Ex-10.1



 





Exhibit 10.1




Description of Annual Incentive and Long-Term Incentive Bonus Awards




          On February 17, 2006, the Compensation Committee of the Board of Directors (the “Compensation
Committee”) of CT Communications, Inc. (the “Company”) approved the terms pursuant to which the
Company would award annual incentive bonus awards for the 2006 fiscal year and the performance
criteria for the long-term incentive bonus awards for the 2006-2007 performance period. The
Company maintains an annual incentive discretionary bonus plan (the “annual incentive plan”) and
long-term incentive discretionary bonus plan (the “long-term incentive plan”) for the benefit of
its executive officers, other officers and certain other key employees of the Company. The annual
incentive plan and the long-term incentive plan are administered and paid out under the Company’s
shareholder-approved Amended and Restated 2001 Stock Incentive Plan.



          For 2006, the annual incentive award will consist of a cash bonus that may be paid based on
goals established and approved by the Company’s Compensation Committee. Potential bonuses are
specified as a percentage of the employees’ annual base salary, ranging from 25% to 150% for the
Chief Executive Officer, 20% to 100% for Senior Vice Presidents of the Company and 15% to 70% for
all other executive officers of the Company. For 2006, the annual incentive award will be based on
a combination of financial and operational objectives. Such objectives and their relative
weighting in the overall performance score are as follows:



	 	 	 	 	 
	Objective	 	Weight
	Operating revenue
	 	 	15	%
	 
	 	 	 	 
	Operating earnings before interest, taxes,
depreciation and amortization
	 	 	20	%
	 
	 	 	 	 
	Operating free cash flow
	 	 	5	%
	 
	 	 	 	 
	Aggregate net customer growth in the
Company’s ILEC, Wireless and DSL businesses
	 	 	10	%
	 
	 	 	 	 
	Aggregate customer disconnects in the
Company’s ILEC, Wireless and DSL businesses
	 	 	10	%
	 
	 	 	 	 
	Achievement of milestones related to broadband
network and product deployment
	 	 	40	%






          The Company, as authorized by the Compensation Committee, may also pay a long-term incentive
award based on a multi-year performance period with performance goals established at the beginning
of the cycle. Potential bonuses are specified as a percentage of the employees’ annual base
salary, ranging from 80% to 400% for the Chief Executive Officer, 50%



 









 







to 200% for Senior Vice Presidents, 30% to 100% for all other Vice Presidents reporting directly to
the Chief Executive Officer and 15% to 70% for all other executive officers of the Company.



          Although prior to 2005 the performance period established by the Compensation Committee was a
three-year period, in 2005, the Compensation Committee determined not to grant a long-term
incentive award for the 2005 to 2007 performance period and instead determined that a performance
period consisting of two years is more appropriate and consistent with the Company’s compensation
objectives and the rapidly changing telecommunications industry. Accordingly, in connection with
the transition from a three-year performance period to a two-year performance period, the
Compensation Committee approved in February 2005 a long-term incentive award for the 2006 to 2007
performance period, subject to the determination of the key performance objectives for such period,
which were approved by the Compensation Committee on February 17, 2006.



          For the long-term incentive award granted in 2005 for the 2006 to 2007 performance period, the
long-term incentive award is based on the following combination of financial measurements and
weightings:



	 	 	 	 	 
	Objective	 	Weight
	Operating revenue
	 	 	20	%
	 
	 	 	 	 
	Operating earnings before interest, taxes,
depreciation and amortization
	 	 	20	%
	 
	 	 	 	 
	Cumulative operating free cash flow
	 	 	10	%
	 
	 	 	 	 
	Period-end customers of the Company’s ILEC,
Wireless and Broadband businesses
	 	 	20	%
	 
	 	 	 	 
	Total shareholder return (compared to a
peer stock index)
	 	 	30	%






          The long-term incentive awards for the 2006 to 2007 performance period will consist of 25%
unrestricted common stock and 75% restricted common stock. The restricted common stock will vest
according to the following schedule: 33% will vest one year from the award date and 67% will vest
two years from the award date. The price that is used to calculate the number of restricted and
unrestricted shares that are awarded will be the average closing NASDAQ price for all trading days
in the month of December at the end of the applicable performance period.



               In addition to the annual and long-term incentive compensation, compensation for executive
officers may include additional awards of nonqualified and/or incentive stock options issued under
the Company’s Amended and Restated 2001 Stock Incentive Plan.