Document:

exv10wxay

 

Exhibit 10-a

PROSPECTUS

ADC TELECOMMUNICATIONS, INC.

GLOBAL STOCK INCENTIVE PLAN

21,329,775 shares of Common Stock

($.20 par value)

 

	 	 	This document constitutes part of a prospectus covering securities that have been registered
under the Securities Act of 1933.

	 	 	These securities have not been approved or disapproved by the Securities and Exchange
Commission or any state securities commission, nor has the Securities and Exchange
Commission or any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.

 

	 	 	No person is authorized to give any information or to make any representations, other than
those contained in this prospectus, in connection with the offer described in this
prospectus. If any other information or representations are made, you may not rely upon
them as having been authorized by ADC. This prospectus is not an offer to sell, or a
solicitation of an offer to buy, securities in any jurisdiction to any person to whom it is
unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of
this prospectus nor any sale made under it shall, under any circumstances, create an
implication that the information contained in this prospectus is correct as of any time
after the date of this prospectus.

The date of this prospectus is January 10, 2007.

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
	 	 	1	 
	 
	 	 	 	 
	NATURE OF INVESTMENT
	 	 	2	 
	 
	 	 	 	 
	INFORMATION ABOUT THE PLAN
	 	 	2	 
	General
	 	 	2	 
	Administration
	 	 	3	 
	Types of Awards
	 	 	3	 
	Transferability of Awards
	 	 	4	 
	Exercise of Awards
	 	 	5	 
	Share Accounting
	 	 	5	 
	Adjustments
	 	 	5	 
	Amendments or Termination of the Plan
	 	 	5	 
	 
	 	 	 	 
	RESALES
	 	 	5	 
	 
	 	 	 	 
	FEDERAL INCOME TAX CONSEQUENCES
	 	 	6	 
	Tax Consequences with Respect to Awards
	 	 	6	 
	Non-Qualified Stock Options
	 	 	6	 
	Incentive Stock Options
	 	 	7	 
	Stock Appreciation Rights
	 	 	9	 
	Restricted Stock Awards
	 	 	9	 
	Deferred Awards
	 	 	11	 
	Special Rules for Executive Officers and Directors Subject to Section 16(b)
	 	 	11	 
	Change in Control
	 	 	12	 

 

 

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The following documents that we have filed with the U.S. Securities and Exchange Commission
(the “Commission”) are incorporated by reference in this prospectus:

	 	(a)	 	our Annual Report on Form 10-K for the fiscal year ended October 31, 2006; and
	 
	 	(b)	 	the description of our Common Stock and Common Stock Purchase Rights contained
in any of our registration statements filed under the U.S. Securities Act of 1933, as
amended (the “Securities Act”), or in any report filed under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and any amendment or report filed for the
purpose of updating the description.

     All documents filed by us under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after
the date of this prospectus and prior to the filing of a post-effective amendment with the
Commission which indicates that all securities offered by this prospectus have been sold, or which
deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference
in this prospectus and to be a part of this prospectus from the respective dates of filing of such
documents.

     We will provide you, without charge, upon your written or oral request, a copy of any or all
of the following:

	 	(a)	 	the documents referred to above that have been or may be incorporated in this
prospectus (not including exhibits, unless the exhibits are specifically incorporated
by reference into such documents);
	 
	 	(b)	 	our annual report to shareholders for our latest fiscal year; and
	 
	 	(c)	 	any report, proxy statement or other communication distributed by us to our
shareholders generally.

     Requests for copies of these documents should be directed to Jeffrey D. Pflaum, Corporate
Secretary, ADC Telecommunications, Inc., 13625 Technology Drive, Eden Prairie, Minnesota 55344
(telephone number (952) 938-8080).

1

 

NATURE OF INVESTMENT

     An investment in our Common Stock involves risk. We encourage you to review our Annual Report
on Form 10-K for the fiscal year ended October 31, 2006, as filed with the Commission. This report
sets forth the significant risk factors involved in an investment in our Common Stock in Item 1A of
such report under the captions “Risks Related to Our Business” and “Risks Related to Our Common
Stock.”

INFORMATION ABOUT THE PLAN

General

     The information in this prospectus relates to the ADC Telecommunications, Inc. Global Stock
Incentive Plan, which we call the “Plan” in this prospectus. The Plan was initially adopted by our
Board of Directors in November 1990 and was approved by our shareholders on February 26, 1991. The
Plan became effective immediately upon shareholder approval. The Board adopted amendments to the
Plan in November 1992, December 1994, November 1996, December 1998, December 1999, December 2000,
December 2001 and December 2002, and our shareholders approved these amendments on February 23,
1993, February 28, 1995, February 25, 1997, February 23, 1999, February 22, 2000, February 27,
2001, February 19, 2002, March 4, 2003 and March 2, 2004, respectively. In December 1996, the
Board adopted an amendment to the Plan that did not require shareholder approval. The Plan was
amended and restated through August 1, 2005 to reflect the 1-for-7 reverse stock split undertaken
by the Company effective May 10, 2005, and was amended and restated through December 12, 2006 to
reflect a change in the calculation of “Fair Market Value” under the Plan. Under the current terms
of the Plan, the Plan will expire on March 2, 2009.

     The Plan is intended to help us recruit, retain and develop key employees capable of assuring
the future success of ADC, to attract and retain the services of experienced and knowledgeable
outside directors, and to offer these employees incentives to put forth maximum efforts for the
success of our business and to provide these employees and outside directors an opportunity to
acquire a proprietary interest in ADC. All key employees of ADC and of our subsidiaries and
affiliates in which we have a significant equity interest and all nonemployee directors of ADC are
eligible to receive awards under the Plan.

     A total of 21,329,775 shares of our Common Stock, par value $.20 per share, are available as
of November 1, 2001 for the issuance of shares under outstanding awards and for the granting of
awards under the Plan. The types of awards that may be granted under the Plan are described below.
Awards granted under the Plan may be granted only during a period commencing February 26, 1991 and
ending on March 2, 2009. However, unless otherwise expressly provided in the Plan or in an
applicable award agreement, any award granted may extend beyond March 2, 2009.

     The Plan is not subject to any provisions of the Employee Retirement Income Security Act of
1974 and is not qualified under Section 401(a) of the U. S. Internal Revenue Code of 1986, as
amended.

     You may obtain additional information about the Plan and its administrators by writing to
Jeffrey D. Pflaum, Corporate Secretary, ADC Telecommunications, Inc., 13625 Technology Drive, Eden
Prairie, Minnesota 55344, or by calling (952) 938-8080.

2

 

Administration

     The Plan is administered by a committee of the Board consisting of three or more nonemployee
directors. The members of the committee are appointed by the Board. The committee has the
authority to establish rules for the administration of the Plan; to select the key employees to
whom awards are granted; to determine the types of awards to be granted and the number of shares of
Common Stock covered by the awards; and to set the terms and conditions of the awards. The
committee may also determine whether the payment of any amounts received under any award shall or
may be deferred and may authorize payments representing dividends in connection with any deferred
award of shares of Common Stock. Determinations and interpretations under the Plan are made in the
sole discretion of the committee, and are binding on all interested parties. The committee may
correct any defect, supply any omission or reconcile any inconsistency in the Plan or any award in
the manner and to the extent it deems desirable to carry the Plan into effect. The committee may
delegate to one or more officers the right to grant awards to employees who are not subject to
Section 16(b) of the Exchange Act.

     Awards under the Plan are granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that upon their grant or
exercise, the holder will receive shares of Common Stock, cash or any combination thereof, as the
committee determines. No employee may be granted any award or awards under the Plan, the value of
which award or awards is based solely on an increase in the value of the Common Stock after the
date of grant of the award or awards, for more than 571,428 shares of Common Stock, in the
aggregate, in any one calendar year.

Types of Awards

     The Plan permits the granting of:

	 	(a)	 	stock options, including “incentive stock options” meeting the requirements of
Section 422 of the Internal Revenue Code (the “Code”) and “nonqualified stock options”
that do not meet these requirements;
	 
	 	(b)	 	stock appreciation rights (or “SARs”);
	 
	 	(c)	 	restricted stock and restricted stock units;
	 
	 	(d)	 	performance awards payable in shares of Common Stock; and
	 
	 	(e)	 	dividend equivalents.

     Under the Plan, the number of shares of Common Stock that may be issued pursuant to restricted
stock, restricted stock units and performance awards granted after March 2, 2004 is limited to
4,285,714.

     Options. The exercise price per share under any stock option will not be less than 100% of
(i) the average of the high and low daily trading prices (rounded down to the nearest whole cent)
of a share as reported on the Nasdaq National Market System, if the shares are then quoted on the
Nasdaq National Market System or (ii) the average of the high and low daily trading prices (rounded
down to the nearest whole cent) of a share on a national securities exchange, if the shares are
then being traded on a national securities

3

 

exchange on the date of grant of the option. Options will be exercisable by payment in full of the
exercise price, either in cash or, at the discretion of the committee, in whole or in part by the
tendering of shares of our Common Stock or other consideration having a fair market value on the
date the option is exercised equal to the option exercise price. Determinations of fair market
value under the Plan will be made in accordance with methods and procedures established by the
committee. For purposes of the Plan, the fair market value of shares of our Common Stock on a
given date will be (a) the last sale price of the shares as reported on the Nasdaq Stock Market on
that date, if the shares are then being quoted on the Nasdaq Stock Market, or (b) the closing price
of the shares on that date on a national securities exchange, if the shares are then being traded
on a national securities exchange.

     SARs. The grant price of any SAR will not be less than 100% of the exercise price per share
under any stock option (determined as described in the preceding paragraph) on the date of grant of
the SAR. The holder of a SAR will be entitled to receive the excess of the fair market value of a
specified number of shares of our Common Stock (calculated as of the exercise date of the SAR or,
if the committee so determines, as of any time during a specified period before or after the
exercise date) over the grant price of the SAR.

     Restricted Stock and Restricted Stock Units. Restricted stock and restricted stock units are
subject to restrictions imposed by the committee during a restriction period determined by the
committee. Restricted stock and restricted stock units may not be transferred by the holder until
these restrictions established by the committee lapse. If the holder’s employment terminates
during the restriction period, all restricted stock and restricted stock units will be forfeited
unless the committee determines otherwise.

     The holder of restricted stock may have all of the rights of our shareholders, including the
right to vote the shares subject to the restricted stock award and to receive any dividends with
respect thereto, or these rights may be limited.

     Holders of restricted stock units shall have the right, subject to any restrictions imposed by
the committee, to receive shares of Common Stock at some future date. After the lapse or waiver of
any applicable restrictions, holders of restricted stock units will be issued such shares.

     Performance Awards. Holders of performance awards have the right to receive shares of our
Common Stock upon the achievement of specified performance goals during performance periods
established by the committee. A performance award granted under the Plan may be payable in shares
of Common Stock or restricted stock.

     Dividend Equivalents. Dividend equivalents will entitle the holders thereof to receive
payments (in cash or shares, as determined by the committee) equivalent to the amount of cash
dividends with respect to a specified number of shares.

Transferability of Awards

     You may not assign, transfer, pledge or otherwise encumber any award granted under the Plan,
except for transfers by will, by designation of a beneficiary or by the laws of descent and
distribution. You may, however, transfer all or a portion of a nonqualified stock option to
specified members of your immediate family or to certain family trusts, partnerships or other
entities in accordance with the terms of the Plan.

4

 

Exercise of Awards

     Each award is exercisable only by you, by a permitted transferee or, if permissible under
applicable law, by your guardian or legal representative.

Share Accounting

     If any shares of our Common Stock subject to an award or to which an award relates are not
purchased or are forfeited, or if any award terminates without the delivery of shares or other
consideration, the shares previously used for these awards will be available for future awards
under the Plan. Except as otherwise provided under procedures adopted by the committee to avoid
double-counting with respect to awards granted in tandem with or in substitution for other awards,
all shares relating to awards granted will be counted against the aggregate number of shares
available for granting awards under the Plan. Shares that are used by a participant as full or
partial payment to ADC of the purchase price of shares acquired upon exercise of a stock option or
to satisfy applicable tax withholding requirements upon the exercise or vesting of an award will be
available for future awards under the Plan.

Adjustments

     Under the Plan, appropriate adjustments will be made to the Plan and to the number of
outstanding options in the event of changes in our Common Stock through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in corporate
structure.

Amendments or Termination of the Plan

     The Board may amend, alter or discontinue the Plan at any time, but may not, without
shareholder approval, make any revisions or amendments to the Plan that (a) absent shareholder
approval, would cause Rule 16b-3, as promulgated by the Commission under the Exchange Act, or any
successor rule or regulation, to become unavailable with respect to the Plan; (b) require the
approval of our shareholders under any rules or regulations of the National Association of
Securities Dealers, Inc. or any securities exchange that are applicable to ADC; or (c) require the
approval of our shareholders under the Internal Revenue Code in order to permit incentive stock
options to be granted under the Plan.

RESALES

     The resale of shares acquired upon exercise or receipt of awards generally is not restricted
by the terms of the Plan. If you are “affiliate” (as defined in Rule 144(a)(1) promulgated under
the Securities Act) of ADC, then your resale of any shares must comply with the registration
requirements of the Securities Act or Rule 144 and all applicable state securities laws. Shares
acquired by affiliates of ADC pursuant to awards or upon the exercise of an award may be resold
under Rule 144 without a one-year holding period.

5

 

U.S. FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of the U.S. federal income tax consequences of the issuance,
exercise and payment of (or lapse of restrictions with respect to) awards under the Plan, based on
currently applicable provisions of the Internal Revenue Code. The following description applies to
U.S. citizens and residents who receive awards under the Plan. Participants who are neither U.S.
citizens nor residents but who perform services in the United States may also be subject to U.S.
federal income tax under some circumstances. In addition, former citizens or long-term residents
of the United States may be subject to special expatriate tax rules, which are not addressed in
this summary.

     Due to the complexity of the applicable provisions of the Internal Revenue Code, this
prospectus describes only the general federal tax principles affecting awards that may be granted
under the Plan. Depending on individual facts and circumstances, these general tax principles
might not apply to you. In addition, these general tax principles are subject to changes that may
be brought about by subsequent legislation or by regulations and administrative rulings, which may
be applied on a retroactive basis. Furthermore, if you are an executive officer or director of ADC
subject to Section 16(b) of the Exchange Act, special rules may apply to you. (See “Special Rules
for Executive Officers and Directors Subject to Section 16(b)” below.)

     You also may be subject to state, local or foreign income taxes and you should refer to the
applicable laws in those jurisdictions.

     For all of these reasons, we note that (i) the tax advice set forth herein was not intended or
written to be used, and cannot be used by you or anyone else, for the purpose of avoiding federal
income tax penalties that may be imposed; (ii) the advice was written to support the promotion or
marketing of the transactions described herein; and (iii) we urge you to consult your own tax
advisor to determine your tax liability in connection with the receipt or exercise of an award or
the subsequent disposition of shares received in connection with or upon exercise of an award.

Tax Consequences with Respect to Awards

     Non-Qualified Stock Options

	 	•	 	Grant. You will not recognize any taxable income at the time a non-qualified option is granted.
	 
	 	•	 	Exercise. Upon the exercise of a non-qualified option, you will recognize ordinary
income in the amount by which the fair market value of the Common Stock at the time of
exercise exceeds the option exercise price. If you pay the exercise price by tendering
other shares of our Common Stock then owned by you, you will recognize ordinary income
in an amount equal to the fair market value of the number of shares received upon
exercise that exceed the number of other shares you tendered.
	 
	 	•	 	Tax Deduction for ADC. We will be allowed an income tax deduction in the amount
that, and for our taxable year in which, you recognize ordinary income, to the extent such amount satisfies the general rules concerning
deductibility of compensation.

6

 

	 	•	 	Tax Basis of the Acquired Shares. If you pay the non-qualified option exercise
price in cash, your original tax basis in the shares received upon exercise will equal
the sum of (1) the option exercise price plus (2) the amount you are required to
recognize as income as a result of the exercise. If you pay the option exercise price
by tendering other shares of our Common Stock then owned by you, you will not recognize
gain or loss on the tendered shares, but your original tax basis for an equal number of
 shares acquired upon exercise of the option will be the same as your adjusted tax basis
for the tendered shares. The remaining acquired shares will have an original tax basis
equal to (a) the sum of the amount of the exercise price paid in cash, if any, plus (b)
any amount that you are required to recognize as income as a result of the option
exercise.
	 
	 	•	 	Sale of Shares. When you sell shares acquired upon the exercise of a non-qualified
option, the difference between the amount received and the adjusted tax basis of the
 shares will be gain or loss. If, as usually is the case, the Common Stock is a capital
asset in your hands, the gain or loss will be capital gain or loss.
	 
	 	•	 	Characterization of Capital Gain or Loss. Any capital gain or loss you recognize
upon sale of the shares will be taxed as long-term capital gain or loss if you have
held the shares for more than 12 months and as short-term capital gain or loss if you
have held the stock for 12 months or less. For purposes of determining whether you
will recognize long-term or short-term capital gain or loss on your subsequent sale of
the shares, the holding period will begin at the time you exercise the option.
However, if, as usually is the case, the Common Stock is a capital asset in your hands,
the holding period for acquired shares having the same basis as tendered shares will
include the period during which you held the tendered shares.

     Incentive Stock Options

	 	•	 	Grant. You will not recognize any taxable income at the time an incentive stock
option is granted.
	 
	 	•	 	Exercise. Upon the exercise of an incentive stock option, you will not recognize
any income for purposes of the regular income tax. However, you may be required to
recognize income for purposes of the alternative minimum tax (or “AMT”).
	 
	 	 	 	For purposes of the AMT, an incentive stock option will be treated as a
non-qualified option. Accordingly, for purposes of the AMT, you must recognize
ordinary income in the amount by which the fair market value of the Common Stock at
the time of exercise exceeds the option exercise price. As a result, if you
recognize a substantial amount of AMT income upon exercise of the incentive stock
option in relation to your taxable income from wages and other sources in the year
you exercise the option, you may be subject to the AMT. Furthermore, the fact that
you recognize AMT income at the time you exercise an incentive stock option may not
alter the amount of regular income
you must recognize at the time you sell or otherwise dispose of the shares acquired
upon exercise of the incentive stock option.

7

 

	 	 	 	We urge you to consult your own tax advisor regarding the effect of the AMT and the
desirability of selling or otherwise disposing of shares acquired upon exercise of
an incentive stock option in the same calendar year in which you acquired the shares
to avoid having the AMT apply in the year you exercise the option and the regular
tax apply in the year you sell the shares. We also urge you to consult your own tax
advisor regarding the benefit that may be available from a tax credit for a prior
year’s minimum tax liability provided for in Section 53 of the Internal Revenue
Code.
	 
	 	•	 	Tax Deduction for ADC. If you sell or otherwise dispose of shares acquired upon the
exercise of an incentive stock option more than two years from the date the option was
granted to you and more than one year after you exercised the option, then we will not
be allowed a deduction for federal income tax purposes in connection with the grant or
exercise of the option. However, if you sell or otherwise dispose of the shares before
the holding period described above is satisfied, then we will be allowed a tax
deduction at the time and in the amount you recognize ordinary income, if and to the
extent the amount satisfies the general rules concerning deductibility of compensation.
Under current law, this income is not subject to income or payroll tax withholding.
	 
	 	•	 	Tax Basis of the Acquired Shares. If you pay the exercise price for an incentive
stock option in cash, your original tax basis in the shares received upon exercise will
equal the option exercise price.
	 
	 	 	 	If you pay the exercise price for an incentive stock option by tendering other
 shares of our Common Stock already owned by you, and you acquired those tendered
shares through any means other than by exercising one or more incentive stock
options, you will not recognize gain or loss on the tendered shares, but your
original tax basis for an equal number of shares acquired upon exercise of the
option will be the same as your adjusted tax basis for the tendered shares. The
remaining acquired shares will have an original tax basis equal to the amount of the
exercise price paid in cash, if any. If you pay the exercise price solely by
tendering other shares of our Common Stock, then the original tax basis of the
remaining acquired shares will be zero.
	 
	 	 	 	If you pay the exercise price for an incentive stock option by tendering shares of
our Common Stock already owned by you, and you acquired those tendered shares by
exercising another incentive stock option, Section 1036 of the Internal Revenue Code
generally provides that you will recognize no gain or loss with respect to the
tendered shares (except possibly for purposes of the AMT as described above), as
long as you have held the tendered shares for a period of time ending at least two
years after the date the option for the tendered shares was granted and at least one
year after you acquired the tendered shares upon exercise of the option.
	 
	 	•	 	Sale of Shares and Characterization of Capital Gain or Loss. If you sell or
otherwise dispose of shares acquired upon exercise of an incentive stock option at a
time more than two years from the date the option was granted to
you and more than one year after you exercised the option, and if, as usually is the
case, the Common Stock is a capital asset in your hands, then you will recognize
long-term capital gain or loss in an amount equal to the difference

8

 

	 	 	 	between the sale
price of the shares and the exercise price you paid for the shares.
	 
	 	 	 	If you sell or otherwise dispose of shares acquired upon exercise of an incentive
stock option before the holding period described above is satisfied, then you will
recognize ordinary income at the time of the disposition in an amount equal to the
lesser of (1) the difference between the exercise price and the fair market value of
the shares at the time the option was exercised or (2) the difference between the
exercise price and the amount realized upon disposition of the shares, and you will
recognize long-term or short-term capital gain or loss (depending on whether you
have held the shares for more than 12 months or for 12 months or less) in an amount
equal to the difference between the sale price of the shares and the fair market
value of the shares on the date you exercised the option.

     Stock Appreciation Rights

	 	•	 	Grant. At the time a SAR is granted, you will not recognize any taxable income.
	 
	 	•	 	Exercise. At the time you exercise a SAR, you will recognize ordinary income equal
to the cash or fair market value of any shares of Common Stock received at that time
(in the amount that is equal to the excess of the fair market value of a share of our
Common Stock on the date the SAR is exercised over the grant price of the SAR).
	 
	 	•	 	Tax Deduction for ADC. Subject to the general rules concerning deductibility of
compensation, we will be allowed an income tax deduction in the amount that, and for
our taxable year in which, you recognize ordinary income upon the exercise of a SAR.
	 
	 	•	 	Tax Basis of the Acquired Shares. Your tax basis in any shares received will equal
the fair market value of those shares at the time you recognize ordinary income as a
result of exercising the SAR.
	 
	 	•	 	Sale of Shares. If, as usually is the case, the shares are a capital asset in your
hands, any additional gain or loss recognized on a subsequent sale or
exchange of the shares will not be ordinary income but will qualify as a capital gain or loss.
	 
	 	•	 	Characterization of Capital Gain or Loss. Any capital gain or loss you recognize
upon sale of the shares will be characterized as long-term capital gain or loss if you
have held the shares for more than 12 months and as short-term capital gain or loss if
you have held the stock for 12 months or less. For purposes of determining whether you
will recognize long-term or short-term capital gain or loss on your subsequent sale of
the shares, the holding period will begin at the time you exercise the SAR.

     Restricted Stock Awards

	 	•	 	Grant and Lapse of Restrictions. Section 83(b) of the Internal Revenue Code allows
you to elect, within 30 days after the date you receive a restricted

9

 

	 	 	 	stock award, to
recognize and be taxed on ordinary income equal to the fair market value of the Common
Stock at that time. If you do not make a Section 83(b) election within 30 days from
the date you receive a restricted stock award, you will recognize ordinary income equal
to the fair market value of the Common Stock upon expiration of the restriction period.
	 
	 	•	 	Forfeiture. If you do not make the Section 83(b) election described above and,
before the restriction period expires, you forfeit the restricted stock under the terms
of the award, you will not recognize any ordinary income in connection with the
restricted stock award. If you do make a Section 83(b) election and subsequently
forfeit the restricted stock under the terms of the award, you will not be allowed an
ordinary income tax deduction with respect to the forfeiture. However, you may be
entitled to a capital loss.
	 
	 	 	 	We urge you to consult your tax advisor to determine, in light of current tax rates
and possible future tax legislation, whether it is more advantageous for you to make
a Section 83(b) election upon receipt of a restricted stock award (resulting in a
current tax liability plus the potential for future capital gains, currently taxed
at lower rates than the rate applicable to ordinary income, and a risk of forfeiture
without an ordinary income tax deduction) than not making the Section 83(b) election
(resulting in the deferral of tax and the eventual recognition as ordinary income of
any appreciation in the fair market value of your shares).
	 
	 	•	 	Dividends Received on Restricted Stock. Dividends received by you before the end of
the restriction period will be taxed as ordinary income to you.
	 
	 	•	 	Tax Deduction for ADC. Subject to the general rules concerning deductibility of
compensation, we will be allowed an income tax deduction in the amount that, and for
our taxable year in which, you recognize ordinary income in connection with a
restricted stock award. Dividends on the restricted stock that are received by you
before the end of the restriction period will also be deductible by us subject to the
general rules concerning compensation.
	 
	 	•	 	Tax Basis of Shares. Your basis in the shares will equal their fair market value at
the time you recognize ordinary income.
	 
	 	•	 	Sale of Shares. You cannot sell or otherwise dispose of the restricted stock until
after the restriction period expires. When you sell the shares after the restriction
period expires, you will recognize gain or loss in an amount by which the sale price of
the shares differs from your tax basis in the shares. If, as usually is the case, the
shares are a capital asset in your hands, any gain or loss recognized on a sale or
other disposition of the shares will qualify as capital gain or loss.
	 
	 	•	 	Characterization of Capital Gain or Loss. Any capital gain or loss you recognize
upon sale of the shares will be treated as long-term capital gain or loss if you have
held the shares for more than 12 months from the date you
recognized ordinary income with respect to the shares and as short-term capital gain
or loss if you have held the stock for 12 months or less from the date you
recognized ordinary income.

10

 

	 	 	Restricted Stock Units, Performance Awards and Dividend Equivalents (collectively, “deferred
awards”)

	 	•	 	Grant. At the time deferred awards are granted, you will not recognize any taxable
income.
	 
	 	•	 	Vesting. At the time the deferred awards vest, you will recognize ordinary income
equal to the cash or fair market value of the shares of Common Stock received at that
time.
	 
	 	•	 	Dividend Equivalents Received on Deferred Awards. Dividend equivalents received by
you before the deferred awards vest will be taxed as ordinary income to you.
	 
	 	•	 	Tax Deduction for ADC. Subject to the general rules concerning deductibility of
compensation, we will be allowed an income tax deduction in the amount that, and for
our taxable year in which, you recognize ordinary income upon the vesting of the
deferred awards.
	 
	 	•	 	Tax Basis of Shares. Your basis in any shares received will equal the fair market
value of the shares at the time you recognize ordinary income as a result of the
vesting of the deferred awards.
	 
	 	•	 	Sale of Shares. If, as usually is the case, the Common Stock is a capital asset in
your hands, any additional gain or loss recognized on a subsequent sale or exchange of
the shares will not be ordinary income but will qualify as capital gain or loss.
	 
	 	•	 	Characterization of Capital Gain or Loss. Any capital gain or loss you recognize
upon sale of the shares will be treated as long-term capital gain or loss if you have
held the shares for more than 12 months from the date the deferred awards vested and as
short-term capital gain or loss if you have held the shares for 12 months or less from
the date the deferred awards vested.

Special Rules for Executive Officers and Directors Subject to Section 16(b) 

     If you are an executive officer or director of ADC subject to Section 16(b) of the Exchange
Act, any shares you acquire upon exercise or payout of a non-qualified option, an incentive stock
option (for purposes of the AMT only), a SAR or a deferred award, and any shares of restricted
stock that vest, may be treated as restricted property for purposes of Section 83 of the Internal
Revenue Code if you have had a non-exempt acquisition of shares of ADC stock within the six months
prior to the exercise, payout or vesting. In that case, you may be deemed to have acquired the
shares at a date up to six months after the date the award was exercised or paid out or vested, and
you will recognize (and be taxed on) ordinary income as of the later date, rather than as of the
date of exercise, payout or vesting.

     However, Section 83(b) of the Internal Revenue Code allows you to elect to recognize ordinary
income as of the date of exercise, payout or vesting, without regard to Section 16(b) restrictions.
You must make the election in the manner specified in Section 83(b) within 30 days after the date
you exercise the option or SAR or the date of payout or vesting, as applicable. If (1) the shares
you acquired upon the exercise, payout

11

 

or vesting of the award are treated as restricted property
for purposes of Section 83 of the Internal Revenue Code because of the application of Section 16(b)
of the Exchange Act and (2) you do not make a Section 83(b) election within the required time
period, the amount of ordinary income to you will be determined as follows:

	 	•	 	For non-qualified options (and incentive stock options treated as non-qualified
options for purposes of the AMT), you will recognize and be taxed on ordinary income in
the amount by which the fair market value of the shares at the later date exceeds the
exercise price, rather than recognizing, and being taxed on, ordinary income in the
amount by which the fair market value of the shares on the exercise date exceeds the
exercise price.
	 
	 	•	 	For a SAR, you will recognize and be taxed on ordinary income in the amount of the
fair market value of the shares of common stock at the later date, rather than
recognizing, and being taxed on, ordinary income in the amount of the fair market value
of the shares as of the date you exercised the SAR.
	 
	 	•	 	For a deferred award, you will recognize and be taxed on ordinary income in the
amount of the fair market value of the shares of Common Stock at the later date, rather
than recognizing, and being taxed on, ordinary income in the amount of the fair market
value of the shares on the date the award matured.
	 
	 	•	 	For restricted stock, you will recognize and be taxed on ordinary income in the
amount of the fair market value of the shares of common stock at the later date, rather
than recognizing, and being taxed on, ordinary income in the amount of the fair market
value of the shares on the date the restricted stock vested.

     We urge you to consult your own tax advisor for more details about these special rules and to
help you determine if you should make a Section 83(b) election.

Change in Control

     Depending on the terms of your award agreement and the determinations of the committee, upon a
change in control of ADC, restrictions on your award may lapse, or your award may mature or become
exercisable on an accelerated scheduled. If this type of benefit, or other benefits and payments
connected with your award that result from a change in control of ADC, are granted to certain
individuals (such as our executive officers), the benefits and payments may be deemed to be
“parachute payments” within the meaning of Section 280G of the Internal Revenue Code. Section 280G
provides that if parachute payments to an individual equal or exceed three times the individual’s
“base amount,” the excess of the parachute payments over one times the base amount (1) will not be
deductible by us and (2) will be subject to a 20% excise tax payable by the individual. “Base
amount” is the individual’s average annual compensation over the five taxable years preceding the
taxable year in which the change in control occurs. We urge you to consult your own tax advisor
regarding your tax liability upon a change in control of ADC.

12exv10wxdy

 

Exhibit 10-d

Publish Date:  01 November 2006

Destroy Date: 31 December 2007

ADC

Management Incentive Plan Document

Fiscal Year 2007

 

 

MANAGEMENT INCENTIVE PLAN DOCUMENT

Fiscal Year 2007

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, 2006 through October 31, 2007.

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 2007 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. 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, 2007.

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 FY07 corporate success are Pro Forma Operating Income, Free Cash Flow, and Net Sales. The
key factors in ADC’s FY07 Global Connectivity Solutions success are Pro Forma Operating Income,
adjusted Inventory Turns, and Net Sales. For the Wireline and Wireless Business Units, the key
factors for FY07 are Pro Forma Operating Income, Inventory Turns, and Net Sales. For APS U.S., the
key factors for FY07 are Pro Forma Operating Income including Product Pull Through, Contribution
Margin without Product Pull Through, Days Sales Outstanding, and Net Sales including Product Pull
Through. For APS Germany, the key factors for FY07 are Pro Forma Operating Income without Product
Pull Through, Cash Conversion Cycle, and Net Sales including Product Pull Through. Goals are set
at the ADC and Business Unit levels including regional goals for GCS. Accounting methodology
changes may dictate corresponding goal modifications during the plan year.

Page 2

 

Following is a description of the plan components:

	 	 	 
	Plan Goal	 	Definition
	Pro Forma Operating 

Income

	 	Net Sales less all relevant expenses incurred to produce the products or deliver
services. Expenses include direct material and labor costs as well as regional and
Business Unit costs, including engineering, sales & marketing expenses, and
corporate overhead costs. Pro Forma Operating Income does not include interest
income, interest expense, income tax or other non-operating income. It also
excludes restructuring and other one-time expenses that are not reflective of the
ongoing business.
	 
	 	 
	 

	 	Beginning in FY07, corporate overhead costs not directly attributable to the
Business Unit will be assessed as a shared service charge set at a fixed percentage
of Revenue. ADC-level Pro Forma Operating Income will reflect absorption of ALL
corporate expenses including variances above or below the level of the shared
service charge.
	 
	 	 
	Net Sales / Revenue

	 	The amount ADC can recognize in accordance with Generally Accepted Accounting
Principles (GAAP) for goods shipped or services provided to third party customers,
net of returns received and discounts.
	 
	 	 
	Free Cash Flow

	 	ADC cash from operations (including restructuring charges) less capital expenditures.
	 
	 	 
	Cash Conversion 

Cycle (Days)

	 	Represents the average number of days between ADC cash payments for products,
services, labor, and operating expenses, and ADC cash receipts from customers: days
of receivables plus days of inventory supply less days payables. 

Above metrics are based upon monthly average balances of inventory, receivables, and
	 
	 	 
	 

	 	payables relative to 3rd party Net Sales and 3rd party cost of
sales.
	 
	 	 
	Inventory Turns*

	 	Represents a measure of how many times per year ADC sells through its inventory
balance: 3rd party cost of sales divided by average monthly net
inventory balance.
	 
	 	 
	Days Sales 

Outstanding

	 	A measure of the amount of uncollected 3rd party obligations to ADC
(Accounts Receivable) relative to average daily sales. The calculation is average
monthly net accounts receivable balance divided by average quarterly 3rd
party Revenues divided by 90. (Also called Days of Receivables)
	 
	 	 
	Product Pull Through

	 	ADC product sales that are sold through ADC Professional Services channels.
	 
	 	 
	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 administrative expenses. It does not take into
account operating expenses deemed regional during the budgeting process, corporate
allocations, 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 Global Connectivity Solutions the measure is Adjusted Inventory Turns: (Inventory Turns x
percent ship-to-request).

Page 3

 

NOTE: For the Business Units, Net Sales, Contribution Margin, and Pro-Forma Operating Income are
measured on Plan foreign exchange rates.

Goal Weightings

Employees serving multiple Business Units have 100% of their incentive plan based on ADC goals and
results. Employees dedicated at least 90% to one Business Unit have a portion of their incentive
based on ADC results and a portion on Business Unit results. The weightings for Business Unit
participation are as follows:

	 	 	 	 	 	 	 	 	 
	 	 	ADC	 	BU or Regional
	Grade	 	Weighting	 	Weighting
	Grade 19+:
	 	 	50	%	 	 	50	%
	Grades 15-18
	 	 	30	%	 	 	70	%

For purposes of this Plan, Wireless, Wireline, APS U.S. and APS Germany will be treated as separate
Business Units. Executives responsible for more than one of these will have two Business Units as
part of their Business Unit incentive component (ratio of 30% Wireless and 20% Wireline; or 30% APS
U.S. and 20% APS Germany). All Business Unit plans will be global, with the exception of GCS,
which will have regional plans. Manufacturing facilities will be subject to the relevant GCS
regional plan. The only Manufacturing exception is China, which will be subject to the Global GCS
plan.

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. No awards will be
made from this pool unless ADC GAAP net income is above zero. The maximum individual performance
award is 50% of the participant’s total target MIP award.

Performance Gates

To ensure protection of shareholder interest, no payment will be provided as the result of any
ADC-wide financial performance factor unless ADC achieves its threshold Pro-Forma Operating Income
for the year. Similarly, no payment will be provided as the result of any Business Unit financial
performance factor unless the Business Unit achieves its threshold Pro-Forma Operating Income.

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 2007 Eligible Base Salary earnings.
	 
	 	2.	 	FY2007 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.

Page 4

 

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 GCS Regional Plan participant with the following facts, where the ADC performance gate has
been met:

	 	 	 	 	 
	 

	 	Target Opportunity:
	 	15% of Eligible Base Salary earnings
	 

	 	FY07 Eligible Base Salary:
	 	70,000 EUR
	 

	 	Business Performance Percentages:
	 	Hypothetical ADC and GCS regional
results shown in the following table

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Metrics	 	Measure Weighting	 	Performance	 	Wtd. Perf.
	ADC Level Metrics
	 	 	 	 	 	 	 	 	 	 	 	 
	Pro Forma Operating Income
	 	 	60	%	 	 	107	%	 	 	64.2	%
	Free Cash Flow
	 	 	20	%	 	 	95	%	 	 	19.0	%
	Net Sales
	 	 	20	%	 	 	102	%	 	 	20.4	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	103.6	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	GCS EMEA Regional Level Metrics
	 	 	 	 	 	 	 	 	 	 	 	 
	Pro Forma Operating Income
	 	 	60	%	 	 	110	%	 	 	66.0	%
	Adjusted Inventory Turns
	 	 	20	%	 	 	95	%	 	 	19.0	%
	Net Sales
	 	 	20	%	 	 	108	%	 	 	21.6	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	106.6	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Overall Weighted Performance
	 	 	 	 	 	 	 	 	 	 	 	 
	ADC Metrics
	 	 	30	%	 	 	103.6	%	 	 	31.1	%
	GCS EMEA Regional Metrics
	 	 	70	%	 	 	106.6	%	 	 	74.6	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	105.7	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Payment Calculation:
	70,000 (Eligible Base Salary)
* 15% (incentive target) * 105.7%
(Business Performance) = 11,099 EUR
	 	 	 	 	 	 	 	 	 	 	 	 

Page 5

 

Effect of Change in Employment Status

Termination of Employment. If employment with ADC is terminated for any reason other than
death, disability or as a result of a reduction in force implemented by the Company, 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. For the purposes of this Plan, if employment with ADC is involuntarily terminated as a
result of the participant’s death or disability or as a result of a reduction in force implemented
by the Company, the employee may be entitled to receive a prorated payment. To be eligible, the
employee must have been employed by the Company for at least 3 full calendar months during FY07 and
involuntarily terminated as described above. In such cases, the prorated payment, if any, will be
subject to the achievement of the applicable Business Performance criteria for the plan year and
would not be adjusted for individual performance. Such prorated payment will be payable following
the end of the fiscal year in accordance with the Company’s Incentive Plan payment practices.

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.

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.

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.

Page 6

 

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’ Base 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.

Page 7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}]]