Document:

exv10w1

 

Exhibit 10.1

2006 Incentive

Compensation Plan

	 	 	 	 	 	 	 
	Version

	 	 5.0	 	 	 	 
	Effective Date

	 	 January 1, 2006	 	 	 	 
	 

	 	 	 	 

	 	 

 

 

	 	 	 	 	 
	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	 
	 
	 	 	 	 

					
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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.

 

					
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     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.

 

					
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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.

 

					
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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.
	 
	 	 

					
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	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.

 

					
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          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.

 

					
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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	%

					
	 
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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
	 
	 	 	 

					
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Exhibit 10.2

AMENDMENT ONE

EMPLOYMENT AGREEMENT

          THIS AMENDMENT ONE TO THE EMPLOYMENT AGREEMENT (“Amendment One”), is entered into and
effective as of February 9, 2006 (the “Effective Date”), by and between VALOR
COMMUNICATIONS GROUP, INC., a Delaware corporation (the “Company”), and John J. Mueller
(the “Employee”).

W I T N E S S E T H:

     WHEREAS, the Company and the Employee entered into a Employment Agreement dated February 14,
2005; and,

     WHEREAS, on December 8, 2005, the Company, Alltel Corporation and Alltel Holding Corp. entered
into an Agreement and Plan of Merger (“Transaction”); and,

          WHEREAS, the Company and the Employee desire to amend certain provisions of the Employment
Agreement in anticipation of the closing of the Transaction.

     NOW, THEREFORE, for and in consideration of the premises hereof and the mutual covenants
contained herein, the Company and the Employee hereby covenant and agree to amend the Employment
Agreement as follows:

     1. Amend section 4.2(b)(iii) to delete “on January 1, 2007,” and replace it with “upon the
earlier of the close of the Transaction or January 1, 2007”.

     2. Amend sections 7.2(a)(i) and 7.2(a)(ii)(x) to delete “eighteen (18)” and replace
it with “twenty-four (24)”.

     3. Amend section 7.2(a)(i) to delete “plus an Annual Bonus equal to 100% of the Employee’s
Target Bonus provided for in Section 4.2(a) with respect to the fiscal year in which such
termination occurs (such Annual Bonus to be payable within thirty days after the close of such
fiscal year),” and replace it with the following:

plus an amount equal to two-times the Employee’s Target Bonus provided for in
Section 4.2(a) with respect to the fiscal year in which such termination occurs,
less any pro-rata 2006 Annual Bonus payment received upon close of the
Transaction. Such amount is payable in a lump sum upon termination of employment
and close of the Transaction.

 

 

     4. All other terms and conditions of the Employment Agreement shall remain in full force and
effect.

          IN WITNESS WHEREOF, the Company and the Employee have duly executed and delivered this
Amendment One to the Employment Agreement as of the day and year first above written.

	 	 	 	 	 
	 	 	VALOR COMMUNICATIONS GROUP, INC.
	 
	 	 	 	 
	 

	 	By:	 	/s/ William M. Ojile, Jr.
	 

	 	 	 	 
	 	 	Name: William M. Ojile, Jr.
	 	 	Title: Senior Vice President, Chief Legal
	 	 	Officer & Secretary
	 
	 
	 	/s/ John J. Mueller
	 	 	 
	 	 	Employee

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