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United States Cellular Corporation
Notes to Consolidated Financial Statements (Continued)
NOTE 15 STOCK-BASED COMPENSATION (Continued)
Under the U.S. Cellular Long-Term Incentive Plans, 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, 2013, the only types of awards
outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred
compensation stock unit awards.
On June 25, 2013, U.S. Cellular paid a special cash dividend to all holders of U.S. Cellular Common
Shares and Series A Common Shares as of June 11, 2013. Outstanding U.S. Cellular stock options,
restricted stock unit awards and deferred compensation stock units were equitably adjusted for the
special cash dividend. The impact of such adjustments are fully reflected for all years presented. See
Note 4—Earnings Per Share for additional information.
At December 31, 2013, U.S. Cellular had reserved 10,139,000 Common Shares for equity awards granted
and to be granted under the Long-Term Incentive Plans. No Common Shares were reserved for issuance
to employees under any employee stock purchase plan since this plan was terminated in the fourth
quarter of 2011.
U.S. Cellular also has established a Non-Employee Director compensation plan under which it has
reserved 212,000 Common Shares at December 31, 2013 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 Plans—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 a period of three years
from the date of grant. Stock options outstanding at December 31, 2013 expire between 2014 and 2023.
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 options 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 2013, 2012, and 2011 using the
Black-Scholes valuation model and the assumptions shown in the table below.
2013 2012 2011
Expected life ........................ 4.6 - 9.0 years 4.5 years 4.3 years
Expected volatility .................... 29.2% - 39.6% 40.7% - 42.6% 43.4% - 44.8%
Dividend yield ....................... 0% 0% 0%
Risk-free interest rate .................. 0.7% - 2.4% 0.5% - 0.9% 0.7% - 2.0%
Estimated annual forfeiture rate .......... 0.0% - 8.1% 0.0% - 9.1% 0.0% - 7.8%
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