**Exhibit 10.16**

 

**CHANGE OF CONTROL AGREEMENT**

 

This Change of Control Agreement (this “Agreement”) isentered into as of the 29th day of November, 2007, by and betweenHickoryTech Corporation, a Minnesota corporation (the “Company”), and John P.Morton (the “Executive”).

 

**WITNESSETH:**

 

WHEREAS, the Executive will devote substantial skilland effort to the affairs of the Company, and the Board of Directors of theCompany desires to recognize the significant personal contribution that theExecutive will make to further the best interests of the Company; and

 

WHEREAS, it is desirable and in the best interests ofthe Company and its stockholders to continue to obtain the benefits of theExecutive’s services and attention to the affairs of the Company, and

 

WHEREAS, it is desirable and in the best interests ofthe Company and its stockholders to provide inducement for the Executive (1) toremain in the service of the Company in order to facilitate an orderlytransition in the event of a change in control of the Company and (2) toremain in the service of the Company in the event of any threatened oranticipated change in control of the Company; and

 

WHEREAS, it is desirable and in the best interests ofthe Company and its stockholders that the Executive be in a position to makejudgments and take actions with respect to a proposed change in control of theCompany without regard to the possibility that his or her employment may beterminated without compensation in the event of certain changes in control ofthe Company; and

 

WHEREAS, the Executive desires to be protected in theevent of certain changes in control of the Company; and

 

WHEREAS, for the reasons set forth above, the Companyand the Executive desire to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the facts recitedabove and the mutual covenants and agreements contained herein, the Company andthe Executive agree as follows:

 

1.             Rightto Payment. If the Executive’s employment with the Company or its Successoris terminated within three (3) years following an Event (as defined inParagraph 2 below) for any reason other than a reason specified in Paragraph 3 (a) through(d) below, then the Executive shall be entitled to receive the Benefitsset out in Paragraph 4 below. If a subsequent Event occurs, and if theExecutive is an employee of the Company or its Successor, without limiting anyrights the Executive may have, Executive shall have all rights provided by thefirst sentence of this Paragraph 1 relating to such subsequent event.

 

2.             Change of ControlEvents.  An “Event” shall be deemedto have occurred if:

 

(a)           A majority of thedirectors of the Company shall be persons other than persons

 

(1)           for whose electionproxies shall have been solicited by the Board of Directors of the Company; or

 

(2)           who are then serving asdirectors and who were initially appointed or elected by the Board of Directorsto fill vacancies on the Board of Directors caused by death or resignation (butnot by removal), or to fill newly created directorships created by the Board ofDirectors;

 

provided, however, that aperson shall not be deemed to be a director subject to clause (1) or (2),above, if his or her initial assumption of office occurs as a result of anactual or threatened election contest with respect to the threatened electionor removal of directors (or other actual or threatened solicitation of proxiesor consents) by or on behalf of any person other than the Board of Directors ofthe Company; or

 

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(b)           30% or more of theoutstanding voting stock of the Company or all or substantially all of theassets or stock of the Company is acquired or beneficially owned (as defined inRule 13d-3 under the Securities and Exchange Act of 1934, as amended, orany successor rule thereto), directly or indirectly, by any Person (otherthan by the Company, a subsidiary of the Company, an employee benefit plan (orrelated trust) sponsored or maintained by the Company or one or more of itssubsidiaries, or by the Employee or a group of persons, including the Employee,acting in concert) or group of Persons, acting in concert, whether byacquisition of assets, merger, consolidation, statutory share exchange (otherthan a merger, consolidation or statutory share exchange described in clause(c)(i) or (ii), below), tender offer, exchange offer, or otherwise;

 

(c)           The Company is mergedinto or consolidated with another corporation (other than a subsidiary of theCompany) or a statutory share exchange for the Company’s outstanding votingstock of any class is consummated unless (i) a majority of the votingpower of the voting stock of the surviving corporation is, immediatelyfollowing the merger, consolidation or statutory share exchange, beneficiallyowned, directly or indirectly, by the Employee (or a group of Persons,including the Employee, acting in concert) or (ii) immediately followingthe merger, consolidation or statutory share exchange, more than 70% of thevoting power of the voting stock of the surviving corporation is beneficiallyowned, directly or indirectly, by the persons who beneficially owned votingstock of the Company immediately prior to such merger, consolidation orstatutory share exchange in substantially the same proportion as theirownership of the voting stock of the Company immediately prior to such merger,consolidation or statutory share exchange; or

 

(d)           The shareholders of theCompany approve the complete liquidation or dissolution of the Company.

 

3.             Termination NotEntitling Executive to Benefits. The Executive shall not be entitled to theBenefits set out in Paragraph 4 if his or her employment is terminated duringthe three (3) year period following an Event for any of the followingreasons:

 

(a)           Death. TheExecutive’s death.

 

(b)           Disability. TheExecutive’s disability. “Disability” shall mean the inability of the Executiveto perform the duties and responsibilities of his or her employment by reasonsof illness or other physical or mental impairment or condition, if suchinability continues for an uninterrupted period of ninety (90) calendar days ormore. A period of inability shall be “uninterrupted” unless and until theExecutive is no longer considered disabled by the Company’s Long TermDisability Insurer.

 

(1)           The determination ofwhether the Executive is suffering from a “disability” as defined herein shallbe made. The determination of whether the Executive is disabled shall be on thesame basis as the Company provided Long-Term Disability benefit, which is afully insured benefit provided by an independent third party. If the Executivemeets the disability criteria for long term disability benefits under thisCompany provided benefit, the Executive will also be considered disabled underthis Agreement.

 

(2)           The Executive agrees tomake himself or herself available for and to submit to examinations by suchphysicians as may be requested by the Company or the Company’s Long TermDisability Insurer. The Executive’s failure to submit to examinations by suchphysicians as may be requested shall disqualify Executive from receivingBenefits under this Agreement.

 

(c)           VoluntaryTermination. The Executive’s voluntary retirement or voluntary terminationof employment. However, the Executive’s retirement or termination of employmentshall not be considered voluntary if, following the Event and subject to theprovisions for notification set forth below, one or more of the following hasoccurred without Executive’s express written consent and results in a materialnegative change to Executive:

 

(1)           There has been a failureto provide the Executive with substantially equivalent reportingresponsibilities, titles, offices or positions, or Executive has been removedfrom, or has not been re-elected to, any of such positions, which has theeffect of materially diminishing the Executive’s responsibility or authority;

 

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(2)           There has been afailure to provide the Executive with: (a) the same base salary, or (b) substantiallyequivalent (or greater) total salary opportunity, or (c) employee benefitswhich are, in the aggregate, substantially equivalent to those provided to theExecutive at the time of the Event;

 

(3)           There has been afailure to provide the Executive with substantially equivalent office space oradministrative support; or

 

(4)           Executive has beenrequired to perform his or her services in a location that is more than fifty(50) miles from the Executive’s regularly assigned office location at the timeof the Event, or Executive is required to undertake substantially morejob-related traveling.

 

In the event of anoccurrence of the type enumerated in subparagraphs (1) through (4) above,Executive shall, within ten (10) days following Executive’s actualknowledge of such occurrence, notify the Company in writing of the specificoccurrence which Executive believes would render his/her retirement ortermination not voluntary and, following receipt of such notice, the Companyshall be afforded a period of thirty (30) days within which to remedy suchoccurrence.  In the event that Executivefails to provide such notice or to afford such opportunity to remedy theoccurrence, or in the event the Company does remedy the occurrence withinthirty days, then none of the occurrences specified in subparagraphs (1) through(4) above may be relied upon by Executive to characterize his/herretirement or termination as not voluntary.

 

(d)           Involuntary TerminationFor Cause. The Executive’s involuntary termination “for cause.”  “For cause” shall mean:

 

(1)           A persistent failure bythe Executive to perform the duties and responsibilities of his or her job,which failure is willful and deliberate on the Executive’s part and is notremedied within a reasonable period of time after the Executive’s receipt ofwritten notice from the Company or its Successor specifying the act or omissionconstituting such failure;

 

(2)           A criminal act or actsundertaken by the Executive and intended to result in substantial gain orpersonal enrichment of the Executive at the expense of the Company or itsSuccessor;

 

(3)           Unlawful conduct orgross misconduct that is willful and deliberate on the Executive’s part andthat, in either event, is materially injurious to the Company or its Successor;or

 

(4)           The conviction of theExecutive of a felony.

 

(e)           Subsequent Occurrences.If the Executive’s employment is terminated under circumstances in whichExecutive would be entitled to Benefits as defined in Paragraph 4, andthereafter there is an occurrence that would have justified the termination ofthe Executive’s employment with no entitlement to Benefits (such as theExecutive’s death, disability, voluntary termination, or involuntarytermination for cause [all as defined above in this Paragraph]), thatsubsequent occurrence shall not disqualify the Executive (or the Executive’slegal representative) from receiving or continuing to receive the Benefitsprovided under this Agreement. If the Executive’s employment is terminatedunder circumstances in which the Executive would be entitled to Benefits asdefined in Paragraph 4, and thereafter the executive is re-employed by theCompany, the Executive would be entitled to continue to receive paymentsprovided under this Agreement.

 

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4.             Benefits. Ifthe Executive’s employment is terminated under circumstances entitling theExecutive to Benefits, the Executive shall receive the following:

 

(a)           Lump Sum Payment.The Executive shall be entitled to a lump sum cash payment in the amount of OneMonth’s Salary times 24. One Month’s Salary shall be determined by taking theExecutive’s highest annual compensation for a calendar year (including basesalary, the HickoryTech Executive Incentive Plan bonuses paid in that calendaryear, stock grants under the Long Term Executive Incentive Program and anyother incentive payments with the exception of stock options) during thefive-year period prior to the Executive’s termination and dividing that amountby twelve (12). For executives who have not yet been eligible to receive apayment under the HickoryTech Executive Incentive Plan, or who have only beeneligible for one bonus payment under the HickoryTech Executive Incentive Plandue to their time in the position or with the Company, One Month’s Salary willbe determined by taking one month of current base salary and adding it to thegreater of:

 

(1)           the bonus percentagefor which the Executive is eligible, calculated at the target payout asindicated in the Hickory Tech Executive Incentive Plan, divided by twelve (12);or

 

(2)           the actual bonus paymentreceived, or calculated at the close of the fiscal year but not 

yet received due totiming of the payout as indicated in the HickoryTech Executive Incentive Plan,divided by twelve (12).

 

This lump sum paymentshall be made by the Company or its Successor at the time of the Executive’stermination of employment, and shall be subject to withholding of all taxes andother amounts required by law to be withheld or paid to others.

 

(b)           Section 280GParachute Tax. In the event it shall be determined that any payment ordistribution by the Company or other amount with respect to the Company to orfor the benefit of the Executive, whether paid or payable or distributed ordistributable pursuant to the terms of this Agreement or otherwise, (a “Payment”)is (or will be) subject to the excise tax imposed by Section 280G of theInternal Revenue Code or any interest or penalties are (or will be) incurred bythe Executive with respect to the excise tax imposed by Section 280G ofthe Internal Revenue Code with respect to the Company (the excise tax, togetherwith any interest and penalties, are hereinafter collectively referred to asthe “Excise Tax”), and if a reduction in the Payment sufficient to avoid theExcise Tax would result in an increase in the total amount of Payment net ofall applicable taxes, then, and only then, the Payment shall be reduced to theamount that, when combined with all other payments and transfers of propertyrequired to be taken into account under Section 280G of the InternalRevenue Code, is $1 less than the smallest sum that would subject the Executiveto the Excise Tax.

 

 (c)          Continued Insurance Coverage. The Executiveshall be entitled to continuation of his or her Company-provided insurancecoverage (health, life, dental, accidental death and dismemberment, and anyother applicable insured health and welfare benefit programs, excluding shortand long-term disability) for two years after the Executive’s employmenttermination, at the same levels and coverage and on the same terms and conditionsas if the Executive were still an active employee of the Company or itsSuccessor throughout such period, including the right (if provided to activeemployees) to elect spousal or family coverage. In the event that theparticipation of the Executive in any such insurance plan or program is barred,the Company or its Successor, at its sole cost and expense, shall arrange toprovide the Executive with benefits substantially similar to those which theExecutive would otherwise be entitled to receive under such plans and programs.Notwithstanding the foregoing, however, the Company or its Successor shall notbe required to provide any continuation coverage under this subparagraph 4(d) tothe extent that such coverage is duplicative of any coverage the Executive isreceiving under any other policy provided at the expense of the Company.

 

(d)           Continuation of anyother benefits or perquisites being received by the Executive at the time ofthe Executive’s employment termination will be negotiated with the Company orits Successor.

 

5.             Benefits Offset ByOther Severance Payments. The lump sum payment provided in subparagraph 4(a) shallbe in addition to any salary or other remuneration otherwise payable to theExecutive on account of the Executive’s employment by the Company or itsSuccessor. This payment shall be in lieu of any severance payments under anyother agreement resulting from his or her termination of employment with theCompany or its Successor.

 

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6.             No Duty toMitigate. The Executive shall not be required to mitigate the amount of anypayment or other benefit provided for in Paragraph 4 by seeking otheremployment or otherwise, nor (except as specifically provided in subparagraph 4(d) above)shall the amount of any payment or other benefit provided for in Paragraph 4 bereduced by any compensation earned by the Executive as the result of employmentafter the Executive’s employment termination.

 

7.             Definition ofCertain Terms.

 

(a)           Successor. “Successor”means any Person that succeeds to the business of the Company through merger,consolidation, or acquisition, including any Person acquiring all orsubstantially all of the assets or stock of the Company.

 

(b)           Person.  “Person” means an individual, partnership,corporation, estate, trust, or other entity.

 

8.             Successors andAssigns.

(a)           This Agreement shall bebinding upon and inure to the benefit of the legal representatives, successors,and assigns of the parties hereto; provided, however, that the Executive shallnot have any right to assign, pledge, or otherwise dispose of or transfer anyinterest in this Agreement or any payments hereunder, whether directly orindirectly or in whole or in part, without the written consent of the Companyor its Successor.

 

(b)           The Company willrequire any Successor, by agreement in form and substance satisfactory to theExecutive, to assume expressly and agree to perform this Agreement in the samemanner and to the same extent that the Company would be required to perform itif no such succession had taken place.

 

9.             Attorneys’ Fees,Costs and Interest. If the Executive (or the Executive’s legalrepresentative) successfully challenges, in whole or in part, the refusal ofthe Company or its Successor to provide Benefits under this Agreement or toabide by any other provision of this Agreement, then the Company or itsSuccessor shall pay to the Executive (or the Executive’s legal representative):

 

(a)           All legal fees, costs,disbursements, and expenses incurred as a result of the refusal to provideBenefits or to abide by the other provisions of the Agreement; and

 

(b)           Interest on any funds(or on the fair market value of any benefits) that were wrongfully withheld bythe Company or its Successor, calculated by reference to the prime rate as ineffect during the applicable period.

 

10.           Governing Law.This Agreement shall be construed in accordance with the laws of the State ofMinnesota, without giving effect to principles of conflicts of laws.

 

11.           Notices. Allnotices, requests, and demands given to or made pursuant hereto shall be inwriting and be either hand-delivered or mailed to any such party at its addresswhich:

 

(a)           In the case of theCompany shall be:

 

HickoryTech Corporation

221 East Hickory Street

P.O. Box 3248

Mankato, MN  56002-3248

 

(b)           In the case of theExecutive shall be:

 

John P. Morton

6537 Eagle Lake Drive

Maple Grove, MN 55369

 

Either party may, bynotice hereunder, designate a changed address. Any notice, if properlyaddressed and sent prepaid by registered or certified mail shall be deemeddispatched on the registered date or that stamped on the certified mailreceipt, and shall be deemed received within the second business day thereafteror when it is actually received, whichever is sooner. Any notice sent regularmail or hand-delivered shall be deemed received when it is actually received bythe other party.

 

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12.           Severability. Inthe event that any portion of this Agreement may be held to be invalid or unenforceablefor any reason, such invalidity or unenforceability shall not affect the otherportions of this Agreement, and any court of competent jurisdiction may somodify the objectionable provision as to make it valid, reasonable, andenforceable.

 

13.           IncentiveCompensation Plan and Stock Options. In the case of a payment being due asdescribed in Paragraph 1, the Executive’s benefits under the Annual Award ofthe HickoryTech Corporation Executive Incentive Plan shall become immediatelypayable and any outstanding stock options and unvested restricted shares shallbe immediately vested. Any Restricted Stock or Performance Stock Awards underthe Long Term Executive Incentive Program which are payable due to achievementof Performance Objectives through the year in which the payment under thisAgreement becomes due will be paid and fully vested immediately upon theaudited close of the fiscal year financials, but in no case later than March 15of the year following when the payment becomes due under this Agreement. TheLong Term Executive Incentive Program Awards that are not earned based onresults at the close of the fiscal year in which the payment under thisAgreement becomes due will not be payable. Awards issued to the Executive shallimmediately have all restrictions removed.

 

14.           Amendment orTermination of this Agreement.

 

(a)           Prior to theOccurrence of an Event. Prior to the occurrence of an Event, the Company,by resolution of the Compensation Committee of the Board of Directors, has theunilateral power to amend or terminate this Agreement at any time and for anyreason, and may do so without the Executive’s consent. Notwithstanding theforegoing, however:

(1)           No such amendment ortermination of this Agreement shall be effective with respect to the Executiveuntil two weeks following the date that Executive is provided with writtennotice of the change.

(2)           No such amendment ortermination of this Agreement shall be effective with respect to the Executive,unless otherwise agreed by the Executive, if an Event occurs during theone-year period following the date of adoption of the resolution amending orterminating this Agreement.

(b)           After the Occurrenceof an Event. After the occurrence of an Event, the Company, by resolutionof the Compensation Committee of the Board of Directors, may amend or terminatethis Agreement, but no such amendment or termination of this Agreement shall beeffective unless the Executive consents thereto in writing.  Any waiver by an Executive of rights of anybenefits due under this agreement for any reason (rehire or other) must beexpress and in writing.

 

IN WITNESS WHEREOF, the parties hereto have executedthis Agreement as of the date set out above.

 
| EXECUTIVE                 | HICKORYTECH CORPORATION |
|---------------------------|-------------------------|
|                      |                    |
|  /s/ John P.  Morton | By:                     | /s/ John W. Finke |
| John P. Morton            |                    |
|                      |                    |   |
|                      |                    | Its: |  President and  Chief Executive Officer |
|                           |                         |  |  |  |  |

 

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