United States Cellular Corporation 2020 Executive Officer Annual Incentive Plan effective January 1, 2020

The following U.S. Cellular officers are eligible to participate in this 2020 Executive Officer Annual Incentive Plan (“Plan”): all Executive Vice Presidents. An officer classified as temporary would not be eligible to participate in this plan.

Company Performance - Weighting: 60%: Actual performance will be assessed against the targeted performance for each performance measure. The performance measures are defined below.

 

Consolidated Operating Cash Flow: Operating cash flow determined on a consolidated company-wide basis and in a manner consistent with U.S. Cellular’ s presentation of Adjusted OIBDA (Operating income before depreciation, amortization, accretion, gains and losses) for external reporting purposes, and further adjusted to remove expenses associated with the annual bonus and performance share unit plans.

 

Customer Engagement:  Customer Engagement as measured by the Loyalty Index Score from the Customer Engagement Total Experience Survey. The Loyalty Index Score is a calculated score of customers’ responses based on their overall experience of U.S. Cellular, including overall brand, network and customer experience, laddering to overall satisfaction, likelihood to recommend and likelihood to continue to do business with U.S. Cellular.

Consolidated Equivalent Handset Net Additions: Equivalent Handset Net Additions are determined on a consolidated company-wide basis and are calculated as consolidated equivalent handset gross additions minus consolidated equivalent handset defections.  The equivalency factor is established by device type (which for this purpose includes postpaid smartphones, postpaid feature phones, and prepaid phones) and is determined by calculating the contribution margin for the particular device type over the average life of customers within that device type and comparing such contribution margins.  The calculated postpaid smartphone lifetime contribution margin is considered to have an equivalency factor of 1.0 (or 100%) and the other device types will have an equivalency factor which represents their respective lifetime contribution margin measure in relation to the postpaid smartphone lifetime contribution margin.  For example, if the lifetime contributions are calculated to be $1,000 for postpaid smartphones, $700 for postpaid feature phones, and $500 for prepaid phones, the equivalency factors are 1.0, 0.7 and 0.5, respectively.  Once established, the equivalency factor is applied to the gross additions and defections in a device category.

The Chairman in his qualitative and subjective assessment of U.S. Cellular’ s overall company performance during the year will consider the following key factors and any other information he deems relevant in determining the level of attainment for this measure:

Each officer’s individual performance for the year will be assessed by the President and CEO based on such officer’s effectiveness/success with regard to:

In making these assessments, the President and CEO also will take into consideration:

The Plan is subject to the Administrative Guidelines attached hereto as Exhibit A. There are no oral or written agreements or understandings between U.S. Cellular and the participants affecting or relating to this Plan not referenced herein.  If any participant fails to adhere to the ethical and legal standards as referenced by U.S. Cellular policy, U.S. Cellular shall have the right to revoke this Plan, reduce or eliminate compensation as it applies to the violator, or any other remedy as provided by corporate policy or law.

Any compensation earned or paid pursuant to this Plan is subject to forfeiture, recovery by U.S. Cellular or other action pursuant to any clawback or recoupment policy which U.S. Cellular may adopt from time to time, including without limitation any such policy which U.S. Cellular may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.

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

The Executive Officer Annual Incentive Plan, as set forth in this document, represents the general guidelines U.S. Cellular intends to utilize to determine what bonus payments, if any, will be paid to the officers. U.S. Cellular reserves the right to modify or terminate the Plan at its sole discretion, at any time (including, during or following the applicable plan year) and for any reason, with or without written notification and without regard to the effect that any such action may have on any officer’s bonus or potential bonus. U.S. Cellular shall have the full power and authority to interpret and administer the Plan and shall be the sole arbiter of all matters of interpretation and application of the Plan.

The bonus ranges were set to reinforce the Company’s pay for performance philosophy.  The ranges result in substantial reductions in bonuses when targets are not achieved, and greater rewards for above target performance.

Note related to Consolidated Equivalent Handset Net Additions: Due to small numbers, percentages are not meaningful. Minimum measure is target less 60K, maximum measure is target plus 80K.

Bonus payouts between the minimum and target performance levels and between the target and maximum performance levels will be computed by interpolation.

Any bonus for performance below the minimum level will be determined and approved at the discretion of the Chairman.