DEF 14A 1 frp-proxy2016.htm DEF 14A DEF 14A


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
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))
x
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to §240.14a‑12

FAIRPOINT COMMUNICATIONS, INC.
(Name of the Registrant as Specified In Its Charter)
                                                                                                                 .
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
x
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a‑6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:                                                                     
 
(2)
Aggregate number of securities to which transaction applies:                                                                       
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0‑11 (Set forth the amount on which the filing fee is calculated and state how it was determined):                       
 
(4)
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o
Fee paid previously with preliminary materials.
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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.
 
(1)
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(4)
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FairPoint Communications, Inc.
521 East Morehead Street, Suite 500
Charlotte, NC 28202

(704) 344-8150


March 25, 2016

 
Dear Fellow Shareholder:
 
You are cordially invited to attend the annual meeting of shareholders of FairPoint Communications, Inc. to be held at 11:00 a.m., EDT, on Monday, May 16, 2016, at The Westin Charlotte, 601 South College Street, Charlotte, North Carolina 28202. The formal notice of annual meeting appears on the next page.
 

In addition to the formal items of business to be brought before the meeting, I will be pleased to report on the activities of the past year and items of interest about FairPoint.
 

We look forward to greeting personally those shareholders who are able to be present at the meeting. However, whether or not you plan to be with us at the meeting, it is important that your shares be represented. Accordingly, you are requested to promptly complete your proxy, which can be submitted by Internet, telephone or mail. Thank you for voting.



Very truly yours,



Paul H. Sunu
Director and Chief Executive Officer






FAIRPOINT COMMUNICATIONS, INC.
521 East Morehead Street, Suite 500
Charlotte, North Carolina 28202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on May 16, 2016
TO THE SHAREHOLDERS:
You are cordially invited to attend the annual meeting of shareholders of FairPoint Communications, Inc., a Delaware corporation, which will be held at The Westin Charlotte, 601 South College Street, Charlotte, North Carolina 28202, on Monday, May 16, 2016, at 11:00 a.m., EDT, for the following purposes:
1.
To elect the nine directors nominated by our board of directors and named in the Proxy Statement to serve until our next annual meeting of shareholders and until their successors are duly elected and qualified;
2.
To approve, by a non-binding advisory vote, our named executive officer compensation;
3.
To consider and vote upon a proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016; and
4.
To transact such other business as may properly come before the annual meeting or any postponement or adjournment thereof.
You can vote your shares of common stock if our records show that you were the owner of the shares as of the close of business on March 23, 2016, the record date for the annual meeting.
Whether or not you plan to attend, please complete a proxy promptly --- by Internet, telephone or mail, as instructed on the proxy card --- so that your shares may be represented and voted at the annual meeting.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on May 16, 2016. On or about March 30, 2016, we will mail a printed copy of this proxy statement, a proxy card and FairPoint's annual report for the year ended December 31, 2015, which we refer to collectively as the proxy materials. The proxy materials will also be available at www.edocumentview.com/FRP.

By Order of the Board of Directors,
Shirley J. Linn
Executive Vice President,
General Counsel and Secretary
March 25, 2016






TABLE OF CONTENTS
 
Page
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
WHERE AND WHEN WILL THE ANNUAL MEETING BE HELD?
WHY AM I RECEIVING THIS PROXY STATEMENT?
WHAT DO I NEED TO ATTEND THE ANNUAL MEETING AND WHEN SHOULD I ARRIVE?
WHAT CAN I VOTE ON AT THE MEETING?
HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
WHO CAN VOTE?
WHAT IS THE REQUIRED VOTE FOR APPROVAL?
HOW ARE VOTES COUNTED AND WHAT HAPPENS IF I ABSTAIN?
WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?
HOW DO I VOTE?
HOW DO I VOTE PRIOR TO THE ANNUAL MEETING BY PROXY?
WHAT IF OTHER MATTERS COME UP AT THE ANNUAL MEETING?
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
WHAT DO I DO IF MY SHARES ARE HELD IN "STREET NAME"?
WHAT DO I DO IF I RECEIVE DUPLICATE SETS OF PROXY MATERIALS?
WHAT IS "HOUSEHOLDING"?
WHO WILL COUNT THE VOTES?
WHERE DO I FIND THE VOTING RESULTS OF THE ANNUAL MEETING?
WHO WILL CONDUCT THIS PROXY SOLICITATION AND WHO PAYS FOR THIS PROXY SOLICITATION?
WHOM CAN I CALL WITH ANY QUESTIONS ABOUT MY SHARES?
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
DIRECTOR INDEPENDENCE
DIRECTORS
COMMITTEES OF THE BOARD OF DIRECTORS
ATTENDANCE OF DIRECTORS
CORPORATE GOVERNANCE
POLICIES RELATING TO OUR BOARD OF DIRECTORS
AUDIT COMMITTEE REPORT
COMPENSATION COMMITTEE REPORT
COMPENSATION DISCUSSION AND ANALYSIS
GENERAL PRINCIPLES AND PROCEDURES
SPECIFIC PRINCIPLES FOR DETERMINING EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION DECISIONS FOR 2015
EMPLOYMENT AGREEMENTS
REALIZED COMPENSATION
2015 SUMMARY COMPENSATION TABLE
GRANTS OF PLAN-BASED AWARDS FOR 2015
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2015
OPTION EXERCISES AND STOCK VESTED FOR 2015
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
DIRECTOR COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
EXECUTIVE OFFICERS
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS




 
Page
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PROPOSAL 1: ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
VOTE REQUIRED; RECOMMENDATION
PROPOSAL 2: APPROVAL ON AN ADVISORY BASIS OF OUR NAMED EXECUTIVE OFFICER COMPENSATION
VOTE REQUIRED; RECOMMENDATION
PROPOSAL 3: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
VOTE REQUIRED; RECOMMENDATION
PRINCIPAL ACCOUNTING FEE INFORMATION
SHAREHOLDER PROPOSALS
ANNUAL REPORT
OTHER BUSINESS






FAIRPOINT COMMUNICATIONS, INC.
521 East Morehead Street, Suite 500
Charlotte, North Carolina 28202
PROXY STATEMENT
Annual Meeting of Shareholders
to be held on May 16, 2016
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
This proxy statement is being furnished in connection with the solicitation by the board of directors of FairPoint Communications, Inc. of proxies to be voted at the annual meeting of shareholders on May 16, 2016. On or about March 30, 2016, we expect to begin mailing to shareholders of record this proxy statement, the proxy card and a copy of FairPoint's annual report for the year ended December 31, 2015, which we refer to collectively as the proxy materials.
The principal executive offices of FairPoint Communications, Inc., a Delaware corporation, are located at 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202 and our telephone number is (704) 344-8150.
The term "FairPoint" (as well as the words "we," "us" and "our") refers to FairPoint Communications, Inc. excluding its subsidiaries and the term the "Company" refers to FairPoint and its subsidiaries. References to "you" or "your" refer to FairPoint's shareholders.
In this section of the proxy statement, we answer some common questions regarding the annual shareholders meeting and the voting of shares of common stock at the annual meeting.
Where and when will the annual meeting be held?
The date, time and place of the annual meeting are: May 16, 2016 at 11:00 a.m., EDT, at The Westin Charlotte, 601 South College Street, Charlotte, North Carolina 28202.
Why am I receiving this proxy statement?
This proxy statement was prepared under the direction of our board of directors to solicit your proxy for voting at our annual meeting. You have received this proxy statement because our board of directors is asking for your proxy to vote your shares at the annual meeting. We have summarized information in this proxy statement that you should consider in deciding how to vote at the meeting. But you do not have to attend in order to vote your shares. Instead, you may vote your shares by Internet, telephone or mail, as instructed on the proxy card.
What do I need to attend the annual meeting and when should I arrive?
The annual meeting will be held at The Westin Charlotte, 601 South College Street, Charlotte, North Carolina 28202. Admission to the annual meeting will begin at 10:15 a.m. for the 11:00 a.m. meeting.
In order to be admitted to the annual meeting, you should:
Provide enough time to ensure that you are seated by the commencement of the annual meeting at 11:00 a.m.; and
Bring photo identification, such as a driver's license and proof of ownership of FairPoint stock on the record date, March 23, 2016, such as a brokerage statement or letter from a bank or broker indicating ownership on March 23, 2016, a proxy card, legal proxy or voting instruction card provided by your broker, bank or nominee.
Any holder of a proxy from a shareholder must present a properly executed legal proxy and a copy of the proof of ownership.
If you do not provide photo identification and comply with the other procedures outlined above for attending the annual meeting in person, we will be unable to admit you to attend in person.

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What can I vote on at the meeting?
There are three matters scheduled to be voted on at the annual meeting:
(1)
The election of the nine director nominees nominated by our board of directors and named in this proxy statement to serve until our next annual meeting of shareholders and until their successors are duly elected and qualified;
(2)
The approval, by a non-binding advisory vote, of our named executive officer compensation; and
(3)
The consideration and voting upon a proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
In addition, at the annual meeting we will transact such other business as may properly come before the annual meeting or any postponement or adjournment thereof.
How does the board of directors recommend that I vote?
The board of directors recommends that you vote your shares "FOR" the election of each of the nominees to the board of directors, "FOR" the approval of our named executive officer compensation and "FOR" the ratification of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
Who can vote?
You can vote your shares of common stock if our records show that you were the owner of the shares as of the close of business on March 23, 2016, the record date for determining the shareholders who are entitled to vote at the annual meeting. As of the close of business on March 23, 2016, there were a total of 27,065,799 shares of our common stock outstanding and entitled to vote at the annual meeting. You get one vote for each share of common stock that you own. Holders of shares of common stock do not have cumulative voting rights.
What is the required vote for approval?
The election of each of our nominees for director requires a plurality of the votes cast at the annual meeting. The approval of a non-binding advisory vote of our named executive officer compensation and the ratification of the appointment of BDO USA, LLP as our independent auditors require the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote on each such proposal in order to pass.
How are votes counted and what happens if I abstain?
We will hold the annual meeting if shareholders representing the required quorum of shares of common stock entitled to vote either sign and return their proxy card by mail, deliver their proxy via the Internet at the website provided in the proxy materials, deliver their proxy via the toll free number provided on the proxy card or attend the annual meeting. One third of the shares of common stock issued and outstanding and entitled to vote at the annual meeting present in person or by proxy will constitute a quorum. If you submit a proxy, whether by Internet, telephone or mail, your shares will be counted to determine whether we have a quorum even if you abstain or fail to vote as indicated on the proxy card.
You may vote "for", "against" or "abstain" on each of the proposals (other than the proposal regarding the election of the nine nominees to the board of directors). With respect to director nominations, you may vote in favor of all nominees, withhold votes on all nominees or vote in favor of and withhold votes as to specific nominees. A share voted "abstain" with respect to any proposal is considered as present and entitled to vote with respect to that proposal, but is not considered a vote cast with respect to that proposal. An abstention will not have any effect on the election of directors. An abstention could prevent the approval of the other proposals because it does not count as an affirmative vote, namely the proposal to approve on an advisory basis our named executive officer compensation and the ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. These two proposals require the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote on each such proposal in order to pass. If you return a signed proxy card without indicating your vote on any matter, the designated proxies will vote to elect all nine director nominees, approve, on an advisory basis, our named executive officer compensation and ratify the appointment of BDO USA, LLP as our independent auditors for the fiscal year ending December 31, 2016.
Will my shares be voted if I do not provide my proxy?
Depending on the proposal, your shares may be voted if they are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under the Nasdaq Stock Market LLC (the "NASDAQ") rules to cast votes on certain "routine" matters if they do not receive instructions from their customers. The proposal

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to ratify the appointment of BDO USA, LLP as our independent auditors is considered a "routine" matter for which brokerage firms may vote shares without receiving voting instructions. Brokerage firms do not have the authority under the NASDAQ rules to vote on non-routine matters. The election of directors and the approval of our named executive officer compensation are considered non-routine matters. If you do not provide your brokerage firm with voting instructions on these proposals, your shares will not be voted and are called "broker non-votes."
How do I vote?
Shareholders of record may vote in person by attending the annual meeting or before the annual meeting as set forth below. Your vote is very important, so whether you plan to attend the annual meeting or not, we encourage you to vote before the annual meeting in one of the following ways if possible:
visiting the website shown on your proxy card, to submit a proxy via the Internet;
calling the toll free number shown on your proxy card, to submit a proxy via the telephone; or
completing, signing, dating and returning a proxy card by mail.
How do I vote prior to the annual meeting by proxy?
Follow the instructions on the proxy card to vote on the matters to be considered at the annual meeting. The individuals named and designated as proxies on the proxy card will vote your shares as you instruct. If you do not make a selection when you submit your proxy by Internet, telephone or mail, your proxy will be voted as recommended by the board of directors.
What if other matters come up at the annual meeting?
The only matters we now know of that will be voted on at the annual meeting are the proposals we have described in this proxy statement: the proposal to elect directors, the proposal to approve by a non-binding advisory vote our named executive officer compensation and the proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. If other matters are properly presented at the meeting, the designated proxies will vote your shares in their discretion.
Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your vote in any of the following ways:
by sending a written notice to the corporate secretary of FairPoint that is received prior to the annual meeting stating that you revoke your proxy;
by submitting a subsequent proxy by Internet, telephone or mail with a later date; or
by attending the annual meeting and voting your shares.
A shareholder whose shares are held in "street name" by its broker and who has directed that person to vote its shares should instruct that person in order to change or revoke its vote.
What do I do if my shares are held in "street name"?
If your FairPoint shares are registered in your name, you are a shareholder of record. If your FairPoint shares are held in the name of your broker, bank or other holder of record, your shares are held in "street name". If your shares are held in the name of your broker, a bank or other holder of record, that party will give you instructions for voting your shares.
You may examine a list of the shareholders of record as of the close of business on March 23, 2016 for any purpose germane to the annual meeting during normal business hours during the 10-day period preceding the date of the meeting at FairPoint's corporate headquarters, located at 521 East Morehead Street, Suite 500, Charlotte, NC 28202. This list will also be made available at the annual meeting.
What do I do if I receive duplicate sets of proxy materials?
You may receive more than one set of proxy materials. This duplication will occur if you have shares registered in different names or your shares are in more than one type of account maintained by Computershare, Inc., our transfer agent. To have all your shares voted, you should vote each set of proxy materials you receive.

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What is "householding"?
"Householding" allows companies to deliver only one copy of notices and other proxy materials to multiple shareholders who share the same address (if they appear to be members of the same family) unless we have received contrary instructions from an affected shareholder. We do not offer "householding" for shareholders of record. Please contact your broker if you are not a shareholder of record to find out if your broker offers "householding".
Who will count the votes?
Computershare, Inc., our transfer agent, will count the votes and will serve as tabulator of the votes. J. Garrett Van Osdell, our Vice President and Assistant General Counsel, will serve as the inspector of election.
Where do I find the voting results of the annual meeting?
We will announce preliminary voting results at the annual meeting. We will also publish the final results on Form 8-K, which we will file with the Securities and Exchange Commission (the "SEC") within four business days after the annual meeting. Once filed, you can request a copy of the Form 8-K by contacting our Investor Relations department at (866) 377-3747 or the SEC at (800) SEC-0330 for the location of its nearest public reference room. You can also obtain a copy on the Internet at www.fairpoint.com on the "Investor Relations" page, under the "SEC Filings" caption, or through the SEC's electronic data system called EDGAR at www.sec.gov.
Who will conduct this proxy solicitation and who pays for this proxy solicitation?
We have retained Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut 06902, to assist in the solicitation of proxies. Morrow & Co., LLC may solicit proxies by telephone, facsimile, other forms of electronic transmission and by mail. It is anticipated that the fee for those services will not exceed $7,500 plus reimbursement for customary out-of-pocket expenses. We will pay such fee and expenses. In addition, proxies may be solicited on our behalf by our directors, officers or employees in person or by telephone, facsimile, electronic transmission and by mail. None of these persons will receive any extra compensation for doing this.
In addition, we will request that brokerage houses, banks and other custodians or nominees holding shares in their names for others forward proxy materials to their customers or principals who are the beneficial owners of shares and we will reimburse them for their expenses in doing so.
Whom can I call with any questions about my shares?    
If you hold shares in "street name", you may contact your broker. If you are a shareholder of record, you may call our transfer agent, Computershare, Inc., at (877) 295-8608 or visit their web site at www.computershare.com/investor.

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BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors currently consists of nine directors. Paul H. Sunu was appointed as our Chief Executive Officer ("CEO") and a member of our board of directors effective August 24, 2010. The other members of our board of directors, other than Peter C. Gingold and Peter D. Aquino, were appointed in accordance with our Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (as confirmed, the " Reorganization Plan") on January 24, 2011 (the "Effective Date"), the date we substantially consummated our reorganization through a series of transactions contemplated by the Reorganization Plan and the Reorganization Plan became effective pursuant to its terms. Mr. Gingold, upon recommendation by a non-management director, was appointed to our board of directors in June 2012 to replace a director who had resigned. Mr. Aquino was elected to our board of directors in May 2014 at our annual meeting of shareholders.
Director Independence
The board of directors considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. Our board of directors has determined that, other than Paul H. Sunu, all of our directors are independent under the criteria for independence set forth in the listing standards of the NASDAQ and accordingly are independent directors with no material relationship to us other than being a director or shareholder of FairPoint. Therefore, we satisfy the NASDAQ requirement that a majority of our board of directors be comprised of independent directors.
Directors
The following sets forth selected biographical information for our directors, including their ages as of March 23, 2016.
Peter D. Aquino—Mr. Aquino, age 54, has held leadership positions in both public and private companies, specializing in turnarounds, start-ups and emerging markets. He is the founder of Broad Valley Capital, LLC, focused on companies needing both telecommunication expertise and capital. Mr. Aquino recently served as the Executive Chairman of Primus Telecom Group, Inc. ("PTGI") (NYSE: PTGI) until April 30, 2013, transitioning from chairman and CEO after nearly a three-year assignment with the international telecommunication company. Prior to PTGI, Mr. Aquino was the President and CEO of RCN Corporation (formerly NASDAQ: RCNI) from December 2004 until its go-private sale in August 2010. Mr. Aquino formerly served as chairman of the United Way Worldwide - U.S. Board of Trustees through 2015 and currently serves as a board member of TiVo, Inc. (NASDAQ: TIVO) and Lumos Networks Corp. (NASDAQ: LMOS). Mr. Aquino is a graduate of Montclair State College in New Jersey and has a Masters of Business Administration from George Washington University in Washington, DC.
We believe Mr. Aquino's qualifications to serve on our board include his leadership background in the communications industry, including his experience from both an operational and financial perspective and his service as a member of the board of directors of two other publicly-traded companies.
Dennis J. Austin—Mr. Austin, age 71, has served as an independent telecommunications consultant since 2002.  Mr. Austin previously served as a consultant at BearingPoint, formerly KPMG Consulting and formerly KPMG LLP, from 1995 to 2002 and as vice president at San Francisco Consulting Group ("SFCG") from 1985 to 1995. Prior to joining SFCG, Mr. Austin was vice president of engineering with Dataspeed Inc. from 1983 to 1985 and director of switch engineering, network planning and design at GTE Sprint from 1977 to 1983. Prior to joining GTE Sprint, Mr. Austin served as a member of the technical staff with Bell Telephone Laboratories from 1966 to 1977. Mr. Austin holds a Ph.D. in electrical engineering from Stanford University.
We believe Mr. Austin's qualifications to serve on our board include his significant consulting and leadership experience in the telecommunications industry, as well as his strong technical and product background.
Peter C. Gingold—Mr. Gingold, age 42, joined Angelo, Gordon & Co. ("Angelo Gordon") in May of 2007 as a vice president and became a director of Angelo Gordon in February 2011, in each case focusing in distressed and leverage credit. Mr. Gingold became a managing director of Angelo Gordon in February 2014. Mr. Gingold's background includes significant management experience across several operational roles, positions as an investment banker and functions related to corporate development and strategy.  Mr. Gingold currently serves as a board member of C&D Technologies, Inc. He holds a Bachelor of Science degree from Cornell University and a Master of Business Administration degree from the Columbia Business School.
We believe Mr. Gingold's qualifications to serve on our board include his extensive understanding of equity and debt capital markets, as well as his current and past positions on the boards or as a board observer of other companies.
Edward D. Horowitz—Mr. Horowitz, age 68, currently serves as our chair of the board of directors. Mr. Horowitz is chairman of EdsLink LLC, a New York City based venture capital firm, which he founded in 2000 and is also a director of Globecomm

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Systems Inc. and the First Responder Network Authority.  He served as co-CEO of Encompass Digital Media, a global operator of satellite teleports and digital content management from January 2013 through March 2014 and on its board from 2010 through 2014. Mr. Horowitz served as president and CEO of SES-Americom, a communications satellite operator and as a member of the executive committee of its parent company, SES (SESG, Lux.) from 2005 to 2008.  Before founding EdsLink LLC, Mr. Horowitz was executive vice president of Advanced Development at Citigroup from 1997 through 2000 and was the founder and chairman of e-Citi. Prior to joining Citigroup, from 1989 to 1997, Mr. Horowitz was a senior vice president of Viacom Inc. and a member of its operating committee. Mr. Horowitz is a trustee of the New York Hall of Science and the American Management Association. He received a Bachelor of Science degree in physics from the City College of New York and a Master of Business Administration degree from the Columbia Business School.
We believe Mr. Horowitz's qualifications to serve on our board include his breadth of leadership experience in the communications industry, as well as his current and past service on the boards of other companies.
Michael J. Mahoney—Mr. Mahoney, age 65, previously served as president and CEO of Commonwealth Telephone Enterprises, Inc. ("Commonwealth Telephone") from 2000 to 2007.  Prior to joining Commonwealth Telephone, Mr. Mahoney served as president and chief operating officer of RCN Corporation from 1997 to 2000 and as president and chief operating officer of C-TEC Corporation from 1993 to 1997.  Mr. Mahoney currently serves as a director of Level 3 Communications, Inc. (NYSE: LVLT). He received a Bachelor of Science degree in accounting from Villanova University.
We believe Mr. Mahoney's qualifications to serve on our board include his extensive management, operational and financial experience in telecommunications and specifically in businesses similar to ours, his significant regulatory experience and expertise and his service as a director of another publicly-traded company.
Michael K. Robinson—Mr. Robinson, age 59, has served as president and CEO since 2005, and as a director since 2009, of Broadview Networks, Inc. ("Broadview").  Broadview executed a pre-packaged Chapter 11 restructuring in 2012 and exited bankruptcy in November 2012. Mr. Robinson previously served as executive vice president and chief financial officer ("CFO") of US LEC (which is now part of Windstream Corporation) from 1998 to 2005. Prior to 1998, Mr. Robinson spent 10 years as an executive at Alcatel (now Alcatel-Lucent). Mr. Robinson also serves as a director of Lumos Networks Corp. (NASDAQ: LMOS). Mr. Robinson received a bachelor's degree in Business and Economics from Emory & Henry College and a Master of Business Administration degree from Wake Forest University.
We believe Mr. Robinson's prior experience in telecommunications, both from an operational and financial perspective, including in non-local exchange carrier environments, adds significant perspective to the changing market for communication services.
Paul H. Sunu—Mr. Sunu, age 60, has served as our CEO since August 2010, prior to which he was CFO of Hargray Communications Group, Inc., a position he had held since 2008.  Mr. Sunu was CFO of Hawaiian Telcom Communications, Inc. from 2007 to 2008 and a managing director and CFO of Madison River Communications Corp. from 1996 to 2007.  He currently serves as the chairman of the board of directors of Integra Telecom, Inc. and is a former board member of Madison River Communications Corp., Hawaiian Telcom Communications, Inc. and Centennial Communications Corp. He received a Bachelor of Arts degree in public administration from the University of Illinois and a J.D. from the University of Illinois College of Law.
We believe Mr. Sunu's role as our CEO makes him uniquely qualified to serve on our board, as he brings the day to day knowledge of our business to the board and shares his strategic vision with the board as it provides oversight and policy direction for the Company.
David L. Treadwell—Mr. Treadwell, age 61, has been a director of FairPoint since 2011 and serves on a number of other boards in various industries. Mr. Treadwell currently serves on the board of directors of Flagstar Bancorp. Inc. (NYSE: FBC), Visteon Corporation (NYSE: VC) and EPMC Holdings Corporation and serves as chairman of the board of directors of C&D Technologies, Inc., Revere Industries, LLC, AGY, LLC and Grow Michigan, LLC. In addition to being the chairman of the board of directors of C&D Technologies, Inc., he served as interim CEO from April 2012 to September 2012. He previously served as president and CEO of EP Management Corporation, formerly known as EaglePicher Corporation, from 2006 through 2011. Mr. Treadwell was EaglePicher Corporation's chief operating officer from 2005 to 2006. Prior to that, he served as CEO of Oxford Automotive, Inc. in 2004 to 2005 through its restructuring. Mr. Treadwell received a Bachelor of Business Administration degree from the University of Michigan, Ann Arbor.
We believe Mr. Treadwell's qualifications to serve on our board include his strong operational and leadership skills and his previous experience outside of the telecommunications industry, as well as his previous experience as a turn-around agent for businesses seeking strategic alternatives.
Wayne Wilson—Mr. Wilson, age 67, a New Hampshire resident, has been an independent business advisor since 2002. From 1995 to 2002, Mr. Wilson served in various roles as president, chief operating officer and CFO of PC Connection, Inc., a Fortune

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1000 direct marketer of information technology products and services.  From 1986 to 1995, Mr. Wilson was a partner in the assurance and advisory services practice of Deloitte & Touche LLP.  Mr. Wilson currently serves as a director of ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) and Edgewater Technology, Inc. (NASDAQ: EDGW). He retired as a director of Hologic, Inc. (NASDAQ: HOLX) in March 2016 and previously served as a director of Cytyc Corporation. Mr. Wilson received a Bachelor of Arts degree in political science from Duke University and a Master of Business Administration degree from the University of North Carolina at Chapel Hill. He is a certified public accountant in New Hampshire and North Carolina.
We believe Mr. Wilson's qualifications to serve on our board include his strong accounting and finance understanding gained from years as a certified public accountant in industry and with a major public accounting firm. This allows him to provide leadership to our audit committee. Mr. Wilson's qualifications also include his experience as a director on the boards of multiple publicly-traded companies. Mr. Wilson also fulfills the regulatory requirement that at least one member of our board reside in northern New England, as Mr. Wilson is a resident of New Hampshire.
Committees of the Board of Directors
Our board of directors has four separately designated standing committees: an audit committee, a compensation committee, a corporate governance and nominating committee and a regulatory committee.
Audit Committee
Our audit committee consists of Peter D. Aquino, Dennis J. Austin, Michael J. Mahoney, Michael K. Robinson and Wayne Wilson and met eight times during 2015. Mr. Wilson is the chair of our audit committee. All such audit committee members satisfy the independence criteria set forth in the listing standards of the NASDAQ and the applicable provisions of the Securities Exchange Act of 1934 (the "Exchange Act"). Messrs. Wilson, Mahoney and Robinson are qualified as audit committee financial experts within the meaning of item 407(d)(5)(ii) of Regulation S-K under the Exchange Act and our board of directors has determined that they have the requisite accounting and related financial management expertise within the meaning of the listing standards of the NASDAQ. The SEC has determined that the audit committee financial expert designation does not impose on any person with that designation any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the audit committee of the board of directors in the absence of such designation.
Among other functions, the principal duties and responsibilities of our audit committee are to select and appoint our independent registered public accounting firm, oversee the quality and integrity of our financial reporting and the audit of our financial statements and internal controls over financial reporting by our independent registered public accounting firm and, in fulfilling its obligations, our audit committee reviews with our management and independent registered public accounting firm the scope and results of the annual audit, our accounting firm's independence and our accounting policies.
The audit committee is required to report regularly to our board of directors to discuss any issues that arise with respect to risks facing us, the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance and independence of our independent registered public accounting firm and the performance of the internal audit function. For further discussion of the board's and the audit committee's role in our risk oversight, see "—Policies Relating to Our Board of Directors—Risk Assessment" herein.
A copy of our audit committee charter can be found on our website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption. In addition, a copy of our audit committee charter is available free of charge upon request directed to our secretary at: Secretary, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202.
Compensation Committee
Our compensation committee consists of Peter C. Gingold, Edward D. Horowitz and David L. Treadwell and met four times during 2015. Mr. Horowitz is the chair of our compensation committee. All such compensation committee members satisfy the independence criteria set forth in the listing standards of the NASDAQ.
Among other functions, our compensation committee oversees the compensation of our CEO and other executive officers, including plans and programs relating to cash compensation, incentive compensation, equity based awards and other benefits and perquisites and administers any such plans or programs as required by the terms thereof.
A copy of our compensation committee charter can be found on our website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption. In addition, a copy of our compensation committee charter is available free of charge upon request directed to our secretary at: Secretary, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202.

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Corporate Governance and Nominating Committee
Our corporate governance and nominating committee consists of Edward D. Horowitz, David L. Treadwell and Wayne Wilson and met five times during 2015. Mr. Treadwell is the chair of our corporate governance and nominating committee. All such corporate governance and nominating committee members satisfy the independence criteria set forth in the listing standards of the NASDAQ.
Among other functions, the principal duties and responsibilities of our corporate governance and nominating committee are to identify qualified individuals to become board members, recommend to our board of directors individuals to be designated as nominees for election as directors at the annual meetings of shareholders and develop and recommend to our board of directors our corporate governance guidelines.
A copy of our corporate governance and nominating committee charter can be found on our website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption. In addition, a copy of our corporate governance and nominating committee charter is available free of charge upon request directed to our secretary at: Secretary, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202.
Regulatory Committee
Our regulatory committee consists of Peter D. Aquino, Dennis J. Austin, Michael J. Mahoney and Michael K. Robinson and met four times during 2015. Mr. Mahoney is the chair of our regulatory committee. Among other functions, our regulatory committee's primary responsibility is to oversee our compliance with regulatory requirements and reporting.
A copy of our regulatory committee charter can be found on our website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption. In addition, a copy of our regulatory committee charter is available free of charge upon request directed to our secretary at: Secretary, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202.
Attendance of Directors
During 2015, the board of directors held 18 meetings. Each director attended at least 75% of the aggregate of the total number of meetings held by the board of directors and the total number of meetings held by all committees of the board of directors on which he served during the period such director was a director or served as a committee member in 2015.
Corporate Governance
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. This code of business conduct and ethics is designed to comply with the SEC regulations and the NASDAQ listing standards related to codes of conduct and ethics and is posted on our corporate website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption. A copy of our code of business conduct and ethics, which was updated in November 2015, is available free of charge upon request directed to our secretary at: Secretary, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202.
Code of Ethics for Financial Professionals
We have also adopted a code of ethics for financial professionals as required by the SEC under Section 406 of the Sarbanes—Oxley Act of 2002. This code sets forth written standards that are designed to deter wrongdoing and to promote honest and ethical conduct by our senior financial officers, including our CEO, and is a supplement to our code of business conduct and ethics. In addition to applying to our CEO, CFO, Chief Accounting Officer and Treasurer, this code applies to all of the other persons employed by us who have significant responsibility for preparing or overseeing the preparation of our financial statements and the other financial data included in our periodic reports filed with the SEC and in other public communications made by us that are designated from time to time by our CFO as senior financial professionals. Our code of ethics for financial professionals is posted on our corporate website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption. A copy of our code of ethics for financial professionals is available free of charge upon request directed to our secretary at: Secretary, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202.
Corporate Governance Guidelines
We have also adopted corporate governance guidelines to advance the functioning of our board of directors and its committees and to set forth our board of directors' expectations as to how it should perform its functions. Our corporate governance guidelines are posted on our corporate website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance"

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caption. A copy of our corporate governance guidelines is available free of charge upon request directed to our secretary at: Secretary, FairPoint Communications, Inc. 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202.
Policies Relating to our Board of Directors
Nomination and Selection of Directors
Our corporate governance and nominating committee identifies and evaluates potential director candidates in a variety of ways. Recommendations may come from current members of our board of directors, professional search firms, members of management, shareholders or other persons. In assessing the qualifications of potential nominees, the corporate governance and nominating committee may rely on personal interviews or discussions with the candidate and others familiar with the candidate's professional background, on third-party background and reference checks and on such other due diligence information as is reasonably available. Although we do not have a formal policy regarding board diversity, when evaluating candidates for nomination as a director, the corporate governance and nominating committee does consider diversity in its many forms, including, among others, experience, skills, ethnicity, race and gender. We believe a diverse board, as so defined, provides for different points of view and debate among our board members and enhances the effectiveness of our board of directors. We believe we have a diverse board of directors, which includes one or more current and/or former CEOs, CFOs, chief operating officers, equity and debt investors, securities analysts and investment bankers, expertise in a variety of industries and subcategories of the communications industry such as cable and satellite, and business people and individuals of different ethnicity, views and backgrounds. The corporate governance and nominating committee must be satisfied that the candidate possesses the highest professional and personal ethics and values and has broad experience and diversity at the policymaking level in business, government, education or public interest before the corporate governance and nominating committee will recommend a candidate as a nominee to our board of directors.
Leadership Structure
We separate the roles of chair of the board, currently held by Mr. Horowitz, and CEO, currently held by Mr. Sunu, in recognition of the differences between the two roles. As discussed in our corporate governance guidelines, the Company's business is conducted by its officers, managers and employees, under the direction of the CEO, while the board of directors, under the oversight of the chair of the board, is elected by the shareholders to oversee management and to exercise its business judgment in the best interests of the Company. The chair and the CEO may be the same person; however, the board of directors currently deems it advisable to separate these two functions to facilitate the board's oversight of management and to encourage our independent directors to have more active involvement in the setting of agendas and in establishing priorities for the work of the board.
Risk Assessment
Our corporate governance guidelines require, among other things, that our directors be familiar with the Company's business, its financial statements and capital structure and the risks and competition it faces. While the board of directors is ultimately responsible for the risk oversight of the Company and is expected to conduct enterprise risk assessments, the board has delegated to our audit committee, in accordance with the audit committee charter, the initial review of both the significant financial risks or exposures and the steps management has taken to minimize such risks to the Company and the Company's policies with respect to internal controls over financial reporting. To this end, the audit committee receives regular updates on the Company's existing and emerging risks from the Company's Executive Vice President and CFO; Vice President, Internal Audit; other officers of the Company and from its independent auditors.
Communications with Board of Directors
Our board of directors has adopted policies with respect to the consideration of candidates recommended by shareholders for election as well as for director and shareholder communications with the board of directors.
Shareholders may recommend nominees for consideration by the corporate governance and nominating committee by timely submitting the names and the following supporting information to our secretary at: Secretary, Shareholder Nominations, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202. The submissions should include a current resume of the candidate and a statement describing the candidate's qualifications and contact information for the candidate. The submission should also include the name and address of the shareholder who is submitting the nominee, the number of shares which are owned of record or beneficially by the submitting shareholder and a description of all arrangements or understandings between the submitting shareholder and the nominee.
Shareholders and other interested parties may communicate directly with our board of directors or the non-management directors. All communications should be in writing and should be directed to our secretary at: Secretary, Shareholder Communications, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202. The sender should indicate in the address whether it is intended for the entire board of directors, the non-management directors as a

9



group or an individual director. Each communication intended for the board of directors or non-management directors received by the secretary will be forwarded to the intended recipients in accordance with the submitted instructions.
The full text of the shareholder nominations and communications policy is available on our corporate website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption.
Non-employee Chair and Private Sessions
The non-management directors regularly meet in private session without our CEO. Our non-employee chair of our board of directors, Edward D. Horowitz, presides at these non-management director executive sessions.
Director Attendance at Annual Meeting of Shareholders
We do not have a formal policy regarding attendance by directors at our annual meeting of shareholders but invite and encourage all directors to attend. The annual meeting of shareholders is also generally held in conjunction with a regularly scheduled board of directors meeting to encourage director attendance. Such is the case for our 2016 annual meeting. All nine directors attended the 2015 annual meeting.

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AUDIT COMMITTEE REPORT*
The audit committee of the board of directors currently has five members, Peter D. Aquino, Dennis J. Austin, Michael J. Mahoney, Michael K. Robinson and Wayne Wilson. As of the date of this proxy statement, each audit committee member satisfies the independence criteria and has the qualifications set forth in the listing standards of the NASDAQ and the applicable provisions of the Exchange Act. The audit committee, among other things, oversees the Company's financial reporting process and system of internal controls on behalf of the board of directors, as well as overseeing the qualifications, independence and performance of our external and internal auditors. The audit committee also has the sole authority and responsibility to select, evaluate and, as appropriate, replace our independent registered public accounting firm. The audit committee's aggregate responsibilities are described in a written charter that was adopted by the board of directors. The charter of the audit committee is available on the Company's website at www.fairpoint.com on the "Investor Relations" page, under the "Corporate Governance" caption.
Management has the primary responsibility for the financial statements and reporting process, including the systems of internal controls and disclosure controls. In undertaking its oversight function, the audit committee relied, without independent verification, on management's representation that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States and on the representations of the independent registered public accounting firm included in their report on our financial statements. The audit committee is not, however, professionally engaged in the practice of accounting or auditing and does not provide any expert or other special assurance or professional opinion as to the sufficiency of the external or internal audits, whether the Company's financial statements are complete and accurate and in accordance with generally accepted accounting principles, or on the effectiveness of the system of internal control.
The audit committee has reviewed and discussed the Company's audited financial statements for the fiscal year ended December 31, 2015 with the Company's management. The audit committee has discussed with Ernst & Young LLP, the Company's independent registered public accounting firm for 2015, the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16, Communication with Audit Committees. The audit committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence and has discussed with Ernst & Young LLP the independence of Ernst & Young LLP. The audit committee also reviewed, among other things, the audit and permissible non-audit services performed by, and the amount of fees paid for such services to, Ernst & Young LLP, as well as the compatibility of any such non-audit services with regard to Ernst & Young LLP's independence. The audit committee meetings include, whenever appropriate, executive sessions with the Company's independent registered public accounting firm without the presence of the Company's management.
Based on the audit committee's review, discussions with management and discussions with Ernst & Young LLP, all as described above, the audit committee recommended to the board of directors, and the board of directors approved, the inclusion of the Company's audited financial statements for the year ended December 31, 2015 in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 for filing with the SEC. The audit committee also has approved the appointment of BDO USA, LLP as the independent registered public accounting firm to audit the financial statements of the Company for the 2016 fiscal year.
Submitted by the audit committee of the board of directors:
Wayne Wilson (Chair)
Peter D. Aquino
Dennis J. Austin
Michael J. Mahoney
Michael K. Robinson

________________
* The material in this report shall not be deemed to be "soliciting material", or to be "filed" with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and is not incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in any such filing.



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COMPENSATION COMMITTEE REPORT*
The compensation committee of the board of directors oversees the executive compensation program for the Company's CEO and other executive officers, including those named in "Compensation Discussion and Analysis—Summary Compensation Table" in this proxy statement. The executive officers named in that table are referred to collectively as the named executive officers (the "NEOs").
The compensation committee is generally responsible for strategic decisions relating to the overall compensation structure and program applicable to the Company's executives and senior management. The program currently includes: base salaries, cash-based annual incentive compensation and equity-based long-term incentives. The compensation committee, jointly with the corporate governance and nominating committee, is responsible for the compensation program of our non-employee directors, which program is currently comprised of cash fees and equity.
On behalf of the shareholders, the compensation committee has carefully monitored the Company's executive compensation program. We believe that the Compensation Discussion and Analysis contained in this proxy statement and the related tables that follow will show an executive compensation program that is designed to maximize long-term shareholder value and provide the NEOs with incentives for superior corporate and individual performance and encourage them to remain with the Company.
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management, and, based on such review and discussions, recommended to the board of directors that it be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and in the Company's proxy statement.
Shareholders are invited to express their views to the board of directors regarding executive compensation as well as other matters as described in this proxy statement. See "Board of Directors and Committees of the Board of Directors—Policies Relating to our Board of Directors—Communications with Board of Directors" in this proxy statement.
Submitted by the compensation committee of the board of directors:
Edward D. Horowitz (Chair)
Peter C. Gingold
David L. Treadwell
______________
* The material in this report shall not be deemed to be "soliciting material", or to be "filed" with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and is not incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in any such filing.


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COMPENSATION DISCUSSION AND ANALYSIS

General Principles and Procedures
Executive Summary
Our executive compensation program is designed to attract, motivate and retain top executives and managerial talent and to reward our executives and managers for delivering results that will build sustainable growth and value for our shareholders over the long-term. We believe our compensation program aligns the interests of our executives with those of our shareholders by tying short- and long-term incentive compensation directly to the Company's achievement of short- and long-term performance goals. In determining certain aspects of executive compensation for fiscal year 2015, the compensation committee considered the sustained, overwhelming shareholder support our "say-on-pay" advisory votes have received since 2012 and the continued alignment of executive compensation with shareholder interests.
The Company's named executive officers ("NEOs") included in the tables that follow this Compensation Discussion and Analysis for 2015 were:
Paul H. Sunu, Director and Chief Executive Officer
Ajay Sabherwal, Executive Vice President and Chief Financial Officer
Shirley J. Linn, Executive Vice President, General Counsel and Secretary
Peter G. Nixon, Executive Vice President, External Affairs and Operational Support
Anthony A. Tomae, Executive Vice President and Chief Revenue Officer (Mr. Tomae's employment was terminated without cause effective January 29, 2016)
Kenneth W. Amburn, former Executive Vice President, Operations (Mr. Amburn's employment was terminated without cause effective January 26, 2015)
2015 Executive Compensation Highlights
The key compensation decisions and factors affecting the compensation of our NEOs for 2015 were as follows:
There were no base salary increases, which is further described on page 18.
Signing bonus for our CEO paid in 2015, which is further described on page 18.
Performance-based annual bonuses earned during 2015 and paid in 2016 based on achievement of corporate and individual performance goals as described on pages 18-20.
Equity awards with grant date values between 127% and 178% of base salary as described on page 20-21.
2015 Performance Highlights
The direct alignment of our compensation program with Company performance helped produce the following 2015 business highlights:
(1)
Operationalization of new collective bargaining agreements. Following the February 2015 ratification by unions representing approximately 1,700 employees in northern New England, we operationalized many of the efficiencies and financial benefits of the new collective bargaining agreements, which provided improved service to our customers. Our trouble loads have been significantly reduced as we implemented improvements in our operations.
(2)
Delivered solid financial performance. For 2015, we achieved our financial guidance and ended the year with what we believe is a strong cash position through diligent and effective cost management.
(3)
Completed next-generation emergency 9-1-1 system installation for Vermont. Building on the successful implementation of the Maine next-generation 9-1-1 system in 2014 and a growing reputation for next-generation 9-1-1 project management, we completed the installation of the Vermont system in July of 2015.
(4)
Continued Ethernet revenue growth. Leveraging our over 21,000 miles of fiber, Ethernet revenue grew by nearly 12% year-over-year and we experienced a 15% increase in Ethernet circuits in 2015 compared to 2014.

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Compensation Philosophy and Objectives
Our overriding objective is to achieve and sustain significant increases in shareholder value. Our executive compensation program has been designed to support this objective with a clear link between pay and corporate and individual performance while discouraging executives from taking excessive risks. We structure our compensation plans to provide target compensation levels and opportunities that are competitive with the median target opportunities for comparable positions among the companies that comprise our peer group. This approach is also aimed at ensuring our ability to attract, retain and motivate the executives, managers and professionals who are critical to our short- and long-term success. A significant portion of our executives' compensation is "performance-based" in the form of both short- and long-term incentives that are intended to motivate balanced decision making by our executives while also aligning their interests with those of our shareholders.
Shareholder Engagement
Your board encourages shareholder feedback and believes that fostering long-term relationships with shareholders is an important objective. Our engagement team, which is comprised of senior leaders and members of the board, interacts with shareholders on a regular basis through face-to-face meetings, participation in industry conferences, phone calls and email.
Since our last annual meeting, our engagement team has conducted face-to-face meetings with shareholders that combined represented in excess of 50% of our outstanding common stock. These forums allow for an open dialogue on our financial performance, community involvement, governance practices, compensation programs and industry trends. Feedback received from shareholders is routinely shared with the chair of the board.
At our 2015 annual meeting, we received strong support of our executive compensation programs, with the "say-on-pay" proposal receiving votes in favor of approximately 99% of those cast. We will continue to engage with shareholders on executive compensation and other pertinent matters.
Governance and Oversight of our Executive Compensation Program
Our executive compensation program is governed and administered by the compensation committee of the board of directors. The compensation committee is comprised of independent, non-employee members of the board.
The compensation committee's overall responsibilities include approving our compensation philosophy, policies and plans; reviewing and approving corporate goals and objectives relevant to the compensation for our CEO and other executive officers; evaluating the CEO's performance in light of these goals; setting the compensation of our CEO; and after considering the recommendation of our CEO, approving the compensation of our other executives, including the other NEOs. Our CEO does not participate in discussions or decision making regarding his own compensation but does make recommendations to the compensation committee regarding the compensation of the other NEOs as well as other senior executives. However, the ultimate decisions are made by the compensation committee. The compensation committee also has oversight responsibility for our management development and succession planning efforts.
The compensation committee retains an independent executive compensation consulting firm, Lyons, Benenson & Company Inc. ("LB&Co."), to assist and advise the compensation committee on all aspects of our executive compensation program. LB&Co. provides no other services to us. The services of LB&Co. include:
Advising on the compensation philosophy and the compensation committee charter;
Assessing risk in connection with compensation programs;
Developing and analyzing the appropriateness of our peer group;
Providing and analyzing competitive market compensation data;
Analyzing the effectiveness of our executive compensation plans and making recommendations, as appropriate;
Assisting in the design of employment and severance agreements, as applicable;
Evaluating how well our compensation program adheres to our stated objectives and philosophy; and
Providing data, advice and counsel on director compensation.
Harvey Benenson, the Managing Director of LB&Co., generally attends all meetings of the compensation committee. Certain of our directors, including Mr. Sunu, serve or have served on the boards of other companies, including their compensation committees, for which LB&Co. has provided or provides compensation consulting services. The compensation committee assessed the independence of LB&Co. pursuant to SEC rules and concluded that no conflict of interest exists that prevents LB&Co. from providing independent consulting services to the compensation committee.

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Peer Group
The compensation committee uses executive compensation data from a peer group of companies to assist the compensation committee with analyzing the effectiveness and competitiveness of our executive compensation program. The peer group is designed to reflect the current competitive environment for our products, services and executive talent, as well as the competitive environment we expect to face in the future. In structuring the peer group, we focused on companies of comparable scope with notable performance accomplishments. Using data from the public filings of a large number of companies, we narrowed the peer group to 15 companies by applying the following selection criteria:
Relevant industry classification (based on our global industry classification standard), business description and services provided;
With some exceptions, based on industry relevance, comparable size, with revenues between $470 million and $2.82 billion; and
Levels of achievement in certain performance metrics, such as revenue, revenue growth, three-year total shareholder return, return on average assets, return on invested capital, gross margin, operating margin and earnings before interest, taxes, depreciation and amortization ("EBITDA").
Applying these criteria, the companies included in the peer group in 2014 were: Akamai Technologies, Inc.; AOL Inc.; Cablevision Systems Corporation; Charter Communications, Inc.; Cincinnati Bell Inc.; Consolidated Communications Holdings, Inc.; DISH Network Corporation; EarthLink, Inc.; Frontier Communications Corporation; IAC/InterActiveCorp; Level 3 Communications, Inc.; Open Text Corporation; Primus Telecommunications Group, Inc.; tw telecom inc.; Vonage Holdings Corp. and Windstream Corporation.
The following companies were removed from our peer group in 2015:
Company Name
Reason for Removal
DISH Network Corporation
Above revenue range
IAC/InterActive Corp
Above revenue range and weak business alignment
Open Text Corporation
Weak business alignment
Primus Telecommunciations Group, Inc.
Acquired by HC2 Holdings, Inc. (OTC)
tw telecom inc.
Acquired by Level 3 Communications
The following companies were added to our peer group in 2015 using the selection criteria described above:
Company Name
Hawaiian Telcom Holdco, Inc.
j2 Global, Inc.
Premier Global Services, Inc.
SBA Communications Corporation
As a result of these changes, the companies included in the peer group in 2015 were: Akamai Technologies, Inc.; AOL Inc.; Cablevision Systems Corporation; Charter Communications, Inc.; Cincinnati Bell Inc.; Consolidated Communications Holdings, Inc.; EarthLink, Inc.; Frontier Communications Corporation; Hawaiian Telcom Holdco, Inc.; j2 Global, Inc.; Level 3 Communications, Inc.; Premier Global Services, Inc.; SBA Communications Corporation; Vonage Holdings Corp. and Windstream Corporation.
The compensation committee believes this peer group is both reflective of where we are positioned currently as well as where we aspire to be in the future. The compensation committee recognizes that certain of the companies included in the peer group are considerably larger than us. These companies have been included because of their relevance to the industry and their offerings and because we draw from the same talent pool for employees. The compensation committee is mindful of differences in size and scope when using peer group data.

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Specific Principles for Determining Executive Compensation
Assessing the Competitiveness of Our Compensation Program
The compensation committee benchmarks executive compensation levels annually. We strive to ensure that the target total compensation opportunity for each of our executives is competitive relative to comparable positions with the peer group companies. Specifically, base salaries, annual incentives and long-term equity based incentives are all targeted at the peer group median. Both our annual and long-term incentives are structured, however, to deliver actual total compensation that may exceed the market median when the underlying performance upon which those incentives are based exceeds median performance.
Total Compensation Mix
As reflected in the following charts, a significant portion, 74% and 64%, respectively, of our CEO's and average other NEOs' target total compensation opportunity was performance-based using 2015 annual base salary, 2015 target annual incentive plan ("AIP") and 2015 long-term incentive plan ("LTIP") grants as illustrated below.
Paying for Performance
We are committed to the principle of paying for performance. Our compensation program is designed such that a significant portion of the total compensation opportunity of our executives is based on achievement of financial measures as illustrated below. For the 2015 annual incentive payout, actual achievement of $267.9 million for Pre-Bonus Adjusted EBITDA (as defined hereinafter), or 102.7% of target, resulted in payout at 40.0% for that measure compared to a target of 32.5%. The actual achievement of $44.2 million for Pre-Bonus Free Cash Flow (as defined hereinafter), or 108.3% of target, resulted in payout at 36.1% for that measure compared to a target of 32.5%.

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The table below identifies and explains the reason for each component and the method for determining amounts earned under our executive compensation program.
Element
Reason and Method for Element
Base Salary
Base salary represents "fair" pay for the performance of duties and responsibilities. The compensation committee determines the level of base salary based on compensation benchmarking, the different levels of responsibility that exist within the Company, each executive's level of experience within the communications industry and individual performance at the Company.
Annual Incentives
Under the annual incentive plan, executives may earn annual cash incentives based on short-term corporate and individual performance. The incentive opportunity motivates executives to achieve the performance objectives and goals that are consistent with our plans and budgets and that strengthen our ability to compete effectively.
Long Term Incentives/Equity Awards
The FairPoint Communications, Inc. Amended and Restated 2010 Long Term Incentive Plan (the "LTIP Plan") effective May 12, 2014 allows executives to receive stock-based awards that link the executives' interests with those of our shareholders. The value of the awards is based on the Company's performance over multi-year periods to retain and motivate key executives and encourage them to operate the Company's business with a view towards creating long-term shareholder value.
Retirement and Welfare Benefits
We maintain a 401(k) retirement savings plan. In 2015, this plan included an employer matching contribution up to an amount equal to 5% of each participant's compensation. Additionally, we provide, on equal terms for all employees, group term life insurance, group health insurance and short- and long-term disability insurance.
Post-employment, Severance and Change-in-Control Benefits
We provide severance benefits to certain NEOs at levels that we consider conservative yet competitive when compared to those offered by our peers. We believe that such benefits are necessary and appropriate in order to attract and retain qualified NEOs.
The severance benefits for these executives are generally paid if the executives are terminated without cause or they resign with good reason. In addition to cash severance payments that would be due upon a qualifying termination, each terminated executive is entitled to continued welfare benefits for a limited period after termination.
Share Ownership Guidelines
Our executive officers are subject to share ownership guidelines to better align their interests with those of our shareholders by requiring the executives to acquire and maintain meaningful equity positions in the Company. Under the guidelines, each executive officer is required to own shares of our common stock with a value equal to a multiple of the executive officer’s base salary as indicated in the table below. Executive officers are required to meet these guidelines within the later of five years of the date of adoption of these guidelines (by June 4, 2018) or of such individual becoming subject to them.
Position
 
Base Salary Multiple
Chief Executive Officer
 
4.00X
Executive Vice Presidents
 
2.25X

For executive officers, the failure to timely meet or, in certain circumstances, to show sustained progress toward timely meeting the goals set forth in the share ownership guidelines could result in a reduction of future long-term incentive equity grants and/or payment of future annual and/or long-term cash incentive payouts in the form of equity, at the discretion of the compensation committee.
No Hedging/No Pledging Provisions
Our insider trading policy prohibits the executive officers from using any strategies or products (such as derivative securities or short-selling techniques) to hedge against potential changes in the value of our common stock, prohibits the holding of our securities in a margin account and prohibits any executive officer from pledging our securities as collateral for a loan.

17



Incentive Recoupment Policy
The compensation committee has adopted a clawback policy that requires an executive officer to repay us a compensation payment or award previously made to the officer if the following conditions are met:
(1)
the payment was predicated upon achieving certain financial results that were required to be reported under the securities laws that were subsequently the subject of a restatement of our financial statements filed with the SEC due to our material noncompliance with any financial reporting requirement under the securities laws;
(2)
the compensation committee determines the officer engaged in fraud and/or intentional misconduct that caused or substantially caused the need for the restatement; and
(3)
a lower payment would have been made to the officer based upon the restated financial results.
Executive Compensation Decisions for 2015
Base Salary
The table below shows the annual base salary rates for increase from 2014 to 2015 for each NEO:
Executive (1)
 
Annual Base Salary Rate (2)
% of Base Salary Increase
2015
2014
Mr. Sunu
 
$830,000
$830,000
—%
Mr. Sabherwal
 
$408,000
$408,000
—%
Ms. Linn
 
$331,000
$331,000
—%
Mr. Nixon
 
$342,000
$342,000
—%
Mr. Tomae
 
$343,000
$343,000
—%
(1)
Mr. Amburn's employment was terminated without cause effective January 26, 2015.
(2)
There were no base salary increases for 2015. The annual base salary rate for 2014 was effective on July 1, 2014. Base salary reflected in the Realized Compensation table and the Summary Compensation table is based on the respective NEO's W-2.
Signing Bonus
Mr. Sunu received a $500,000 signing bonus during 2015 in connection with the extension of his employment agreement. Mr. Sunu's exemplary leadership over the last several years and the successful execution of our four pillar strategy, including ratification of the new collective bargaining agreements which resulted in the reduction of approximately $700 million of combined liabilities for pension and post-employment benefit plan obligations at December 31, 2015 compared to December 31, 2014, among other items, were key factors to this extension. These achievements were outside the goals covered by the annual incentive compensation award.
Annual Incentive Compensation Awards
NEOs earn annual incentive compensation based on the achievement of financial and non-financial goals established by the compensation committee each year. For 2015, the financial goals were measured by the Company's Pre-Bonus Consolidated EBITDA and Pre-Bonus Free Cash Flow and the non-financial goals included five service quality measures. In setting the 2015 financial goals, the compensation committee considered the industry-wide trends that are negatively impacting revenue (primarily for voice-related products) as well as the impact of the labor strike on financial results. The target goals for 2015 were set based on the expected post-strike business plan with stretch goals added to achieve maximum payout. Threshold was reduced from 50% payout in prior years to 25% payout for 2015.
The compensation committee believes achievement of these goals is critically important to the Company's business and strategy and will increase the value of the Company.


18



The compensation committee adopted the following challenging financial and service quality targets for the 2015 annual incentive compensation awards ($ in millions):
 
 
Weight
 
Performance Measures
 
Threshold
(25% payout)
Target
(100% payout)
Maximum
(150% payout)
 
2015 Actual
Results
2015 Results Relative to Target
Financial Measures (1)
 
32.5%
 
Pre-Bonus Consolidated EBITDA (2)
 
$
245.4

$
260.8

$
276.2

 
$
267.9

102.7% of target
 
32.5%
 
Pre-Bonus Free Cash Flow (2)
 
$
25.9

$
40.8

$
56.2

 
$
44.2

108.3% of target
Service Quality Measures (3)
 
5.0%
 
Call center abandonment rate
 
6.0
%
5.0
%
N/A

 
4.3
%
Above target
 
 
Call center calls not answered within one minute
 
10.0
%
5.0
%
N/A

 
17.9
%
Less than threshold
 
 
Installation appointments not met for Company reasons
 
12.0
%
10.0
%
N/A

 
13.1
%
Less than threshold
 
 
Mean time to repair service affecting abnormal events (in hours)
 
7

6

N/A

 
3.8

Above target
 
 
Wholesale performance credits
 
$75,000
$50,000
N/A

 
$47,573
Above target
(1)
The performance period for financial measures was January 1, 2015 through December 31, 2015.
(2)
Pre-Bonus Consolidated EBITDA and Pre-Bonus Free Cash Flow are non-GAAP financial measures used by management to measure operational and financial performance. For purposes of calculating Pre-Bonus Consolidated EBITDA, the Company adjusts net income/(loss) for interest, income taxes, depreciation and amortization, in addition to: a) the add-back of aggregate pension and other post-employment benefits ("OPEB") expense, b) the add-back (or subtraction) of the adjustment to the compensated absences accrual to eliminate the impact of changes in the accrual, c) the add-back of costs related to the reorganization, including professional fees for advisors and consultants, d) other adjustments, such as the add-back of costs and expenses, including those imposed by regulatory authorities, with respect to casualty events, acts of God or force majeure to the extent they are not reimbursed from proceeds of insurance; other non-cash items, except to the extent they will require a cash payment in a future period, including impairment charges; and other items, including facility and office closures, labor negotiation related expenses (including losses related to disruption of operations), non-cash gains/losses, non-operating dividend and interest income and other extraordinary gains/losses, e) the add-back of any bonus expense to the extent any bonuses were earned and f) Estimated Avoided Costs (as defined hereinafter). On October 17, 2014, two of our labor unions in northern New England initiated a work stoppage and returned to work on February 25, 2015. As a result, significant union employee and vehicle and other related expenses related to northern New England were not incurred between January 1, 2015 and February 24, 2015 (the "work stoppage period"). Therefore, to assist in the evaluation of the Company's operating performance without the impact of the work stoppage, the Company estimated the union employee and vehicle and other related expenses using historical data for the work stoppage period that the Company believes would have been incurred absent the work stoppage ("Estimated Avoided Costs"). Estimated Avoided Costs is a pro forma estimate only. Actual costs absent the strike may have been different. In 2015, had our incumbent workforce been in place, actual labor costs during the work stoppage period may have been higher than the $27 million recorded as Estimated Avoided Costs due to significant winter storm activity that increased our service demands. Estimated employee expenses avoided during the work stoppage period include salaries and wages, bonus, overtime, capitalized labor, benefits, payroll taxes, travel expenses and other employee related costs based on a trailing 12-month average calculated per striking employee per day during the work stoppage period less any actual expense incurred. Estimated vehicle fuel and maintenance expense savings, which resulted from the contingent workforce utilizing their own vehicles, for the work stoppage period were estimated based on a trailing 12-month average of historical costs less actual expense incurred. Pre-Bonus Free Cash Flow adjusts Pre-Bonus Consolidated EBITDA for pension contributions, OPEB payments and capital expenditures.
(3)
The performance period for service quality measures was April 1, 2015 through December 31, 2015. The period from January 1, 2015 through March 31, 2015 was impacted by the work stoppage.

19



In addition, 30% of each officer's 2015 annual incentive award was based on the officer's achieving individual or departmental goals or milestones related to the officer's areas of responsibility. The goals or milestones include certain financial milestones, legal and infrastructure development milestones, regulatory and human resources milestones and revenue and sales force development milestones. In order for any bonuses to be paid for 2015, the Company had to achieve threshold performance under both of the financial objectives (Pre-Bonus Consolidated EBITDA and Pre-Bonus Free Cash Flow) set by the compensation committee.
The table below shows the 2015 target bonus opportunity percentages, performance goals and weightings for our NEOs:
Executive
 
Bonus Target
(% of 2015 Annual Base Salary)
 
Performance Criteria
Mr. Sunu
 
100%
 
(i) 32.5%—Pre-Bonus Consolidated EBITDA; (ii) 32.5%—Pre-Bonus Free Cash Flow; (iii) 5%—the Company achieving specified service quality measures and (iv) 30%—the Company meeting certain objectives set by the board of directors.
Messrs. Sabherwal, Nixon, Tomae and Ms. Linn
 
50%
 
(i) 32.5%—Pre-Bonus Consolidated EBITDA; (ii) 32.5%—Pre-Bonus Free Cash Flow; (iii) 5%—the Company achieving specified service quality measures and (iv) 30%—the executive officer achieving certain individual or departmental goals or milestones.
Mr. Amburn*
 
N/A
 
N/A
*Mr. Amburn's employment was terminated without cause effective January 26, 2015.
The following table shows the 2015 annual incentive earned by the NEOs based on the financial and service quality results achieved, the relative weighting of each corporate performance objective (as shown above) and each NEO's individual performance rating:
 
 
Performance Achievement
 
Annual Incentive Payout
Executive
 
Financial Measures
 
Service Quality Measures
 
Individual Goals
 
$
 
As a % of Target
Mr. Sunu
 
76.1%
 
3.0%
 
28.5%
 
893,100
 
107.6%
Mr. Sabherwal
 
76.1%
 
3.0%
 
28.5%
 
219,500
 
107.6%
Ms. Linn
 
76.1%
 
3.0%
 
28.5%
 
178,100
 
107.6%
Mr. Nixon
 
76.1%
 
3.0%
 
28.5%
 
184,000
 
107.6%
Mr. Tomae
 
76.1%
 
3.0%
 
28.5%
 
184,500
 
107.6%
Mr. Amburn*
 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
*Mr. Amburn's employment was terminated without cause effective January 26, 2015.
2015 Equity Compensation Awards
The compensation committee awards long-term, equity based awards to executives to reward the NEOs for their performance and to retain and motivate them and encourage them to create long-term shareholder value. On January 22, 2015, the compensation committee approved the following equity compensation awards to our NEOs:
Executive
 
Number of Shares of Restricted Stock
 
Number of Stock Options
 
Number of Performance Shares
 
Grant Date Value ($)
 
Grant Date Value (% of Base Salary)
Mr. Sunu
 
38,000
 
65,000
 
26,000
 
$1,474,864
 
178%
Mr. Sabherwal
 
13,500
 
22,800
 
9,000
 
$518,370
 
127%
Ms. Linn
 
11,500
 
18,500
 
7,500
 
$431,362
 
130%
Mr. Nixon
 
12,500
 
19,000
 
8,000
 
$457,212
 
134%
Mr. Tomae
 
11,700
 
19,000
 
7,500
 
$438,752
 
128%
Mr. Amburn*
 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
*Mr. Amburn's employment was terminated without cause effective January 26, 2015.
The amount of equity awards for 2015 were determined by the compensation committee in its discretion, taking into account the CEO's recommendations other than with respect to the amounts awarded to the CEO. The equity grant included a mix of stock

20



options, restricted stock and performance shares. The compensation committee added performance shares to the equity grant mix in 2015 to further link pay to Company performance. The options and restricted stock are time-vested, with 25% vesting on the grant date and the remainder vesting in three equal annual installments, commencing on the first anniversary date of the grant. The performance shares will be earned, at the end of a three-year performance period, based upon (i) the Company's achievement of a growth revenue performance goal and (ii) the total shareholder return to our shareholders compared to the total shareholder return achieved by the companies in a telecommunications industry group. One share of our common stock will be distributed to the participant for each whole performance share earned by the participant. Such performance shares also vest at target upon a change in control.
Employment Agreements
Paul H. Sunu
On April 9, 2013, the Company entered into an amended and restated employment agreement with Mr. Sunu (the “2013 Employment Agreement”). The 2013 Employment Agreement entirely replaced the employment agreement entered into with Mr. Sunu when he was appointed CEO in 2010. Mr. Sunu's term of employment under the 2013 Employment Agreement will be extended automatically for successive one-year terms unless notice of termination is given by either the Company or Mr. Sunu prior to the expiration of the term of employment (including any extension thereof) pursuant to the terms of the 2013 Employment Agreement. In addition, under the 2013 Employment Agreement, Mr. Sunu is nominated annually to the board of directors of the Company (and has and will so serve, if elected). Under the 2013 Employment Agreement, Mr. Sunu will receive an annual base salary of not less than $800,000 (with any increase in excess of his base salary to occur at the Company's designated time for increases), subject to periodic review and adjustment.
On August 14, 2015, the Company and Mr. Sunu agreed upon a First Amendment (the “Sunu First Amendment”) to the 2013 Employment Agreement, which provided for a $500,000 signing bonus. Pursuant to the Sunu First Amendment, Mr. Sunu will serve as Chief Executive Officer of the Company until August 31, 2017, unless terminated sooner or renewed as provided in the 2013 Employment Agreement. The Sunu First Amendment eliminated the provision in the 2013 Employment Agreement for payment of relocation expenses upon Mr. Sunu’s termination of employment.
Mr. Sunu is eligible to participate in the benefits programs generally available to the Company's other senior executives, including the LTIP Plan, as determined at the discretion of the compensation committee of the board of directors and subject to the terms of such plan. In any year that the compensation committee determines to make a grant or grants under the LTIP Plan, the grant date value of any award to Mr. Sunu is anticipated to be no less than 1.5 times the annual base salary payable to him in effect at such time. Under the 2013 Employment Agreement, Mr. Sunu is eligible to participate in the Company's annual incentive plan and earn a performance-based bonus thereunder for annual performance periods. Mr. Sunu's target level bonus under the annual incentive plan is 100% of the base salary payable to him during the applicable performance period and, consistent with his previous employment agreement, Mr. Sunu is eligible for a maximum bonus under such plan of up to 150% of his base salary.
Under the 2013 Employment Agreement with Mr. Sunu, either party may terminate Mr. Sunu's employment at any time. Information about his potential severance pay and benefits appears under "—Potential Payments Upon Termination or Change in Control."
Ajay Sabherwal, Shirley J. Linn and Peter G. Nixon
On January 22, 2013, the Company entered into employment agreements with Messrs. Sabherwal and Nixon and Ms. Linn. The employment agreements replaced the change in control and severance agreements that the Company entered into with Mr. Sabherwal on July 19, 2010 and Ms. Linn and Mr. Nixon on March 14, 2007. In connection with the entry into the employment agreements and pursuant to the LTIP Plan, the Company granted (i) 2,000 restricted shares of the Company's common stock to each of these executives and (ii) 5,500 stock options to Mr. Sabherwal, 3,000 stock options to Mr. Nixon and 2,000 stock options to Ms. Linn, all of which vested immediately.
On August 14, 2015, the Company implemented the First Amendment (the “First Amendment”) to the 2013 employment agreements with Messrs. Sabherwal and Nixon and Ms. Linn.
Pursuant to the First Amendment, each executive will serve in their respective positions (with such title subject to change from time to time as determined by the board of directors) with the Company through December 31, 2016, subject to earlier termination or extension as set forth in the employment agreements. Following such period of employment (or the applicable extension term, if any), the executive will continue on an at will basis until such time as the Company provides a written notice of termination in accordance with the terms of his or her employment agreement.
Pursuant to the respective employment agreements, Mr. Sabherwal, Ms. Linn and Mr. Nixon will receive an annual base salary of not less than $380,000, $310,000 and $325,000, respectively. The executives are eligible to participate in the annual incentive plan and are eligible to earn a performance-based bonus thereunder. The executives are also eligible to participate in the benefits

21



programs and other plans made available generally to the Company's other senior executives, including but not limited to the LTIP Plan.
Information about the potential severance pay and benefits associated with these employment agreements appears under
"—Potential Payments Upon Termination or Change in Control" herein.
Anthony A. Tomae
The Company entered into an employment agreement with Mr. Tomae on November 15, 2012. Mr. Tomae's employment agreement set forth the terms and conditions of his employment as Executive Vice President and Chief Revenue Officer of the Company for a three-year term ending on November 15, 2015, subject to extension as set forth in his employment agreement. On August 14, 2015, the Company amended Mr. Tomae’s employment agreement, which extended the term of the agreement through December 31, 2016. Following the term of employment (or the applicable extension term, if any), Mr. Tomae was to have remained employed on an at will basis until such time as the Company provided a written notice of termination in accordance with the terms of his employment agreement. Pursuant to this employment agreement, Mr. Tomae received an annual base salary of not less than $320,000. Mr. Tomae was also eligible to participate in the annual incentive plan and was eligible to earn a performance-based bonus thereunder. He was also eligible to participate in the benefits programs and other plans made available generally to the Company's other senior executives, including but not limited to the LTIP Plan.
Mr. Tomae's employment with the Company terminated without cause effective January 29, 2016. In accordance with his employment agreement, Mr. Tomae received a separation payment which consisted of: (x) his accrued, but unpaid, base salary through the date of termination, unpaid or unreimbursed expenses and accrued and unpaid vacation pay as provided under the Company's employee benefits plans upon a termination of employment; and (y) an amount equal to the sum of (A) two times the amount of Mr. Tomae's then-current base salary, (B) two times the amount of his average annual incentive plan bonus for 2014 and 2015 where the average was determined by reference to the actual annual bonus paid to Mr. Tomae and (C) the cost of continued health and disability insurance coverage for Mr. Tomae for a period of twenty-four months following his termination. In accordance with the employment agreement, the Company did not provide any tax gross-up on the benefits paid under the agreement.
Information about the potential severance pay and benefits associated with this employment agreement appears under
"—Potential Payments Upon Termination or Change in Control" herein.
Kenneth W. Amburn
The Company entered into an employment agreement with Mr. Amburn on July 1, 2011. Mr. Amburn's employment agreement set forth the terms and conditions of his employment as Executive Vice President, Operations of the Company for a three-year term ending on July 1, 2014, subject to extension as set forth in his employment agreement. On July 1, 2014, the Company amended Mr. Amburn’s employment agreement to extend the term of the agreement through December 31, 2015. Following the term of employment (or the applicable extension term, if any), Mr. Amburn would have continued employment on an at will basis until such time as the Company provided a written notice of termination in accordance with the terms of his employment agreement. Pursuant to this employment agreement, Mr. Amburn received an annual base salary of not less than $275,000. Mr. Amburn was also eligible to participate in the annual incentive plan and was eligible to earn a performance-based bonus thereunder. He was also eligible to participate in other plans generally available to the Company's other senior executives, including but not limited to the LTIP Plan.
Mr. Amburn's employment with the Company terminated without cause effective January 26, 2015. Further information about his severance pay and benefits appears under "—Potential Payments Upon Termination or Change in Control" herein.
Tax Considerations
Section 162(m) of the Code generally disallows a tax deduction to public corporations for taxable compensation, other than performance-based compensation, over $1.0 million paid for any fiscal year to any of the Company's NEOs (excluding the Chief Financial Officer) as of the end of any fiscal year. The Company's policy is to qualify its executive program and plans for deductibility under Section 162(m) to the extent the compensation committee determines such action to be appropriate.
While the compensation committee's general policy is to preserve the deductibility of compensation paid to the NEOs, the compensation committee nevertheless authorizes payments that might not be deductible if it believes that they are in the best interests of the Company and its shareholders.

22




Realized Compensation
The SEC's calculation of total compensation, as shown in the Summary Compensation table, includes several items that are driven by accounting assumptions. In some cases, the actual compensation realized by the NEOs may be very different than what is reported in the Summary Compensation table and compensation reported may not be realized for many years, if at all. Furthermore, realized compensation for a NEO for any given year may be greater or less than the compensation reported in the Summary Compensation table for that year depending on fluctuations in stock prices on the grant and vesting dates, differences in equity grant values from year to year and SEC reporting requirements, as described below.
The primary difference between the table below (the "Realized Compensation table") and the Summary Compensation table is the method used to value restricted stock awards, stock options and performance shares. SEC rules require that the entire grant date fair value of all restricted stock awards (calculated as the fair market value of the common stock on the date of grant), stock options (estimated using the Black-Scholes option pricing model, as outlined in footnote (1) of the Summary Compensation table) and performance shares (calculated as the fair market value of the common stock on the date of grant based upon the probable outcome of performance conditions) be reported in the Summary Compensation table during the year in which they were granted. As a result, a significant portion of the total compensation amounts reported in the Summary Compensation table relates to restricted stock awards and performance shares that have not vested and stock options that have not been exercised during the year. In contrast, the Realized Compensation table below includes only the value of restricted stock awards that vested (calculated as the fair market value of the common stock on the date of vesting) and stock options that were exercised (calculated as the difference between the exercise price and the market value of the common stock on the date of exercise) during the applicable fiscal year. In addition, the Realized Compensation table below does not include any items from the "All Other Compensation" column of the Summary Compensation table, which include (1) matching contributions made by the Company to its 401(k) retirement savings plan, (2) contributions made by the Company to the term life insurance plan it sponsors and (3) relocation expense reimbursement, since in each case for subsections (1), (2) and (3) there is no cash compensation received by the NEO for these benefits, as well as (4) severance expenses, because this is not compensation received during the course of employment with the Company.

23



The Realized Compensation table below supplements the Summary Compensation table and shows compensation actually realized by each NEO in 2015, 2014 and 2013, as described above.
Executive
 
Year
 
Salary (1)
$
 
Bonus (5)
$
 
Non-Equity Incentive Plan Compensation (2)
$
 
Stock
Awards (3)
$
 
Option
Awards (4)
$
 
Total
$
Mr. Sunu (5)
 
2015
 
830,000

 
500,000

 
893,100

 
504,510

 

 
2,727,610

 
2014
 
815,000

 

 
407,500

 
706,320

 

 
1,928,820

 
2013
 
787,500

 

 
787,500

 
378,100

 

 
1,953,100

Mr. Sabherwal
 
2015
 
408,000

 

 
219,500

 
171,308

 

 
798,808

 
2014
 
401,600

 

 
100,400

 
215,940

 

 
717,940

 
2013
 
387,500

 

 
238,500

 
127,625

 

 
753,625

Ms. Linn
 
2015
 
331,000

 

 
178,100

 
128,010

 

 
637,110

 
2014
 
325,600

 

 
81,400

 
161,888

 

 
568,888

 
2013
 
315,000

 

 
193,200

 
98,080

 

 
606,280

Mr. Nixon
 
2015
 
342,000

 

 
184,000

 
150,977

 

 
676,977

 
2014
 
336,400

 

 
84,100

 
178,692

 

 
599,192

 
2013
 
328,000

 

 
200,000

 
108,723

 

 
636,723

Mr. Tomae
 
2015
 
343,000

 

 
184,500

 
334,856

 

 
862,356

 
2014
 
337,200

 

 
84,300

 
222,455

 

 
643,955

 
2013
 
325,500

 

 
200,000

 
97,875

 

 
623,375

Mr. Amburn (6)
 
2015
 
26,169

 

 

 
100,149

 
388,586

 
514,904

 
2014
 
317,954

 

 
76,826

 
175,397

 

 
570,177

 
2013
 
303,500

 

 
188,400

 
89,803

 

 
581,703

(1)
Base salary as reported on the respective NEO's W-2 and as presented in the Summary Compensation table.
(2)
For 2015, represents the performance-based compensation under the annual incentive plan earned during 2015 and paid in 2016, as presented in the Summary Compensation table.
(3)
The value of restricted stock that vested during the year, as reported on the respective NEO's W-2 and as presented in the table "Option Exercises and Stock Vested for 2015" herein (the "Option Exercises and Stock Vested for 2015 table").
(4)
The value of stock options exercised during the year, as reported on the respective NEO's W-2 and as presented in the Option Exercises and Stock Vested for 2015 table.
(5)
As described further in "Executive Compensation Decisions for 2015", Mr. Sunu received a $500,000 signing bonus. Mr. Sunu does not receive any compensation for serving on our board of directors.
(6)
Mr. Amburn's employment was terminated without cause effective January 26, 2015.

24



2015 Summary Compensation Table
The table below summarizes the total compensation paid or earned by each of the NEOs for the fiscal years ended December 31, 2015, 2014 and 2013.
Name and
Principal Position
Year
 
Salary
$
 
Bonus
$
 
Stock
Awards(1)
$
 
Option
Awards(1)
$
 
Non-Equity
Incentive
Plan
Compensation(2)
$
 
All Other
Compensation(3)
$
 
Total
$
Paul H. Sunu (4)
Director and Chief Executive Officer
2015
 
830,000

 
500,000

 
905,704

 
569,160

 
893,100

 
15,722

 
3,713,686

2014
 
815,000

 

 
738,080

 
583,075

 
407,500

 
15,664

 
2,559,319

2013
 
787,500

 

 
378,400

 
390,485

 
787,500

 
15,414

 
2,359,299

Ajay Sabherwal
Executive Vice President and Chief Financial Officer
2015
 
408,000

 

 
318,726

 
199,644

 
219,500

 
14,763

 
1,160,633

2014
 
401,600

 

 
263,600

 
198,931

 
100,400

 
14,578

 
979,109

2013
 
387,500

 

 
132,440

 
139,162

 
238,500

 
14,268

 
911,870

Shirley J. Linn
Executive Vice President, General Counsel and Secretary
2015
 
331,000

 

 
269,370

 
161,992

 
178,100

 
14,477

 
954,939

2014
 
325,600

 

 
210,880

 
161,889

 
81,400

 
14,279

 
794,048

2013
 
315,000

 

 
80,410

 
83,082

 
193,200

 
13,989

 
685,681

Peter G. Nixon
Executive Vice President, External Affairs and Operational Support
2015
 
342,000

 

 
290,842

 
166,370

 
184,000

 
14,518

 
997,730

2014
 
336,400

 

 
218,788

 
167,239

 
84,100

 
14,323

 
820,850

2013
 
328,000

 

 
122,980

 
114,238

 
200,000

 
14,049

 
779,267

Anthony A. Tomae(5)
Executive Vice President and Chief Revenue Officer
2015
 
343,000

 

 
272,382

 
166,370

 
184,500

 
14,522

 
980,774

2014
 
337,200

 

 
263,600

 
198,931

 
84,300

 
14,323

 
898,354

2013
 
325,500

 

 
85,140

 
91,390

 
200,000

 
139,882

 
841,912

Kenneth W. Amburn(6)
Former Executive Vice President, Operations
2015
 
26,169

 

 

 

 

 
936,767

 
962,936

2014
 
317,954

 

 
205,608

 
157,636

 
76,826

 
13,562

 
771,586

2013
 
303,500

 

 
104,060

 
112,161

 
188,400

 
13,281

 
721,402

(1) The amounts shown are the grant date fair value of the stock and option awards, adjusted to eliminate the effect of any forfeiture assumption in calculating stock compensation, computed in accordance with the Compensation—Stock Compensation Topic of the Accounting Standards Codification ("ASC"). In the case of performance shares, the grant date fair value is based upon the probable outcome of the performance conditions.
The grant date fair value per share of the restricted stock awards was calculated as the fair market value per share of the common stock on the date of grant.
The performance shares are based upon (i) the Company's achievement of a growth revenue performance goal (non-market portion) and (ii) the total shareholder return to our shareholders compared to the total shareholder return achieved by the companies in a telecommunications industry group (market portion). The grant date fair value of the non-market portion of the performance shares was calculated as the fair market value per share of the common stock on the date of grant. For purposes of determining compensation expense for the market portion of the performance shares, the grant date fair value was estimated using the Monte Carlo valuation model.
The grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model which requires the use of various assumptions including the expected life of the option, expected dividend rate, expected volatility and risk-free interest rate. Key assumptions used for determining the fair value of the stock options granted during 2015, 2014 and 2013 were as follows:
 
Year Ended December 31, 2015
 
Year Ended December 31, 2014
 
Year Ended December 31, 2013
Expected life (a)
5.5 - 6.5 years

 
5.5 - 6.5 years

 
5.5 - 6 years

Expected dividend (b)

 

 

Expected volatility (c)
59.6
%
 
51
%
 
45
%
Risk-free interest rate (d)
1.35% - 1.66%

 
1.63% - 2.29%

 
0.77% - 1.01%

(a)
The expected lives (estimated period of time outstanding) of stock options granted were estimated using the 'Simplified Method' which utilizes the midpoint between the vesting date and the end of the contractual term. This

25



method was utilized for the stock options due to the lack of historical exercise behavior of the Company's employees. 
(b)
For all stock options granted during 2015, 2014 and 2013, no dividends are planned to be paid over the contractual term of the stock options resulting in the use of a zero expected dividend rate. 
(c)
The expected volatility rate is based on the observed historical volatilities of our common stock and observed historical and implied volatilities of comparable companies, which were adjusted to account for the various differences between the comparable companies and us. 
(d)
The risk-free interest rate is specific to the date of grant and is based on the United States Treasury constant maturity market yields in effect at the time of the grant.
(2) These awards were granted pursuant to the annual incentive plan. The 2015 amounts were paid in March 2016.
See "—Annual Incentive Compensation Awards" for additional information.
(3) The amount shown for 2015 reflects the following for each NEO:
Name
 
401(k)(a)
 
Term life (b)
 
Severance (c)
 
Total All Other Compensation
Mr. Sunu
 
$
13,250

 
$
2,472

 
$

 
$
15,722

Mr. Sabherwal
 
$
13,250

 
$
1,513

 
$

 
$
14,763

Ms. Linn
 
$
13,250

 
$
1,227

 
$

 
$
14,477

Mr. Nixon
 
$
13,250

 
$
1,268

 
$

 
$
14,518

Mr. Tomae
 
$
13,250

 
$
1,272

 
$

 
$
14,522

Mr. Amburn
 
$
5,150

 
$
56

 
$
931,561

 
$
936,767

(a)
Reflects matching contributions made by the Company to its 401(k) retirement savings plan for each NEO.
(b)
Contributions made by the Company to the term life insurance plans it sponsors for all eligible employees (including our NEOs).
(c)
As described further in "Employment Agreements", Mr. Amburn received a separation payment in 2015.
(4) As described further in "Executive Compensation Decisions for 2015", Mr. Sunu received a $500,000 signing bonus. Mr. Sunu does not receive any compensation for serving on our board of directors.
(5) Mr. Tomae's employment was terminated without cause effective January 29, 2016.
(6) Mr. Amburn's employment was terminated without cause effective January 26, 2015.

26



Grants of Plan-Based Awards for 2015
 
 
 
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
 
Estimated Future Payouts Under Equity Incentive Plan Awards
 
All Other
Stock Awards:
Number of Shares of Stock or Units
(#)
 
All Other
Option Awards:
Number of Securities Underlying Options
(#)
 
Exercise
or Base Price
of Option Awards(5)
($/Sh)
 
Closing Market Price on Date of Option Award Grant(5)
($/Sh)
 
Grant Date
Fair Value
of Stock and Option Awards(6)
($)
Executive(1)
 
Grant
Date
 
Threshold
($)
Target
($)
Maximum
($)
 
Threshold
(#)
Target
(#)
Maximum
(#)
 
 
 
 
 
Mr. Sunu
 
5/11/2015(2)
 
207,500

830,000

1,245,000

 



 

 

 

 

 

 
1/22/2015(3)
 



 

26,000

26,000

 

 

 

 
N/A

 
333,424

 
1/22/2015(4)
 



 



 

 
65,000

 
14.73

 
15.06

 
569,160

 
1/22/2015(4)
 



 



 
38,000

 

 

 
N/A

 
572,280

Mr. Sabherwal
 
5/11/2015(2)
 
51,000

204,000

306,000

 



 

 

 

 

 

 
1/22/2015(3)
 



 

9,000

9,000

 

 

 

 
N/A

 
115,416

 
1/22/2015(4)
 



 



 

 
22,800

 
14.73

 
15.06

 
199,644

 
1/22/2015(4)
 



 



 
13,500

 

 

 
N/A

 
203,310

Ms. Linn
 
5/11/2015(2)
 
41,375

165,500

248,250

 



 

 

 

 

 

 
1/22/2015(3)
 



 

7,500

7,500

 

 

 

 
N/A

 
96,180

 
1/22/2015(4)
 



 



 

 
18,500

 
14.73

 
15.06

 
161,992

 
1/22/2015(4)
 



 



 
11,500

 

 

 
N/A

 
173,190

Mr. Nixon
 
5/11/2015(2)
 
42,750

171,000

256,500

 



 

 

 

 

 

 
1/22/2015(3)
 



 

8,000

8,000

 

 

 

 
N/A

 
102,592

 
1/22/2015(4)
 



 



 

 
19,000

 
14.73

 
15.06

 
166,370

 
1/22/2015(4)
 



 



 
12,500

 

 

 
N/A

 
188,250

Mr. Tomae
 
5/11/2015(2)
 
42,875

171,500

257,250

 



 

 

 

 

 

 
1/22/2015(3)
 



 

7,500

7,500

 

 

 

 
N/A

 
96,180

 
1/22/2015(4)
 



 



 

 
19,000

 
14.73

 
15.06

 
166,370

 
1/22/2015(4)
 



 



 
11,700

 

 

 
N/A

 
176,202

(1)
Mr. Amburn's employment was terminated without cause effective January 26, 2015.
(2)
See "—Annual Incentive Compensation Awards" and the Summary Compensation table for additional information. Amounts represent potential payouts under the annual incentive plan based on a percentage of 2015 annual base salary assuming achievement of the financial and service quality targets as follows: 25% for threshold, 100% for target and 150% for maximum. The actual amounts under the annual incentive plan for 2015 for Messrs. Sunu, Sabherwal, Nixon and Tomae and Ms. Linn were paid in March 2016 and are indicated in the Summary Compensation table.
(3)
These performance shares were granted under the LTIP Plan and will be earned, at the end of a three-year performance period, based upon (i) the Company's achievement of a growth revenue performance goal and (ii) the total shareholder return to our shareholders compared to the total shareholder return achieved by the companies in a telecommunications industry group.
(4)
These restricted stock awards and stock options were granted under the LTIP Plan and are time-vested. 25% vested on the grant date with the remainder vesting in equal installments on January 22, 2016, January 23, 2017 and January 22, 2018.
(5)
Exercise price of stock options is calculated as the average of the low and high market value of our common stock on the date of grant.
(6)
Reflects the grant date fair value of stock and option awards based on the number of awards included in the grant and the fair value of the awards at the date of grant, as determined in accordance with the Compensation—Stock Compensation Topic of the ASC. In the case of restricted stock this amount is equal to the number of restricted shares issued multiplied by the market value of our common stock on the date of grant. In the case of performance shares, the grant date fair value is based upon the probable outcome of the performance conditions. See note (1) to the Summary Compensation table for more information on the assumptions used.

27



Outstanding Equity Awards at December 31, 2015
 
 
 
 
Option Awards
 
Stock Awards
Executive(1)
 
Grant Date
 
Number of Securities Underlying Unexercised Options (2)
(#)
Exercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (2)
(#)
Option Exercise
 Price (3)
($)
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested(4)
(#)
Market Value of Shares or Units of Stock That Have Not Vested(5)
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (6)
(#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (7)
($)
Mr. Sunu
 
1/22/2015
 




 
28,500

457,995



 
1/22/2015
 
16,250

48,750

14.73

1/22/2025

 




 
1/22/2015
 




 


26,000

417,820

 
1/22/2014
 




 
28,000

449,960



 
1/22/2014
 
42,500

42,500

13.29

1/22/2024

 




 
1/22/2013
 




 
10,000

160,700



 
1/22/2013
 
70,500

23,500

9.36

1/22/2023

 




 
1/24/2012
 
48,000


4.56

1/24/2022

 




 
1/24/2011
 
125,000


24.29

1/24/2021

 




Mr. Sabherwal
 
1/22/2015
 




 
10,125

162,709



 
1/22/2015
 
5,700

17,100

14.73

1/22/2025

 




 
1/22/2015
 




 


9,000

144,630

 
1/22/2014
 




 
10,000

160,700



 
1/22/2014
 
14,500

14,500

13.29

1/22/2024

 




 
1/22/2013
 




 
3,000

48,210



 
1/22/2013
 
26,500

7,000

9.36

1/22/2023

 




 
1/24/2012
 
15,500


4.56

1/24/2022

 




 
1/24/2011
 
42,000


24.29

1/24/2021

 




Ms. Linn
 
1/22/2015
 




 
8,625

138,604



 
1/22/2015
 
4,625

13,875

14.73

1/22/2025

 




 
1/22/2015
 




 


7,500

120,525

 
1/22/2014
 




 
8,000

128,560



 
1/22/2014
 
11,800

11,800

13.29

1/22/2024

 




 
1/22/2013
 




 
1,625

26,114



 
1/22/2013
 
15,500

4,500

9.36

1/22/2023

 




 
1/24/2012
 
13,000


4.56

1/24/2022

 




 
1/24/2011
 
33,000


24.29

1/24/2021

 




Mr. Nixon
 
1/22/2015
 




 
9,375

150,656



 
1/22/2015
 
4,750

14,250

14.73

1/22/2025

 




 
1/22/2015
 




 


8,000

128,560

 
1/22/2014
 




 
8,300

133,381



 
1/22/2014
 
12,190

12,190

13.29

1/22/2024

 




 
1/22/2013
 




 
2,750

44,193



 
1/22/2013
 
21,375

6,125

9.36

1/22/2023

 




 
1/24/2012
 
13,000


4.56

1/24/2022

 




 
1/24/2011
 
33,000


24.29

1/24/2021

 





28



 
 
 
 
Option Awards
 
Stock Awards
Executive(1)
 
Grant Date
 
Number of Securities Underlying Unexercised Options (2)
(#)
Exercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (2)
(#)
Option Exercise
 Price (3)
($)
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested(4)
(#)
Market Value of Shares or Units of Stock That Have Not Vested(5)
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (6)
(#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (7)
($)
Mr. Tomae
 
1/22/2015
 




 
8,775

141,014



 
1/22/2015
 
4,750

14,250

14.73

1/22/2025

 




 
1/22/2015
 




 


7,500

120,525

 
1/22/2014
 




 
10,000

160,700



 
1/22/2014
 
14,500

14,500

13.29

1/22/2024

 




 
1/22/2013
 




 
2,250

36,158



 
1/22/2013
 
16,500

5,500

9.36

1/22/2023

 




 
5/30/2012
 
26,000


5.29

5/30/2022

 




(1)
No unvested stock options or stock awards were outstanding at December 31, 2015 for Mr. Amburn.
(2)
These stock options were granted under the LTIP Plan. Refer to "—Grants of Plan-Based Awards for 2015" for vesting details of the January 22, 2015 grant. The stock options shown for the January 22, 2014, January 22, 2013, January 24, 2012 and January 24, 2011 grants are time-vested. 25% vested on the grant date with the remainder vesting in three annual installments of 25%, commencing on or about the first anniversary date of the grant, except the following granted on January 22, 2013: 5,500 stock options for Mr. Sabherwal, 2,000 stock options for Ms. Linn and 3,000 stock options for Mr. Nixon, that vested 100% on the grant date. The stock options shown for the May 30, 2012 grant were time-vested, vesting in three equal annual installments, commencing on the first anniversary date of the grant.
(3)
The exercise price is calculated as the average of the low and high market value of our common stock on the date of grant.
(4)
These stock awards were granted under the LTIP Plan. Refer to "—Grants of Plan-Based Awards for 2015" for vesting details of the January 22, 2015 grant. The stock awards shown for the January 22, 2014 and January 22, 2013 grants are time-vested. 25% vested on the grant date with the remainder vesting in three annual installments of 25%, commencing on or about the first anniversary date of the grant.
(5)
Computed by multiplying the number of unvested shares by $16.07, the market closing price of our common stock on December 31, 2015.
(6)
These performance share awards were granted under the LTIP Plan. Refer to "—Grants of Plan-Based Awards for 2015" for vesting details of the January 22, 2015 grant.
(7)
Computed by multiplying the number of unvested shares by $16.07, the market closing price of our common stock on December 31, 2015.

29



Option Exercises and Stock Vested for 2015
 
 
Option Awards
 
Stock Awards
Executive
 
Number of Shares Acquired on Exercise
(#)
 
Value Realized on Exercise(1)
($)
 
Number of Shares Acquired on Vesting
(#)
 
Value Realized on Vesting (2)
($)
Mr. Sunu
 

 

 
33,500

 
504,510

Mr. Sabherwal
 

 

 
11,375

 
171,308

Ms. Linn
 

 

 
8,500

 
128,010

Mr. Nixon
 

 

 
10,025

 
150,977

Mr. Tomae
 

 

 
19,175

 
334,856

Mr. Amburn
 
44,740

 
388,586

 
6,650

 
100,149

(1)
Value realized by Mr. Amburn is computed by multiplying the number of shares acquired upon exercise by the difference between the market price of the underlying securities on the exercise date ($17.66) and the strike price of the stock options (20,250 at $9.36, 13,000 at $4.56 and 11,490 at $13.29).
(2)
Value realized is computed by multiplying the number of shares acquired upon vesting by the market price of the underlying securities on the vesting date of January 22, 2015 at $15.06 for all shares except 9,000 shares for Mr. Tomae which vested on May 30, 2015 at $20.18.
Potential Payments Upon Termination or Change in Control
As of December 31, 2015, we had employment agreements with Messrs. Sunu, Sabherwal, Nixon and Tomae and Ms. Linn. The employment agreements provide benefits to our NEOs in the event their employment is terminated under certain circumstances as summarized below. In addition, as described below, we had an employment agreement with Mr. Amburn, whose employment terminated without cause effective January 26, 2015, pursuant to which Mr. Amburn received certain benefits upon such termination.
Employment Agreements
Paul H. Sunu
The Company entered into the 2013 Employment Agreement with Mr. Sunu, as amended on August 14, 2015. Under the 2013 Employment Agreement, in the event (a) the Company terminates Mr. Sunu's employment without cause (as defined in the 2013 Employment Agreement), (b) the term of employment under the Employment Agreement expires following the Company's delivery of a non-extension notice or (c) Mr. Sunu resigns his employment for good reason (as defined in the 2013 Employment Agreement), Mr. Sunu is entitled to receive (i) any accrued but unpaid base salary through the date of the termination, any unpaid annual incentive plan bonus (in respect of any completed fiscal year that has ended prior to the date of the termination of Mr. Sunu's employment), any unpaid or unreimbursed expenses and any benefits to be provided under the Company's employee benefits plans upon a termination of employment; and (ii) an amount equal to the sum of (A) two times the amount of Mr. Sunu's then-current base salary, (B) two times the amount of his average annual incentive plan bonus; and (C) the cost of continued health and disability insurance coverage for Mr. Sunu and his covered dependents for a period of 24 months. Mr. Sunu will also be entitled to any (x) amounts payable under the LTIP Plan (in accordance with its terms) and (y) a pro rata portion of the annual incentive plan bonus for the year in which the termination occurred. The amount of Mr. Sunu's average annual incentive plan bonus will be determined based on Mr. Sunu's actual annual incentive plan bonus in the two years immediately preceding the year in which termination occurs.
In addition, upon termination of his employment under the circumstances described in (a), (b) and (c) of the preceding paragraph, Mr. Sunu is entitled to immediate accelerated vesting of (i) the next tranche of any time-based equity award that would have otherwise vested except for the termination or receipt of a non-extension notice and (ii) any performance-based equity award, if, in the discretion of the compensation committee, the performance vesting criteria have been met as of the date of termination, prorated for the time employed during the performance period prior to the date of termination or receipt of a non-extension notice. The benefits and payments described in this and the preceding paragraph are subject to adjustment in the event that Mr. Sunu's employment is terminated by the Company without cause (other than due to his death or disability) within 12 months before or 12 months after a change in control (as defined in the 2013 Employment Agreement). The amount of Mr. Sunu's bonus upon termination related to a change in control will be the greater of (B) of the preceding paragraph or two times his target annual incentive plan bonus for the year in which the termination occurred. Also upon the occurrence of a change in control, Mr. Sunu's unvested benefits under the LTIP Plan are accelerated and vest in full.

30



Pursuant to the 2013 Employment Agreement, in the event that Mr. Sunu's employment is terminated (a) by the Company with cause, (b) by Mr. Sunu without good reason or (c) upon the expiration of the term of employment following delivery by Mr. Sunu to the Company of a non-extension notice, Mr. Sunu is entitled to (x) any accrued but unpaid base salary through the date of the termination of Mr. Sunu's employment, (y) any unpaid or unreimbursed expenses and (z) any benefits to be provided under the Company's employee benefits plans (in accordance with the terms of such plans). Mr. Sunu will also be entitled to amounts payable under the LTIP Plan (in accordance with its terms). However, Mr. Sunu will be entitled to receive the payments and benefits as provided by the 2013 Employment Agreement for termination by Mr. Sunu for good reason, subject to the same conditions as those under such circumstances, in the event that Mr. Sunu provides the Company with notice of his termination of employment without good reason during the 13th month following the consummation of a change in control.
In the event that Mr. Sunu's employment is terminated due to death or disability, Mr. Sunu or his estate or his beneficiaries, as the case may be, are entitled to (i) any accrued but unpaid base salary through the date of the termination of Mr. Sunu's employment, (ii) any unpaid annual incentive plan bonus (in respect of any completed fiscal year that has ended prior to the date of the termination of Mr. Sunu's employment), (iii) any unpaid or unreimbursed expenses, (iv) any benefits to be provided under the Company's employee benefits plans (in accordance with such plans), (v) amounts payable under the LTIP Plan (in accordance with its terms) and (vi) an amount equal to the sum of (x) Mr. Sunu's then-current base salary, (y) Mr. Sunu's annual incentive plan bonus for the immediately preceding fiscal year and (z) the cost of continued health and disability insurance coverage for Mr. Sunu and his covered dependents during the 12-month period following the date of such termination.
The payment of any amount or provision of any benefit, subject to certain exceptions set forth in the 2013 Employment Agreement, is conditioned upon Mr. Sunu's execution and delivery to the Company of a release of all claims against, among other parties, the Company and its subsidiaries, in connection with those termination circumstances under the 2013 Employment Agreement requiring a release. In addition, Mr. Sunu's entitlement to payments and benefits upon termination under the 2013 Employment Agreement is subject to his compliance with a non-interference agreement with the Company, pursuant to which Mr. Sunu agrees to, among other things, certain non-competition and non-solicitation provisions for 24 months following the termination of his employment with the Company.
Ajay Sabherwal, Shirley J. Linn, Peter G. Nixon and Anthony A. Tomae
Under the employment agreements with each of the above named executives, as amended on August 14, 2015, either party may terminate the executive's employment at any time. In the event (i) the Company terminates the executive's employment without cause (as defined in the employment agreements) prior to the expiration of the term of employment, (ii) the Company delivers a termination notice to the executive in accordance with the provisions of his or her employment agreement or (iii) the executive resigns his or her employment for good reason (as defined in the employment agreements), the executive will receive: (x) any accrued but unpaid base salary through the date of the termination, any unpaid annual incentive plan bonus (in respect of any completed fiscal year that has ended prior to the date of the termination of the executive's employment), any unpaid or unreimbursed expenses, any benefits to be provided under the Company's employee benefits plans upon a termination of employment and any amounts payable under the LTIP Plan; and (y) an amount equal to the sum of (A) two times the amount of the executive's then-current base salary, (B) two times the amount of his or her average annual incentive plan bonus for the immediately preceding two fiscal years where such average is determined by reference to the actual annual bonus paid to the executive for the immediately two preceding fiscal years; and (C) the cost of continued health and disability insurance coverage for the executive and his or her covered dependents for a period of 24 months following such termination or resignation, as applicable. In the case of (iii) above, the executive is also entitled to accelerated vesting of the next tranche of awards payable under the LTIP Plan. The employment agreements do not require the Company to provide any tax gross-up on the benefits paid under the employment agreements.
In the event the Company terminates the executive's employment without cause (as defined in the employment agreements) or the Company delivers a termination notice to the executive, in either case after the expiration of the term of employment, the executive will receive: (i) any accrued but unpaid base salary through the date of the termination, (ii) any unpaid or unreimbursed expenses, (iii) any benefits to be provided under the Company's employee benefits plans and (iv) any amounts payable under the LTIP Plan. However, if such termination occurs within six months of a change in control, the executive is also entitled to any unpaid annual incentive plan bonus (in respect of any completed fiscal year that has ended prior to the date of the termination of the executive's employment) and each of the payments and benefits described in (A) and (C) in the immediately preceding paragraph. The amount of the executive's bonus upon termination related to a change in control will be the greater of (B) in the preceding paragraph or two times his or her target annual incentive plan bonus for the year in which the termination occurred.
In the event that the executive's employment is terminated due to death or disability, the executive or his or her estate or his or her beneficiaries, as the case may be, is entitled to (i) any accrued but unpaid base salary through the date of the termination of the executive's employment, (ii) any unpaid annual incentive plan bonus (in respect of any completed fiscal year that has ended prior to the date of the termination of the executive's employment), (iii) any unpaid or unreimbursed expenses, (iv) any benefits

31



to be provided under the Company's employee benefits plans (in accordance with such plans) and (v) any amounts payable under the LTIP Plan.
In the event that the executive's employment is terminated (i) by the Company with cause, (ii) by the executive without good reason or (iii) upon the delivery by the executive to the Company of a termination notice pursuant to the terms of his or her employment agreement, the executive is entitled to any accrued but unpaid base salary through the date of the termination of the executive's employment, any unpaid or unreimbursed expenses, any benefits to be provided under the Company's employee benefits plans upon a termination of employment (in accordance with the terms of such plans) and any amounts payable under the LTIP Plan.
Upon the occurrence of a change in control, all of the executives' unvested benefits under the LTIP Plan are accelerated and vest in full.
The executive's entitlement to payments and benefits under his or her employment agreement is subject to his or her compliance with a non-interference agreement with the Company, pursuant to which the executive agrees to, among other things, certain non-competition and non-solicitation provisions for 12 months following his or her employment with the Company.
In addition, in the event that (i) the executive's employment is terminated due to death or disability, (ii) the Company terminates the executive's employment without cause, (iii) the Company delivers a termination notice prior to the expiration of the executive's term of employment pursuant to the provisions of the employment agreement, or (iv) the executive terminates his or her employment with good reason in accordance with his or her employment agreement, the payment of any amount or provision of any benefit in connection therewith is conditioned upon the executive's execution and delivery to the Company of a release of all claims, subject to certain exceptions set forth in the employment agreements.
Mr. Tomae’s employment with the Company terminated without cause effective January 29, 2016. The benefits and payments provided to him in connection with such termination were provided pursuant to his employment agreement. As a result of Mr. Tomae's termination, he was entitled to and received the payments and benefits set forth above in connection with his termination. In accordance with his employment agreement, the Company did not provide any tax gross-up on the benefits paid under the agreement.
Kenneth W. Amburn
Mr. Amburn's employment with the Company terminated without cause effective January 26, 2015. The benefits and payments provided to him in connection with such termination were provided pursuant to his employment agreement with the Company dated as of July 1, 2011, as amended on July 1, 2014.
In accordance with his employment agreement, Mr. Amburn received a separation payment which consisted of: (x) his accrued, but unpaid, base salary through the date of termination, unpaid or unreimbursed expenses and accrued and unpaid vacation pay as provided under the Company's employee benefits plans upon a termination of employment; and (y) an amount equal to the sum of (A) two times the amount of Mr. Amburn's then-current base salary, (B) two times the amount of his average annual incentive plan bonus for 2013 and 2014 where the average was determined by reference to the actual annual bonus paid to Mr. Amburn and (C) the cost of continued health and disability insurance coverage for Mr. Amburn for a period of twenty-four months following his termination. In accordance with his employment agreement, the Company did not provide any tax gross-up on the benefits paid under the agreement.
Mr. Amburn's entitlement to payments and benefits under his employment agreement were subject to his compliance with a non-interference agreement with the Company, pursuant to which Mr. Amburn agreed to, among other things, certain non-competition and non-solicitation provisions for twelve months following his employment with the Company and a general release of claims.
Potential Post-Employment Payments Table
The following table shows cash compensation and other benefits that would have been provided under the employment agreements with the CEO if his employment had terminated on December 31, 2015 under conditions that would trigger payments.

32



Reason for Payment
 
Base
Salary(1)
($)
 
Non-Equity Incentive Plan(2)
($)
 
Acceleration and Continuation of Equity Awards(3)
($)
 
Continuation of Medical/Welfare Benefits(4)
($)
 
Total
Termination
Benefits
($)
Mr. Sunu
 
 
 
 
 
 
 
 
 
 
Involuntary termination with cause or voluntary termination without good reason
 

 

 

 

 

Death or disability
 
830,000

 
407,500

 
1,446,463

 
17,092

 
2,701,055

Expiration following non-extension notice
 
1,660,000

 
1,195,000

 
139,273

 
34,185

 
3,028,458

Termination without cause or voluntary termination with good reason
 
1,660,000

 
1,195,000

 
916,153

 
34,185

 
3,805,338

Termination after change in control
 
1,660,000

 
1,660,000

 
1,827,635

 
34,185

 
5,181,820


(1)
Other than for Mr. Sunu's death or disability, the base salary paid upon termination under the applicable scenario is calculated as two times the 2015 base salary. In the event of Mr. Sunu's death or disability, the base salary paid upon termination is equal to his 2015 base salary.
(2)
Other than for Mr. Sunu's death or disability, the incentive paid upon termination under the applicable scenario is calculated as two times the average of the annual incentive paid for the immediately two preceding fiscal years (fiscal years 2014 and 2013), except in the case of termination due to a change in control, which is the greater of the average annual incentive paid for the immediately two preceding fiscal years or two times the annual incentive target. In the event of Mr. Sunu's death or disability, the incentive is equal to his annual incentive paid for the immediately preceding fiscal year (fiscal year 2014).
(3)
The amounts are calculated based on the closing price of $16.07 on December 31, 2015 under the applicable scenario. In the event of Mr. Sunu's death or disability, the amount is calculated for full vesting of stock awards, the next tranche for option awards and a prorated amount for performance share awards pursuant to the LTIP Plan. In the event of Mr. Sunu's receipt of a non-extension notice, the amount is calculated for a prorated amount for performance awards. In the event of Mr. Sunu's termination without cause or voluntary termination with good reason, the amount is calculated for the next tranche of stock and option awards and a prorated amount for performance awards. In the case of termination related to a change in control, the amount is calculated for full vesting of all unvested awards.
(4)
Other than for Mr. Sunu's death or disability, the cost of continued health and disability insurance coverage paid upon termination under the applicable scenario is calculated at the present value of 24 months of benefits. In the event of Mr. Sunu's death or disability, the amount is calculated at the present value of 12 months of benefits.
The following table shows cash compensation and other benefits that would have been provided under the employment agreements with the other NEOs if their employment had terminated on December 31, 2015 under conditions that would trigger payments, other than Mr. Amburn. The information set forth in the table below with respect to Mr. Amburn shows the cash compensation and other benefits provided to him in connection with the termination of his employment with the Company without cause effective January 26, 2015.


33



Reason for Payment
 
Base
Salary(1)
($)
 
Non-Equity Incentive Plan(2)
($)
 
Acceleration and Continuation of Equity Awards(3)
($)
 
Continuation of Medical/Welfare Benefits(4)
($)
 
Total
Termination
Benefits
($)
Mr. Sabherwal
 
 
 
 
 
 
 
 
 
 
Involuntary termination with cause or voluntary termination without good reason
 

 

 

 

 

Death or disability
 

 

 
494,592