Exhibit 10(a)


 


HICKORYTECH CORPORATION


EXECUTIVE INCENTIVE PLAN


(December 4, 2002 Amended & Restated)


 


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


 


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


 


3.                                       “Chair”
means the Chairman of the Board of the Company.


 


4.                                       “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.


 


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


 


6.                                       “EBITDA”
means pre-tax earnings before interest, tax, depreciation and amortization, and
for purposes of this Plan, before all profit sharing expense.


 


1

















 


7.                                       “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.


 


8.                                       “Free
Cash Flow” means EBITDA less CAPEX, dividend, debt principal repayment
required by the Company’s debt agreements, interest and taxes.


 


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.                                 “Pre-Tax
Earnings” means operating revenues and other income minus operating and
other expenses.


 


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


 


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


 


17.                                 “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.  In contrast, the
transactions between the Company (parent Company) and its Subsidiaries,
consisting mainly of cost allocations and interest on intercompany loans, will
be eliminated in the calculation to determine “Revenue”.  Significant variances due to non-operating
income will be reviewed on a case by case basis.


 


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


 


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


 


2

















 


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 Participants’ 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 Free Cash Flow of less
than 50% of HickoryTech’s budgeted Free Cash Flow for the fiscal year.


 


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.


 


3

















 


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:


 


	
  Position

  	
   

  	
  Base

  Salary

  	
   

  	
  Target

  Award %

  	
   

  	
  Target

  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

  	
   

  
	
  Position

  	
   

  	
  Corporate

  Financial Results

  	
   

  	
  Subsidiary
  or Division

  Financial Results

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Executive A

  	
   

  	
  100

  	
  %

  	
  —

  	
   

  
	
  Executive B

  	
   

  	
  25

  	
  %

  	
  75

  	
  %

  
	
  Executive C

  	
   

  	
  45

  	
  %

  	
  55

  	
  %

  



 


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.


 


4

















 


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 the results area will be increased 3% for each 1% by which
actual performance exceeds planned performance.


 


(iii)                               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.


 


Example:


 


(Assume $3,000 target organizational award)


 


	
   

  	
   

  	
  Net Income

  (20%)

  	
   

  	
  Revenue

  (30%)

  	
   

  	
  EBITDA

  (50%)

  	
   

  	
  Total

  Award

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Target Award

  	
   

  	
  $

  	
  600

  	
   

  	
  $

  	
  900

  	
   

  	
  $

  	
  1,500

  	
   

  	
  $

  	
  3,000

  	
   

  
	
  Actual % of Plan

  	
   

  	
  98

  	
  %

  	
  250

  	
  %

  	
  95

  	
  %

  	
  —

  	
   

  
	
  Adjustment to Target

  	
   

  	
   

  	
   

  	
  +200

  	
  %

  	
  -15

  	
  %

  	
  —

  	
   

  
	
  Award

  	
   

  	
  $

  	
  -0-

  	
   

  	
  $

  	
  1800

  	
   

  	
  $

  	
  1,275

  	
   

  	
  $

  	
  3,075 

  	
  (102.5)%

  



 


5

















 


e.                                       A review of the
award payouts will be made by the Compensation Committee.  In the event that a one-time occurrence, not
within the control of an organization, affects the year-end organization’s
performance, the Compensation Committee may review and adjust award payouts, if
determined appropriate.


 


F.                                      Total Award


 


Organizational and individual 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.


 


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 applicable withholding of state, federal, local or other
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
Performance 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 Section VI (B).


 


6

















 


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 as a dividend 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).


 


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.  The Committee may, in its sole discretion,
accelerate payments and pay the Performance Account value in a lump sum.


 


7

















 


2.                                       The Performance
Account will be paid out in shares of Company stock following the Participant’s
termination of employment with the company as set forth in Section VI (D) and
(E).


 


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, regardless of whether performance
criteria has been met for that year at that time.


 


2.                                       If a payment
becomes due to a Participant under the 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 regardless of whether
performance criteria has been met for that year at that time.


 


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 applicable withholding of state, federal, local or other taxes.


 


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


 


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.


 


8

















 


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.


 


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.


 


9

















 


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.


 


10