AutoCoded Document



Publish Date:    21 December 2004
Destroy Date:   31 December 2005




ADC



Management Incentive Plan Document
Fiscal Year 2005


 










MANAGEMENT INCENTIVE PLAN DOCUMENT
Fiscal Year 2005



Plan Name and Effective Date


The name of
this Plan is the ADC Telecommunications, Inc. Management Incentive Plan.  The plan is
effective from November 1, 2004 through October 31, 2005.




Purpose


The
purpose of the Plan is to provide, with full regard to the protection of
shareholder’s investments, a direct financial incentive for eligible
managers and individual contributors to make a significant contribution to
ADC’s established goals.



Eligibility


Eligibility
for Fiscal Year 2005 is limited to full or part-time regular employees in the
U.S. and in such other countries where ADC has specifically notified employees
of eligibility for participation in the Plan. Eligibility for participation in
this Plan is limited to such employees who hold executive, certain management
and higher-level individual contributor positions. Temporary employees and
independent contractors are not eligible for participation in this plan. In
order to be eligible, an employee cannot participate in any other ADC incentive
plan, except as approved by the Compensation and Organization Committee of the
Board of Directors or the CEO, and must be employed in an eligible position on
or before October 1, 2005.



Timing of Payment


Payments
that become due under this Plan are made as soon as administratively feasible
following the close of ADC’s fiscal year, generally in late December or
early January. All payments are subject to appropriate withholdings.



Plan Goals


The
Plan reinforces the key goals that support ADC’s long-term strategic plans.
The key factors in ADC’s FY 05 corporate and regional success are net sales
and pro forma operating income. For global business units, the key factors for
FY05 are net sales and global contribution margin. These goals will be set at
the ADC, regional, and global business unit levels. Accounting methodology
changes may dictate corresponding goal modifications during the plan year.




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Following
is a description of the plan components:




	Plan Goal
	Definition

	Net Sales	 	The amount ADC can recognize in accordance with GAAP for goods shipped or services provided to third party customers, net of returns received.	 
	
	
	

	Pro Forma Operating Income	 	Net sales less the everyday expenses of doing business, including cost of incentive payments. It does not take into account interest income, interest expense, or other income/loss or income tax. It also excludes restructuring and other one-time expenses that are not reflective of the ongoing business.
For FY05, any stock option expense will be excluded from pro forma operating
income for incentive calculation.	 
	
	
	

	Business Unit Contribution Margin	 	Net sales less the cost to produce the products or services sold and less certain costs directly associated with that business unit including but not limited to engineering, product management, and business-unit administration. It does not take  into account operating expenses deemed regional during the budgeting process,
interest  income, interest expense, other income/loss or income tax. It also excludes
restructuring  and other one-time expenses that are not reflective of the ongoing
business. For FY05, any  stock option expense will be excluded from business unit
contribution margin for incentive  calculation.	 










Goal Weightings


Employees
serving multiple business units and multiple regions have 100% of their
incentive plan based on ADC goals and results. Employees dedicated to only one
business unit have a portion of their incentive based on ADC results and a
portion on global business unit results. Employees serving only one region have
a portion of their incentive based on ADC results and a portion on regional
results. Each participant will be notified of their applicable business unit or
region, if any. The weightings for business unit or regional participation are
as follows:



	Grade
	
	ADC Weighting
	
	BU or Regional Weighting

	Grade 19+	 	 	 	 	50%	 	 	50%
	Grades 15-18	 	 	 	 	30%	 	 	70%







Individual Performance


Exceptional
individual performance can be recognized in the MIP program. An ADC-wide award
pool is available to supplement the financial-based awards for outstanding
performers.


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ADC Performance Gate


To
ensure protection of shareholder interest, an established level of ADC pro forma
operating income must be achieved before an incentive payment can be generated.



Calculation of Payment


Prior
to making any payment under this Plan, the Board of Directors must determine
that the claimed business performance levels have been achieved. The Board of
Directors has complete authority and discretion to determine whether performance
levels have been achieved, including without limitation the authority and
discretion to properly calculate pro forma operating income. The size of an
incentive award will be based on three factors:


	1.	 	
Target Incentive Opportunity – Determined on the basis of the ADC
salary grade associated with an individual’s job and country of work. It is
expressed as a percentage of an individual’s FY 2005 eligible base salary
earnings.






	2.	 	
FY2005 Eligible Base Salary – This is the amount paid to the
participant during the fiscal year in Base Salary. 







	3.	 	
Business   Performance in comparison with the established goals.









While
each goal has a threshold of 0% of target incentive opportunity, the minimum
individual payment is a total payment of 10% of an employee’s target. If
incentives earned total less than 10% of target, no payout will be made. The
maximum award attributable to each performance factor is 200% of its target. The
maximum total individual award is 200% of the target payout. This maximum
includes any MIP award also provided for exceptional individual performance.
Specific financial goals have been established for 0%, 100%, and 200% of target.
Results between these specific points are interpolated for each goal.


Here
is an example of a hypothetical award calculation.


Assume
a Regional Plan participant with the following facts, in a scenario where the
ADC performance gate has been met:

		
		
	Target Opportunity:	15% of base salary earnings
	FY05 Eligible Base Salary:	70,000 EUR
	Business Performance
Percentages:	Hypothetical ADC and
regional results shown in the
following table





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	Metrics
	Measure Weighting
	
	Performance
	
	Wtd. Perf.
	

	ADC Level Metrics	 	 	 		 	 		 	 		 
	   ADC Net Sales	 	 	 	50	%	 	107	%	 	53.5	%
	   Pro Forma Operating Income	 	 	 	50	%	 	95	%	 	47.5	%
				
	
	 	 	 	 	 	 	 	 	 	 	101.0	%
	
	
	
	
	
	
	
	
	
	
	

	Regional Level Metrics	 	 
	   Regional Net Sales	 	 	 	50	%	 	110	%	 	55.0	%
	   Regional Pro Forma Operating Income	 	 	 	50	%	 	95	%	 	47.5	%
				
	
	 	 	 	 	 	 	 	 	 	 	102.5	%
	
	
	
	
	
	
	
	
	
	
	

	 Overall Weighted Performance	 	 
	   ADC Metrics	 	 	 	30	%	 	101	.0%	 	30.3	%
	   Regional Metrics	 	 	 	70	%	 	102	.5%	 	71.8	%
				
	
	 	 	 	 	 	 	 	 	 	 	102.1	%





Payment Calculation:
70,000 (base salary) * 15% (incentive target) * 102.1% (business
performance) = 10,721 EUR






Effect of Change in Employment Status


Termination
of Employment. If employment with ADC is terminated for any reason other
than death and if the Employment Termination Date occurs prior to the end of the
Fiscal Year, a participant will not receive an award under the Plan. For
purposes of this Plan, the “Employment Termination Date” is the date
that the participant ceases to be an employee of ADC (as determined by the
company). In the case of termination of employment by ADC, the Employment
Termination Date shall be determined without regard to whether such termination
is with or without cause or with or without reasonable notice.


Transfer,
Promotion or Demotion to another position with a different ADC incentive plan,
target incentive opportunity or business goals. A participant, who
transfers, is promoted or demoted to another position with a different plan,
target incentive opportunity or business goals will receive a prorated
calculation of payment based upon the number of months served in each position.
The participant must be in the new position by the first of the month in order
to receive credit for that month under the new plan, target or goals. For
example, a participant transferring from Wireless to Connectivity on June 10
would receive eight months payment under the Wireless plan (November 1 —
June 30) and four months under Connectivity (July 1 – October 31). In order
to receive payment under MIP, a participant must have completed one full month
of service under the plan during that plan year.


Death.
If a participant dies during the fiscal year, a pro-rated payment will be made
to the participant’s estate after the end of the fiscal year. The payment
will be based upon the time the participant served in the eligible position
during the fiscal year.



Administration


A
Management Incentive Plan Committee (“Committee”), appointed and
authorized by the Compensation Committee of the Company’s Board of
Directors, will administer this Plan. Subject to the complete and full
discretion of the Compensation Committee of the Board of Directors, the
Committee is authorized to make all decisions as required in administration of
the Plan and to exercise its discretion to define, interpret, construe, apply,
approve, administer, withdraw and make any exceptions to the terms of the Plan.




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Right to Modify


ADC
reserves the right to modify or adjust the Plan at any time in its sole
discretion either in whole or with respect to a particular business unit. The
Participant explicitly agrees with this modification right of ADC.



Governing Law


The
Plan is made and shall be construed in accordance with the laws of the State of
Minnesota, U.S.A. without regard to conflicts of law principles thereof, or
those of any other state of the U.S.A. or of any other country, province or
city.



Severability


If any
provision of this Plan is held invalid, illegal or unenforceable by a court or
tribunal of a competent jurisdiction, this Plan shall be deemed severable and
such invalidity, illegality or unenforceability shall not affect any other
provision of this Plan which shall be enforced in accordance with the intent of
this Plan.



Assignment


The
Company shall have the right to assign this Plan to its successors and assigns
and this Plan shall inure to the benefit of and be enforceable by said
successors and assigns. Participant may not assign this Plan or any rights
hereunder.



Entire Understanding


This
Plan constitutes the entire understanding between the parties regarding the
payment of incentive compensation under this Plan, and it supercedes any and all
prior agreements or understandings, whether oral or written, express or implied,
on such subject matter.



No Acquired Rights or Entitlements/Plan Amendment or Termination


The
Plan shall not entitle Participants to any future compensation. The Plan is not
an element of the employees’ salary or base compensation and shall not be
considered as part of such in the event of severance, redundancy, or
resignation. ADC has no obligation to offer incentive plans to Participants in
the future, and the plan shall be effective only for the time period specified
in the plan and shall not be deemed to renew year over year. The Participant
understands and accepts that the incentive payments made under the Plan are
entirely at the sole discretion of ADC. Specifically, ADC assumes no obligation
to the Participant under this Plan with respect to any doctrine or principle of
acquired rights or similar concept. Subject to the provisions of the Plan, ADC
may amend or terminate the Plan or discontinue the payment of incentives under
the Plan at any time, at its sole discretion and without advance notice.