Exhibit 10.1
ADTRAN INC.
VARIABLE INCENTIVE COMPENSATION PLAN
Section 1. Purpose and Scope.
1.1 Background. The Company originally adopted the ADTRAN, Inc. Management
Incentive Bonus Plan under a plan document adopted by the Board of Directors of
the Company on January 23, 2006 and effective January 1, 2006 (the “Plan”), and
which was approved by the Company’s shareholders in May 2006. The Company hereby
renames the Plan the ADTRAN, Inc. Variable Incentive Compensation Plan and
amends and restates the Plan, effective January 1, 2011, contingent upon the
Plan being approved by the shareholders of the Company at their annual meeting
in May 2011.
1.2 General Purpose. The purpose of the Plan is as follows: (i) to provide
annual cash incentives and rewards for certain officers and management employees
of the Company; (ii) to attract and retain qualified executives by providing
performance-based compensation as an incentive for their efforts to achieve the
Company’s financial and strategic objectives; and (iii) to qualify compensation
paid under the Plan as “performance-based compensation” within the meaning of
Section 162(m) of the Code, in order to preserve the Company’s tax deduction for
compensation paid under the Plan to Eligible Employees.
Section 2. Definitions.
The following words and phrases as used in this Plan shall have the meanings set
forth in this Section unless a different meaning is clearly required by the
context.
2.1 “Affiliate” shall mean, as of any date, an entity that, directly or
indirectly, controls, is controlled by, or is under common control with the
Company, pursuant to the provisions of Code Sections 414(b), (c), (m) or (o).
2.2 “Base Compensation” shall mean a Participant’s base rate of salary prorated
over the Plan Year (e.g., if a Participant’s base salary rate is $10,000 per
month (or $120,000 annually) for the first six months of the Plan Year and then
$15,000 per month (or $180,000 annually) for the last six months of the year,
then his Base Compensation for the Plan Year for purposes of the Plan will be
$150,000).
2.3 “Board” shall mean the Board of Directors of the Company.
2.4 “Change in Control” shall mean the occurrence of any one of the following
events, as determined under the provisions of Code Section 409A:
(a) Change in Ownership. A change in the ownership of the Company occurs on the
date that any one person, or more than one person acting as a group, acquires
ownership of stock of the Company that, together with stock held by such person
or group, constitutes more than fifty percent (50%) of the total fair market
value or total voting power of the stock of the Company. However, if any one
person or more than one person acting as a group, is considered to own more than
fifty percent (50%) of the total fair market value or total voting power of the
stock of the Company, the acquisition of additional stock by the same person or
persons is not considered to cause a change in the ownership of the Company or
to cause a change in the effective control of the Company (within the meaning of
subsection (ii) herein). An increase in the percentage of stock owned by any one
person, or persons acting as a group, as a result of a transaction in which the
Company acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this section. This applies only when there
is a transfer of stock of the Company (or issuance of stock of the Company) and
stock in the Company remains outstanding after the transaction.
(b) Change in Effective Control. A change in the effective control of the
Company occurs on the date that either:

 

 

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(i) Any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company
possessing 35 percent or more of the total voting power of the stock of the
Company; or
(ii) a majority of members of the Company’s Board is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Board prior to the date of the appointment or
election.
A change in effective control may occur in any transaction in which either of
the two corporations involved in the transaction has a Change in Control Event.
(c) Change in Ownership of a Substantial Portion of Assets. A change in the
ownership of a substantial portion of the Company’s assets shall occur on the
date that any one person, or more than one person acting as a group, acquires
(or has acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) assets from the Company that have
a total gross fair market value equal to or more than 40 percent of the total
gross fair market value of all of the assets of the Company immediately prior to
such acquisition or acquisitions. For this purpose, gross fair market value
means the value of the assets of the Company, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such
assets.
In determining whether a Change in Control has occurred, the rules and
regulations issued under Code Section 409A shall apply.
2.5 “Chief Executive Officer” or “CEO” shall mean the Chief Executive Officer of
the Company.
2.6 “Chief Operating Officer” or “COO” shall mean the Chief Operating Officer of
the Company.
2.7 “Committee” shall mean the Compensation Committee of the Board or such other
committee as may be appointed by the Board, the members of which shall all be
qualified as “outside directors” under Code Section 162(m), to administer the
Plan for each Plan Year, pursuant to Section 9.2.
2.8 “Company” shall mean ADTRAN, Inc., a Delaware corporation, and any successor
thereto.
2.9 “Eligible Employee” shall mean any officer or such other management
employees who are selected by the CEO or COO and recommended to the Committee
for participation in the Program for a particular Plan Year.
2.10 “Maximum Performance Award” shall mean, for any individual for a given Plan
Year, a Performance Award in an amount equal to Three Million Dollars
($3,000,000).
2.11 “Outside Directors” shall mean members of the Board who qualify as outside
directors, as that term is defined in Section 162(m) of the Code and the
regulations issued thereunder.
2.12 “Participant” shall mean an Eligible Employee approved by the Committee
under Section 3 to participate in the Plan, who has been notified by the CEO or
COO of his or her approved participation.
2.13 “Performance Award” shall mean the cash amounts awarded to a Participant
under the terms of the Plan. Performance Awards shall usually be determined as a
percentage of the Participant’s Base Compensation, subject to the Committee’s
discretion.
2.14 “Performance Measure” means any one or more of the objective criteria or
measurements by which specific performance goals may be established and
performance may be measured, as determined by the Committee in its discretion
for any particular Plan Year, pursuant to the provisions of Section 4.3.
2.15 “Plan” shall mean this ADTRAN, Inc. Variable Incentive Compensation Plan,
as amended from time to time.

 

 

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2.16 “Plan Year” shall mean the 12-month period ending on each December 31;
provided that if the Company’s fiscal year should be changed to any other
12-month period, then the Plan Year shall contemporaneously and automatically
change to such 12-month period.
Section 3. Participation.
3.1 Eligibility to Participate. As soon as possible following the commencement
of each Plan Year, the Committee shall specify by name or position the
Participants eligible to participate in the Plan for that Plan Year. The
Committee shall retain discretion to name as a Participant an employee hired or
promoted into an eligible position for the first time after the commencement of
the Plan Year. A Participant must remain employed by the Company through the
date that payment of the Performance Awards is scheduled to be made for a Plan
Year in order to be eligible to receive a Performance Award for that Plan Year,
except in the case of a Change in Control as provided in Sections 7 and 8 below.
3.2 Termination of Participation. Except in the case of a Change in Control as
provided in Sections 7 and 8 below, a Participant’s participation in the Plan
shall terminate upon his termination of employment with the Company. The
Committee shall retain the discretion to reduce participation in the Plan to a
level less than full participation or to suspend or terminate participation of
any Participant reassigned to substantially different duties, undertaking an
authorized leave of absence or disqualified for any reason by the Committee.
Notice of the reduction in participation or suspension or termination of any
individual Participant shall be forwarded to the CEO or COO and the affected
Participant or Participants in writing.
Section 4. Establishment of Performance Measures and Performance Awards.
4.1 Time of Establishment. No later than ninety (90) days after the commencement
of the Plan Year, the Committee shall specify in writing the Performance
Measures and Performance Awards which are to apply for that Plan Year with
regard to each Participant or each group of Participants (by name or position),
subject to the provisions of Sections 4.2 and 4.3. In its discretion, the
Committee may establish minimum, target and maximum levels of Performance
Measures and the related Performance Awards for each Plan Year. The Committee
may establish Performance Measures for each Participant’s individual
performance, as well as establishing Performance Measures based on corporate
performance.
4.2 Performance Awards. The amount of Performance Awards may vary among
Participants and from Plan Year to Plan Year; however, no individual Performance
Award shall exceed the Maximum Performance Award.
4.3 Performance Measures. The Committee shall establish its specific Performance
Measures for a Plan Year by reference to any one or more of the following:
(i) earnings before all or any taxes (“EBT”); (ii) earnings before all or any of
interest expense, taxes, depreciation and amortization (“EBITDA”);
(iii) earnings before all or any of interest expense, taxes, depreciation,
amortization and rent (“EBITDAR”); (iv) earnings before all or any of interest
expense and taxes (“EBIT”); (v) net earnings; (vi) net income; (vii) operating
income or margin; (viii) earnings per share; (ix) growth; (x) return on
shareholders’ equity; (xi) capital expenditures; (xii) expenses and expense
ratio management; (xiii) return on investment; (xiv) improvements in capital
structure; (xv) profitability of an identifiable business unit or product;
(xvi) profit margins; (xvii) stock price; (xviii) market share; (xix) revenues;
(xx) costs; (xxi) cash flow; (xxii) working capital; (xxiii) return on assets;
(xxiv) economic value added; (xxv) industry indices; (xxvi) peer group
performance; (xxvii) regulatory ratings; (xxviii) asset quality; (xxix) gross or
net profit; (xxx) net sales; (xxxi) total shareholder return; (xxxii) sales (net
or gross) measured by product line, territory, customers or other category;
(xxxiii) earnings from continuing operations; (xxxiv) net worth; and
(xxxv) levels of expense, cost or liability by category, operating unit or any
other delineation. Performance Measures may relate to the Company and/or one or
more of its Affiliates, one or more of its divisions or units or any combination
of the foregoing, on a consolidated or nonconsolidated basis, and may be applied
on an absolute basis or be relative to one or more peer group companies or
indices, or any combination thereof, all as the Committee determines. In
addition, to the extent consistent with the requirements of Code Section 162(m),
the Performance Measures may be calculated without regard to extraordinary
items. These factors will not be altered or replaced by any other criteria
without ratification by the shareholders of the Company if failure to obtain
such approval would result in jeopardizing the tax deductibility of Performance
Awards to Participants.

 

 

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Section 5. Determination of Amount of Performance Awards.
5.1 Committee Certification Regarding Performance Measures. As soon as
practicable following the end of each Plan Year, the Committee shall certify for
each Participant whether the Performance Measures for that Plan Year have been
met. If such Measures have been met, the Committee will award such Participant
the Performance Award established under Section 4 hereof, subject to the
discretion reserved in Section 5.3 to reduce such awards, but with no discretion
to increase the Performance Award. The Board shall have final approval of the
amounts of the Performance Awards payable to the officers of the Company, as
recommended and previously approved by the Committee.
5.2 Maximum Award. No individual Performance Award to a Participant for a Plan
Year may exceed the Maximum Performance Award.
5.3 Reduction of Award Amount. The Committee may, in its sole discretion, award
to a Participant less than the specified Performance Award regardless of the
fact that the Performance Measures for the Plan Year have been met.
Section 6. Payment of Awards.
Performance Awards for a given Plan Year shall be paid in cash as soon as
practicable following the certification by the Committee of the attainment of
the Performance Measures. The Committee shall certify the attainment of the
Performance Measures in a timely manner so that the Performance Awards shall be
paid no later than 2 1/2 months after the close of the applicable Plan Year.
Notwithstanding the above and Section 3.1, the Board or Committee may provide,
at the time it approves any Performance Award under Section 4.1, that such
Performance Award will be paid in one or more installment payments, that such
installment payments will be adjusted for earnings and losses to the date of
payment based on a reasonable rate of interest or predetermined actual
investment designated at the time of such approval, and that any installment
payment is conditioned upon the Participant’s continuous employment by the
Company through the date of the applicable payment (excluding certain
terminations if designated by the Board or Committee).
Payments of Performance Awards (including installment payments) may be subject
to deferral by the Participant pursuant to the provisions of any applicable
deferred compensation plan maintained by the Company.
Section 7. Termination of Employment.
A Participant whose employment with the Company is terminated for any reason
(voluntarily or involuntarily) prior to the scheduled date of a payment of all
or a portion of a Performance Award for a Plan Year shall forfeit such payment;
except that any Participant whose employment with the Company is terminated on
or prior to, and in connection with a Change in Control, shall continue to be
entitled to the payment of his or her Performance Award for the prior Plan Year
(if not yet paid), and for the Plan Year in which the Change in Control occurred
as set forth in Section 8 below.
Section 8. Change in Control.
If a Change in Control occurs, then to the extent consistent with Code
Section 162(m), the Performance Measures and the Performance Award shall be
automatically adjusted on a pro-rata basis (generally, based on the number of
days in the Plan Year through the date of the Change in Control, divided by the
number of total days in the Plan Year), and to reflect the time value of money.
If the Committee, in its discretion, established minimum, target and maximum
levels of Performance Measures and the related Performance Awards for such Plan
Year, then the automatic adjustment described in this section shall apply to
each such level. The Committee shall certify whether each Participant has
attained the Performance Measures (as adjusted) as of the date of the Change in
Control. Notwithstanding any later date provided by Section 6 above, each
Participant who has been certified by the Committee as having attained the
Performance Measures (as adjusted) shall receive, at the closing of the Change
in Control, an immediate lump sum cash payment of any Performance Award (as
adjusted) to which he or she is entitled under this Section.
Section 9. Plan Administration.
9.1 Administration by Committee. The Plan shall be administered by the
Committee, which shall have the authority in its sole discretion, subject to the
provisions of the Plan, to administer the Plan and to exercise all the powers
either specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan.

 

 

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9.2 Appointment of Committee. The Board shall appoint the Committee from among
its members to serve at the pleasure of the Board. The Board from time to time
may remove members from, or add members to, the Committee and shall fill all
vacancies thereon. The Committee shall at all times consist solely of two or
more Outside Directors.
9.3 Interpretation of Plan Provisions. The Committee shall have complete
discretion to construe and interpret the Plan and may adopt rules and
regulations governing administration of the Plan. The Committee may consult with
the management of the Company but shall retain responsibility for administration
of the Plan. The Committee’s decisions, actions and interpretations regarding
the Plan shall be final and binding upon all Participants.
Section 10. Compliance with Section 162(m) of the Code.
The Company intends that Performance Awards under this Plan satisfy the
applicable requirements of Section 162(m) of the Code so that such Code section
does not deny the Company a tax deduction for such Performance Awards. It is
intended that the Plan shall be operated and interpreted such that Performance
Awards remain tax deductible by the Company, except to the extent set forth in
Section 13.
Section 11. Nonassignability.
No Performance Award granted to a Participant under the Plan shall be assignable
or transferable, except by will or by the laws of descent and distribution.
Section 12. Effective Date and Term of Plan.
The Plan, as amended and restated, shall be effective as of January 1, 2011,
subject to approval by the shareholders of the Company. The Plan shall continue
from year to year until terminated by the Board.
Section 13. Amendment of the Plan.
The Board may amend, modify or terminate the Plan at any time and from time to
time. Notwithstanding the foregoing, no such amendment, modification or
termination shall affect the payment of a Performance Award for a Plan Year
already ended. In addition, any amendment or modification of the Plan shall be
subject to shareholder approval if necessary for purposes of continuing to
qualify compensation paid under the Plan as “performance-based compensation”
under Code Section 162(m).
Section 14. General Provisions.
14.1 Unfunded Plan. The Plan shall be an unfunded incentive compensation
arrangement for a select group of key management employees of the Company.
Nothing contained in the Plan, and no action taken pursuant to the Plan, shall
create or be construed to create a trust of any kind. A Participant’s right to
receive a Performance Award shall be no greater than the right of an unsecured
general creditor of the Company. All Performance Awards shall be paid from the
general funds of the Company, and no segregation of assets shall be made to
ensure payment of Performance Awards.
14.2 Governing Law. The Plan shall be interpreted, construed and administered in
accordance with the laws of the State of Alabama, without giving effect to
principles of conflicts of law.
14.3 Section Headings. The section headings contained in the Plan are for
purposes of convenience only and are not intended to define or limit the
contents of the Plan’s sections.
14.4 Effect on Employment. Nothing contained in the Plan shall affect or be
construed as affecting the terms of employment of any Eligible Employee except
as expressly provided in the Plan. Nothing in the Plan shall affect or be
construed as affecting the right of the Company to terminate the employment of
an Eligible Employee at any time for any reason, with or without cause.
14.5 Successors. All obligations of the Company with respect to Performance
Awards granted under the Plan shall be binding upon any successor to the
Company, whether such successor is the result of an acquisition of stock or
assets of the Company, a merger, a consolidation or otherwise.

 

 

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14.6 Withholding of Taxes. The Company shall deduct from each Performance Award
the amount of any taxes required to be withheld by any federal, state or local
governmental authority.
IN WITNESS WHEREOF, ADTRAN, Inc. has caused this restated Plan to be executed
this _____ day of _____, _____.

         
 
      ADTRAN, INC.
 
       
 
  By:    
 
       
 
       
 
  Name:    
 
       
 
       
 
  Title: