Document:

ex10-1q210.htm

  

Exhibit 10.1

MEDTOX SCIENTIFIC, INC.

2010 STOCK INCENTIVE PLAN

SECTION 1:                         Purpose; Definitions

 

The purpose of the Plan is to give the Company a competitive advantage in attracting, retaining and motivating officers and employees other than senior management, and to provide the Company and its Subsidiaries with a stock plan providing incentives directly linked to the profitability of the Company's businesses and increases in stockholder value.

For purposes of the Plan, the following terms are defined as set forth below:

	
a.  

	
"Award" means an award of Restricted Stock.

 

	
b.  

	
"Board" means the Board of Directors of the Company.

 

	
c.  

	
"Change of Control" has the meaning set forth in Section 8(b).

 

	
d.  

	
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

 

	
e.  

	
"Commission" means the Securities and Exchange Commission or any successor agency.

 

	
f.  

	
"Committee" means the Committee referred to in Section 2.

 

	
g.  

	
"Common Stock" means common stock, par value $.01 per share, of the Company.

 

	
h.  

	
"Company" means MEDTOX Scientific, Inc., a Delaware corporation.

 

	
i.  

	
"Covered Employee" means a participant designated prior to the grant of Restricted Stock by the Committee who is or may be a "covered employee" within the meaning of Section 162(m)(3) of the Code in the year in which Restricted Stock is expected to be taxable to such participant.

 

	
j.  

	
"Disability" means permanent and total disability as determined for purposes of the Company's Long Term Disability Plan for the staff of the Company's corporate headquarters.

 

	
k.  

	
"Eligible Individuals" means officers or other employees of the Company or any of its Subsidiaries and prospective employees who have accepted offers of employment from the Company or its Subsidiaries who are or will be responsible for or contribute to the management, growth or profitability of the business of the Company or its Subsidiaries.

 

	
l.  

	
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.

 

	
m.  

	
"Performance Goals" means the performance goals established by the Committee in connection with the grant of Restricted Stock.  In the case of Qualified Performance-Based Awards, the following requirements shall apply.  Such Performance Goals shall be expressed in terms of one or more of the following financial or other objective goals which may be Company-wide or otherwise, including on a division basis, regional basis or on an individual basis: (i) total stockholder return, including its components of stock price appreciation, dividends and/or dividend yield; (ii) return  on  assets, equity, invested  capital, cash  flow, investment, or related return ratios; (iii) sales, operating income, revenues or net revenues; (iv) pre-tax or after-tax profit levels, including: net earnings, net earnings growth, earnings per share, and earnings before interest, taxes, depreciation and amortization (EBITDA); (v) cash flow, operating cash flow, or free cash flow; or (vi) levels of operating expense, including reductions in the Company’s overhead ratio, expense to sales ratios, or debt levels.

 

Any criteria may be measured in absolute terms or as compared to another company or companies.  Criteria in addition to those provided above (including, but not limited to, criteria relating to confidential business information) may also be taken into account, but only to the extent permitted by Section 162(m) of the Code.  To the extent applicable, any such Performance Goal shall be determined (I) in accordance with the Company’s audited financial statements and generally accepted accounting principles and reported upon by the Company’s independent accountants or (II) so that a third party having knowledge of the relevant facts could determine whether such Performance Goal is met.  Performance Goals shall include a threshold level of performance below which no Award shall be made, levels of performance at which specified percentages of the target Award shall be paid and a maximum level of performance above which no additional Award shall be paid.  The Performance Goals established by the Committee may be (but need not be) different for different performance periods and different Performance Goals may be applicable to different Eligible Individuals.  The applicable Performance Goal or Goals may be adjusted for such events and circumstances as the Committee deems appropriate, provided, however, that all Performance Goals and any related adjustments to the Performance Goals applicable to officers covered by Section 162(m) of the Code shall be preestablished in accordance with Section 162(m) of the Code and regulations thereunder.

	
n.  

	
"Plan" means the MEDTOX Scientific, Inc. 2010 Stock Incentive Plan, as set forth herein and as hereinafter amended from time to time.

 

	
o.  

	
"Qualified Performance-Based Award" means an Award of Restricted Stock designated as such by the Committee at the time of grant, based upon a determination that (i) the recipient is or may be a "covered employee" within the meaning of Section 162(m)(3) of the Code in the year in which the Company would expect to be able to claim a tax deduction with respect to such Restricted Stock and (ii) the Committee wishes such Award to qualify for the Section 162(m) Exemption.

 

	
p.  

	
"Restricted Stock" means an Award granted under Section 5.

 

	
q.  

	
"Section 162(m) Exemption" means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code.

 

	
r.  

	
"Subsidiary" means any corporation, partnership, joint venture or other entity during any period in which at least a majority voting interest in such entity is owned, directly or indirectly, by the Company or any successor to the Company.

 

	
s.  

	
"Termination of Employment" means the termination of the participant's employment with the Company and any of its Subsidiaries.  A participant employed by a Subsidiary shall also be deemed to incur a Termination of Employment if the Subsidiary ceases to be such a Subsidiary, and the participant does not immediately thereafter become an employee of the Company or another Subsidiary.  Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries shall not be considered Terminations of Employment.  If so determined by the Committee, a participant shall be deemed not to have incurred a Termination of Employment if the participant enters into a contract with the Company or a subsidiary providing for the rendering by the participant of consulting services to the Company or such subsidiary on terms approved by the Committee; however, Termination of Employment of the participant shall occur when such contract ceases to be in effect.

 

In addition, certain other terms used herein have definitions given to them in the first place in which they are used.

SECTION 2:                         Administration

The Plan shall be administered by the Compensation Committee or such other committee of the Board as the Board may from time to time designate (the "Committee"), which shall be composed of not less than two directors, and shall be appointed by and serve at the pleasure of the Board.

The Committee shall have plenary authority to grant Awards pursuant to the terms of the Plan to Eligible Individuals.

Among other things, the Committee shall have the authority, subject to its power to delegate its authority as described below and subject to the other terms of the Plan:

(a) To select the Eligible Individuals to whom Awards may from time to time be granted;

(b) To determine the number of shares of Common Stock to be covered by each Award granted hereunder;

(c) To determine the terms and conditions of any Award granted hereunder, including, but not limited to, any vesting condition, restriction or limitation (which may be related to the performance of the participant, the Company or any Subsidiary) and any vesting acceleration or forfeiture waiver regarding any Award and the shares of Common Stock relating thereto, based on such factors as the Committee shall determine; and

(d) To modify, amend or adjust the terms and conditions of any Award, at any time or from time to time, including but not limited to Performance Goals; provided, however, that the Committee may not adjust upwards the amount payable with respect to a Qualified Performance-Based Award or waive or alter the Performance Goals associated therewith or cause such Restricted Stock to vest earlier than permitted by Section 5(c)(viii).

The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan.

The Committee may act only by a majority of its members then in office, except that the Committee may, except to the extent prohibited by applicable law or regulation or the applicable rules of a stock exchange, allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it; provided that no such delegation may be made that would cause Awards or other transactions under the Plan to cease to be exempt from Section 16(b) of the Exchange Act or cause an Award designated as a Qualified Performance-Based Award not to qualify for, or to cease to qualify for, the Section 162(m) Exemption.  Any such allocation or delegation may be revoked by the Committee at any time.

Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter.  All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan participants.

Any authority granted to the Committee may also be exercised by the full Board, except to the extent that the grant or exercise of such authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act or cause an Award designated as a Qualified Performance-Based Award not to qualify for, or to cease to qualify for, the Section 162(m) Exemption.  To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control.

SECTION 3:                                Common Stock Subject to Plan

The maximum number of shares of Common Stock that may be issued to participants and their beneficiaries under the Plan shall be 500,000.  No participant may be granted Awards covering in excess of 5,000 shares of Common Stock in any calendar year during which the Plan is in existence.  Shares subject to an Award under the Plan may be authorized and unissued shares or may be treasury shares.  If any Award is forfeited, shares of Common Stock subject to such Awards shall again be available for distribution in connection with Awards under the Plan.  To the extent any shares of Common Stock subject to an Award are not delivered to a participant because such shares are used to satisfy an applicable tax-withholding obligation, such shares shall not be deemed to have been issued for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan.

In the event of any change in corporate capitalization (including, but not limited to, a change in the number of shares of Common Stock outstanding), such as a stock split or a corporate transaction, any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Company, the Committee or Board may make such substitution or adjustments in the aggregate number and kind of shares reserved for issuance under the Plan; provided, however, that the number of shares subject to any Award shall always be a whole number.

SECTION 4:                         Eligibility

Awards may be granted under the Plan to Eligible Individuals.  No grant shall be made under this Plan to a director who is not an officer or a salaried employee of the Company or its Subsidiaries.

SECTION 5:                         Restricted Stock Awards

(a) Administration.  Shares of Restricted Stock may be awarded either alone or in addition to other Awards granted under the Plan.  The Committee shall determine the Eligible Individuals to whom and the time or times at which grants of Restricted Stock will be awarded, the number of shares to be awarded to any Eligible Individual, the conditions for vesting, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards, in addition to those contained in Section 5(c).

(b) Awards and Certificates.  Shares of Restricted Stock shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates.  Any certificate issued in respect of shares of Restricted Stock shall be registered in the name of such Eligible Individual and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:

"The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the MEDTOX Scientific, Inc. 2010 Stock Incentive Plan and a Restricted Stock Agreement.  Copies of such Plan and Agreement are on file at the offices of MEDTOX Scientific, Inc., 402 West County Road D, St. Paul, MN 55112."

The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award.

 

	
(c)  

	
Terms and Conditions.  Shares of Restricted Stock shall be subject to the following terms and conditions:

(i) The Committee may, prior to or at the time of grant, designate an Award of Restricted Stock as a Qualified Performance-Based Award, in which event it shall condition the grant or vesting, as applicable, of such Restricted Stock upon the attainment of Performance Goals.  If the Committee does not designate an Award of Restricted Stock as a Qualified Performance-Based Award, it may also condition the grant or vesting thereof upon the attainment of Performance Goals.  Regardless of whether an Award of Restricted Stock is a Qualified Performance-Based Award, the Committee may also condition the grant or vesting thereof upon the continued service of the participant.  The conditions for grant or vesting and the other provisions of Restricted Stock Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient.  The Committee may at any time, in its sole discretion, accelerate or waive, in whole or in part, any of the foregoing restrictions; provided, however, that in the case of Restricted Stock that is a Qualified Performance-Based Award, the applicable Performance Goals have been satisfied.

(ii) Subject to the provisions of the Plan and the Restricted Stock Agreement referred to in Section 5(c)(vi), during the period, if any, set by the Committee, commencing with the date of such Award for which such participant's continued service is required (the "Restriction Period"), and until the later of (i) the expiration of the Restriction Period and (ii) the date the applicable Performance Goals (if any) are satisfied, the participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock.

(iii) Except as provided in this paragraph (iii) and Sections 5(c)(i) and 5(c)(ii) and the Restricted Stock Agreement, the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Common Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any cash dividends.  If so determined by the Committee in the applicable Restricted Stock Agreement, (A) cash dividends on the class or series of Common Stock that is the subject of the Restricted Stock Award shall be automatically deferred and reinvested in additional Restricted Stock, held subject to the vesting of the underlying Restricted Stock, or held subject to meeting Performance Goals applicable only to dividends, and (B) dividends payable in Common Stock shall be paid in the form of Restricted Stock of the same class as the Common Stock with which such dividend was paid, held subject to the vesting of the underlying Restricted Stock, or held subject to meeting Performance Goals applicable only to dividends.

(iv) Except to the extent otherwise provided in the applicable Restricted Stock Agreement or Section 5(c)(i), 5(c)(ii), 5(c)(v) or 8(a)(ii), upon a participant's Termination of Employment for any reason during the Restriction Period or before the applicable Performance Goals are satisfied, all shares still subject to restriction shall be forfeited by the participant.

(v)       Except to the extent otherwise provided in Section 6(a)(i), in the event that a participant retires or such participant's employment is involuntarily terminated, the Committee shall have the discretion to waive, in whole or in part, any or all remaining restrictions (other than, in the case of Restricted Stock with respect to which a participant is a Covered Employee, satisfaction of the applicable Performance Goals unless the participant's employment is terminated by reason of death or Disability) with respect to any or all of such participant's shares of Restricted Stock.

(vi) If and when any applicable Performance Goals are satisfied and the Restriction Period expires without a prior forfeiture of the Restricted Stock, unlegended certificates for such shares shall be delivered to the participant upon surrender of the legended certificates.

(vii) Each Award shall be confirmed by, and be subject to, the terms of a Restricted Stock Agreement.

(viii) Notwithstanding the foregoing, but subject to the provisions of Section 8 hereof, no Award in the form of Restricted Stock, the vesting of which is conditioned only upon the continued service of the participant, shall vest earlier than the first, second and third anniversaries of the date of grant thereof, on each of which dates a maximum of one-third of the shares of Common Stock subject to the Award may vest, and no award in the form of Restricted Stock, the vesting of which is conditioned upon the attainment of a specified Performance Goal or Goals, shall vest earlier than the first anniversary of the date of grant thereof.

SECTION 6:                         Change of Control Provisions

(a) Impact of Event.  Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control:

(i) The restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant.

(ii) The Committee may also make additional adjustments and/or settlements of outstanding Awards as it deems appropriate and consistent with the Plan’s purposes.

(b) Definition of Change of Control.  For purposes of the Plan, a "Change of Control" shall mean the happening of any of the following:

(i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement; or

(ii)       a merger or consolidation to which the Company is a party if, following the effective date of such merger or consolidation, the individuals and entities who were stockholders of the Company prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of less than fifty percent (50%) of the combined voting power of the surviving corporation following the effective date of such merger or consolidation; or

(iii)       when, during any period of twenty-four (24) consecutive months, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof, provided, however, that a director who was not a director at the beginning of such twenty-four (24) month period shall be deemed to have satisfied such twenty-four (24) month requirement, and be an Incumbent Director, if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually, because they were directors at the beginning of such twenty-four (24) month period, or by prior operation of this Section.

SECTION 7:                         Term, Amendment and Termination

The Plan will terminate on the tenth anniversary of the effective date of the Plan.  Under the Plan, Awards outstanding as of such date shall not be affected or impaired by the termination of the Plan.

The Board may amend, alter, or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made which would impair the rights of a recipient of an Award, theretofore granted without the recipient's consent, except such an amendment made to comply with applicable law, stock exchange rules or accounting rules.  In addition, no such amendment shall be made without the approval of the Company's stockholders to the extent such approval is required by applicable law or stock exchange rules and no such amendment may, without the approval of the Company's stockholders, (1) increase, other than by operation of the antidilution clauses contained in Section 3 of the Plan, the number of shares of Common Stock available for the grant of Awards under the Plan or to alter the maximum number of shares available for the grant of Awards; (2) modify the criteria for eligibility to participate in the Plan or the nature of the Awards which may be granted under the Plan; and (3) alter the provisions set forth in Section 5(c)(viii) of the Plan with respect to minimum vesting schedules relating to Awards in the form of Restricted Stock.

The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall cause a Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption or impair the rights of any holder without the holder's consent except such an amendment made to cause the Plan or Award to comply with applicable law, or regulation, stock exchange rules, or accounting rules.

Subject to the above provisions, the Board shall have authority to amend the Plan to take into account changes in law and tax and accounting rules as well as other developments, and to grant Awards which qualify for beneficial treatment under such rules without stockholder approval.

SECTION 8:                         General Provisions

(a) The Committee may require each person purchasing or receiving shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to the distribution thereof.  The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.

Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Company shall not be required to issue or deliver any certificate or certificates for shares of Common Stock under the Plan prior to fulfillment of all of the following conditions:

(i) Listing or approval for listing upon notice of issuance, of such shares on the securities exchange as may at the time be the principal market for the Common Stock;

(ii) Any registration or other qualification of such shares of the Company under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and

(iii) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable.

(b) Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting other or additional compensation arrangements for its employees.

(c) The Plan shall not constitute a contract of employment, and adoption of the Plan shall not confer upon any employee any right to continued employment, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any employee at any time.

(d) No later than the date as of which an amount first becomes includible in the gross income of the participant for federal income tax purposes with respect to any Award under the Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount.  Withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award that gives rise to the withholding requirement; provided, that not more than the legally required minimum withholding may be settled with Common Stock.  The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant.  The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with Common Stock.

(e) The Committee shall establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participant's death are to be paid or by whom any rights of the participant, after the participant's death, may be exercised.

(f) In the case of a grant of an Award to any employee of a Subsidiary of the Company, the Company may, if the Committee so directs, issue or transfer the shares of Common Stock, if any, covered by the Award to the Subsidiary, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Subsidiary will transfer the shares of Common Stock to the employee in accordance with the terms of the Award specified by the Committee pursuant to the provisions of the Plan.  All shares of Common Stock underlying Awards that are forfeited or canceled shall revert to the Company.

(g) The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws.

(h) In the event an Award is granted to an Eligible Individual who is employed or providing services outside the United States and who is not compensated from a payroll maintained in the United States, the Committee may, in its sole discretion, modify the provisions of the Plan as they pertain to such individual to comply with applicable foreign law.

SECTION 12:                                Effective Date of Plan

The Plan shall be effective as of the date it is approved by the stockholders of the Company.ex10-2.htm

Exhibit 10.2

 

HICKORYTECH CORPORATION

EXECUTIVE INCENTIVE PLAN

(Amended & Restated as of January 1, 2010)

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.

	
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.

	
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.

  

1

  

 

	
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.  

	
"Revenue" means after-elimination operating revenue as defined by Generally Accepted Accounting Principles.

	
16.  

	
"Subsidiary" means a corporation, the majority of whose stock is owned by the Company.

	
17.  

	
"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.

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.

  

2

  

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  base salary as of the close of the plan year.  (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 75% of HickoryTech's budgeted Adjusted 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 base salary at the close of the plan year.  This will establish the dollar award target for the executive, as follows:

      Example

	 	  	 	
Base

	 	 	
Target

	 	 	
Target

	 
	 	
Position

	 	
Salary

	 	 	
Award %

	 	 	
Award

	 
	 	  	 	 	 	 	 	 	 	 	 
	 	
Executive A

	 	$	150,000	 	 	 	40	%	 	$	60,000	 
	 	
Executive B

	 	$	120,000	 	 	 	30	%	 	$	36,000	 
	 	
Executive C

	 	$	98,000	 	 	 	25	%	 	$	24,500	 

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	%

 

 

 

 

	
  

	
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 each result area will be reduced 3% for each 1% by which actual performance is less than planned performance. No award will be paid for a results area if actual performance is less than 85% of 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%.

	
  

	
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.

  

5

  

Example:

 

	 	 	(Assume $20,000 target organizational award)
	 	 	Net Income	 	 	Revenue	 	 	EBITDA	 	 	 	 Total Award
	 	 	 	(45%)	 	 	 	(30%)	 	 	 	(25%)	 	 	 	 
	
Target Award

	 	$	9,000	 	 	$	6,000	 	 	$	5,000	 	 	 	  
	
Actual % of Plan

	 	 	95	%	 	 	250	%	 	 	110.7	%	 	 	  
	
Adjustment to Target

	 	 	85	%	 	 	200	%	 	 	200	%	 	 	  
	Award	 	$	7,650	 	 	$ 	 12,000	 	 	$ 	 10,000	 	 	$ 	29,650
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(148%)

	
  

	
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.

	
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.

 

  

6

  

 

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).

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).

  

7

  

	
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.

H.           Withholding

	
  

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

  

8

  

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.

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.

  

9

  

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.

  

10

  

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

a.    Target Amount ( _____% of Line 2)                                                                                                                                                     $ ___________

b.    Performance Adjustment:

    Net Income                                EBITDA                      Revenue

 

 

	
o  

	
Target                      $ __________                          $________                      $_______

	
o  

	
% of Plan                   __________                            _________                        _______

	
o  

	
Factor                         __________                            _________                        _______

c.     Award                                             $ __________               +         $_________   +                $________         = $ ________

Total Annual Award (3c  )                                                                                                                                           $ ___________

  

11

  

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

  

12

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