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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934 (Amendment No. )
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Preliminary Proxy
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Soliciting Material Under Rule
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Confidential, For Use of
the
Commission Only (as permitted
by Rule 14a-6(e)(2)) |
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Definitive Proxy
Statement |
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Definitive Additional
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Consolidated Communications Holdings, Inc. |
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(Name of Registrant as
Specified In Its Charter) |
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
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Table of Contents
CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 4, 2015
To Our
Stockholders:
The 2015 annual meeting of
stockholders of Consolidated Communications Holdings, Inc. will be held at
Consolidated Communications’ Plymouth office, 2950 Xenium Lane North, Suite 138,
Plymouth, Minnesota 55441 on May 4, 2015, at 9:00 a.m., central time. The 2015
annual meeting of stockholders is being held for the following
purposes:
1.
To elect Richard A. Lumpkin and Timothy D. Taron as Class I directors to serve
for a term of three years, in accordance with our amended and restated
certificate of incorporation and amended and restated bylaws (Proposal No.
1);
2.
To ratify the appointment of Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2015 (Proposal
No. 2);
3.
To approve certain provisions of the Consolidated Communications Holdings, Inc.
2005 Long-Term Incentive Plan
(Proposal No. 3); and
4.
To transact such other business as may properly come before the annual meeting
and any adjournment or postponement thereof.
Only stockholders of record at
the close of business on March 11, 2015 are entitled to vote at the meeting or
at any postponement or adjournment thereof.
We hope that as many
stockholders as possible will personally attend the meeting. Whether or not you
plan to attend the meeting, please complete the enclosed proxy card and sign,
date and return it promptly so that your shares will be represented. You also
may vote your shares by telephone or through the Internet by following the
instructions set forth on the proxy card. Submitting your proxy in writing, by
telephone or through the Internet will not prevent you from voting in person at
the meeting.
| By
Order of the Board of Directors, |
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|
Steven J. Shirar
Chief Information Officer
& Secretary |
March 30, 2015
Important Notice Regarding
the Availability of Proxy Materials for the Stockholder Meeting to Be Held on
May 4, 2015 — Our Proxy Statement and 2014 Annual Report to Stockholders are
available at www.edocumentview.com/cnsl.
Table of Contents
TABLE OF
CONTENTS
-i-
Table of Contents
-ii-
Table of Contents
-iii-
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CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
121 South 17th Street
Mattoon, Illinois 61938
PROXY
STATEMENT
This proxy statement contains
information related to the 2015 annual meeting of stockholders of Consolidated
Communications Holdings, Inc., a Delaware corporation (the “Company,”
“Consolidated,” “we,” “our” or “us”), that will be held at our Plymouth office,
2950 Xenium Lane North, Suite 138, Plymouth, Minnesota 55441, on May 4, 2015, at
9:00 a.m., central time, and at any postponements or adjournments thereof. The
approximate first date of mailing for this proxy statement and proxy card, as
well as a copy of our combined 2014 annual report to stockholders and annual
report on Form 10-K for the year ended December 31, 2014, is March 30,
2015.
ABOUT THE MEETING
What is the purpose of this
proxy statement?
The purpose of this proxy
statement is to provide information regarding matters to be voted on at the 2015
annual meeting of our stockholders. Additionally, it contains certain
information that the Securities and Exchange Commission (the “SEC”) requires us
to provide annually to stockholders. The proxy statement is also the document
used by our board to solicit proxies to be used at the 2015 annual meeting.
Proxies are solicited by our board to give all stockholders of record an
opportunity to vote on the matters to be presented at the annual meeting, even
if the stockholders cannot attend the meeting. The board has designated Steven
J. Shirar and Matthew K. Smith as proxies, who will vote the shares represented
by proxies at the annual meeting in the manner indicated by the
proxies.
What proposals will be
voted on at the annual meeting?
Stockholders will vote on the
following proposals at the annual meeting:
| ● |
the election of Richard
A. Lumpkin and Timothy D. Taron as Class I directors to serve for a term
of three years, in accordance with our amended and restated certificate of
incorporation and amended and restated bylaws (Proposal No. 1);
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| ● |
the ratification of the
appointment of Ernst & Young LLP as our independent registered public
accounting firm (the “independent auditors”), for the fiscal year ending
December 31, 2015 (Proposal No. 2); |
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| ● |
the approval of certain
provisions of the Consolidated Communications Holdings, Inc. 2005
Long-Term Incentive Plan (Proposal No. 3); and |
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| ● |
any other business
properly coming before the annual meeting and any adjournment or
postponement thereof. |
Who is entitled to
vote?
Each outstanding share of our
common stock entitles its holder to cast one vote on each matter to be voted
upon at the annual meeting. Only stockholders of record at the close of business
on the record date, March 11, 2015, are entitled to receive notice of the annual
meeting and to vote the shares of common stock that they held on that date at
the meeting, or any postponement or adjournment of the meeting. If your shares
are held for you by a
Table of Contents
beneficial holder in “street
name” please refer to the information forwarded to you by your bank, broker or
other holder of record to see what you must do to vote your shares. Please see
the next question below on this page for a description of a beneficial owner in
“street name.”
A complete list of
stockholders entitled to vote at the annual meeting will be available for
examination by any stockholder at our corporate headquarters, 121 South 17th
Street, Mattoon, Illinois 61938, during normal business hours for a period of
ten days before the annual meeting and at the time and place of the annual
meeting.
What is the difference
between a stockholder of record and a beneficial holder of
shares?
If your shares are registered
directly in your name with our transfer agent, Computershare Trust Company,
N.A., you are considered a stockholder of record with respect to those shares.
If this is the case, we have sent or provided proxy materials directly to
you.
If your shares are held in a
stock brokerage account or by a bank or other nominee, you are considered the
“beneficial holder” of the shares held for you in what is known as “street
name.” If this is the case, the proxy materials have been forwarded to you by
your brokerage firm, bank or other nominee, which is considered the stockholder
of record with respect to these shares. As the beneficial holder, you have the
right to direct your broker, bank or other nominee how to vote your shares.
Please contact your broker, bank, or other nominee for instructions on how to
vote any shares you beneficially own.
Who can attend the
meeting?
All stockholders of record as
of March 11, 2015, or their duly appointed proxies, may attend the meeting.
Cameras, recording devices and other electronic devices will not be permitted at
the meeting. If you hold your shares in “street name,” you will need to bring a
copy of a brokerage statement reflecting your stock ownership as of the record
date and check in at the registration desk at the meeting.
What constitutes a
quorum?
A quorum of stockholders is
necessary to hold the annual meeting. The presence at the meeting, in person or
by proxy, of the holders of a majority of the shares of common stock outstanding
on the record date will constitute a quorum. As of March 11, 2015, the record
date, 50,489,726 shares of our common stock were outstanding. Proxies received
but marked as withheld, abstentions or broker non-votes will be included in the
calculation of the number of shares considered present at the meeting for
purposes of establishing a quorum. In the event that a quorum is not present at
the annual meeting, we expect that the annual meeting will be adjourned or
postponed to solicit additional proxies.
How do I
vote?
If you are a stockholder of
record, you may vote by any of the following methods:
| ● |
Internet.
Electronically through the Internet by accessing our materials using the
website listed on your proxy card. To vote through the Internet, you
should sign on to this website and follow the procedures described at the
website. Internet voting is available 24 hours a day, and the procedures
are designed to authenticate votes cast by using a personal identification
number located on your proxy card. These procedures allow you to give a
proxy to vote your shares and to confirm that your instructions have been
properly recorded. If you vote through the Internet, you should not return
your proxy card. If you vote through the Internet, your proxy will be
voted as you direct on the website. |
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| ● |
Mail. By returning your proxy through the mail.
If you complete and properly sign the accompanying proxy card and return
it to us, it will be voted as you direct on the proxy card. You should
follow the instructions set forth on the proxy card, being sure to
complete it, to sign it and to mail it in the enclosed postage-paid
envelope. |
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| ● |
Telephone. By
calling 1-800-652-8683 (VOTE). This toll free number is also included on
the proxy card. Telephone voting is available 24 hours a day, and the
procedures are designed to authenticate votes cast by using a personal
identification number located on your proxy card. These procedures allow
you to give a proxy to vote your shares and to confirm that your
instructions have been properly recorded. If you vote by telephone, you
should not return your proxy card. |
|
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| ● |
In
Person. In person at the
meeting. |
We recommend that you vote in
advance even if you plan to attend the meeting so that we will know as soon as
possible that enough votes will be present for us to hold the meeting. If you
are a stockholder of record and attend the meeting, you may vote at the meeting
or deliver your completed proxy card in person.
If your shares are held in
“street name,” please refer to the information forwarded to you by your bank,
broker or other holder of record to see what you must do in order to vote your
shares, including whether you may be able to vote electronically through your
bank, broker or other record holder. If so, instructions regarding electronic
voting will be provided by the bank, broker or other holder of record to you as
part of the package that includes this proxy statement. If you are a “street
name” stockholder and you wish to vote in person at the meeting, you will need
to obtain a proxy from the institution that holds your shares and present it to
the inspector of elections with your ballot when you vote at the annual
meeting.
Can I revoke or change my
vote after I return my proxy card?
Yes. Even after you have
submitted your proxy, you may revoke or change your vote at any time before the
proxy is voted by:
| ● |
delivering to our
Secretary at the address on the first page of this proxy statement a
written notice of revocation of your proxy by mail, by telephone or
through the Internet; |
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| ● |
delivering a duly
executed proxy bearing a later date; or |
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| ● |
voting in person at the
annual meeting. |
If your shares are held in
“street name,” you may revoke or change your vote by voting in person at the
annual meeting if you obtain a proxy as described in the answer to the previous
question.
How many votes are required
for the proposals to pass?
Election of Directors
(Proposal No. 1). Directors are
elected by a plurality vote. Accordingly, the two director nominees who receive
the greatest number of votes cast will be elected.
Ratification of the
Appointment of Ernst & Young LLP (Proposal No. 2), Approval of Certain
Provisions of the Consolidated Communications Holdings, Inc. 2005 Long-Term
Incentive Plan (Proposal No. 3), and Approval of any Other Proposals.
The vote required for the
ratification of the appointment of Ernst & Young LLP, the approval of
certain provisions of the Consolidated Communications Holdings, Inc. 2005
Long-Term Incentive Plan, and the approval of any other proposal not presently
anticipated that may properly come before the annual meeting or any adjournment
or postponement of the meeting, is the approval of a majority of the votes
present, in person or by proxy, and entitled to vote on the matter.
How are abstentions and
broker non-votes treated?
With respect to Proposal No.
1, abstentions will have no effect. If a stockholder abstains from voting on
Proposal No. 2 or Proposal No. 3, it will have the same effect as a vote
“AGAINST” that proposal. Broker non-votes and shares as to which proxy authority
has been withheld with respect to any matter are not entitled to vote for
purposes of determining whether stockholder approval for that matter has been
obtained and, therefore, will have no effect on the outcome of the vote on any
such matter. A broker “non-vote” occurs on a proposal when shares held of record
by a broker are present or represented at the meeting but the broker is not
permitted to vote on that proposal without instruction from the beneficial owner
of the shares and no instruction has been given.
3
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What if I do not specify a
choice for a matter when returning a proxy?
Stockholders should specify
their choice for each matter on the enclosed proxy. If no specific instructions
are given, proxies that are signed and returned will be voted:
| ● |
“FOR” the election of
Richard A. Lumpkin and Timothy D. Taron as Class I directors (see page 7);
|
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|
| ● |
“FOR” the proposal to
ratify the appointment of Ernst & Young LLP as our independent
auditors (see page 21); and |
|
|
| ● |
“FOR” the proposal to
approve certain provisions of the Consolidated Communications Holdings,
Inc. 2005 Long-Term Incentive Plan (see page
40). |
What are the board’s
recommendations?
The board’s recommendations,
together with the description of each proposal, are set forth in this proxy
statement. In summary, the board recommends that you vote:
| ● |
“FOR” the election of
Richard A. Lumpkin and Timothy D. Taron as Class I directors (see page 7);
|
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|
| ● |
“FOR” the ratification
of the appointment of Ernst & Young LLP as our independent auditors
(see page 21); and |
|
|
| ● |
“FOR” the approval of
certain provisions of the Consolidated Communications Holdings, Inc. 2005
Long-Term Incentive Plan (see page 40). |
Unless you give other
instructions on your proxy card, the persons named as proxy holders on the
enclosed proxy card will vote in accordance with the recommendations of the
board of directors.
What happens if additional
matters are presented at the annual meeting?
Other than the three proposals
described in this proxy statement, we are not aware of any other business to be
acted upon at the annual meeting.
Pursuant to the provisions of
Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), with respect to any other matter that properly comes before the
meeting, if you grant a proxy the persons named as proxy holders on the enclosed
proxy card will vote your shares as recommended by the board of directors or, if
no recommendation is given, in their own discretion.
Will anyone contact me
regarding this vote?
No arrangements or contracts
have been made or entered into with any solicitors as of the date of this proxy
statement, although we reserve the right to engage solicitors if we deem them
necessary. If done, such solicitations may be made by mail, telephone,
facsimile, e-mail, the Internet or personal interviews.
Who will tabulate and
certify the vote?
Representatives of
Computershare Trust Company, N.A., our transfer agent, will tabulate the votes
and act as Inspector of Elections.
ANNUAL
REPORT
Will I receive a copy of
Consolidated’s 2014 Annual Report to Stockholders?
We have enclosed our 2014
annual report to stockholders for the fiscal year ended December 31, 2014 with
this proxy statement. The annual report includes our audited financial
statements, along with other financial information about us, which we urge you
to read carefully.
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How can I receive a copy of
Consolidated’s Annual Report on Form 10-K?
Our annual report on Form 10-K
for the fiscal year ended December 31, 2014, as filed with the SEC on March 2,
2015, is included in the 2014 annual report to stockholders, which accompanies
this proxy statement.
You can also obtain, free of
charge, a copy of our annual report on Form 10-K, including all exhibits filed
with it, by:
| ● |
accessing the investor
relations section of our website at http://ir.consolidated.com and clicking on the “Financial Information” link followed by
clicking on the “SEC Filings” link; |
|
|
| ● |
accessing the materials
online at www.edocumentview.com/cnsl; |
|
|
| ● |
writing
to: |
|
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|
Consolidated
Communications Holdings, Inc. — Investor Relations
121 South 17th
Street
Mattoon, Illinois 61938; or |
|
|
| ● |
telephoning us at: (217)
258-2959. |
You can also obtain a copy of
our annual report on Form 10-K and other periodic filings that we make with the
SEC from the SEC’s EDGAR database at http://www.sec.gov.
STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth
certain information that has been provided to us with respect to the beneficial
ownership of shares of our common stock for (i) each stockholder who is known by
us to own beneficially more than 5.0% of the outstanding shares of our common
stock, (ii) each of our directors, (iii) each of our executive officers named in
the Summary Compensation Table on page 34, and (iv) all of our directors and
executive officers as a group. Unless otherwise indicated, each stockholder
shown on the table has sole voting and dispositive power with respect to all
shares shown as beneficially owned by that stockholder. Unless otherwise
indicated this information is current as of March 11, 2015, and the address of
all individuals listed in the table is as follows: Consolidated Communications
Holdings, Inc., 121 South 17th Street, Mattoon, Illinois 61938-3987.
|
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Aggregate Number of |
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Shares Beneficially |
|
Percentage of |
| Name of Beneficial
Owner |
|
Owned |
|
Shares
Outstanding |
| BlackRock Fund Advisors (a) |
|
|
4,687,419 |
|
|
|
9.3 |
% |
|
| The
Vanguard Group, Inc. (b) |
|
|
3,881,046 |
|
|
|
7.7 |
% |
|
| City
National Rochdale LLC (c) |
|
|
3,148,755 |
|
|
|
6.2 |
% |
|
| Lumpkin, Richard Anthony (d) |
|
|
2,103,586 |
|
|
|
4.2 |
% |
|
| Robert J. Currey |
|
|
76,015 |
|
|
|
* |
|
|
| C.
Robert Udell, Jr. |
|
|
61,604 |
|
|
|
* |
|
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| Steven L. Childers |
|
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90,116 |
|
|
|
* |
|
|
| Thomas A. Gerke |
|
|
9,626 |
|
|
|
* |
|
|
| Dale
E. Parker |
|
|
19,294 |
|
|
|
* |
|
|
| Maribeth S. Rahe |
|
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36,116 |
|
|
|
* |
|
|
| Timothy D. Taron |
|
|
24,666 |
|
|
|
* |
|
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| Roger H. Moore |
|
|
28,683 |
|
|
|
* |
|
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| All
directors & officers as a group (9 persons) |
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2,449,706 |
|
|
|
4.9 |
% |
|
* Less
than 1.0% ownership.
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| (a) |
|
Beneficial and percentage ownership
information is based on information contained in a Form 13G/A filed with
the SEC on January 15, 2015, by BlackRock, Inc. The address of BlackRock,
Inc. is 40 East 52nd Street, New York, New York 10022. BlackRock, Inc. has
sole voting power with respect to 4,842,994 shares. |
|
|
|
| (b) |
|
Beneficial and percentage ownership
information is based on information contained in a Form 13G/A filed with
the SEC on February 11, 2015, by The Vanguard Group, Inc. The address of
The Vanguard Group, Inc. is Vanguard Blvd., Malvern, Pennsylvania 19355.
The Vanguard Group has sole voting power with respect to 70,736 shares,
sole dispositive power with respect to 3,814,692 shares, and shared
dispositive power with respect to 66,354 shares. |
| |
| (c) |
|
Beneficial and percentage ownership
information is based on information contained in a Form 13F filed with the
SEC on January 22, 2015, by City National Rochdale LLC. The address of
City National Rochdale LLC is 570 Lexington Avenue, New York, New York
10022. City of National Rochdale LLC has sole voting power with respect to
2,692,240 shares. |
| |
| (d) |
|
Includes: (i) 481,154 shares owned by Living
Trust FBO Richard A. Lumpkin, (ii) 919,677 shares owned by 1970 Trust FBO
Richard A. Lumpkin, (iii) 3,500 shares owned by Mr. Lumpkin’s wife, (iv)
106,153 shares owned by the Benjamin I. Lumpkin 2012 Irrevocable Trust,
for which Mr. Lumpkin is the trustee, (v) 6,011 shares owned directly by
Mr. Lumpkin, (vi) 309,674 shares owned by Benjamin I. Lumpkin 2008 Dynasty
Trust, for which Mr. Lumpkin is the trustee, and (vii) 277,417 shares
owned by Elizabeth L. Celio 2008 Dynasty Trust, for which Mr. Lumpkin is
the trustee. |
6
Table of Contents
PROPOSAL NO. 1 — ELECTION
OF RICHARD A. LUMPKIN AND TIMOTHY D. TARON AS DIRECTORS
Our amended and restated
certificate of incorporation provides for the classification of our board of
directors into three classes of directors, designated Class I, Class II and
Class III, as nearly equal in size as is practicable, serving staggered
three-year terms. One class of directors is elected each year to hold office for
a three-year term or until successors of such directors are duly elected and
qualified. The corporate governance committee has recommended, and the board
also recommends, that the stockholders elect Mr. Lumpkin and Mr. Taron, the
nominees designated below as the Class I directors, at this year’s annual
meeting to serve for a term of three years expiring in 2018 or until his
respective successor is duly elected and qualified. The nominees for election to
the position of Class I directors, and certain information with respect to their
backgrounds and the backgrounds of non-nominee directors, are set forth
below.
It is the intention of the
persons named in the accompanying proxy card, unless otherwise instructed, to
vote to elect the nominees named herein as the Class I directors. The nominees
named herein presently serve on our board of directors, and each nominee has
consented to serve as a director if elected at this year’s annual meeting. In
the event that any of the nominees named herein is unable to serve as a
director, discretionary authority is reserved to the board to vote for a
substitute for such nominee. The board has no reason to believe that the
nominees named herein will be unable to serve if elected.
Nominees standing for
election to the board
| Name |
|
|
Age |
|
Current Position With
Consolidated |
|
| Richard A. Lumpkin |
|
|
|
|
| (Class I Director –
term expiring in 2018) |
|
80 |
|
Founding Director |
| Timothy D. Taron |
|
|
|
|
| (Class I Director –
term expiring in 2018) |
|
64 |
|
Director |
| |
| Directors continuing to serve on the board |
|
|
|
|
| |
| Name |
|
|
Age |
|
Current Position With
Consolidated |
|
| Roger H. Moore |
|
|
|
|
| (Class II Director
– term expiring in 2016) |
|
73 |
|
Director |
| Thomas A. Gerke |
|
|
|
|
| (Class II Director
– term expiring in 2016) |
|
58 |
|
Director |
| Dale E. Parker |
|
|
|
|
| (Class II Director
– term expiring in 2016) |
|
63 |
|
Director |
| Robert J. Currey |
|
|
|
|
| (Class III Director
– term expiring in 2017) |
|
69 |
|
Executive Chairman of the Board and Director |
| Maribeth S. Rahe |
|
|
|
|
| (Class III Director
– term expiring in 2017) |
|
66 |
|
Director |
| C.
Robert Udell, Jr. |
|
|
|
|
| (Class III Director
– term expiring in 2017) |
|
49 |
|
President & Chief Executive Officer and
Director |
Set forth below is information
with respect to the nominees to the board and each continuing director regarding
their experience. After the caption “Board Contributions,” we describe some of
the specific experience, qualifications, attributes or skills that led to the
conclusion that the person should serve as a director for the
Company.
Business experience of
nominees to the board
Richard A.
Lumpkin has served as a
director with us and our predecessor since 2002. He served as Chairman of the
Board from 2005 until November 2013, at which time the board designated him a
Founding Director. From 1997 to 2002, Mr. Lumpkin served as Vice Chairman of
McLeodUSA, which acquired our predecessor in 1997. From 1963 to 1997, Mr.
Lumpkin served in various positions at our predecessor, including Chairman,
Chief Executive Officer, President and Treasurer. Mr. Lumpkin is currently a
director of Agracel, Inc., a real estate
7
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investment company and is
Treasurer and formerly a Trustee of The Lumpkin Family Foundation. Mr. Lumpkin
is also a former director, former President and former Treasurer of the
USTelecom Association, a former president of the Illinois Telecommunications
Association, a former director of First Mid-Illinois Bancshares, Inc. (“First
Mid-Illinois”), a financial services holding company and a former director of
Ameren Corp., a public utility holding company. Mr. Lumpkin has also served on
the University Council Committee on Information Technology for Yale
University.
Board
Contributions: Mr. Lumpkin is
a long-time telecommunications industry veteran, has long experience in the
executive leadership of the Company and its predecessor and is a significant
stockholder in the Company. He is well known and respected by other industry
participants and enjoys access to, and a long-standing relationship with, the
senior executives, ownership, and board members of many public and private
telecommunications companies with whom the Company considers its relationships
to be important. By virtue of his significant ownership, Mr. Lumpkin represents
a strong voice for stockholders in the Board’s deliberations.
Timothy D.
Taron has served as director
since July 2012. Mr. Taron, a practicing attorney for over 30 years, served on
the board of directors of SureWest Communications (“SureWest”) from 2000 until
the consummation of the Company’s merger with SureWest on July 2, 2012. Since
1981, Mr. Taron has been a senior partner with the law firm of Hefner Stark
& Marois, LLP, Attorneys-at-Law, Sacramento, California. He was formerly the
President and a director of the Sacramento Metropolitan Chamber of Commerce, a
private, non-profit organization.
Board
Contributions: Mr. Taron, a
practicing attorney for over 30 years with a firm located in our Sacramento
market, specializes in complex business transactions, real estate development
and tax-exempt bond financing, providing the board with the ability to analyze a
variety of business matters. His extensive involvement in the Sacramento
business community, coupled with his hands-on experience in areas affecting the
growth and health of the economy in the community he resides and practices law,
provides the board with better insight into the markets the Company principally
serves and its potential business opportunities. Mr. Taron is well suited for
the corporate governance committee chair position due to his past involvement on
public and non-profit boards and his training and continuing education as an
attorney.
BUSINESS EXPERIENCE OF
CONTINUING DIRECTORS
Robert J.
Currey serves as our
Executive Chairman. Mr. Currey has served as one of the Company’s directors and
as a director of our predecessors since 2002 and served as our Chief Executive
Officer from 2002 until December 31, 2014. From 2002 to November 2013, he also
served as our President. From 2000 to 2002, Mr. Currey served as Vice Chairman
of RCN Corporation, a competitive telephone company providing telephony, cable
and Internet services in high-density markets nationwide. From 1998 to 2000, Mr.
Currey served as President and Chief Executive Officer of 21st Century Telecom
Group. From 1997 to 1998, Mr. Currey served as Director and Group President of
Telecommunications Services of McLeodUSA, which acquired our predecessor in
1997. Mr. Currey joined our predecessor in 1990 and served as President through
its acquisition in 1997. Mr. Currey is also a director of Cartesian, Inc.
(formerly The Management Network Group, Inc.), a professional services company,
the USTelecom Association and the Illinois Business RoundTable.
Board
Contributions: Mr. Currey is a
long-time industry veteran and has significant experience leading other
companies in the telecommunications and media sector. He is well known
throughout the telecommunications industry and is respected as an opinion leader
especially among the mid-sized telecom carriers. Because of his experience and
his role as our former Chief Executive Officer until December 31, 2014, Mr.
Currey also has substantial institutional knowledge regarding the Company,
including its operations and strategies.
C. Robert Udell,
Jr. serves as our President
and Chief Executive Officer and as a director. Mr. Udell served as Chief
Operating Officer from May 2011 to December 31, 2014, and as President from
November 2013 until December 31, 2014. He became Chief Executive Officer on
January 1, 2015. He has served as a director since November 2013. From 1999 to
2004, Mr. Udell served in various capacities at the predecessor of our Texas
operations, including Executive Vice President and Chief Operating Officer. From
2004 to November 2013, Mr. Udell served as Senior Vice President. Prior to
joining the predecessor of our Texas operations in March 1999,
8
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Mr. Udell was employed by our
predecessor from 1993 to 1999 in a variety of senior roles, including Senior
Vice President, Network Operations, and Engineering. He serves on the boards of
the Greater Conroe Economic Development Council and Board of trustees for The
John Cooper School.
Board
Contributions: Mr. Udell has
been in the telecommunications industry for a number of years, and has worked in
a number of capacities. He brings a broad knowledge of our operating
environment, key trends in technology and regulation, and market forces
impacting the Company. By dint of his role as President and Chief Executive
Officer of the Company, he is also able to provide the board with in-depth
insight into the Company’s current performance and future plans.
Maribeth S.
Rahe has served as a director
since July 2005. Ms. Rahe has served as President and Chief Executive Officer of
Fort Washington Investment Advisors, Inc. since November 2003. Ms. Rahe is
currently a member of the board of directors of First Financial Bancorp and
First Financial Bank. From January 2001 to October 2002, Ms. Rahe was President
and a member of the board of directors of U.S. Trust Company of New York, and
from June 1997 to January 2001, was its Vice Chairman and a member of the board
of directors.
Board
Contributions: Ms. Rahe has
deep background as a senior executive in the banking industry and is well
attuned to developments in the capital markets and their potential impact on the
Company. She provides a strong risk-management perspective and oversees the
Board’s succession planning efforts. She also qualifies as an “audit committee
financial expert” under SEC guidelines and serves as our audit committee
chairperson.
Roger H.
Moore has served as a
director since July 2005. Mr. Moore was President and Chief Executive Officer of
Illuminet Holdings, Inc., a provider of network, database and billing services
to the communications industry, from October 1998 to December 2001, a member of
its board of directors from July 1998 to December 2001, and its President and
Chief Executive Officer from January 1996 to August 1998. In December of 2001,
Illuminet was acquired by VeriSign, Inc. and Mr. Moore retired at that time. In
September 1998 and October 1998, he served as President, Chief Executive Officer
and a member of the board of directors of VINA Technologies, Inc., a
telecommunications equipment company. From June 2007 to November 2007, Mr. Moore
served as interim President and CEO of Arbinet. From December 2007 to May 2009,
Mr. Moore served as a consultant to VeriSign Corporation. Mr. Moore also
presently serves as a director of VeriSign, Inc. and was previously a director
of Western Digital Corporation.
Board
Contributions: Mr. Moore is a
seasoned telecommunications executive with a deep background in the industry and
very strong technical aptitude. He has a strong entrepreneurial bent and is a
knowledgeable analyst of the evolution of telecommunications and the impact of
new technologies on our business. He brings perspective from service on other
boards. He also qualifies as an “audit committee financial expert” under SEC
guidelines.
Thomas A.
Gerke has served as a
director since February 2013 and is the Chief Legal Officer at H&R Block,
the world’s largest consumer tax services provider, since January 2012. From
January 2011 to April 2011, Mr. Gerke served as Executive Vice President,
General Counsel and Secretary of YRC Worldwide, a Fortune 500 transportation
service provider. From July 2009 to December 2010, Mr. Gerke served as Executive
Vice Chairman of CenturyLink, a Fortune 500 integrated communications business.
From December 2007 to June 2009, he served as President and Chief Executive
Officer at Embarq, then a Fortune 500 integrated communications business. He
also held the position of Executive Vice President and General Counsel – Law and
External Affairs at Embarq from May 2006 to December 2007. From October 1994
through May 2006, Mr. Gerke held a number of executive and legal positions with
Sprint, serving as Executive Vice President and General Counsel for over two
years. Mr. Gerke is also a former director of the CenturyLink, Embarq and United
States Telecom Association and is a former member of the Rockhurst University
Board of Trustees. He currently serves as a Trustee for the Greater Kansas City
Local Investment Commission, Inc. (LINC).
Board
Contributions: Mr. Gerke has
substantial experience in the telecommunications sector. His leadership and
industry experiences bring a strong and knowledgeable operational and strategic
perspective to the Board’s deliberations. He also brings perspective from
service on other boards. Although Mr. Gerke is not currently a member of our
audit committee, he also qualifies as an “audit committee financial expert”
under SEC guidelines.
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Dale E.
Parker has served as a
director since October 2014. Mr. Parker was a director on the Enventis
Corporation (formerly Hickory Tech) board from 2006 until the consummation of
Enventis Corporation’s merger with the Company on October 16, 2014, and served
as Chair of Enventis Corporation board from January 2011 to May 2013. Mr. Parker
is currently the Interim President and Chief Executive Officer for Image Sensing
Systems, Inc. He has served as the Chief Operating Officer (COO), Chief
Financial Officer (CFO) and Treasurer for Image Sensing Systems since June 2013.
Mr. Parker also continues to serve on the board of Image Sensing Systems, Inc.,
of St. Paul, Minnesota, a technology company focused in infrastructure
improvement through the development of software–based detection solutions for
the intelligent transportation systems sector. Mr. Parker served as interim CFO
for Ener1, Inc. from 2011 to 2012. Ener1, Inc. is an energy storage technology
company that develops lithium-ion-powered storage solutions for application in
the electric utility, transportation and industrial electronics markets. In
2010, Mr. Parker worked as CFO of Neenah Enterprises, Inc., an independent
foundry. From 2009 to 2010, Mr. Parker was the Vice President of Finance for
Paper Works, a producer of coated recycled paper board. Mr. Parker was CFO at
Forest Resources, LLC, a company focused on paper product production and
conversion, from 2007 to October 2008. Mr. Parker is a CPA and holds an
MBA.
Board
Contributions: Mr. Parker has
extensive experience working in senior executive positions for both public and
private companies in a variety of industries, and expertise with financial
statement preparation and SEC reporting gained from his experience as a CFO.
Further, having served as the past chair of the Enventis Corporation Board, and
living and working in the Minneapolis-St. Paul market, Mr. Parker brings an
in-depth knowledge of the Company’s newly-acquired Minnesota operations and the
business climate in which the Company operates.
Board recommendation and
stockholder vote required
The board of directors
recommends a vote “FOR” the election of each of the nominees named above
(Proposal No. 1 on the accompanying proxy card). The affirmative vote of a plurality of the votes
cast at the meeting at which a quorum is present is required for the election of
each nominee named above.
CORPORATE GOVERNANCE AND
BOARD COMMITTEES
Are a majority of the
directors independent?
Yes. The corporate governance
committee undertook its annual review of director independence and reviewed its
findings with the board of directors. During this review, the board of directors
considered relationships and transactions between each director or any member of
his or her immediate family and Consolidated and its subsidiaries and
affiliates, including those reported under “Certain Relationships and Related
Transactions” below. The board of directors also examined relationships and
transactions between directors or their affiliates and members of our senior
management. The purpose of this review was to determine whether any such
transactions or relationships compromised a director’s independence.
The board also considered the
relationship between the Company and H&R Block, a company that purchases
telecommunications services from the Company in the ordinary course of business,
because Mr. Gerke is an officer of H&R Block. The Company received
$63,984.96 in payments from H&R Block in 2014 from 28 separate H&R Block
locations. Similarly, the board also considered the relationship between the
Company and the law firm of Hefner Stark & Marois, LLP, a company that also
purchases telecommunications services form the Company in the ordinary course of
business, because Mr. Taron is a partner with Hefner, Stark, & Marois. The
Company received $12,759.36 in payments from Hefner Stark & Marois, LLP in
2014. The board concluded that since most of the services provided by the
Company to H&R Block and Hefner Stark & Marois, LLP are offered pursuant
to state and federal tariffs, and that all such purchases were made on customary
business terms, these relationships were not material for purposes of The NASDAQ
Stock Market LLC’s (“NASDAQ”) listing standards and would not influence Mr.
Gerke’s nor Mr. Taron’s actions or decisions as directors of the
Company.
10
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As a result of this review,
our board of directors affirmatively determined that Messrs. Gerke, Moore,
Parker and Taron and Ms. Rahe are independent for purposes of Rule 5605(a)(2) of
NASDAQ’s Marketplace Rules. The board also determined that each member of the
audit committee, Messrs. Parker and Taron and Ms. Rahe, satisfy the heightened
standards of independence for audit committee members set forth in Rule
10A-3(b)(1) of the Exchange Act. Additionally, the board determined that each
member of the compensation committee, Messrs. Gerke and Moore and Ms. Rahe,
satisfy the heightened standards of independence for compensation committee
members pursuant to Rule 5605(d)(2)(A) of the NASDAQ Marketplace
Rules.
How are directors
compensated?
The director compensation
described below is based on a benchmark study conducted by Towers Watson, the
outside consultant engaged by the compensation committee in late 2012, following
the Company’s acquisition of SureWest Communications. The outside consultant
developed a peer group of 16 companies, which are similar in size and scope to
the Company, and with whom we compete for investors. For more information
regarding the consultant and our peer group, see “Compensation Discussion and
Analysis — Executive Compensation Objectives.”
For 2014, directors received the
following cash compensation: (1) $25,000 annual cash retainer; (2) $1,250 for
board meetings attended in person and $750 for committee meetings attended in
person, with meeting fees halved for each board or board committee meeting
attended by means of telephone conference call; (3) $15,000 additional annual
cash retainer for the chairperson of the audit committee; and (4) $10,000
additional annual cash retainer for the chairperson of each of the compensation
committee and the corporate governance committee. We reimburse all non-employee
directors for reasonable expenses incurred to attend board or board committee
meetings. In addition, a restricted share award of 3,192 shares was made to each
of the independent directors, except for Mr. Parker, who was not a director at
that time, in March 2014 pursuant to the Consolidated Communications Holdings,
Inc. 2005 Long-Term Incentive Plan. The number of shares granted to the
independent directors was determined by dividing $61,000 by the 20-day average
closing price of the stock as of two trading days before the award date. One
hundred percent (100%) of such shares vested on December 5, 2014.
Mr. Udell, who also serves as
President and Chief Executive Officer and served as President and Chief
Operating Officer in 2014, and Mr. Currey, our Chairman of the Board since
November 2013 and Chief Executive Officer during 2014, did not receive any
additional compensation for their service on the board in 2014. Mr. Currey’s and
Mr. Udell’s compensation is set forth in the Summary Compensation
Table.
For 2015, since Mr. Currey no
longer serves as Chief Executive Officer, the Board determined that Mr. Currey’s
compensation for serving as Chairman of the Board of Directors would be as
follows:
| ● |
Mr. Currey will receive an annualized retainer
of $300,000 for his service to the Board;
|
| ● |
Mr. Currey will participate pari passu in the
non-employee director equity plan, with a 2015 target grant value of
$66,000; and
|
| ● |
Mr. Currey will be reimbursed for normal
business travel and entertainment expenses for Board and Company
matters. |
11
Table of Contents
The table below discloses all
compensation provided to each non-employee director of the Company in 2014.
| Name |
|
Fees
Earned
or
Paid
in Cash
($) |
|
Stock
Awards
($)(1) |
|
Total
($) |
| Roger H. Moore |
|
|
$ |
48,375 |
|
|
|
|
$ |
63,170 |
|
|
|
$ |
111,545 |
|
| Maribeth S. Rahe |
|
|
$ |
51,625 |
|
|
|
|
$ |
63,170 |
|
|
|
$ |
114,795 |
|
| Timothy D. Taron |
|
|
$ |
49,500 |
|
|
|
|
$ |
63,170 |
|
|
|
$ |
112,670 |
|
| Thomas A. Gerke |
|
|
$ |
39,375 |
|
|
|
|
$ |
63,170 |
|
|
|
$ |
102,545 |
|
| Richard A. Lumpkin |
|
|
$ |
33,125 |
|
|
|
|
$ |
62,531 |
|
|
|
$ |
95,656 |
|
| Dale
E. Parker |
|
|
$ |
25,625 |
(2) |
|
|
|
$ |
0 |
|
|
|
$ |
25,625 |
|
| (1) |
|
Stock
Awards. The amounts in this
column represent the grant date fair value of the restricted share award
made on March 7, 2014, to Mr. Moore, Ms. Rahe, Mr. Taron, and Mr. Gerke;
and the grant date fair value of the restricted share award made on March
12, 2014 to Mr. Lumpkin; in each case computed in accordance with
Financial Accounting Standards Board Statement Accounting Standards
Codification Topic 718. Also see Footnote 8 to the Consolidated Financial
Statements contained in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2014 for an explanation of the assumptions made by
the Company in the valuation of these awards. None of the non-employee
directors had any grants outstanding as of December 31, 2014. |
|
|
|
| (2) |
|
Fees
Earned or Paid in Cash –
Dale E. Parker. Our directors’ retainer fees are customarily paid in
November of each year, for the following year’s service. In October 2014,
Mr. Parker was elected to our board. His fees paid in 2014 therefore
included his retainer for 2015 service, and meeting fees for his service
on the board in 2014. |
How often did the board
meet during 2014?
The board met nine times
during calendar year 2014. Each director attended at least 75% of the board
meetings and meetings of board committees on which they served. During 2014, the
independent directors held four meetings at which only independent directors
were present in connection with regularly scheduled meetings of the board or
committees of the board.
What is the policy
regarding director attendance at annual meetings?
Absent special circumstances,
each director is expected to attend the annual meeting of stockholders. All of
the Company’s directors attended the 2014 annual meeting of
stockholders.
What is the leadership
structure of the board?
In consultation with the
corporate governance committee, the board reviews the leadership structure of
the board from time to time in order to ensure that the board’s leadership
structure is optimal for the board at the current time. Until November 2013, the
board had separated the Chairman’s role from the Chief Executive Officer’s role.
When Mr. Currey became Chairman of the Board in November 2013, the board
determined that it would be in the best interests of the Company if he retained
the Chief Executive Officer title as well, as a part of the Company’s succession
plan. Effective January 1, 2015, as a planned additional step in the Chief
Executive Officer succession plans, Mr. Currey became Executive Chairman of the
Board of Directors, but no longer acts as the Company’s Chief Executive Officer.
Mr. Udell became President and Chief Executive Officer on January 1, 2015. The
Board believes this current separation of duties is in the best interest of the
Company. Mr. Currey is a long-time industry veteran and has relationships with
other industry participants and the various regulatory and public policy bodies
with whom the Company must interact. By serving as Executive Chairman, Mr.
Currey is able to bring this knowledge to bear as he works with Mr. Udell, our
newly-elected President and Chief Executive Officer, in the daily decision
making and long term strategy development for the Company. This structure also
provides continuity of leadership and a respectful climate of informed and open
dialogue, debate, and decision making on topics important to the Company and its
stockholders. The board does not have a lead independent director, but
12
Table of Contents
each of the board’s committees
is composed solely of independent directors. The board will continue to review
the leadership structure of the board from time to time and will appoint a lead
independent director if it determines that doing so would be in the best
interests of the Company.
What committees has the
board established?
The board has standing audit,
corporate governance and compensation committees. The membership of the standing
committees currently is, as follows:
| Name |
|
Audit
Committee |
|
Corporate
Governance
Committee |
|
Compensation
Committee |
| Roger H. Moore |
|
|
|
* |
|
Chairperson |
| Maribeth S. Rahe |
|
Chairperson |
|
|
|
* |
| Timothy D. Taron |
|
* |
|
Chairperson |
|
|
| Thomas A. Gerke |
|
|
|
* |
|
* |
| Dale
E. Parker |
|
* |
|
|
|
|
____________________
Audit
Committee. The audit committee
consists of Messrs. Parker and Taron and Ms. Rahe, who serves as the
Chairperson. The board has determined that all members of the audit committee
are independent for purposes of Rule 5605(a)(2) of NASDAQ’s Marketplace Rules
and Rule 10A-3(b)(1) of the Exchange Act. The board has also determined that in
addition to being independent, each of Mr. Parker and Ms. Rahe is an “audit
committee financial expert” as such term is defined under the applicable SEC
rules and is presumed to be financially sophisticated for purposes of Rule
5605(c)(2)(A) of NASDAQ’s Marketplace Rules.
The audit committee met four
times during 2014. The board has adopted an audit committee charter, which may
be found by accessing the investor relations section of our website at
http://ir.consolidated.com
and clicking on the “Corporate Governance” link.
The principal duties and
responsibilities of the audit committee are to assist the board in its oversight
of:
| ● |
the integrity of our financial statements and
reporting process;
|
| ● |
our compliance with legal and regulatory
matters;
|
| ● |
the independent auditor’s qualifications and
independence;
|
| ● |
risk management of the Company, including
reviewing risks and exposures relating to financial reporting,
particularly disclosure and SEC reporting, disclosure controls, internal
control over financial reporting, accounting, internal and independent
auditors, financial policies, and tax, investment, credit and liquidity
matters; and
|
| ● |
the performance of our independent
auditors. |
Our audit committee is also
responsible for the following:
| ● |
conducting an annual performance evaluation of
the audit committee;
|
| ● |
compensating, retaining, and overseeing the
work of our independent auditors;
|
| ● |
establishing procedures for (a) receipt and
treatment of complaints on accounting and other related matters and (b)
submission of confidential employee concerns regarding questionable
accounting or auditing matters; |
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| ● |
reviewing and overseeing all related party
transactions required to be disclosed in our proxy statement pursuant to
our Related Person Transactions Policy, which we describe beginning on
page {X}; and
|
| ● |
preparing reports to be included in our public
filings with the SEC. |
The audit committee has the
power to investigate any matter brought to its attention within the scope of its
duties. It also has the authority to retain counsel and advisors to fulfill its
responsibilities and duties. See the “Report of the Audit Committee of the Board
of Directors” on page [X].
Corporate Governance
Committee. The corporate
governance committee consists of Messrs. Gerke, Moore and Taron, who serves as
the Chairperson. The board has determined that each of Mr. Gerke, Mr. Moore and
Mr. Taron are independent for purposes of Rule 5605(a)(2) of NASDAQ’s
Marketplace Rules.
The corporate governance
committee met five times during 2014. The board has adopted a corporate
governance committee charter, a copy of which may be found by accessing the
investor relations section of our website at http://ir.consolidated.com and clicking on the “Corporate Governance”
link.
The principal duties and
responsibilities of the corporate governance committee are as
follows:
| ● |
to identify individuals qualified to become
directors and to select, or recommend that the board select, director
nominees;
|
| ● |
to develop and recommend to the board the
content of our corporate governance principles, a copy of which may be
found by accessing the investor relations section of our website at
http://ir.consolidated.com and clicking on the “Corporate Governance”
link;
|
| ● |
to review with management and, as the corporate
governance deems useful, consultants or legal counsel, the areas of
material risk to the corporation relating to (i) management continuity and
succession planning, (ii) board and board committee selection,
composition, evaluation, continuity and succession planning, (iii)
directors’ and officers’ liability insurance, and (iv) other corporate
governance matters; and
|
| ● |
to oversee the evaluation of our board and
management team. |
In evaluating candidates for
directorships, our board, with the assistance of the corporate governance
committee, will take into account a variety of factors it considers appropriate,
which may include strength of character and leadership skills; general business
acumen and experience; broad knowledge of the telecommunications industry;
knowledge of strategy, finance, internal business and relations between
telecommunications companies and government; age; number of other board seats;
and willingness to commit the necessary time to ensure an active board whose
members work well together and possess the collective knowledge and expertise
required by the board. We have not previously paid a fee to any third party in
consideration for assistance in identifying potential nominees for the board.
While the board has not adopted a specific policy regarding diversity, it
believes the diverse backgrounds and perspectives of its current directors, as
described above for each nominee and current director under the heading “Board
Contributions,” are well suited to the oversight of the Company’s management
team, its business plans, and performance.
Compensation
Committee. The compensation
committee consists of Mr. Moore, who serves as its Chairperson, Ms. Rahe and Mr.
Gerke. The board has determined that each of Mr. Moore, Ms. Rahe and Mr. Gerke
is independent for purposes of Rule 5605(a)(2) of NASDAQ’s Marketplace Rules and
satisfies the heightened standards of independence for compensation committee
members pursuant to Rule 5605(d)(2)(A) of NASDAQ’s Marketplace Rules.
The compensation committee met
five times during 2014. The board has adopted a compensation committee charter,
a copy of which may also be found by accessing the investor relations section of
our website at http://ir.consolidated.com
and clicking on the “Corporate Governance” link.
14
Table of Contents
The principal duties and
responsibilities of the compensation committee are as follows:
| ● |
to review and approve goals and objectives relating to
the compensation of our Chief Executive Officer and, based upon a
performance evaluation, to determine and approve the compensation of the
Chief Executive Officer and other senior officers;
|
| ● |
to review compensation risk to determine whether
compensation policies and practices for employees are reasonably likely to
have a material adverse effect on the Company, including whether the
design or operation of the Company’s compensation programs encourage
employees to engage in excessive risk-taking, is aligned to the interests
of stockholders, promotes effective leadership and leadership development
and appropriately awards pay for performance;
|
| ● |
to approve the grant of long term incentive awards
Company-wide and recommend amendments to the Company’s executive
compensation programs to the board for approval;
|
| ● |
to review and recommend to the board of directors, or
approve, new executive compensation programs, based on its periodic review
of the operations of the Company’s executive compensation programs to
determine whether they are properly coordinated and achieving their
intended purpose;
|
| ● |
to establish and periodically review policies in the area
of senior management perquisites;
|
| ● |
to make recommendations to our board on incentive
compensation and equity-based plans; and
|
| ● |
to prepare reports on executive compensation to be
included in our public filings with the SEC. |
Additional information on the
compensation committee’s processes and procedures for the consideration and
determination of executive and director compensation are addressed in the
“Compensation Discussion and Analysis – Processes and Procedures for the
Consideration and Determination of Executive and Director Compensation” section
of this proxy statement.
Role of Independent
Compensation Consultant
The compensation committee has
directly engaged Towers Watson as its outside consultant to assist it in
reviewing the effectiveness and competitiveness of the Company’s executive
compensation and outside director programs and policies. Pursuant to its charter
and NASDAQ listing standards, the compensation committee regularly reviews the
independence of Towers Watson relative to key factors, including
whether:
| ● |
Towers Watson provides any other services to
the Company;
|
| ● |
the amount of fees paid to Towers Watson
relative to the total revenue of the firm;
|
| ● |
policies in place to prevent conflicts of
interest;
|
| ● |
any personal or business relationships with
members of the compensation committee;
|
| ● |
ownership of Company stock; and
|
| ● |
any personal or business relationships with
executive officers. |
The Company paid Towers Watson
$8,186 for services provided to the compensation committee in 2014 and $39,347
in 2013. Towers Watson also provided competitive market assessment of the
Company’s overall salary and wage structure and pension actuarial services and
individual employee pension benefit calculations support to the Company during
2014 for which the Company paid Towers Watson $77,011 and $286,601,
respectively. The decision to engage Towers Watson for these other services was
made by the Company’s HR staff and the pension committee of management. The
Company’s relationship with Towers Watson (and its predecessor Watson Wyatt) is
a long-standing one pre-dating the Company’s initial public offering of stock
whereby Towers Watson performs ad hoc issue analysis as requested from
time-to-time by management, and neither the compensation committee nor the board
approved such other services.
15
Table of Contents
Towers Watson assisted the
compensation committee with the following in 2013, with a view toward
compensation decisions for 2014:
| ● |
construction of the peer group companies to be used in
compensation analysis;
|
| ● |
analysis of the Company’s total direct compensation,
including base salary, annual bonus, and long-term
incentives;
|
| ● |
review and consulting on compensation design and
performance linkage;
|
| ● |
advising the Company on certain changes in its
compensation programs pursuant to the realignment of roles in which Mr.
Currey became Chairman of the Board and Mr. Udell became President and a
director;
|
| ● |
evaluation of the compensation program for the Company’s
non-executive senior management team, including total direct compensation
and Employment Security Agreements relative to broad market and telecom
industry trends, as described below; and
|
| ● |
ad hoc issue analysis as requested by the compensation
committee. |
Towers Watson’s work in 2014
consisted principally of performing analysis and providing recommendations
concerning the compensation programs for the Company’s senior management
personnel, including:
| ● |
evaluation and benchmarking certain of the Company’s
senior management jobs relative to the peer group and to broad marketplace
trends;
|
| ● |
review of the non-executive senior management
change-in-control agreements;
|
| ● |
analysis of total direct compensation programs including
salary, bonus, and long term incentives; and
|
| ● |
evaluation and recommendations concerning the type,
amount, and frequency of long term incentive compensation to be offered to
the non-executive senior management personnel going
forward. |
Board oversight of
risk
The Company’s Board of
Directors has responsibility for general oversight of risk management of the
Company and has delegated oversight of certain risks, as appropriate, to the
Audit Committee, the Compensation Committee and the Corporate Governance
Committee, as further described below.
As set forth in the Audit
Committee Charter, the Audit Committee reviews with management and, to the
extent the Committee deems it appropriate, with the independent auditors or
counsel to the corporation, compliance with laws and regulations, major pending
litigation, and risks and exposures relating to financial reporting,
particularly disclosure and SEC reporting, disclosure controls, internal control
over financial reporting, accounting, internal and independent auditors,
financial policies, and tax, investment, credit and liquidity
matters.
The Compensation Committee
reviews compensation risk to determine whether compensation policies and
practices for employees are reasonably likely to have a material adverse effect
on the corporation, including whether the design or operation of the
corporation’s compensation programs encourage employees to engage in excessive
risk-taking, is aligned to the interests of stockholders, promotes effective
leadership and leadership development, and appropriately awards pay for
performance. In doing so the Committee reviews the overall program design, as
well as the balance between short-term and long-term compensation, the metrics
used to measure performance and the award opportunities under the corporation’s
incentive compensation program, and the implementation of other administrative
features designed to mitigate risk such as vesting requirements. In February
2015 the Compensation Committee reviewed the company compensation policies and
practices and determined that these programs are not reasonably likely to have a
material adverse effect on the corporation.
The Corporate Governance
Committee reviews with management and, as the Committee deems useful,
consultants or legal counsel, the areas of material risk to the corporation
relating to (i) management continuity and succession planning, (ii) board and
board committee continuity and succession, (iii) directors’ and
16
Table of Contents
officers’ liability insurance,
and (iv) other corporate governance matters. Management has an Enterprise Risk
Management (“ERM”) steering committee in place which includes the President and
Chief Executive Officer, and Chief Financial Officer and other key executives
and a representative from the Company’s outside counsel. The Chief Financial
Officer, as Committee Chairman, is the primary liaison between management and
the Board regarding the ERM implementation and process. The steering committee
has responsibility for the implementation and oversight of the ongoing ERM
process including identifying, prioritizing, and assigning ownership of key
risks. The management team has primary responsibility for monitoring and
managing these key risks which could affect the Company’s operating and
financial performance. ERM is a standing agenda item on the quarterly board
meeting agenda. At least annually, upon reviewing and establishing the financial
and operating targets for the next fiscal year, the management team reviews with
the full board the key risks facing the Company during the upcoming year and the
plans the Company has put in place to mitigate those risks.
Stockholder recommendations
for director nominations
As noted above, the corporate
governance committee considers and establishes procedures regarding
recommendations for nomination to the board, including nominations submitted by
stockholders. Recommendations of
stockholders should be timely sent to us, in accordance with the deadlines set
forth under the caption “Stockholder Proposals for 2016 Annual Meeting,” either
in person or by certified mail, to the attention of the Secretary, Consolidated
Communications Holdings, Inc., 121 South 17th Street, Mattoon, Illinois
61938-3987. Any recommendations submitted to the Secretary should be in writing
and should include whatever supporting material the stockholder considers
appropriate in support of that recommendation, and must include the information
that would be required to be disclosed under the SEC’s rules in a proxy
statement soliciting proxies for the election of such candidate and a signed
consent of the candidate to serve as our director if elected. The corporate
governance committee will evaluate all potential candidates in the same manner,
regardless of the source of the recommendation. Based on the information
provided to the corporate governance committee, it will make an initial
determination whether to conduct a full evaluation of a candidate. As part of
the full evaluation process, the corporate governance committee may, among other
things, conduct interviews, obtain additional background information and conduct
reference checks of the candidate. The corporate governance committee may also
ask the candidate to meet with management and other members of the
board.
Communications with
directors
Stockholders interested in
communicating directly with the board or the independent directors may do so by
writing to the Secretary, Consolidated Communications Holdings, Inc., 121 South
17th Street, Mattoon, Illinois 61938-3987. The Secretary will review all such
correspondence and forward to the board or the independent directors a summary
of that correspondence and copies of any correspondence that, in his opinion,
deals with functions of the board or that he otherwise determines requires their
attention. Any director or any independent director may at any time review a log
of all correspondence received by the Company that is addressed to members of
the board or independent directors and request copies of such correspondence.
Any concerns relating to accounting, internal controls or auditing matters will
be brought to the attention of the audit committee and handled in accordance
with the procedures established by the audit committee with respect to such
matters.
Code of Business Conduct
and Ethics
The board has adopted a Code
of Business Conduct and Ethics (the “Code”), a copy of which may be found by
accessing the investor relations section of our website at http://ir.consolidated.com and clicking on the “Corporate Governance” link.
Under the Code, we insist on honest and ethical conduct by all of our directors,
officers, employees and other representatives, including the
following:
| ● |
Our directors, officers
and employees are required to deal honestly and fairly with our customers,
collaborators, competitors and other third parties. |
|
|
| ● |
Our directors, officers
and employees should not be involved in any activity that creates or gives
the appearance of a conflict of interest between their personal interests
and the interests of Consolidated. |
|
|
| ● |
Our directors, officers
and employees should not disclose any of our confidential information or
the confidential information of our suppliers, customers or other business
partners. |
17
Table of Contents
We are also committed to
providing our stockholders and investors with full, fair, accurate, timely and
understandable disclosure in the documents that we file with the SEC. Further,
we will comply with all laws, rules and regulations that are applicable to our
activities and expect all of our directors, officers and employers to obey the
law.
Our board of directors and
audit committee have established the standards of business conduct contained in
this Code and oversee compliance with this Code. Training on this Code is
included in the orientation of new employees and has been provided to existing
directors, officers and employees.
If it is determined that one
of our directors, officers or employees has violated the Code, we will take
appropriate action including, but not limited to, disciplinary action, up to and
including termination of employment. If it is determined that a non-employee
(including any contractor, subcontractor or other agent) has violated the Code,
we will take appropriate corrective action, which could include severing the
contractor, subcontractor or agency relationship.
18
Table of Contents
REPORT OF THE AUDIT
COMMITTEE TO THE BOARD OF DIRECTORS
The audit committee is made up
solely of independent directors, as defined in the applicable NASDAQ and SEC
rules, and it operates under a written charter, dated February 28, 2011, which
is available by accessing the investor relations section of our website at
http://ir.consolidated.com. The charter of the audit committee specifies that the purpose of the
audit committee is to assist the Board in fulfilling its oversight
responsibility for:
| ● |
the quality and
integrity of the company’s financial statements; |
|
|
| ● |
the company’s compliance
with legal and regulatory requirements; |
|
|
| ● |
the independent
auditors’ qualifications and independence; and |
|
|
| ● |
the performance of the
company’s independent auditors. |
In carrying out these
responsibilities, the audit committee, among other things, supervises the
relationship between the Company and its independent auditors including making
decisions with respect to their appointment or removal, reviewing the scope of
their audit services, pre-approving audit engagement fees and non-audit services
and evaluating their independence. The audit committee oversees and evaluates
the adequacy and effectiveness of the Company’s systems of internal and
disclosure controls and internal audit function. The audit committee has the
authority to investigate any matter brought to its attention and may engage
outside counsel for such purpose.
The Company’s management is
responsible, among other things, for preparing the financial statements and for
the overall financial reporting process, including the Company’s system of
internal controls. The independent auditor’s responsibilities include (i)
auditing the financial statements and expressing an opinion on the conformity of
the audited financial statements with U.S. generally accepted accounting
principles and (ii) auditing the financial statements and expressing an opinion
on management’s assessment of, and the effective operation of, the Company’s
internal control over financial reporting.
The audit committee met four
times during fiscal year 2014. The audit committee schedules its meetings with a
view to ensuring that it devotes appropriate attention to all of its tasks. The
audit committee’s meetings include executive sessions with the Company’s
independent auditor and, at least quarterly and at other times as necessary,
sessions without the presence of the Company’s management.
As part of its oversight of
the Company’s financial statements, the audit committee reviewed and discussed
with management and Ernst & Young LLP, the Company’s independent auditor,
the audited financial statements of the Company for the fiscal year ended
December 31, 2014. The audit committee discussed with Ernst & Young LLP,
such matters as are required to be discussed by Public Company Accounting
Oversight Board Auditing Standard No. 16, Communications with the Audit Committee, relating to the conduct of the audit. The audit
committee also has discussed with Ernst & Young LLP, the auditor’s
independence from the Company and its management, including the matters in the
written disclosures and the letter the audit committee received from the
independent auditor as required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent accountant’s communications
with the audit committee concerning independence, and discussed with the
independent auditor the independent auditor’s independence.
Based on its review and
discussions referred to above, the audit committee has recommended to the board
of directors that the audited financial statements be included in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2014, for
filing with Securities and Exchange Commission. The audit committee has also
selected Ernst & Young LLP as the Company’s independent auditors for
2015.
| MEMBERS OF THE AUDIT COMMITTEE |
| |
|
Maribeth S. Rahe,
Chairperson
Dale E. Parker
Timothy D.
Taron |
19
Table of Contents
PRINCIPAL INDEPENDENT
ACCOUNTANT FEES AND SERVICES
Audit Committee’s
Pre-Approval Policies and Procedures
In accordance with the
requirements of the Sarbanes-Oxley Act of 2002 and the Audit Committee Charter,
all audit and audit-related work performed by the independent public registered
accounting firm, Ernst & Young LLP, must be submitted to the audit committee
for specific approval in advance by the audit committee, including the proposed
fees for such work. The audit committee has not delegated any of its
responsibilities under the Sarbanes-Oxley Act to management.
Principal Accounting Firm
Fees
Fees (including reimbursement
for out-of-pocket expenses) paid to our independent
registered public accounting firm for services in 2014 and 2013 were as follows:
|
|
|
|
Audit |
|
|
|
All |
|
|
Audit |
|
Related |
|
|
|
Other |
|
|
Fees |
|
Fees |
|
Tax Fees |
|
Fees |
|
|
(In millions) |
| 2014 |
|
$2.0 |
|
$0.0 |
|
$0.3 |
|
$0.0 |
| 2013 |
|
$1.6 |
|
$0.0 |
|
$0.4 |
|
$0.0 |
Audit Fees include fees billed
for professional services rendered by Ernst & Young LLP for the audit of our
consolidated financial statements for fiscal 2014 and 2013, including the audit
of internal controls over financial reporting under Sarbanes-Oxley Act of 2002.
Also included in the Audit Fees for 2014, is approximately $0.5 million of fees
and out-of-pocket expenses associated with the Company’s acquisition of Enventis
and the related equity and debt registration statements.
For fiscal 2014 and 2013,
there were no Audit-Related Fees. Tax Fees include fees billed for professional
services rendered by Ernst & Young LLP related to tax consulting and tax
compliance services.
For fiscal years 2014 and
2013, there were no All Other Fees. For fiscal years 2014 and 2013, Tax Fees or
All Other Fees disclosed above, were approved in reliance on the exceptions to
the pre-approval process set forth in 17 CFR 210.2-01(c)(7)(i)(C).
20
Table of Contents
PROPOSAL NO. 2 —
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The audit committee of the
board of directors has appointed Ernst & Young LLP as our independent
auditors for the year ending December 31, 2015. Our stockholders are being asked
to ratify this appointment at the annual meeting. Ernst & Young LLP has
served as our auditors since December 31, 2002, when Homebase Acquisition, LLC,
one of our predecessors, acquired our Illinois operations from
McLeodUSA.
Board Recommendation and
Stockholder Vote Required
The board of directors
recommends a vote “FOR” the ratification of the appointment of Ernst & Young
LLP as our independent auditors for the year ending December 31, 2015 (Proposal
No. 2 on the proxy card).
The affirmative vote of the
holders of a majority of the votes represented at the annual meeting in person
or by proxy will be required for approval. Representatives of Ernst & Young
LLP, expected to be present at the 2015 annual meeting, will have the
opportunity to make a statement at the meeting if they desire to do so and are
expected to be available to respond to appropriate questions.
If the appointment is not
ratified, the audit committee will reconsider the appointment.
BUSINESS EXPERIENCE OF
EXECUTIVE OFFICERS
The following is a description
of the background of our continuing executive officer who is not a director:
Steven L.
Childers serves as Chief
Financial Officer of CCH. Mr. Childers has served in this position since April
2004. From April 2003 to April 2004, Mr. Childers served as Vice President of
Finance. From January 2003 to April 2003, Mr. Childers served as the Director of
Corporate Development. From 1997 to 2002, Mr. Childers served in various
capacities at McLeodUSA, including as Vice President of Customer Service and, a
Vice President of Sales and as a member of its Business Process Teams, leading
an effort to implement new revenue assurance processes and controls. Mr.
Childers joined CCH’s predecessor in 1986 and served in various capacities
through its acquisition by McLeodUSA in 1997, including as President of its
former Market Response division and in various finance and executive roles. Mr.
Childers is a director of the Illinois State Chamber of Commerce, serving as
Treasurer and as member of the Executive Committee. He is a director for the
Lake Land College and is a member of the Business Advisory Board for Eastern
Illinois University.
21
Table of Contents
EQUITY COMPENSATION PLAN
INFORMATION
Immediately prior to the
closing of our initial public offering in July 2005, our stockholders approved
the 2005 Long-Term Incentive Plan, which was effective upon completion of our
initial public offering. At the 2009 annual meeting of stockholders, the
stockholders approved the Consolidated Communications Holdings, Inc. 2005
Long-Term Incentive Plan, as amended (the “LTIP”). At the 2010 annual meeting of
stockholders, stockholders approved an amendment to the LTIP increasing the
number of shares available under the LTIP. Stockholders are being asked at the
2015 annual meeting of stockholders to approve certain provisions of the LTIP,
including increasing the number of shares available under the LTIP.
The following table sets forth
information regarding the LTIP, the Company’s only equity compensation plan, as
of December 31, 2014:
|
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
Remaining Available |
|
|
|
|
|
|
for Future Issuance |
|
|
Number of Securities to |
|
|
|
Under Equity |
|
|
be Issued Upon |
|
Weighted-Average Exercise |
|
Compensation Plans |
|
|
Exercise of Outstanding |
|
Price of Outstanding |
|
(Excluding Securities |
|
|
Options, Warrants and |
|
Options, Warrants and |
|
Reflected in Column |
|
|
Rights |
|
Rights |
|
(a)) |
| Plan Category |
|
(a) |
|
(b) |
|
(c)(1) |
| Equity compensation plans approved by |
|
|
|
|
|
|
| security
holders |
|
— |
|
— |
|
603,970 |
| Equity compensation plans not approved
by |
|
|
|
|
|
|
| security
holders |
|
— |
|
— |
|
— |
| Total |
|
— |
|
— |
|
603,970 |
____________________
(1)
603,970 shares remain available for future issuance under the LTIP as described
above.
22
Table of Contents
COMPENSATION COMMITTEE
REPORT
The compensation committee of
the board of directors has furnished the following report to the stockholders of
the Company in accordance with rules adopted by the Securities and Exchange
Commission.
The compensation committee
reviewed and discussed with management the Company’s Compensation Discussion and
Analysis contained in this Proxy Statement.
Based upon the review and
discussions referred to above, the compensation committee recommended to the
board of directors that the Company’s Compensation Discussion and Analysis be
included in this Proxy Statement.
The information in this report
is not “soliciting material,” is not deemed filed with the SEC and is not to be
incorporated by reference in any of our filings under the Securities Act of
1933, as amended, or the Exchange Act, whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filings.
This report is submitted on
behalf of the members of the compensation committee:
Roger H. Moore, Chairperson
Maribeth S. Rahe
Thomas A.
Gerke |
23
Table of Contents
COMPENSATION DISCUSSION
AND ANALYSIS
Determination of
Executive Officers
This section of the proxy
statement is intended to provide stockholders with information about the
compensation awarded in 2014 to the Company’s “named executive officers,” and
how it was determined. This information includes a discussion of the key
elements of the Company’s compensation program and the philosophy and rationale
behind the compensation committee’s executive compensation decisions. The named
executive officers in 2014 are those listed in the Summary Compensation Table of
this proxy statement, who served in the roles listed below during 2014:
Robert J. Currey, Chief Executive Officer and Chairman of the Board
C.
Robert Udell, Jr., President and Chief Operating Officer
Steven L. Childers, Chief Financial Officer
Effective January 1, 2015, the
Company’s board of directors appointed Mr. Udell as President and Chief
Executive Officer and Mr. Currey as the Chairman of the Board. Previously, in
November 2013, the Company reorganized its executive structure, and in
connection therewith Mr. Udell was appointed President and assumed additional
responsibilities and policy-making functions within the organization. As a
result, Steven J. Shirar and Christopher A. Young, who had previously been
executive officers, ceased being executive officers at such time.
You should review this
Compensation Discussion and Analysis section together with the tabular
disclosures beginning on page 34.
Executive Compensation
Objectives
The compensation committee has
designed the Company’s executive compensation program to achieve the following
objectives:
| ● |
provide incentives to
company executives to maximize stockholder return; |
|
|
| ● |
enable the company to
attract, and retain talented, results-oriented managers capable of leading
key areas of the Company’s business; and |
|
|
| ● |
reward the management
team for achieving key financial and operational objectives which will
promote the long-term health of the
business. |
Each key element of total
compensation serves a specific purpose that helps achieve the objectives of the
executive compensation program.
The three key elements of the
current executive compensation program are (1) annual base salary; (2) annual
cash bonuses, and (3) long-term, equity-based incentives. The Company also
provides its executive officers with severance and change-in-control benefits as
well as a limited number of perquisites and other personal benefits. Our
discussion below, under the caption “Elements of Executive Compensation”
contains an explanation of each of these elements. In evaluating the mix of
these compensation components, as well as the short-term and long-term value of
the executive compensation plans, the compensation committee considers both the
performance and skills of each executive, as well as the compensation paid to
those in similar organizations with similar responsibilities.
The following discussion
explains how the compensation committee uses the three key compensation elements
to meet the objectives of its executive compensation program.
Objective #1:
Provide incentives to Company executives to maximize stockholder
return. The compensation
committee uses both time-based and performance-based restricted shares in an
effort to unify the interests of the Company’s executives and
stockholders.
24
Table of Contents
The compensation committee
believes that granting restricted shares based on performance, which then vest
incrementally over time, but only so long as an executive remains employed by
the Company, encourages an executive to increase the Company’s stock value over
time so the executive can realize a greater value of those shares once they
vest.
The compensation committee
granted performance shares to all of its executives in March 2013, pursuant to
which restricted shares were awarded in March 2014 based on the attainment of
certain performance goals for 2013 and also granted performance shares to all
executive officers in March 2014, pursuant to which restricted shares were
awarded in March 2015 based on the attainment of certain performance goals for
2014.
The Company had awarded Mr.
Currey a two-year grant of time-based restricted shares in March 2013 and had
also awarded each of Mr. Udell and Mr. Childers with a three-year grant of
time-based restricted shares in March 2013. As such, there were no shares of
time-based restricted stock granted to the Company’s executives in
2014.
Objective #2: Enable
the Company to attract and retain talented, results-oriented managers capable of
leading key areas of the Company’s business. In order to assist the compensation committee in
setting compensation levels, the committee has, from time to time, obtained from
Towers Watson, its outside consultant, information regarding compensation paid
by the Company’s peer group, as defined below. The Company believes this
benchmarking work plays an important role in helping the Company ensure its
compensation programs are competitive within its industry so that it can both
retain and attract talented managers.
In the fourth quarter of 2012,
following the completion of its acquisition of SureWest Communications, and the
subsequent restructuring of its executive team, the Company engaged Towers
Watson to do a full benchmark study, in which a new peer group was constructed,
and the Company’s executive compensation program was compared to the
50th percentile of the peer group. This study formed the basis for
executive compensation decisions. Under direction of the compensation committee,
Towers Watson conducted a custom survey of compensation paid by the following
companies (our “peer group”) that, at the time of the study, operated in the
integrated communications, wireless telecommunications, communications equipment
and broadcasting and cable television industries and that had annual revenues
ranging from $200 million to $1.5 billion, with a median revenue of $599 million
(which was at the time in line with the Company’s 2013 full year revenue of
approximately $602 million as reported on our Annual Report on Form 10-K filed
with the SEC on March 5, 2014).
| — |
Alaska Communications Systems |
— |
Primus Telecommunications |
— |
Cogent Communications |
| |
Group, Inc. |
|
Group, Inc. |
|
Group, Inc. |
| — |
Ntelos Holdings Corp. |
— |
Knology, Inc. |
— |
USA
Mobility, Inc. |
| — |
Fairpoint Communications, Inc. |
— |
Clearwire Corporation Corp. |
— |
Cincinnati Bell Inc. |
| — |
Lumos Networks Corp |
— |
SBA
Communications Corp. |
— |
General Communications Inc. |
| — |
TW
Telecom Inc. (f/k/a Time |
— |
Atlantic Telenetwork, Inc. |
— |
Cbeyond, Inc. |
|
Warner Telecom, Inc.) |
|
|
|
|
| — |
Shenandoah Telecommunications |
|
|
|
|
|
Company |
|
|
|
|
The compensation committee
selected these companies because the Company competes with them for executive
talent, and because these companies also compete with the Company for
investors.
In late 2013, in preparation
for the 2014 executive compensation planning cycle, Towers Watson refreshed its
findings at the direction of the Committee.
For 2014, based on the Towers
Watson benchmarking update, the compensation committee determined that, in the
aggregate, the total targeted compensation for the Company’s named executive
officers was approximately 30% below the 50th percentile of the peer
group. The primary reasons for this lag (which decreased from 44% below the
50th percentile of the peer group in 2013) were the decisions to
defer compensation increases for the past several years due to (i) the overall
challenging market conditions and the desire to contain costs during
25
Table of Contents
these periods of economic
uncertainty and (ii) the decision to wait until after the Company’s 2012
acquisition of SureWest Communications and the completion of the benchmark study
once the transaction closed. These trends were partially offset by increases in
executive compensation which had been previously implemented in 2013.
The compensation committee
made changes to certain of the named executive officers’ compensation, effective
January 1, 2014, to increase each of their base salaries, cash bonus payment
opportunities (short term incentive or “STI”), and long-term, incentive based
incentive compensation opportunities (or “LTI”).
In the aggregate, the
percentage increases for each element of total direct compensation for each of
the Company’s named executive officers, assuming payouts at the applicable
target levels, is outlined in the table below:
|
|
Percent Increases
to: |
| Name |
|
|
Base
Salary |
|
STI |
|
LTI |
|
Total |
| Robert J. Currey |
|
0 |
% |
|
0 |
% |
|
0 |
% |
|
0 |
% |
| C.
Robert Udell, Jr. |
|
|
10 |
% |
|
9 |
% |
|
52 |
% |
|
26 |
% |
| Steven L. Childers |
|
0 |
% |
|
0 |
% |
|
45 |
% |
|
18 |
% |
The refreshed information from
Towers Watson provided guidance for decisions regarding various elements of the
Company’s executive compensation program for 2014, including:
| ● |
levels of salary, annual
bonus, long-term incentives and total direct
compensation; |
|
|
| ● |
percentage of total
compensation that is cash and percentage that is equity; |
|
|
| ● |
percentage of total
compensation that is current and percentage that is
long-term; |
|
|
| ● |
types and features of
equity-based compensation awards; |
|
|
| ● |
amounts and types of
perquisites and other personal benefits; and |
|
|
| ● |
components of potential
change-in-control benefits. |
In general, the Company’s
compensation structure encourages executives to remain with the Company by
paying annual cash bonuses, which motivates executives to remain employed
through the year, and by granting restricted shares and performance shares,
which require a long-term commitment to the Company since executives must
generally remain employees for at least four years (in the case of restricted
shares) or five years (in the case of performance shares) in order to realize
the full value of the shares when they vest.
Objective #3: Reward
the management team for achieving key financial and operational objectives which
will promote the long-term health of the business. The Company’s cash incentive bonus plan ties the
level of achievement of the Company’s annual financial and operational
performance goals to the amount of annual incentive compensation that we pay to
each of our executives. In addition, the Company makes annual Long Term
Incentive Plan (or “LTIP”) awards in the form of performance shares which are
only earned when performance criteria are met. This provides a strong linkage
between the number of restricted shares ultimately awarded and the Company’s
achievement of its performance goals. As a result, a significant portion of each
executive’s total compensation is dependent on the degree to which we achieve
these performance goals. This provides an incentive for the Company’s executives
to increase performance with respect to these measures, and in turn increase
stockholder value.
26
Table of Contents
Processes and Procedures
for the Consideration and Determination of Executive and Director
Compensation
The board of directors
approves and establishes the annual operating and performance goals for the
Company, and the compensation committee then determines the appropriate criteria
for linking compensation of the named executive officers and the non-employee
directors to this performance, including the establishment of:
| ● |
base salary amounts for
the Company’s executive officers;
|
| ● |
annual incentive
programs for the Company’s executive officers;
|
| ● |
long-term equity
incentive compensation and all policies related to the issuance of
restricted shares and performance shares by the Company, including grants
of restricted shares to directors;
|
| ● |
annual performance goals
and payouts for the Company under the bonus plan and the Company’s
long-term incentive plan; and
|
| ● |
amounts of the annual
retainers and other fees for the Company’s non-employee
directors. |
Role of Executive Officers,
Management and Independent Compensation Consultant
The compensation committee
conducts an annual review of the Chief Executive Officer’s performance, and
reviews it with the board of directors. The Chief Executive Officer prepares a
performance review for each of the other executives for each completed calendar
year. Based on his assessment of each individual’s performance during the
preceding calendar year, as well as a review of how each executive’s
compensation compares with the peer group companies, the Chief Executive Officer
recommends to the compensation committee, for each such executive, base salary
amounts, time-based and performance share awards and annual performance goals
under the bonus plan and the long-term incentive plan.
Please see the caption
“Corporate Governance and Board Committees – Role of Independent Compensation
Consultant” on page 14 for an explanation of the role of the compensation
committee’s outside consultant, Towers Watson.
Elements of Executive
Compensation for 2014
The key elements of the
compensation committee’s executive compensation program for 2014
were:
| ● |
an annual base
salary;
|
| ● |
cash bonuses directly
linked to achievement of the Company’s annual financial and operational
performance goals; and
|
| ● |
(i) the continued
vesting of previously awarded time-vesting restricted shares for all named
executive officers; and (ii) a grant of performance-based restricted
shares for all of our executive officers. |
In addition, the Company
provides severance and change-in-control benefits, as well as a limited number
of perquisites and other personal benefits to all of its executive
officers.
For 2014, as in prior years,
the compensation committee determined that each of the named executive officers
should receive an annual base salary and also be eligible for a cash bonus
opportunity. The compensation committee set performance-based targets for
restricted shares to be awarded to all named executive officers if certain
performance goals were met.
In addition to monitoring
compensation and executive performance throughout the year, in general, the
compensation committee formally reviews executive compensation and executive
performance on an annual basis, in the first quarter, following the completion
of the previous performance year. For 2014 performance, the formal review took
place in February 2015.
27
Table of Contents
Compensation Element 1:
Annual Base Salaries for 2014
The Company pays all of its
executive officers an annual salary, which the compensation committee believes
provides financial stability for executives and reflects their level of
responsibility with the Company. The compensation committee also believes that
salary increases should reward an individual’s contributions and
responsibilities to the Company.
The compensation committee
reviews, and may revise, at its discretion, salaries for executive officers when
it feels those changes are warranted. In its annual review of the salaries of
executive officers for 2014, in addition to the market position of the Company’s
executive compensation program relative to its peer group, the committee
considered the following principal factors:
| ● |
performance of the
executive during the previous year, including that individual’s
contribution to the Company’s attainment of its pre-established
performance goals;
|
| ● |
achievement by the
Company during the previous year of its performance goals;
and
|
| ● |
salary levels of
comparable positions at companies in the Company’s peer
group. |
Mr. Udell’s base salary for
2014 was increased from $294,000 to $323,000. There were no other changes to
executive base salaries for 2014.
Compensation Element 2:
Annual Cash Bonuses for 2014
The Company maintains a cash
incentive bonus plan that is designed to reward achievement of annual Company
performance goals. The compensation committee believes that consistent
attainment of these goals is critical to the Company’s long-term success. In
2014, each of the named executive officers was eligible to participate in the
bonus plan, which provided them with the opportunity to earn a cash bonus
payment. The payment was measured as a percentage of the named executive
officer’s salary and was based on the achievement of criteria established by the
compensation committee.
For the named executive
officers, other than the Chief Executive Officer (the “other named executives”),
the compensation committee based its performance targets on the following
measures and in the following amounts:
| ● |
50% on the Company’s
adjusted earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA) for 2014 (target of $280.0
million);
|
| ● |
20% on dividend payout
ratio for 2014 (target of 69.9% or less);
|
| ● |
15% on broadband
subscriber net additions for 2014 (target of 10,000 net additions), which
consisted of the number of the Company’s subscribers to its high speed
internet, digital subscriber lines (DSL) and video
lines;
|
| ● |
15% on a set of ten
related “other operating goals” which the compensation committee set for
the Company’s executive team to meet as a group. These “other operating
goals” contain a mix of qualitative and quantitative goals which are
established by the compensation committee to guide the management team in
achieving the company’s operating, strategic, and public policy goals. The
goals were the same for all the other named executives, and the
achievement score was determined by the compensation committee, based on
the Chief Executive Officer’s recommendation, as a part its annual
evaluation of the other named executives’ performance as a team. For 2014
these “other operating goals” included, among other items, specific goals
related to the Company’s planned capital expenditures and network
development, quality of service metrics, successful integration of
SureWest Communications into the Company’s operations, advancement of the
Company’s interests in the regulatory and public policy arena, fine-tuning
of the Company’s capital structure, product-development initiatives and
corporate development/business development. |
28
Table of Contents
These performance measure
categories and weightings for 2014 were the same as those used in 2013. As
described above under the caption “Role of Executive Officers, Management and
Independent Compensation Consultant,” the Chief Executive Officer prepares a
performance review for each of the other executives for each completed calendar
year. This includes his assessment of each other named executive officer’s
performance during the preceding calendar year with respect to the level of
attainment of the “other operating goals.” The Chief Executive Officer
recommended, and the compensation committee approved, an attainment level of
8.75 out of 10 with respect to the other operating goals for 2014.
For the Chief Executive
Officer, the compensation committee used the same measures and targets as
described above for the other named executive officers, except that the
committee did not use the “other operating goals” measure, some of which require
subjective assessment. Accordingly, the compensation committee weighted the
measures for the Chief Executive Officer as follows:
| ● |
60% on the Company’s
adjusted earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA) for 2014;
|
| ● |
20% on dividend payout
ratio for 2014; and
|
| ● |
20% on broadband
subscriber net additions for 2014. |
These performance measures for
2014 were the same as those used in 2013. In March 2014, the compensation
committee determined these measures for both the Chief Executive Officer and the
other named executives, and established a formula to link the results with
payout levels. The compensation committee used these specific performance
measures, target levels and a simple weighting of the measures because it
believed that they served to most effectively promote the Company’s primary
short-term goals of increasing earnings, sustaining its dividend, and adding
broadband subscribers.
For 2014, the compensation
committee established the bonus targets for each executive, as a percentage of
2014 salary level, based on its assessment of appropriate balance and mix
between base salary and short-term bonus in determining the total cash to be
paid to each executive.
For 2014, the bonus payout
targets as a percentage of salary for each named executive officer were: 116%
for Mr. Currey, 65% for Mr. Udell, and 64% for Mr. Childers. The compensation
committee used these levels because achieving the targeted payouts at those
levels would result in an annual bonus payout to each officer equal to roughly
the 50th percentile of the annual bonus paid to executives in comparable
positions at companies in the peer group. However, as described above, the
Company is aware that even after these changes, the aggregate total direct
compensation for its named executive officers remains below the 50th
percentile of the relevant peer group.
As in prior years, the
compensation committee also set a maximum payment equal to 120% of the target
amount if the goals were attained above 105% of the target level and a threshold
level such that attainment of 90% of the target level would have resulted in a
payment of 50% of the target amount. Attainment of below 90% of the target level
would have resulted in no bonus payment.
For 2014, the Company and the
named executive officers achieved the Company performance targets at the
following levels:
| Performance
Measure |
|
Actual |
|
Target |
|
% of
Target |
| Adjusted EBITDA |
|
$276.8 million |
|
$280.0 million |
|
98.9% |
| Dividend Payout Ratio |
|
64.4% |
|
≤69.9% |
|
107.9% |
| Broadband Subscriber Net Adds |
|
7,842 |
|
10,000 |
|
78.4% |
| Other Operating Goals |
|
8.75/10 |
|
10 |
|
87.5% |
In the compensation
committee’s review of 2014 performance, the compensation committee first
determined the amounts earned by the executives by computing the weighted
average of the actual achievement of the performance targets at the levels
described above. For the Chief Executive Officer, this weighted average was
29
Table of Contents
96.6% of target, and for the
other named executive officers (“NEOs”), this weighted average was 95.9% of
target. These weighted averages consisted of the following components,
reflecting the weighting of the performance measures described above and the
actual level of achievement of those measures:
|
CEO’s |
|
Other NEOs’ |
|
Component |
|
Component |
| Performance
Measure |
Percentage |
|
Percentage |
| Adjusted EBITDA |
59.3% |
|
49.4% |
| Dividend Payout Ratio |
21.6% |
|
21.6% |
| Broadband subscriber net
adds |
15.7% |
|
11.8% |
| Other Operating Goals |
N/A |
|
13.1% |
| Weighted Average |
96.6% |
|
95.9% |
The following payout table was
used to convert the weighted average component percentages to a bonus payout,
which resulted in a payout of 75% of target:
| Performance |
|
Payout (as a % of
Target) |
| < 90% |
|
0% |
| 90%
- 94.9% |
|
50% |
| 95% - 97.9% |
|
75% |
| 98%
- 101.9% |
|
Weighted Achievement Score |
| 102% - 104.9% |
|
110% |
| >
105% |
|
120% |
The resulting bonuses, all of
which were paid in March 2015, represented the following percentages of each
named executive officer’s respective 2014 annual salary level:
|
|
2014 Bonus Payout as
a Percentage of 2014 Salary |
|
|
Actual Percentage of |
|
Target Opportunity,
as |
| Name |
|
Salary
Paid |
|
a Percentage
of Salary |
| Robert J. Currey |
|
87 |
% |
|
116 |
%
|
| C.
Robert Udell, Jr. |
|
49 |
% |
|
65 |
% |
| Steven L. Childers |
|
48 |
% |
|
64 |
% |
The “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table shows the cash bonus the
compensation committee awarded to each of the named executive officers for 2014
pursuant to this bonus plan.
The compensation committee
believes that the level of the cash bonus opportunities and the cash bonuses
actually paid for 2014 performance to the named executive officers helped serve
the compensation committee’s executive compensation program objectives
to:
| ● |
retain its named
executive officers by providing them with a cash bonus opportunity at a
level competitive with the Company’s peer group;
and
|
| ● |
reward the named
executive officers for operational and financial
performance. |
30
Table of Contents
Compensation Element 3:
Long-Term, Equity-Based Incentives for 2014
The Company maintains the
stockholder-approved LTIP that provides for grants of stock options, stock,
stock units and stock appreciation rights and for the adoption of one or more
cash incentive programs. The Company’s non-employee directors and certain
employees, including each of the named executive officers, are eligible for
grants under the LTIP. The principal purposes of the LTIP are to:
| ● |
provide these
individuals with incentives to maximize stockholder return and otherwise
contribute to the Company’s success; and
|
| ● |
enable the Company to
attract, retain and reward the best available individuals for positions of
responsibility. |
The compensation committee
administers the LTIP and determines if, when, and in what amount awards should
be granted, as well as the type of award vehicle to be employed (choosing from
among those award vehicles authorized by the LTIP).
The Company’s Executive
Long-Term Incentive Program (the “program”) provides a methodology for
determining the equity compensation to be granted each year. Under the program,
each year the compensation committee determines for each executive eligible to
participate, including each named executive officer, the economic value of
target annualized long-term incentive compensation. The goal of the compensation
committee is to establish those targets so that they are at approximately the
50th percentile of the peer group. The Company pays 50% of this
annualized target to the executives in the form of performance shares. If in any
year the compensation committee decides to make time-based restricted share
grants, the awards will be based on 50% of this annualized target value,
multiplied by the number of years the grant is to represent.
Performance
Shares
In March 2014, the
compensation committee established a target value of long-term incentive
compensation and made performance share awards equal to 50% of this target
value. The compensation committee also approved Company performance goals and
minimum, target and maximum payouts. The goals and pay out levels were the same
as those approved for the cash incentive bonus plan.
The 2014 performance share
target award levels were determined by taking half of the annual target LTIP
grant value for each of the named executive officers, and converting that value
to a number of shares based on the 20-day average closing price for our stock as
of two trading days before the award date (discounted 10% to reflect the
challenge associated with attaining the performance goals).
The performance share awards
entitled the executives to receive awards of restricted shares in 2015 depending
on the level of attainment of the performance goals. Attainment of the goals at
the target levels would result in the target number of performance shares
awarded as restricted shares, and attainment of the goals at above or below the
target levels would result in an increased or decreased number of restricted
shares awarded, using the same formulas as those with respect to annual cash
bonuses.
In March 2015, the
compensation committee approved awards of restricted shares based on 2014
performance, as follows:
|
|
2014 Performance |
|
March 2015 Restricted |
| Named Executive
Officer |
|
Share
Target |
|
Shares
Earned/Awarded |
| Robert J. Currey |
|
24,121 |
|
18,090 |
| C.
Robert Udell |
|
14,392 |
|
10,792 |
| Steven L. Childers |
|
11,514 |
|
8,632 |
Under the terms of the
performance share awards, the number of restricted shares granted in March 2015
were to be determined, for our Chief Executive Officer, as 75% of the 2014
performance share target based on the achievement level of 96.6% of the target
performance goals; and for the other named executive officers, also as
31
Table of Contents
75% of the 2014 performance
share target based on an achievement level of 95.9% of the target performance
goals, in each case as previously described in the “Cash Bonus” section above.
The restricted shares vest at a rate equal to 25% per year on each December 5th
following the date of grant, except for our Chief Executive Officer, which vest
100% on the first December 5th following the date of grant.
Time-Based Restricted
Stock
As previously described, the
Company had awarded Mr. Currey a two-year grant of time-based restricted shares
in March 2013 and had also awarded each of Mr. Udell and Mr. Childers with a
three-year grant of time-based restricted shares in March 2013. As such, there
were no shares of time-based restricted stock granted to the Company’s
executives in 2014.
The compensation committee
believes that the long-term, equity-based incentives it awarded to the named
executive officers in 2014 helped meet its objectives to:
| ● |
retain the named
executive officers by providing them with long-term, equity-based
compensation at a level competitive with the Company’s peer group;
and
|
| ● |
reward the named
executive officers for achieving key financial and operational objectives,
which were attained at a 96.6% level (for the Chief Executive Officer) and
a 95.9% level (for the other named executive officers) in
2014. |
All Other
Compensation
As part of our executive
compensation program, the Company provides certain of its executives with the
following other benefits:
| ● |
personal use of a
company automobile;
|
| ● |
living expenses if the
executive’s responsibilities require repeated and extended stays away from
home;
|
| ● |
expenses paid for
business related meals and travel for spouses (when required to attend
company functions);
|
| ● |
tax reimbursement for
personal use of a company automobile and business related travel for
spouses when required to attend company functions;
and
|
| ● |
company matching
contributions to its 401(k) plan. |
The “All Other Compensation”
column of the Summary Compensation Table on page 34 shows the aggregate amounts
of such compensation paid to each of the named executive officers.
Employment Security
Agreements
On February 20, 2007, the
Company adopted Employment Security Agreements (“ESAs”) with each of its named
executive officers, as well as certain other executives. The ESAs were further
amended in December 2009 as a result of the Company’s outside compensation
consultant’s evaluation of the ESAs compared to general market and peer company
best practices. Please see the caption “Potential Payments upon Termination or
Change in Control of the Company — Employment Security Agreements” below for an
explanation of the terms of the ESAs.
The Company believes that the
protections afforded by the agreements are a valuable incentive for attracting
and retaining top managers. It believes that the agreements are particularly
important because the Company does not have employment agreements or long-term
arrangements with its executives. The Company also believes that, in the event
of an extraordinary corporate transaction, the agreements could prove crucial to
the Company’s ability to retain top management through the transaction process.
The Company also benefits from certain restrictive covenants, including
non-competition covenants, contained in these agreements.
32
Table of Contents
Deductibility of
Compensation
Section 162(m) of the Internal
Revenue Code limits the deductibility of executive compensation paid to the
Chief Executive Officer and to each of the three other most highly compensated
officers of a public company (other than the Chief Financial Officer) who are
named executive officers to $1 million per year. However, compensation that is
considered qualified “performance-based compensation” generally does not count
toward the $1 million deduction limit.
We believe it is in the best
interests of our shareholders for us to maximize tax deductibility when
appropriate. Although deductibility of compensation is preferred, tax
deductibility is not a primary objective of our compensation programs. We
believe it is important to retain the flexibility to compensate executives
competitively. The compensation committee and the board consider the impacts of
Section 162(m) in developing, implementing and administering our compensation
programs. However, the compensation committee balances this consideration with
our primary goal of structuring compensation programs to attract, motivate and
retain highly talented executives. As such, individual exceptions may occur when
the compensation committee or the board, after balancing tax efficiency with
overall objectives, believes such exceptions to be in the best interests of our
shareholders.
The Company annually reviews
the compensation paid to its named executive officers other than the Chief
Financial Officer to determine the deductibility of compensation under Section
162(m). Base salary, by its nature, does not qualify as performance-based under
Section 162(m). The Company’s grants of performance-based restricted stock and
annual cash bonus payments under the LTIP qualify as performance-based
compensation, and the time-based restricted stock grants (when made) are not for
amounts that are expected to raise deductibility issues under Section
162(m).
For 2014, the Company believes
substantially all of the compensation received by its named
executive officers is fully deductible by the Company without regard to Code
Section 162(m).
Changes to Compensation
Program for 2015 resulting from Mr. Udell’s Promotion
Effective as of January 1,
2015, the board elected Mr. Udell to the role of President and Chief Executive
Officer. In conjunction with this additional increase in his duties and
responsibilities, the board increased Mr. Udell’s compensation as
follows:
| ● |
Mr. Udell’s annual base
salary rate for 2015 was increased from $323,000 to $375,000, effective
March 8, 2015; and
|
| ● |
Mr. Udell’s target
annual cash bonus for 2015 performance was increased from $210,000 to
$375,000. |
33
Table of Contents
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The following table lists
information regarding the compensation for the years ended December 31, 2014,
2013 and 2012, of our Chief Executive Officer, Chief Financial Officer and each
of the other executive officers named in this section, to whom we refer to,
collectively, as the named executive officers.
| Name and |
|
|
|
|
|
|
|
|
|
Stock |
|
Non-Equity |
|
|
|
|
|
|
|
|
| Principal |
|
|
|
|
|
|
|
|
|
Awards |
|
Incentive Plan |
|
All
Other |
|
|
|
|
|
| Position |
|
Year |
|
Salary($) |
|
Bonus($)(3) |
|
($)(4) |
|
Compensation($) |
|
Compensation($) |
|
|
|
Total
($) |
| Robert J. Currey(1) |
|
2014 |
|
$ |
425,000 |
|
$ |
0 |
|
$ |
476,149 |
|
$ |
369,000
|
|
$ |
87,324
|
|
(5) |
|
$ |
1,357,473 |
| Executive |
|
2013 |
|
$ |
422,885 |
|
$ |
0 |
|
$ |
1,318,393 |
|
$ |
486,588 |
|
$ |
96,366 |
|
|
|
$ |
2,324,232 |
| Chairman |
|
2012 |
|
$ |
370,000 |
|
$ |
40,700 |
|
$ |
377,199 |
|
$ |
444,000 |
|
$ |
68,419 |
|
|
|
$ |
1,300,318 |
|
| C.
Robert Udell, Jr. (2). |
|
2014 |
|
$ |
323,000 |
|
$ |
0 |
|
$ |
284,098 |
|
$ |
157,500 |
|
$ |
82,227 |
|
(6) |
|
$ |
846,825 |
| President and Chief. |
|
2013 |
|
$ |
295,654 |
|
$ |
0 |
|
$ |
686,639 |
|
$ |
190,877 |
|
$ |
83,338 |
|
|
|
$ |
1,256,508 |
| Executive Officer |
|
2012 |
|
$ |
248,923 |
|
$ |
20,000 |
|
$ |
167,428 |
|
$ |
165,000 |
|
$ |
55,746 |
|
|
|
$ |
657,097 |
|
| Steven L. Childers |
|
2014 |
|
$ |
251,000 |
|
$ |
0 |
|
$ |
227,286 |
|
$ |
120,750 |
|
$ |
69,604 |
|
(7) |
|
$ |
668,640 |
| Chief Financial |
|
2013 |
|
$ |
249,885 |
|
$ |
0 |
|
$ |
572,142 |
|
$ |
159,229 |
|
$ |
75,338 |
|
|
|
$ |
1,056,594 |
| Officer |
|
2012 |
|
$ |
222,000 |
|
$ |
16,650 |
|
$ |
123,404 |
|
$ |
122,100 |
|
$ |
54,643 |
|
|
|
$ |
538,797 |
| (1) |
|
Name and Principal
Position — Robert J. Currey — Mr. Currey served as Chairman of the Board and Chief Executive
Officer throughout 2014. On January 1, 2015, he ceased serving as Chief
Executive Officer but continues to serve as Executive Chairman of the
Board. |
| |
| (2) |
|
Name and Principal
Position — C. Robert Udell, Jr. — Mr. Udell served as President and Chief Operating Officer and a
director throughout 2014. On January 1, 2015, he became President and
Chief Executive Officer and continues to serve as a director. |
| |
| (3) |
|
Bonus —
The amounts in this column
represent a one-time cash award to each of the named executive officers,
made in 2012, intended to approximate the annualized impact of a 5% wage
increase. |
| |
| (4) |
|
Stock Awards —
The amounts in this column
represent the grant date fair value, computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718, of
the restricted stock granted in 2014, 2013 and 2012 and the target number
of performance shares awarded in 2014, 2013 and 2012 based upon the
probable outcome of the performance conditions. The grant date value of
the performance shares in 2014 assuming the performance conditions were
met at the maximum level was for Mr. Currey: $571,359; for Mr. Udell:
$340,898; and for Mr. Childers: $272,724. Also, see Footnote 8 to the
Consolidated Financial Statements contained in the Company’s Annual Report
on Form 10-K for the years ended December 31, 2014, 2013 and 2012 for an
explanation of the assumption made by the Company in the valuation of
these awards. |
| |
| (5) |
|
All Other
Compensation — Robert J. Currey. This column includes $15,600 of matching contributions made in 2014
under the Company’s 401(k) Plan on behalf of Mr. Currey. Mr. Currey is
also provided with personal use of a Company automobile ($1,357), a tax
“gross-up” reimbursement in connection with payment for his personal use
of a Company automobile ($511), and the value of dividends paid on
unvested restricted stock ($69,857). |
| |
| (6) |
|
All Other
Compensation — C. Robert Udell, Jr. This column includes $15,600 of matching
contributions made in 2014 under the Company’s 401(k) Plan on behalf of
Mr. Udell. Mr. Udell is also provided with personal use of a Company
automobile ($1,427), a tax “gross-up” reimbursement in connection with
payment for his personal use of a Company automobile ($537), and the value
of dividends paid on unvested restricted stock ($64,663). |
| |
| (7) |
|
All Other
Compensation — Steven L. Childers. This column includes $15,600 of matching contributions made in 2014
under the Company’s 401(k) Plan on behalf of Mr. Childers and the value of
dividends paid on unvested restricted stock
($54,004). |
34
Table of Contents
Salary
The “Salary” column of the
Summary Compensation Table shows the salaries paid in 2014, 2013 and 2012 to
each of the named executive officers. The salary rates in effect for 2014
were:
| Robert J. Currey |
$ |
425,000 |
| C.
Robert Udell, Jr. |
$ |
323,000 |
| Steven L. Childers |
$ |
251,000 |
Non-Equity Incentive
Compensation
The “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table shows the cash bonus the
Company awarded to each of the named executive officers for 2014, 2013 and 2012
pursuant to the Company’s bonus plan. For more information, please refer to the
Compensation Discussion and Analysis section of this proxy statement on page 24.
The Company paid all of these amounts in March 2015, March 2014 and March 2013,
respectively.
2014 Grants of Plan-Based
Awards
This table sets forth
information for each named executive officer with respect to (1) estimated
possible payouts under non-equity incentive plan awards and (2) equity incentive
plan awards that could have been earned for 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts |
|
Fair Value |
|
|
|
|
Estimated Future Payouts Under |
|
Under Equity Incentive Plan |
|
of Stock and |
|
|
Grant |
|
Non-Equity
Incentive Plan Awards(1) |
|
Awards(2) |
|
Option |
| Name |
|
Date |
|
Threshold($) |
|
Target($) |
|
Maximum($) |
|
Threshold |
|
Target |
|
Maximum |
|
Awards(3) |
| Robert J. Currey |
|
|
|
$ |
246,000 |
|
$ |
492,000 |
|
$ |
590,400 |
|
|
|
|
|
|
|
|
|
|
|
3/7/14 |
|
|
|
|
|
|
|
|
|
|
12,060 |
|
24,121 |
|
28,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
571,359 |
| C.
Robert Udell, Jr. |
|
|
|
$ |
96,500 |
|
$ |
193,000 |
|
$ |
231,600 |
|
|
|
|
|
|
|
|
|
|
|
3/7/14 |
|
|
|
|
|
|
|
|
|
|
7,196 |
|
14,392 |
|
17,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
340,898 |
| Steven L. Childers |
|
|
|
$ |
80,500 |
|
$ |
161,000 |
|
$ |
193,200 |
|
|
|
|
|
|
|
|
|
|
|
3/7/14 |
|
|
|
|
|
|
|
|
|
|
5,757 |
|
11,514 |
|
13,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
272,724 |
____________________
| (1) |
|
Estimated Future
Payouts Under Non-Equity Incentive Plan Awards. Payouts under the bonus plan were based on
performance in 2014. The performance targets were set in March 2014, as
described in the Compensation Discussion and Analysis section under the
caption “Annual Incentive Compensation.” The amounts actually paid under
the bonus plan for 2014 appear in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table. Pursuant to the
bonus plan for 2014, the compensation committee established a performance
award formula which linked the payouts to the weighted average achievement
across the four goal areas it had established. Target payout was to be
made if the performance goals were attained at target level, and the
payout was to be capped at a maximum payment of 120% of the target level
if the goals were attained at or above the 105% level and payout was to be
zero if the performance goals were attained below the 90% level (payout at
the 90% level of attainment resulted in a payment of 50% of the target
payout level). The compensation committee had discretion to determine
payouts for achievement between threshold and target, and target and
maximum. |
| |
| (2) |
|
Estimated Future
Payouts Under Equity Incentive Plan Awards. These columns show the threshold, target
and maximum number of shares of restricted stock that could have been
awarded in 2015 pursuant to performance shares previously granted in March
2014. These awards of restricted stock were based on performance in 2014,
which has now occurred. Pursuant to the LTIP for 2014, the compensation
committee granted performance shares to executives, which reflected the
target number of shares of restricted stock to
be |
35
Table of Contents
|
|
granted in 2014 if
target performance goals set by the compensation committee for 2014 were
met. The target award was subject to adjustment based on the weighted
average level of attainment of the performance goals, subject to a maximum
award of 120% of the target number of shares if the goals were attained at
a 105% level and a minimum of zero shares if the goals were attained below
an 90% level (attainment of goals at the 90% level resulted in an award of
50% of the target number of shares). The LTIP is described in the
Compensation Discussion and Analysis section under the caption “Long-Term,
Equity Based Incentives.” |
|
|
|
| (3) |
|
Grant Date Fair
Value of Stock and Option Awards. This column shows the grant date fair value, computed in
accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 718, of the target performance share awards made in
2014 to the named executive officers. See Footnote 8 to the Consolidated
Financial Statements contained in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2014 for an explanation of the assumptions
made by the Company in the valuation of these
awards. |
Outstanding Equity Awards
at 2014 Fiscal Year-End
This table sets forth
information for each named executive officer with respect to each award of
restricted shares that had been made at any time, had not vested, and remained
outstanding at December 31, 2014.
|
|
Stock
Awards |
|
|
Number of Shares
or |
|
Market Value of
Shares |
|
|
Units of Stock
That |
|
or Units of Stock
That |
| Name |
|
Have Not
Vested (#)(1) |
|
Have Not
Vested ($)(2) |
| Robert J. Currey |
|
|
0 |
|
|
|
$ |
0 |
|
| C.
Robert Udell, Jr.(3) |
|
|
29,053 |
|
|
|
$ |
808,545 |
|
| Steven L. Childers(4) |
|
|
24,024 |
|
|
|
$ |
668,588 |
|
____________________
| (1) |
|
Number Of Shares
Or Units Of Stock That Have Not Vested. The unvested shares represent a mix of
time-based restricted shares from the grant made in March 2014; and
unvested performance-based shares from grants made in March 2012; March
2013; and March 2014. |
| |
| (2) |
|
Market Value Of
Shares Or Units Of Stock That Have Not Vested. Represents the number of shares of common
stock covered by the restricted shares valued using $27.83 (the closing
market price of the Company’s common stock as reported in The Wall Street Journal for December 31, 2014, which was the last
trading day of fiscal year 2014). |
| |
| (3) |
|
Vesting Dates –
Udell. The vesting dates of
the restricted shares are as follows: December 5, 2015 (14,019 restricted
shares), December 5, 2016 (12,376 restricted shares), December 5, 2017
(2,658 restricted shares). |
| |
| (4) |
|
Vesting Dates –
Childers. The vesting dates
of the restricted shares are as follows: December 5, 2015 (11,726
restricted shares), December 5, 2016 (10,083 restricted shares), December
5, 2017 (2,215 restricted shares). |
36
Table of Contents
2014 Option Exercises and
Stock Vested
This table sets forth
information concerning the number of restricted shares that vested during 2014
and the value of those vested shares. The Company has not granted
options.
|
|
Stock
Awards |
| Name |
|
Number of
Shares
Acquired
On
Vesting
(#) |
|
Value
Realized
On Vesting
($)(1) |
| Robert J. Currey |
|
|
51,835 |
|
|
|
$ |
1,419,242 |
|
| C.
Robert Udell, Jr. |
|
|
15,336 |
|
|
|
$ |
419,900 |
|
| Steven L. Childers |
|
|
13,043 |
|
|
|
$ |
357,117 |
|
____________________
| (1) |
|
Value Realized on
Vesting. Represents the
number of shares of common stock covered by the restricted shares acquired
on vesting of such restricted shares on December 5, 2014, as shown in the
“Number of Shares Acquired on Vesting” column valued using the closing
market price of the common stock ($27.38) as reported in The Wall Street Journal for December 5, 2014, which was the date of
vesting of the restricted shares. |
POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE IN CONTROL OF THE COMPANY
Pursuant to its Employment
Security Agreements and the LTIP, the Company provides eligible employees,
including the named executive officers, with certain benefits upon a change in
control of the Company or upon certain types of termination of employment
following a change in control of the Company. These benefits are in addition to
those benefits to which employees would be entitled upon a termination of
employment generally (i.e., vested retirement benefits accrued as of the date of
termination, stock awards that are vested as of the date of termination, and the
right to elect continued health benefits pursuant to COBRA). Those incremental
benefits as they pertain to the named executive officers are described
below:
Employment Security
Agreements
The Company has Employment
Security Agreements with the named executive officers and certain other
executives, which provide benefits upon the occurrence of certain terminations
of employment following a change in control of the Company. The Agreements with
named executive officers provide for benefits upon the following types of
employment termination:
| ● |
an involuntary termination of the executive’s
employment by the Company without “cause” that occurs within 24 months
after a change in control of the Company; or
|
| ● |
a voluntary termination of employment by the
executive for “good reason” that occurs within 24 months after a change in
control of the Company. |
The benefits provided upon
such a termination of employment include the following:
| ● |
A lump sum cash payment, payable within 30 days
of the termination of employment, equal to two times (three times in the
case of the Chief Executive Officer) the sum of (i) the executive’s annual
base salary rate, determined as of the date of the change in control or,
if higher, the date of employment termination and (ii) the annual target
amounts payable to the executive under all cash-based incentive plans of
the Company for the year in which the change in control occurs, or if
higher, the date of employment termination.
|
| ● |
A pro rata portion of the amounts that would
have been paid to the executive under the Company’s cash-based incentive
plans for the year in which the termination of employment occurs
(determined at the target levels), if such amounts would not otherwise be
paid to the executive. |
37
Table of Contents
| ● |
Continuation of coverage under all welfare
plans of the Company during the two-year severance period (three years for
the Chief Executive Officer), or if earlier, until the executive is
eligible for coverage under similar plans from a new employer. Such
coverage will be on the same basis and at same cost as in effect prior to
the change in control, or any time after, if more favorable to the
executive. If such coverage is not available under the plan, the Company
shall provide substantially similar benefits. The COBRA period for benefit
continuation begins after the end of the initial continuation period
described above.
|
| ● |
Reimbursement of out-of-pocket expenses,
including attorney’s fees, incurred by the executive in connection with
the successful enforcement of any provision of the
Agreement. |
The Agreements will reduce the
benefits described above to the extent necessary to avoid the imposition of any
excise tax pursuant to Section 280G of the Internal Revenue Code.
The Agreements contain
restrictive covenants that prohibit the executive from (i) associating with a
business that is competitive with any line of business of the Company for which
the executive provided substantial services, in any geographic area in which
such line of business was active at the time of the executive’s termination,
without the Company’s consent and (ii) soliciting the Company’s customers,
agents or employees. These restrictive covenants remain in effect during the
12-month period following termination of employment.
For purposes of the
Agreements:
(a)
“change in control” means (i) the acquisition, by a person other than an
affiliate of Richard A. Lumpkin, of a majority of the voting power of the
Company’s outstanding securities; (ii) during any period of two consecutive
years or less, the incumbent directors cease to constitute a majority of the
Board, unless any new direction’s election or nomination was approved by at
least 2/3 of the incumbent directors; (iii) a reorganization, merger,
consolidation or share exchange resulting in the conversion or exchange of the
Company’s common stock into securities of another company, or any dissolution or
liquidation, or a sale of 50% or more of all the Company’s assets; or (iv) a
merger, consolidation, reorganization or share exchange, unless following such
transaction at least a majority of the voting power of the outstanding
securities of the surviving entity is owned, in the same proportion, by
substantially the persons who owned the Company’s outstanding voting securities
immediately prior to the transaction.
(b)
“cause” means the executive’s (i) conviction or admission of guilt with respect
to any felony, fraud, misappropriate or embezzlement, (ii) malfeasance or gross
negligence in the performance of his duties that is materially detrimental to
the Company, or (iii) breach of any Company code of conduct, if the consequence
would be termination of employment. In each case, the Company must give the
executive written notice of the existence of cause, and if the act is capable of
being cured, 30 days in which to cure.
(c)
“good reason” means (i) a reduction in the executive’s base salary and/or bonus
opportunity without his consent, (ii) a reduction in the scope or importance of
the executive’s duties and responsibilities without his consent, or (iii) a
transfer of the executive’s primary worksite of more than 30 miles (unless the
new worksite is closer to the executive’s residence). In each case, the
executive must give written notice within 90 days and the Company has 30 days in
which to cure the action constituting good reason.
Consolidated
Communications Holdings, Inc. 2005 Long-Term Incentive Plan
The LTIP provides that if
there is a change in control of the Company, and there is no assumption of
outstanding awards by the successor entity, or conversion of outstanding awards
into comparable equity awards of the successor entity, then as of the effective
date of the change in control all stock options and stock appreciation rights
will vest and all restrictions on all outstanding stock awards and stock unit
awards will lapse, and if any restrictions relate to satisfying performance
goals, the performance goals will be deemed satisfied at target levels (unless
the target level was exceeded for any performance goal before the effective date
of the change in control, in which case the restrictions will lapse based on
actual attainment of the performance goal). The LTIP also provides that if in
connection with the change in control the LTIP awards are assumed or converted
by the successor entity as described above, and within 24 months following the
effective date of the change in control the participant’s employment is
terminated without cause or the participant terminates employment for good
reason, or a participant who is a director is asked to resign for other than
cause, all stock options and stock appreciation rights will vest
38
Table of Contents
and all restrictions on all
outstanding stock awards and stock unit awards will lapse, and if any
restrictions relate to satisfying performance goals, the performance goals will
be deemed satisfied at target levels (unless the target level was exceeded for
any performance goal before the date of termination of employment or service, in
which case the restrictions will lapse based on actual attainment of the
performance goal).
The LTIP uses the same
definitions of change in control, cause and good reason as set forth in the
Employment Security Agreements.
The tables set forth below
quantify the additional benefits as described above that would be payable to
each named executive officer under the arrangements described above.
Termination of Employment
Following a Change in Control
The additional amounts set
forth in this table would be payable pursuant to the Employment Security
Agreements, assuming a change in control of the Company and that the named
executive officer became eligible for benefits following a termination of
employment on December 31, 2014.
| Name |
|
Robert J.
Currey |
|
C. Robert
Udell, Jr. |
|
Steven L.
Childers |
| Base
Salary(1) |
|
|
$ |
1,275,000 |
|
|
|
$ |
646,000 |
|
|
|
$ |
502,000 |
|
| Bonus(1) |
|
|
$ |
1,476,000 |
|
|
|
$ |
420,000 |
|
|
|
$ |
322,000 |
|
Welfare Benefits for
Severance
Period(2) |
|
|
$ |
67,776 |
|
|
|
$ |
61,419 |
|
|
|
$ |
67,776 |
|
____________________
| (1) |
|
Base
Salary and Bonus. These
amounts represent, in the case of Mr. Currey, three times base salary and
target bonus, and in the case of all other named executive officers, two
times base salary and target bonus |
|
|
|
| (2) |
|
Welfare
Benefits for Severance Period. Amounts in this row consist of projected Company premiums for
health (including medical, dental, vision), life, AD&D and disability
policies, reduced by the amount of projected employee premiums during the
severance period for each named executive
officer. |
Benefits Upon Change in
Control
The additional amounts set
forth in this table would be realized by each named executive officer under the
LTIP, assuming a change of control of the Company occurred on December 31,
2014.
| Name |
|
Robert J.
Currey |
|
C. Robert
Udell, Jr. |
|
Steven L.
Childers |
Value of Unvested
Restricted
Shares(1) |
|
|
$ |
0 |
|
|
|
$ |
808,545 |
|
|
|
$ |
668,588 |
|
____________________
| (1) |
|
Amounts in this row
represent the value of the restricted shares that would vest upon the
change in control on December 31, 2014 under the terms of the LTIP. The
value of the restricted shares is based on the closing market price of the
Company’s stock as reported in The Wall Street Journal for December 31, 2014 ($27.83), which was the last trading day of
fiscal year 2014. |
39
Table of Contents
PROPOSAL NO. 3 — APPROVE
CERTAIN PROVISIONS OF THE CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. 2005
LONG-TERM INCENTIVE PLAN
The Company maintains the
Consolidated Communications Holdings, Inc. 2005 Long-Term Incentive Plan (the
“Plan”). The Plan is the Company’s only stock-based compensation plan, and it
provides for grants of stock options, stock appreciation rights, stock awards
and stock unit awards to eligible employees and non-employee directors and
grants of cash awards to eligible employees.
Approval/Reapproval of Plan
Provisions
We are asking our stockholders
to (i) approve an additional 1,000,000 shares for issuance under the Plan and
(ii) reapprove the material terms of the Plan’s performance goals to ensure
continued deductibility under Section 162(m) of the Internal Revenue
Code.
Share
Increase. When the Plan was
first adopted in 2005, 750,000 shares were issuable pursuant to awards. In 2010,
stockholders approved a share increase to 1,650,000 shares. The Company has
issued a significant number of the currently available shares under the Plan for
awards. As of December 31, 2014, 603,970 shares remained available for issuance
under the Plan. With its recent acquisition of Enventis Corporation, the Company
has added a number of new participants who are eligible for awards under the
Plan. Accordingly, on March 6, 2015, the Board of Directors of the Company
approved an amendment to the Plan to increase the number of shares available
under the Plan by 1,000,000, which represents an increase from 1,650,000 to
2,650,000 shares. This increase is subject to approval by the Company’s
stockholders.
The Company views its use of
stock-based awards as an essential part of the Company’s compensation program
and as an important element in achieving the program’s goals of attracting and
retaining key employees and directors, providing them with additional incentive
to increase the long-term value of the Company, and linking their financial
interests with those of the Company’s stockholders.
The Company, through its
compensation committee, believes that it has prudently managed awards under the
Plan, giving proper consideration to the dilutive impact of stock awards on
stockholder equity. The Company further expects that the available Plan shares
(including the newly approved shares) are likely to be awarded over the next
four years at which time the Company would seek stockholder approval for the
award of any additional shares under the Plan.
The Plan contains certain
restrictions that the Company believes furthers the objectives of the Plan and
reflects sound corporate governance principles:
| ● |
Dividends on performance-based stock awards and dividend
equivalents on performance-based stock unit awards are paid only to the
extent the performance goals are met;
|
| ● |
Awards are generally subject to minimum vesting periods
(one year minimum vesting period for stock options and stock appreciation
rights (“SARs”) and a three year minimum vesting period for time-based
stock and stock unit awards);
|
| ● |
Stock options and SARs may not be granted with an
exercise price less than the fair market value of the underlying common
stock on the date of grant, and the term is limited to 10 years from the
date of grant;
|
| ● |
Repricing of stock options or SARs without stockholder
approval is prohibited; and
|
| ● |
If upon a change in control of the Company outstanding
awards are assumed and converted into new awards of the acquiring company,
accelerated vesting only occurs if the employee is subsequently terminated
without cause or for good reason within 24 months following the change in
control. |
Material Terms of the
Plan’s Performance Goals.
Section 162(m) generally precludes a publicly traded company from taking a tax
deduction for compensation in excess of $1 million paid to certain executives.
These executives are the company’s chief executive officer and three other
highest paid executives, other than the chief financial officer, who are the
named executive officers listed in the Summary Compensation Table of the
company’s annual proxy statement. This restriction is subject to an exception
for “performance-based”
40
Table of Contents
compensation that meets
certain requirements, including a requirement that the “material terms of the
performance goals” applicable to these named executive officers must be
disclosed to and approved by stockholders before any compensation is paid to
them. Stockholders last approved the Plan, including the material terms of the
performance goals, at the 2009 annual meeting. Section 162(m) requires that if
the targets under the performance goals can be changed, the material terms of
the performance goals be reapproved by stockholders every five years in order to
retain qualification under Section 162(m).
The material terms of the
performance goals for purposes of Section 162(m) include: (i) the individuals
eligible to receive compensation; (ii) a description of the business criteria on
which the performance goals are based; and (iii) the maximum amount of
compensation that can be paid to an individual under the performance goals. Each
of these material terms is described below.
Individuals Eligible to
Receive Compensation. The compensation committee (the “Committee”)
administers the Plan. It has the authority to determine the key employees and
non-employee directors to whom awards are to be granted under the Plan. All
employees of the Company designated by the Committee and all non-employee
directors of the Company are eligible to receive awards under the Plan. On March
6, 2015, approximately 50 employees and all non-employee directors were eligible
to participate in the Plan.
Description of the Business
Criteria on Which the Performance Goals Are Based. Awards that the Committee
seek to qualify as “performance-based compensation” will be subject to the
attainment of performance goals based on one or more of the following business
criteria, as selected and defined by the Committee: (i) free cash flow; (ii)
free cash flow per share; (iii) earnings before interest, taxes, depreciation,
and amortization (“EBITDA”); (iv) improvement in EBITDA margins; (v) revenue
growth; (vi) maintenance of targeted capital structure and leverage ratios;
(vii) pre- or after-tax net income; (viii) earnings per share; (ix) share price
performance; (x) total stockholder returns; (xi) economic value added; (xii)
dividend payout ratio; (xiii) broadband subscriber net additions; (xiv) customer
service operating results; (xv) network performance; and (xvi) any other
criteria the Committee deems appropriate. Performance goals may be absolute in
their terms or measured against or in relationship to the performance of other
companies or indices selected by the Committee. The performance goals may be
particular to one or more lines of business or subsidiaries or may be based on
the performance of the Company and its subsidiaries as a whole. The performance
goals may be identical for all participants for a given performance period or,
at the discretion of the Committee, may differ among participants. In addition,
performance goals may be adjusted for any extraordinary items or other unusual
or non-recurring items (including acquisition expenses, extraordinary charges,
losses from discontinued operations, restatements and accounting charges and
restructuring expenses), as may be determined by the Committee.
Maximum Amount of
Compensation. Subject to certain adjustments, (i) the maximum number of
shares issued as stock options to any employee in any calendar year is 300,000
(25,000 shares in the case of a non-employee director); (ii) the maximum number
of shares pursuant to which stock appreciation rights are issued to any employee
in any calendar year is 300,000 (25,000 shares in the case of a non-employee
director); (iii) no stock awards or stock unit awards made to an employee in any
calendar year can relate to shares having a fair market value on the date of
grant that exceeds $6,000,000 ($500,000 in the case of a non-employee director);
and (iv) the maximum number of non-forfeitable shares subject to stock awards or
stock unit awards that may be issued under the Plan to any employee in any
calendar year is 300,000 (25,000 shares in the case of a non-employee director).
In addition, no more than $5,000,000 may be paid to an employee for each year in
any performance period under a Cash Incentive Program.
Description of the Plan as
Amended and Restated
The following is a summary of
the Plan. It is qualified by reference to the full text of the Plan, which is
attached as Exhibit A to this proxy statement. Stockholders are
encouraged to review the Plan carefully.
Number of Shares and
Maximum Cash Incentive Payments. The number of shares of the Company’s common stock that may be issued
under the Plan would, if this amendment is adopted, increase from 1,650,000
shares to 2,650,000 shares. The number of shares that may be granted to each
participant each year is limited as described above.
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Shares issuable under the Plan
may be authorized but unissued shares or treasury shares. If there is a lapse,
forfeiture, expiration, termination or cancellation of any award made under the
Plan for any reason, the shares subject to the award will again be available for
issuance. Any shares subject to an award that are delivered to the Company by a
participant, or withheld by the Company on behalf of a participant, as payment
for an award or payment of withholding taxes due in connection with an award
will again be available for issuance. The number of shares of common stock
issuable under the Plan is subject to adjustment, in the event of any
reorganization, recapitalization, stock split, stock distribution, merger,
consolidation, split-up, spin-off, combination, subdivision, consolidation or
exchange of shares, any change in the capital structure of the Company or any
similar corporate transaction. In each case, the Company has the discretion to
make adjustments it deems necessary to preserve the intended benefits under the
Plan.
No award granted under the
Plan may be transferred, except by will and the laws of descent and
distribution, or as permitted by the Committee with respect to a stock-based
award transferred without value by the participant during his lifetime for
estate planning purposes.
Administration. The
Plan is administered by a committee comprised of two or more directors who
satisfy the “non-employee director” definition under Rule 16b-3 of the
Securities Exchange Act of 1934 and the “outside director” definition under
Section 162(m) of the Code. If there are not two directors who satisfy this
criteria, the Plan will be administered by the Board. The Plan is currently
administered by the Compensation Committee of the Board. The Committee has full
authority to select the individuals who will receive awards under the Plan,
determine the form and amount of each of the awards to be granted and establish
the terms and conditions of awards.
Awards to
Participants. The Plan
provides for awards of stock options, stock appreciation rights, stock awards
and stock unit awards to all participants and for cash awards to participants
who are employees. Each stock-based award made under the Plan will be evidenced
by a written award agreement specifying the terms and conditions of the award as
determined by the Committee in its sole discretion, consistent with the terms of
the Plan.
Stock Options. The
Committee has the discretion to grant non-qualified stock options and incentive
stock options to participants and to set the terms and conditions applicable to
the options, including the type of option, the number of shares subject to the
option and the vesting schedule; provided that (i) the exercise price of each
stock option shall not be less than the closing sales price of the Company’s
common stock on the date which the option is granted (“fair market value”), (ii)
the vesting period for each option will be at least one year (unless the
Committee determines that a shorter period better serves the Company’s
interest), and (iii) each option shall expire 10 years from the date of
grant.
An incentive stock option,
which may be granted only to employees, is subject to the following rules: (i)
the aggregate fair market value (determined at the time the option is granted)
of the shares of common stock with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar year (under
all incentive stock option plans of the Company and its subsidiaries) shall not
exceed $100,000, and if this limitation is exceeded, that portion of the
incentive stock option that does not exceed the applicable dollar limit shall be
an incentive stock option and the remainder will be a non-qualified stock
option; (ii) if an incentive stock option is granted to an employee who owns
stock possessing more than 10% of the total combined voting power of all class
of stock of the Company, the exercise price of the incentive stock option shall
be 110% of the closing price of the common stock on the date of grant and the
incentive stock option shall expire no later than five years from the date of
grant; and (iii) no incentive stock option shall be granted after 10 years from
the date the Plan was adopted.
Stock Appreciation
Rights. The Committee has the discretion to grant stock appreciation rights
to participants. Each right entitles the participant to receive the difference
between the fair market value of the common stock on the date of exercise of the
right and the exercise price thereof, multiplied by the number of shares with
respect to which the right is being exercised. The stock appreciation right may
be issued independently or together with a stock option, in which case the
exercise of a stock appreciation right will cancel the related option with
respect to the same number of shares for which the stock appreciation right was
exercised, and the exercise of an option will cancel the related stock
appreciation right with respect to the same number of shares for which the
option was exercised. Upon exercise, the stock appreciation right will be paid
in cash or in shares of common
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stock (based upon the fair
market value on the date of exercise) or a combination thereof, as set forth in
the award agreement. The Committee has the discretion to set the terms and
conditions applicable to stock appreciation rights, provided that (i) the
exercise price of each stock appreciation right will be not less than the fair
market value of the common stock on the date of grant, (ii) the vesting period
for each stock appreciation right will be at least one year (unless the
Committee determines that a shorter period better serves the Company’s
interest), and (ii) each stock appreciation right will expire 10 years from the
date of grant.
Stock Awards. The
Committee has the discretion to grant stock awards to participants. The number
of shares awarded to each participant, and the restrictions, terms and
conditions of the award, will be at the discretion of the Committee. Subject to
the restrictions, a participant will be a stockholder with respect to the shares
awarded to him and will have the rights of a stockholder with respect to the
shares, including the right to vote the shares and receive dividends on the
shares; provided that dividends otherwise payable on any performance-based stock
award, or stock dividends otherwise payable with respect to any stock award,
will be held by the Company and will be paid only to the holder of the stock
award to the extent the restrictions on such stock award lapse. The vesting
period for any time-based stock award will be at least three years (unless the
Committee determines that a shorter period better serves the Company’s
interest).
Stock Unit Awards. The
Committee has the discretion to grant stock unit awards to participants. Each
stock unit entitles the participant to receive, on a specified date or event set
forth in the award agreement, one share of common stock of the Company or cash
equal to the fair market value of one share on such date or event, as provided
in the award agreement. The number of stock units awarded to each participant,
and the terms and conditions of the award, will be at the discretion of the
Committee. A participant will not be a stockholder with respect to the stock
units awarded to him prior to the date they are settled in shares of common
stock. Until the restrictions on the stock units lapse, the participant will be
paid an amount equal to the dividends that would have been paid had the stock
units been actual shares; provided that such dividend equivalents otherwise
payable on any performance-based stock unit award, or stock dividend equivalents
otherwise payable on any stock unit award, will be held by the Company and will
be paid only to the holder of the stock unit award to the extent the
restrictions on such stock unit award lapse. The vesting period for any
time-based stock unit award will be at least three years (unless the Committee
determines that a shorter period better serves the Company’s
interest).
Cash Incentive Awards.
The Committee has the discretion to adopt one or more Cash Incentive Programs,
pursuant to which employees will be eligible for cash payments based upon the
level of attainment of pre-established performance goals set by the Committee
with respect to a performance period (which the Committee sets with a duration
of one to five years). The Committee has the discretion to set the terms and
conditions applicable to the cash incentive award, including the eligible
employees, the performance criteria and goals and the amount of payments to be
made upon attainment of the goals.
Performance-Based
Compensation. The Committee
in its discretion may provide that any stock award or stock unit award will be
subject to attainment of performance goals, including those that qualify the
awards as “performance-based compensation” under Section 162(m) so that they are
fully deductible by the Company for federal income tax purposes. Payments under
any Cash Incentive Program shall be subject to the attainment of performance
goals, including those that qualify the payment as performance-based
compensation under Section 162(m) of the Code. In such case, the Committee will
establish performance goals for certain performance periods and targets for
achievement of the performance goals, and the performance-based restrictions on
the stock award or stock unit award will lapse, and cash incentive payments will
be made, if the performance goals and targets are achieved for the designated
performance period. The performance goals will be based on one or more of the
following criteria as described above.
Payment for Stock
Options and Withholding Taxes. The Committee may make one or more of the following methods available
for payment of the exercise price of a stock option, and for payment of the
minimum required tax obligation associated with an award: (i) in cash; (ii) in
cash received from a broker-dealer to whom the holder has submitted an exercise
notice together with irrevocable instructions to deliver promptly to the Company
the amount of sales proceeds from the sale of the shares subject to the award to
pay the exercise price or tax withholding; (iii) by directing the Company to
withhold shares of common stock otherwise issuable in connection with the award
having a fair market value equal to the amount required to be withheld; and (iv)
by delivery of previously acquired shares of common stock that are acceptable to
the Committee.
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Provisions Relating to a
“Change in Control” of the Company. The Plan provides that if there is a change in control of the Company,
and there is no assumption of outstanding awards by the successor entity, or
conversion of outstanding awards into comparable equity awards of the successor
entity, then as of the effective date of the change in control all stock options
and stock appreciation rights will vest and all restrictions on all outstanding
stock awards and stock unit awards will lapse, and if any restrictions relate to
satisfying performance goals, the performance goals will be deemed satisfied at
target levels (unless the target level was exceeded for any performance goal
before the effective date of the change in control, in which case the
restrictions will lapse based on actual attainment of the performance goal). If
required by the terms of the transaction, the Committee has the right to cancel
such grants after having given the participants a reasonable time to exercise
the options and stock appreciation rights and take necessary action to receive
stock or cash pursuant to stock and stock unit awards. The Plan also provides
that if in connection with the change in control the Plan awards are assumed or
converted by the successor entity as described above, and within 24 months
following the effective date of the change in control the participant’s
employment is terminated without cause or the participant terminates employment
for good reason, or a participant who is a director is asked to resign for other
than cause, all stock options and stock appreciation rights will vest and all
restrictions on all outstanding stock awards and stock unit awards will lapse,
and if any restrictions relate to satisfying performance goals, the performance
goals will be deemed satisfied at target levels (unless the target level was
exceeded for any performance goal before the date of termination of employment
or service, in which case the restrictions will lapse based on actual attainment
of the performance goal). See Section 15 of the Plan for the definition of
“change in control”.
Amendment and
Termination of the Plan; Term of the Plan. The Board may terminate, suspend or amend the
Plan from time to time, without the approval of the stockholders, unless such
approval is required by applicable law or stock exchange rule, provided that (i)
no amendment shall be made to the Plan’s change in control provisions after the
date of the change in control which would adversely affect any rights that would
vest on the effective date of the change in control, and (ii) no amendment shall
result in the modification or cancellation of an award without the written
consent of the participant, unless there is a dissolution, liquidation, change
in control or change in capital structure of the Company. Notwithstanding the
foregoing, there shall be no amendment to the Plan or any award agreement that
results in the repricing of stock options without stockholder approval (except
in the case of an equitable adjustment to the awards to reflect changes in the
capital structure of the Company or similar events).
No awards may be granted under
the Plan on or after May 5, 2019.
Awards Granted Under the
Plan. It is not possible to
determine the awards that will be made under the Plan, since the Plan does not
require that any awards be made to any individual and all awards under the Plan
are at the discretion of the compensation committee.
Description of Changes from
Existing Plan
The only material change from
the Plan as in effect prior to this amendment is the increase of 1,000,000
shares available for issuance under the Plan, from 1,650,000 shares to 2,650,000
shares. A non-material change approved by the Board lowered the annual limit on
the number of shares that can be granted to non-employee directors (previously
the annual share limit that applies to employees also applied to non-employee
directors).
Summary of Federal Income
Tax Consequences
The following is a summary of
the federal income tax consequences of the Plan. It is based on the federal tax
laws and regulations currently in effect and existing administrative rulings of
the Internal Revenue Service. Participants may also be subject to state and
local taxes in connection with the grant of awards under the Plan. Participants
should consult with their individual tax advisers to determine the tax
consequences associated with awards granted under the Plan. This information may
not be applicable to employees of foreign subsidiaries or to employees who are
not residents of the United States.
Non-Qualified Stock
Options. A participant will
not recognize any income at the time the participant is granted a non-qualified
stock option. On the date the participant exercises the non-qualified stock
option, the participant will recognize ordinary income in an amount equal to the
excess of the fair market value of the shares on the date of exercise over the
exercise price. The participant will be responsible for remitting to the Company
the
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withholding tax obligation
that arises at the time the option is exercised. The Company generally will
receive a tax deduction for the same amount of ordinary income recognized by the
participant. When the participant sells these shares, any gain or loss
recognized by the participant is treated as either short-term or long-term
capital gain or loss depending on whether the participant has held the shares
more than one year.
Incentive Stock
Options. A participant will
not recognize any income at the time the participant is granted an incentive
stock option. If the participant is issued shares pursuant to the exercise of an
incentive stock option, and if the participant does not make a disqualifying
disposition of the shares within one year after the date of exercise or within
two years after the date of grant, the participant will not recognize any
income, for federal income tax purposes, at the time of the exercise. When the
participant sells the shares issued pursuant to the incentive stock option, the
participant will be taxed, for federal income tax purposes, as a long-term
capital gain on any amount recognized by the participant in excess of the
exercise price, and any loss sustained by the participant will be a long-term
capital loss. No deduction will be allowed to the Company for federal income tax
purposes. If, however, the participant sells the shares before the expiration of
the holding periods, the participant will recognize ordinary income on the
difference between the exercise price and the fair market value at exercise, and
the Company generally will receive a tax deduction in the same amount. Upon
exercise of an incentive stock option, the excess of the fair market value over
the exercise price is an item of tax preference to the participant for purposes
of determining the alternative minimum tax.
In order to qualify as an
incentive stock option, the option must be exercised within three months after
the participant’s termination of employment for any reason other than death or
disability and within one year after termination of the participant’s employment
due to disability. If the option is not exercised within this time period, it
will be treated as a non-qualified stock option and taxed
accordingly.
Stock Appreciation
Rights. A participant will
not recognize any income at the time of the grant of the stock appreciation
right. Upon exercise of the stock appreciation right, the participant will
recognize ordinary income equal to the amount received upon exercise. The
participant will be responsible for remitting to the Company the withholding tax
obligation that arises at the time the ordinary income is recognized. The
Company generally will be entitled to a deduction with respect to the ordinary
income recognized by the participant.
Stock
Awards/Units. If the
participant receives a stock award, the participant will recognize ordinary
income upon becoming entitled to transfer the shares at the end of any
restriction period without forfeiture. If the participant receives a stock unit
award, he generally will recognize ordinary income when he receives shares or
cash pursuant to the settlement of the award, provided that if the shares are
subject to any restrictions on transfer, the participant will recognize ordinary
income upon becoming entitled to transfer the shares at the end of the
restriction period without forfeiture. The amount of income the participant
recognizes will be equal to the fair market value of the shares on such date, or
the amount of cash received. This amount will also be the participant’s tax
basis for the shares. The participant will be responsible for remitting to the
Company the withholding tax obligation that arises at the time the ordinary
income is recognized. In addition, the holding period begins on the day the
restrictions lapse, or the date the shares are received if not subject to any
restrictions, for purposes of determining whether the participant has long-term
or short-term capital gain or loss on a subsequent sale of the shares. The
Company generally will be entitled to a deduction with respect to the ordinary
income recognized by the participant.
If a participant who receives
a stock award subject to restrictions makes an election under Section 83(b) of
the Code within 30 days after the date of the grant, the participant will have
ordinary income equal to the fair market value on the date of grant, less the
amount paid by the participant for the shares, and the participant will
recognize no additional income until the participant subsequently sells the
shares. The participant will be responsible for remitting to the Company the
withholding tax obligation that arises at the time the ordinary income is
recognized. When the participant sells the shares, the tax basis will be equal
to the fair market value on the date of grant, and the holding period for
capital gains purposes begins on the date of the grant. If the participant
forfeits the shares subject to the Section 83(b) election, the participant will
not be entitled to any deduction, refund, or loss for tax purposes (other than a
capital loss with respect to the amount previously paid by the participant), and
the Company will have to include the amount that it previously deducted from its
gross income in the taxable year of the forfeiture.
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Cash Incentive
Awards. A participant who
receives a cash incentive award will recognize ordinary income equal to the
amount received. The Company generally will be entitled to a deduction with
respect to the ordinary income recognized by the participant.
Board Recommendation and
Stockholder Vote Required
The board of directors
recommends a vote “FOR” (i) the approval of 1,000,000 increase in shares
available under the Plan and (ii) the reapproval of the material terms of the
Plan’s performance goals (Proposal No. 3 on the accompanying proxy
card).
The affirmative vote of the
holders of a majority of the votes represented at the annual meeting in person
or by proxy will be required for approval.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Related Person Transactions
Policy
Our audit committee has
adopted a written Related Person Transactions Policy, which provides for
procedures for review and oversight of transactions involving the Company and
“related persons” (which consists of directors, director nominees, executive
officers and stockholders owning five percent or more of the Company’s
outstanding stock, any of their immediate family members, and any firm,
corporation or other entity in which any of the foregoing persons is employed,
is a general partner, principal or in a similar position or has, together with
the beneficial ownership interests of all other “related persons,” a 10% or
greater beneficial ownership interest). The policy covers any related person
transaction that would be required to be disclosed in our proxy statement under
applicable SEC rules (generally, transactions in which the Company is a
participant, the amount involved exceeds $120,000 and in which a “related
person” has a direct or indirect material interest).
Certain transactions are not
subject to specific review under the policy by virtue of being exempt from the
set of related person transactions that must be disclosed pursuant to applicable
SEC rules (“exempt transactions”). In addition, the audit committee has approved
in the policy the provision of products or services by the Company and its
subsidiaries to “related persons,” if conducted in the ordinary course of
business and on terms that are no less favorable to the Company than those
available to customers who are not related to the Company.
The policy requires, prior to
a party entering into any related person transaction (other than an exempt
transaction), to provide, to the extent practicable, notice to the Company of
the proposed related person transaction. The audit committee or its chairperson
may approve only those related person transactions that are in, or are not
inconsistent with, the best interests of the Company and its stockholders, as
the audit committee or its chairperson, as applicable, determines in good faith.
In the event the Company becomes aware of a related person transaction that has
not been previously approved or previously ratified under the policy that is
pending or ongoing, it will be submitted to the audit committee or its
chairperson, as applicable, which shall evaluate all options, including but not
limited to ratification, amendment or termination of the related person
transaction, and (if appropriate) any disciplinary actions recommended. No
member of the audit committee may participate in the consideration, approval or
ratification of any related person transaction with respect to which such member
or any of his or her immediate family members is the “related person” or in
which he, she or they otherwise have an interest.
SKL Investment
Group
Richard A. Lumpkin, together
with members of his family, beneficially owns 100% of SKL Investment Group, a
Delaware limited liability company (“SKL”), which is an investment company
serving the Lumpkin family. Mr. Lumpkin and members of his family are the sole
voting members of SKL. SKL and its related entities paid $54,582 to the Company
in 2014 for the use of office space, computers, telephones and for other office
related equipment. This amount is based upon actual usage incurred by SKL. For
example, in 2014, SKL paid $39,176 to rent approximately 2,191 square feet of
office space, which is equivalent to the Company’s base rent per square foot
plus a prorated share of real-estate taxes, utilities, and maintenance. The
charges for use of equipment and other office related expenses were based on
actual third-party charges or SKL’s estimated share of usage. The Company
believes these terms are reasonable and customary, and are comparable to those
which would have been obtained in an arms-length transaction.
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LATEL
Sale/Leaseback
The Company paid $813,528
during 2014 to lease office and warehouse space from LATEL, LLC, a limited
liability company of which Mr. Lumpkin and his immediate family have a
beneficial ownership of 72.4%. Agracel Inc. (“Agracel”) is a real estate
investment company of which Mr. Lumpkin, together with his family, beneficially
owns 44.7%. In addition, Mr. Lumpkin and his son, Benjamin I. Lumpkin, are
directors of Agracel. Agracel is the sole managing member and 50% owner of
LATEL, LLC. These payments represent 84% of the total revenue of LATEL,
LLC.
First Mid-Illinois
Bancshares, Inc.
Pursuant to various agreements
with Consolidated Communications, Inc. (“CCI”), First Mid-Illinois provides the
Company with general banking services, including depository, disbursement and
payroll accounts, on terms comparable to those available to other large
unaffiliated business accounts. Mr. Lumpkin and members of his family own
approximately 30.7% of the common stock and 30.0% of the Series C Non-Cumulative
Perpetual Convertible Preferred Stock of First Mid-Illinois. During 2014, the
Company paid maintenance and activity related charges of $20,922 to First
Mid-Illinois and earned $205 of interest on its deposits. The fees charged and
earnings received on deposits through repurchase agreements, are based on First
Mid-Illinois’ standard schedule for large customers.
Illinois Consolidated
Telephone Company (“ICTC”), a wholly owned subsidiary of the Company, provides
First Mid-Illinois with local dial tone, custom calling features, long distance
and other telecommunications services. In 2014, First Mid-Illinois paid ICTC
approximately $290,688 for these services. These services are based on standard
prices for strategic business customers.
The Company’s payments to
First Mid-Illinois and its subsidiaries did not exceed 1% of the gross revenue
of First Mid-Illinois. Also, payments from First Mid-Illinois did not exceed 1%
of the Company’s gross revenue.
Cartesian,
Inc.
On June 18, 2014, through our
subsidiary, Consolidated Communications Services Company, we entered into an
agreement with Cartesian, Inc. (formerly The Management Network Group, Inc. (a
professional services company)), to provide Smart Building Services. Under the
agreement, Cartesian, Inc., is to deploy and monitor the energy consumption in
approximately 61% of the company’s facilities. The estimated cost to implement
the Smart Building Services is approximately $4,900,000 over the next seven
years. It is estimated that we will save approximately $5,700,000 in energy
costs through the use of the Smart Building Services. In connection with the
Smart Building Services, we also entered into a three year Market Enablement
Agreement (“Marketing Agreement”) with Elutions, Inc., a partial owner of
Cartesian, Inc. Under the Marketing Agreement, we will be required to provide
certain marketing support to provided solutions. We may receive up to $2,400,000
under the Marketing Agreement over the three year term of the agreement.
Robert J. Currey, our
Executive Chairman, is a member of the board of directors at Cartesian, Inc.
Robert J. Currey has not received any payments as part of our agreement with
Cartesian, Inc. or Elutions, Inc.
Consolidated
Communications, Inc.
On June 18, 2014, through our
Consolidated Communications Services Company, we entered into an agreement with
Cartesian, Inc. (formerly The Management Network Group, Inc. (a professional
services company)), to provide Smart Building Services. Under the agreement,
Cartesian, Inc., is to deploy and monitor the energy consumption in
approximately 61% Consolidated facilities. The estimated cost to implement the
Smart Building Services is approximately $4,900,000 over the next seven years.
It is estimated that we will save approximately $5,700,000 in energy costs
through the use of the Smart Building Services. In connection with the Smart
Building Services, we also entered into a three year Market Enablement Agreement
(“Marketing Agreement”) with Elutions, Inc., a partial owner of Cartesian, Inc.
Under the Marketing Agreement, we will be required to provide certain marketing
support to provided solutions. We may receive up to $2,400,000 under the
Marketing Agreement over the three year term of the agreement. Robert J. Currey,
Consolidated Chairman and CEO, is a member of the board of directors at
Cartesian, Inc. Robert J. Currey has not received any payments as part of our
agreement with Cartesian, Inc. or Elutions, Inc.
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On May 30, 2012, the Company,
through CCI (as successor by merger to Consolidated Communications Finance Co.)
completed a $300 million offering of its 10.875% Senior Notes, sold at 99.345%
for a yield to maturity of 11.00%. The Richard Adamson Lumpkin Trust dated
2/6/70 fbo Richard Anthony Lumpkin purchased $10 million, Robert J. Currey
purchased $500,000 and Roger H. Moore purchased $250,000 of the 10.875% Senior
Notes. The 10.875% Senior Notes mature on June 1, 2020 and pay interest
semi-annually in arrears on June 1 and December 1 of each year, commencing on
December 1, 2012. During 2014, the aforementioned Trust received $1,087,500 in
interest, Robert J. Currey received approximately $54,375 in interest and Roger
H. Moore received approximately $27,188 in interest.
On September 18, 2014, the
Company, through CCI (as successor by merger to Consolidated Communications
Finance II Co.) completed a $200 million offering of its 6.50% Senior Notes. The
Richard Adamson Lumpkin Trust dated 2/6/70 fbo Richard Anthony Lumpkin purchased
$5 million of the 6.50% Senior Notes. The 6.50% Senior Notes mature on October
1, 2022 and pay interest semi-annually in arrears on April 1 and October 1 of
each year, commencing on April 1, 2015.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During 2014, Roger H. Moore,
Thomas A. Gerke and Maribeth S. Rahe served on the compensation committee. No
member of the compensation committee was, during 2014, an officer or employee of
the Company, was formerly an officer of the Company, or had any relationship
requiring disclosure by the Company as a related party transaction under Item
404 of Regulation S-K, other than Mr. Moore. Please see “Certain Relationships
and Related Transactions – Consolidated Communications, Inc. Senior Notes.”
During 2014, none of the Company’s executive officers served on the board of
directors or the compensation committee of any other entity, any officers of
which served either on the Company’s board of directors or its compensation
committee.
ANNUAL REPORT TO
STOCKHOLDERS
Our combined 2014 annual
report to stockholders and annual report on Form 10-K for the year ended
December 31, 2014 accompanies this proxy statement.
STOCKHOLDER PROPOSALS FOR
2016 ANNUAL MEETING
The proxy rules of the SEC
permit our stockholders, after notice to the Company, to present proposals for
stockholder action in our proxy statement where such proposals are consistent
with applicable law, pertain to matters appropriate for stockholder action and
are not properly omitted by our action in accordance with the proxy rules. In
order for any stockholder proposal to be considered for inclusion in our proxy
statement to be issued in connection with our 2016 annual meeting of
stockholders, that proposal must be received at our principal executive offices,
121 South 17th Street, Mattoon, Illinois 61938-3987 (Attention: Secretary), no
later than December 1, 2015.
Our amended and restated
bylaws provide that certain additional requirements be met in order that
business, including the nomination of directors, may properly come before the
stockholders at the annual meeting. Among other things, stockholders intending
to bring business before the annual meeting must provide written notice of such
intent to the Secretary of the Company. Such notice must be given not less than
90 days nor more than 120 days prior to the first anniversary of the date on
which we mailed our proxy materials for the preceding year’s annual meeting. In
addition, the following information must be provided regarding each proposal: as
to each person whom the stockholder proposes to nominate for election as a
director, the name, age, business address and, if known, residential address,
principal occupation or employment, the class, series and number of shares
beneficially owned by such nominee and all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required by Regulation 14A of the Exchange Act,
including such person’s written consent to being named in the proxy statement as
a nominee and to serving as a director if elected; a brief description of the
business desired to be brought before the meeting; the text of any resolution
proposed to be adopted at the meeting; and the reasons for conducting such
business at the meeting; and a statement of any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made and, in the case of director nominations, a description of
all arrangements or understandings between the stockholder and each nominee and
any other persons (naming them) pursuant to which the nominations are to be made
by the stockholder.
48
Table of Contents
In addition, the following
information must be provided regarding the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is made: the name and
address of such stockholder, as it appears on the Company’s stock transfer
books, and of such beneficial owner; the class, series and number of shares of
the Company which are owned beneficially and of record by such stockholder and
such beneficial owner; a representation that the stockholder giving the notice
is a stockholder of record and intends to appear in person or by a qualified
representative at the annual meeting to bring the business proposed in the
notice before the meeting; a representation whether the stockholder or the
beneficial owner, if any, intends or is part of a group which intends to solicit
proxies from stockholders in support of such proposal or nomination; and any
other information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
the Exchange Act and the rules and regulations promulgated
thereunder.
GENERAL
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Exchange
Act requires our directors and executive officers, and any persons who
beneficially own more than 10% of our stock, to file with the SEC initial
reports of ownership and reports of changes in ownership of our stock. Such
persons are required by SEC regulations to furnish us with copies of all Section
16(a) forms they file. As a matter of practice, our administrative staff assists
our executive officers and directors in preparing and filing such reports with
the SEC.
To our knowledge, based solely
upon a review of filings with the SEC and written representations that no other
reports were required, we believe that all of our directors and executive
officers complied during 2014.
Other
Information
The expenses of preparing and
mailing this proxy statement and the accompanying proxy card and the cost of
solicitation of proxies, if any, will be borne by us. In addition to the use of
mailings, proxies may be solicited by personal interview and telephone and by
our directors, officers and regular employees without special compensation
therefore. We expect to reimburse banks, brokers and other persons for their
reasonable out-of-pocket expenses in handling proxy materials for beneficial
owners of our common stock.
Unless contrary instructions
are indicated on the proxy card, all shares of common stock represented by valid
proxies received pursuant to this solicitation (and not revoked before they are
voted) will be voted in accordance with the recommendation of the board of
directors.
OTHER
MATTERS
Our board does not know of any
other matters that are to be presented for action at the 2014 annual meeting.
Should any other matter come before the annual meeting, however, the persons
named in the enclosed proxy will have discretionary authority to vote all
proxies with respect to such matter in accordance with their
judgment.
| BY
ORDER OF THE BOARD OF DIRECTORS |
| |
 |
|
Steven J.
Shirar
Chief Information
Officer and Secretary |
Dated: March 30,
2015
49
Table of Contents
EXHIBIT A
CONSOLIDATED COMMUNICATIONS
HOLDINGS, INC.1
2005 LONG-TERM INCENTIVE
PLAN
(As Amended and Restated
Effective May 4,
2015)
____________________
| 1 |
|
This copy of the 2005
Long-Term Incentive Plan reflects the amendments made to the Plan since
the Plan was last approved by stockholders of the Company on May 5, 2009,
including the amendment that is discussed in Proposal 3 of the Proxy
Statement for the year ended December 31,
2014. |
Table of Contents
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page |
| § |
1. |
|
PURPOSE |
|
1 |
| § |
2. |
|
DEFINITIONS |
|
1 |
|
|
|
2.1 |
|
Board |
|
1 |
|
|
|
2.2 |
|
Cash Incentive Program |
|
1 |
|
|
|
2.3 |
|
Cause |
|
1 |
|
|
|
2.4 |
|
Change Effective Date |
|
1 |
|
|
|
2.5 |
|
Change in Control |
|
2 |
|
|
|
2.6 |
|
Code |
|
2 |
|
|
|
2.7 |
|
Committee |
|
2 |
|
|
|
2.8 |
|
Company |
|
2 |
|
|
|
2.9 |
|
Director |
|
2 |
|
|
|
2.10 |
|
Eligible Employee |
|
2 |
|
|
|
2.11 |
|
Fair
Market Value |
|
3 |
|
|
|
2.12 |
|
Good Reason |
|
3 |
|
|
|
2.13 |
|
Grant |
|
3 |
|
|
|
2.14 |
|
ISO |
|
3 |
|
|
|
2.15 |
|
1933
Act |
|
3 |
|
|
|
2.16 |
|
1934 Act |
|
3 |
|
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|
2.17 |
|
Non-ISO |
|
3 |
|
|
|
2.18 |
|
Option |
|
3 |
|
|
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2.19 |
|
Option Certificate |
|
4 |
|
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|
2.20 |
|
Option Price |
|
4 |
|
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|
2.21 |
|
Parent |
|
4 |
|
|
|
2.22 |
|
Performance Period |
|
4 |
|
|
|
2.23 |
|
Plan |
|
4 |
|
|
|
2.24 |
|
Rule 16b-3 |
|
4 |
|
|
|
2.25 |
|
SAR
Value |
|
4 |
|
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|
2.26 |
|
Stock |
|
4 |
|
|
|
2.27 |
|
Stock Appreciation Right |
|
4 |
|
|
|
2.28 |
|
Stock Appreciation Right
Certificate |
|
4 |
|
|
|
2.29 |
|
Stock Grant |
|
4 |
|
|
|
2.30 |
|
Stock Grant Certificate |
|
4 |
|
|
|
2.31 |
|
Stock Unit Grant |
|
4 |
|
|
|
2.32 |
|
Subsidiary |
|
4 |
|
|
|
2.33 |
|
Ten
Percent Stockholder |
|
4 |
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Table of Contents
| § |
3. |
|
SHARES AND GRANT LIMITS |
|
4 |
|
|
|
3.1 |
|
Shares Reserved |
|
4 |
|
|
|
3.2 |
|
Source of Shares |
|
4 |
|
|
|
3.3 |
|
Use
of Proceeds |
|
5 |
|
|
|
3.4 |
|
Grant Limits |
|
5 |
| § |
4. |
|
EFFECTIVE DATE |
|
5 |
|
|
|
4.1 |
|
Effective Date |
|
5 |
|
|
|
4.2 |
|
Stockholder Approval |
|
5 |
| § |
5. |
|
COMMITTEE |
|
5 |
| § |
6. |
|
ELIGIBILITY |
|
6 |
| § |
7. |
|
OPTIONS |
|
6 |
|
|
|
7.1 |
|
Committee Action |
|
6 |
|
|
|
7.2 |
|
$100,000 Limit |
|
6 |
|
|
|
7.3 |
|
Option Price |
|
6 |
|
|
|
7.4 |
|
Payment |
|
6 |
|
|
|
7.5 |
|
Exercise |
|
6 |
| § |
8. |
|
STOCK APPRECIATION RIGHTS |
|
7 |
|
|
|
8.1 |
|
Committee Action |
|
7 |
|
|
|
8.2 |
|
Terms and Conditions |
|
7 |
|
|
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8.3 |
|
Exercise |
|
8 |
| § |
9. |
|
STOCK GRANTS AND STOCK UNIT GRANTS |
|
8 |
|
|
|
9.1 |
|
Committee Action |
|
8 |
|
|
|
9.2 |
|
Conditions |
|
8 |
|
|
|
9.3 |
|
Dividends, Voting Rights and Creditor Status |
|
9 |
|
|
|
9.4 |
|
Satisfaction of Forfeiture Conditions |
|
10 |
|
|
|
9.5 |
|
Performance-Based Stock Grants and Stock Unit
Grants |
|
10 |
| § |
10. |
|
CASH
INCENTIVE PROGRAM |
|
10 |
|
|
|
10.1 |
|
General |
|
10 |
|
|
|
10.2 |
|
Performance Goals |
|
11 |
|
|
|
10.3 |
|
Adjustments |
|
11 |
|
|
|
10.4 |
|
Performance Period |
|
11 |
| § |
11. |
|
CONDITIONS OF TRANSFER |
|
11 |
| § |
12. |
|
SECURITIES REGISTRATION |
|
12 |
| § |
13. |
|
LIFE
OF PLAN |
|
12 |
| § |
14. |
|
ADJUSTMENT |
|
12 |
|
|
|
14.1 |
|
Capital Structure |
|
12 |
|
|
|
14.2 |
|
Available Shares |
|
13 |
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Table of Contents
|
|
|
14.3 |
|
Transactions Described in § 424 of the Code |
|
13 |
|
|
|
14.4 |
|
Fractional Shares |
|
13 |
| § |
15. |
|
CHANGE IN CONTROL |
|
13 |
| § |
16. |
|
AMENDMENT OR TERMINATION |
|
14 |
| § |
17. |
|
MISCELLANEOUS |
|
14 |
|
|
|
17.1 |
|
Stockholder Rights |
|
14 |
|
|
|
17.2 |
|
No
Contract of Employment |
|
15 |
|
|
|
17.3 |
|
Withholding |
|
15 |
|
|
|
17.4 |
|
Construction |
|
15 |
|
|
|
17.5 |
|
Other Conditions |
|
15 |
|
|
|
17.6 |
|
Rule
16b-3 |
|
15 |
|
|
|
17.7 |
|
Coordination with Employment Agreements and Other
Agreements |
|
15 |
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Table of Contents
CONSOLIDATED COMMUNICATIONS
HOLDINGS, INC.
2005 LONG-TERM INCENTIVE PLAN
(As Amended And Restated Effective May 4,
2015)
§ 1.
PURPOSE
The primary purpose of this
Plan is to promote the interest of the Company by authorizing the Committee to
grant Options, Stock Appreciation Rights, Stock Grants, Stock Unit Grants and
Cash Incentive Program awards to Eligible Employees and Directors in order to
(1) attract and retain Eligible Employees and Directors, (2) provide an
additional incentive to each Eligible Employee or Director to work to increase
the Company’s long-term value and (3) provide each Eligible Employee or Director
with a stake in the future of the Company that corresponds to the stake of each
of the Company’s stockholders.
§ 2.
DEFINITIONS
2.1 Board means the
Board of Directors of the Company.
2.2 Cash Incentive
Program means a cash incentive program described in § 10.
2.3 Cause means, with
respect to an Eligible Employee or Director:
|
(a) |
the conviction of,
pleading guilty to, or confessing or otherwise admitting to any felony or
any act of fraud, misappropriation or embezzlement; |
|
|
|
|
|
(b) |
the act or omission
by the individual involving malfeasance or gross negligence in the
performance of the individual’s duties and responsibilities to the
material detriment of the Company; or |
|
|
|
(c) |
the breach of any
provision of any code of conduct adopted by the Company which applies to
the Company if the consequence to such violation for any individual
subject to such code of conduct ordinarily would be a termination of his
or her employment by the Company or removal from the Board, as applicable;
provided however, |
|
|
|
(d) |
no such act or
omission or event shall be treated as “Cause” under this Plan unless (i)
the individual has been provided a detailed, written statement of the
basis for belief that such act or omission or event constitutes “Cause”
and an opportunity to meet with the Committee (together with the
individual’s counsel if the individual chooses to have counsel present at
such meeting) after the individual has had a reasonable period in which to
review such statement and, if the act or omission or event is one which
can be cured by the individual, the individual has had at least a thirty
(30) day period to take corrective action and (ii) a majority of the
Committee after such meeting (if the individual exercises the individual’s
right to have a meeting) and after the end of such thirty (30) day
correction period (if applicable) determines reasonably and in good faith
that “Cause” does exist under this Plan. |
2.4 Change Effective
Date means either the date which includes the “closing” of the transaction
which makes a Change in Control effective if the Change in Control is made
effective through a transaction which has a “closing” or the date a Change in
Control is reported in accordance with applicable law as effective to the
Securities and Exchange Commission if the Change in Control is made effective
other than through a transaction which has a “closing”.
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Table of Contents
2.5 Change in Control
means a change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the 1934 Act as in effect at the time of such “change in
control”, provided that such a change in control shall be deemed to have
occurred at such time as
|
(a) |
any “person” (as that term is used in
Sections 13(d) and 14(d)(2) of the 1934 Act), other than an “affiliate”
(as that term is defined in Section 5 of Article IV of the Company’s
amended and restated certificate of incorporation) of Richard A. Lumpkin,
is or becomes the beneficial owner (as defined in Rule 13d-3 under the
1934 Act) directly or indirectly, of securities representing a majority of
the combined voting power for election of directors of the then
outstanding securities of the Company or any successor to the
Company; |
| |
|
|
|
(b) |
during any period of two consecutive years
or less, individuals who at the beginning of such period constitute the
Board cease, for any reason, to constitute at least a majority of the
Board, unless the election or nomination for election of each new director
was approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of the period; |
|
|
|
(c) |
the stockholders of the Company approve any
reorganization, merger, consolidation or share exchange as a result of
which the common stock of the Company shall be changed, converted or
exchanged into or for securities of another corporation (other than a
merger with a wholly-owned subsidiary of the Company) or any dissolution
or liquidation of the Company or any sale or the disposition of 50% or
more of the assets or business of the Company; or |
|
|
|
(d) |
stockholders of the Company approve any
reorganization, merger, consolidation or share exchange unless (i) the
persons who were the beneficial owners of the outstanding shares of the
common stock of the Company immediately before the consummation of such
transaction beneficially own at least a majority of the outstanding shares
of the common stock of the successor or survivor corporation in such
transaction immediately following the consummation of such transaction and
(ii) the number of shares of the common stock of such successor or
survivor corporation beneficially owned by the persons described in §
2.5(d) (i) immediately following the consummation of such transaction is
beneficially owned by each such person in substantially the same
proportion that each such person had beneficially owned shares of the
Company common stock immediately before the consummation of such
transaction, provided (iii) the percentage described in § 2.5(d)(i) of the
beneficially owned shares of the successor or survivor corporation and the
number described in § 2.5(d)(ii) of the beneficially owned shares of the
successor or survivor corporation shall be determined exclusively by
reference to the shares of the successor or survivor corporation which
result from the beneficial ownership of shares of common stock of the
Company by the persons described in § 2.5(d)(i) immediately before the
consummation of such transaction. |
2.6 Code means the
Internal Revenue Code of 1986, as amended.
2.7 Committee means (a)
a committee of the Board which shall have at least two members, each of whom
shall be appointed by and shall serve at the pleasure of the Board and shall
come within the definition of a “non-employee director” under Rule 16b-3 and an
“outside director” under § 162(m) of the Code or (b) if the Board does not have
two members who meet this criteria, the Board.
2.8 Company means
Consolidated Communications Holdings, Inc. and any successor to Consolidated
Communications Holdings, Inc.
2.9 Director means any
member of the Board who is not an employee of the Company or a Parent or
Subsidiary or an affiliate (as such term is defined in Rule 405 of the 1933 Act)
of the Company.
2.10 Eligible Employee
means an employee of the Company or any Subsidiary or Parent to whom the
Committee decides for reasons sufficient to the Committee to make a grant under
this Plan.
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Table of Contents
2.11 Fair Market Value
means either (a) the closing price on any date for a share of Stock as reported
by The Wall Street Journal or, if The Wall Street Journal no
longer reports such closing price, such closing price as reported by a newspaper
or trade journal selected by the Committee or, if no such closing price is
available on such date, (b) such closing price as so reported in accordance with
§ 2.11(a) for the immediately preceding business day, or, if no newspaper or
trade journal reports such closing price or if no such price quotation is
available, (c) the price which the Committee acting in good faith determines
through any reasonable valuation method that a share of Stock might change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or to sell and both having reasonable knowledge of the relevant
facts.
2.12 Good Reason means
with respect to any Eligible Employee or Director:
|
(a) |
the material
reduction after the Change Effective Date in the individual’s base salary
and/or bonus opportunity without the individual’s express written
consent; |
| |
|
|
|
(b) |
the material
reduction after the Change Effective Date in the scope, importance or
prestige of individual’s duties, responsibilities or powers at the Company
without the individual’s express written consent; or |
|
|
|
(c) |
the Company transfers
the individual’s primary work site to a new primary work site which is
more than 30 miles (measured along a straight line) from the individual’s
then current primary work site unless such new primary work site is closer
(measured along a straight line) to the individual’s primary residence
than individual’s then current primary work site; provided
however; |
|
|
|
(d) |
no such act or
omission shall be treated as “Good Reason” under this Plan
unless: |
|
|
|
|
(i) |
(A) The individual delivers to the Committee
a detailed, written statement of the basis for the individual’s belief
that such act or omission constitutes Good Reason, (B) the individual
delivers such statement before the later of (I) the end of the ninety (90)
day period which starts on the date there is an act or omission which
forms the basis for the individual’s belief that Good Reason exists or
(II) the end of the period mutually agreed upon for purposes of this
paragraph in writing by the individual and the Committee, (C) the
individual gives the Committee a thirty (30) day period after the delivery
of such statement to cure the basis for such belief and (D) the Individual
actually submits his or her written resignation to the Committee during
the sixty (60) day period which begins immediately after the end of such
thirty (30) day period if the individual reasonably and in good faith
determines that Good Reason continues to exist after the end of such
thirty (30) day period; or |
|
|
|
|
|
|
(ii) |
the Company states in writing to the
individual that the individual has the right to treat any such act or
omission as Good Reason under this Plan and the individual resigns during
the sixty (60) day period which starts on the date such statement is
actually delivered to the individual. |
2.13 Grant means the
award of an Option, Stock Appreciation Right, Stock Grant or Stock Unit made
under the Plan.
2.14 ISO means an
option granted under this Plan to purchase Stock which is intended to satisfy
the requirements of § 422 of the Code.
2.15 1933 Act means the
Securities Act of 1933, as amended.
2.16 1934 Act means the
Securities Exchange Act of 1934, as amended.
2.17 Non-ISO means an
option granted under this Plan to purchase Stock which is intended to fail to
satisfy the requirements of § 422 of the Code.
2.18 Option means an
ISO or a Non-ISO which is granted under § 7.
-A-3-
Table of Contents
2.19 Option Certificate
means the certificate (whether in electronic or written form) which sets forth
the terms and conditions of an Option granted under this Plan.
2.20 Option Price means
the price which shall be paid to purchase one share of Stock upon the exercise
of an Option granted under this Plan.
2.21 Parent means any
corporation which is a parent corporation (within the meaning of § 424(e) of the
Code) of the Company.
2.22 Performance Period
means a performance period described in § 9.5 and § 10.
2.23 Plan means this
Consolidated Communications Holdings, Inc. 2005 Long-Term Incentive Plan, as
Amended and Restated Effective May 5, 2009 and as amended from time to time
thereafter.
2.24 Rule 16b-3 means
the exemption under Rule 16b-3 to Section 16(b) of the 1934 Act or any successor
to such rule.
2.25 SAR Value means
the value assigned by the Committee to a share of Stock in connection with the
grant of a Stock Appreciation Right under § 8.
2.26 Stock means the
common stock of the Company.
2.27 Stock Appreciation
Right means a right which is granted under § 8 to receive the appreciation
in a share of Stock.
2.28 Stock Appreciation
Right Certificate means the certificate (whether in electronic or written
form) which sets forth the terms and conditions of a Stock Appreciation Right
which is not granted as part of an Option.
2.29 Stock Grant means
a grant under § 9 which is designed to result in the issuance of the number of
shares of Stock described in such grant rather than a payment in cash based on
the Fair Market Value of such shares of Stock.
2.30 Stock Grant
Certificate means the certificate (whether in electronic or written form)
which sets forth the terms and conditions of a Stock Grant or a Stock Unit
Grant.
2.31 Stock Unit Grant
means a grant under § 9 which is designed to result in the payment of either
cash (based on the Fair Market Value of the number of shares of Stock described
in such grant) or Stock (based on the issuance of the number of shares of Stock
described in such grant), as determined in the sole discretion of the Committee
at the time of grant.
2.32 Subsidiary means a
corporation which is a subsidiary corporation (within the meaning of § 424(f) of
the Code) of the Company.
2.33 Ten Percent
Stockholder means a person who owns (after taking into account the
attribution rules of § 424(d) of the Code) more than ten percent of the total
combined voting power of all classes of stock of either the Company, a
Subsidiary or Parent.
§ 3.
SHARES AND GRANT
LIMITS
3.1 Shares Reserved.
There shall (subject to § 14) be reserved for issuance under this Plan 1,650,000
shares of Stock (2,650,000 shares of Stock as of March 6, 2015). No more than
1,650,000 shares of Stock (2,650,000 shares of Stock as of March 6, 2015) shall
be issued in connection with the exercise of ISOs.
3.2 Source of Shares.
The shares of Stock described in § 3.1 shall be reserved to the extent that the
Company deems appropriate from authorized but unissued shares of Stock and from
shares of Stock which have been reacquired by the Company. All shares of Stock
described in § 3.1 shall remain available for issuance under this Plan until
issued pursuant to the exercise of an Option or a Stock Appreciation Right or
issued pursuant to a
-A-4-
Table of Contents
Stock Grant, and any such
shares of stock which are issued pursuant to an Option, a Stock Appreciation
Right or a Stock Grant which are forfeited thereafter shall again become
available for issuance under this Plan. Finally, if the Option Price under an
Option is paid in whole or in part in shares of Stock or if shares of Stock are
tendered to the Company in satisfaction of any condition to a Stock Grant, such
shares thereafter shall become available for issuance under this Plan and shall
be treated the same as any other shares available for issuance under this
Plan.
3.3 Use of Proceeds.
The proceeds which the Company receives from the sale of any shares of Stock
under this Plan shall be used for general corporate purposes and shall be added
to the general funds of the Company.
3.4 Grant Limits. No
Eligible Employee in any calendar year shall be granted an Option to purchase
(subject to § 13) more than 300,000 shares of Stock or a Stock Appreciation
Right based on the appreciation with respect to (subject to § 14) more than
300,000 shares of Stock (25,000 shares, respectively, in the case of a
Director), and no Stock Grant or Stock Unit Grant shall be made to any Eligible
Employee in any calendar year where the Fair Market Value of the Stock subject
to such grant on the date of the grant exceeds $6,000,000 ($500,000 in the case
of a Director). No more than 300,000 non-forfeitable shares of Stock shall
(subject to § 14) be issued to an Eligible Employee pursuant to Stock Grants or
Stock Unit Grants under § 9 (25,000 shares in the case of a Director), and no
more than $5,000,000 may be paid to any Eligible Employee under any Cash
Incentive Program for each year of each Performance Period under such
program.
§ 4.
EFFECTIVE
DATE
4.1 Effective Date. The
Plan was initially approved by the stockholders of the Company, and became
effective, as of July 21, 2005. The Plan is hereby amended and restated,
effective as of May 5, 2009, subject to approval by the stockholders of the
Company at the Company’s annual meeting of stockholders to be held on May 5,
2009 and any adjournment or postponement thereof.
4.2 Stockholder
Approval. In the event the Plan is not approved by stockholders at the
Company’s 2009 annual meeting, (a) the Plan as amended and restated shall have
no effect; (b) the terms of the Plan as in effect immediately prior to the
amendment and restatement shall remain in effect and, to the extent permitted
under those terms, shall apply to all Grants and Cash Incentive Program payments
made on or after May 5, 2009; and (c) any Grants and Cash Incentive Program
payments made on or after May 5, 2009 not permitted under the terms of the Plan
as in effect immediately prior to the amendment and restatement shall be
cancelled.
§ 5.
COMMITTEE
This Plan shall be
administered by the Committee. The Committee acting in its absolute discretion
shall exercise such powers and take such action as expressly called for under
this Plan and, further, the Committee shall have the power to interpret this
Plan and (subject to § 15 and § 16 and Rule 16b-3) to take such other action in
the administration and operation of this Plan as the Committee deems equitable
under the circumstances, which action shall be binding on the Company, on each
affected Eligible Employee or Director and on each other person directly or
indirectly affected by such action. Furthermore, the Committee as a condition to
making any grant under this Plan to any Eligible Employee or Director shall have
the right to require him or her to execute an agreement which makes the Eligible
Employee or Director subject to non-competition provisions and other restrictive
covenants which run in favor of the Company.
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§ 6.
ELIGIBILITY
Only Eligible Employees shall
be eligible for a grant of ISOs under this Plan, and only Eligible Employees
shall be eligible to participate in any Cash Incentive Program. All Eligible
Employees and all Directors shall be eligible for a grant of Non-ISOs, Stock
Appreciation Rights, Stock Grants and Stock Unit Grants under this
Plan.
§ 7.
OPTIONS
7.1 Committee Action. The
Committee acting in its absolute discretion shall have the right to grant
Options to Eligible Employees and to Directors under this Plan from time to time
to purchase shares of Stock, but the Committee shall not (subject to § 14) take
any action, whether through amendment, cancellation, replacement grants, or any
other means, to reduce the Option Price of any outstanding Options absent the
approval of the Company’s stockholders. Each grant of an Option to a Eligible
Employee or Director shall be evidenced by an Option Certificate, and each
Option Certificate shall set forth whether the Option is an ISO or a Non-ISO and
shall set forth such other terms and conditions of such grant as the Committee
acting in its absolute discretion deems consistent with the terms of this Plan;
however, (a) if the Committee grants an ISO and a Non-ISO to a Eligible Employee
on the same date, the right of the Eligible Employee to exercise the ISO shall
not be conditioned on his or her failure to exercise the Non-ISO and (b) if the
only condition to exercise of the Option is the completion of a period of
service, such period of service shall be no less than the one (1) year
period which starts on the date as of which the Option is
granted unless the Committee determines that a shorter period of service (or no
period of service) better serves the Company’s interest.
7.2 $100,000 Limit. No Option
shall be treated as an ISO to the extent that the aggregate Fair Market Value of
the Stock subject to the Option which would first become exercisable in any
calendar year exceeds $100,000. Any such excess shall instead automatically be
treated as a Non-ISO. The Committee shall interpret and administer the ISO
limitation set forth in this § 7.2 in accordance with § 422(d) of the Code, and
the Committee shall treat this § 7.2 as in effect only for those periods for
which § 422(d) of the Code is in effect.
7.3 Option Price. The Option
Price for each share of Stock subject to an Option shall be no less than the
Fair Market Value of a share of Stock on the date the Option is granted;
provided, however, if the Option is an ISO granted to an Eligible Employee who
is a Ten Percent Stockholder, the Option Price for each share of Stock subject
to such ISO shall be no less than 110% of the Fair Market Value of a share of
Stock on the date such ISO is granted.
7.4 Payment. The Option Price
shall be payable in full upon the exercise of any Option and, at the discretion
of the Committee, an Option Certificate can provide for the payment of the
Option Price either in cash, by check or in Stock which is acceptable to the
Committee, through any cashless exercise procedure which is effected by an
unrelated broker through a sale of Stock in the open market and which is
acceptable to the Committee, by directing the Company to withhold shares of
Stock otherwise issuable in connection with the exercise of the Option having a
Fair Market Value equal to the exercise price, or in any combination of such
forms of payment. Any payment made in Stock shall be treated as equal to the
Fair Market Value of such Stock on the date the certificate for such Stock (or
proper evidence of such certificate) is presented to the Committee or its
delegate in such form as acceptable to the Committee.
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7.5
Exercise. |
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(a) |
Exercise
Period. Each Option granted under this Plan shall be exercisable in whole
or in part at such time or times as set forth in the related Option
Certificate, but no Option Certificate shall make an Option exercisable on
or after the earlier of |
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(i) |
the date which is the fifth anniversary of
the date the Option is granted, if the Option is an ISO and the Eligible
Employee is a Ten Percent Stockholder on the date the Option is granted,
or |
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(ii) |
the date which is the tenth anniversary of
the date the Option is granted, if the Option is (A) a Non-ISO or (B) an
ISO which is granted to an Eligible Employee who is not a Ten Percent
Stockholder on the date the Option is granted. |
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(b) |
Termination of Status as
Eligible Employee or Director. Subject to § 7.5(a), an Option
Certificate may provide for the exercise of an Option after an Eligible
Employee’s or a Director’s status as such has terminated for any reason
whatsoever, including death or disability. |
§ 8.
STOCK APPRECIATION
RIGHTS
8.1 Committee Action.
The Committee acting in its absolute discretion shall have the right to grant
Stock Appreciation Rights to Eligible Employees and to Directors under this Plan
from time to time, and each Stock Appreciation Right grant shall be evidenced by
a Stock Appreciation Right Certificate or, if such Stock Appreciation Right is
granted as part of an Option, shall be evidenced by the Option Certificate for
the related Option.
8.2 Terms and
Conditions.
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(a) |
Stock Appreciation Right Certificate.
If a Stock Appreciation Right is granted independent of an Option, such
Stock Appreciation Right shall be evidenced by a Stock Appreciation Right
Certificate, and such certificate shall set forth the number of shares of
Stock on which the Eligible Employee’s or Director’s right to appreciation
shall be based and the SAR Value of each share of Stock. Such SAR Value
shall be no less than the Fair Market Value of a share of Stock on the
date that the Stock Appreciation Right is granted. The Stock Appreciation
Right Certificate shall set forth such other terms and conditions for the
exercise of the Stock Appreciation Right as the Committee deems
appropriate under the circumstances, but no Stock Appreciation Right
Certificate shall make a Stock Appreciation Right exercisable on or after
the date which is the tenth anniversary of the date such Stock
Appreciation Right is granted. |
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Option Certificate. If a Stock
Appreciation Right is granted together with an Option, such Stock
Appreciation Right shall be evidenced by an Option Certificate, the number
of shares of Stock on which the Eligible Employee’s or Director’s right to
appreciation shall be based shall be the same as the number of shares of
Stock subject to the related Option, and the SAR Value for each such share
of Stock shall be no less than the Option Price under the related Option.
Each such Option Certificate shall provide that the exercise of the Stock
Appreciation Right with respect to any share of Stock shall cancel the
Eligible Employee’s or Director’s right to exercise his or her Option with
respect to such share and, conversely, that the exercise of the Option
with respect to any share of Stock shall cancel the Eligible Employee’s or
Director’s right to exercise his or her Stock Appreciation Right with
respect to such share. A Stock Appreciation Right which is granted as part
of an Option shall be exercisable only while the related Option is
exercisable. The Option Certificate shall set forth such other terms and
conditions for the exercise of the Stock Appreciation Right as the
Committee deems appropriate under the
circumstances. |
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(c) |
Minimum Period of Service. If the only
condition to exercise of a Stock Appreciation Right is the completion of a
period of service, such period of service shall be no less than the one
(1) year period which starts on the date as of which the Stock
Appreciation Right is granted unless the Committee determines that a
shorter period of service (or no period of service) better serves the
Company’s interest. |
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8.3 Exercise. A Stock
Appreciation Right shall be exercisable only when the Fair Market Value of a
share of Stock on which the right to appreciation is based exceeds the SAR Value
for such share, and the payment due on exercise shall be based on such excess
with respect to the number of shares of Stock to which the exercise relates. An
Eligible Employee or Director upon the exercise of his or her Stock Appreciation
Right shall receive a payment from the Company in cash or in Stock issued under
this Plan, or in a combination of cash and Stock, and the number of shares of
Stock issued shall be based on the Fair Market Value of a share of Stock on the
date the Stock Appreciation Right is exercised. The Committee acting in its
absolute discretion shall have the right to determine the form and time of any
payment under this § 8.3.
§ 9.
STOCK GRANTS AND STOCK
UNIT GRANTS
9.1 Committee Action.
The Committee acting in its absolute discretion shall have the right to make
Stock Grants and Stock Unit Grants to Eligible Employees and Directors. Each
Stock Grant and each Stock Unit Grant shall be evidenced by a Stock Grant
Certificate, and each Stock Grant Certificate shall set forth the conditions, if
any, under which Stock will be issued under the Stock Grant or Stock Unit Grant
or cash will be paid under the Stock Unit Grant and the conditions under which
the Eligible Employee’s or Director’s interest in any Grant will become
non-forfeitable.
9.2
Conditions.
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(a) |
Conditions to
Issuance of Stock. The Committee acting in its absolute discretion may
make the issuance of Stock under a Stock Grant, or the issuance of Stock
or payment in cash under a Stock Unit Grant, subject to the satisfaction
of one or more conditions which the Committee deems appropriate under the
circumstances for Eligible Employees or Directors generally or for an
Eligible Employee or a Director in particular, and the related Stock Grant
Certificate shall set forth each such condition and the deadline for
satisfying each such condition. Stock subject to a Stock Grant, or the
Stock or cash payment subject to a Stock Unit Grant, shall be issued or
paid to an Eligible Employee or Director only after each such condition,
if any, has been timely satisfied, and any Stock issued in connection with
a Stock Grant shall be held by the Company pending the satisfaction of the
forfeiture conditions, if any, under § 9.2(b) for the related Stock
Grant. |
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(b) |
Conditions on
Forfeiture of Stock or Cash Payment. The Committee acting in its
absolute discretion may make any cash payment due under a Stock Unit Grant
or Stock issued in the name of an Eligible Employee or Director under a
Stock Grant or Stock Unit Grant non-forfeitable subject to the
satisfaction of one or more objective employment, performance or other
condition that the Committee acting in its absolute discretion deems
appropriate under the circumstances for Eligible Employees or Directors
generally or for an Eligible Employee or a Director in particular, and the
related Stock Grant Certificate shall set forth each such condition, if
any, and the deadline, if any, for satisfying each such condition. An
Eligible Employee’s or a Director’s non-forfeitable interest in the shares
of Stock underlying a Stock Grant or the cash payable or Stock issuable
under a Stock Unit Grant shall depend on the extent to which he or she
timely satisfies each such condition. If a share of Stock is issued under
this § 9.2(b) before a Eligible Employee’s or Director’s interest in such
share of Stock is non-forfeitable, (i) [such share of Stock shall not be available for re-issuance under §
3 until such time, if any, as such share of Stock thereafter is forfeited
as a result of a failure to timely satisfy a forfeiture condition and
(ii)] the Company shall have the right to
condition any such |
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issuance on the Eligible
Employee or Director first signing an irrevocable stock power in favor of
the Company with respect to the forfeitable shares of Stock issued to such
Eligible Employee or Director in order for the Company to effect any
forfeiture called for under the related Stock Grant
Certificate. |
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Minimum Period of Service. If the
only condition to the forfeiture of a Stock Grant or a Stock Unit Grant is
the completion of a period of service, such period of service shall be no
less than the three (3) year period which starts on the date as of which
the Stock Grant or Stock Unit Grant is made unless the Committee
determines that a shorter period of service (or no period of service)
better serves the Company’s interest. |
9.3 Dividends, Voting
Rights and Creditor Status.
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(a) |
Cash Dividends. Except as otherwise
set forth in § 9.3(d) or in a Stock Grant Certificate, if a cash dividend
is paid on a share of Stock after such Stock has been issued under a Stock
Grant, or a cash dividend would be payable with respect to the shares of
Stock described in a Stock Unit Grant had such shares been outstanding,
but in each case before the first date that an Eligible Employee’s or a
Director’s interest in such Stock or Stock Unit (i) is forfeited
completely or (ii) becomes completely non-forfeitable, the Company shall
pay such cash dividend directly to such Eligible Employee or
Director. |
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Stock Dividends.
Except as otherwise set forth in § 9.3(d), if a Stock dividend is paid on
a share of Stock after such Stock has been issued under a Stock Grant, or
a Stock dividend would be payable with respect to the shares of Stock
described in a Stock Unit Grant had they been outstanding, but in each
case before the first date that an Eligible Employee’s or a Director’s
interest in such Stock or Stock Unit (i) is forfeited completely or (ii)
becomes completely non-forfeitable, the Company shall hold such dividend
Stock and pay such dividend Stock only upon, and to the extent, the
conditions under § 9.2(b) applicable to the related Stock Grant or Stock
Unit Gran are satisfied. |
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Other. Except as
otherwise set forth in § 9.3(d), if a dividend (other than a dividend
described in § 9.3(a) or § 9.3(b)) is paid with respect to a share of
Stock after such Stock has been issued under a Stock Grant, or such
dividend would be payable with respect to the shares of Stock described in
a Stock Unit Grant had they been outstanding, but in each case before the
first date that an Eligible Employee’s or a Director’s interest in such
Stock or Stock Unit (i) is forfeited completely or (ii) becomes completely
non-forfeitable, the Company shall distribute or hold such dividend in
accordance with such rules as the Committee shall adopt with respect to
each such dividend. |
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(d) |
Performance-Based
Grants. Notwithstanding the foregoing provisions of this §9.3, in the
case of any dividends otherwise payable as described in § 9.3(a), (b) or
(c) with respect to a Stock Grant or Stock Unit Grant subject to the
attainment of performance goals as described in § 9.5, the Company shall
hold such dividends and pay such dividends only upon, and to the extent,
the conditions under § 9.2(b) applicable to the related Stock Grant or
Stock Unit Grant are satisfied. |
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(e) |
Voting. Except
as otherwise set forth in a Stock Grant Certificate, an Eligible Employee
or a Director shall have the right to vote the Stock issued under his or
her Stock Grant during the period which comes after such Stock has been
issued under a Stock Grant but before the first date that an Eligible
Employee’s or Director’s interest in such Stock (i) is forfeited
completely or (ii) becomes completely
non-forfeitable. |
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9.4 Satisfaction of
Forfeiture Conditions. A share of Stock shall cease to be subject to a Stock
Grant or Stock Unit Grant at such time as an Eligible Employee’s or a Director’s
interest in such Grant becomes non-forfeitable under this Plan, and the
certificate or other evidence of ownership representing such share, or if
applicable the cash payment, shall be transferred to the Eligible Employee or
Director as soon as practicable thereafter.
9.5 Performance-Based Stock
Grants and Stock Unit Grants.
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(a) |
General. The
Committee in its discretion may make Stock Grants and Stock Unit Grants to
Eligible Employees and Directors subject to one or more conditions related
to one or more performance goals, including the performance goals
described in § 9.5(b) that qualify the Grant as “performance-based
compensation” under § 162(m) of the Code. |
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Performance
Goals. A performance goal is described in this § 9.5(b) if such goal
relates to (i) free cash flow, (ii) free cash flow per share, (iii)
earnings before interest, taxes, depreciation, and amortization
(“EBITDA”), (iv) improvement in EBITDA margins, (v) revenue growth, (vi)
maintenance of targeted capital structure and leverage ratios, (vii) pre
or after-tax net income, (viii) earnings per share, (ix) share price
performance, (x) total stockholder returns, (xi) economic value added,
(xii) dividend payout ratio, (xiii) broadband subscriber net additions,
(xiv) customer service operating results, (xv) network performance and
(xvi) any other criteria the Committee deems appropriate. Performance
goals may be particular to one or more lines of business or Subsidiaries
or may be based on the performance of the Company and its Subsidiaries as
a whole. |
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(c) |
Adjustments.
When the Committee determines whether a performance goal has been
satisfied for any Performance Period established by the Committee, the
Committee may exclude any or all “extraordinary items” as determined under
U.S. generally accepted accounting principles and any other unusual or
non-recurring items, including, without limitation, the charges or costs
associated with restructurings of the Company, discontinued operations,
and the cumulative effects of accounting changes and, further, may take
into account any unusual or non-recurring events affecting the Company,
changes in applicable tax laws or accounting principles, or such other
factors as the Committee may determine are reasonable and appropriate
under the circumstances (including, without limitation, taking into
account any factor that would result in the Company’s paying
non-deductible compensation to an Eligible Employee). |
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Performance
Period. With respect to each Performance Period established by the
Committee, (i) the Committee shall establish such performance goals
relating to one or more of the business criteria selected pursuant to §
9.5(b), and (ii) the Committee shall establish targets for achievement of
performance goals. The performance goals and performance targets
established by the Committee may be identical for all Eligible Employees
and Directors for a given Performance Period or, at the discretion of the
Committee, may differ among them. Following the completion of each
Performance Period, the Committee shall determine the extent to which
performance goals for that Performance Period have been achieved and shall
authorize the award of Stock Grants, Stock Units, shares of Stock or cash,
as applicable, to the Eligible Participants and Directors for whom the
targets were established, in accordance with the terms of the applicable
Grant Certificates. |
§ 10.
CASH INCENTIVE
PROGRAM
10.1 General. The
Committee may adopt one or more Cash Incentive Programs under this Plan, and
each such Program shall run for a Performance Period which shall be expressed in
whole years, from one to five years. Such Cash Incentive Program shall be
separate and distinct from any other cash incentive plan or program sponsored by
the Company. The Committee shall determine the terms and conditions for any
Eligible Employee
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to participate in each such
Program, and payments shall be made thereunder based on the satisfaction of one
or more performance goals, including the performance goals described in § 10.2
that qualify the payments as “performance-based compensation” under § 162(m) of
the Code. A performance goal may be set in any manner determined by the
Committee, including looking to achievement on an absolute or relative basis in
relation to peer groups or indexes.
10.2 Performance Goals.
A performance goal is described in this § 10.2 if such goal relates to (a) free
cash flow, (b) free cash flow per share, (c) earnings before interest, taxes,
depreciation, and amortization (“EBITDA”), (d) improvement in EBITDA margins,
(e) revenue growth, (f) maintenance of targeted capital structure and leverage
ratios, (g) pre or after-tax net income, (h) earnings per share, (i) share price
performance, (j) total stockholder returns, (k) economic value added, (l)
dividend payout ratio, (m) broadband subscriber net additions, (n) customer
service operating results, (o) network performance and (p) any other criteria
the Committee deems appropriate. Performance goals may be particular to one or
more lines of business or Subsidiaries or may be based on the performance of the
Company and its Subsidiaries as a whole.
10.3 Adjustments. When
the Committee determines whether a performance goal has been satisfied for any
period, the Committee may exclude any or all “extraordinary items” as determined
under U.S. generally accepted accounting principles and any other unusual or
non-recurring items, including, without limitation, the charges or costs
associated with restructurings of the Company, discontinued operations, and the
cumulative effects of accounting changes and, further, may take into account any
unusual or non-recurring events affecting the Company, changes in applicable tax
laws or accounting principles, or such other factors as the Committee may
determine are reasonable and appropriate under the circumstances (including,
without limitation, taking into account any factor that would result in the
Company’s paying nondeductible compensation to an Eligible Employee).
10.4 Performance
Period. With respect to each Performance Period established by the
Committee, (i) the Committee shall establish such performance goals relating to
one or more of the business criteria selected pursuant to § 10.2, and (ii) the
Committee shall establish targets for Eligible Employees for achievement of
performance goals. The performance goals and performance targets established by
the Committee may be identical for all Eligible Employees for a given
Performance Period or, at the discretion of the Committee, may differ among
Eligible Employees. Following the completion of each Performance Period, the
Committee shall determine the extent to which performance goals for that
Performance Period have been achieved and shall authorize payment in accordance
with the terms of the Cash Incentive Program.
§ 11.
CONDITIONS OF
TRANSFER
Each Option and each Stock
Appreciation Right granted under this Plan and each Stock Grant and Stock Unit
Grant made under this Plan shall be transferable by the Eligible Employee or
Director to whom the related grant is made only by will or the laws of descent
and distribution, unless the Committee authorizes a transfer under circumstances
other than by will or the laws of descent and distribution in accordance with
this § 11. A transfer (other than by will or the laws of descent and
distribution) shall be authorized in accordance with this § 11 only if (a) an
Eligible Employee or Director requests in writing that the Committee authorize
such transfer, (b) the Eligible Employee or Director demonstrates to the
Committee’s satisfaction that the transfer is contemplated in connection with a
professionally prepared estate plan for the Eligible Employee or Director and
(c) the Committee acting in its absolute discretion determines that (1) the
requested transfer is not inconsistent with the purpose of this Plan, (2) there
is no legal prohibition against such transfer and (3) there will be a basis on
which to register any related shares of Stock under the 1933 Act or there will
be a registration exemption under the 1933 Act if the request is granted. If a
transfer is authorized in accordance with this § 11, the related Option, Stock
Appreciation Right, Stock Grant or Stock Unit Grant shall by operation of this §
11 remain immediately following such transfer subject to the same terms and
conditions as in effect immediately before such transfer, and no shares of Stock
shall be issued to any person pursuant to such transfer and no cash shall be
paid to any such person pursuant to such transfer before the Eligible Employee
or Director satisfies in full all of the conditions for such issuance or payment
and pays, or makes provision satisfactory to the Committee for the payment of,
any applicable taxes due with respect to such
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issuance or payment. The
Committee as a condition to any authorization under this § 11 may require an
Eligible Employee or Director to reimburse the Company for any additional
expenses the Company incurs to register any affected shares of Stock under the
1933 Act. Finally, if a transfer is authorized in accordance with this § 11, the
Eligible Employee or a Director shall by operation of this § 11 have the
responsibility to notify any transferee of any events or conditions which affect
any related Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant,
including any deadline for taking any action with respect to any such Option,
Stock Appreciation Right, Stock Grant or Stock Unit Grant, and neither the
Committee nor the Company shall have any responsibility whatsoever to notify any
transferee of any such events or conditions. Subject to § 17.5, the restrictions
on transferability described in this § 11 shall not apply to shares of Stock
that have actually been delivered to the transferee as a result of the exercise
of an Option or Stock Appreciation Right or the lapse of all restrictions with
respect to a Stock Grant.
§ 12.
SECURITIES
REGISTRATION
As a condition to the receipt
of shares of Stock under this Plan, the Eligible Employee or Director shall, if
so requested by the Company, agree to hold such shares of Stock for investment
and not with a view of resale or distribution to the public and, if so requested
by the Company, shall deliver to the Company a written statement satisfactory to
the Company to that effect. Furthermore, if so requested by the Company, the
Eligible Employee or Director shall make a written representation to the Company
that he or she will not sell or offer for sale any of such Stock unless a
registration statement shall be in effect with respect to such Stock under the
1933 Act and any applicable state securities law or he or she shall have
furnished to the Company an opinion in form and substance satisfactory to the
Company of legal counsel satisfactory to the Company that such registration is
not required. Certificates or other evidence of ownership representing the Stock
transferred upon the exercise of an Option or Stock Appreciation Right or upon
the lapse of the forfeiture conditions, if any, on any Stock Grant may at the
discretion of the Company bear a legend to the effect that such Stock has not
been registered under the 1933 Act or any applicable state securities law and
that such Stock cannot be sold or offered for sale in the absence of an
effective registration statement as to such Stock under the 1933 Act and any
applicable state securities law or an opinion in form and substance satisfactory
to the Company of legal counsel satisfactory to the Company that such
registration is not required.
§ 13.
LIFE OF
PLAN
Notwithstanding anything to
the contrary contained herein, no Grant shall be made under this Plan, and no
Cash Incentive Program shall commence, on or after May 5, 2019.
§ 14.
ADJUSTMENT
14.1 Capital Structure. The
grant caps described in § 3.4, the number, kind or class (or any combination
thereof) of shares of Stock subject to outstanding Options and Stock
Appreciation Rights granted under this Plan and the Option Price of such Options
and the SAR Value of such Stock Appreciation Rights as well as the number, kind
or class (or any combination thereof) of shares of Stock subject to outstanding
Stock Grants and Stock Unit Grants made under this Plan shall be adjusted by the
Committee in a reasonable and equitable manner to preserve immediately
after
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any equity
restructuring or change in the capitalization of the Company, including,
but not limited to, spin offs, stock dividends, large non-reoccurring
dividends, rights offerings or stock splits, or |
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(b) |
any other transaction
described in § 424(a) of the Code which does not constitute a Change in
Control of the Company |
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the aggregate intrinsic value
of each such outstanding Option, Stock Appreciation Right, Stock Grant and Stock
Unit Grant immediately before such restructuring or recapitalization or other
transaction.
14.2 Available Shares.
If any adjustment is made with respect to any outstanding Option, Stock
Appreciation Right, Stock Grant or Stock Unit Grant under § 14.1, then the
Committee shall adjust the number, kind or class (or any combination thereof) of
shares of Stock reserved under § 3.1 so that there is a sufficient number, kind
and class of shares of Stock available for issuance pursuant to each such
Option, Stock Appreciation Right, Stock Grant and Stock Unit Grant as adjusted
under § 14.1 without seeking the approval of the Company’s stockholders for such
adjustment unless such approval is required under applicable law or the rules of
the stock exchange on which shares of Stock are traded. Furthermore, the
Committee shall have the absolute discretion to further adjust such number, kind
or class (or any combination thereof) of shares of Stock reserved under § 3.1 in
light of any of the events described in § 14.1(a) and § 14.1(b) to the extent
the Committee acting in good faith determinates that a further adjustment would
be appropriate and proper under the circumstances and in keeping with the
purposes of this Plan without seeking the approval of the Company’s stockholders
for such adjustment unless such approval is required under applicable law or the
rules of the stock exchange on which shares of Stock are traded.
14.3 Transactions Described
in § 424 of the Code. If there is a corporate transaction described in §
424(a) of the Code which does not constitute a Change in Control of the Company,
the Committee as part of any such transaction shall have right to make Stock
Grants, Stock Unit Grants and Option and Stock Appreciation Right grants
(without regard to any limitations set forth under § 3.4 of this Plan) to effect
the assumption of, or the substitution for, outstanding stock grants, stock unit
grants and option and stock appreciation right grants previously made by any
other corporation to the extent that such corporate transaction calls for such
substitution or assumption of such outstanding stock grants, stock unit grants
and stock option and stock appreciation right grants. Furthermore, if the
Committee makes any such grants as part of any such transaction, the Committee
shall have the right to increase the number of shares of Stock available for
issuance under § 3.1 by the number of shares of Stock subject to such grants
without seeking the approval of the Company’s stockholders for such adjustment
unless such approval is required under applicable law or the rules of the stock
exchange on which shares of Stock are traded.
14.4 Fractional Shares.
If any adjustment under this § 14 would create a fractional share of Stock or a
right to acquire a fractional share of Stock under any Option, Stock
Appreciation Right or Stock Grant, such fractional share shall be disregarded
and the number of shares of Stock reserved under this Plan and the number
subject to any Options or Stock Appreciation Right grants and Stock Grants shall
be the next lower number of shares of Stock, rounding all fractions downward. An
adjustment made under this § 14 by the Committee shall be conclusive and binding
on all affected persons.
§ 15.
CHANGE IN
CONTROL
If there is a Change in
Control of the Company and there is no assumption of the Options, Stock
Appreciation Rights, Stock Units or Stock Unit Grants that are outstanding
immediately prior to the Change Effective Date and no substitution of comparable
grants with comparable intrinsic values in connection with such Change in
Control, then as of the Change Effective Date for such Change in Control, any
and all conditions to the exercise of all such outstanding Options and Stock
Appreciation Rights on such date and any and all outstanding issuance and
forfeiture conditions on any such Stock Grants and Stock Unit Grants on such
date automatically shall be deemed 100% satisfied as of such Change Effective
Date, and the Board shall have the right (to the extent expressly required as
part of such transaction) to cancel such Options, Stock Appreciation Rights,
Stock Grants and Stock Unit Grants after providing each Eligible Employee and
Director a reasonable period to exercise his or her Options and Stock
Appreciation Rights and to take such other action as necessary or appropriate to
receive the Stock subject to any Stock Grants and the cash payable under any
Stock Unit Grants; provided, if any issuance or forfeiture condition described
in this § 15 relates to satisfying any performance goal and there is a target
for such
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Table of Contents
goal, such issuance or
forfeiture condition shall be deemed satisfied under this § 15 only to the
extent of such target unless such target has been exceeded before the Change
Effective Date, in which event such issuance or forfeiture condition shall be
deemed satisfied to the extent such target had been so exceeded.
If there is a Change in
Control of the Company and there is an assumption of an Eligible Employee’s or
Director’s Options, Stock Appreciation Rights, Stock Units or Stock Unit Grants
that are outstanding immediately prior to the Change Effective Date or a
substitution of comparable grants with comparable intrinsic values in connection
with such Change in Control and the employment of such Eligible Employee is
either terminated without Cause or the Eligible Employee terminates for Good
Reason or a Director is asked to resign other than for Cause, within twenty-four
(24) months following the Change Effective Date, then any and all conditions to
the exercise of all such Options and Stock Appreciation Rights and any and all
outstanding issuance and forfeiture conditions on any Stock Grants and Stock
Unit Grants shall be deemed 100% satisfied; provided, that if any issuance or
forfeiture condition described in this §15 relates to satisfying any performance
goal and there is a target for such goal, such issuance or forfeiture condition
shall be deemed satisfied under this §15 only to the extent of the target,
unless such target has been exceeded before the date of such termination, in
which event such issuance or forfeiture condition shall be deemed satisfied to
the extent such target had been so exceeded.
A Change in Control shall
affect payments under a Cash Incentive Program only to the extent expressly
provided in such Cash Incentive Program, and a Change in Control shall affect a
Stock Appreciation Right or Stock Unit Grant which is subject to § 409A of the
Code only if the Change in Control also constitutes a change in the ownership or
effective control of Company or in the ownership of a substantial portion of the
assets of the Company within the meaning of § 409A(a)(2)(A)(v) of the
Code.
§ 16.
AMENDMENT OR
TERMINATION
This Plan may be amended by
the Board from time to time to the extent that the Board deems necessary or
appropriate; provided, however, (a) no amendment shall be made absent the
approval of the stockholders of the Company to the extent such approval is
required under applicable law or the rules of the stock exchange on which shares
of Stock are listed, and (b) no amendment shall be made to § 15 on or after the
date of any Change in Control which might adversely affect any rights which
otherwise would vest on the related Change Effective Date. The Board also may
suspend granting Options or Stock Appreciation Rights or making Stock Grants or
Stock Unit Grants under this Plan at any time and may terminate this Plan at any
time; provided, however, the Board shall not have the right unilaterally to
modify, amend or cancel any Option or Stock Appreciation Right granted or Stock
Grant made before such suspension or termination unless (i) the Eligible
Employee or Director consents in writing to such modification, amendment or
cancellation or (ii) there is a dissolution or liquidation of the Company or a
transaction described in § 14.1 or § 15.
§ 17.
MISCELLANEOUS
17.1 Stockholder
Rights. No Eligible Employee or Director shall have any rights as a
stockholder of the Company as a result of the grant of an Option or a Stock
Appreciation Right pending the actual delivery of the Stock subject to such
Option or Stock Appreciation Right to such Eligible Employee or Director. An
Eligible Employee’s or a Director’s rights as a stockholder in the shares of
Stock which remain subject to forfeiture under § 9.2(b) shall be set forth in
the related Stock Grant Certificate. Subject to § 17.5, an Eligible Employee or
Director shall have the rights of a stockholder of the Company with respect to
any shares of Stock that have been actually delivered to such individual as a
result of the exercise of an Option or Stock Appreciation Right or the lapse of
all restrictions with respect to a Stock Grant or Stock Unit Grant.
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17.2 No Contract of
Employment. The grant of an Option or a Stock Appreciation Right or a Stock
Grant or Stock Unit Grant to an Eligible Employee or Director under this Plan or
his or her participation in a Cash Incentive Program shall not constitute a
contract of employment or a right to continue to serve on the Board and shall
not confer on an Eligible Employee or Director any rights upon his or her
termination of employment or service in addition to those rights, if any,
expressly set forth in this Plan or the related Option Certificate, Stock
Appreciation Right Certificate, Stock Grant Certificate or Cash Incentive
Plan.
17.3 Withholding. Each
Option, Stock Appreciation Right, Stock Grant and Stock Unit Grant and
participation in each Cash Incentive Plan shall be made subject to the condition
that the Eligible Employee or Director consents to whatever action the Committee
directs to satisfy the minimum statutory federal and state tax withholding
requirements, if any, which the Company determines are applicable to the
exercise of such Option or Stock Appreciation Right or to the satisfaction of
any forfeiture conditions with respect to Stock subject to a Stock Grant or
Stock Unit Grant issued in the name of the Eligible Employee or Director or to
payments under any Cash Incentive Plan. No withholding shall be effected under
this Plan which exceeds the minimum statutory federal and state withholding
requirements.
17.4 Construction. All
references to sections (§) are to sections (§) of this Plan unless otherwise
indicated. This Plan shall be construed under the laws of the State of Delaware.
Each term set forth in § 2 shall, unless otherwise stated, have the meaning set
forth opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular. Finally, if there is any conflict between the terms of this Plan
and the terms of any Option Certificate, Stock Appreciation Right Certificate,
Stock Grant Certificate or Cash Incentive Program, the terms of this Plan shall
control.
17.5 Other Conditions.
Each Option Certificate, Stock Appreciation Right Certificate or Stock Grant
Certificate may require that an Eligible Employee or a Director (as a condition
to the exercise of an Option or a Stock Appreciation Right or the issuance of
Stock subject to a Stock Grant) enter into any agreement or make such
representations prepared by the Company, including (without limitation) any
agreement which restricts the transfer of Stock acquired pursuant to the
exercise of an Option or a Stock Appreciation Right or a Stock Grant or provides
for the repurchase of such Stock by the Company.
17.6 Rule 16b-3. The
Committee shall have the right to amend any Option, Stock Grant or Stock
Appreciation Right to withhold or otherwise restrict the transfer of any Stock
or cash under this Plan to an Eligible Employee or Director as the Committee
deems appropriate in order to satisfy any condition or requirement under Rule
16b-3 to the extent Rule 16 of the 1934 Act might be applicable to such grant or
transfer.
17.7 Coordination with
Employment Agreements and Other Agreements. If the Company enters into an
employment agreement or other agreement with an Eligible Employee or Director
which expressly provides for the acceleration in vesting of an outstanding
Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant or of a
payment under a Cash Incentive Plan or for the extension of the deadline to
exercise any rights under an outstanding Option, Stock Appreciation Right, Stock
Grant or Stock Unit Grant, any such acceleration or extension shall be deemed
effected pursuant to, and in accordance with, the terms of such outstanding
Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant and this Plan
even if such employment agreement or other agreement is first effective after
the date the outstanding Option or Stock Appreciation Right was granted or the
Stock Grant or Stock Unit Grant was made.
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Table of Contents
IN WITNESS
WHEREOF, the Company has caused
its duly authorized officer to execute this Plan to evidence its adoption of
this Plan.
| CONSOLIDATED COMMUNICATIONS |
| HOLDINGS, INC. |
| |
| |
| By: |
|
|
-A-16-
Table of Contents
| |
|
CONSOLIDATED
COMMUNICATIONS
HOLDINGS, INC. |
|
|
|
|
|
IMPORTANT ANNUAL
MEETING INFORMATION |
|
 |
|
|
|
Using a black ink pen, mark your votes with an
X as shown in
this example.
Please do not write outside the designated areas. |
|
 |
|
| Annual Meeting Proxy
Card |
|
|
|
▼ PLEASE FOLD
ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.▼ |
| A |
|
Proposals
— |
The Board
of Directors recommends a vote FOR the director candidates nominated by
the Board of |
|
|
|
Directors, FOR Proposal 2, and FOR Proposal 3. |
|
|
|
|
 |
| 1. |
Election of Directors: |
For |
Withhold |
|
|
For |
Withhold |
|
|
|
|
|
| |
|
01 - Richard A. Lumpkin |
☐ |
☐ |
|
02 - Timothy D. Taron |
☐ |
☐ |
|
|
|
|
|
|
|
For |
Against |
Abstain |
| |
|
|
|
|
| 2. |
Approval of Ernst & Young, LLP, as the
independent registered public accounting firm. |
☐ |
☐ |
☐ |
|
|
For |
Against |
Abstain |
| |
|
|
|
|
| 3. |
Approve certain provisions of the
Consolidated Communications, Inc. 2005 Long-Term Incentive Plan. |
☐ |
☐ |
☐ |
| B
|
|
Authorized Signatures — This
section must be completed for your vote to be counted. — Date and Sign
Below |
|
Please sign exactly as name(s) appears hereon.
Joint owners should each sign. When signing as attorney, executor,
administrator, corporate officer, trustee, guardian, or custodian, please
give full title. |
| Date (mm/dd/yyyy) — Please
print date below. |
|
Signature 1 — Please keep
signature within the box. |
|
Signature 2 — Please keep
signature within the box. |
| / / |
|
|
|
|
Table of Contents
|
▼PLEASE FOLD
ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.▼ |
|
Proxy — CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC. |
CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
2950 Xenium Lane North, Suite 138, Plymouth, MN
55441
Proxy Solicited by Board of
Directors for Annual Meeting – May 4, 2015 at 9:00 a.m. Central
Time
Steven J. Shirar and
Matthew K. Smith, or either of them, each with the power of substitution, are
hereby authorized to represent and vote the shares of the undersigned, with all
the powers which the undersigned would possess if personally present, at the
Annual Meeting of Stockholders of Consolidated Communications Holdings, Inc. to
be held on May 4, 2015 or at any postponement or adjournment thereof.
Shares represented by
this proxy will be voted by the stockholder. If no such directions are
indicated, the Proxies will have authority to vote FOR the director candidates
nominated by the Board of Directors, FOR Proposal 2, and FOR Proposal
3.
In their discretion, the
Proxies are authorized to vote upon such other business as may properly come
before the meeting.
(Continued and to be voted
on reverse side.)
Table of Contents
| |
|
CONSOLIDATED
COMMUNICATIONS
HOLDINGS, INC. |
|
|
|
|
|
IMPORTANT ANNUAL
MEETING INFORMATION |
 |
 |
|
 |
|
Electronic Voting
Instructions
Available 24
hours a day, 7 days a week!
Instead of mailing your proxy, you may
choose one of the voting methods outlined below to vote your
proxy.
VALIDATION DETAILS
ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by
1:00 a.m., Central Time, on May 4, 2015.
|
 |
Vote by
Internet |
| ● Go to www.envisionreports.com/CNSL |
| ● Or scan the QR code with your
smartphone |
| ● Follow the steps outlined on the
secure website |
Vote by
telephone |
| ● | Call toll free 1-800-652-VOTE
(8683) within the USA, US territories & Canada on a touch tone
telephone |
| ● | Follow the instructions provided
by the recorded message |
|
Using a black ink pen, mark your votes with an
X as
shown in
this example. Please do not write outside the designated
areas. |
|
|
|
| Annual Meeting Proxy
Card |
 |
|
|
▼IF YOU HAVE NOT VOTED VIA THE
INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.▼ |
| A |
|
Proposals — |
The Board of Directors recommends a vote FOR the director
candidates nominated by the
Board of Directors, FOR Proposal 2,
and FOR Proposal 3. |
|
|
|
|
 |
| 1. |
Election of Directors: |
For |
|
Withhold |
|
|
For |
|
Withhold |
|
|
|
|
|
|
|
01 - Richard A. Lumpkin |
☐ |
|
☐ |
|
02 - Timothy D.
Taron |
☐ |
|
☐ |
|
|
|
|
|
|
| |
|
|
For |
|
Against |
|
Abstain |
|
|
|
|
For |
|
Against |
|
Abstain |
| 2. |
Approval of Ernst & Young, LLP, as the
independent registered public accounting firm. |
|
☐ |
|
☐ |
|
☐ |
|
3. |
Approve certain provisions of the
Consolidated Communications, Inc. 2005 Long-Term Incentive Plan. |
|
☐ |
|
☐ |
|
☐ |
| B |
|
Non-Voting
Items |
|
|
|
|
| Change of
Address —
Please print your new address below. |
|
Comments
— Please
print your comments below. |
|
Meeting
Attendance |
| |
|
|
|
Mark the box to the right if you plan to
attend the Annual Meeting. |
☐ |
| |
|
|
| C |
|
Authorized
Signatures — This section must be completed for your vote to be counted. —
Date and Sign Below |
|
Please sign exactly as
name(s) appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian,
or custodian, please give full title. |
| Date (mm/dd/yyyy) —
Please print date below. |
|
Signature 1 — Please
keep signature within the box. |
|
Signature 2 — Please
keep signature within the box. |
| /
/ |
|
|
|
|
Table of Contents
|
▼IF YOU HAVE
NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.▼ |
|
Proxy — CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC. |
CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
2950 Xenium Lane North, Suite 138, Plymouth, MN
55441
Proxy Solicited by Board of
Directors for Annual Meeting – May 4, 2015 at 9:00 a.m. Central
Time
Steven J. Shirar and
Matthew K. Smith, or either of them, each with the power of substitution, are
hereby authorized to represent and vote the shares of the undersigned, with all
the powers which the undersigned would possess if personally present, at the
Annual Meeting of Stockholders of Consolidated Communications Holdings, Inc. to
be held on May 4, 2015 or at any postponement or adjournment thereof.
Shares represented by
this proxy will be voted by the stockholder. If no such directions are
indicated, the Proxies will have authority to vote FOR the director candidates
nominated by the Board of Directors, FOR Proposal 2, and FOR Proposal
3.
In their discretion, the
Proxies are authorized to vote upon such other business as may properly come
before the meeting.
(Continued and to be voted
on reverse side.)
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