US Cellular 2009 Annual Report Download - page 77

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UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16 STOCK-BASED COMPENSATION
U.S. Cellular has established the following stock-based compensation plans: a long-term incentive plan,
an employee stock purchase plan, and a non-employee director compensation plan. Also, U.S. Cellular
employees are eligible to participate in the TDS employee stock purchase plan.
Under the U.S. Cellular 2005 Long-Term Incentive Plan, U.S. Cellular may grant fixed and performance-
based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred
compensation stock unit awards to key employees. At December 31, 2009, the only types of awards
outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred
compensation stock unit awards.
At December 31, 2009, U.S. Cellular had reserved 6,266,000 Common Shares for equity awards granted
and to be granted under the long-term incentive plan, and also had reserved 83,000 Common Shares for
issuance to employees under an employee stock purchase plan. The maximum number of U.S. Cellular
Common Shares that may be issued to employees under all stock-based compensation plans in effect at
December 31, 2009, was 6,349,000.
U.S. Cellular also has established a Non-Employee Director Compensation Plan under which it has
reserved 48,000 Common Shares for issuance as compensation to members of the Board of Directors
who are not employees of U.S. Cellular or TDS.
U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its
various stock-based compensation plans.
Long-Term Incentive Plan—Stock Options—Stock options granted to key employees are exercisable over
a specified period not in excess of ten years. Stock options generally vest over periods of between three
and five years from the date of grant. Stock options outstanding at December 31, 2009 expire between
2010 and 2019. However, vested stock options typically expire 30 days after the effective date of an
employee’s termination of employment for reasons other than retirement. Employees who leave at the
age of retirement have 90 days (or one year if they satisfy certain requirements) within which to exercise
their vested stock options. The exercise price of the option generally equals the market value of
U.S. Cellular Common Shares on the date of grant.
U.S. Cellular estimated the fair value of stock options granted during 2009, 2008, and 2007 using the
Black-Scholes valuation model and the assumptions shown in the table below.
2009 2008 2007
Expected life ........................ 3.9 Years 3.7 Years 3.1 Years
Expected volatility .................... 40.3% - 44.2% 28.1% - 40.3% 22.5% - 25.7%
Dividend yield ....................... 0% 0% 0%
Risk-free interest rate .................. 1.2% - 2.2% 1.2% - 3.5% 3.3% - 4.8%
Estimated annual forfeiture rate .......... 6.89% 11.29% 9.60%
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