AUDIT COMMITTEE REPOR
T
The Audit Committee of the Board (the “Audit Committee”) consists of Kurt M. Cellar (Chairman), Steven C. Oldham, and Meredith J. Ching. Each member of the Audit Committee meets the definition of “independent director” and otherwise qualifies to be a member of the Audit Committee under the NASDAQ rules.
The Audit Committee’s general role is to assist the Board in monitoring the Company’s financial reporting process and related matters. Its specific responsibilities are set forth in its charter. The Audit Committee reviews its charter annually. The charter was last reviewed in March 2017 and is available through the “Investor Relations” link on our website at
www.hawaiiantel.com
.
As required by the charter, the Audit Committee reviewed the Company’s audited financial statements for the fiscal year ended December 31, 2016, and met with management, as well as with representatives of Deloitte, the Company’s independent registered public accounting firm, to discuss the financial statements. The Audit Committee also discussed with members of Deloitte the matters required to be discussed by applicable Public Company Accounting Oversight Board and Securities and Exchange Commission rules.
In addition, the Audit Committee received the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte’s communications with the Audit Committee concerning independence and discussed with members of Deloitte its independence from management and the Company.
Based on these discussions, the financial statement review and other matters it deemed relevant, the Audit Committee recommended to the Board that the Company’s audited financial statements for 2016 be included in the Company’s proxy statement and Annual Report on Form 10‑K for the year ended December 31, 2016.
Furthermore, in connection with the standards for independence promulgated by the Securities and Exchange Commission, the Audit Committee reviewed the services provided by Deloitte, the fees the Company paid for these services, and whether the provision of the services is compatible with maintaining the independence of the independent registered public accounting firm. The Audit Committee deemed that the provision of the services is compatible with maintaining that independence.
The Audit Committee has selected Deloitte to be the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017. In doing so, the Audit Committee considered the results from its review of Deloitte’s independence, including (a) all relationships between Deloitte and the Company and any disclosed relationships or services that may impact Deloitte’s objectivity and independence, (b) Deloitte’s performance and qualification as an independent registered public accounting firm, and (c) the regular rotation of Deloitte’s engagement audit partner, as required by applicable laws and regulations. As a matter of good corporate governance, the Audit Committee has determined to submit its selection of Deloitte to the stockholders for ratification. In the event that a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter do not ratify this selection, the Audit Committee will review its future appointment of Deloitte.
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Kurt M. Cellar, Chairman
Meredith J. Ching
Steven C. Oldham
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2016 Financial Performance and Executive Compensation
In 2016, our senior management continued to make progress executing our strategic plan, including investing in the key growth areas of our business, the ultimate goal of which is to increase stockholder value. Reflecting such progress, we recorded our seventh consecutive year of profitability since becoming a public company. During 2016, we continued to focus on expanding the reach and density of our fiber network, launching innovative IP-based products and services, and improving operational efficiencies. As a result, we believe we have strengthened our competitive position as a next-generation communications company, highlighted in 2016 by the 11% growth in key, new services revenue, which largely offset the declines in our consumer and business legacy services. Over the last three years consumer and business strategic revenue has grown 66%, while revenue from Hawaiian Telcom TV, our IPTV service, more than tripled to a $43 million annualized revenue stream that continues to grow. Hawaiian Telecom now has over 200,000 fiber-enabled homes on Oahu eligible for next-generation broadband services. The Company has fiber enabled over 7,000 business, 1,100 commercial buildings and 500 cell towers throughout the state.
Executive Compensation Philosophy
The telecommunications industry is a highly‑technical and competitive industry, which requires the Company to compete for qualified executives. To succeed in recruiting and retaining qualified executives, the Compensation Committee must offer a compensation program that is competitive and will attract, retain, and motivate highly‑skilled executives. The compensation plan aligns our executives’ interests with the interests of stockholders. The plan is designed to achieve our financial and strategic objectives by tying a substantial portion of executives’ annual and long‑term compensation to meeting meaningful performance objectives. The Compensation Committee considers data from surveys conducted by its compensation consultant in determining the appropriate allocation of our executives’ total compensation among annual base salary, annual cash performance compensation, and long‑term, equity‑based compensation. Our Compensation Committee seeks to target total direct compensation, on average, at the 50
th
percentile (median) based on competitive survey and peer company data provided by its compensation consultant.
Executive Compensation Process
Role of the Compensation Committee
The Compensation Committee is responsible for establishing our executive compensation philosophy and administering our executive compensation program, including reviewing and approving the compensation of our Named Executive Officers. It also has the responsibility to assess the compensation policies and practices for all employees to determine if they create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee regularly consults with and reports to our full Board of Directors on its deliberations and actions.
Currently, the Compensation Committee consists of three members of the Board of Directors, Mr. Oldham (Chairman), Mr. Dods and Ms. Ching. Our Board of Directors determined that each member of our Compensation Committee was and remains a non‑employee director for purposes of Rule 16b‑3 under the Exchange Act and an independent director as that term is defined under the NASDAQ rules.
The Compensation Committee reviews our executive compensation program on a periodic basis to determine whether it is appropriate, properly coordinated, and achieves its intended purposes.
Role of Management
In carrying out its responsibilities, our Compensation Committee works with our Chief Executive Officer and the senior management team to obtain information such as Company and individual performance, market data, and management’s perspective and recommendations on compensation matters. Typically, our Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of executives other than himself and attends Compensation Committee and Board meetings at which such compensation matters are discussed (other than those portions of such meetings involving his own compensation).
Role of Compensation Consultant
The Compensation Committee has the authority to retain the services of compensation consultants and other advisors as it deems necessary or appropriate, to establish and administer compensation and employee benefit plans, policies and programs. In February 2013, pursuant to the request of the Compensation Committee, Pay Governance completed its evaluation of the competitiveness and effectiveness of the total compensation package offered to our executives, including our Named Executive Officers (the “2013 Report”). In December 2014, Pay Governance provided an updated Bi‑Annual Executive Compensation review (the “2014 Updated Report”) including a market review and recommendations for 2015 for the base salaries, short-term performance compensation and long‑term equity compensation programs, as well as a review of, and recommendations for, 2015 regarding annual incentive plan design, performance measures and performance ranges. The Compensation Committee also based its recommendations on 2016 base salaries, performance compensation payments and long‑term equity compensation programs on the 2014 Updated Report. Pay Governance serves at the discretion of the Compensation Committee and does not advise the Company on any other matters.
Use of Competitive Data
The 2013 Report compared the pay levels for 13 executive positions to competitive market data from the Towers Watson 2011/2012 Survey Report on Top Management Compensation and to publicly‑reported compensation at the following peer telecommunications companies: Alaska Communications Systems Group Inc., CenturyLink, Inc., Consolidated Communications Holdings Inc., FairPoint Communications Inc., Frontier Communications Corporation, General Communication Inc., NTELOS Holdings Corp., USA Mobility, Inc., and Windstream Corporation. The 2014 Updated Report compared the pay levels for 11 executive positions to competitive market data from the Towers Watson 2013/2014 Survey Report on Top Management Compensation and to publicly‑reported compensation at the following peer telecommunications companies: Alaska Communications Systems Group Inc., Atlantic Tele‑Network, Inc., Cogent Communications Holdings, Inc., Consolidated Communications Holdings Inc., FairPoint Communications Inc., General Communication Inc., Inteliquent, Inc., Iridium Communications Inc., Lumos Networks Corp., NTELOS Holdings Corp., Premiere Global Services, Inc., Shenandoah Telecommunications Co., Spok Holdings, Inc., and Vonage Holdings Corporation. The Compensation Committee reviews the peer group periodically and makes adjustments to its composition as necessary.
The results of the 2013 Report and the 2014 Updated Report showed that, in general, our executive base salaries were positioned at approximately the 50th percentile of the competitive survey and peer company data; target annual performance payments were positioned between approximately the 50th and 63
rd
percentiles; and our long-term incentive compensation (as a percentage of base salary) was below the 50th percentile for our named executive officers. Target total cash compensation (the sum of base salary and target annual performance compensation) was near the 50th percentile, while target total direct compensation (the sum of base salary, target annual performance compensation, and long-term incentive compensation) was approximately 3% below the 50th percentile as of the 2013 Report and approximately 11% below the 50th percentile as of the 2014 Updated Report.
Tax and Accounting Considerations
In determining executive compensation, the Compensation Committee also considers, among other factors, the possible tax consequences to the Company and to its executives, accounting consequences to the Company, and the impact of certain arrangements on stockholder dilution. However, to maintain maximum flexibility in designing appropriate compensation programs, the Compensation Committee, while considering these and other factors in determining compensation, will not limit compensation to those levels or types of compensation that are intended to have a particular tax or accounting result, to be deductible by the Company, or to achieve a specific level of stockholder dilution.
The Compensation Committee considers the provisions of Section 162(m) of the Internal Revenue Code and related regulations that restrict deductibility for federal income tax purposes of executive compensation paid to certain of our executive officers, to the extent such compensation exceeds $1,000,000 for any of such officers in any year and does not qualify for an exception under the statute or regulations. However, in the event our Compensation Committee believes that our interests are best served, in a particular situation, by providing compensation that does not qualify as performance‑based compensation under Section 162(m), it may grant compensation which may be subject to the $1,000,000 annual limit on deductibility, including base salary, annual cash bonuses, and equity awards.
Sections 280G and 4999 of the Internal Revenue Code provide that executive officers, persons who hold significant equity interests, and certain other highly‑compensated service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control of our Company that exceeds certain prescribed limits, and that our Company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. Further, Section 409A of the Internal Revenue Code imposes certain additional taxes on service providers who enter into certain deferred compensation arrangements that do not comply with the requirements of Section 409A. The Company does not pay its executive officers, including any Named Executive Officer, a “gross‑up” or other reimbursement payment for any tax liability that he might owe as a result of the application of Sections 280G, 4999 or 409A.
Executive Compensation Program
For 2016, the compensation program for our Named Executive Officers consisted of three principal elements: (1) base salary, (2) short-term performance compensation, and (3) long-term equity compensation. The compensation program is designed to incentivize the Named Executive Officers to achieve the Company’s strategic goals. Set forth below is a discussion of each element of our executive compensation program and the criteria for decisions made with respect to each such element for 2016.
Base Salary.
Base salaries for our Named Executive Officers are based on the scope of their responsibilities, taking into account competitive survey data compiled by Pay Governance on compensation paid by comparable companies for similar positions. Base salary merit increases for the Named Executive Officers are considered each year and are based on the individual performance appraisals of the executives and on the amount of the merit increase pool budgeted by management and approved by the Compensation Committee for the year in question. The Updated 2014 Report determined that our executive base salaries, on average, were positioned near the 50th percentile of the competitive survey and peer company data. For 2016, the Compensation Committee considered Pay Governance’s Updated 2014 Report, salary adjustment survey data obtained from Hawaii businesses by the Hawaii Employers Council, and past merit increases for our Named Executive Officers. Taking into account the foregoing, the Compensation Committee approved a 2.0 percent merit increase for our non-union employees, and also approved a 2.0 percent base salary increase for Messrs. Barber and Bessey and a 1.9 percent base salary increase for Messrs. Komeiji and Paul, each of which was at or below the national and Hawaii averages.
When setting or making changes to base salary, the Chief Executive Officer reviews the performance of the other Named Executive Officers and the Compensation Committee reviews the performance of our Chief Executive Officer. The following table shows the base salary information for each Named Executive Officer:
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Base Salary as of
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Base Salary as of
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Percentage Increase
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Name
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December 31, 2015
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December 31, 2016
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in Base Salary
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Scott K. Barber
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$
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485,000
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$
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495,000
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2.0
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%
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Dan T. Bessey
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$
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340,000
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$
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346,300
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2.0
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%
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John T. Komeiji
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$
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343,500
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$
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350,000
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1.9
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%
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Kevin T. Paul
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$
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301,700
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$
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307,700
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1.9
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%
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Annual Performance Compensation Plan.
The annual Performance Compensation Plan provides our Named Executive Officers and other key employees with the opportunity to obtain, in addition to their base salary, an annual performance payment that is dependent upon achieving defined corporate performance goals. Any such performance payments generally are awarded no later than the end of the first quarter of the following year. Employment with the Company at the time of award is a prerequisite to receiving an award. The 2014 Updated Report found the target annual cash performance payments for our executives generally were positioned between the 50th and 62.5th percentiles of the competitive survey and peer company data. Following a review of our Performance Compensation Plan, Pay Governance recommended revising the payout percentages for achieving threshold and maximum levels from 75% and 125% of target, respectively, to either 75% and 150%, respectively, or 50% and 200%, respectively. The Compensation Committee chose a conservative approach and decided to maintain the payout percentages for threshold and maximum levels at 75% and 125%, respectively.
The Performance Compensation Plan is reviewed annually and its terms may be modified from time-to-time to reflect changes in our business strategies and focus. In 2016, the Compensation Committee amended the Performance
Compensation Plan to allow for bonus payments to be made in the form of the Company’s common stock. Beginning with the 2017 payments, each of the Named Executive Officers will receive an amount equal to 40% of their Performance Compensation Plan payments in the form of the Company’s common stock. Pursuant to the Performance Compensation Plan, the Compensation Committee approves the target annual performance payment awards for our Chief Executive Officer and other Named Executive Officers and the corporate and individual performance goals, if any, and their relative weights. The performance payment is calculated as a percentage of the employee’s annual salary. For Named Executive Officers for the 2016 plan year, the percentages of annual salary used to determine the target annual performance payment ranged from 40% to 100%. Depending on the achievement of the predetermined targets set by the Compensation Committee, the annual performance payment may be less than or greater than the target annual performance payment. In addition, at the Committee’s sole discretion, additional performance-based compensation may be paid to Named Executive Officers and other key employees apart from the Performance Compensation Plan. The corporate performance calculations under our Performance Compensation Plan are based on audited financial results, as shown below.
For the 2016 performance year, the Company goals consisted of revenue, EBITDA as adjusted to account for certain non recurring costs and stock compensation (“Adjusted EBITDA) (see Appendix A for calculation and GAAP reconciliation), and customer satisfaction. For the 2016 performance year, in consultation with the Company’s Compensation Consultant, the Compensation Committee eliminated the net cash flow goal (which was used in prior years), principally as being largely redundant of the Adjusted EBITDA, with Adjusted EBITDA at present being a more precise indicator of performance, and reallocated the weighting among revenue, Adjusted EBITDA and customer satisfaction. Customer satisfaction goals are based on a composite of total telephone and email surveys from each of the consumer (10%), HTTV (5%) and business (10%) customer service categories in which survey participants gave the Company a “satisfied” 6-10 rating on a scale from 1 to 10. The relative weighting of the Company goals, performance target levels, and threshold and maximum levels are set forth in the table below, with the customer satisfaction targets representing the average of the three customer service categories:
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Percent of
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Target
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Company Goal
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Weighting
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Target
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($ in mils)
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% Payout
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Revenue
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35
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%
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Threshold
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95
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%
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$
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386.1
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75
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%
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Target
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100
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%
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$
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406.4
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100
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%
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Maximum
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105
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%
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$
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426.7
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125
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%
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Adjusted EBITDA
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35
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%
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Threshold
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95
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%
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$
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113.5
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75
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%
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Target
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100
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%
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$
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119.5
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100
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%
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Maximum
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105
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%
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$
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125.5
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125
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%
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Total Customer Satisfaction
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30
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%
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Customer Composite
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10
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%
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Threshold
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85
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%
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N/A
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75
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%
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Target
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87
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%
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N/A
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100
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%
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Maximum
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89
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%
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N/A
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125
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%
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HTTV Composite
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10
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%
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Threshold
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89
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%
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N/A
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75
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%
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Target
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91
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%
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N/A
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100
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%
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Maximum
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93
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%
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N/A
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125
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%
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Business Composite
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10
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%
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Threshold
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84
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%
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N/A
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75
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%
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Target
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86
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%
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N/A
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100
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%
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Maximum
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88
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%
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N/A
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125
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%
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The Compensation Committee determined that no payments for the 2016 plan year would be made unless the minimum thresholds for both revenue and Adjusted EBITDA were achieved. In addition, individual payouts were contingent upon the executive obtaining a “meets expectations” or better performance evaluation. Target annual performance payments were based on a payout schedule that provided targets of 100% of annual salary for the Chief Executive Officer and between 40% and 65% of annual salary for the other Named Executive Officers, and maximum payout opportunities of 125% for the Chief Executive Officer and between 50% and 81.25% for the other Named Executive Officers.
The Company’s 2016 results for revenue, Adjusted EBITDA, and customer satisfaction are presented in the table below. Based on the foregoing, the Compensation Committee approved 2016 plan year performance payments for the Named
Executive Officers that reflected 59% of the Company goals component of their target annual performance payments, summarized as follows:
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Actual
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Result as a
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Payout as a
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Target
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Result
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Percentage
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Percentage
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Corporate Performance Metric
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($ in millions)(1)
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($ in millions)(1)
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of Target(2)(3)
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Weighting
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of Target(2)
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Revenue
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$
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406.4
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$
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393.4
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96.7
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%
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35
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%
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29.2
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%
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Adjusted EBITDA
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$
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119.5
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$
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116.0
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97.1
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%
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35
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%
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29.8
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%
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Customer Satisfaction (4)
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—
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—
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—
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30
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%
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—
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%
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Payout percentage
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59.0
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%
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(1)
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Rounded to nearest million dollars.
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(2)
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Rounded to nearest tenth of a percent.
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(3)
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Determined by interpolation based on how the actual results compared to the threshold, target, and maximum levels.
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(4)
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Customer satisfaction was measured in three categories based on customer surveys. All three categories were below the threshold level.
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The following chart lists the 2016 plan year target and actual annual performance payment awards, as represented by reference to the applicable percentage of base salary, and actual dollar payouts for each Named Executive Officer:
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Potential
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Payout
|
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Actual
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Target as a
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Range as a
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Payout as a
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Percentage of
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Percentage of
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Percentage of
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Actual
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Name
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Annual Salary
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Annual Salary
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Annual Salary
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Payout
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Scott K. Barber
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100
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%
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0 - 125
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%
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59.0
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%
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$
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290,688.0
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Dan T. Bessey
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75
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%
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0 - 81.25
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%
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44.3
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%
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$
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152,594.0
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John T. Komeiji
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65
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%
|
|
0 - 81.25
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%
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38.4
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%
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$
|
133,650.0
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Kevin T. Paul
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40
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%
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0 - 50
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%
|
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23.6
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%
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$
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72,290.0
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2010 Equity Incentive Plan.
The 2010 Equity Incentive Plan provides key employees, including our Named Executive Officers, and non-employee directors of the Company and its subsidiaries with the opportunity to receive restricted stock units (“RSUs”), stock options, and other equity based awards. The maximum number of shares of our common stock issuable pursuant to awards granted under the 2010 Equity Incentive Plan is 1,400,000 shares. As explained above, Pay Governance’s 2013 Report and the 2014 Updated Report found that our long-term incentive compensation (as a percentage of base salary) was below the 50th percentile of the competitive survey and peer-company data for the Named Executive Officers.
The RSU awards are intended to provide long-term compensation for a four-year period beginning on the grant date. The size of each RSU award is determined as a percentage of the executive’s base salary and the fair market value of the Company’s common stock on the grant date. The Compensation Committee set the base salary percentage for each Named Executive Officer in line with the recommendation of the Company’s compensation consultant, following its assessment of competitive long-term incentive compensation levels for each Named Executive Officer. All RSU awards are non-transferable. RSUs vest on an accelerated basis upon the participant’s death or disability, termination without Cause or by the participant for Good Reason or a change of control, as those terms are defined in the 2010 Equity Incentive Plan. See “Potential Payments on Termination or Change in Control” below.
The RSUs awarded to the Named Executive Officers are divided equally into time-based RSUs and performance based RSUs (“PBRSU”). The time-based RSUs vest in equal installments over a four-year period. In the case of the time-based RSUs awarded in 2016, for example, shares vest on March 12 of 2017, 2018, 2019, and 2020. In order to tie RSU awards to shareholder return and the Company’s financial performance, the Named Executive Officers’ PBRSUs vest over a four-year period (the first vesting occurring in year 2), based on the Company’s performance with respect to Adjusted EBITDA, total revenue and total shareholder return (“TSR”), each described in more detail below. In the case of PBRSUs granted in 2016, for example, vesting will take place on March 12 of 2018, 2019, and 2020. The vesting percentage for PBRSUs is determined based on the Company’s performance during the applicable performance period. For PBRSU grants made in and after 2013, the vesting percentage is based on revenue and Adjusted EBITDA performance in the year of grant and TSR performance in the year of grant and the following year, and the same vesting percentage is applied to all three
vesting years. All vesting of PBRSUs is subject to continued employment through each vesting date and provided that no PBRSUs will vest if Adjusted EBITDA performance in the applicable performance year is below the threshold performance goal.
The PBRSUs allow for the possibility of vesting more than the target number of PBRSUs if actual performance exceeds the performance goals and for the possibility of vesting fewer shares than the target number if actual performance falls short of performance goals. Additionally, for all RSUs, the Compensation Committee has the discretion, after consideration of such factors it deems appropriate, to reduce the number of PBRSUs that otherwise would vest based upon the achievement of the applicable performance goals. No discretionary adjustments were made in 2016.
PBRSU Vesting Formula
The number of PBRSUs that vest with respect to a given performance period is equal to the product of A times B times C, where:
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A
|
=
|
The target number of PBRSUs scheduled to vest with
respect to the applicable performance period.
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B
|
=
|
Weighted % Vested from Revenue Performance + Weighted % Vested from
Adjusted EBITDA Performance.
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C
|
=
|
TSR Award Modifier.
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A = Target number of PBRSUs Scheduled to Vest with Respect to the Applicable Performance Period
The number of PBRSUs scheduled to vest are that number of PBRSUs scheduled to vest with respect to a performance period assuming performance at the target level.
B = Sum of Weighted % Vested from Revenue plus Weighted % Vested from Adjusted EBITDA Performance.
Weighted % Vested from Revenue and Adjusted EBITDA Performance are based on the achievement of goals determined for the applicable performance period by the Compensation Committee. Revenue performance is weighted forty percent (40%) and Adjusted EBITDA performance is weighted sixty percent (60%). The vesting percentage for each of revenue and Adjusted EBITDA ranges from seventy-five percent (75%) for achieving Threshold to one hundred twenty-five percent (125%) for achieving Maximum. In the event of performance between Threshold and Target or between Target and Maximum, straight-line interpolation is used to determine the weighted percentages set forth above. If performance is below Threshold, the applicable weighted percentage will equal zero percent (0%). In no event may the Weighted % Vested from Revenue Performance or the Weighted % Vested from Adjusted EBITDA Performance exceed 125%.
The performance targets and weightings for revenue and Adjusted EBITDA for the 2016 performance year are set forth below. Performance goals for the 2015 and 2014 performance years are set forth in the Company’s Proxy Statement for 2016 and 2015, respectively.
Weighted % Vested from Revenue Performance for 2016 Performance Year
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Vested
|
|
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
Measurement
|
|
Weighting
|
|
Factor
|
|
Amount
|
|
Performance
|
|
|
|
|
|
|
|
|
|
($ in mils)
|
|
|
|
FY2016 Revenue
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
95
|
%
|
|
$
|
386.1
|
|
75
|
%
|
Target
|
|
|
|
|
100
|
%
|
|
$
|
406.4
|
|
100
|
%
|
Maximum
|
|
|
|
|
105
|
%
|
|
$
|
426.7
|
|
125
|
%
|
Weighted % Vested from Adjusted EBITDA Performance for 2016 Performance Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Vested
|
|
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
Measurement
|
|
Weighting
|
|
Factor
|
|
Amount
|
|
Performance
|
|
|
|
|
|
|
|
|
|
($ in mils)
|
|
|
|
FY2016 EBITDA
|
|
60
|
%
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
|
95
|
%
|
|
$
|
113.5
|
|
75
|
%
|
Target
|
|
|
|
|
100
|
%
|
|
$
|
119.5
|
|
100
|
%
|
Maximum
|
|
|
|
|
105
|
%
|
|
$
|
125.5
|
|
125
|
%
|
C = TSR Award Modifier
The TSR Award Modifier ranges from a low of seventy-five percent (75%) for achievement of 15% or greater below target and up to one hundred twenty-five percent (125%) for achievement of 15% or greater above target, depending upon the performance of the Company’s TSR relative to the performance of the NASDAQ Telecommunications Index (Index) TSR as set forth below.
|
|
|
|
|
|
|
|
TSR Relative Performance
|
|
|
|
|
|
[(Company TSR minus
|
|
TSR Award
|
Level
|
|
Index TSR) × 100%]
|
|
Modifier
|
High
|
|
+15% and higher
|
|
125
|
%
|
Target
|
|
0%
|
|
100
|
%
|
Low
|
|
−15% and lower
|
|
75
|
%
|
The TSR Award Modifier is calculated by subtracting the Index TSR from the Company TSR where:
Company TSR = (Company Share Ending Price/Company Share Beginning Price) – 1
Index TSR = (Index Ending Price/ Index Beginning Price) – 1
Beginning Price = trading volume weighted average price of the Company’s common stock or the NASDAQ Telecommunications Index, as applicable, over the first 5 trading days in January 2016, accounting for the reinvestment of dividends over this period.
Ending Price = trading volume weighted average price of the Company’s common stock or the NASDAQ Telecommunications Index, as applicable, over the last 5 trading days in December 2017, accounting for the reinvestment of dividends over this period.
In the event of TSR relative performance between levels, straight‑line interpolation will determine the TSR Award Modifier.
Results and Vesting Calculations
For PBRSUs granted in 2013 and vesting in 2016, revenue and Adjusted EBITDA are based on the 2013 performance year and TSR is based on 2013 and 2014. For PBRSUs granted in 2014 and vesting in 2017, revenue and Adjusted EBITDA are based on the 2014 performance year and TSR is based on 2014 and 2015. For PBRSUs granted in 2015 and vesting in 2017, revenue and Adjusted EBITDA are based on the 2015 performance year and TSR is based on 2015 and 2016.
2013 Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
|
|
|
|
|
Result as a
|
|
|
|
|
Vesting as a
|
|
|
Target
|
|
Result
|
|
Percentage of
|
|
|
|
|
Percentage
|
Corporate Performance Metric
|
|
($ in millions)(1)
|
|
($ in millions)(1)
|
|
Target(2)
|
|
Weighting
|
|
of Target(2)(3)
|
Revenue
|
|
$
|
402.5
|
|
$
|
389.2
|
|
96.7
|
%
|
|
40
|
%
|
|
33.4
|
%
|
Adjusted EBITDA
|
|
$
|
122.4
|
|
$
|
119.7
|
|
97.8
|
%
|
|
60
|
%
|
|
55.3
|
%
|
Vested % before TSR Award Modifier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86.6
|
%
|
TSR Award Modifier(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109.5
|
%
|
Vested % after TSR Award Modifier(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94.9
|
%
|
2014 Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
|
|
|
|
|
Result as a
|
|
|
|
|
Vesting as a
|
|
|
Target
|
|
Result
|
|
Percentage of
|
|
|
|
|
Percentage
|
Corporate Performance Metric
|
|
($ in millions)(1)
|
|
($ in millions)(1)
|
|
Target(2)
|
|
Weighting
|
|
of Target(2)(3)
|
Revenue
|
|
$
|
407.8
|
|
$
|
390.7
|
|
95.8
|
%
|
|
40
|
%
|
|
31.6
|
%
|
Adjusted EBITDA
|
|
$
|
123.0
|
|
$
|
117.8
|
|
95.8
|
%
|
|
60
|
%
|
|
47.3
|
%
|
Vested % before TSR Award Modifier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79.0
|
%
|
TSR Award Modifier(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75.0
|
%
|
Vested % after TSR Award Modifier(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59.2
|
%
|
2015 Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
|
|
|
|
|
Result as a
|
|
|
|
|
Vesting as a
|
|
|
Target
|
|
Result
|
|
Percentage of
|
|
|
|
|
Percentage
|
Corporate Performance Metric
|
|
($ in millions)(1)
|
|
($ in millions)(1)
|
|
Target(2)(3)
|
|
Weighting
|
|
of Target(2)
|
Revenue
|
|
$
|
401.5
|
|
$
|
393.4
|
|
98.0
|
%
|
|
40
|
%
|
|
36.0
|
%
|
Adjusted EBITDA
|
|
$
|
120.4
|
|
$
|
119.5
|
|
99.3
|
%
|
|
60
|
%
|
|
57.8
|
%
|
Vested % before TSR Award Modifier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93.8
|
%
|
TSR Award Modifier(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75.0
|
%
|
Vested % after TSR Award Modifier(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70.4
|
%
|
|
(1)
|
|
Rounded to nearest million dollars.
|
|
(2)
|
|
Rounded to nearest tenth of a percent.
|
|
(3)
|
|
Determined by interpolation based on how the actual results compared to the threshold, target, and maximum levels.
|
|
(4)
|
|
TSR Award Modifier was calculated by subtracting the Index TSR from the Company TSR.
|
|
(5)
|
|
The vested percentage was calculated as Weighted % Vested from Revenue Performance + Weighted % Vested from Adjusted EBITDA Performance x TSR Award Modifier.
|
2017 RSU Vesting
Based on the foregoing performance, RSUs vesting in 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PBRSUs
|
|
2013 Grant
|
|
2014 Grant
|
|
2015 Grant
|
|
|
|
|
|
|
|
Eligible for
|
|
Calculated
|
|
Calculated
|
|
Calculated
|
|
|
Total PBRSUs
|
|
Total RSUs Vesting
|
Name
|
|
Vesting
|
|
Vesting %
|
|
Vesting %
|
|
Vesting %
|
|
|
Vesting # (1)
|
|
TB+PB RSUs # (1)(2)
|
Scott K. Barber
|
|
7,202
|
|
94.9
|
|
59.2
|
|
70.4
|
|
|
5,485
|
|
13,847
|
Dan T. Bessey(3)
|
|
1,578
|
|
94.9
|
|
59.2
|
|
70.4
|
|
|
1,110
|
|
3,791
|
John T. Komeiji
|
|
3,981
|
|
94.9
|
|
59.2
|
|
70.4
|
|
|
3,030
|
|
7,352
|
Kevin T. Paul
|
|
2,604
|
|
94.9
|
|
59.2
|
|
70.4
|
|
|
1,993
|
|
4,728
|
|
(1)
|
|
Number of shares of the Company’s Common Stock to be issued in settlement of RSUs.
|
|
(2)
|
|
Includes both time-based and PBRSUs.
|
2016 RSU Grants
During 2016, the Compensation Committee granted a total of 52,613 RSUs to our Named Executive Officers, which includes both PBRSUs (which assumes performance at target level) and time‑based RSUs (collectively, “Target RSUs”). The following chart shows the number of Target RSUs awarded to each Named Executive Officer in 2016, as well as the maximum number of RSUs that could vest in the event of performance at above target levels (“Maximum RSUs”):
|
|
|
|
|
|
|
|
|
% of
|
|
Number of
|
|
Number of
|
Name
|
|
Base Salary
|
|
Target RSUs
|
|
Maximum RSUs
|
Scott K. Barber
|
|
120
|
|
23,687
|
|
30,348
|
Dan T. Bessey
|
|
85
|
|
11,980
|
|
15,349
|
John T. Komeiji
|
|
75
|
|
10,684
|
|
13,688
|
Kevin T. Paul
|
|
50
|
|
6,262
|
|
8,023
|
Retirement and Other Benefits
We have a tax‑qualified Section 401(k) retirement savings plan for employees and Named Executive Officers who satisfy certain eligibility requirements. Under this plan, participants may elect to make pre‑tax contributions not to exceed the applicable statutory income tax limitation (which was $18,000 in 2016). In addition, the Company may make discretionary contributions to the plan in any year, up to certain limits. In 2016, the Company provided a matching contribution equal to 100% of a participant’s salary deferrals, up to a maximum of 6% of a participant’s compensation. Our contributions to the accounts of the Named Executive Officers are shown in the All Other Compensation column of the Summary Compensation Table below. The plan is intended to qualify under Section 401(a) of the Internal Revenue Code so that contributions by participants to the plan, and income earned on plan contributions, are not taxable to participants until withdrawn from the plan.
Additional benefits received by our Named Executive Officers include Company‑funded executive group life, disability, and accidental death and dismemberment insurance; reimbursement of out‑of‑pocket medical expenses; entitlement to severance benefits in the event of termination of employment under certain circumstances (as described in more detail below); and group medical plans and medical and dependent care flexible spending accounts available to salaried employees generally.
Except as described herein, we generally do not provide perquisites or other personal benefits to our Named Executive Officers. Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. In the future, we may provide perquisites in circumstances where the Committee believes they are appropriate to assist our executives in the performance of their duties, to make our executives more efficient and effective, and/or for recruitment, motivation, or retention purposes. Any future practices with respect to perquisites or other personal benefits will be approved and subject to review by the Compensation Committee.
While the Committee intends to continue to maintain current benefits for our Named Executive Officers, we have discretion to revise, amend, or add to them. The Committee believes these benefits are at competitive levels for comparable companies.
Severance Benefits
The Board of Directors recognizes that it is critical to provide competitive compensation packages to attract and retain experienced and skilled executives in a competitive and dynamic industry, including competitive severance benefits. In November 2016, in consultation with Pay Governance, the Compensation Committee adopted changes to the Company’s Executive Severance Plan and entered into Change of Control Agreements with each of the Company’s Named Executive Officers that were designed to more closely align the Company’s severance benefits with market benefits. The Committee believes that the severance benefits provided to our Named Executive Officers under our Executive Severance Plan and Change of Control Agreements, among other things, will improve retention and allow the Named Executive Officers to maintain continued focus and dedication to their assigned duties to maximize stockholder value. A discussion of the severance benefits of our Named Executive Officers is explained in greater detail under “Potential Payments on Termination or Change in Control” set forth below.
Other Compensation Policies
Stock Ownership Guidelines
Our Board of Directors believes that ownership of our common stock by our directors and officers promotes a focus on long-term growth and aligns the interests of our directors and officers with those of our stockholders. Our stock ownership guidelines require our executives at the senior vice president level and higher, including our Named Executive Officers, and our non-employee directors to achieve ownership of our common stock with a value that is equal to or greater than: (i) for our Named Executive Officers, 200% of annual base salary, not later than five years, and (ii) 300% of the annual cash retainer for our non‑employee directors, not later than three years, after the later of the date of adoption of the stock ownership guidelines and the date the individual becomes subject to the guidelines.
Such ownership includes ownership of restricted as well as unrestricted shares of common stock, whether owned by the individual, jointly, or by the individual’s revocable living trust, as well as unvested time‑based restricted stock units. All of our Named Executive Officers except one have met the stock ownership guidelines or have time remaining under the guidelines, with the non-compliant officer having implemented a plan to achieve compliance.
Prohibition Against Certain Equity Transactions
We have a policy regarding hedging the economic risk of the ownership of shares of our common stock which prohibits the Named Executive Officers from engaging in short sales and similar arrangements involving our common stock.
Compensation Recovery Policy
Once final rules regarding clawback policies are issued as contemplated by the Dodd‑Frank Act, we intend to develop a policy regarding retroactive adjustments to our Named Executive Officers’ compensation in situations where such compensation was predicated upon the achievement of financial results that subsequently were the subject of a financial restatement. Once final rules are released regarding clawback requirements under the Dodd‑Frank Act, we intend to review our policies and plans and, if necessary, amend them to comply with the new mandates.
Compensation Committee Repor
t
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be incorporated into the Company’s Proxy Statement and Annual Report on Form 10‑K for the year ended December 31, 2016.
|
Bernard R. Phillips III
|
|
Respectfully Submitted By:
The Compensation Committee
Steven C. Oldham, Chairman
Walter A. Dods, Jr.
Meredith J. Ching
|
Notwithstanding anything to the contrary set forth in any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings, including this Proxy Statement, in whole or in part, the Compensation Committee Report shall not be deemed to be incorporated by reference into any such filings, unless we specifically incorporate these reports by reference in some other filed document.
Relationship between Compensation Plans and Ris
k
We believe that the Company’s compensation programs, either individually or in the aggregate, do not encourage executives or employees to undertake unnecessary or excessive risks that are reasonably likely to have a material adverse effect on us. We note the following mitigating factors:
|
·
|
|
The Compensation Committee sets the performance goals for our annual Performance Compensation Plan. These goals typically are objective financial goals which the Compensation Committee believes are appropriately correlated with stockholder value;
|
|
·
|
|
The use of a performance-based equity compensation (restricted stock units) that utilizes multi-year performance goals determined by the Compensation Committee and multi-year vesting periods that align our executives’ interests with those of our stockholders; and
|
|
·
|
|
Stock ownership guidelines for senior executives, monitored by the Compensation Committee, that encourage alignment with stockholder interests over the long term.
|
Summary Compensation Tabl
e
The following table sets forth information regarding compensation earned for the fiscal years ended December 31, 2016, 2015, and 2014 by our Named Executive Officers who were serving as executive officers at the end of 2016.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and Principal
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)
|
|
($)(2)
|
|
($)
|
|
($)(3)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Scott K. Barber
|
|
2016
|
|
494,557
|
|
—
|
|
591,582
|
|
—
|
|
290,688
|
|
—
|
|
20,345
|
|
1,397,172
|
President and Chief
|
|
2015
|
|
452,580
|
|
—
|
|
463,282
|
|
—
|
|
298,772
|
|
—
|
|
18,462
|
|
1,233,096
|
Executive Officer
|
|
2014
|
|
407,631
|
|
—
|
|
314,026
|
|
—
|
|
204,834
|
|
—
|
|
29,315
|
|
955,806
|
Dan T. Bessey
|
|
2016
|
|
346,153
|
|
—
|
|
299,200
|
|
—
|
|
152,594
|
|
—
|
|
20,201
|
|
818,149
|
Chief Financial Officer
|
|
2015
|
|
221,000
|
|
50,000
|
|
246,452
|
|
—
|
|
103,895
|
|
—
|
|
6,599
|
|
627,946
|
and Treasurer
|
|
2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
John T. Komeiji
|
|
2016
|
|
349,821
|
|
—
|
|
266,833
|
|
—
|
|
133,650
|
|
—
|
|
20,964
|
|
771,268
|
Chief Administrative Officer
|
|
2015
|
|
343,271
|
|
—
|
|
257,749
|
|
—
|
|
165,891
|
|
—
|
|
20,939
|
|
787,850
|
and General Counsel
|
|
2014
|
|
336,600
|
|
—
|
|
172,927
|
|
—
|
|
146,589
|
|
—
|
|
20,651
|
|
676,767
|
Kevin T. Paul
|
|
2016
|
|
307,475
|
|
—
|
|
156,393
|
|
—
|
|
72,290
|
|
—
|
|
13,006
|
|
549,165
|
Senior Vice President—
|
|
2015
|
|
301,453
|
|
—
|
|
150,922
|
|
—
|
|
89,649
|
|
—
|
|
13,073
|
|
555,098
|
Technology
|
|
2014
|
|
295,532
|
|
—
|
|
121,379
|
|
—
|
|
79,203
|
|
—
|
|
12,981
|
|
509,095
|
|
(1)
|
|
Represents the aggregate grant date fair values, calculated in accordance with FASB ASC Topic 718, of RSU awards under the 2010 Equity Incentive Plan. There can be no assurance that these grant date fair values will ever be realized by the Named Executive Officers. For 2016, this column includes the grant date fair values of the target number of shares that may be earned pursuant to RSU awards granted in 2016. See the “Grants of Plan Based Awards” table below for information on RSU awards made in 2016. The grant date fair value of the maximum number of shares that may be earned are: (a) Scott Barber: $758,773, (b) Dan Bessey: $383,762, (c) John Komeiji: $342,234, and (d) Kevin Paul: $200,594.
|
|
(2)
|
|
Represents cash performance payments earned in the year indicated, under the Company’s Performance Compensation Plan.
|
|
(3)
|
|
“All Other Compensation” in 2016 includes: (i) amounts contributed by the Company to its 401(k) plan ($18,000 for Messrs. Barber, Bessey and Komeiji and $10,954 for Mr. Paul), (ii) premiums paid with respect to supplemental term life, accidental death and dismemberment, disability and health benefits for the benefit of the Named Executive Officers, and (iii) reimbursement of out-of-pocket medical expenses for each of the Named Executive Officers.
|
Employment Agreement
s
Each of Messrs. Barber, Bessey, Komeiji, and Paul is party to an employment agreement with us, with Mr. Bessey entering into his initial employment agreement with us in May 2015, Mr. Barber entering into a new employment agreement in June 2015 in connection with his promotion to Chief Executive Officer, and each of Messrs. Komeiji and Paul entering
into new employment agreements in 2014. Each of the employment agreements has no specified term but instead provides that the Named Executive Officer is an at-will employee of the Company and that either party may terminate the employment agreement at any time. Each of the employment agreements also provides that the respective Named Executive Officer is eligible to receive an annual performance payment under our Performance Compensation Plan (see “Annual Performance Compensation Plan” above) and an equity award under the Company’s 2010 Equity Incentive Plan (see “2010 Equity Incentive Plan” above) pursuant to which performance payments and equity grants are tied to achieving certain corporate performance goals, as determined under the respective plan. Each of the employment agreements also provides that the respective Named Executive Officer is entitled to participate in our Executive Severance Plan (see “Potential Payments on Termination or Change of Control” below) and employee benefit plans, programs and arrangements at a level commensurate with their position.
Grants of Plan‑Based Award
s
The following table summarizes pertinent information concerning plan‑based awards granted to each of the Named Executive Officers during the fiscal year ended December 31, 2016:
Grants of Plan‑Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Date Fair
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
Number
|
|
Number of
|
|
or Base
|
|
Value of
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive Plan
|
|
of Shares
|
|
Securities
|
|
Price of
|
|
Stock and
|
|
|
|
|
Plan Awards(1)
|
|
Awards
|
|
of Stock
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)(2)
|
|
(#)
|
|
(#)(2)
|
|
(#)
|
|
($/Sh)
|
|
($)(3)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
Scott K. Barber
|
|
—
|
|
371,250
|
|
495,000
|
|
618,750
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,843
|
|
18,504
|
|
—
|
|
—
|
|
—
|
|
297,259
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,843
|
|
—
|
|
—
|
|
294,323
|
Dan T. Bessey
|
|
—
|
|
194,794
|
|
259,725
|
|
324,656
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,990
|
|
9,359
|
|
—
|
|
—
|
|
—
|
|
150,349
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,990
|
|
—
|
|
—
|
|
148,852
|
John T. Komeiji
|
|
—
|
|
170,625
|
|
227,500
|
|
284,375
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,342
|
|
8,346
|
|
—
|
|
—
|
|
—
|
|
134,084
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,342
|
|
—
|
|
—
|
|
132,749
|
Kevin T. Paul
|
|
—
|
|
92,310
|
|
123,080
|
|
153,850
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,131
|
|
4,892
|
|
—
|
|
—
|
|
—
|
|
78,588
|
|
|
3/3/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,131
|
|
—
|
|
—
|
|
77,805
|
|
(1)
|
|
Represents potential payouts under the Company’s Performance Compensation Plan. The actual payouts are reflected in column (g) of the Summary Compensation Table.
|
|
(2)
|
|
Each RSU award listed in column (g) was granted under the 2010 Equity Incentive Plan and represents half of the RSU awards granted on the grant dates shown in column (b). These RSU awards are performance-based and vest in three equal installments over four years on each of March 12, 2018, 2019 and 2020, subject to the performance goals being met as described in “Executive Compensation Program—2010 Equity Incentive Plan” above. The other half of the RSU awards granted on the grant date shown in column (b) are listed in column (i). These RSU awards are time-based and vest in equal annual increments over a four-year period on each of March 12, 2017, 2018, 2019, and 2020.
|
|
(3)
|
|
Represents the aggregate grant date fair values, computed in accordance with FASB ASC Topic 718, of RSU awards under the 2010 Equity Incentive Plan. There can be no assurance that these grant date fair values will ever be realized by the Named Executive Officers. For fiscal year 2016, this column includes the grant date fair values of the target number of shares that may be earned pursuant to RSU awards granted in 2016. See the “Grants of Plan-Based Awards” table below for information on RSU awards made in fiscal 2016.
|
Outstanding Equity Awards at Fiscal Year‑En
d
The following table summarizes the outstanding equity awards held by each of the Named Executive Officers at December 31, 2016. There were no outstanding option awards as of December 31, 2016.
Outstanding Equity Awards at Fiscal Year‑End
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
Equity Incentive Plan
|
|
|
|
|
|
|
Equity Incentive Plan
|
|
Awards: Market or
|
|
|
|
|
Market Value of
|
|
Awards: Number of
|
|
Payout Value of
|
|
|
Number of Shares
|
|
Shares or Units
|
|
Unearned Shares,
|
|
Unearned Shares,
|
|
|
or Units of
|
|
of Stock
|
|
Units or Other
|
|
Units or Other
|
|
|
Stock That Have
|
|
That Have Not
|
|
Rights That Have
|
|
Rights That Have
|
Name
|
|
Not Vested (#)
|
|
Vested($)
|
|
Not Vested(#)(1)
|
|
Not Vested($)(2)
|
Scott K. Barber
|
|
|
|
|
|
|
|
|
2013
|
|
11,670
|
|
321,742
|
|
5,601
|
|
154,419
|
2014
|
|
8,185
|
|
225,660
|
|
5,239
|
|
144,439
|
2015
|
|
8,899
|
|
221,229
|
|
8,899
|
|
221,229
|
2016
|
|
11,844
|
|
293,494
|
|
11,844
|
|
293,494
|
Dan T. Bessey
|
|
|
|
|
|
|
|
|
2015
|
|
4,734
|
|
117,687
|
|
4,734
|
|
117,687
|
2016
|
|
5,900
|
|
146,202
|
|
5,900
|
|
146,202
|
John T. Komeiji
|
|
|
|
|
|
|
|
|
2013
|
|
6,418
|
|
176,944
|
|
3,081
|
|
84,943
|
2014
|
|
4,507
|
|
124,258
|
|
2,885
|
|
79,539
|
2015
|
|
4,951
|
|
123,082
|
|
4,951
|
|
123,082
|
2016
|
|
5,342
|
|
132,375
|
|
5,342
|
|
132,375
|
Kevin T. Paul
|
|
|
|
|
|
|
|
|
2013
|
|
4,512
|
|
124,396
|
|
2,165
|
|
59,689
|
2014
|
|
3,165
|
|
87,259
|
|
2,025
|
|
55,829
|
2015
|
|
2,899
|
|
72,069
|
|
2,899
|
|
72,069
|
2016
|
|
3,131
|
|
77,586
|
|
3,131
|
|
77,586
|
|
(1)
|
|
Restricted Stock Unit (“RSU”) grants under the Company’s 2010 Equity Incentive Plan are divided equally into time-based and performance-based RSUs (“PBRSU”). The time-based RSUs vest in equal installments over a four-year period. In the case of the time-based RSUs awarded in 2016, for example, vesting takes place on each of March 12, 2017, 2018, 2019, and 2020. PBRSUs vest in three equal installments over a four-year period (with the first vesting in year 2) on each of March 12, 2018, 2019 and 2020, subject to meeting total shareholder return and financial performance goals. The number of unearned RSUs assumes that target performance goals were achieved. See “2010 Equity Incentive Plan” above.
|
|
(2)
|
|
The market value of the RSU that have not vested was determined by multiplying the number of RSU that have not vested by the closing price of our common stock on December 30, 2016, which was $24.78 per share. Dollar values are rounded to the nearest whole dollar.
|
Option Exercises and Stock Veste
d
The following table sets forth the number of shares acquired on vesting of
RSU
by each of the Named Executive Officers during the fiscal year ended December 31, 2016. The table also presents the value realized upon such vesting, as calculated based on the closing price per share of our common stock on the vesting date. Amounts presented in the “Value Realized on Vesting” column under “Stock Awards” do not necessarily mean that the Named Executive Officer has actually sold the vested shares for cash. None of our Named Executive Officers was granted or exercised stock options during the fiscal year ended December 31, 2016.
|
|
|
|
|
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
|
Shares
|
|
Value
|
|
|
Acquired on
|
|
Realized on
|
Name
|
|
Vesting (#)
|
|
Vesting ($)(1)
|
Scott K. Barber
|
|
8,797
|
|
202,947
|
Dan T. Bessey
|
|
1,183
|
|
27,292
|
John T. Komeiji
|
|
6,970
|
|
160,798
|
Kevin T. Paul
|
|
3,733
|
|
86,120
|
(1)
Based on closing price of $23.07 on March 10, 2016.
Pension Benefit
s
None of the Named Executive Officers participate in or have account balances in the Hawaiian Telcom Management Pension Plan.
Nonqualified Deferred Compensatio
n
None of the Named Executive Officers participate in or have account balances in a non‑qualified defined contribution plan or other deferred compensation plan maintained by the Company.
Potential Payments on Termination or Change in Contro
l
The Named Executive Officers are entitled to receive payments upon a termination in connection with a change of control under a Change of Control agreement between the Named Executive Officer and the Company (a “Change of Control Agreement”)
OR
upon a change of control under the Hawaiian Telcom Holdco, Inc. Executive Severance Plan (“Executive Severance Plan”); provided, that if severance or other benefits would be provided under both the Severance Plan and a Change of Control Agreement, the Named Executive Officer will receive the severance and other benefits provided by the Change of Control Agreement and not the Severance Plan. Named Executive Officers are also entitled to accelerated vesting of Restricted Stock Units upon certain terminations or a change of control under the Company’s 2010 Equity Incentive Plan and the respective Named Executive Officer’s Restricted Stock Unit Grant Agreement. Each of the Executive Severance Plan, Change in Control Agreements and Restricted Stock Unit Grant Agreement is described in more detail below.
Executive Severance Plan
Under each of the Named Executive Officers’ respective employment agreement with us, the Named Executive Officer is eligible to participate and receive benefits under the Executive Severance Plan, currently administered by the Company’s Compensation Committee. In October 2016,
in consultation with the Compensation Committee’s independent compensation consultant,
the Compensation Committee approved certain amendments to the Executive Severance Plan, including
(i) increasing the multiplier for the base severance payment for the CEO from 1.5x to 2x, (ii) including in the base severance amount that is subject to the multiplier an amount equal to the participant’s bonus opportunity under the performance compensation plan at the target level of performance for the year of termination (the “Bonus”), (iii) eliminating benefits that are triggered upon the participant’s death or disability, (iv) requiring that a participant receiving severance benefits under the Severance Plan sign a confidentiality and non-disparagement agreement; and (vii) capping the total amount of severance payments made to a participant under the Executive Severance Plan to an amount equal to twice the participant’s annual compensation paid during the year immediately preceding the year in which the separation from service occurs.
The full text of the Executive Severance Plan is filed as Exhibit 10.1 to the Company’s Form 10-Q, filed with the SEC on November 3, 2016.
Under the Executive Severance Plan, as amended, participants have the right to receive certain payments in the event of a termination by us without Cause or by them for Good Reason (in each case as defined in the Executive Severance Plan). Upon termination of a Named Executive Officer’s employment either by us without Cause or by him for Good Reason, in each case provided he delivers and does not revoke a waiver, release of claims, confidentiality and non-disparagement agreement, and provided he is not otherwise eligible to receive benefits under a Change of Control Agreement, he is entitled
to receive (i)(a) for the CEO, an amount equal to the sum of the CEO’s base salary and Bonus (at target level), multiplied by 2, with an amount equal to 1.5x his base salary to be paid over 18 months, and the balance paid in a lump sum, and (b) for Named Executive Officers other than the CEO, the sum of the participant’s base salary and Bonus (at target level), with an amount equal to his base salary to be paid over 12 months, and the balance paid in a lump sum, subject to termination in the event he breaches any of the covenants described in his employment agreement, (ii) continue to receive for a period of (a) 24 months for the CEO, and (b) 12 months for the other Named Executive Officers, coverage for himself and any dependents under the Company group health benefit plans in which he was entitled to participate immediately prior to the date of termination other than certain supplemental coverage plans available to senior executives, and (iii) receive a pro-rata portion of his performance payment under the Performance Compensation Plan for the year of termination, to be paid at the same time as performance payments are paid to the other Performance Compensation Plan participants. In no event, however, will any Named Executive Officer receive severance benefits under the Executive Severance Plan that exceed, in the aggregate, the equivalent of twice his annual compensation paid during the year immediately preceding the year of termination.
Under the Executive Severance Plan, upon a termination of a Named Executive Officer’s employment either by the Company without Cause or by him for Good Reason, subject to the conditions described above, the Named Executive Officers would have been paid the following benefits as of December 31, 2016: (a) Scott Barber—$2,296,830, which includes $26,142 in estimated health insurance costs for 24 months, (b) Dan Bessey—$742,202, which includes $18,213 in estimated health insurance costs for 12 months, (c) John Komeiji—$761,940, which includes $14,790 in estimated health insurance costs for 12 months, and (d) Kevin Paul—$521,283, which includes $18,213 in estimated health insurance costs for 12 months.
Change of Control Agreements
In 2016, the Company entered into Change of Control Agreements with each of the Named Executive Officers. These Change of Control Agreements have a three-year term and provide for the following severance benefits if the Named Executive Officer is terminated by the Company without Cause, or by the Named Executive Officer for Good Reason, within the period beginning six months before, and ending twenty four months after, a Change of Control (in each case as defined in the Change of Control Agreement): (i) payment to our CEO of an amount equal to 2x his base salary plus Bonus, with the portion of such amount equal to 1.5x his base salary to be paid over 18 months and the balance to be paid in a lump sum, (ii) payment to each of the other Named Executive Officers of an amount equal to 1.5x their respective base salary plus Bonus, with the portion of such amount equal to 1x their respective base salary to be paid over 12 months, and the balance to be paid in a lump sum, (iii) medical insurance benefits for a period of 24 months for our CEO and 18 months for each of the other Named Executive Officers, and (iv) a pro rata portion of the Named Executive Officer’s bonus for the year of termination based on actual performance, paid in a lump sum at the time such bonuses are generally paid under the Performance Compensation Plan. The full text of the Change of Control Agreements was filed as Exhibit 10.2 of the Company’s Form 10-Q, filed with the SEC on November 3, 2016.
Under the Change of Control Agreements, subject to the conditions noted above, if the Named Executive Officer is terminated by the Company without Cause, or by the Named Executive Officer for Good Reason, within the period beginning six months before and ending twenty four months after a Change of Control, the Named Executive Officer would have been paid the following benefits as of December 31, 2016: (a) Scott Barber—$2,296,830, which includes $26,142 in estimated health insurance costs for 24 months, (b) Dan Bessey—$1,037,006, which includes $27,320 in estimated health insurance costs for 18 months, (c) John Komeiji—$1,023,235, which includes $22,185 in estimated health insurance costs for 18 months, and (d) Kevin Paul—$745,780, which includes $27,320 in estimated health insurance costs for 18 months.
2010 Equity Incentive Plan
The Named Executive Officers also have the right to accelerate vesting of their unvested restricted stock units in the event of a change in control of the Company as of December 31, 2016, or termination by us without cause, by them for good reason, or due to death or disability. For the Named Executive Officers, the terms “cause”, “good reason” and “disability” have the same meanings as in the Executive Severance Plan.
In the event of a change in control, any unvested time‑based RSUs would vest immediately and the unvested maximum number of PBRSUs would vest immediately subject to achievement of the applicable performance goal as determined by the Compensation Committee at the time of the change in control. In all cases, any contractual transfer restrictions applicable to any shares of common stock previously issued to our Named Executive Officers upon vesting of
PBRSUs would immediately lapse. In the event of a change of control, assuming the Company achieved the target level of performance in each applicable performance year, RSUs in the following amounts (based on the closing price of $24.78 as of December 30, 2016) would vest as follows as of December 31, 2016: (a) Scott Barber—$1,232,260; (b) Dan Bessey—$502,167; (c) John Komeiji—$622,226; and Kevin Paul—$381,191.
In the event of death, disability, or termination of employment without cause or for good reason, unvested time-based RSUs held by our Named Executive Officers that otherwise would have vested on the next vesting date would vest immediately on a pro-rated basis, and unvested PBRSUs held by our Named Executive Officers that otherwise would have vested on the next determination date or vesting date, as applicable, subject to achievement of the applicable performance goal, would remain outstanding and vest on such determination date or vesting date, as applicable, on a pro-rated basis. In all cases, any contractual transfer restrictions applicable to any shares of common stock previously issued to the Named Executive Officers upon vesting of PBRSUs would immediately lapse. In the event of death, disability, or termination of the employment of a Named Executive Officer without cause or for good reason, assuming the Company achieved the target level of performance in each applicable performance year, RSUs in the following amounts (based on the closing price of $24.78 as of December 30, 2016) would vest as follows as of December 31, 2016: (a) Scott Barber—$1,232,260; (b) Dan Bessey—$502,167; (c) John Komeiji—$622,226; and Kevin Paul—$381,191.
In October 2016, the Company’s Compensation Committee approved amendments to the form of Restricted Stock Unit Grant Agreement under the Equity Plan to be entered into between the Company and certain participants under the Equity Plan, including each of the Named Executive Officers, beginning with the 2017 Restricted Stock Unit (“RSU”) grants. As the amendments relate to a change of control, the amendments, among other things: (i) modify the change in control trigger by (a) adding the requirement that the participant must also be terminated by the Company without Cause or by the Participant for Good Reason within the period beginning 2 months before, and 24 months after, the change in control transaction, (b) modifying the number of performance-based RSUs vesting upon such termination or, if later, change in control transaction, from the maximum number of unvested performance-based RSUs, to vesting the target number of unvested performance-based RSUs for vesting dates that have not yet occurred, and (c) provide that the accelerated vesting that would otherwise occur upon a participant’s termination in connection with a change in control will occur immediately prior to, and contingent upon, the consummation of the Change in Control if the successor in interest does not agree to assume the RSUs, or substitute equivalent awards or rights.
Each respective employment agreement prohibits the Named Executive Officer from competing with us or soliciting our employees and customers during the term of his employment and for one year following the termination of his employment or the expiration of his term of employment, whichever is longer. Each employment agreement also places restrictions on the dissemination by the Named Executive Officer of confidential or proprietary information.
Compensation of Director
s
The compensation of directors is determined by the full Board of Directors. The Compensation Committee annually reviews the non‑employee director compensation (including cash retainer, cash meeting fees and equity awards) and recommends to the full Board for adoption any changes to such compensation. Changes to non‑employee director compensation are made to ensure that their compensation levels are market‑competitive and that the compensation structure supports our business objectives, aligns the directors’ interests with those of our stockholders, and reflects competitive best practices.
In January 2013, pursuant to the request of the Compensation Committee, Pay Governance completed an evaluation of the Company’s non-employee director compensation, which evaluation was updated in December 2014 by the 2014 Updated Report. Consistent with the recommendations of Pay Governance, the Company’s non-employee directors receive an annual cash retainer of $50,000 (an additional $30,000 if also serving as Chairman of the Board); an additional annual fee if also serving as Chairperson of a committee of the Board ($15,000 for the Audit Committee, $10,000 for the Compensation Committee, $7,500 for the Nominating and Governance Committee, and $5,000 for the Executive Committee); annual equity grants valued at $65,000 (an additional $35,000 if also serving as Chairman of the Board); and an attendance fee of $1,500 per Board or committee meeting attended in person or telephonically.
The following table sets forth a summary of the compensation earned by our non‑employee directors during the fiscal year ended December 31, 2016.
Director Compensation
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Change in
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Pension
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Non-Equity
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Value and
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Fees Earned
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Incentive
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Nonqualified
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or Paid
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Stock
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Option
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Plan
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Deferred
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Compensation
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Compensation
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Total
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Name
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($)
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($)(2)(3)
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($)
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($)
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Earnings
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($)
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($)
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(a)(1)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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Kurt M. Cellar
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90,096
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65,753
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—
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—
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—
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—
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155,849
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Meredith J. Ching
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74,000
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65,753
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—
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—
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—
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—
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139,753
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Walter A. Dods, Jr.
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87,500
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65,753
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—
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—
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—
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—
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153,253
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N. John Fontana III
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42,654
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64,585
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—
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—
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—
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—
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107,239
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Richard A. Jalkut
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119,500
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101,140
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—
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—
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—
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—
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220,640
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Steven C. Oldham
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100,635
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65,753
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—
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—
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—
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—
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166,388
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Robert B. Webster
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42,654
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64,585
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—
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—
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—
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—
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107,239
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Eric K. Yeaman
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71,000
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65,753
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—
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—
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—
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—
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136,753
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Warren H. Haruki(4)
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31,615
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8,468
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—
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—
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—
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—
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40,083
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Bernard R. Phillips III(4)
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26,846
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8,468
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—
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—
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—
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—
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35,314
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(1)
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Mr. Barber did not receive any additional compensation for his service on the Board of Directors.
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(2)
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“Stock Awards” represent the aggregate grant date fair values, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, of restricted stock unit awards issued to non-employee directors pursuant to the 2010 Equity Incentive Plan. There can be no assurance that these grant date fair values will ever be realized by the non-employee directors. For a discussion of the valuation assumptions, see Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.
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(3)
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As of December 31, 2016, Richard Jalkut had 4,070 unvested RSUs, Messrs. Fontana and Webster each had 2,599 unvested RSUs, and each of the other non-employee directors had 2,646 unvested RSUs. Each of Warren Haruki and Bernard Phillips had no unvested RSUs outstanding as of December 31, 2016.
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(4)
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Warren Haruki and Bernarnd Phillips served as directors until the annual meeting of stockholders held in April 2016.
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Compensation Committee Interlocks and Insider Participatio
n
The members of our Compensation Committee are Mr. Oldham (Chairman), Mr. Dods, and Ms. Ching. None of the members of our Compensation Committee serves, or has served during the last completed fiscal year, as an officer or employee of the Company. None of our executive officers currently serves, or during the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board or Compensation Committee.
Certain Relationships and Related Transaction
s
The Company has a written Code of Business Conduct and conflict of interest policies that require employees to disclose any actual or perceived conflict of interest and any material transaction that could be expected to give rise to a conflict of interest, including a potential related party transaction. In the case of the Company’s executive officers, any potential conflict of interest must be reported to and reviewed by the Chief Executive Officer, or if the potential conflict of interest involves a material amount, by the Board of Directors. The Chief Executive Officer or the Board, as the case may be, will make a determination whether a violation of the code of conduct has occurred based on consideration of all relevant facts and circumstances. In the event of a violation, employees may be disciplined up to and including dismissal. Directors also are required, pursuant to the Code of Conduct of the Board of Directors of the Company, to disclose any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company. Such disclosure must be made promptly to the Chairman of the Nominating and Governance Committee.
Nomination, Standstill and Support Agreement with Black Diamond Capital Management, L.L.C.
On February 25, 2016, the Company entered into a Nomination, Standstill and Support Agreement (the “Black Diamond Standstill Agreement”) and a Confidentiality Agreement (the “Black Diamond Confidentiality Agreement”) with Black Diamond Capital Management, L.L.C. (“Black Diamond”). As of March 1, 2017, Black Diamond held approximately 23% of the Company’s outstanding common stock. Pursuant to the Black Diamond Standstill Agreement, during the Term (as defined in the Black Diamond Standstill Agreement), Black Diamond and its affiliates, among other things, agree not to: (i) acquire more than 31.5% of the Company’s outstanding securities; (ii) form or participate in any “group” or otherwise act in concert with any other person in respect of the Company’s securities; (iii) solicit proxies or conduct any other type of referendum; (iv) call any special meeting of the Company’s stockholders or present any proposal for consideration for action by the stockholders; (v) seek any change in the composition of the Board; (vi) subject to limited exceptions, sell the Company’s securities if such sale would knowingly result in the purchaser owning 5% or more of the Company’s securities, or to any person that already has a beneficial or other ownership interest of 5% or more of the Company’s securities; (vii) grant any authority to vote Black Diamond’s shares with respect to any matters or subject them to a voting agreement or similar arrangement; (viii) arrange or participate in any financing for the purchase of the Company’s securities or assets, other than the financing for a transaction that has been approved by the Board; (ix) make a proposal regarding any extraordinary corporate transaction involving the Company or its securities (including, without limitation, any merger, reorganization, recapitalization, extraordinary dividend, liquidation, tender or exchange offer or non-ordinary course sale or transfer of assets); (x) knowingly cause the Company’s securities to become eligible for termination of registration under the Exchange Act; (xi) participate in any litigation against the Company or any of its current or former directors or officers (including derivative actions); (xii) request that the prohibitions under the Black Diamond Standstill Agreement be waived or otherwise seek an amendment or modification of the Black Diamond Standstill Agreement; or (xiii) initiate or otherwise participate in any of the foregoing actions. Additionally, under the Black Diamond Standstill Agreement, Black Diamond and its affiliates are required to vote (a) for all directors nominated by the Board for election, and (b) in accordance with the recommendation of the Board on any other proposals or other business (other than with respect to certain extraordinary corporate transactions) that comes before any stockholder meeting.
In exchange, the Company has agreed, during the Term, to take certain actions to cause Black Diamond’s designated representative to be nominated and elected to the Company’s Board of Directors at each of the Company’s 2016, 2017 and 2018 Annual Meeting of Stockholders. Additionally, provided Black Diamond has no financial or other interest in the subject transaction, the Company has agreed to include the Black Diamond representative as a member of any special committee of the Board created to oversee or consider any transaction or other strategic event that might lead to a change of control or other material change to the Company’s capital structure. Pursuant to the Black Diamond Standstill Agreement, in 2016 the Company also issued a letter in support of Black Diamond’s petition to the Hawaii Public Utilities Commission to acquire additional shares the Company’s outstanding stock (up to a maximum of 31.5%).
The Term of the Black Diamond Standstill Agreement is three years, with certain obligations of each party terminating earlier upon the occurrence of certain events. Concurrently with the execution of the Black Diamond Standstill Agreement, the Company and Black Diamond also executed the Black Diamond Confidentiality Agreement (in the form attached as Exhibit B to the Black Diamond Standstill Agreement) to protect the confidentiality of business information that may be provided by the Company to Black Diamond or its representative. The Black Diamond Confidentiality Agreement will terminate 90 days following the date on which a Black Diamond representative no longer serves as a director of the Company.
Nomination, Standstill and Support Agreement with Twin Haven Capital Partners, LLC and Affiliates
On March 14, 2016, the Company entered into a Nomination, Standstill and Support Agreement (the “Twin Haven Standstill Agreement”) and a Confidentiality Agreement (the “Twin Haven Confidentiality Agreement”) with Twin Haven Capital Partners, L.L.C., Twin Haven Special Opportunities Fund III, L.P., Twin Haven Special Opportunities Partners III, L.L.C., Twin Haven Special Opportunities Fund IV, L.P. and Twin Haven Special Opportunities Partners IV, L.L.C. (collectively, “Twin Haven”). As of March 1, 2012, Twin Haven owned approximately 22.7% of the Company’s outstanding Common Stock.
Pursuant to the Twin Haven Standstill Agreement, during the Term (as defined in the Twin Haven Standstill Agreement), Twin Haven and its affiliates, among other things, agree not to: (i) acquire more than 31.5% of the Company’s outstanding securities; (ii) form or participate in any “group” or otherwise act in concert with any other person in respect of
the Company’s securities; (iii) solicit proxies or conduct any other type of referendum; (iv) call any special meeting of the Company’s stockholders or present any proposal for consideration for action by the stockholders; (v) seek any change in the composition of the Board; (vi) subject to limited exceptions, sell the Company’s securities if such sale would knowingly result in the purchaser owning 5% or more of the Company’s securities, or to any person that already has a beneficial or other ownership interest of 5% or more of the Company’s securities; (vii) grant any authority to vote Twin Haven’s shares with respect to any matters or subject them to a voting agreement or similar arrangement; (viii) arrange or participate in any financing for the purchase of the Company’s securities or assets, other than the financing for a transaction that has been approved by the Board; (ix) make a proposal regarding any extraordinary corporate transaction involving the Company or its securities (including, without limitation, any merger, reorganization, recapitalization, extraordinary dividend, liquidation, tender or exchange offer or non-ordinary course sale or transfer of assets); (x) knowingly cause the Company’s securities to become eligible for termination of registration under the Exchange Act; (xi) participate in any litigation against the Company or any of its current or former directors or officers (including derivative actions); (xii) request that the prohibitions under the Black Diamond Standstill Agreement be waived or otherwise seek an amendment or modification of the Black Diamond Standstill Agreement; or (xiii) initiate or otherwise participate in any of the foregoing actions. Additionally, under the Twin Haven Standstill Agreement, Twin Haven and its affiliates are required to vote (a) for all directors nominated by the Board for election, and (b) in accordance with the recommendation of the Board on any other proposals or other business (other than with respect to certain extraordinary corporate transactions) that comes before any stockholder meeting.
In exchange, the Company has agreed, during the Term, to take certain actions to cause Twin Haven’s designated representative to be nominated and elected to the Company’s Board of Directors at each of the Company’s 2016, 2017 and 2018 Annual Meeting of Stockholders. Additionally, provided Twin Haven has no financial or other interest in the subject transaction, the Company has agreed to include the Twin Haven representative as a member of any special committee of the Board created to oversee or consider any transaction or other strategic event that might lead to a change of control or other material change to the Company’s capital structure. Pursuant to the Twin Haven Standstill Agreement, if Twin Haven petitions the Hawaii Public Utilities Commission to acquire additional shares of the Company’s outstanding stock (up to a maximum of 31.5%), the Company will also issue a letter, in form reasonably acceptable to Twin Haven, in support of Twin Haven’s petition. Additionally, under the Twin Haven Standstill Agreement, if the Company waives or modifies any term of the Black Diamond Agreement or enters into a new agreement with Black Diamond, the Company must offer substantially similar treatment to Twin Haven if the facts and circumstances of each of Black Diamond and Twin Haven are substantially equivalent at that time. Finally, under the Twin Haven Standstill Agreement, the Company may not, without Twin Haven’s consent, waive Black Diamond’s voting support obligations under the Black Diamond Standstill Agreement.
The Term of the Twin Haven Standstill Agreement is three years, with certain obligations of each party terminating earlier upon the occurrence of certain events. Concurrently with the execution of the Twin Haven Standstill Agreement, the Company and Twin Haven executed the Twin Haven Confidentiality Agreement (in the form attached as Exhibit B to the Twin Haven Standstill Agreement) to protect the confidentiality of business information that may be provided by the Company to Twin Haven or its representative. The Twin Haven Confidentiality Agreement will terminate 90 days following the date on which a Twin Haven representative no longer serves as a director of the Company.
Credit Agreement
On February 24, 2017, Hawaiian Telcom Communications, Inc., a wholly-owned subsidiary of the Company, entered into a Credit Agreement (the “Credit Agreement”) under which First Hawaiian Bank (“FHB”) is one of the lenders. Mr. Yeaman, a Director of the Company, is President and Chief Operating Officer of FHB. Mr. Dods, a Director of the Company, serves on the Board of Directors of FHB. The loan from FHB was made in the ordinary course of business, on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans with persons not related to FHB, and did not involve more than the normal risk of collectability or present other unfavorable features.
OTHER INFORMATIO
N
Stockholder Proposals for the 2018 Annual Meetin
g
Proposals of stockholders intended to be presented pursuant to Rule 14a-8 under the Exchange Act at the Company’s Annual Meeting in 2018 must be received at the Company’s headquarters on or before November 14, 2017 in order to be considered for inclusion in the 2018 Proxy Statement and proxy. The Company’s Bylaws require that proposals of
stockholders made outside of Rule 14a-8 under the Exchange Act be submitted, in accordance with Section 2.9 of the Bylaws, not earlier than December 29, 2017, and not later than January 28, 2018; provided, however, that in the event the 2018 Annual Meeting is called for a date that is not within 30 days before or after the anniversary date of the 2017 Annual Meeting, notice by the stockholders in order to be timely must be received by the Company not later than the close of business on the 10th day following the day on which notice of the date of the 2018 Annual Meeting was mailed or public disclosure of the date of the 2018 Annual Meeting was made, whichever occurs first. Additionally, in accordance with Rule 14a-4(c) under the Exchange Act, management proxy holders intend to use their discretionary voting authority with respect to any stockholder proposal raised at the 2018 Annual Meeting as to which the stockholder fails to notify the Company on or before January 28, 2018.
OTHER MATTER
S
The Board knows of no other matters to be presented for stockholder action at the Annual Meeting. However, if other matters do properly come before the Annual Meeting or any adjournments or postponements thereof, the Board intends that the persons named in the proxies will vote upon such matters in accordance with their best judgment.
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By Order of the Board of Directors
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/s/ Sean K. Clark
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Sean K. Clark
Secretary
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Dated: March 14, 2017
Appendix
A
Schedule of Adjusted EBITDA Calculation
(Unaudited, dollars in thousands)
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December 31,
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2016
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2015
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Net income (loss)
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$
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1,106
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$
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1,100
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Income tax provision (credit)
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591
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1,357
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Interest expense and other income and expense, net
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17,095
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16,805
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Operating income
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18,792
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19,262
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Depreciation and amortization
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89,916
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87,879
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Non-cash stock and other performance-based compensation
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2,946
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1,584
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SystemMetrics earn-out
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765
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258
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Pension settlement loss
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1,277
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8,088
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Other special items
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2,287
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2,464
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Adjusted EBITDA
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$
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115,983
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$
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119,535
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aNNUal mEETiNG Of sTOcKhOldERs Of haWaiiaN TElcOm hOldcO, april 28, 2017 iNc. iNTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. TElEphONE - Call toll-free 1-800-pROXiEs (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until 11:59 PMESTthe day before the meeting. mail - Sign, date and mail your proxy card in the envelope provided as soon as possible. iNpERsON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. 20930403000000000000 9 042817 3 years 2 years 1 year ABSTAIN frequency of future advisory votes on executive 4. To ratify the selection of Deloitte & Touche LLP as the fiscal year ending December 31, 2017. changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. ThE BOaRd Of diREcTORs REcOmmENds a vOTE "fOR" ThE ElEcTiON Of diREcTORs, "fOR" pROpOsals NO. 2 aNd NO. 4, aNd “3 yEaRs” ON pROpOsal NO. 3. plEasE siGN, daTE aNd RETURN pROmpTly iN ThE ENclOsEd ENvElOpE. plEasE maRK yOUR vOTE iN BlUE OR BlacK iNK as shOWN hERE x 1. Election of Directors: NOmiNEEs: FOR ALL NOMINEESO Richard A. Jalkut O Kurt M. Cellar WITHHOLD AUTHORITYO Walter A. Dods, Jr. FOR ALL NOMINEESO Steven C. Oldham O Eric K. Yeaman FOR ALL EXCEPTO Meredith J. Ching (See instructions below)O Scott K. Barber O N. John Fontana III O Robert B. Webster INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN 2. To adopt, on a non-binding advisory basis, a resolution approving the compensation of our named executive officers as described in the proxy statement. 3. To recommend, on a non-binding advisory basis, the compensation. FOR AGAINST ABSTAIN Company’s independent registered public accounting firm for the THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS NO. 2 AND NO 4, AND “3 YEARS” ON PROPOSAL NO. 3. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: NOTicE Of iNTERNET availaBiliTy Of pROXy maTERial: The Notice of Meeting, proxy statement and proxy card are available at http://ir.hawaiiantel.com cOmpaNy NUmBER accOUNT NUmBER pROXy vOTiNG iNsTRUcTiONs
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- 0 HAWAIIAN TELCOM HOLDCO, INC. proxy for annual meeting of stockholders on april 28, 2017 This pROXy is sOliciTEd By ThE BOaRd Of diREcTORs Of ThE cOmpaNy The undersigned hereby appoints Richard A. Jalkut and Scott K. Barber, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Hawaiian Telcom Holdco, Inc. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held April 28, 2017 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting. (continued and to be signed on the reverse side.) 14475 1.1
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- 0 HAWAIIAN TELCOM HOLDCO, INC. proxy for annual meeting of stockholders on april 28, 2017 This pROXy is sOliciTEd By ThE BOaRd Of diREcTORs Of ThE cOmpaNy The undersigned hereby appoints Richard A. Jalkut and Scott K. Barber, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Hawaiian Telcom Holdco, Inc. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held April 28, 2017 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting. (continued and to be signed on the reverse side.) 14475 1.1
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aNNUal mEETiNG Of sTOcKhOldERs Of haWaiiaN TElcOm hOldcO, april 28, 2017 iNc. GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. NOTicE Of iNTERNET availaBiliTy Of pROXy maTERial: The Notice of Meeting, proxy statement and proxy card are available at http://ir.hawaiiantel.com Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20930403000000000000 9 042817 3 years 2 years 1 year ABSTAIN frequency of future advisory votes on executive 4. To ratify the selection of Deloitte & Touche LLP as the fiscal year ending December 31, 2017. changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. ThE BOaRd Of diREcTORs REcOmmENds a vOTE "fOR" ThE ElEcTiON Of diREcTORs, "fOR" pROpOsals NO. 2 aNd NO. 4, aNd “3 yEaRs” ON pROpOsal NO. 3. plEasE siGN, daTE aNd RETURN pROmpTly iN ThE ENclOsEd ENvElOpE. plEasE maRK yOUR vOTE iN BlUE OR BlacK iNK as shOWN hERE x 1. Election of Directors NOmiNEEs: FOR ALL NOMINEESO Richard A. Jalkut O Kurt M. Cellar WITHHOLD AUTHORITYO Walter A. Dods, Jr. FOR ALL NOMINEESO Steven C. Oldham O Eric K. Yeaman FOR ALL EXCEPTO Meredith J. Ching (See instructions below)O Scott K. Barber O N. John Fontana III O Robert B. Webster INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN 2. To adopt, on a non-binding advisory basis, a resolution approving the compensation of our named executive officers as described in the proxy statement. 3. To recommend, on a non-binding advisory basis, the compensation. FOR AGAINST ABSTAIN Company’s independent registered public accounting firm for the THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS NO. 2 AND NO 4, AND “3 YEARS” ON PROPOSAL NO. 3. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate:
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Hawaiian Telcom Holdco, Inc. (delisted) (NASDAQ:HCOM)
過去 株価チャート
から 6 2024 まで 7 2024
Hawaiian Telcom Holdco, Inc. (delisted) (NASDAQ:HCOM)
過去 株価チャート
から 7 2023 まで 7 2024