2006 Incentive Compensation Plan

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)

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