Document:

ex10kkk.htm

Exhibit 10-kkk

 

 

AT&T INC.

 

2011 Incentive Plan

 

 

	
Article 1.  

	
Establishment and Purpose.

 

	
1.1  

	
Establishment of the Plan.  AT&T Inc., a Delaware corporation (the “Company” or “AT&T”), hereby establishes an incentive compensation plan (the “Plan”), as set forth in this document.

 

	
1.2  

	
Purpose of the Plan.  The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of the Company’s shareowners, and by providing Participants with an incentive for outstanding performance.

 

	
1.3  

	
Effective Date of the Plan.  The Plan is effective on May 1, 2011.

 

	
Article 2.  

	
Definitions.  Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:

 

(a) “Applicable Law” means the legal requirements relating to the administration of options and share-based or performance-based awards under any applicable laws of the United States, any other country, and any provincial, state, or local subdivision, any applicable stock exchange or automated quotation system rules or regulations, as such laws, rules, regulations and requirements shall be in place from time to time.

 

(b) “Award” means, individually or collectively, a grant or award under this Plan of Stock Options, Restricted Stock (including unrestricted Stock), Restricted Stock Units, Performance Units, or Performance Shares.

 

(c) “Award Agreement” means an agreement which may be entered into by each Participant and the Company, setting forth the terms and provisions applicable to Awards granted to Participants under this Plan.

 

(d) “Board” or “Board of Directors” means the AT&T Board of Directors.

 

(e) “Cause” means willful and gross misconduct on the part of an Employee that is materially and demonstrably detrimental to the Company or any Subsidiary as determined by the Company in its sole discretion.

 

(f) “Change in Control” shall be deemed to have occurred if (1) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the shareowners of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the total voting power represented by the Company’s then outstanding voting securities; or (2) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new Director whose election by the Board of Directors or nomination for election by the Company’s shareowners was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (3) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareowners of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

 

(g) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

(h) “Committee” means the committee or committees of the Board of Directors given authority to administer the Plan as provided in Article 3.

 

(i) “Director” means any individual who is a member of the AT&T Board of Directors.

 

(j) “Disability” means, absence of an Employee from work under the relevant Company or Subsidiary long term disability plan.

 

(k) “Employee” means any employee of the Company or of one of the Company’s Subsidiaries.  “Employment” means the employment of an Employee by the Company or one of its Subsidiaries.  Directors who are not otherwise employed by the Company shall not be considered Employees under this Plan.

 

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto.

 

(m) “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee.

 

(n) “Fair Market Value” means the closing price on the New York Stock Exchange (“NYSE”) for a Share on the relevant date, or if such date was not a trading day, the next preceding trading date, all as determined by the Company.  A trading day is any day that the Shares are traded on the NYSE.  In lieu of the foregoing, the Committee may, from time to time, select any other index or measurement to determine the Fair Market Value of Shares under the Plan, including but not limited to an average determined over a period of trading days.

 

(o) “Insider” means an Employee who is, on the relevant date, an officer, director, or ten percent (10%) beneficial owner of the Company, as those terms are defined under Section 16 of the Exchange Act.

 

(p) “Officer Level Employee” means a Participant who is an officer level Employee for compensation purposes as indicated on the records of AT&T.

 

(q) “Option” means an option to purchase Shares from AT&T.

 

(r) “Participant” means an Employee or former Employee who holds an outstanding Award granted under the Plan.

 

(s) “Performance Unit” and “Performance Share” each mean an Award granted to an Employee pursuant to Article 8 herein.

 

(t) “Retirement” or to “Retire” means the Participant’s Termination of Employment for any reason other than death, Disability or for Cause, on or after the earlier of the following dates, or as otherwise provided by the Committee: (1) for Officer Level Employees, the date the Participant is at least age fifty-five (55) and has five (5) years of net credited service; or (2) the date the Participant has attained one of the following combinations of age and service, except as otherwise indicated below:

 

	
Net Credited Service

	
Age

	
10 years or more

	
65 or older

	
20 years or more

	
55 or older

	
25 years or more

	
50 or older

	
30 years or more

	
Any age

 

For purposes of this Plan only, Net Credited Service shall be calculated in the same manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan – Nonbargained Program (“Pension Plan”), as that may be amended from time to time, except that service with an Employer shall be counted as though the Employer were a “Participating Company” under the Pension Plan and the Employee was a participant in the Pension Plan.

 

(u)  “Senior Manager” means a Participant who is a senior manager for compensation purposes as indicated on the records of AT&T.

 

(v) “Shares” or “Stock” means the shares of common stock of the Company.

 

(w) “Subsidiary” means any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a fifty percent (50%) or greater ownership interest.  The Committee may, at its sole discretion, designate, on such terms and conditions as the Committee shall determine, any other corporation, partnership, limited liability company, venture other entity a Subsidiary for purposes of this Plan.

 

(x) “Termination of Employment” or a similar reference means the event where the Employee is no longer an Employee of the Company or of any Subsidiary, including but not limited to where the employing company ceases to be a Subsidiary.  With respect to any Award that provides “nonqualified deferred compensation” within the meaning of Section 409A of the Code, “Termination of Employment” shall mean a “separation from service” as defined under Section 409A of the Code.

 

	
Article 3.  

	
Administration.

 

	
         3.1  

	
The Committee.  Administration of the Plan shall be as follows:

 

(a) With respect to Insiders, the Plan and Awards hereunder shall be administered by the Human Resources Committee of the Board or such other committee as may be appointed by the Board for this purpose (each of the Human Resources Committee and such other committee is the “Disinterested Committee”), where each Director on such Disinterested Committee is a “Non-Employee Director,” as that term is used in Rule 16b-3 under the Exchange Act (or any successor designation for determining the committee that may administer plans, transactions or awards exempt under Section 16(b) of the Exchange Act), as that rule may be modified from time to time.

 

(b) With respect to persons who are not Insiders, the Plan and Awards hereunder shall be administered by each of the Disinterested Committee and such other committee, if any, to which the Board may delegate such authority (such other Committee shall be the “Non-Insider Committee”), and each such Committee shall have full authority to administer the Plan and all Awards hereunder, except as otherwise provided herein or by the Board.  The Disinterested Committee may, from time to time, limit the authority of the Non-Insider Committee in any way.  Any Committee may be replaced by the Board at any time.

 

(c) Except as otherwise indicated from the context, references to the “Committee” in this Plan shall be to either of the Disinterested Committee or the Non-Insider Committee.

 

	
         3.2  

	
Authority of the Committee.  The Committee shall have complete control over the administration of the Plan and shall have the authority in its sole discretion to (a) exercise all of the powers granted to it under the Plan, (b) construe, interpret and implement the Plan, grant terms and grant notices, and all Award Agreements, (c) prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations, (d) make all determinations necessary or advisable in administering the Plan, (e) correct any defect, supply any omission and reconcile any inconsistency in the Plan, (f) amend the Plan to reflect changes in applicable law (whether or not the rights of the holder of any Award are adversely affected, unless otherwise provided by the Committee), (g) grant Awards and determine who shall receive Awards, when such Awards shall be granted and the terms and conditions of such Awards, including, but not limited to, conditioning the exercise, vesting, payout or other term of condition of an Award on the achievement of Performance Goals (defined below), (h) unless otherwise provided by the Committee, amend any outstanding Award in any respect, not materially adverse to the Participant, including, without limitation, to (1) accelerate the time or times at which the Award becomes vested, unrestricted or may be exercised (and, in connection with such acceleration, the Committee may provide that any Shares acquired pursuant to such Award shall be Restricted Shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Participant’s underlying Award), (2) accelerate the time or times at which shares of Common Stock are delivered under the Award (and, without limitation on the Committee’s rights, in connection with such acceleration, the Committee may provide that any shares of Common Stock delivered pursuant to such Award shall be Restricted Shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Grantee’s underlying Award), or (3) waive or amend any goals, restrictions or conditions applicable to such Award, or impose new goals, restrictions and (i) determine at any time whether, to what extent and under what circumstances and method or methods (1) Awards may be (A) settled in cash, shares of Stock, other securities, other Awards or other property (in which event, the Committee may specify what other effects such settlement will have on the Participant’s Award), (B) exercised or (C) canceled, forfeited or suspended, (2) Shares, other securities, cash, other Awards or other property and other amounts payable with respect to an Award may be deferred either automatically or at the election of the Participant or of the Committee, or (3) Awards may be settled by the Company or any of its Subsidiaries or any of its or their designees.

 

No Award may be made under the Plan after April 30, 2021.

 

References to determinations or other actions by AT&T or the Company, herein, shall mean actions authorized by the Committee, the Chairman of the Board of AT&T, the Senior Executive Vice President of AT&T in charge of Human Resources or their respective successors or duly authorized delegates, in each case in the discretion of such person, provided, however, only the Disinterested Committee may take action with respect to Insiders with regard to granting or determining the terms of Awards or other matters that would require the Disinterested Committee to act in order to comply with Rule 16b-3 promulgated under the Exchange Act.

 

All determinations and decisions made by AT&T pursuant to the provisions of the Plan and all related orders or resolutions of the Board shall be final, conclusive, and binding on all persons, including but not limited to the Company, its stockholders, Employees, Participants, and their estates and beneficiaries.

 

	
Article 4.  

	
Shares Subject to the Plan.

 

	
         4.1  

	
Number of Shares.  Subject to adjustment as provided in Section 4.3 herein, the number of Shares available for issuance under the Plan shall not exceed ninety (90) million Shares.  The Shares granted under this Plan may be either authorized but unissued or reacquired Shares.  The Disinterested Committee shall have full discretion to determine the manner in which Shares available for grant are counted in this Plan.

 

	
         4.2  

	
Share Accounting.  Without limiting the discretion of the Committee under this section, unless otherwise provided by the Disinterested Committee, the following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan or compliance with the foregoing limits:

 

(a) If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if Shares acquired pursuant to an Award subject to forfeiture are forfeited under the terms of the Plan or the relevant Award, the Shares allocable to the terminated portion of such Award or such forfeited Shares shall again be available for issuance under the Plan.

 

(b) Shares shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash, other than an Option.

 

(c) If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, or an Option is settled without the payment of the exercise price, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.

 

	
         4.3  

	
Adjustments in Authorized Plan Shares and Outstanding Awards.  In the event of any merger, reorganization, consolidation, recapitalization, separation, split-up, liquidation, Share combination, Stock split, Stock dividend, or other change in the corporate structure of the Company affecting the Shares, an adjustment shall be made in the number and class of Shares which may be delivered under the Plan (including but not limited to individual limits), and in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, and/or the number of outstanding Options, Shares of Restricted Stock, and Performance Shares (and Performance Units and other Awards whose value is based on a number of Shares) constituting outstanding Awards, as may be determined to be appropriate and equitable by the Disinterested Committee, in its sole discretion, to prevent dilution or enlargement of rights.

 

	
Article 5.  

	
Eligibility and Participation.

 

	
         5.1  

	
Eligibility.  All management Employees are eligible to receive Awards under this Plan.

 

	
         5.2  

	
Actual Participation.  Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, those to whom Awards shall be granted and shall determine the nature and amount of each Award.  No Employee is entitled to receive an Award unless selected by the Committee.

 

	
Article 6.  

	
Stock Options.

 

	
         6.1  

	
Grant of Options.  Subject to the terms and provisions of the Plan, Options may be granted to eligible Employees at any time and from time to time, and under such terms and conditions, as shall be determined by the Committee.  In addition, the Committee may, from time to time, provide for the payment of dividend equivalents on Options, prospectively and/or retroactively, on such terms and conditions as the Committee may require.  The Committee shall have discretion in determining the number of Shares subject to Options granted to each Employee; provided, however, that no single Employee may receive Options under this Plan for more than one percent (1%) of the Shares approved for issuance under this Plan during any calendar year.  The Committee may not grant Incentive Stock Options, as described in Section 422 of the Code, under this Plan.

 

	
         6.2  

	
Form of Issuance.  Each Option grant may be issued in the form of an Award Agreement and/or may be recorded on the books and records of the Company for the account of the Participant.  If an Option is not issued in the form of an Award Agreement, then the Option shall be deemed granted as determined by the Committee.  The terms and conditions of an Option shall be set forth in the Award Agreement, in the notice of the issuance of the grant, or in such other documents as the Committee shall determine.  Such terms and conditions shall include the Exercise Price, the duration of the Option, the number of Shares to which an Option pertains (unless otherwise provided by the Committee, each Option may be exercised to purchase one Share), and such other provisions as the Committee shall determine.

 

	
         6.3  

	
Exercise Price.  Unless a greater Exercise Price is determined by the Committee, the Exercise Price for each Option Awarded under this Plan shall be equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted.  Subject to adjustment as provided in Section 4.3 herein or as otherwise provided herein, the terms of an Option may not be amended to reduce the exercise price nor may Options be cancelled or exchanged for cash, other awards or Options with an exercise price that is less than the exercise price of the original Options .

 

	
         6.4  

	
Duration of Options.  Each Option shall expire at such time as the Committee shall determine at the time of grant (which duration may be extended by the Committee); provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant.  In the event the Committee does not specify the expiration date of an Option, then such Option will expire on the tenth (10th) anniversary date of its grant, except as otherwise provided herein.

 

	
         6.5  

	
Vesting of Options.  A grant of Options shall vest at such times and under such terms and conditions as determined by the Committee; provided, however, unless another vesting period is provided by the Committee at or before the grant of an Option, one-third of the Options will vest on each of the first three anniversaries of the grant; if one Option remains after equally dividing the grant by three, it will vest on the first anniversary of the grant, if two Options remain, then one will vest on each of the first two anniversaries.  The Committee shall have the right to accelerate the vesting of any Option; however, the Chairman of the Board or the Senior Executive Vice President-Human Resources, or their respective successors, or such other persons designated by the Committee, shall have the authority to accelerate the vesting of Options for any Participant who is not an Insider.

 

	
         6.6  

	
Exercise of Options.  Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.  Exercises of Options may be effected only on days and during the hours that the New York Stock Exchange is open for regular trading.  The Company may change or limit the times or days Options may be exercised.  If an Option expires on a day or at a time when exercises are not permitted, then the Options may be exercised no later than the immediately preceding date and time that the Options were exercisable.

 

An Option shall be exercised by providing notice to the designated agent selected by the Company (if no such agent has been designated, then to the Company), in the manner and form determined by the Company, which notice shall be irrevocable, setting forth the exact number of Shares with respect to which the Option is being exercised and including with such notice payment of the Exercise Price, as applicable.  When an Option has been transferred, the Company or its designated agent may require appropriate documentation that the person or persons exercising the Option, if other than the Participant, has the right to exercise the Option.  No Option may be exercised with respect to a fraction of a Share.

 

	
         6.7  

	
Payment.  Unless otherwise determined by the Committee, the Exercise Price shall be paid in full at the time of exercise.  No Shares shall be issued or transferred until full payment has been received or the next business day thereafter, as determined by AT&T.

 

The Committee may, from time to time, determine or modify the method or methods of exercising Options or the manner in which the Exercise Price is to be paid.    Unless otherwise provided by the Committee in full or in part:

 

(a) Payment may be made in cash.

 

(b) Payment may be made by delivery of Shares owned by the Participant in partial (if in partial payment, then together with cash) or full payment.

 

(c) If the Company has designated a stockbroker to act as the Company’s agent to process Option exercises, an Option may be exercised by issuing an exercise notice together with instructions to such stockbroker irrevocably instructing the stockbroker: (A) to immediately sell (which shall include an exercise notice that becomes effective upon execution of a sale order) a sufficient portion of the Shares to be received from the Option exercise to pay the Exercise Price of the Options being exercised and the required tax withholding, and (B) to deliver on the settlement date the portion of the proceeds of the sale equal to the Exercise Price and tax withholding to the Company.  In the event the stockbroker sells any Shares on behalf of a Participant, the stockbroker shall be acting solely as the agent of the Participant, and the Company disclaims any responsibility for the actions of the stockbroker in making any such sales.  No Shares shall be issued until the settlement date and until the proceeds (equal to the Exercise Price and tax withholding) are paid to the Company.

 

(d) At any time, the Committee may, in addition to or in lieu of the foregoing, provide that an Option may be “stock settled,” which shall mean upon exercise of an Option, the Company may fully satisfy its obligation under the Option by delivering that number of shares of Stock found by taking the difference between (a) the FMV of the Stock on the exercise date, multiplied by the number of Options being exercised and (b) the total Exercise Price of the Options being exercised, and dividing such difference by the FMV of the Stock on the exercise date.

 

If payment is made by the delivery of Shares, the value of the Shares delivered shall be equal to the then most recent Fair Market Value of the Shares established before the exercise of the Option.

 

Restricted Stock may not be used to pay the Exercise Price.

 

	
         6.8  

	
Termination of Employment.  Unless otherwise provided by the Committee, the following limitations on exercise of Options shall apply upon Termination of Employment:

 

(a) Termination by Death or Disability.  In the event of the Participant’s Termination of Employment by reason of death or Disability, all outstanding Options granted to that Participant shall immediately vest as of the date of Termination of Employment and may be exercised, if at all, no more than five (5) years from the date of the Termination of Employment, unless the Options, by their terms, expire earlier.

 

(b) Termination for Cause.  In the event of the Participant’s Termination of Employment by the Company for Cause, all outstanding Options held by the Participant shall immediately be forfeited to the Company and no additional exercise period shall be allowed, regardless of the vested status of the Options.

 

(c) Retirement or Other Termination of Employment.  In the event of the Participant’s Termination of Employment for any reason other than the reasons set forth in (a) or (b), above:

 

	
(i)  

	
If upon the Participant’s Termination of Employment, the Participant is eligible to Retire, then all outstanding unvested Options granted to that Participant shall immediately vest as of the date of the Participant’s Termination of Employment;

 

	
(ii)  

	
All outstanding Options which are vested as of the effective date of Termination of Employment may be exercised, if at all, no more than five (5) years from the date of Termination of Employment if the Participant is eligible to Retire, or three (3) months from the date of the Termination of Employment if the Participant is not eligible to Retire, as the case may be, unless in either case the Options, by their terms, expire earlier; and

 

	
(iii)  

	
In the event of the death of the Participant after Termination of Employment, this paragraph (c) shall still apply and not paragraph (a), above.

 

(d) Options not Vested at Termination.  Except as provided in paragraphs (a) and (c)(i), above, all Options held by the Participant which are not vested on or before the effective date of Termination of Employment shall immediately be forfeited to the Company (and the Shares subject to such forfeited Options shall once again become available for issuance under the Plan).

 

(e) Other Terms and Conditions.  Notwithstanding the foregoing, the Committee may, in its sole discretion, establish different, or waive, terms and conditions pertaining to the effect of Termination of Employment on Options, whether or not the Options are outstanding, but no such modification shall shorten the terms of Options issued prior to such modification or otherwise be materially adverse to the Participant.

 

	
         6.9  

	
Restrictions on Exercise and Transfer of Options.  Unless otherwise provided by the Committee:

 

(a) During the Participant’s lifetime, the Participant’s Options shall be exercisable only by the Participant or by the Participant’s guardian or legal representative.  After the death of the Participant, except as otherwise provided by AT&T’s Rules for Employee Beneficiary Designations, an Option shall only be exercised by the holder thereof (including, but not limited to, an executor or administrator of a decedent’s estate) or his or her guardian or legal representative.

 

(b) No Option shall be transferable except: (i) in the case of the Participant, only upon the Participant’s death and in accordance with the AT&T Rules for Employee Beneficiary Designations; and (ii) in the case of any holder after the Participant’s death, only by will or by the laws of descent and distribution.

 

	
Article 7.  

	
Restricted Stock.

 

	
          7.1  

	
Grant of Restricted Stock.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to eligible Employees in such amounts and upon such terms and conditions as the Committee shall determine.  In addition to any other terms and conditions imposed by the Committee, vesting of Restricted Stock may be conditioned upon the achievement of Performance Goals in the same manner as provided in Section 8.4, herein, with respect to Performance Shares.  No Employee may be awarded, in any calendar year, a number of Shares in the form of Restricted Stock (or Restricted Stock Units) exceeding one percent (1%) of the Shares approved for issuance under this Plan.

 

	
         7.2  

	
Restricted Stock Agreement.  The Committee may require, as a condition to receiving a Restricted Stock Award, that the Participant enter into a Restricted Stock Award Agreement, setting forth the terms and conditions of the Award.  In lieu of a Restricted Stock Award Agreement, the Committee may provide the terms and conditions of an Award in a notice to the Participant of the Award, on the Stock certificate representing the Restricted Stock, in the resolution approving the Award, or in such other manner as it deems appropriate.

 

	
         7.3  

	
Transferability.  Except as otherwise provided in this Article 7, and subject to any additional terms in the grant thereof, Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until fully vested.

 

	
         7.4  

	
Restrictions.  The Restricted Stock shall be subject to such vesting terms, including the achievement of Performance Goals (as described in Section 8.4), as may be determined by the Committee.  Unless otherwise provided by the Committee, to the extent Restricted Stock is subject to any condition to vesting, if such condition or conditions are not satisfied by the time the period for achieving such condition has expired, such Restricted Stock shall be forfeited.  The Committee may impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including but not limited to a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock and/or restrictions under applicable Federal or state securities laws; and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions.  The Committee may also grant Restricted Stock without any terms or conditions in the form of vested Stock Awards.

 

The Company shall also have the right to retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as the Shares are fully vested and all conditions and/or restrictions applicable to such Shares have been satisfied.

 

	
         7.5  

	
Removal of Restrictions.  Except as otherwise provided in this Article 7 or otherwise provided in the grant thereof, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after completion of all conditions to vesting, if any.  However, the Committee, in its sole discretion, shall have the right to immediately vest the shares and waive all or part of the restrictions and conditions with regard to all or part of the Shares held by any Participant at any time.

 

	
         7.6  

	
Voting Rights, Dividends and Other Distributions.  Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights and shall receive all dividends and distributions paid with respect to such Shares.  The Committee may require that dividends and other distributions, other than regular cash dividends, paid to Participants with respect to Shares of Restricted Stock be subject to the same restrictions and conditions as the Shares of Restricted Stock with respect to which they were paid.  If any such dividends or distributions are paid in Shares, the Shares shall automatically be subject to the same restrictions and conditions as the Shares of Restricted Stock with respect to which they were paid.

 

	
         7.7  

	
Termination of Employment Due to Death or Disability.  In the event of the Participant’s Termination of Employment by reason of death or Disability, all restrictions imposed on outstanding Shares of Restricted Stock held by the Participant shall immediately lapse and the Restricted Stock shall immediately become fully vested as of the date of Termination of Employment.

 

	
         7.8  

	
Termination of Employment for Other Reasons.  Unless otherwise provided by the Committee, in the event of the Participant’s Termination of Employment for any reason other than those specifically set forth in Section 7.7 herein, all Shares of Restricted Stock held by the Participant which are not vested as of the effective date of Termination of Employment immediately shall be forfeited and returned to the Company.

 

	
         7.9  

	
Restricted Stock Units.  In lieu of or in addition to Restricted Stock, the Committee may grant Restricted Stock Units under such terms and conditions as shall be determined by the Committee.  Restricted Stock Units shall be subject to the same terms and conditions under this Plan as Restricted Stock except as otherwise provided in this Plan or as otherwise provided by the Committee.  Except as otherwise provided by the Committee, the award shall be settled and pay out promptly upon vesting (to the extent permitted by Section 409A of the Code), and the Participant holding such Restricted Stock Units shall receive, as determined by the Committee, Shares (or cash equal to the Fair Market Value of the number of Shares as of the date the award becomes payable) equal to the number of such Restricted Stock Units. Restricted Stock Units shall not be transferable, shall have no voting rights, and shall not receive dividends, but shall, unless otherwise provided by the Committee, receive dividend equivalents at the time and at the same rate as dividends are paid on Shares with the same record and pay dates. Upon a Participant’s Termination of Employment due to Death or Disability, his or her Restricted Stock Units will vest, and in the case of Death, will pay out promptly, and in the case of Disability, will only pay out in accordance with the terms of the grant (without regard to the Termination due to Disability).  If the Participant dies after Termination of Employment, vested Restricted Stock Units will be promptly paid out.

 

 

	
Article 8.  

	
Performance Units and Performance Shares.

 

	
          8.1  

	
Grants of Performance Units and Performance Shares.  Subject to the terms of the Plan, Performance Shares and Performance Units may be granted to eligible Employees at any time and from time to time, as determined by the Committee.  The Committee shall have complete discretion in determining the number of Performance Units and/or Performance Shares Awarded to each Participant and the terms and conditions of each such Award.

 

	
         8.2  

	
Value of Performance Shares and Units.

 

(a) A Performance Share is equivalent in value to a Share.  In any calendar year, no individual may be awarded Performance Shares having a potential payout of Shares exceeding one percent (1%) of the Shares approved for issuance under this Plan.

 

(b) A Performance Unit shall be equal in value to a fixed dollar amount determined by the Committee.  In any calendar year, no individual may be Awarded Performance Units having a potential payout equivalent exceeding the Fair Market Value, as of the date of granting the Award, of one percent (1%) of the Shares approved for issuance under this Plan.  The number of Shares equivalent to the potential payout of a Performance Unit shall be determined by dividing the maximum cash payout of the Award by the Fair Market Value per Share on the effective date of the grant.  The Committee may denominate a Performance Unit Award in dollars instead of Performance Units.  A Performance Unit Award may be referred to as a “Key Executive Officer Short Term Award.”

 

	
         8.3  

	
Performance Period.  The Performance Period for Performance Shares and Performance Units is the period over which the Performance Goals are measured.  The Performance Period is set by the Committee for each Award; however, in no event shall an Award have a Performance Period of less than one year.

 

	
         8.4  

	
Performance Goals.  For each Award of Performance Shares or Performance Units, the Committee shall establish (and may establish for other Awards) performance objectives (“Performance Goals”) for the Company, its Subsidiaries, and/or divisions of any of foregoing, using the Performance Criteria and other factors set forth in (a) and (b), below.  It may also use other criteria or factors in establishing Performance Goals in addition to or in lieu of the foregoing.  A Performance Goal may be stated as an absolute value or as a value determined relative to an index, budget, prior period, similar measures of a peer group of other companies or other standard selected by the Committee.  Performance Goals shall include payout tables, formulas or other standards to be used in determining the extent to which the Performance Goals are met, and, if met, the number of Performance Shares and/or Performance Units which would be converted into Stock and/or cash (or the rate of such conversion) and distributed to Participants in accordance with Section 8.6.  Unless previously canceled or reduced, Performance Shares and Performance Units which may not be converted because of failure in whole or in part to satisfy the relevant Performance Goals or for any other reason shall be canceled at the time they would otherwise be distributable.  When the Committee desires an Award of Performance Shares, Performance Units, Restricted Stock or Restricted Stock Units to qualify under Section 162(m) of the Code, as amended, the Committee shall establish or modify the Performance Goals for the respective Award prior to or within 90 days of the beginning of the Performance Period relating to such Performance Goal, and not later than after twenty-five percent (25%) of such period has elapsed.  For all other Awards, the Performance Goals must be established before the end of the respective Performance Period.

 

(a) The Performance Criteria which the Committee is authorized to use, in its sole discretion, are any of the following criteria or any combination thereof, including but not limited to the offset against each other of any combination of the following criteria:

 

	
(1)  

	
Financial performance of the Company (on a consolidated basis), of one or more of its Subsidiaries, and/or a division of any of the foregoing.  Such financial performance may be based on net income, Value Added (after- tax cash operating profit less depreciation and less a capital charge), EBITDA (earnings before interest, taxes, depreciation and amortization), revenues, sales, expenses, costs, gross margin, operating margin, profit margin, pre-tax profit, market share, volumes of a particular product or service or category thereof, including but not limited to the product’s life cycle (for example, products introduced in the last two years), number of customers or subscribers, number of items in service, including but not limited to every category of access or other telecommunication or television lines, return on net assets, return on assets, return on capital, return on invested capital, cash flow, free cash flow, operating cash flow, operating revenues, operating expenses, and/or operating income.

 

	
(2)  

	
Service performance of the Company (on a consolidated basis), of one or more of its Subsidiaries, and/or of a division of any of the foregoing.  Such service performance may be based upon measured customer perceptions of service quality.  Employee satisfaction, employee retention, product development, completion of a joint venture or other corporate transaction, completion of an identified special project, and effectiveness of management.

 

	
(3)  

	
The Company’s Stock price, return on stockholders’ equity, total stockholder return (Stock price appreciation plus dividends, assuming the reinvestment of dividends), and/or earnings per Share.

 

	
(4)  

	
Impacts of acquisitions, dispositions, or restructurings, on any of the foregoing.

 

 

(b) If the matters in a specific category below have a collective net impact (whether positive or negative) on net income, after taxes and available and collectible insurance, that exceed $500 million in a calendar year, then such matters (as well as any related effects on cash flow, if applicable) shall be excluded in determining whether or the extent to which the relevant Performance Goals applicable to such year are met:

 

Categories:

	
  

	
(1)  changes in accounting principles;

	
  

	
(2)  extraordinary items;

	
  

	
(3)  changes in Federal tax law;

	
  

	
(4)  changes in the tax laws of the states; 

	
  

	
(5)  expenses caused by natural disasters, including but not limited to floods, hurricanes, and earthquakes;

	
  

	
(6)  expenses resulting from intentionally caused damage to property of the Company or its Subsidiaries taken as a whole;

	
  

	
(7)  non-cash accounting write-downs of goodwill and other intangible assets.

 

In addition, where matters in a specific category have a collective net impact (whether positive or negative) on net income, after taxes and available and collectible insurance, that exceed $200 million but not $500 million in a calendar year, then such matters (as well as any related effects on cash flow, if applicable) shall also be excluded in determining the achievement of the relevant Performance Goals but only if the combined net effect of matters in all such categories (exceeding $200 million but not $500 million) exceeds $500 million.

 

Gains and losses related to the assets and liabilities from pension plans and other post retirement benefit plans (and any associated tax effects) shall be disregarded in determining whether or the extent to which a Performance Goal has been met.  

 

Unless otherwise provided by the Committee at any time, no such adjustment shall be made for a current or former executive officer to the extent such adjustment would cause an Award to fail to satisfy the performance based exemption of Section 162(m) of the Code.

 

	
         8.5  

	
Dividend Equivalents on Performance Shares.  Unless otherwise provided by the Committee,  a cash payment (“Dividend Equivalent”) in an amount equal to the dividend payable on one Share shall be made to a Participant for each Performance Share held by such Participant on the record date for the dividend.  Such Dividend Equivalent, if any, will be payable at the time the relevant AT&T common stock dividend is payable or at such other time as determined by the Committee, and may be modified or terminated by the Committee at any time.  Notwithstanding the foregoing, unless otherwise provided by the Committee, Dividend Equivalents paid with respect to Performance Shares granted to an Officer Level Employee shall only be paid on the number of Performance Shares actually distributed and such payment shall be made when the related Performance Shares are distributed.

 

	
         8.6  

	
Form and Timing of Payment of Performance Units and Performance Shares.  As soon as practicable after the applicable Performance Period has ended and all other conditions (other than Committee actions) to conversion and distribution of a Performance Share and/or Performance Unit Award have been satisfied (or, if applicable, at such other time determined by the Committee at or before the establishment of the Performance Goal), the Committee shall determine whether and the extent to which the Performance Goals were met for the applicable Performance Units and Performance Shares.  If Performance Goals have been met, then the number of Performance Units and Performance Shares to be converted into Stock and/or cash and distributed to the Participants shall be determined in accordance with the Performance Goals for such Awards, subject to any limits imposed by the Committee.  Payment of Performance Units and Performance Shares shall be made in a single lump sum, as soon as reasonably administratively possible following the determination of the number of Shares or amount of cash to which the Participant is entitled but not later than the 15th day of the third month following the end of the applicable Performance Period.  Performance Units will be distributed to Participants in the form of cash.  Performance Shares will be distributed to Participants in the form of fifty percent (50%) Stock and fifty percent (50%) Cash, or at the Participant’s election, one hundred percent (100%) Stock or one hundred percent (100%) Cash.  In the event the Participant is no longer an Employee at the time of the distribution, then the distribution shall be one hundred (100%) in cash, provided the Participant may elect to take fifty percent (50%) or one hundred percent (100%) in Stock.  At any time prior to the distribution of the Performance Shares and/or Performance Units, unless otherwise provided by the Committee or prohibited by this Plan (such as in the case of a Change in Control), the Committee shall have the authority to reduce or eliminate the number of Performance Units or Performance Shares to be converted and distributed, or to cancel any part or all of a grant or award of Performance Units or Performance Shares, or to mandate the form in which the Award shall be paid (i.e., in cash, in Stock or both, in any proportions determined by the Committee).

 

Unless otherwise provided by the Committee, any election to take a greater amount of cash or Stock with respect to Performance Shares must be made in the calendar year prior to the calendar year in which the Performance Shares are distributed.

 

For the purpose of converting Performance Shares into cash and distributing the same to the holders thereof (or for determining the amount of cash to be deferred), the value of a Performance Share shall be the Fair Market Value of a Share on the date the Committee authorizes the payout of Awards.  Performance Shares to be distributed in the form of Stock will be converted at the rate of one (1) Share per Performance Share.

 

	
         8.7  

	
Termination of Employment Due to Death.  In the event of the Participant’s Termination of Employment by reason of death during a Performance Period, the Participant shall receive a lump sum payout of the related outstanding Performance Units and Performance Shares calculated as if all unfinished Performance Periods had ended with one hundred percent (100%) of the Performance Goals achieved, valued as of the first business day of the calendar year following the date of Termination of Employment and payable as soon thereafter as reasonably possible but not later than the 15th day of the third month after the end of the calendar year in which such death occurred.  Where the amount or part of Dividend Equivalents is determined by the number of Performance Shares that are paid out or is otherwise determined by a performance measure, and the related Performance Period for the Dividend Equivalents was not completed at death, then the Dividend Equivalents will be calculated as though one hundred percent (100%) of the goals were achieved and paid as soon as reasonably possible.

 

	
         8.8  

	
Termination of Employment for Other than Death or Disability.  Unless the Committee determines otherwise at any time, in the event of the Participant’s Termination of Employment during the Performance Period for a reason other than due to death or Disability (and other than for Cause), then upon such Termination, the amount of the Participant’s Performance Units and number of Performance Shares shall be adjusted; the revised Awards shall be determined by multiplying the amount of the Performance Units and the number of Performance Shares, as applicable, by the number of months the Participant worked at least one day during the respective Performance Period divided by the number of months in the Performance Period, to be paid, if at all, at the same time and under the same terms that such outstanding Performance Units or Performance Shares would otherwise be paid; provided, however, if the Participant is not Retirement eligible and Terminates Employment voluntarily during the Performance Period for a grant of Performance Units or Performance Shares, then such Award shall be cancelled upon such Termination.  A Termination shall be deemed to be voluntary if it is recorded as such on the records of the Company, as determined by the Company in its sole discretion.

 

	
         8.9  

	
Termination of Employment for Cause.  In the event of the Termination of Employment of a Participant by the Company for Cause, all Performance Units and Performance Shares shall be forfeited by the Participant to the Company.

 

	
       8.10  

	
Nontransferability.  Performance Units and Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than in accordance with the AT&T Rules for Employee Beneficiary Designations.

 

	
Article 9.  

	
Beneficiary Designation.  In the event of the death of a Participant, distributions or Awards under this Plan, other than Restricted Stock, shall pass in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time.  A Participant’s most recent Beneficiary Designation that is applicable to awards under the 1996 Stock and Incentive Plan, the 2001 Incentive Plan, or the 2006 Incentive Plan will also apply to distributions or awards under this Plan unless and until the Participant provides to the contrary in accordance with the procedures set forth in such Rules.

 

	
Article 10.  

	
Employee Matters.

 

	
       10.1  

	
Employment Not Guaranteed.  Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s Employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or one of its Subsidiaries.

 

	
       10.2  

	
Participation.  No Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

 

	
       10.3  

	
Loyalty Conditions and Enforcement.  This section relates solely to Awards granted to a Participant who is an Officer Level Employee or a Senior Manager as of the date the Award is made.

 

(a) Each Award under the Plan is intended to closely align the Participant’s long-term interests with those of the Company and its shareholders, and the conditions set forth in subsections (b) or (d) hereof (collectively, the “Loyalty Conditions”) are intended to protect the Company’s critical need for each Participant’s loyalty to the Company and its shareholders.  If any Participant does not comply with a Loyalty Condition, either during employment or within the periods described below following Termination of Employment for any reason, then the Participant is acting contrary to the long-term interests of the Company, and there will be a failure of the consideration on which the Participant received any Award or Awards pursuant to the Plan.  Accordingly, unless otherwise provided in the Award, as a condition of such Award, the Participant is deemed to agree that he shall not, without obtaining the written consent of AT&T in advance, violate the Loyalty Provisions of this Section 10.3.  Unless otherwise expressly provided in an Award Agreement, if the Participant violates a Loyalty Condition, then the Company may terminate any outstanding, unexercised, unexpired, unpaid, or deferred Awards (“Award Termination”), rescind any exercise, payment or delivery pursuant to any Award or Awards (“Rescission”), or recapture any cash or Shares (whether restricted or unrestricted) issued pursuant to any Award or Awards, or proceeds from the Participant’s sale of such Shares (“Recapture”).

 

(b) During the Participant’s employment with the Company and any of its Subsidiaries and for a period of two years after a Termination of Employment for any reason, a Participant shall not, without the Company’s prior written authorization, (i) disclose to anyone outside the Company or use, other than in the Company’s business, any Confidential Information, or (ii) disclose any trade secrets of the Company, as that term is defined under Applicable Law, for as long as such information is not generally known to the Company’s competitors through no fault or negligence of the Participant.

 

“Confidential Information” means all information belonging to, or otherwise relating to the business of the Company, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Company has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Company’s business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Company, or any of the products or services made, developed or sold by the Company.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Company; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Agreement.

 

(c) Coincidentally with the exercise, receipt of payment, or delivery of cash or Shares pursuant to an Award, the Company may require that the Participant shall give a certification to the Company in writing if the Participant is not for any reason in full compliance with the terms and conditions of the Plan, including its Loyalty Conditions.  If a Termination of Employment has occurred for any reason, the Participant’s certification shall state the name and address of the Participant’s then-current employer or any entity for which the Participant performs business services and the Participant’s title, and shall identify any organization or business in which the Participant owns an equity interest of greater than five percent.

 

(d) If the Company determines, in its sole and absolute discretion, that (i) a Participant has violated any of the Loyalty Conditions, or (ii) during his or her employment by the Company or any of its Subsidiaries, or within two years after the Termination of Employment for any reason, a Participant has engaged in any of the following conduct:

 

	
(i)  

	
  owned, operated or controlled, or participated in the ownership, operation or control of, any business enterprise (including, without limitation, any corporation, partnership, proprietorship or other venture) that competes with the Company in the Restricted Business (defined below) anywhere in the Restricted Territory (defined below);

 

	
(ii)  

	
  become employed as an officer or executive by any business enterprise (including, without limitation, any corporation, partnership, proprietorship or other venture) that competes with the Company in the Restricted Business anywhere in the Restricted Territory, if such employment or engagement requires Participant to compete against the Company in the Restricted Business;

 

	
(iii)  

	
  solicited any nonclerical employee of the Company with whom the Participant had Contact during his or her employment to terminate employment with the Company; or

 

	
(iv)  

	
  committed any breach of Participant’s fiduciary duty or the duty of loyalty, as determined by Applicable Law,

 

then the Committee may, in its sole and absolute discretion, impose an Award Termination, Rescission, and/or Recapture with respect to any or all of the Participant’s Awards, including any Shares or cash associated therewith, or any proceeds thereof.  For purposes of this Agreement, the term “Restricted Business” means the business of providing communications or connectivity services, including both wireless and wire-lined telephone, messaging, Internet, data, and related services; the term “Restricted Territory” shall mean the state in which the Participant maintained his or her principal office with the Company on the date the Award was granted; and the term “Contact” means interaction between the Participant and the nonclerical employee during performance of Participant’s job responsibilities on behalf of the Company.

 

(e) Within ten days after receiving notice from the Company of any such activity described in subsection (d) above, the Participant shall deliver to the Company the cash or Shares acquired pursuant to any and all Awards, or, if Participant has sold the Shares, the gain realized, or payment received as a result of the rescinded exercise, payment, or delivery; provided, that if the Participant returns Shares that the Participant purchased pursuant to the exercise of an Option (or the gains realized from the sale of such Shares), the Company shall promptly refund the exercise price, without earnings or interest, that the Participant paid for the Shares.  Any payment by the Participant to the Company pursuant to this Section shall be made either in cash or by returning to the Company the number of Shares that the Participant received in connection with the rescinded exercise, payment, or delivery.  It shall not be a basis for Award Termination, Rescission or Recapture if, after a Termination of Employment, the Participant purchases, as an investment or otherwise, stock or other securities of an organization engaged in the Restricted Business, so long as (i) such stock or other securities are listed upon a recognized securities exchange or traded over the counter, and (ii) such investment does not represent more than a ten percent (10%) equity interest in the organization or business.

 

(f) Notwithstanding the foregoing provisions of this Section, the Company has sole and absolute discretion not to require Award Termination, Rescission and/or Recapture, and its determination not to require Award Termination, Rescission and/or Recapture with respect to any particular act by a particular Participant or Award shall not in any way reduce or eliminate the Company’s authority to require Award Termination, Rescission and/or Recapture with respect to any other act or Participant or Award.  Nothing in this Section shall be construed to impose obligations on the Participant to refrain from engaging in lawful competition with the Company after the Participant’s Termination of Employment that does not violate subsections (b) or (d) of this Section, other than any obligations that are part of any separate agreement between the Company and the Participant or that arise under Applicable Law.

 

(g) All administrative and discretionary authority given to the Company under this Section shall be exercised by the most senior human resources executive of the Company or such other person or committee (including without limitation the Committee) as the Committee may designate from time to time.

 

(h) If any provision within this Section is determined to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted by Applicable Law, and shall automatically be deemed amended in a manner consistent with its objectives and any limitations required under Applicable Law.

 

	
       10.4  

	
Reimbursement of Company for Unearned or Ill-gotten Gains.  Unless otherwise specifically provided in an Award Agreement, and to the extent permitted by Applicable Law, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, the Committee may, without obtaining the approval or consent of the Company’s shareholders or of any Participant, require that any Participant who personally engaged in one of more acts of fraud or misconduct that have caused or partially caused the need for such restatement or any current or former chief executive officer, chief financial officer, or executive officer, regardless of their conduct,  to reimburse the Company for all or any portion of any Awards granted or settled under this Plan (with each such case being a “Reimbursement”), or the Committee may require the Termination or Rescission of, or the Recapture associated with, any Award, in excess of the amount the Participant would have received under the accounting restatement.

 

 

 

 

	
Article 11.  

	
Change in Control.

 

Unless the Committee provides otherwise prior to the grant of an Award, upon the occurrence of a Change in Control, the following shall apply to such Award:

 

(a) Any and all Options granted hereunder to a Participant immediately shall become vested and exercisable upon the Termination of Employment of the Participant by the Company or by the Participant for “Good Reason”;

 

(b) Any Restriction Periods and all restrictions imposed on Restricted Stock and Restricted Stock Units shall lapse and they shall immediately become fully vested upon the Termination of Employment of the Participant by the Company or by the Participant for “Good Reason” provided, Restricted Stock Units shall be settled in accordance with the terms of the grant without regard to the Change in Control unless the Change in Control constitutes a “change in control event” within the meaning of Section 409A of the Code and such Termination of Employment occurs within two years following such Change in Control, in which case the Restricted Stock Units shall be settled and paid out with such Termination of Employment;

 

(c) Unless otherwise determined by the Committee, the payout of Performance Units and Performance Shares shall be determined exclusively by the attainment of the Performance Goals established by the Committee, which may not be modified after the Change in Control, and AT&T shall not have the right to reduce the Awards for any other reason;

 

(d) For purposes of this Plan, “Good Reason” means in connection with a termination of employment by a Participant within two (2) years following a Change in Control, (a) a material adverse alteration in the Participant’s position or in the nature or status of the Participant’s responsibilities from those in effect immediately prior to the Change in Control, or (b) any material reduction in the Participant’s base salary rate or target annual bonus, in each case as in effect immediately prior to the Change in Control, or (c) the relocation of the Participant’s principal place of employment to a location that is more than fifty (50) miles from the location where the Participant was principally employed at the time of the Change in Control or materially increases the time of the Participant’s commute as compared to the Participant’s commute at the time of the Change in Control (except for required travel on the Company’s business to an extent substantially consistent with the Participant’s customary business travel obligations in the ordinary course of business prior to the Change in Control).

 

In order to invoke a Termination of Employment for Good Reason, a Participant must provide written notice to AT&T or the Employer with respect to which the Participant is employed or providing services of the existence of one or more of the conditions constituting Good Reason within ninety (90) days following the Participant’s knowledge of the initial existence of such condition or conditions, specifying in reasonable detail the conditions constituting Good Reason, and AT&T shall have thirty (30) days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition.  In the event that AT&T or the Employer fails to remedy the condition constituting Good Reason during the applicable Cure Period, the Participant’s “separation from service” (within the meaning of Section 409A of the Code) must occur, if at all, within two (2) years following such Cure Period in order for such termination as a result of such condition to constitute a Termination of Employment for Good Reason.

 

	
Article 12.  

	
Amendment, Modification, and Termination.

 

	
        12.1  

	
Amendment, Modification, and Termination.  The Board or the Disinterested Committee may at any time and from time to time, alter or amend the Plan or any Award in whole or in part or suspend or terminate the Plan in whole or in part.

 

	
       12.2  

	
Awards Previously Granted.  No termination, amendment, or modification of the Plan or any Award (other than Performance Shares or Performance Units) shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award; provided, however, that any such modification made for the purpose of complying with Section 409A of the Code may be made by the Company without the consent of any Participant.

 

	
       12.3  

	
Delay in Payment. To the extent required in order to avoid the imposition of any interest and/or additional tax under Section 409A(a)(1)(B) of the Code, any amount that is considered deferred compensation under the Plan or Agreement and that is required to be postponed pursuant to Section 409A of the Code, following the a Participant’s Termination of Employment shall be delayed for six months if a Participant is deemed to be a “specified employee” as defined in Section 409A(a)(2)(i)(B) of the Code; provided that, if the Participant dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of Section 409A shall be paid to the executor or administrator of the decedent’s estate within 60 days following the date of his death.  A “Specified Employee” means any Participant who is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the twelve (12) month period ending on each December 31st (such twelve (12) month period is referred to below as the “identification period”).  All Participants who are determined to be key employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Specified Employees for purposes of the Plan during the twelve (12) month period that begins on the first day of the 4th month following the close of such identification period.

 

	
Article 13.  

	
Withholding.

 

	
        13.1  

	
Tax Withholding.  Unless otherwise provided by the Committee, the Company shall deduct or withhold an amount sufficient to satisfy Federal, state, and local taxes (including but not limited to the Participant’s employment tax obligations) required by law to be withheld with respect to any taxable event arising or as a result of this Plan (“Withholding Taxes”).

 

	
       13.2  

	
Share Withholding.  Unless otherwise provided by the Committee, upon the exercise of Options, the lapse of restrictions on Restricted Stock, the distribution of Performance Shares in the form of Stock, or any other taxable event hereunder involving the transfer of Stock to a Participant, the Company shall withhold Stock equal in value, using the Fair Market Value on the date determined by the Company to be used to value the Stock for tax purposes, to the Withholding Taxes applicable to such transaction.

 

Any fractional Share of Stock payable to a Participant shall be withheld as additional Federal withholding, or, at the option of the Company, paid in cash to the Participant.

 

Unless otherwise determined by the Committee, when the method of payment for the Exercise Price is from the sale by a stockbroker pursuant to Section 6.7(b)(ii), herein, of the Stock acquired through the Option exercise, then the tax withholding shall be satisfied out of the proceeds.  For administrative purposes in determining the amount of taxes due, the sale price of such Stock shall be deemed to be the Fair Market Value of the Stock.

 

If permitted by the Committee, prior to the end of any Performance Period a Participant may elect to have a greater amount of Stock withheld from the distribution of Performance Shares to pay withholding taxes; provided, however, the Committee may prohibit or limit any individual election or all such elections at any time.

 

Alternatively, or in combination with the foregoing, the Committee may require Withholding Taxes to be paid in cash by the Participant or by the sale of a portion of the Stock being distributed in connection with an Award, or by a combination thereof.

 

	
Article 14.  

	
Successors.

 

All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

 

	
Article 15.  

	
Legal Construction.

 

	
       15.1  

	
Gender and Number.  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

 

	
       15.2  

	
Severability.  In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

 

	
       15.3  

	
Requirements of Law.  The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

	
       15.4  

	
Errors.  At any time AT&T may correct any error made under the Plan without prejudice to AT&T.  Such corrections may include, among other things, changing or revoking an issuance of an Award.

 

	
       15.5  

	
Elections and Notices.  Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind shall be made on forms prepared by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates or shall be made in such other manner as permitted or required by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates, including but not limited to elections or notices through electronic means, over the Internet or otherwise.  An election shall be deemed made when received by AT&T (or its designated agent, but only in cases where the designated agent has been appointed for the purpose of receiving such election), which may waive any defects in form.  AT&T may limit the time an election may be made in advance of any deadline.

 

Where any notice or filing required or permitted to be given to AT&T under the Plan, it shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President-Human Resources of AT&T or his or her successor.  Such notice shall be deemed given on the date of delivery.

 

Notice to the Participant shall be deemed given when mailed (or sent by telecopy) to the Participant’s work or home address as shown on the records of AT&T or, at the option of AT&T, to the Participant’s e-mail address as shown on the records of AT&T.

 

It is the Participant’s responsibility to ensure that the Participant’s addresses are kept up to date on the records of AT&T.  In the case of notices affecting multiple Participants, the notices may be given by general distribution at the Participants’ work locations.

 

	
       15.6  

	
Governing Law.  To the extent not preempted by Federal law, the Plan, and all awards and agreements hereunder, and any and all disputes in connection therewith, shall be governed by and construed in accordance with the substantive laws of the State of Texas, without regard to conflict or choice of law principles which might otherwise refer the construction, interpretation or enforceability of this Plan to the substantive law of another jurisdiction.

 

	
       15.7  

	
Venue.  Because awards under the Plan are granted in Texas, records relating to the Plan and awards thereunder are located in Texas, and the Plan and awards thereunder are administered in Texas, the Company and the Participant to whom an award under this Plan is granted, for themselves and their successors and assigns, irrevocably submit to the exclusive and sole jurisdiction and venue of the state or federal courts of Texas with respect to any and all disputes arising out of or relating to this Plan, the subject matter of this Plan or any awards under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any awards or the terms and conditions of this Plan.  To achieve certainty regarding the appropriate forum in which to prosecute and defend actions arising out of or relating to this Plan, and to ensure consistency in application and interpretation of the Governing Law to the Plan, the parties agree that (a) sole and exclusive appropriate venue for any such action shall be an appropriate federal or state court in Dallas County, Texas, and no other, (b) all claims with respect to any such action shall be heard and determined exclusively in such Texas court, and no other, (c) such Texas court shall have sole and exclusive jurisdiction over the person of such parties and over the subject matter of any dispute relating hereto and (d) that the parties waive any and all objections and defenses to bringing any such action before such Texas court, including but not limited to those relating to lack of personal jurisdiction, improper venue or forum non conveniens.

 

	
       15.8  

	
409A Compliance.  Awards under the Plan may be structured to be exempt from or be subject to Section 409A of the Code.  To the extent that Awards granted under the Plan are subject to Section 409A of the Code, the Plan will be construed and administered in a manner that enables the Plan and such Awards to comply with the provisions of Section 409A of the Code.ex10-14.htm

Exhibit 10.14

CHANGE OF CONTROL AGREEMENT

Originally Entered into as of November 29, 2007

 

Amended and Restated December 10, 2010

 

           This Change of Control Agreement (this “Agreement”) which was orginally entered into as of the 29th day of November, 2007, and hereby amended and restated as of the 10th day of December, 2010, by and between HickoryTech Corporation, a Minnesota corporation (the “Company”), and Walter A. Prahl (the “Executive”).

 

WITNESSETH:

 

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

 

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

 

           WHEREAS, it is desirable and in the best interests of the Company and its stockholders to provide inducement for the Executive (1) to remain in the service of the Company in order to facilitate an orderly transition in the event of a change in control of the Company and (2) to remain in the service of the Company in the event of any threatened or anticipated change in control of the Company; and

 

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

 

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

 

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

 

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

 

	
1.

	
Right to Payment.  If the Executive’s employment with the Company or its Successor is terminated within three (3) years following an Event (as defined in Paragraph 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 Benefits set out in Paragraph 4 below.  If a subsequent Event occurs, and if the Executive is an employee of the Company or its Successor, without limiting any rights the Executive may have, Executive shall have all rights provided by the first sentence of this Paragraph 1 relating to such subsequent event.

 

	
2.

	
Change of Control Events.  An “Event” shall be deemed to have occurred if:

 

	
  

	
(a)

	
A majority of the directors of the Company shall be persons other than persons

 

	
  

	
(1)

	
for whose election proxies shall have been solicited by the Board of Directors of the Company; or

 

	
  

	
(2)

	
who are then serving as directors and who were initially appointed or elected by the Board of Directors to fill vacancies on the Board of Directors caused by death or resignation (but not by removal), or to fill newly created directorships created by the Board of Directors;

 

provided, however, that a person 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 an actual or threatened election contest with respect to the threatened election or removal of directors (or other actual or threatened solicitation of proxies or consents) by or on behalf of any person other than the Board of Directors of the Company; or

 

  

  

 

  

	
  

	
(b)

	
30% or more of the outstanding voting stock of the Company or all or substantially all of the assets or stock of the Company is acquired or beneficially owned (as defined in Rule 13d-3 under the Securities and Exchange Act of 1934, as amended, or any successor rule thereto), directly or indirectly, by any Person (other than by the Company, a subsidiary of the Company, an employee benefit plan (or related trust) sponsored or maintained by the Company or one or more of its subsidiaries, or by the Employee or a group of persons, including the Employee, acting in concert) or group of Persons, acting in concert, whether by acquisition of assets, merger, consolidation, statutory share exchange (other than 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 merged into or consolidated with another corporation (other than a subsidiary of the Company) or a statutory share exchange for the Company’s outstanding voting stock of any class is consummated unless (i) a majority of the voting power of the voting stock of the surviving corporation is, immediately following the merger, consolidation or statutory share exchange, beneficially owned, directly or indirectly, by the Employee (or a group of Persons, including the Employee, acting in concert) or (ii) immediately following the merger, consolidation or statutory share exchange, more than 50% of the voting power of the voting stock of the surviving corporation is beneficially owned, directly or indirectly, by the persons who beneficially owned voting stock of the Company immediately prior to such merger, consolidation or statutory share exchange in substantially the same proportion as their ownership of the voting stock of the Company immediately prior to such merger, consolidation or statutory share exchange; or

 

	
  

	
(d)

	
The shareholders of the Company approve the complete liquidation or dissolution of the Company.

 

	
3.

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

 

	
  

	
(a)

	
Death.  The Executive’s death.

 

	
  

	
(b)

	
Disability.  The Executive’s disability.  “Disability” shall mean the inability of the Executive to perform the duties and responsibilities of his or her employment by reasons of illness or other physical or mental impairment or condition, if such inability continues for an uninterrupted period of ninety (90) calendar days or more.  A period of inability shall be “uninterrupted” unless and until the Executive is no longer considered disabled by the Company’s Long Term Disability Insurer.

 

	
  

	
(1)

	
The determination of whether the Executive is suffering from a “disability” as defined herein shall be made.  The determination of whether the Executive is disabled shall be on the same basis as the Company provided Long-Term Disability benefit, which is a fully insured benefit provided by an independent third party.  If the Executive meets the disability criteria for long term disability benefits under this Company provided benefit, the Executive will also be considered disabled under this Agreement.

 

	
  

	
(2)

	
The Executive agrees to make himself or herself available for and to submit to examinations by such physicians as may be requested by the Company or the Company’s Long Term Disability Insurer.  The Executive’s failure to submit to examinations by such physicians as may be requested shall disqualify Executive from receiving Benefits under this Agreement.

 

	
  

	
(c)

	
Voluntary Termination.  The Executive’s voluntary retirement or voluntary termination of employment.  However, the Executive’s retirement or termination of employment shall not be considered voluntary if, following the Event and subject to the provisions for notification set forth below, one or more of the following has occurred without Executive’s express written consent and results in a material negative change to Executive:

 

  

2

  

 

	
  

	
(1)

	
There has been a failure to provide the Executive with substantially equivalent reporting responsibilities, titles, offices or positions, or Executive has been removed from, or has not been re-elected to, any of such positions, which has the effect of materially diminishing the Executive’s responsibility or authority;

 

	
  

	
(2)

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

 

	
  

	
(3)

	
There has been a failure to provide the Executive with substantially equivalent office space or administrative support; or

 

	
  

	
(4)

	
Executive has been required 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 time of the Event, or Executive is required to undertake substantially more job-related traveling.

 

In the event of an occurrence of the type enumerated in subparagraphs (1) through (4) above, Executive shall, within ten (10) days following Executive’s actual knowledge of such occurrence, notify the Company in writing of the specific occurrence which Executive believes would render his/her retirement or termination not voluntary and, following receipt of such notice, the Company shall be afforded a period of thirty (30) days within which to remedy such occurrence. If the Company fails to timely remedy, the occurrences specified in subparagraphs (1) through (4) above may be relied upon by Executive to characterize his/her retirement or termination as not voluntary, provided that such termination shall occur no later than sixty (60) days following the occurances specified in subparagraphs (1) through (4) above.  In the event that Executive fails to provide such notice or to afford such opportunity to remedy the occurrence, or in the event the Company does remedy the occurrence within thirty (30) days, then none of the occurrences specified in subparagraphs (1) through (4) above may be relied upon by Executive to characterize his/her retirement or termination as not voluntary.

 

	
  

	
(d)

	
Involuntary Termination For Cause.  The Executive’s involuntary termination “for cause.”  “For cause” shall mean:

 

	
  

	
(1)

	
A persistent failure by the 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 not remedied within a reasonable period of time after the Executive’s receipt of written notice from the Company or its Successor specifying the act or omission constituting such failure;

 

	
  

	
(2)

	
A criminal act or acts undertaken by the Executive and intended to result in substantial gain or personal enrichment of the Executive at the expense of the Company or its Successor;

 

	
  

	
(3)

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

 

	
  

	
(4)

	
The conviction of the Executive of a felony.

 

	
  

	
(e)

	
Subsequent Occurrences.  If the Executive’s employment is terminated under circumstances in which Executive would be entitled to Benefits as defined in Paragraph 4, and thereafter there is an occurrence that would have justified the termination of the Executive’s employment with no entitlement to Benefits (such as the Executive’s death, disability, voluntary termination, or involuntary termination for cause [all as defined above in this Paragraph]), that subsequent occurrence shall not disqualify the Executive (or the Executive’s legal representative) from receiving or continuing to receive the Benefits provided under this Agreement.  If the Executive’s employment is terminated under circumstances in which the Executive would be entitled to Benefits as defined in Paragraph 4, and thereafter the executive is re-employed by the Company, the Executive would be entitled to continue to receive payments provided under this Agreement.

 

	
4.

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

 

  

3

  

 

	
  

	
(a)

	
Lump Sum Payment.  The Executive shall be entitled to a lump sum cash payment in the amount of One Month’s Salary times 24.  One Month’s Salary shall be determined by taking the sum of: (i) the Executive’s then-current annual base salary for the year in which the termination occurs; (ii) the bonus that the Executive would have earned under the HickoryTech Annual Executive Incentive Plan for the year in which the termination occurs had “target” goals been achieved; and (iii) the target bonus dollar amount awarded to the Executive under the Long-Term Executive Incentive Program for the performance period that begins in the year in which the termination occurs; and dividing that sum by twelve (12).  The foregoing sum shall be determined without regard to any reduction in pay under subparagraph 3(c).  This lump sum payment shall be made by the Company or its Successor at the time of the Executive’s termination of employment, and shall be subject to withholding of all taxes and other amounts required by law to be withheld or paid to others.

 

	
  

	
(b)

	
Section 280G Parachute Tax.  In the event it shall be determined that any payment or distribution by the Company or other amount with respect to the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable 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 the Internal Revenue Code or any interest or penalties are (or will be) incurred by the Executive with respect to the excise tax imposed by Section 280G of the Internal Revenue Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), and if a reduction in the Payment sufficient to avoid the Excise Tax would result in an increase in the total amount of Payment net of all applicable taxes, then, and only then, the Payment shall be reduced to the amount that, when combined with all other payments and transfers of property required to be taken into account under Section 280G of the Internal Revenue Code, is $1 less than the smallest sum that would subject the Executive to the Excise Tax.

 

	
  

	
(c)

	
Continued Insurance Coverage.  The Executive shall be entitled to continuation of his or her Company-provided insurance coverage (health, life, dental, accidental death and dismemberment, and any other applicable insured health and welfare benefit programs, excluding short and long-term disability) for two years after the Executive’s employment termination, at the same levels and coverages and on the same terms and conditions as if the Executive were still an active employee of the Company or its Successor throughout such period, including the right (if provided to active employees) to elect spousal or family coverage.  In the event that the participation 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 to provide the Executive with benefits substantially similar to those which the Executive would otherwise be entitled to receive under such plans and programs.  Notwithstanding the foregoing, however, the Company or its Successor shall not be required to provide any continuation coverage under this subparagraph 4(c) to the extent that such coverage is duplicative of any coverage the Executive is receiving under any other policy provided at the expense of the Company.

 

  

4

  

 

	
  

	
(d)

	
Continuation of any other benefits or perquisites being received by the Executive at the time of the Executive’s employment termination will be negotiated with the Company or its Successor.

 

	
5.

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

 

	
6.

	
No Duty to Mitigate.  The Executive shall not be required to mitigate the amount of any payment or other benefit provided for in Paragraph 4 by seeking other employment or otherwise, nor (except as specifically provided in subparagraph 4(c) above) shall the amount of any payment or other benefit provided for in Paragraph 4 be reduced by any compensation earned by the Executive as the result of employment after the Executive’s employment termination.

 

	
7.

	
Definition of Certain 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 or substantially all of the assets or stock of the Company.

 

	
  

	
(b)

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

 

	
8.

	
Successors and Assigns.

 

	
  

	
(a)

	
This Agreement shall be binding upon and inure to the benefit of the legal representatives, successors, and assigns of the parties hereto; provided, however, that the Executive shall not have any right to assign, pledge, or otherwise dispose of or transfer any interest in this Agreement or any payments hereunder, whether directly or indirectly or in whole or in part, without the written consent of the Company or its Successor.

 

	
  

	
(b)

	
The Company will require any Successor, by agreement in form and substance satisfactory to the Executive, to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 

	
9.

	
Attorneys’ Fees, Costs and Interest.  If the Executive (or the Executive’s legal representative) successfully challenges, in whole or in part, the refusal of the Company or its Successor to provide Benefits under this Agreement or to abide by any other provision of this Agreement, then the Company or its Successor 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 provide Benefits 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 by the Company or its Successor, calculated by reference to the prime rate as in effect during the applicable period.

 

	
10.

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

 

  

5

  

 

	
11.

	
Notices.  All notices, requests, and demands given to or made pursuant hereto shall be in writing and be either hand-delivered or mailed to any such party at its address which:

 

	
  

	
(a)

	
In the case of the Company shall be:

 

HickoryTech Corporation

221 East Hickory Street

P.O. Box 3248

Mankato, MN  56002-3248

	
  

	
(b)

	
In the case of the Executive shall be:

 

Walter A. Prahl

Duluth, MN 55803

Either party may, by notice hereunder, designate a changed address.  Any notice, if properly addressed and sent prepaid by registered or certified mail, shall be deemed dispatched on the registered date or that stamped on the certified mail receipt, and shall be deemed received within the second business day thereafter or when it is actually received, whichever is sooner.  Any notice sent regular mail or hand-delivered shall be deemed received when it is actually received by the other party.

 

	
12.

	
Severability.  In the event that any portion of this Agreement may be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the other portions of this Agreement, and any court of competent jurisdiction may so modify the objectionable provision as to make it valid, reasonable, and enforceable.

 

	
13.

	
Incentive Compensation Plan and Stock Options.  In the case of a payment being due as described in Paragraph 1, the Executive’s benefits under the Annual Award of the HickoryTech Corporation Executive Incentive Plan shall become immediately payable and any outstanding stock options and unvested restricted shares shall be immediately vested.  Any Restricted Stock or Performance Stock Awards under the Long Term Executive Incentive Program which are payable due to achievement of Performance Objectives through the year in which the payment under this Agreement becomes due will be paid and fully vested immediately upon the audited close of the fiscal year financials, but in no case later than March 15 of the year following when the payment becomes due under this Agreement.  The Long Term Executive Incentive Program Awards that are not earned based on results at the close of the fiscal year in which the payment under this Agreement becomes due will not be payable.  Awards issued to the Executive shall immediately have all restrictions removed.

 

	
14.

	
Amendment or Termination of this Agreement.

 

	
  

	
(a)

	
Prior to the Occurrence of an Event.  Prior to the occurrence of an Event, the Company, by resolution of the Compensation Committee of the Board of Directors, has the unilateral power to amend or terminate this Agreement at any time and for any reason, and may do so without the Executive’s consent.  Notwithstanding the foregoing, however:

 

	
  

	
(1)

	
No such amendment or termination of this Agreement shall be effective with respect to the Executive until two weeks following the date that Executive is provided with written notice of the change.

 

	
  

	
(2)

	
No such amendment or termination of this Agreement shall be effective with respect to the Executive, unless otherwise agreed by the Executive, if an Event occurs during the one-year period following the date of adoption of the resolution amending or terminating this Agreement.

 

	
  

	
(b)

	
After the Occurrence of an Event.  After the occurrence of an Event, the Company, by resolution of the Compensation Committee of the Board of Directors, may amend or terminate this Agreement, but no such amendment or termination of this Agreement shall be effective unless the Executive consents thereto in writing.  Any waiver by an Executive of rights of any benefits due under this agreement for any reason (rehire or other) must be express and in writing.

 

  

6

  

 

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

 

	
EXECUTIVE

	
HICKORYTECH CORPORATION

	 	 
	 	 
	
/s/ Walter A. Prahl

	
By: /s/ John W. Finke

	
Walter A. Prahl

	  
	  	
Its:  President and Chief Executive Officer

  

7

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