Exhibit 10.1
(VALOR TELECOM LOGO) [d33107d3310700.gif]
2006 Incentive
Compensation Plan

             
Version
   5.0        
Effective Date
   January 1, 2006        
 
     
 
   

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]

         
1  ADMINISTRATIVE RULES
    3  
 
       
1.1  Purpose
    3  
1.2  Definitions
    3  
1.3  Administration
    3  
1.4  Eligible Participants
    4  
1.5  Awards
    4  
1.6  Payment of Awards
    4  
1.7  Amendment or Termination
    5  
1.8  Other Conditions
    5  
1.9  Award Year
    5  
 
       
2  OPERATING RULES
    6  
 
       
2.1  Plan Principles
    6  
2.2  Plan Structure
    6  
2.3  Incentive Factors
    7  
 2.3.1 Company Performance (as measured by EBITDA)
    7  
 2.3.2 Individual Performance Evaluation and Objectives
    8  
2.4  Assigning Incentive Factors to Groups
    8  
2.5  Allocating Incentive Factors and Weights to Groups
    9  
2.6  Incentive Potential
    9  
2.7  Award Calculation Method
    10  
2.7.1 The Performance Potential Factor (PPF)
    10  
2.7.2 Incentive Potential Factor (IPF)
    10  
2.7.3 The Final Incentive Award (FIA)
    10  
 
       

Version 5.0   Page 2   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]
1 Administrative Rules
     1.1 Purpose
The purpose of the Incentive Compensation Plan (the “Plan”) is to enhance and
reinforce the goals and strategic objectives of Valor Communications Group, Inc.
(the “Company”) for company and individual performance. This will be
accomplished by providing eligible employees with financial awards for
attainment of revenue and operational objectives. The accomplishment of these
goals will be measured through the attainment of the following elements as
defined in Part II:

  •   Company Performance (as measured by EBITDA)

The Plan sets forth the guidelines and formulas for the computation of incentive
compensation awards for participating employees.
     1.2 Definitions
Definitions of terms as used throughout the Plan document are as follows:

  •   “Award Year” means the earlier of that portion of 2006 up to and including
the date of closing of the Transaction or the twelve-month period coinciding
with the Company’s annual accounting period for 2006.     •   “Committee” means
the Compensation Committee of the Company’s Board of Directors.     •  
“Participant” means an employee designated by management and approved by the
Committee to participate in the Plan.     •   “Transaction” means the Plan of
Merger between VALOR Communications Group, Inc. and Alltel Corporation and
Alltel Holding Corp.

     1.3 Administration
The Committee has delegated to the Chief Executive Officer and the senior
executive team (“Executive Management”) the responsibility to develop and
administer the Plan. The Vice President – Human Resources of the Company shall
administer the Plan in accord with direction provided by Executive Management.
The Committee shall approve the Plan prior to its implementation.
Executive Management shall have full power and authority to select Participants
from among those eligible, to determine the size and timing of individual
awards, and to adopt and revise such rules and procedures as it shall deem
necessary for the administration of the Plan. The decision of the Executive
Management with respect to the individuals selected for awards, and the
interpretation of the Plan shall be final and conclusive. All incentive
compensation awards computed under the Plan are subject to final approval and
modification of Executive Management. The Plan may be modified or withdrawn at
any time without prior notification at the discretion of Executive Management.
 

Version 5.0   Page 3   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]
     1.4 Eligible Participants
Participation in the Plan shall be limited to regular salaried employees of the
Company, including officers as recommended by management and approved by the
Committee. In selecting Participants, Executive Management shall consider an
individual’s job, individual performance objectives, and potential impact on the
Company’s business results and performance. Participants will be members of the
participant groups as defined in Part II of the Plan. Participants should not be
eligible to participate in any other incentive or bonus plan(s). The selection
of Participants and their respective incentive awards, shall be determined
annually by Executive Management and communicated to Participants as soon as
possible. In actual practice, decisions on participation will be made at or near
the beginning of the Award Year. Executive Management has the right to change or
modify the participant list with or without notice.
Eligible employees are full-time employees who are selected to participate in
the Plan (as defined above), and are employed by the Company during the entire
Award Year for which the incentive is being paid. If an employee becomes
eligible during the Award Year and would otherwise be eligible to participate in
the incentive compensation plan, at the discretion of the department Senior
Vice-President and the Chief Executive Officer, the individual may be allowed to
participate. This Participant would receive pro-rated incentive award based on
the full months that he or she is eligible and the End of the Year. Employees
who become eligible after January 1 of the Award Year will not be eligible to
participate.
     1.5 Awards
Individual Participant awards are determined based on quantitative and
qualitative performance measurements as described by the Incentive Factors in
Part II. All award payments are subject to Executive Management approval. The
Committee shall review Awards payable under the Plan to the Chief Executive
Officer and other senior officers. Awards will be made in the form of cash.
     1.6 Payment of Awards
Normal Payment. Incentive awards shall be earned as of the payment of incentive
award date. Payment of awards shall be made in cash within fifteen (15) days
following the end of the Award Year. Participants must be full-time employees on
the Company’s payroll at the end of the Award Year. Awards will be pro-rated
based on the Participant’s annual Incentive Potential Target to the nearest
month in the Award Year.
Payment Under Conditions of Termination. If termination of employment occurs
during an Award Year because of death, total disability, or approved leave of
absence, such Participant terminating employment shall be deemed to have earned
a proportionate share of what would have otherwise been the Award Year’s actual
incentive. The amount paid will be prorated to the number of full months worked,
and based on the Final Incentive Award calculation.
 

Version 5.0   Page 4   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]
If termination of employment occurs for any reason other than death, total
disability, or approved leave of absence, no incentive shall be deemed earned
for the Award Year in which such termination occurs.
Participant Transfer. If a Participant is transferred to another
unit/department, etc. within or affiliated with the Company during the Award
Year, and is determined to be eligible for payments under one or both of the
units’ plans, partial awards will be made under each unit’s plan, using the
respective job and salary and prorated as describe in Section 1.4.
     1.7 Amendment or Termination
Executive Management may, at any time, terminate, modify, or amend the Plan. No
awards may be made under the Plan at any time, if the overall financial
condition of the Company is not sound.
     1.8 Other Conditions
Right of Assignment. No right or interest of any Participant in the Plan shall
be assignable or transferable, or subject to any lien, directly, by operation of
law, or otherwise including levy, garnishment, attachment, pledge, and
bankruptcy. In the event of the Participant’s death, payment shall be made to
the Participant’s designated beneficiary or in the absence of such designation,
to the Participant’s estate.
Right of Employment. The receipt of an award under the Plan shall not give any
employee the right to continue employment with the Company, and the right to
dismiss any employee is specifically reserved by the Company. The receipt of an
award in any year shall not give an employee the right to receive an award in
any subsequent year.
Withholding of Taxes. The Company shall have the right and obligation to deduct
from all payments under the Plan any federal or state taxes required by law to
be withheld with respect to such payments.
Withholding of 401(k). Savings Plan (401(k)) deductions shall be made from all
payments under the Plan, if a Participant is enrolled in 401(k) plan.
     1.9 Award Year
The effective date of the Plan shall be January 1, 2006 through the Transaction
closing date. Upon closing of the Transaction, the Plan shall terminate.
 

Version 5.0   Page 5   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]
2  Operating Rules
     2.1 Plan Principles
The purpose of the Plan as defined in Part I is to provide Participants with
annual incentive awards for their contributions to the Company’s growth and
achievement of strategic goals. The Plan will be operated on the following
principles:

  •   Setting of Goals

The Company will set the Participant’s incentive factors on an annual basis and
revise them during the Award Year as needed.

  •   Measurement of Performance

The Company, through its managers, will review performance of Participants . The
measurement may be either quantitative or qualitative.

  •   Payment of Awards

The Company will pay Awards to the Participants, according to the measured
results, within fifteen (15) days of the end of the Award Year.
     2.2 Plan Structure
The Plan is based on incentive factors important to the Company’s success in
achieving its strategic objectives that have been adopted by resolution of the
Company’s Board of Directors . Plan Participants are divided into groups with
similar job responsibilities and/or job functions. Executive Management will
make a determination as to which group a Participant will be assigned, using the
criteria below as a guideline:

      Participant Groups
Group AA
  Participants in this group are responsible for the long-range planning and
growth of the Company. Will be responsible for all business functions and Senior
Vice-Presidents in their reporting structure. Common titles in this category
will be President and Chief Executive Officer.  
Group A
  Participants in this group are responsible for the long-range planning and
growth of the Company. They are usually responsible for multiple business
functions and will most often have Vice-President(s) in their reporting
structure. Common titles in this category will be Senior Vice-President.  
Group B
  Participants in this group are responsible for assisting in developing and
implementing long-range plans for the Company. They will usually be responsible
for a specific business function and have Directors and/or Managers in their
reporting structure. Common titles in this group will be Vice-President.  
Group C
  Participants in this group are responsible for the implementation of both
short- and long range plans as well as overseeing the day-to-day operations for
the Company in a specific business region (Division). Common titles in this
group will be Division Manager.
 
   

Version 5.0   Page 6   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]

      Participant Groups
Group D
  Participants in this group are responsible for intermediate business goals.
They will usually be responsible for multiple disciplines within a business
function and will usually have Managers and/or professionals in their reporting
structure. Common titles in this group will be Directors.  
Group E
  Participants in this group are responsible for short to intermediate range
business goals. They will usually be responsible for one or a few disciplines
within a business function and may have administrative staff, supervisors,
and/or professionals in their reporting structure. Common titles in this group
will be Managers.  
Group F
  Participants in this group are responsible for immediate to short-term
business goals. They will usually be responsible for one discipline or
sub-discipline within a business function. This responsibility may be defined
through the supervision of at least 3 subordinate (exempt or nonexempt)
employees, and individual contributor manager who supervise less than 3
employees. Common titles in this group will be Supervisor and Manager.

The groups are assigned incentive factors for which they have responsibility,
control, or influence. Factor weights will be assigned to the incentive factors
for the groups. The total factor weight allocated to each should equal
100 percent. Factor weights are allocated only to the incentive factors that
have been assigned to the groups and not all factors may have weights.
     2.3 Incentive Factors
Incentive factors are elements through which the Company achieves strategic
goals and will be used by the Plan to measure the success of Participants to
help the Company reach its goals. The Committee has selected one incentive
factor for measurement in the Plan. This factor is as follows:

  •   Company Performance (as measured by EBITDA)

Senior management, department management, and eligible Participants will
establish goals for each of these incentive factors. Participants with
“Unsatisfactory” individual performance are not eligible for any payout under
the Plan.
          2.3.1 Company Performance (as measured by EBITDA)
Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) is a
measure of financial performance that is used to measure the Company’s
performance. At the beginning of each year, the Company’s Board of Directors
shall adopt a resolution setting the EBITDA goals. At the end of the year,
actual EBITDA achievement will be compared to the EBITDA goal and the percentage
of achievement will be determined. Executive Management reserves the right to
consider extraordinary expenses and revenues in consideration for End of Year
Award.
 

Version 5.0   Page 7   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]
          2.3.1.1 EBITDA Evaluation Score Table
The score table defines the achievement level expected by the Company. The
incentive level represents the percent of the incentive that the Participant
will receive depending on the level of EBITDA attained by the Company. Higher
levels of achievement will yield higher incentive levels and consequently
increase incentive award.
Table 2.3.1.1.1 EBITDA Evaluation Score Table

          Level of EBITDA   Incentive Level Achievement          
102.00%-103.99%
    125 %
99.00%-101.00%
    100 %
98.00%-98.99%
    80 %
97.00%-97.99%
    70 %
     < 97.00%
    0 %

          2.3.1.2 EBITDA End of Award Year
At the end of the Award Year, senior management will compare actual EBITDA
results with EBITDA goals and determine incentive level based on attainment.
Executive Management reserves the right to adjust the incentive level, either
increasing or decreasing, based on unusual or extenuating circumstances.
          2.3.2 Individual Performance Evaluation and Objectives
Due to the pending Transaction, individual performance evaluation will not be
performed during the Award year. To be eligible for Final Incentive Award,
Participants are expected to report to work as scheduled and to perform the
duties required of his/her position to the best of his/her abilities to ensure
that the Company will achieve its financial targets.
Participants performing at “Unsatisfactory” levels will not be eligible for
payout under the Plan.
     2.4 Assigning Incentive Factors to Groups
Incentive factors are assigned to the groups that have responsibility, control,
and influence over them. Plan participants should constantly review these
factors and their goals, monitoring their progress and adjusting their priority
to meet their goals. Incentive factor goals serve as constant reminders as to
which areas Participants should focus their efforts.
 

Version 5.0   Page 8   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]
Table 2.4.1.1.1 Incentive Factors Assigned to Participant Groups

                                  Incentive Factors   Participant Groups     AA
  A   B   C   D   E   F  
Company Performance (as measured by EBITDA)
  X   X   X   X   X   X     X  

     2.5 Allocating Incentive Factors and Weights to Groups
The incentive factors assigned to each participant group were examined carefully
to determine which factors should be allocated to the group level. Participant
groups were allocated the incentive factors they have the most control over.
These will be the focal point of the groups’ efforts.
Next, a weight is distributed among the factors assigned to each group based on
the importance each factor plays in relation to reaching the set goals. The
factor weight is the percentage of the factor allocated to a specific group. The
total factor weight for each group should equal 100 percent.
Table 2.5.1.1.1 Incentive Factors Allocated to Participant Groups

                                  Incentive Factors   Participant Groups        
    AA   A   B   C   D   E   F    
Company Performance (as measured by EBITDA)
  100.00%   100.00%   100.00%   100.00%   100.00%   100.00%     100.00 %  
Total
  100.00%   100.00%   100.00%   100.00%   100.00%   100.00%     100.00 %  

     2.6 Incentive Potential
Incentive potential is defined as the percentage of the annual salary designated
to each participant group. This equals to the annual salary multiplied by the
assigned percentage. The assigned percentage increases with the responsibility
level of the group.
Table 2.6.1.1.1 Incentive Percentage Potential Assigned to Groups

          Participant Group  
Percentage
AA
    100.00 %
A
    50.00 %
B
    40.00 %
C
    30.00 %
D
    25.00 %
E
    15.00 %
F
    10.00 %

  Version 5.0   Page 9   January 1, 2006

 

--------------------------------------------------------------------------------

 

(VALOR TELECOM LOGO) [d33107d3310700.gif]
Information for individual plan Participants is confidential and will be
disclosed to each plan Participant in a private manner. Group directors and
managers will only have access to the incentive compensation source data
pertaining to their department or work group.
     2.7 Award Calculation Method
All award calculations will be performed by the Human Resources Department based
on EBITDA and Revenue results as communicated by the Committee and Performance
Evaluation Ratings as communicated by department management. The formulas for
calculations are outlined in this section.
          2.7.1 The Performance Potential Factor (PPF)
The Participant’s performance in each incentive factor allocated is measured in
or according to the Plan guidelines. A score is assigned for each factor based
on the actual results achieved for that Award Year. The Participant’s score in
each factor category is multiplied by the factor weight allocated to it and
divided by 100. Adding all factor category scores times their weights yields the
Performance Potential Factor (PPF).
The Performance Potential Factor is a cumulative index that represents the
overall Participant performance in achieving the assigned goals. The Performance
Potential Index reflects how well Participants have achieved their goals in
their respective incentive factors

              The performance index is derived using the following formula: PPF
=   S1* x F1**   +   S2* x F2**               (Performance
Potential Factor)   100       100

          2.7.2 Incentive Potential Factor (IPF)
Each Participant in the Plan is designated an Incentive Potential Factor. The
value of this factor is determined by a percentage of the Participant’s annual
income as defined in section 2.6.

              IPF=
(Incentive Potential Factor)   Annual Salary   X   Incentive Potential
PercentageÑ

          2.7.3 The Final Incentive Award (FIA)
The Final Incentive Award is calculated as follows:

                  FIA
(Final Incentive
Award)   =   PPF
(Performance Potential Factor)   X   IPF
(Incentive Potential Factor)

 

*   S1, S2, S3, S4 are the Participant’s score for each incentive factor as
defined in the Plan.   **   F1,F1,F3,F4 are the weights allocated to each
incentive factor. These allocations are designated in Table 2.5.1.1.1 and the
sum is 100.00%.   Ñ   Incentive Potential Percentage is defined in Table
2.6.1.1.1        

Version 5.0   Page 10   January 1, 2006