EXHIBIT 10.21

 

HICKORYTECH CORPORATION

EXECUTIVE INCENTIVE PLAN

(Amended & Restated as of January 1, 2009)

 

Section I. Establishment and Purpose

 

A.                                   Establishment

 

HickoryTech Corporation, a Minnesota corporation (the “Company”), has
established, effective January 1, 1989, the HICKORYTECH EXECUTIVE INCENTIVE
PLAN, which has since been amended (the “Plan”).

 

B.                                     Purpose

 

The purpose of this Plan is to provide a means whereby key executives of the
Company may be rewarded according to their impact on, and contribution to, the
operating success of the Company and its component organizations.  It is also
the purpose of this Plan to motivate such executives to achieve a continuing,
high level of personal effectiveness.

 

Section II. Definitions, Gender and Number

 

A.                                   Definitions

 

As used in this Plan, the following terms are defined as indicated unless the
context clearly requires a different meaning:

 

1.               “Adjusted Cash Flow” means EBITDA less CAPEX, debt principal
repayment required by the Company’s debt agreements, interest and taxes.  Taxes
are the actual cash payment of taxes versus the GAAP/book accrual concept.

 

2.               “Annual Award” means the total annual cash award earned under
the provisions of this Plan.

 

3.               “Board of Directors” or “Board” means the Board of Directors of
the Company.

 

4.               “Chair” means the Chair of the Board of the Company.

 

5.               “Committee” or “Compensation Committee” means a committee
appointed by and responsible to the Board to administer this Plan, among other
things, and whose  members shall be ineligible to participate in this Plan.

 

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6.               “Company” means Hickory Tech Corporation, a Minnesota
corporation and any successor thereto, including all Subsidiaries.

 

7.               “EBITDA” means earnings before interest expense, income taxes,
depreciation, and amortization, and it includes employee Team Award expense.

 

8.               “EBITDA Minus CAPEX” means EBITDA minus the capital and
expenditures for   property, plant and equipment, and capitalized software and
any other capitalized expenditures approved by the Compensation Committee to be
included in this definition.

 

9.               “Net Income” means after-tax net income as defined by Generally
Accepted Accounting Principles.

 

10.         “Participant” means an executive of the Company who has been
selected to participate in the Plan.

 

11.         “Performance Account” means an account maintained in the name of a
Participant with credits in Company stock.

 

12.         “Plan” means the HickoryTech Executive Incentive Plan, as stated
herein and as further amended from time to time.

 

13.         “Plan Year” means any fiscal year of the Company for which the Plan
is in effect.

 

14.         “Retirement” means termination for any reason (other than death or
permanent and total disability) after attaining age 55 with ten years of service
or after attaining age 62 irrespective of service.

 

15.         “Return on Invested Capital” means earnings before interest and
taxes divided by total capital (debt and equity).

 

16.         “Revenue” means operating revenues, and excludes other income from
such sources as interest and dividends.  For purposes of this plan, the
intercompany transactions between or among its Subsidiaries are considered to be
at an arms length (i.e., at fair market value), and thus are not eliminated.

 

17.         “Subsidiary” means a corporation, the majority of whose stock is
owned by the Company.

 

18.         “Trustee” means Trustee for the Trust under the HickoryTech
Corporation Executive Plan.  This Trust holds shares of Company Stock for the
eligible Participants’ Performance Award Accounts.

 

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B.                                     Gender and Number

 

Except when otherwise indicated by the context, any masculine terminology when
used in the Plan shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.

 

Section III. Summary of Plan

 

A.                                   Annual Award Opportunity

 

Each fiscal year, an award opportunity will be established for each Plan
Participant, expressed as a percent of the Participant’s fiscal-year base salary
earnings.  (See Attachment A)

 

B.                                     Performance Goals

 

Performance goals, by which Participant’s performance will be measured for Plan
purposes, will be established at the beginning of the fiscal year.  Such goals
will relate to Company, Subsidiary or division organizational performance.

 

C.                                     Award Determination

 

At fiscal year-end the organizational performance will be evaluated, and a
percentage achievement will be determined.  An incentive award, called an Annual
Award, will be determined, such being the total of the awards earned.

 

D.                                    Disposition of Awards

 

Annual Awards will be paid in cash as soon as is practicable following the end
of the fiscal year but no later than March 15 of the following calendar year.

 

E.                                      Shareholder Protection

 

It is the policy of the Company to establish fiscal goals under this Plan which
will provide, first, for the protection of the shareholders.  Accordingly, no
awards will be paid which, by their payment, would cause the Company to
experience Adjusted Cash Flow of less than 50% of HickoryTech’s budgeted
Adjusted Cash Flow for the fiscal year.

 

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SECTION IV. ELIGIBILITY

 

A.                                   Eligibility

 

Executives who, by virtue of their position, exert a significant impact on
Company performance are eligible to participate in this Plan.  Participation is
at the recommendation of the President/CEO, with the approval of the Board of
Directors.

 

SECTION V. ANNUAL PLAN

 

A.                                   Basis of Awards Earned

 

Awards earned under this Plan are earned on a fiscal-year basis.

 

B.                                     Annual Award Opportunity

 

An annual target award opportunity will be assigned to each Participant,
expressed as a percent of fiscal year base salary earnings.  This will establish
the dollar award target for the executive, as follows:

 

 

 

Base

 

Target

 

Target

 

Position

 

Salary

 

Award%

 

Award

 

Executive A

 

$

140,000

 

40

%

$

56,000

 

Executive B

 

$

90,000

 

30

%

$

27,000

 

Executive C

 

$

60,000

 

25

%

$

15,000

 

 

C.                                     Annual Award Make-up

 

1.               Annual Award make-up will reflect the impact of the
Participant’s position and performance on the operating results of the Company. 
As such, award make-up may vary among positions.

 

Example

 

 

 

Percent of Award Relating to Organizational Performance

 

 

 

Corporate

 

Subsidiary or Division

 

Position

 

Financial Results

 

Financial Results

 

Executive A

 

100%

 

—

 

Executive B

 

25%

 

75%

 

Executive C

 

45%

 

55%

 

 

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2.                                       Each award segment will be determined
separately, and the resulting awards will be aggregated into a total award.

 

3.                                       Organizational performance will reflect
equally on Participant awards.

 

D.                                    Organizational Goals

 

1.               Organizational goals will be established in the areas of
financial achievement or operational achievement.  These areas will be weighted
and the weightings will be reviewed annually and may be adjusted at the time of
review.

 

2.               Goals will be established prior to the start of the fiscal year
for purposes of the Plan and approved by the Board of Directors.  Such goals
will relate to, but may not necessarily be, the Company’s annual operating
budget goals.

 

E.                                      Award Calculations

 

1.             Organizational Awards

 

a.                                       Organizational performance will be
evaluated in terms of actual versus planned results for each result area.

 

(i)                                     The target award for the results area
will be reduced 3% for each 1% by which actual performance is less than planned
performance.

 

(ii)                                  The target award for each organizational
results area, except for the EBITDA results area, will be increased 3% for each
1% by which actual performance exceeds planned performance.

 

(iii)                               The target award for the EBITDA results area
will be increased 3% for each 1% by which actual performance exceeds planned
performance up to 101%. The target award for the EBITDA results area will be
increased by 10% for each 1% by which actual performance exceeds planned
performance for EBITDA achievement over 101%.

 

(iv)                              No award will be paid for the Net Income
results area unless actual performance is at least 100% of planned performance. 
For other organizational awards, no award will be paid for a results area if
actual performance is less than 85% of planned performance.

 

b.                                      The sum of awards for all results areas
will be payable as the organizational award.

 

c.                                       Award calculations will be interpolated
where actual results are other than even percentages of the planned amount.

 

d.                                      There will be a cap, or maximum, for
award payments as a result of actual performance that exceeds the planned
amount.  This cap shall be 200% payout maximum for each award segment.

 

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                Example:

 

 

 

 

 

(Assume $5,000 target organizational award)

 

 

 

Net
Income

 

Revenue

 

EBITDA

 

Return on
Invested
Capital

 

 

 

 

 

(20%)

 

(30%)

 

(25%)

 

(25%)

 

Total Award

 

Target Award

 

$

1,000

 

$

1,500

 

$

1,250

 

$

1,250

 

 

 

Actual % of Plan

 

98

%

250

%

110.7

%

95

%

 

 

Adjustment to Target

 

 

 

200

%

200

%

85

%

 

 

Award

 

$

0

 

$

3,000

 

$

2,500

 

$

1,062.50

 

$

6,562.50

 

 

 

 

 

 

 

 

 

 

 

(131

%)

 

e.                                       A review of the award payouts will be
made by the Compensation Committee.  In the event that a one-time occurrence
affects the year-end organization’s performance, the Compensation Committee may
review and adjust award payouts, if determined appropriate.

 

F.                                      Total Award

 

Organizational awards are combined into a total annual award.  (See Attachment
A)

 

Example:

 

 

 

Executive A

 

Executive B

 

Executive C

 

Organization Award I

 

$

45,000

 

—

 

$

2,500

 

 

 

 

 

 

 

 

 

Organization Award II

 

—

 

19,500

 

5,000

 

 

 

 

 

 

 

 

 

Total Award

 

$

45,000

 

$

19,500

 

$

7,500

 

 

G.                                     Payment of Awards

 

1.               Board Approval

 

Awards earned under this Plan are payable only with the approval of the Board of
Directors.  In the event of a Change of Control, as defined in the Participant’s
Change of Control Agreement, and to the extent provided in Section VI (G),
awards will be payable without the Board of Directors’ approval required.

 

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2.               Time and Manner of Payment

 

Annual Awards will be payable with respect to each fiscal year within thirty
(30) days following completion of the final audited financial report for the
year, no later than March 15 of the following calendar year.  Awards will be
paid in cash, subject  to all required withholdings such as state and federal
taxes.

 

SECTION VI. LONG-TERM PERFORMANCE ACCOUNT

 

A.                                   Performance Account

 

The Performance Account holds shares of company stock that were previously
issued under this Plan.  No additional awards will be granted to this account
after the 2002 fiscal year awards, but shares in the account will continue to
receive interest at a value equal to the dividend as described in VI (B).

 

B.                                     Valuation of Performance Account

 

In lieu of dividends on Shares held in a Participant’s Performance Account, the
Company shall issue, pursuant to its 1993 Stock Award Plan, additional Shares
having a Fair Market Value as of the applicable dividend record date as would
otherwise be paid on the Shares in the Participant’s Performance Account on that
date.

 

C.                                     Vesting

 

                All shares in the Performance Account are fully vested.

 

D.                                    Effect of a Participant’s Death,
Retirement, or Disability

 

1.               A deceased Participant’s Performance Account shall be
distributed beginning no later than March 15 of the following calendar year,
according to the provisions in Section VI (F), to the Participant’s designated
beneficiary. A Participant may, by written notice to the Company in the form of
Attachment B, designate a beneficiary to receive any payments made after his
death.  The Participant may select as his beneficiary any person or entity,
including a trust.  The Participant may designate multiple, successive or
contingent beneficiaries and may change his designation at any time.  If a
Participant dies without having any valid beneficiary designation in effect, his
estate shall be the beneficiary.

 

2.               The Performance Account value for a Participant who terminates
employment by reason of Retirement or who becomes permanently and totally
disabled, shall be distributed beginning no later than March 15 of the calendar
year following such termination or disability, according to the provisions of
Section VI (F).

 

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E.                                      Effect of Other Termination of
Employment

 

1.               If a Participant’s employment with the Company is terminated
for any reason other than his death, retirement, or permanent and total
disability, such Participant’s participation in the Plan immediately ceases, and
any applicable Performance Award shall be distributed beginning no later than 90
days following such termination of employment, according to the provisions of
Section VI (F).

 

2.               If a Participant becomes ineligible for the Plan based on a
change of position within the Company where the new position is not eligible for
participation in the Plan, any applicable Participant’s Performance Account
value shall be distributed commencing no later than March 15 of the calendar
year following such change.

 

F.                                      Method of Payment and Value of
Performance Account

 

1.               A Performance Account will be distributed in three,
approximately equal annual installments, commencing as specified in Section VI
(D) or (E) above.

 

2.               The Performance Account will be paid out in shares of company
stock following the Participant’s termination of employment with the company.

 

G.                                     Payment in the Event of a Change of
Control of the Company

 

1.               If a Change of Control in the Company occurs, as defined in a
Participant’s Change of Control Agreement, the target Annual Award for the
calendar year in which the Change of Control occurs will become immediately
payable. The full target Annual Award will be automatically and immediately
payable to the Participant.

 

2.               If a payment becomes due to a Participant under a Change of
Control Agreement, the Annual Award would become immediately payable at the
target annual award amount. The full target Annual Award will be automatically
and immediately payable to the Participant.

 

3.               If a payment shall become due to the Participant under a Change
of Control Agreement, all applicable Performance Awards shall immediately become
distributable to the Participant.  Performance Awards will be paid to the
Participant within thirty (30) days after the date of the Participant’s payment
being due under a Change of Control Agreement and will be subject to all normal
withholding of state and federal taxes.

 

4.               The provisions of this Section VI (G), shall take precedence
over all other provisions of this Plan.

 

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H.                                    Withholding

 

All payments and distributions shall be subject to applicable withholding
requirements.

 

Section VII. Administration of the Plan

 

A.                                   Authority of Board of Directors

 

This Plan will be administered by the Compensation Committee of the Board of
Directors, appointed by and accountable to the Board and whose members are not
eligible for awards under the Plan.  The Committee may establish rules and
regulations from time to time that are not inconsistent with the provisions of
this Plan.

 

B.                                     Authority of the Chair

 

The Chair and/or his appointee shall be responsible to the Committee for the
administration of this Plan.

 

C.                                     Amendment and Termination

 

The Board of Directors may amend this Plan in any respect at any time and may
terminate the Plan in whole or in part at any time, subject to the following:

 

                                               
1.                                       Fiscal-year performance goals may not
be altered, amended, suspended or discontinued during any Plan Year with respect
to that Plan Year without the approval of the Compensation Committee.

 

                                               
2.                                       Amendment or termination may not
adversely affect the value of any earned Annual Awards.

 

D.                                    Denial of Annual Performance Awards

 

Any Participant who voluntarily terminates employment except as provided in
paragraph (E) below, or who is involuntarily discharged for any reason
whatsoever prior to the last day of a Plan Year, with the exception of a Change
of Control of the Company, will not be entitled to an award for that Plan Year
unless such exception is approved by the Committee.  In the event of a Change of
Control in the Company, Section VI (G) will apply.

 

E.                                      Pro-Rata Awards

 

A Participant whose employment is terminated prior to the last day of a Plan
Year by reason of death, Retirement, or permanent and total disability, shall be
entitled to a pro-rata Annual Award through the date of such termination of a
Participant’s employment.

 

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F.                                      Status of Participants’ Claims

 

All distributions under this Plan are made from the general assets of the
Company or the funds held by the Trustee, as applicable.  The Plan does not
create any lien on or security interest in any property of the Company, and no
person may assert any rights under the Plan superior to the rights of an
unsecured general creditor of the Company.

 

G.                                     Nonalienability

 

Rights under this Plan are not subject to voluntary or involuntary assignment or
alienation. Any attempted assignment or alienation will be disregarded by the
Company.

 

H.                                    Severability

 

If any provision of this Plan is determined to be invalid or illegal, the
remaining provisions shall be effective and shall be interpreted as if the
invalid or illegal provision did not exist, unless the continuance of the Plan
in such circumstances would defeat its purposes.

 

I.                                         Employment Rights

 

Nothing in the Plan shall confer upon any Participant the right to continue in
the employment of the Company or any subsidiary or affect any right which the
Company or any subsidiary may have to terminate the employment of the
Participant with or without cause.

 

J.                                        Headings

 

All headings in this Plan are for reference only and are not to be utilized to
construe its terms.

 

K.                                    Governing Law

 

This Plan is governed in all respects by the laws of the State of Minnesota.

 

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Attachment A

 

HICKORYTECH CORPORATION

ANNUAL AWARD CALCULATION

WORKSHEET EXAMPLE

 

Name:

 

Plan Year:

 

 

 

 

Position Title:

 

 

 

 

1. Fiscal Base Salary Earnings:

 

$

 

 

 

 

 

 

 

2. Target Incentive:

 

%

$

 

 

 

--------------------------------------------------------------------------------

 

3.  Organizational Award I:

 

 

a.

Target Amount (           % of Line 2)

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

b.

Performance Adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

ROIC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

Target

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

% of Plan

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

Factor

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c.

Award

$

 

+

$

 

 

= $

 

 

 

 

 

 

 

 

 

 

 

 

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4.  Organizational Award II:

 

 

a.

Target Amount (           % of Line 2)

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

b.

Performance Adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Division EBITDA

 

Division Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

Target

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

% of Plan

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

Factor

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c.

Award

$

 

+

$

 

 

= $

 

 

 

 

 

 

 

 

 

 

 

 

 

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Total Annual Award (3c + 4c)

 

 

 

 

 

 

 

 

$

 

 

 

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Attachment B

 

HICKORYTECH CORPORATION

 

Executive Incentive Plan

 

DESIGNATION OF BENEFICIARY

 

Participant’s Name:

 

Social Security Number:

 

 

 

 

Home Address:

 

 

If I die prior to the payment of all or a portion of any amount payable to me
under the HickoryTech Corporation Executive Incentive Plan, the balance of the
amount payable shall be paid to the following person(s):

 

Instructions:   List each beneficiary who is to share in any payment due under
the plan.  State specifically what percentage of the total amount to be paid is
to be received by each beneficiary.  Use first, middle and last names (such as
Mary Alice Jones not Mrs. William Jones).

 

 

Primary

 

 

 

 

 

 

 

 

Beneficiary(s) Name

 

Beneficiary (s)

 

Beneficiary (s)

 

Relationship

 

Percent

 

 

Social Security #

 

Address

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.

 

 

 

 

 

 

 

 

 

 

 

 

Contingent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.

 

 

 

 

 

 

 

 

 

 

In the event that all of the above-named beneficiaries shall predecease me, or
if there is doubt as to the right of any beneficiary, HickoryTech Corporation
shall make payments, which would otherwise have been made to such beneficiary,
to my estate, and in such event HickoryTech Corporation shall not be under any
further liability.

 

This beneficiary designation cancels and supersedes any previous designation
that I may have with respect to this Plan.  The designation is effective as of
the date this form is signed by me.  I have the right to change this beneficiary
designation at any time by filing a new beneficiary designation form with the
Company.

 

 

 

 

 

Participant’s Signature

 

Date

 

 

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