CHANGE OF CONTROL AGREEMENT
Exhibit
10.1
This
Change of Control Agreement (this “Agreement”) is entered into as of the 29th
day of November, 2007, by and between HickoryTech Corporation, a Minnesota
corporation (the “Company”), and Xxxxxx X. Xxxxx (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:
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1.
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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
reasonspecified 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.
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2.
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Change
of Control Events. An “Event” shall be deemed to have
occurred if:
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(a)
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A
majority of the directors of the Company shall be persons other
than
persons
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(1)
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for
whose election proxies shall have been solicited by the Board of
Directors
of the Company; or
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(2)
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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;
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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
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(b)
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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;
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(c)
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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 70% 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
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(d)
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The
shareholders of the Company approve the complete liquidation or
dissolution of the Company.
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3.
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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:
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(a)
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Death. The
Executive’s death.
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(b)
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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.
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(1)
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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.
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(2)
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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.
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(c)
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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:
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(1)
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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;
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(2)
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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;
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(3)
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There
has been a failure to provide the Executive with substantially
equivalent
office space or administrative support;
or
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(4)
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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.
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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. 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 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.
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(d)
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Involuntary
Termination For Cause. The Executive’s involuntary
termination “for cause.” “For cause” shall
mean:
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(1)
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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;
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(2)
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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;
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(3)
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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
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(4)
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The
conviction of the Executive of a
felony.
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(e)
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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.
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4.
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Benefits. If
the Executive’s employment is terminated under circumstances entitling the
Executive to Benefits, the Executive shall receive the
following:
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(a)
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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 Executive’s highest
annual compensation for a calendar year (including base salary,
the
HickoryTech Executive Incentive Plan bonuses paid in that calendar
year,
stock grants under the Long Term Executive Incentive Program and
any other
incentive payments with the exception of stock options) during
the
five-year period prior to the Executive’s termination and dividing that
amount by twelve (12). For executives who have not yet been
eligible to receive a payment under the HickoryTech Executive Incentive
Plan, or who have only been eligible for one bonus payment under
the
HickoryTech Executive Incentive Plan due to their time in the position
or
with the Company, One Month’s Salary will be determined by taking one
month of current base salary and adding it to the greater
of:
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(1)
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the
bonus percentage for which the Executive is eligible, calculated
at the
target payout as indicated in the Hickory Tech Executive Incentive
Plan,
divided by twelve (12); or
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(2)
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the
actual bonus payment received, or calculated at the close of the
fiscal
year but not yet received due to timing of the payout as indicated
in the
HickoryTech Executive Incentive Plan, divided by twelve
(12).
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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.
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(b)
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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.
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(c)
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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(d) 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.
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(d)
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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.
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5.
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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.
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6.
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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(d) 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.
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7.
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Definition
of Certain Terms.
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(a)
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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.
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(b)
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Person. “Person”
means an individual, partnership, corporation, estate, trust, or
other
entity.
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8.
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Successors
and Assigns.
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(a)
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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.
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(b)
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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.
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9.
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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):
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(a)
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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
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(b)
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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.
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10.
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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.
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11.
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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:
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(a)
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In
the
case of the Company shall be:
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HickoryTech
Corporation
000
Xxxx
Xxxxxxx Xxxxxx
X.X.
Xxx
0000
Xxxxxxx,
XX 00000-0000
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(b)
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In
the
case of the Executive shall be:
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Xxxxxx
X.
Xxxxx
0000
0xx
Xxxxxx
Xxxxxx,
XX 00000
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.
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12.
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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.
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13.
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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.
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14.
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Amendment
or Termination of this
Agreement.
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(a)
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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:
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(1)
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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.
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(2)
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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.
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(b)
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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.
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IN
WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date set out above.
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EXECUTIVE
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HICKORYTECH
CORPORATION
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/s/
Xxxxxx X. Xxxxx
Xxxxxx
X. Xxxxx
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By:
/s/ Xxxx X. Xxxxx
Its: President
and Chief Executive Officer
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