Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X]
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Filed by a Party other than
the Registrant [ ]
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Check the appropriate
box:
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Preliminary Proxy
Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material Pursuant to §240.14a-12
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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
Registrant)
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Payment of Filing Fee (Check
the appropriate box):
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No fee required.
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of
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value of transaction computed pursuant to Exchange Act Rule 0-11 (set
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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Table of Contents
CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 2, 2016
To Our
Stockholders:
The 2016 annual meeting of
stockholders of Consolidated Communications Holdings, Inc. will be held at
Consolidated Communications corporate headquarters, 121 South 17
th
Street, Mattoon, Illinois 61938 on May 2, 2016, at 9:00 a.m., central time. The
2016 annual meeting of stockholders is being held for the following
purposes:
1. To elect Roger H. Moore,
Thomas A. Gerke, and Dale E. Parker as Class II 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, 2016 (Proposal No. 2); and
3. 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, 2016 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
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March 30, 2016
Important Notice Regarding
the Availability of Proxy Materials for the Stockholder Meeting to Be Held on
May 2, 2016 Our Proxy Statement and 2015 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-
Table of Contents
CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
121 South 17th Street
Mattoon, Illinois 61938
PROXY
STATEMENT
This proxy statement contains
information related to the 2016 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 corporate
headquarters, 121 South 17
th
Street, Mattoon, Illinois 61938, on May
2, 2016, 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 2015 Annual Report to Stockholders
and Annual Report on Form 10-K for the year ended December 31, 2015, is March
30, 2016.
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 2016
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 2016 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:
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the election of Roger H. Moore, Thomas A.
Gerke, and Dale E. Parker as Class II 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, 2016
(Proposal No. 2); and
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any other business properly coming before the
annual meeting and any adjournment or postponement
thereof.
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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, 2016, 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 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 for
a description of a beneficial owner in street name.
Table of Contents
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, 2016, 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, 2016, the record
date, 50,652,328 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:
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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.
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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:
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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.
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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 three director nominees who
receive the greatest number of votes cast will be elected.
Ratification of the
Appointment of Ernst & Young LLP (Proposal No. 2) and Approval of any Other
Proposals.
The vote required for the ratification of the
appointment of Ernst & Young LLP 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, 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.
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:
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FOR the election of Roger H. Moore, Thomas A.
Gerke, and Dale E. Parker as Class II directors (see page 6);
and
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FOR the proposal to ratify the appointment of
Ernst & Young LLP as our independent auditors (see page 19).
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What are the boards
recommendations?
The boards recommendations,
together with the description of each proposal, are set forth in this proxy
statement. In summary, the board recommends that you vote:
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FOR the election of Roger H. Moore, Thomas A.
Gerke, and Dale E. Parker as Class II directors (see page 6);
and
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FOR the
ratification of the appointment of Ernst & Young LLP as our
independent auditors (see page 19).
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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 two 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
Consolidateds 2015 Annual Report to Stockholders?
We have enclosed our 2015
Annual Report to Stockholders for the fiscal year ended December 31, 2015 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.
How can I receive a copy of
Consolidateds Annual Report on Form 10-K?
Our Annual Report on Form 10-K
for the fiscal year ended December 31, 2015, as filed with the SEC on February
29, 2016, is included in the 2015 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:
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accessing the investor relations section of our
website at
http://ir.consolidated.com
and clicking on the Financials & Filings link followed by
clicking on the SEC Filings link;
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accessing the materials online at
www.edocumentview.com/cnsl
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writing to:
Consolidated Communications Holdings, Inc. Investor Relations
121 South 17th Street
Mattoon, Illinois 61938;
or
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telephoning us at: (217)
258-2959.
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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 SECs 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 33, 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, 2016, 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
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Percentage of
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Name of Beneficial
Owner
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Owned
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Shares
Outstanding
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BlackRock Institutional Trust Company,
N.A.(a)
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5,672,843
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11.2
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%
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City
National Rochdale, LLC(b)
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4,334,227
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8.6
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%
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The
Vanguard Group, Inc.(c)
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4,304,911
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8.5
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%
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Lumpkin, Richard Anthony(d)
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1,187,406
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2.3
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%
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Robert J. Currey
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58,793
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*
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C.
Robert Udell, Jr.
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76,617
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*
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Steven L. Childers
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95,410
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*
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Thomas A. Gerke
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13,123
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*
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Dale
E. Parker
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23,991
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*
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Maribeth S. Rahe
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39,613
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*
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Timothy D. Taron
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28,163
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*
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Roger H. Moore
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32,180
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*
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All
directors & officers as a group (9 persons)
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1,555,296
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3.1
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%
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Less than 1.0%
ownership.
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(a)
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Beneficial
and percentage ownership information is based on information contained in
a Form 13G/A filed with the SEC on January 8, 2016, 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 5,557,377
shares.
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(b)
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Beneficial
and percentage ownership information is based on information contained in
a Form 13G/A filed with the SEC on February 10, 2016, 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 3,780,035 shares.
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(c)
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Beneficial
and percentage ownership information is based on information contained in
a Form 13G/A filed with the SEC on February 10, 2016, 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 90,594 shares, shared voting power with respect to 5,100
shares, sole dispositive power with respect to 4,208,199 shares, and
shared dispositive power with respect to 96,712 shares.
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(d)
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Includes:
(i) 481,154 shares owned by Living Trust FBO Richard A. Lumpkin, (ii)
3,500 shares owned by Mr. Lumpkins wife, (iii) 106,153 shares owned by
the Benjamin I. Lumpkin 2012 Irrevocable Trust, for which Mr. Lumpkin is
the trustee, (iv) 6,011 shares owned directly by Mr. Lumpkin, (v) 309,674
shares owned by Benjamin I. Lumpkin 2008 Dynasty Trust, for which Mr.
Lumpkin is the trustee, and (vi) 277,417 shares owned by Elizabeth L.
Celio 2008 Dynasty Trust, for which Mr. Lumpkin is the
trustee.
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Table of Contents
PROPOSAL NO. 1 ELECTION
OF ROGER H. MOORE, THOMAS A. GERKE, AND DALE E. PARKER 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. Moore, Mr. Gerke, and Mr.
Parker, the nominees designated below as the Class II directors, at this years
annual meeting to serve for a term of three years, expiring in 2019 or until his
respective successor is duly elected and qualified. The nominees for election to
the position of Class II 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 II 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 years 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
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Age
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Current Position With
Consolidated
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Roger H. Moore
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(Class
II Director term expiring in 2019)
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74
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Director
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Thomas A. Gerke
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(Class
II Director term expiring in 2019)
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59
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Director
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Dale E. Parker
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(Class
II Director term expiring in 2019)
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64
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Director
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Directors continuing to serve on the
board
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Name
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Age
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Current Position With
Consolidated
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Robert J. Currey
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(Class
III Director term expiring in 2017)
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70
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Executive Chairman of the Board and
Directors
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Maribeth S. Rahe
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(Class
III Director term expiring in 2017)
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67
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Director
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C. Robert Udell, Jr.
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(Class
III Director term expiring in 2017)
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50
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President & Chief Executive Officer and
Director
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Richard A. Lumpkin
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(Class
I Director term expiring in 2018)
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81
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Founding Director
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Timothy D. Taron
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(Class
I Director term expiring in 2018)
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65
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Director
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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
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 (CEO) 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, CEO and a
member of the board of directors of VINA Technologies, Inc.,
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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. Although Mr. Moore is not currently a member of our audit committee, 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 worlds 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 CEO 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) and is board member of Tall Grass Energy
Partners, a provider of natural gas transportation and storage
services.
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 boards 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.
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 Corporations merger with the Company on October 16, 2014, and served
as Chair of Enventis Corporations board from January 2011 to May 2013. Mr.
Parker is currently the Interim President and CEO for Image Sensing Systems,
Inc. He has served as the Chief Operating Officer, 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 on infrastructure improvement through
the development of softwarebased 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
and qualifies as an audit committee
financial expert under SEC guidelines
. 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 Companys newly-acquired Minnesota
operations and the business climate in which the Company operates.
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BUSINESS EXPERIENCE OF
CONTINUING DIRECTORS
Robert J.
Currey
serves as our
Executive Chairman of the Board of Directors. Mr. Currey has served as one of
the Companys directors and as a director of our predecessors since 2002 and
served as our CEO 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 CEO 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 Chairman and director of Cartesian,
Inc. (formerly The Management Network Group, Inc.), a professional services
company. Mr. Currey has also served on the board of 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 CEO 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 CEO 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 CEO 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, 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 USTelecom Association, 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 CEO of the Company,
he is also able to provide the board with in-depth insight into the Companys
current performance and future plans.
Maribeth S.
Rahe
has served as a director
since July 2005. Ms. Rahe has served as President and CEO 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 a
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
boards succession planning efforts. She also qualifies as an audit committee
financial expert under SEC guidelines and serves as our audit committee
chairperson.
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, CEO,
President and Treasurer. Mr. Lumpkin is currently a director of Agracel, Inc., a
real estate 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
8
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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, with lengthy 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 longstanding 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 boards 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 Companys 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, in 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 in which 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.
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 directors 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
$80,299.27 in payments from H&R Block in 2015 from 33 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 from the Company in the ordinary course of
business, because Mr. Taron is a partner with Hefner, Stark, & Marois. The
Company received $13,012.27 in payments from Hefner Stark & Marois, LLP in
2015. 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 LLCs (NASDAQ) listing standards and would not
influence Mr. Gerkes nor Mr. Tarons actions or decisions as directors of the
Company.
9
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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
NASDAQs 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 2014, following
the Companys acquisition of Enventis Corporation. The outside consultant
developed a peer group of 15 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 2015, non-employee
directors received the following cash compensation: (1) $37,500 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
2,819 shares was made to each of the directors, other than Mr. Udell, in March
2015 pursuant to the Consolidated Communications Holdings, Inc. 2005 Long-Term
Incentive Plan. The number of shares granted to these directors was determined
by dividing $66,000 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, 2015.
Mr. Udell, who also serves as
President and CEO during 2015, did not receive any additional compensation for
his service on the board in 2015. Mr. Udells compensation is set forth in the
Summary Compensation Table.
For 2015, since Mr. Currey no
longer served as CEO the board determined that his compensation for serving as
Executive Chairman of the Board of Directors was as follows, which is also set
forth in the Summary Compensation Table:
●
|
Mr. Currey received an annualized retainer of
$300,000 for his service to the Board;
|
●
|
Mr. Currey participated
pari passu
in the non-employee director equity plan,
with a 2015 target grant
value
of $66,000; and
|
●
|
Mr. Currey was reimbursed for normal business
travel and entertainment expenses for Board and
Company matters.
|
The table below discloses all
compensation provided to each non-employee director of the Company in 2015.
|
|
Fees Earned
|
|
Stock
|
|
|
|
|
or Paid
|
|
Awards
|
|
Total
|
Name
|
|
in Cash
($)
|
|
($)(1)
|
|
($)
|
Roger H. Moore
|
|
$65,750
|
|
$58,804
|
|
$124,554
|
Maribeth S. Rahe
|
|
$68,250
|
|
$58,804
|
|
$127,054
|
Timothy D. Taron
|
|
$61,250
|
|
$58,804
|
|
$120,054
|
Thomas A. Gerke
|
|
$51,500
|
|
$58,804
|
|
$110,304
|
Richard A. Lumpkin
|
|
$45,750
|
|
$58,804
|
|
$104,554
|
Dale
E. Parker
|
|
$49,750
|
|
$58,804
|
|
$108,554
|
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(1)
|
Stock
Awards
. The amounts in this
column represent the grant date fair value of the restricted share award
made on March 6, 2015 to Mr. Moore, Ms. Rahe, Mr. Taron, Mr. Lumpkin, Mr.
Parker and Mr. Gerke; in each case computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718.
Also see Footnote 8 to the Consolidated Financial Statements contained in
the Companys Annual Report on Form 10-K for the year ended December 31,
2015 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, 2015.
|
How often did the board
meet during 2015?
The board met seven times
during calendar year 2015. Each director attended at least 75% of the board
meetings and meetings of board committees on which they served. During 2015, 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 Companys directors attended the 2015 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 boards leadership
structure is optimal for the board at the current time. Until November 2013, the
board had separated the Chairmans role from the CEO 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 CEO title as
well, as a part of the Companys succession plan. Effective January 1, 2015, as
a planned additional step in the CEO succession plans, Mr. Currey became
Executive Chairman of the Board of Directors, but no longer acts as the
Companys CEO. Mr. Udell became President and CEO 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
President and CEO, 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 each of the boards
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:
|
|
|
|
Corporate
|
|
|
|
|
Audit
|
|
Governance
|
|
Compensation
|
Name
|
|
Committee
|
|
Committee
|
|
Committee
|
Roger H. Moore
|
|
|
|
*
|
|
Chairperson
|
Maribeth S. Rahe
|
|
Chairperson
|
|
|
|
*
|
Timothy D. Taron
|
|
*
|
|
Chairperson
|
|
|
Thomas A. Gerke
|
|
|
|
*
|
|
*
|
Dale
E. Parker
|
|
*
|
|
|
|
|
____________________
11
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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 NASDAQs 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 NASDAQs Marketplace Rules.
The audit committee met four
times during 2015. 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 auditors 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;
|
●
|
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 17.
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 NASDAQs
Marketplace Rules.
The corporate governance
committee met four times during 2015. 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;
|
12
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●
|
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 Companys 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 NASDAQs Marketplace Rules and
satisfies the heightened standards of independence for compensation committee
members pursuant to Rule 5605(d)(2)(A) of NASDAQs Marketplace Rules.
The compensation committee met
five times during 2015. 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.
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 CEO and, based upon
a performance evaluation, to determine and approve the compensation
of the CEO 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 Companys compensation
programs encourage employees to engage in excessive
risk-taking, are aligned to the interests of
stockholders, promote effective leadership and leadership
development and appropriately award pay for
performance;
|
●
|
to approve the grant of long-term incentive awards
Company-wide and recommend amendments to the
Companys 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 Companys
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.
|
13
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Additional information on the
compensation committees 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 Companys 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
$34,974 for services provided to the compensation committee in 2015 and $8,186
for services provided to the compensation committee in 2014. Towers Watson also
provided competitive market assessment of the Companys overall salary and wage
structure and pension actuarial services and individual employee pension benefit
calculations support to the Company during 2015, for which the Company paid
Towers Watson $66,597 and $277,027, respectively. The decision to engage Towers
Watson for these other services was made by the Companys human resource staff
and the pension committee of management. The Companys relationship with Towers
Watson (and its predecessor Watson Wyatt) is long-standing, pre-dating the
Companys 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.
Towers Watson assisted the
compensation committee with the following in 2014, with a view toward
compensation decisions for 2015:
●
|
construction of the peer group companies to be used in
compensation analysis;
|
●
|
analysis of the Companys 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 Companys
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 Watsons work in 2015
consisted principally of performing analysis and providing recommendations
concerning the compensation programs for the Companys senior management
personnel, including:
●
|
evaluation and benchmarking certain of the Companys
senior management jobs relative to the peer
group and to broad marketplace trends;
|
14
Table of Contents
●
|
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
Companys 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 corporations 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 corporations 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 Companys 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
officers liability insurance, and (iv) other corporate governance matters.
Management has an Enterprise Risk Management (ERM) steering committee
in place which includes the CFO and other key executives and a representative
from the Companys outside counsel. The CFO, as ERM 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 Companys 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 2017 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 SECs 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
15
Table of Contents
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.
|
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.
16
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
May 4, 2015, 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 Companys financial
statements;
|
●
|
the Companys compliance
with legal and regulatory requirements;
|
●
|
the independent
auditors qualifications and independence; and
|
●
|
the performance of the
Companys 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 Companys 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
Companys management is responsible, among other things, for preparing the
financial statements and for the overall financial reporting process, including
the Companys system of internal controls. The independent auditors
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 managements assessment of, and the
effective operation of, the Companys internal control over financial
reporting.
The
audit committee met four times during fiscal year 2015. The audit committee
schedules its meetings with a view to ensuring that it devotes appropriate
attention to all of its tasks. The audit committees meetings include executive
sessions with the Companys independent auditor and, at least quarterly and at
other times as necessary, sessions without the presence of the Companys
management.
As
part of its oversight of the Companys financial statements, the audit committee
reviewed and discussed with management and Ernst & Young LLP, the Companys
independent auditor, the audited financial statements of the Company for the
fiscal year ended December 31, 2015. 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 auditors 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 accountants communications with the audit committee concerning
independence, and discussed with the independent auditor the independent
auditors 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 Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2015, for filing with Securities and Exchange
Commission. The audit committee has also selected Ernst & Young LLP as the
Companys independent auditors for 2016.
MEMBERS OF THE AUDIT
COMMITTEE
Maribeth S. Rahe,
Chairperson
Dale E. Parker
Timothy D.
Taron
|
17
Table of Contents
PRINCIPAL INDEPENDENT
ACCOUNTANT FEES AND SERVICES
Audit Committees
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 our independent registered public
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 of 2002 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 2015 and 2014 were as follows:
|
|
|
|
Audit
|
|
|
|
All
|
|
|
Audit
|
|
Related
|
|
|
|
Other
|
|
|
Fees
|
|
Fees
|
|
Tax
Fees
|
|
Fees
|
|
|
(In millions)
|
2015
|
|
$2.0
|
|
$0.0
|
|
$0.6
|
|
$0.0
|
2014
|
|
$2.0
|
|
$0.0
|
|
$0.3
|
|
$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 years 2015 and 2014, including the
audit of internal controls over financial reporting under the Sarbanes-Oxley Act
of 2002. Also included in the Audit Fees for 2015 and 2014, were approximately
$0.2 million and $0.5 million, respectively, of fees and out-of-pocket expenses
associated with the Companys acquisition of Enventis Corporation and the
related equity and debt registration statements.
For fiscal years 2015 and
2014, 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 2015 and
2014, there were no All Other Fees. For fiscal years 2015 and 2014, 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).
18
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, 2016. 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.
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, 2016 (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 2016
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 CFO of the
Company. 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, 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 the
Companys 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
Foundation and is a member of the Business Advisory Board for Eastern Illinois
University.
19
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.
Subsequently, at the 2015 annual meeting of stockholders, stockholders approved
certain other provisions of the LTIP, including increasing the number of shares
available under the LTIP.
The
following table sets forth information regarding the LTIP, the Companys only
equity compensation plan, as of December 31, 2015:
|
|
|
|
|
|
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
|
|
|
|
|
|
1,478,148
|
Equity compensation plans not approved by
|
|
|
|
|
|
|
security
holders
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
1,478,148
|
____________________
(1)
|
1,478,148
shares remain available for future issuance under the LTIP, as described
above.
|
20
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 Companys
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 Companys 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
|
21
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 2015 to the Companys named
executive officers and how it was determined. This information includes a
discussion of the key elements of the Companys compensation program and the
philosophy and rationale behind the compensation committees executive
compensation decisions. The named executive officers in 2015 are listed in the
Summary Compensation Table of this proxy statement and below:
Robert J. Currey, Chairman of the Board
C.
Robert Udell, Jr., President and Chief Executive Officer
Steven L. Childers, Chief Financial Officer
Transition of Chief Executive Officer and Chairman of the Board
Roles
Effective January 1, 2015, the Companys board of directors appointed Mr.
Udell as President and Chief Executive Officer (CEO) and Mr. Currey as the
Chairman of the Board. Until January 1, 2015, Mr. Currey was the CEO.
In
Mr. Curreys current role as Chairman of the Board, he continues to assist the
Board with the CEO succession and transition plan. The board of directors
determines his compensation, which for 2015 consisted of a $300,000 annual
retainer and, in keeping with his transition to the role of Chairman of the
Board, the same restricted stock award that is granted to the non-employee
directors. While he remains an executive officer, Mr. Currey is not covered by
the Companys executive compensation program, and most of this Compensation
Discussion and Analysis does not pertain to him.
In
conjunction with Mr. Udells increase in his duties and responsibilities as CEO,
the compensation committee believes it is appropriate to transition his
compensation over a multi-year period. Accordingly, the compensation committee
will target total compensation for him at approximately the 50
th
percentile of the total compensation paid to chief executive officers of the
Companys peer group of companies at the end of the transition period. Please
see the section captioned Objective #2 on page 23 for a further description of
the Companys peer group. The first year of this transition occurred in 2015,
and the compensation committee intends to continue to increase Mr. Udells total
compensation over the multi-year period, subject to the compensation committees
annual review of Mr. Udells performance and other factors the compensation
committee determines to be appropriate. For 2015, the compensation committee
increased Mr. Udells compensation as follows:
●
|
His annual base salary
rate for 2015 was increased from $323,000 to $375,000, effective March 8,
2015; and
|
●
|
His target annual cash
bonus for 2015 performance was increased from $210,000 to
$375,000.
|
You
should review this Compensation Discussion and Analysis section together with
the tabular disclosures beginning on page 33.
Executive Compensation
Objectives
The
compensation committee has designed the Companys 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 Companys business; and
|
●
|
reward the management
team for achieving key financial and operational objectives which will
promote the long-term viability and success of the
business.
|
22
Table of Contents
The
compensation committee intends that each key element of our total compensation
plan serves specific purposes that help achieve the objectives of the Companys
executive compensation program.
The
three key elements of the current executive compensation program are (1) annual
base salary, (2) annual cash bonuses (sometimes referred to as short term
incentive, or STI), and (3) long-term, equity-based incentives (sometimes
referred to as LTI). The Company also provides its executive officers with
severance and change-incontrol benefits as well as a limited number of
perquisites and other personal benefits. Our discussion below, under the caption
Elements of Executive Compensation, explains 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, as outlined below.
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
. As a part of
its long-term equity-based incentives, the compensation committee uses both
time-based and performance-based restricted shares in an effort to unify the
interests of the Companys executives and stockholders.
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 Companys stock value over time so the executive can realize a greater value
in connection with those shares once they vest.
The
compensation committee awarded performance shares to Mr. Udell and Mr. Childers
in March 2014, pursuant to which restricted shares were awarded in March 2015
based on the attainment of certain performance goals for 2014, and also awarded
performance shares to Mr. Udell and Mr. Childers in March 2015, pursuant to
which restricted shares were awarded in March 2016 based on the attainment of
certain performance goals for 2015.
The
compensation committee had awarded each of Mr. Udell and Mr. Childers a
three-year grant of time-based restricted shares in March 2013. As such, and
because the target values under which those March 2013 grants were made were
significantly below the target values which have since been established for
them, a gap award of time based restricted shares was granted to each of Mr.
Udell and Mr. Childers in 2015, to more closely match the benchmark values for
the comparable jobs among the Companys peer group, as described in more detail
below under the caption Objective #2. These gap awards were made as part of
a transition from multi-year grants to annual grants.
During 2015, in keeping with the transition to his role as Chairman of
the Board, Mr. Currey received a grant of restricted shares equal to, and under
the same terms as, the restricted share grants made to other non-employee
directors.
In
addition to equity-based incentives, the compensation committee also bases a
significant portion of an executives annual cash bonus on the attainment of
certain corporate performance metrics, which encourages the executive to
increase the Companys profitability, and in turn, its stock value.
Objective #2
: Enable the Company to attract and retain talented,
results-oriented managers capable of leading key areas of the Companys
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 Companys 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 2014, following the completion of its acquisition of
Enventis Corporation, and the subsequent restructuring of its executive team,
the Company engaged Towers Watson to do a full benchmark study, in which a
revised peer group was constructed, and the Companys executive compensation
program was compared to the 50
th
percentile of the revised peer
group. This study provided guidance for the executive compensation decisions. At
the request of the compensation committee, Towers Watson conducted a custom
survey
23
Table of Contents
of compensation paid by the
following companies (our peer group) that, at the time of the study, operated
in the integrated communications, wireless telecommunications, and alternative
carrier industries and that had annual revenues ranging from $207 million to
$4.8 billion, with a median revenue of $812 million (which was at the time in
line with the Companys full year revenue of approximately $800 million, pro
forma for the acquisition of Enventis Corporation, which closed on October 16,
2014):
|
Alaska Communications Systems
|
|
|
IDT
Corporation
|
|
|
Cogent Communications
|
|
Group, Inc.
|
|
|
|
|
|
Holdings, Inc.
|
|
Ntelos Holdings Corp.
|
|
|
Zayo
Group Holdings, Inc.
|
|
|
Vonage Holdings Corporation
|
|
Fairpoint Communications, Inc.
|
|
|
Frontier Communications
|
|
|
Cincinnati Bell Inc.
|
|
|
|
|
Corp.
|
|
|
|
|
Lumos Networks Corp
|
|
|
SBA
Communications Corp.
|
|
|
General Communications Inc.
|
|
Hawaiian Telcom Holdco, Inc.
|
|
|
Atlantic Telenetwork, 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.
The group of companies was updated by the compensation committee in 2015. New
companies were added to replace certain companies in the prior group that were
removed since they were no longer public companies due to acquisition, or that
the compensation committee determined were no longer appropriate peer group
companies.
The companies removed from the
peer group of companies were: Time Warner Telecom, Inc.; Knology, Inc.; USA
Mobility, Inc.; Cbeyond, Inc.; Primus Telecommunications Group, Inc.; and
Clearwire Corporation. The companies which have been added to the peer group
are: Hawaiian Telcom Holdco, Inc.; IDT Corporation; Zayo Group Holdings, Inc.;
Frontier Communications Corp.; and Vonage Holdings Corporation.
For 2015, based on the Towers
Watson benchmarking study findings, the compensation committee determined that,
in the aggregate, the total targeted compensation was, in the case of Mr. Udell,
approximately 65% below the 50
th
percentile of the peer group, and in
the case of Mr. Childers, approximately 24% below the 50
th
percentile
of the peer group. The primary reasons for this lag were (i) the decisions to
provide only modest compensation increases for the past several years due to the
overall challenging market conditions and the desire to contain costs during
these periods of economic uncertainty; (ii) the decision to defer certain
compensation actions until after the Companys 2014 acquisition of Enventis
Corporation and the completion of the benchmark study once the transaction
closed; and (iii) specifically in the case of Mr. Udell, his transition from
Chief Operating Officer in 2013, to President in 2014, and to President and CEO
in 2015 and the determination by the compensation committee to target the
50
th
percentile of CEO total compensation over a multi-year
period.
In view of the significant
gaps to the peer group, and for Mr. Udell, in light of his transition to CEO,
the compensation committee made changes to the compensation of Mr. Udell and Mr.
Childers in 2015, to increase each of their base salaries, target STI, and
target LTI.
In the aggregate, the
percentage increases for each element of total direct compensation for Mr. Udell
and Mr. Childers, assuming payouts at the applicable target levels, are outlined
in the table below:
|
|
2015 Increases
to:
|
|
|
|
|
|
Name
|
|
Base
Salary
|
|
STI
|
|
LTI
|
|
Total
|
C.
Robert Udell, Jr.
|
|
|
16.1
|
%
|
|
|
|
78.5
|
%
|
|
|
|
10.6
|
%
|
|
|
|
26.1
|
%
|
|
Steven L. Childers
|
|
|
7.6
|
%
|
|
|
|
24.6
|
%
|
|
|
|
2.5
|
%
|
|
|
|
8.4
|
%
|
|
24
Table of Contents
Following these increases, the
total targeted compensation was, in the case of Mr. Udell, approximately 53%
below the 50
th
percentile of the peer group, and in the case of Mr.
Childers, approximately 14% below the 50
th
percentile of the peer
group.
The benchmark survey
information from Towers Watson provided guidance for decisions regarding various
elements of the Companys executive compensation program for 2015,
including:
●
|
levels of salary, annual
cash bonus, long-term equity-based 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 addition to targeting
compensation for executives that is appropriately competitive with the market,
the Companys 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 vesting of all shares.
Objective #3
: Reward the
management team for achieving key financial and operational objectives which
will promote the long-term viability and success of the
business.
The Companys annual
cash bonus plan ties the level of achievement of the Companys 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
Companys achievement of its performance goals. As a result, a significant
portion of each executives total compensation is dependent on the degree to
which these performance goals are achieved. This provides an incentive for the
Companys executives to increase performance with respect to these measures, and
in turn increase stockholder value.
Processes and Procedures
for the Consideration and Determination of Executive and Director
Compensation
The board of directors
annually approves and establishes the operating and performance goals for the
Company, and the compensation committee then determines the appropriate criteria
for linking compensation of the named executive officers to this performance,
including the establishment of:
●
|
base salary amounts for
the Companys executive officers;
|
●
|
an annual cash bonus
plan for the Companys executive officers;
|
●
|
long-term equity-based
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; and
|
●
|
annual performance goals
and payouts for the Company under the annual cash bonus plan and the
Companys long-term equity-based incentive
plan.
|
Role of Executive Officers,
Management and Independent Compensation Consultant
The compensation committee
conducts an annual review of the CEO performance, and reviews it with the board
of directors. The CEO prepares a performance review for each of the other
executives for each completed calendar year. Based on his assessment of each
individuals performance during the preceding calendar year, as well as a review
of how each executives compensation compares with the target amounts identified
by the Towers
25
Table of Contents
Watson benchmarking survey,
the CEO recommends to the compensation committee, for each such executive, base
salary amounts, time-based and performance share awards and annual performance
goals under the annual cash bonus plan and the long-term equity-based 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
committees outside consultant, Towers Watson.
Elements of Executive
Compensation for 2015
The key elements of the
executive compensation program for 2015 were:
●
|
annual base
salary;
|
●
|
annual cash bonuses
directly linked to achievement of certain of the Companys annual
financial and operational performance goals;
and
|
●
|
(i) the continued
vesting of previously awarded time-vesting restricted shares for all named
executive officers; (ii) a grant of time-based restricted shares for Mr.
Udell and Mr. Childers; and (iii) a grant of performance-based restricted
shares for Mr. Udell and Mr. Childers.
|
In addition, the Company
provides severance and change-in-control benefits, as well as a limited number
of perquisites and other personal benefits to its executive officers.
For 2015, as in prior years,
the compensation committee determined that Mr. Udell and Mr. Childers should
receive an annual base salary and also be eligible for an annual cash bonus
opportunity. The compensation committee set performance-based targets for
restricted shares to be awarded to Mr. Udell and Mr. Childers if certain
performance goals were met and also approved grants of restricted
stock.
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 2015 performance, the formal review took
place in February 2016.
Compensation Element 1:
Annual Base Salaries for 2015
The Company pays all of its
executive officers an annual base salary (or in the case of Mr. Currey, a
retainer), 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 individuals contributions and responsibilities to the
Company.
The compensation committee
reviews, and may revise, at its discretion, base salaries for executive officers
when it feels those changes are warranted. In its annual review of the salaries
of executive officers for 2015, in addition to the market position of the
Companys 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 individuals
contribution to the Companys 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 Companys peer
group.
|
In view of these factors, Mr.
Udells base salary for 2015 was increased from $323,000 to $375,000. Mr.
Childers base salary for 2015 was increased from $251,000 to
$270,000.
26
Table of Contents
As described above, for 2015,
the compensation committee approved a $300,000 annual retainer to be paid to Mr.
Currey as Chairman of the Board. The compensation committee determined the
annual retainer amount based on information obtained by Towers Watson, the
committees outside consultant, regarding compensation generally paid (by
similarly situated companies) to former chief executive officers who have
transitioned over time from executive board chair roles to full-time
non-employee board chair roles. The compensation committee used the $300,000
annual retainer amount because that level would result in a retainer amount
equal to roughly the 50th percentile of the retainers paid to executives in
comparable positions, during similar periods of active transition.
Compensation Element 2:
Annual Cash Bonuses for 2015
The Company maintains an
annual cash 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 Companys long-term success. In
2015, Mr. Udell and Mr. Childers were 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 their base salary and was based on the
achievement of criteria established by the compensation committee.
For Mr. Childers, the
compensation committee based its performance targets on the
following:
●
|
50% on the Companys
adjusted earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA) for 2015 (target of $328.8
million);
|
●
|
20% on dividend payout
ratio for 2015 (target of 69.9% or less);
|
●
|
10% on broadband
subscriber net additions for 2015 (target of 5,200 net additions), which
consisted of the number of the Companys subscribers to its high speed
internet, digital subscriber lines (DSL) and video
lines;
|
●
|
10% on the Companys
revenue for 2015 (target of $790.0 million);
and
|
●
|
10% on a set of nine
related other operating goals which the compensation committee set for
the Companys executive team to meet as a group. These other operating
goals contain a mix of qualitative and quantitative measures which are
established by the compensation committee to guide the management team in
achieving the Companys operating, strategic, and public policy goals. The
achievement score was determined by the compensation committee, based on
the CEOs recommendation, as a part of its annual evaluation of Mr.
Childers performance. For 2015, these other operating goals included,
among other items, specific goals related to the Companys planned capital
expenditures and network development, quality of service metrics,
successful integration of SureWest Communications and Enventis Corporation
into the Companys operations, advancement of the Companys interests in
the regulatory and public policy arena, product-development initiatives
and corporate development/business development
activities.
|
For 2015, these performance
measures included the addition of an explicit revenue target, which had not been
included in the 2014 performance measures. The compensation committee believes
that the addition of the revenue performance measure is appropriate, given the
importance placed by the Company on organic revenue growth.
As described above under the
caption Role of Executive Officers, Management and Independent Compensation
Consultant, the CEO prepares a performance review for each of the other
executives for each completed calendar year. This includes his assessment of Mr.
Childers performance during the preceding calendar year with respect to the
level of attainment of the other operating goals. The CEO recommended, and the
compensation committee approved, an attainment level of 8 out of 10 with respect
to the other operating goals for 2015.
27
Table of Contents
For the CEO, the compensation
committee used the same measures and targets as described above, 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 CEO as follows:
●
|
60% on the Companys
(adjusted EBITDA) for 2015;
|
●
|
20% on dividend payout
ratio for 2015;
|
●
|
20% on broadband
subscriber net additions for 2015; and
|
●
|
10% on the Companys
revenue for 2015.
|
In March 2015, when the
compensation committee determined these measures for Mr. Udell and Mr. Childers,
it also 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 Companys primary short-term goals of increasing
earnings, sustaining its dividend, and adding broadband subscribers.
For 2015, the compensation
committee established the bonus targets for each executive, as a percentage of
2015 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. The bonus payout targets as a percentage of salary were
100% for Mr. Udell, and 74% for Mr. Childers. As discussed above, Mr. Curreys
2015 compensation plan did not include a cash bonus. The compensation committee
used these levels because achieving the targeted payouts at those levels would
result in an annual bonus payout to each executive 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 Mr.
Udell and Mr. Childers remains below the 50
th
percentile of the
relevant peer group.
As in prior years, the
compensation committee set a maximum payment equal to 120% of the target amount
if the weighted average of all goals were attained above 105% of the target
level and a threshold level such that weighted average attainment of 90% of the
target level would have resulted in a payment of 50% of the target amount.
Weighted average attainment of below 90% of the target level would have resulted
in no bonus payment.
For 2015, each of the Company
performance targets was achieved at the following levels:
Performance
Measure
|
|
Actual
|
|
Target
|
|
% of
Target
|
Adjusted EBITDA
|
|
$328.9
million
|
|
$328.8
million
|
|
100.0%
|
Dividend Payout Ratio
|
|
67.3%
|
|
≤69.9%
|
|
103.7%
|
Broadband Subscriber Net Adds
|
|
6,264
|
|
5,200
|
|
120.4%
|
Revenue
|
|
$776 million
|
|
$790 million
|
|
98.2%
|
Other Operating Goals
|
|
8/10
|
|
10/10
|
|
80.0%
|
28
Table of Contents
In the compensation
committees review of 2015 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 Mr. Udell, this weighted average was 102.6% of target, and
for Mr. Childers, this weighted average was 100.6% 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:
|
|
|
Mr.
Udells
|
|
Mr.
Childers
|
|
|
|
|
Component
|
|
Component
|
|
|
Performance Measure
|
|
Percentage
|
|
Percentage
|
|
|
Adjusted
EBITDA
|
|
|
60.0%
|
|
|
|
50.0%
|
|
|
|
Dividend Payout
Ratio
|
|
|
20.7%
|
|
|
|
20.7%
|
|
|
|
Broadband Subscriber Net
Adds
|
|
|
12.1%
|
|
|
|
12.1%
|
|
|
|
Revenue
|
|
|
9.8%
|
|
|
|
9.8
|
|
|
|
Other Operating
Goals
|
|
|
N/A
|
|
|
|
8.0%
|
|
|
|
Weighted Average
|
|
|
|
102.6%
|
|
|
|
100.6%
|
|
|
The following payout table was
used to convert the weighted average component percentages to a bonus payout,
which in the case of Mr. Udell is 110% and in the case of Mr. Childers is 100.6%. However, in view of the overall economic climate, as well as his desire with
respect to 2015 to be treated no better than the rest of the executive team and
other bonus eligible personnel, Mr. Udell requested (and the compensation
committee concurred) that his bonus payout be limited to 100.6% of his
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 2016, represented the following percentages of Mr.
Udells and Mr. Childers respective 2015 annual salary levels:
|
|
2015 Bonus
Payout as a Percentage of 2015 Salary
|
|
|
Actual Percentage
of
|
|
Target Opportunity,
as
|
Name
|
|
Salary
Paid
|
|
a Percentage
of Salary
|
C.
Robert Udell, Jr.
|
|
|
100.6
|
%
|
|
|
|
100
|
%
|
|
Steven L. Childers
|
|
|
74.4
|
%
|
|
|
|
74
|
%
|
|
The Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table shows the cash bonus the
compensation committee awarded to each of Mr. Udell and Mr. Childers for 2015
pursuant to this annual cash bonus plan.
The compensation committee
believes that the level of the cash bonus opportunities and the cash bonuses
actually paid for 2015 performance to Mr. Udell and Mr. Childers helped fulfill
the compensation committees executive compensation program objectives
to:
●
|
retain Mr. Udell and Mr.
Childers by providing them with a cash bonus opportunity at a level
competitive with the Companys peer group; and
|
●
|
reward Mr. Udell and Mr.
Childers for the Companys operational and financial
performance.
|
29
Table of Contents
Compensation Element 3:
Long-Term, Equity-Based Incentives for 2015
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 Companys non-employee directors and certain
employees, including Mr. Udell and Mr. Childers, 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 Companys 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).
Each year the compensation
committee determines for each executive eligible to participate, the economic
value of target annualized long-term incentive compensation. The goal of the
compensation committee is to establish those targets so that over time they are
at approximately the 50
th
percentile of the peer group. The
compensation committee generally balances its equity grants so that
approximately 50% of this annualized target is paid to the executives in the
form of performance share grants, and approximately 50% of the annualized target
value is paid to the executives in the form of time-based restricted share
grants.
Performance
Shares
In March 2015, 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 payout levels were the same
as those approved for the cash incentive bonus plan.
The 2015 performance share
target award levels were determined by taking half of the annual target LTIP
grant value for each of Mr. Udell and Mr. Childers, 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 2016 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 2016, the
compensation committee approved awards of restricted shares based on 2015
performance, as follows:
|
|
2015 Performance
|
|
March 2016 Restricted
|
Name
|
|
Share Target
|
|
Shares
Earned/Awarded
|
C.
Robert Udell, Jr.
|
|
|
12,991
|
|
|
|
13,068
|
|
Steven L. Childers
|
|
|
9,631
|
|
|
|
9,688
|
|
Under the terms of the
performance share awards, the number of restricted shares granted in March 2016
were determined, for Mr. Udell, as 100.6% of the 2015 performance share target
based on the achievement level of 102.6% of the target performance goals, and
for Mr. Childers, also as 100.6% of the 2015 performance share target based on
an achievement level of 100.6% of the target performance goals, in each case as
previously described in the Cash Bonus section above (and adjusted, in Mr.
Udells case, to align with the payout for the other executive team members).
The restricted shares vest at a rate equal to 25% per year on each December 5th
for four years after the date of grant.
30
Table of Contents
Time-Based Restricted
Stock
As previously described, the
Company had awarded each of Mr. Udell and Mr. Childers with a three-year grant
of time-based restricted shares in March 2013. Because the target values used to
establish those grants (adjusted for subsequent share price appreciation) were,
in the case of Mr. Udell, 7.6% below his 2015 target annual value for time-based
shares as established by the compensation committee, and in the case of Mr.
Childers, 2.3% below his 2015 target annual value for time-based shares
established by the compensation committee, the compensation committee determined
it was appropriate to provide a time-based share grant to each of Mr. Udell and
Mr. Childers in order to close that value gap. As such, the following time-based
share grants were made to Mr. Udell and Mr. Childers in March 2015:
|
|
Annual Grant
|
|
March 2015 Restricted
Shares
|
Name
|
|
Value
Gap
|
|
Earned/Awarded
|
C.
Robert Udell, Jr.
|
|
|
$
|
42,042
|
|
|
|
1,796
|
|
Steven L. Childers
|
|
|
$
|
9,618
|
|
|
|
411
|
|
The compensation committee
believes that the long-term, equity-based incentives it awarded to these named
executive officers in 2015 helped meet its objectives to:
●
|
retain them by providing
them with long-term, equity-based compensation at a level competitive with
the Companys peer group; and
|
●
|
reward them for
achieving key financial and operational objectives, which were attained at
a 102.6% level (for Mr. Udell) and a 100.6% level (for Mr. Childers) in
2015.
|
All Other
Compensation
As part of our executive
compensation program, the Company may from time-to-time provide to its
executives some or all of the following other benefits:
●
|
personal use of a
company automobile;
|
●
|
fitness program
reimbursement;
|
●
|
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.
|
Where applicable, the All
Other Compensation column of the Summary Compensation Table on page 33 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 Companys outside compensation
consultants 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 its 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
31
Table of Contents
that, in the event of an
extraordinary corporate transaction, the agreements could prove crucial to the
Companys 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.
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 Companys 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 2015, 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 2016 resulting from Mr. Udells Promotion to CEO
Effective as of January 1,
2015, the board elected Mr. Udell to the role of President and CEO. In
conjunction with this increase in his duties and responsibilities, the
compensation committee determined that it was appropriate to target the
transition of Mr. Udells compensation to the 50
th
percentile of the
benchmark group of companies, over a multi-year period. The first year of this
transition occurred in 2015. In view of Mr. Udells performance and the
remaining gap between his compensation and the target compensation for his
position, the compensation committee determined it was appropriate to increase
certain elements of Mr. Udells compensation again in 2016, as
follows:
●
|
Mr. Udells annual base
salary rate for 2016 was increased from $375,000 to $425,000, effective
March 6, 2016;
|
●
|
Mr. Udells target
annual cash bonus for 2016 continued at 100% of annual base salary;
and
|
●
|
Mr. Udells long-term
incentive annual target grant value was increased from $553,000 to
$850,000, of which approximately half is
performance-based.
|
Based on information provided
to the compensation committee by the independent compensation consultant, the
Company believes Mr. Udells compensation remains approximately 39% below the
50
th
percentile for CEOs among its benchmark group of
companies.
32
Table of Contents
EXECUTIVE COMPENSATION
Summary Compensation
Table
The following table lists
information regarding the compensation for the years ended December 31, 2015,
2014, and 2013, of our CEO, CFO and each of the other executive officers named
in this section, to whom we refer to, collectively, as the named executive
officers.
Name and
|
|
|
|
|
|
|
Stock
|
|
Non-Equity
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
Awards
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
Position
|
|
|
Year
|
|
Salary($)
|
|
($)(3)
|
|
Compensation($)
|
|
Compensation($)
|
|
|
|
Total
($)
|
Robert J. Currey(1)
|
|
2015
|
|
$
|
389,423
|
|
$58,804
|
|
$0
|
|
$40,559
|
|
|
|
$488,786
|
Executive
|
|
2014
|
|
$
|
425,000
|
|
$476,149
|
|
$369,000
|
|
$87,324
|
|
(4)
|
|
$1,357,473
|
Chairman of the
Board
|
|
2013
|
|
$
|
422,885
|
|
$1,318,393
|
|
$486,588
|
|
$96,366
|
|
|
|
$2,324,232
|
|
C. Robert Udell, Jr. (2)
|
|
2015
|
|
$
|
377,423
|
|
$308,457
|
|
$377,250
|
|
$76,213
|
|
|
|
$1,139,343
|
President and
Chief
|
|
2014
|
|
$
|
323,000
|
|
$284,098
|
|
$157,500
|
|
$82,227
|
|
(5)
|
|
$846,825
|
Executive
Officer
|
|
2013
|
|
$
|
295,654
|
|
$686,639
|
|
$190,877
|
|
$83,338
|
|
|
|
$1,256,508
|
|
Steven L. Childers
|
|
2015
|
|
$
|
276,000
|
|
$209,476
|
|
$201,773
|
|
$64,235
|
|
|
|
$751,484
|
Chief Financial
|
|
2014
|
|
$
|
251,000
|
|
$227,286
|
|
$120,750
|
|
$69,604
|
|
(6)
|
|
$668,640
|
Officer
|
|
2013
|
|
$
|
249,885
|
|
$572,142
|
|
$159,229
|
|
$75,338
|
|
|
|
$1,056,594
|
(1)
|
|
Name
and Principal Position Robert J. Currey
Mr. Currey served as Chairman of the Board
and CEO throughout 2014. On January 1, 2015, he ceased serving as CEO 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 CEO and continues to serve as a
director.
|
|
(3)
|
|
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 2015, 2014 and
2013 and the target number of performance shares awarded in 2015, 2014 and
2013 based upon the probable outcome of the performance conditions. The
grant date value of the performance shares in 2015 assuming the
performance conditions were met at the maximum level was for Mr. Currey:
$0; for Mr. Udell: $307,711; and for Mr. Childers: $228,119. Also, see
Footnote 8 to the Consolidated Financial Statements contained in the
Companys Annual Report on Form 10-K for the year ended December 31, 2015
for an explanation of the assumptions made by the Company in the valuation
of these awards.
|
|
(4)
|
|
All
Other Compensation Robert J. Currey
. This column includes $15,900 of matching
contributions made in 2015 under the Companys 401(k) Plan on behalf of
Mr. Currey. Mr. Currey is also provided a fitness reimbursement ($360) and
the value of dividends paid on unvested restricted stock
($24,299).
|
|
(5)
|
|
All
Other Compensation C. Robert Udell, Jr.
This column includes $15,900 of matching
contributions made in 2015 under the Companys 401(k) Plan on behalf of
Mr. Udell. Mr. Udell is also provided with personal use of a Company
automobile ($484), a tax gross-up reimbursement in connection with
payment for his personal use of a Company automobile ($182), and the value
of dividends paid on unvested restricted stock ($59,647).
|
|
(6)
|
|
All
Other Compensation
Steven L. Childers.
This column includes
$15,900 of matching contributions made in 2015 under the Companys 401(k)
Plan on behalf of Mr. Childers and the value of dividends paid on unvested
restricted stock ($47,735). In addition, Mr. Childers is reimbursed for
business use of his personal mobile phone
($600).
|
33
Table of Contents
Salary
The Salary column of the
Summary Compensation Table shows the salaries paid in 2015, 2014 and 2013 to
each of the named executive officers. Mr. Curreys salary for 2015 was in the
form of the retainer he was paid for his role as Executive Chairman. The
annualized salary rates in effect as of March 8, 2015 were:
Robert J. Currey
|
$
|
300,000
|
C.
Robert Udell, Jr.
|
$
|
375,000
|
Steven L. Childers
|
$
|
270,000
|
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 2015, 2014 and 2013
pursuant to the Companys bonus plan. For more information, please refer to the
Compensation Discussion and Analysis section of this proxy statement on page 22.
The Company paid all of these amounts in March 2016, March 2015 and March 2014,
respectively.
2015 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 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards
|
|
Grant
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
Number
of
|
|
Fair
Value
|
|
|
|
|
Estimated Future
Payouts Under
|
|
Under Equity Incentive Plan
|
|
Shares
of
|
|
of Stock
and
|
|
|
Grant
|
|
Non-Equity Incentive
Plan Awards(1)
|
|
Awards(2)
|
|
Stock
or
|
|
Option
|
Name
|
|
Date
|
|
Threshold($)
|
|
Target($)
|
|
Maximum($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
Units(3)
|
|
Awards$(4)
|
Robert J. Currey
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
3/6/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,819
|
|
58,804
|
C. Robert Udell, Jr.
|
|
|
|
$
|
187,500
|
|
$
|
375,000
|
|
$
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/6/15
|
|
|
|
|
|
|
|
|
|
|
6,496
|
|
12,991
|
|
15,589
|
|
|
|
270,992
|
|
|
3/6/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,796
|
|
37,465
|
Steven L. Childers
|
|
|
|
$
|
100,285
|
|
$
|
200,570
|
|
$
|
240,684
|
|
|
|
|
|
|
|
|
|
|
|
|
3/6/15
|
|
|
|
|
|
|
|
|
|
|
4,816
|
|
9,631
|
|
11,557
|
|
|
|
200,903
|
|
|
3/6/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
411
|
|
8,573
|
____________________
(1)
|
|
Estimated Future
Payouts Under Non-Equity Incentive Plan Awards.
Payouts under the bonus plan were based on
performance in 2015. The performance targets were set in March 2015, as
described in the Compensation Discussion and Analysis section under the
caption Annual Incentive Compensation. The amounts actually paid under
the bonus plan for 2015 appear in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table. Pursuant to the
bonus plan for 2015, 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 2016 pursuant to performance shares previously granted in March
2015. These awards of restricted stock were based on performance in 2015,
which has now occurred. Pursuant to the LTIP for 2015, the compensation
committee awarded performance shares to executives, which reflected the
target number of shares of restricted stock to be granted in
2015
|
34
Table of Contents
|
|
if target
performance goals set by the compensation committee for 2015 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 a 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)
|
|
All
Other Stock Awards Number of Shares of Stock or Units:
This column shows the number of time-based
restricted shares awarded to the named executive officers in
2015.
|
|
(4)
|
|
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 2015 to the named executive officers. See Footnote 8
to the Consolidated Financial Statements contained in the Companys Annual
Report on Form 10-K for the year ended December 31, 2015 for an
explanation of the assumptions made by the Company in the valuation of
these awards.
|
Outstanding Equity Awards
at 2015 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, 2015.
|
|
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)
|
|
|
24,475
|
|
|
|
$
|
512,751
|
|
Steven L. Childers(4)
|
|
|
19,078
|
|
|
|
$
|
399,684
|
|
____________________
(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 grants made in March 2013 and March 2015,
and unvested performance-based shares from grants made in March 2013,
March 2014, and March 2015.
|
|
(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 $20.95 (the closing
market price of the Companys common stock as reported in The Wall Street
Journal for December 31, 2015, which was the last trading day of fiscal
year 2015).
|
|
(3)
|
|
Vesting
Dates Udell.
The vesting
dates of the restricted shares are as follows: December 5, 2016 (15,523
restricted shares), December 5, 2017 (5,805 restricted shares), December
5, 2018 (3,147 restricted shares).
|
|
(4)
|
|
Vesting
Dates Childers.
The
vesting dates of the restricted shares are as follows: December 5, 2016
(12,343 restricted shares), December 5, 2017 (4,475 restricted shares),
December 5, 2018 (2,260 restricted shares).
|
35
Table of Contents
2015 Option Exercises and
Stock Vested
This table sets forth
information concerning the number of restricted shares that vested during 2015
and the value of those vested shares. The Company has not granted
options.
|
|
Stock
Awards
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
Acquired On
|
|
Value Realized
|
Name
|
|
Vesting (#)
|
|
On Vesting
($)(1)
|
Robert J. Currey
|
|
20,909
|
|
|
$
|
451,634
|
|
C.
Robert Udell, Jr.
|
|
17,166
|
|
|
$
|
370,786
|
|
Steven L. Childers
|
|
13,987
|
|
|
$
|
302,119
|
|
____________________
(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 4, 2015, as shown in the Number of Shares Acquired on Vesting
column valued using the closing market price of the common stock ($21.60)
as reported in
The Wall
Street Journal
for December
4, 2015, which was the last trading day prior to 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 generally be entitled upon a termination
of employment (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 (the 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 executives
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 Chairman of the Board) the sum of (i) the executives 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 Companys 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.
|
36
Table of Contents
●
|
Continuation of coverage under all welfare
plans of the Company during the two-year severance period (three years for
the Chairman of the Board), 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 attorneys 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 executives termination,
without the Companys consent and (ii) soliciting the Companys 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 Companys 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 directions 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 Companys common stock into securities of another
company, or any dissolution or liquidation, or a sale of 50% or more of all the
Companys 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 Companys
outstanding voting securities immediately prior to the transaction.
(b) cause means the
executives (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 executives base salary and/or bonus opportunity without his
consent, (ii) a reduction in the scope or importance of the executives duties
and responsibilities without his consent, or (iii) a transfer of the executives
primary worksite of more than 30 miles (unless the new worksite is closer to the
executives 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 participants employment is
terminated without cause or the participant terminates employment for good
reason, or a participant
37
Table of Contents
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).
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, 2015.
|
|
Robert
J.
|
|
C.
Robert
|
|
Steven
L.
|
Name
|
|
Currey
|
|
Udell, Jr.
|
|
Childers
|
Base
Salary(1)
|
|
$
|
900,000
|
|
$
|
750,000
|
|
$
|
540,000
|
Bonus(1)
|
|
$
|
0
|
|
$
|
750,000
|
|
$
|
401,140
|
Welfare Benefits for
|
|
|
|
|
|
|
|
|
|
Severance
Period(2)
|
|
$
|
35,464
|
|
$
|
33,514
|
|
$
|
22,342
|
____________________
(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,
2015.
|
|
Robert J.
|
|
C. Robert
|
|
Steven L.
|
Name
|
|
Currey
|
|
Udell,
Jr.
|
|
Childers
|
Value of Unvested Restricted
|
|
|
|
|
|
|
|
|
|
Shares(1)
|
|
$
|
0
|
|
$
|
512,751
|
|
$
|
399,684
|
____________________
(1)
|
|
Amounts in
this row represent the value of the restricted shares that would vest upon
the change in control on December 31, 2015 under the terms of the LTIP.
The value of the restricted shares is based on the closing market price of
the Companys stock as reported in
The Wall Street Journal
for December 31, 2015 ($20.95), which was the last trading day of
fiscal year 2015.
|
38
Table of Contents
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 Companys
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 $54,714 to the Company
in 2015 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 2015, SKL paid $39,787 to rent approximately 2,191 square feet of
office space, which is equivalent to the Companys 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 SKLs 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.
LATEL
Sale/Leaseback
The Company paid $829,453
during 2015 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 66.7%. Agracel Inc. (Agracel) is a real estate
investment company of which Mr. Lumpkin, together with his family, beneficially
owns 33.5%. 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.
39
Table of Contents
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 26.4% of the common stock and 30.0% of the Series C Non-Cumulative
Perpetual Convertible Preferred Stock of First Mid-Illinois. During 2015, the
Company paid maintenance and activity related charges of $15,270 to First
Mid-Illinois and earned $397 of interest on its deposits. The fees charged and
earnings received on deposits through a repurchase agreement, are based on First
Mid-Illinois standard schedule for large customers.
Consolidated Communications of
Illinois Company (CCIC), formerly known as Illinois Consolidated Telephone
Company, 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 2015, First Mid-Illinois paid CCIC approximately
$754,445 for these services. These services are based on standard prices for
strategic business customers.
The Companys 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 Companys 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 a
number of the companys 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 the Chairman 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 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. On July 8, 2015, the notes were redeemed in full at 114.34% of principal
for proceeds of $11,434,010 to The Richard Adamson Lumpkin Trust, for proceeds
of $571,700 to Robert J. Currey and for proceeds of $285,850 to Roger H. Moore.
During 2015, the aforementioned Trust received $665,521 in interest, Robert J.
Currey received approximately $32,776 in interest and Roger H. Moore received
approximately $16,388 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. During 2015, the aforementioned Trust
received $336,736 interest from the 6.50% Senior Notes.
40
Table of Contents
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During 2015, Roger H. Moore,
Thomas A. Gerke and Maribeth S. Rahe served on the compensation committee. No
member of the compensation committee was, during 2015, 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 2015, none of the Companys executive officers served on the board of
directors or the compensation committee of any other entity, any officers of
which served either on the Companys board of directors or its compensation
committee.
ANNUAL REPORT TO
STOCKHOLDERS
Our combined 2015 Annual
Report to Stockholders and Annual Report on Form 10-K for the year ended
December 31, 2015 accompanies this proxy statement.
STOCKHOLDER PROPOSALS FOR
2017 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 2017 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 2, 2016.
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 years 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 persons 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.
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 Companys 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.
41
Table of Contents
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 2015.
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 2016 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,
2016
42
Table of Contents
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CONSOLIDATED
COMMUNICATIONS
HOLDINGS, INC.
|
|
|
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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
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|
Proposals
|
The Board
of Directors recommends a vote
FOR
the director candidates nominated by
the Board of
|
|
|
|
Directors and
FOR
Proposal 2.
|
|
|
|
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1.
|
Election of Directors:
|
For
|
Withhold
|
|
|
For
|
Withhold
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For
|
Withhold
|
|
|
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01 - Roger H. Moore
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☐
|
☐
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02 - Thomas A. Gerke
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☐
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☐
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03 - Dale E. Parker
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☐
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☐
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For
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Against
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Abstain
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2.
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Approval of Ernst & Young, LLP, as the
independent registered public accounting firm.
|
☐
|
☐
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☐
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B
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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.
121 South 17th Street, Mattoon, IL 61938
Proxy Solicited by Board of
Directors for Annual Meeting May 2, 2016 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 2, 2016 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 and
FOR
Proposal
2.
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 2, 2016.
|
|
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 and
FOR
Proposal 2.
|
|
|
|
|
|
1.
|
Election of Directors:
|
For
|
|
Withhold
|
|
|
For
|
|
Withhold
|
|
|
For
|
|
Withhold
|
|
|
01 - Roger H. Moore
|
☐
|
|
☐
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|
02 - Thomas A. Gerke
|
☐
|
|
☐
|
|
03 - Dale E. Parker
|
☐
|
|
☐
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
2.
|
Approval of Ernst
& Young, LLP, as the independent registered public accounting
firm.
|
|
☐
|
|
☐
|
|
☐
|
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.
121 South 17th Street, Mattoon, IL 61938
Proxy Solicited by Board of
Directors for Annual Meeting May 2, 2016 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 2, 2016 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 and
FOR
Proposal 2.
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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