US Cellular 2008 Annual Report Download - page 48

Bonus
On August 8, 2007, the U.S. Cellular 2007 Executive Officer Annual Incentive Plan Effective
January 1, 2007 (‘‘Executive Bonus Plan’’) was approved by the Chairman, who does not participate in
such incentive plan. This bonus plan measures performance with respect to 2007, relating to bonuses
paid in 2008. A copy of this plan was filed with the SEC on a Form 8-K dated August 8, 2007.
The purposes of the Executive Bonus Plan are: to provide incentive for the officers of U.S. Cellular to
extend their best efforts toward achieving superior results in relation to key business measures; to reward
U.S. Cellular’s executive officers in relation to their success in meeting and exceeding the performance
targets; and to help U.S. Cellular attract and retain talented leaders in positions of critical importance to
the success of U.S. Cellular. Eligible participants in the Executive Bonus Plan are executive vice
presidents and senior vice presidents of U.S. Cellular. Each participant’s target incentive is expressed as
a percentage of base salary.
The Executive Bonus Plan and other officer bonus plans of U.S. Cellular are discretionary in nature
and are based, in part, on company performance, and individual bonus targets, which contribute to the
formation and size of an aggregate bonus pool for all U.S. Cellular officers. This officer bonus pool is
determined by taking each officer’s target annual bonus payout (calculated as a percentage of the
officer’s annual base salary) multiplied by the company / regional performance percentage attainment
number achieved under the applicable officer bonus plan. The President and CEO will consider the
performance factors (see below) and any other information he deems relevant in determining the amount
available under the bonus pool. This pool is not earned, nor are payouts vested until the bonus payout
date.
The following performance measures, using weights and definitions as approved by the Chairman,
will be considered in evaluating the achievements of the executive officer team for the purposes of this
plan: Consolidated Cash Flow; Consolidated Revenue; Postpay Customer Disconnects; Return on
Capital; and Customer Addition Equivalents.
U.S. Cellular sets target levels for such measures at levels that it believes are achievable with above
average performance. U.S. Cellular believes it would require superior performance to achieve 200% of
the target levels, which is the maximum for each factor and the plan. Nevertheless, although such
performance measures may impact the amount of bonus an officer receives, all officer bonuses are
discretionary, and individual performance and other factors contribute to the amount of bonus an officer
receives. The President and CEO may consider the performance factors and any other information he
deems relevant in determining the bonus. Bonuses are not earned, nor are payouts vested until a bonus
has been approved and paid to an officer. As a result, the performance measures are one category of
the factors used in determining the bonus, but do not entitle the officer to any bonus until awarded. In
addition, a bonus can be awarded based on judgment even if the performance measures are not met.
Although performance measures influence the decision of the amount of the bonus, the entire amount of
the bonus is discretionary and cannot be calculated in advance of approval and payment to the officer.
The President and CEO determines the actual payout that each officer will receive allocating the
bonus pool among officers as he deems appropriate, and is not bound to adhere to any guideline,
including any of the identified performance measures. However, the sum of all participants’ actual awards
may not deviate from the amount of the total officer pool by more than plus or minus 18%. In addition,
the Chairman approves all officer bonuses prior to payout.
As noted above, the overall percentage achieved with respect to 2007 was calculated to be 87.5%.
Nevertheless, the entire amount of the bonus pool is discretionary and subject to approval by the
Chairman. Pursuant to this discretionary authority, the Chairman increased the overall bonus pool to
107% of target. This was approved by the Chairman because U.S. Cellular had a number of key
accomplishments in 2007, including the year-to-year change in Gross Customer Additions which was
favorable compared to performance by the national carriers.
The following shows certain information with respect to each named executive officer other than the
President relating to the amount of the bonus relating to 2007 performance (paid in 2008) showing the
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