is made). If such date is earlier than January 1^st of the fourth year following the performance year, I recognize that a portion of the company match will be lost.

Month and Year: January 2019

• I understand that my deferred 2005 Bonus and any 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 TDS Bonus Deferral and Stock Unit Match Program and the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan.

• I acknowledge that my account under the Bonus Deferral and Stock Unit Match 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 Common Stock.

• I acknowledge that the TDS Bonus Deferral and Stock Unit Match Program, as offered in connection with my 2005 Bonus, 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 or terminate such program or this 2005 Bonus Deferral Form, unilaterally, at any time in the future to satisfy any requirements of Section 409A of the Internal Revenue Code or applicable guidance provided by the Treasury.

/s/ LeRoy T. Carlson, Jr.	17 December 2004
Signature	Date

Note: This election must be made on or before December 30^th of the year preceding the year for which the bonus is earned (the performance year).

EX-10

Exhibit 10.3

TELEPHONE AND DATA SYSTEMS, INC.
2005 BONUS DEFERRAL FORM

NAME	LeRoy T. Carlson	SOCIAL SECURITY NUMBER
		DATE OF BIRTH	05-15-1916

Deferral election with respect to my 2005 Bonus:

I hereby elect to defer, under the terms and conditions of the TDS Bonus Deferral and Stock Unit Match Program and the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan, the following whole percentage of my 2005 Bonus that would otherwise be paid to me in 2006.

   100%   

DEFERRAL DATE ELECTION: I request that my deferral of my 2005 Bonus and any stock unit matches thereon be paid as follows:

   X    I elect to receive my deferred 2005 Bonus and any stock unit matches thereon in a single lump sum payment after my separation from service.

- OR -

I elect to receive my deferred 2005 Bonus and any stock unit matches thereon in a single lump sum payment in the following year (which may not be earlier than two years after the date this election is made). If such date is earlier than January 1^st of the fourth year following the performance year, I recognize that a portion of the company match will be lost.

Month and Year:

• I understand that my deferred 2005 Bonus and any 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 TDS Bonus Deferral and Stock Unit Match Program and the Telephone and Data Systems, Inc. 2004 Long-Term Incentive Plan.

• I acknowledge that my account under the Bonus Deferral and Stock Unit Match 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 Common Stock.

• I acknowledge that the TDS Bonus Deferral and Stock Unit Match Program, as offered in connection with my 2005 Bonus, 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 or terminate such program or this 2005 Bonus Deferral Form, unilaterally, at any time in the future to satisfy any requirements of Section 409A of the Internal Revenue Code or applicable guidance provided by the Treasury.

/s/ LeRoy T. Carlson	12/22/04
Signature	Date

Note: This election must be made on or before December 30^th of the year preceding the year for which the bonus is earned (the performance year).