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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.
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Following is a description of the plan components:
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Plan Goal
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Definition
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Pro Forma Operating
Income
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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.
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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.
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Net Sales / Revenue
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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.
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Free Cash Flow
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ADC cash from operations (including restructuring
charges) less capital expenditures.
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Cash Conversion
Cycle (Days)
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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
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payables relative to 3 rd party Net Sales and 3
rd party cost of
sales.
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Inventory Turns*
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Represents a measure of how many times per year
ADC sells through its inventory balance: 3 rd party cost of sales divided by
average monthly net inventory balance.
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Days Sales
Outstanding
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A measure of the amount of uncollected 3
rd party
obligations to ADC (Accounts Receivable) relative to average daily
sales. The calculation is average monthly net accounts receivable
balance divided by average quarterly 3 rd party Revenues divided by 90.
(Also called Days of Receivables)
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Product Pull Through
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ADC product sales that are sold through ADC
Professional Services channels.
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Business Unit
Contribution Margin
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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.
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*For Global Connectivity Solutions the measure is
Adjusted Inventory Turns: (Inventory Turns x percent
ship-to-request).
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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:
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ADC
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BU or Regional
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Grade
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Weighting
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Weighting
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Grade 19+:
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50
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%
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50
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%
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Grades 15-18
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3
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