EX-10.6 2 a06-1481_2ex10d6.htm MATERIAL CONTRACTS

Exhibit 10.6

 

UNITED STATES CELLULAR CORPORATION
2005 EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN
EFFECTIVE JANUARY 1, 2005

 

I.              PURPOSE

 

                  To provide incentive for the officers of U.S. Cellular (USCC) to extend their best efforts towards achieving superior results in relation to key business measures;

 

                  To reward USCC’s executive officers in relation to their success in meeting and exceeding the performance targets; and

 

                  To help USCC attract and retain talented leaders in positions of critical importance to the success of the Company.

 

II.            ELIGIBLE PARTICIPANTS AND TARGETS

 

Executive Vice Presidents and Senior Vice Presidents.  Each participant’s target incentive is expressed as a percentage of his/her base salary.

 

III.           BONUS POOL

 

The officer bonus plans of USCC are discretionary in nature, and are based in part, on Company performance, individual performance, and individual bonus targets, which contribute to the formation and size of a bonus pool.  The total pool is then broken down into Executive Officer, RSO Vice President, and Region Vice President annual plan pools, allocated at the discretion of the President and CEO.  The President and CEO will consider the performance factors described below and any other information he deems relevant.  The pool is not earned, nor are the payouts vested, until the bonus payout date(See Attachment II—Administrative Guidelines)

 

The President and CEO will determine the actual payout that each officer will receive.  In general, it is recommended that the individual performance factor that is assigned to each officer, fall between 50%-150% of the total payout.  The President and CEO may allocate their bonus pool amongst his officers as he deems appropriate, and is not bound to adhere to the guideline listed above.  However, the sum of all participants’ actual awards cannot deviate from the total officer bonus pool by +18% for 2005.   The Chairman of the Board must approve all officer bonuses prior to payout.

 

IV.           PERFORMANCE MEASURES

 

The following performance measures with their assigned weights will be considered in evaluating the achievements of the officer team for the purposes of this Plan.  These components were selected as the best measures of USCC’s growth and success, and are consistent with those used for other levels of USCC management.  Payouts based on each of these measures will be evaluated using the 2005 Officer Annual Incentive Plan Matrices (See Attachment I).

 

Performance Measures

 

Weighting

 

Customer Addition Equivalents

 

20

%

Consolidated Cash Flow

 

20

%

Consolidated Revenue

 

20

%

Return on Capital

 

20

%

Customer Defections

 

20

%

 

V.            DEFINITIONS

 

Customer Addition Equivalents: Pre, post-pay and wholesale customer additions versus budgeted gross pre- and post-pay customer additions on a consolidated company-wide basis, for purposes of this calculation.  Pre-paid and wholesale activations are paid out based on a 5:1 ratio (5 pre-paid activations to each post-pay activation, 5 wholesale activations to each post-pay activation).  For example: If the budget includes 40,000 post-pay activations and 20,000 pre-pay activations, then the budgeted customer addition equivalent is 44,000 (40,000 + 20,000/5).

 



 

Consolidated Cash Flow: Actual cash flow measured against budgeted cash flow on a consolidated company-wide basis.  Cash flow is defined as (1) the sum of the consolidated operations’ earnings before interest and taxes, excluding extraordinary items, plus depreciation and amortization, less (2) all Corporate office operating expenses excluding amounts included in (1) above, by virtue of their allocation to operating companies, and also excluding depreciation, amortization, extraordinary items and TDS charges.  Budgeted cash flow will be adjusted for variances in equivalent customer additions at a rate of $280 per gross addition above or below budget.

 

Consolidated Revenue: Actual revenue measured against budgeted revenue for all consolidated operations on a consolidated company-wide basis.  Revenue includes all retail, wholesale, keeper roaming, toll pass-through revenue, and other revenue generated by USCC’s assets including revenue from the sale of cellular telephones and accessories.

 

Return on Capital: Actual return on capital compared to budgeted return on capital on a consolidated company-wide basis.  This calculation will be adjusted for the effects of acquisitions and other significant events jointly agreed to by USCC and TDS senior management.

 

Customer Defections: Actual full-year post-pay defections measured against full-year post-pay defection target on a consolidated company-wide basis.

 

Reseller lines are included in determining the attainment percentages.

 

VI.           MISCELLANEOUS PROVISIONS

 

Management reserves the right to amend or discontinue the Plan at any time, with or without notice.

 

There are no oral agreements or understandings between USCC and the participants affecting or relating to this plan not referenced herein.  If the participant fails to adhere to the ethical and legal standards as referenced by USCC policy, USCC shall have the right to revoke this program, reduce or eliminate compensation as it applies to the violator, or any other remedy as provided by corporate policy or law.

 

This program shall not be construed as an employment contract or as a promise of continuing employment between USCC and the associate.  Employment with USCC is terminable at will, i.e.; either the participant or USCC may terminate the relationship at any time, with or without cause.

 

 

 

 

 

 

President and CEO

Date

 

 

 

 

 

 

 

 

Chairman of the Board of Directors

Date

 



 

Attachment I

 

2005 EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN
Performance Measure Payout Matrices

 

Performance Measure(s): Gross Addition Equivalents, Consolidated Cash Flow, Return on Capital

 

Actual Performance as a % of
Budget

 

% Payout of Target

 

 

 

< 92%

 

 

0

%

 

 

92% - 93%

 

 

40

%

 

 

94% - 95%

 

 

55

%

 

 

96% - 97%

 

 

70

%

 

 

98% - 99%

 

 

85

%

 

 

100% - 101%

 

 

100

%

{ Target

 

102% - 103%

 

 

125

%

 

 

104% - 105%

 

 

150

%

 

 

106% - 108%

 

 

175

%

 

 

> 108%

 

 

200

%

 

 

 

Performance Measure: Consolidated Revenue

 

Actual Performance as a % of
Budget

 

% Payout of Target

 

 

 

< 95%

 

 

0

%

 

 

95%

 

 

40

%

 

 

96%

 

 

52

%

 

 

97%

 

 

64

%

 

 

98%

 

 

76

%

 

 

99%

 

 

88

%

 

 

100%

 

 

100

%

{ Target

 

101%

 

 

120

%

 

 

102%

 

 

140

%

 

 

103%

 

 

160

%

 

 

104%

 

 

180

%

 

 

> 105%

 

 

200

%

 

 

 

Performance Measure: Defections

 

Actual Performance as a % of
Budget

 

% Payout of Target

 

 

 

> 110%

 

 

0

%

 

 

107.6% - 110%

 

 

40

%

 

 

105.1% - 107.5%

 

 

55

%

 

 

102.6% - 105%

 

 

70

%

 

 

100.1% - 102.5%

 

 

85

%

 

 

97.8% - 100%

 

 

100

%

{ Target

 

95.1% - 97.7%

 

 

125

%

 

 

92.6% - 95%

 

 

150

%

 

 

90.1% - 92.5%

 

 

175

%

 

 

< 90%

 

 

200

%

 

 

 



 

Attachment II

 

RSO 2005 EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN

Administrative Guidelines

 

PLAN EFFECTIVE DATES:

 

January 1, 2005 – December 31, 2005

 

 

 

GENERAL ADMINISTRATION:

 

Awards for exempt participants will be based on that associate’s base salary as of December 31, 2005.

Awards for non-exempt participants will be based on that associate’s regular earnings (regular hours worked + benefit hours) for 2005.

 

 

 

VESTING

 

The bonus is not ‘earned,’ and does not vest unless the associate remains employed through the actual bonus payout date. Special rules apply to those associates who retire or die before the actual payout date (see below).

 

 

 

SEPARATION PRIOR TO VESTING DATE

 

Not eligible for a payout unless separation is because of retirement or death (see below), or unless approved by the President & CEO.

 

 

 

RETIREMENT/DEATH

 

Payout based on a proration for time worked during the plan year (2005), individual performance, and the plan attainment percentage assigned by the CEO.

During Plan Year:

 

 

 

 

 

LOA (FMLA)

 

Full payout made; no prorations.

During Plan Year:

 

 

 

 

 

LOA (NON-FMLA)

 

Payout based on a proration for time worked during the plan year (2005), individual performance, and the plan attainment percentage assigned by the CEO.

During Plan Year:

 

 

 

 

 

MILITARY LEAVE

 

Military leave is considered to be non-FMLA and therefore incentive payouts are subject to the ‘non-FMLA guidelines’ listed above.

 

 

 

TRANSFERS/PROMOTIONS DURING PLAN YEAR

 

 

Within or Between Annual Plans:

 

If an associate is promoted or is transferred within or between annual incentive plan(s), no prorations will be made in determining the bonus pool. The pool allocation will be based on the associate’s plan as of 12/31/05. The actual bonus payout will be recommended and approved by the CEO. It will be based on plan attainment as well as individual performance.

 

 

 

Between an Annual Plan and a Quarterly or Monthly Plan:

 

Prorated payouts from both positions/plans will be determined by the President and CEO following end of plan year.The following factors will be considered in the determination of the payout: both plans’ attainment percentages, individual performance in each job/plan, the last base salary from each position occupied during the plan year (if applicable), target incentive assigned for each position’s pay grade, and percentage of time worked in each position/plan during the plan year (2005).

 

 

 

NEW HIRES DURING THE PLAN YEAR

 

Associates hired during 2005 will be eligible to participate in the Plan on a prorated (percentage of time worked in the year) basis.

The associate must have a start date of at least 11/30/05 in order to be eligible to receive a prorated payout. Any associate hired between 12/01/05 and 12/31/05 will not receive a payout from the 2005 Plan.

 

 

 

TRANSFERS TO OR FROM TDS DURING THE PLAN YEAR

 

If an associate transfers to/from another TDS business unit, he/she will receive a prorated payout based on the factors listed above.

 

 

 

BONUS PAYOUT DATE

 

Targeted to take place on or before March 15, 2006