FairPoint Communications 2010 Annual Report Download - page 145

Table of Contents
Sunu. Accordingly, effective as of August 24, 2010, Mr. Hauser resigned as the Company’s Chairman and Chief Executive Officer and as a director and
became a consultant to the Company. In addition, effective as of August 24, 2010, the Board appointed Mr. Sunu to serve as the Company’s Chief Executive
Officer and as a director and the Company and Mr. Sunu entered into the employment agreement.
The consulting agreement sets forth the terms and conditions of Mr. Hauser’s retention as a consultant by the Company for a term commencing on
August 24, 2010 and expiring on the Effective Date. Pursuant to the consulting agreement, Mr. Hauser received a cash consulting fee of $3,450,000 and a one-
time grant following the Effective Date of 66,794 shares of the reorganized Company’s common stock pursuant to the terms of the New Long Term Incentive
Plan. The shares were fully vested on the date of grant. In addition, pursuant to the consulting agreement, Mr. Hauser was eligible to continue participating in
the Company’s health insurance plan for a period of ninety days and thereafter received a cash payment equal to the cost of COBRA medical insurance, group
life insurance and long-term disability insurance coverage for an additional period of two years.
The employment agreement sets forth the terms and conditions of Mr. Sunu’s employment as Chief Executive Officer of the Company for a three-year term
commencing on August 24, 2010. Pursuant to the Employment Agreement, Mr. Sunu will receive an annual base salary of $750,000 and a one-time signing
bonus of $500,000. Mr. Sunu will also be eligible to participate in the Company’s annual incentive plan and eligible to earn a performance-based bonus
thereunder for annual performance periods beginning in calendar year 2011. Mr. Sunu’s maximum bonus under the annual incentive plan will be 150% of the
base salary payable to him during the applicable performance period.
Following the Effective Date, Mr. Sunu was granted 120,000 restricted shares of the reorganized Company’s common stock and options to purchase
125,000 shares of such common stock. The exercise price of the stock options will be equal to the lesser of (i) $36.03 per share or (ii) the weighted average
trading price of a share of common stock for the first 20 trading days following the Effective Date, but in no event less than $19.28 per share. The exercise
price of the stock options was set at $24.29 in accordance with the New Long Term Incentive Plan agreement. Twenty-five percent of each of the restricted
shares and the options were vested as of the date of grant, and the remaining restricted shares and options will vest thereafter in three substantially equal
vesting tranches on each of the first three anniversaries of the Effective Date, subject to Mr. Sunu’s continued employment with the Company through each
such vesting date.
Mr. Sunu also participated in the FairPoint Communications, Inc. 2010 Success Bonus Plan and was eligible for a success bonus equal to fifty percent of
his annual base salary if the Company performs at Target performance levels, as such Target is defined under the Success Bonus Plan approved by the
Bankruptcy Court. Mr. Sunu received a payment in accordance with the Success Bonus Plan in February 2011.
Mr. Sunu will be eligible to participate in the benefits programs generally available to the Company’s other senior executives.
Tax Considerations
Section 162(m) of the Internal Revenue Code (the “Code”) generally disallows a tax deduction to public corporations for compensation, other than
performance based compensation, over $1.0 million paid for any fiscal year to any of the corporation’s Chief Executive Officer and three other highly
compensated executive officers as of the end of any fiscal year. The Company’s policy is to qualify its executive officers for deductibility under Section
162(m) to the extent the compensation committee determines such to be appropriate. In 2010, compensation did not exceed the deductibility limits of Section
162(m) for any NEO. The compensation committee remains aware of the Code Section 162(m) limitations and the available exemptions and special rules, and
will address the issue of 162(m) deductibility when and if circumstances warrant the use of such exemptions or other considerations.
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