EMPLOYMENT AGREEMENT
BETWEEN
WINDSTREAM CORPORATION AND JEFFERY R. GARDNER
This Employment
Agreement (this “Agreement”) is made, entered into, and
is effective as of November 7, 2006 (the “Effective
Date”), by and between Windstream Corporation, a Delaware
corporation (“Windstream”), and Jeffery R. Gardner (the
“Executive”).
The Executive is
the President and Chief Executive Officer of Windstream. Windstream
is desirous of assuring the continued employment of the Executive
and wishes to establish certain terms and conditions of employment
of the Executive, to provide certain benefits to the Executive in
the case of his termination of employment, and to obtain certain
agreements from the Executive for the benefit of
Windstream.
Windstream and the
Executive agree as follows:
For purposes of
this Agreement, the following terms shall have the meanings
indicated below:
1.1 “Annual
Incentive Benefit” shall mean the higher of the Annual
Incentive Target or the Prior Annual Incentive Amount.
1.2 “Annual
Incentive Plan” shall mean the Windstream Corporation
Performance Incentive Compensation Plan, the Windstream Corporation
Executive Incentive Compensation Plan and any one or more other
formalized plans, if any, in which the Executive is eligible to
participate providing incentive compensation payable in cash to
eligible participants determined on the basis of a measuring period
not in excess of 12 calendar months, but shall expressly exclude,
without limitation, the Windstream Management Deferred Compensation
Plan, the Windstream Executive Deferred Compensation Plan, the
Windstream Benefit Restoration Plan, any plan qualified or intended
to be qualified under Section 401(a) of the Code and any plan
supplementary thereto, the Windstream 2006 Equity Incentive Plan,
and any other plan or arrangement under which stock, stock options,
stock appreciation rights, restricted stock or similar options,
stock, or rights are issued, any amendment or restatement of, or
successor plan to, any of the foregoing plans in effect from time
to time, and any executive fringe benefits.
1.3 “Annual
Incentive Target” shall mean the amount of cash compensation
that would be payable to the Executive under the Annual Incentive
Plan for the measuring period during which the Termination Date
occurs, computed assuming that the level of performance with
respect to a performance goal identified in accordance with the
terms of the Annual Incentive Plan as the “target”
level of performance has been achieved. Where no level of
performance has been specifically identified as the
“target” level, the “target” level shall be
(i) the only level if one level is identified, (ii) the
higher of two levels if two levels are identified, and
(iii) the highest level if three or more levels are
identified. Where the amount of compensation depends on the
achievement of multiple performance goals, the achievement of each
target level of performance with respect to each goal shall be
assumed.
1.4 “Base
Salary” shall have the meaning given to such term in
Section 5.1, except that where the Base Salary of the
Executive has, notwithstanding the provisions of Section 5.1,
been reduced, Base Salary shall mean the Base Salary without giving
effect to the reduction.
1.5
“Beneficiary” shall mean the person so designated by
the Executive in a written notice to Windstream prior to his death,
and in the absence of a written beneficiary designation, the
Executive’s Beneficiary shall be his surviving Spouse, or if
he has no surviving Spouse, his estate, except (in each case) where
otherwise required by law or the terms of an applicable
compensation arrangement or employee benefit plan.
1.6
“Board” (or “Windstream’s Board”)
shall mean the Board of Directors of Windstream or a duly
authorized committee of the Board, including, without limitation,
the Compensation Committee of the Board.
1.7
“Cause” shall have the meaning given to such term in
Section 7.3.
1.8
“Compensation Committee” shall mean the Compensation
Committee of the Board or, with respect to any period during which
there is no Compensation Committee of the Board, the
Board.
1.9
“Disability” shall mean the incapacity of the
Executive, due to injury, illness, disease, or bodily or mental
infirmity, to engage in the performance of his usual duties as
contemplated by Section 3 (Position and Responsibilities),
except for an incapacity of the Executive for a period of 60
calendar days or less in the aggregate during any period of 12
consecutive calendar months in the absence of a reasonable
expectation that the Executive’s incapacity will exist for
more than 60 calendar days. “Disability” shall be
determined by the Board in the good faith exercise of its
discretion upon receipt of and in reliance on competent medical
advice from one or more individuals who are qualified to give
professional medical advice on the matters that are relevant to the
Executive’s condition selected by the Board.
1.10 “Good
Reason” shall mean the occurrence on or after the Effective
Date and no more than 180 calendar days prior to the date that
notice of termination is given by the Executive in accordance with
Section 7.5 (Termination by Windstream Other Than for Cause or
by Executive for Good Reason), without the Executive’s
express written consent, of any one or more of the
following:
(i) Any
action of Windstream that results in a material adverse change in
the Executive’s position (including status, offices, title,
and reporting requirements), authorities, duties, or other
responsibilities, other than an insubstantial and inadvertent
action that is remedied by Windstream promptly after receipt of
notice thereof given by the Executive;
(ii) A
material reduction by Windstream in the Executive’s
compensation, as contemplated by Section 5;
(iii) The
failure of the Board to nominate the Executive for election or
re-election to the Board; and
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(iv) A
material breach by Windstream of any provision of this Agreement
that is not remedied by Windstream promptly after receipt of notice
thereof given to Windstream by the Executive.
Notwithstanding
the foregoing, in no event shall any of the following constitute
“Good Reason”:
(i) A
reduction in any component of the Executive’s compensation if
coincident with the reduction in that component of the
Executive’s compensation one or more other components of the
Executive’s compensation is or are increased or a substitute
or alternative is provided so that the Executive’s overall
compensation is not materially reduced;
(ii) The
Executive does not earn cash bonuses or benefit from equity
incentives awarded to the Executive because one or more performance
goals or targets (including appreciation in value related to equity
awards) was or were not achieved; and
(iii) The
suspension of the Executive for the period during which the Board
is making a determination whether to terminate the Executive for
Cause in accordance with Section 7.3 (Termination for
Cause).
1.11
“Non-Interference/Assistance Period” shall mean the
period commencing with the Termination Date and ending on the first
anniversary of the Termination Date.
1.12 “Notice
of Termination” shall have the meaning given to such term in
Section 12.1.
1.13
“Ordinary Termination Benefits” shall mean (i) the
Executive’s Base Salary earned but not paid through the
Termination Date and (ii) Other Vested Benefits.
1.14 “Other
Vested Benefits” shall mean all compensation and benefits to
which the Executive has a vested right on the Termination Date,
including but not limited to any amount payable to the Executive
under the Annual Incentive Plan’s terms with respect to the
measuring period ending immediately prior to the measuring period
during which the Termination Date occurs, and any other benefits
payable under this Agreement, but expressly excluding Base Salary
or Severance Benefits.
1.15 “Prior
Annual Incentive Amount” shall mean the amount of cash
compensation that was paid or payable to the Executive under the
Annual Incentive Plan for the measuring period ending immediately
prior to the measuring period during which the Termination Date
occurs.
1.16
“Prorated Annual Incentive Benefit” shall mean the
Annual Incentive Benefit multiplied by a fraction, the numerator of
which is the number of calendar months (counting a partial calendar
month as a full month) that have elapsed in the measuring period
during which the Termination Date occurs prior to the Termination
Date, and the denominator of which is twelve (12); reduced by the
amount, if any, paid or payable to the Executive under the Annual
Incentive Plan’s terms with respect to the measuring period
during which the Termination Date occurs.
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1.17
“Protective Covenants” shall mean the Executive’s
obligations under Section 8 of this Agreement.
1.18
“Section 409A” shall mean Section 409A of the
Internal Revenue Code of 1986, as amended, and any proposed,
temporary or final regulations, or any other guidance, promulgated
with respect to such Section 409A by the U.S. Department of
Treasury or the Internal Revenue Service.
1.19
“Severance Benefits” shall mean a lump sum payment, in
cash, equal to the sum of (i) the Executive’s annual
Base Salary multiplied by two; and (ii) the Prorated Annual
Incentive Benefit; and reduced by any cash severance benefit
otherwise paid or payable to the Executive under any severance plan
or other severance arrangement of the Windstream Group.
1.20
“Spouse” shall mean the person (if any) to whom the
Executive is legally married at the relevant time, or if the
Executive is deceased, the person (if any) to whom the Executive
was legally married at the time of the Executive’s
death.
1.21
“Term” shall have the meaning given to such term in
Section 2.
1.22
“Termination Date” shall mean the effective date of the
termination of the Executive’s employment with the Windstream
Group during the Term.
1.23
“Windstream Group” shall mean, collectively, Windstream
and all other entities that are direct or indirect subsidiaries or
affiliates of Windstream from time to time, and a
“member” of the Windstream Group shall mean Windstream
or any of such entities.
Section 2.
Term of Agreement .
(A) Windstream
shall employ the Executive, and may cause any other member of the
Windstream Group to employ the Executive, and the Executive shall
continue his employment in accordance with the terms and conditions
set forth herein, for the “Term” of this
Agreement.
(B) The
“Term” shall mean the period commencing on the
Effective Date and ending on the earlier of: (i) the
Termination Date; or (ii) December 31, 2009. To the
extent not previously terminated, the Term shall be automatically
renewed for successive one-year periods upon the terms and
conditions set forth herein, commencing on December 31, 2009,
and on each December 31 thereafter, unless either party gives
the other party written notice at least 90 calendar days prior to
the end of such initial or extended Term that the Term shall not be
so extended. For purposes of this Agreement, any reference to the
“Term” of this Agreement shall include the original
term and any extension thereof.
Section 3.
Position and Responsibilities .
During the Term,
the Executive shall serve as the Chief Executive Officer and
President of Windstream, with such duties and responsibilities as
are commensurate with such positions, reporting directly to the
Board. In addition, the Company shall cause the Executive to serve
as a member of the Board, and during the Term, the Executive shall
remain on the Board, subject to
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Section 8.6. The Executive agrees to serve,
without additional compensation, as an officer and director for
each member of the Windstream Group (other than Windstream), as
determined by Windstream, provided, that such service does not
materially interfere with the Executive’s performance of his
duties and responsibilities as a member of the Board and Chief
Executive Officer and President of Windstream.
Section 4.
Standard of Care .
During the Term,
the Executive shall devote substantially his full business time,
attention, and energies to the business of the Windstream Group.
During the Term, it shall not be a violation of this Agreement for
the Executive, to serve as a director of or officer of or otherwise
participate in other businesses and civic, charitable, and
educational organizations so long as that service or participation
is not injurious to the Windstream Group, does not violate any
provision of Section 8 (Protective Covenants By the
Executive), and does not interfere with the performance of his
duties for the Windstream Group. During the Term, the Executive
shall:
(i) Devote
his best efforts to the fulfillment of his employment obligations
hereunder;
(ii) Exercise
the highest degree of care and loyalty to the Windstream Group and
the highest standards of conduct in the performance of his
duties;
(iii) Comply
with the corporate governance board guidelines and code of ethics
of each member of the Windstream Group; and
(iv) Do
nothing that intentionally harms, in any way, the business or
reputation of the Windstream Group.
Section 5.
Compensation .
As remuneration
for all services to be rendered to the Windstream Group by the
Executive during the Term and except as otherwise provided in this
Agreement, Windstream shall pay or provide, or cause another member
of the Windstream Group to pay or provide, to the Executive the
following:
During the Term,
the Executive shall receive a base salary (“Base
Salary”) at a rate of no less than $700,000 per annum. During
the Term, the Executive’s Base Salary shall be reviewed
annually by the Board and may be increased by the Board in its sole
and absolute discretion. If so increased, the Base Salary shall be
increased for all purposes of this Agreement. Once so increased,
the Base Salary shall not be decreased during the Term. The
Executive’s Base Salary shall be paid to the Executive in
installments throughout the year, consistent with the normal
payroll practices of Windstream.
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For each fiscal
year during the Term, the Executive shall be eligible to
participate in the Annual Incentive Plan under terms and conditions
no less favorable than other senior executives of Windstream;
provided, however, that the Executive’s “target”
annual bonus opportunity shall not be less than 100% of his Base
Salary (or such higher percentage as determined by the Board from
time to time). Nothing contained in this Section 5.2 will
guarantee the Executive any specific amount of incentive
compensation, or prevent the Board from establishing performance
goals and compensation targets applicable only to the
Executive.
During the Term,
the Executive shall be eligible to participate in all equity
incentive, employee benefits and perquisite plans, programs and
arrangements that are no less favorable to the Executive than the
plans, programs and arrangements provided to other senior
executives of Windstream from time to time.
Section 6.
Expense Reimbursement .
Windstream shall
pay or reimburse the Executive for ordinary and necessary
employment-related expenses of the Executive on a basis that is no
less favorable to the Executive than the basis on which payment or
reimbursement of employment-related expenses is made from time to
time to other senior executives of Windstream.
Section 7.
Employment Termination .
7.1 Termination
Due to Death .
(A) In
the event of the death of the Executive during the Term, Windstream
shall pay or provide to the Executive’s Beneficiary, in full
satisfaction of all amounts due, the Ordinary Termination
Benefits.
(B) The
Ordinary Termination Benefits shall be paid in a single cash lump
sum within 10 business days after the Termination Date, except as
otherwise required by law, by the terms of any applicable
compensation arrangement or employee benefit plan or by the terms
of this Agreement.
7.2 Termination
Due to Disability .
(A) In
the event of the Executive’s Disability during the Term,
Windstream’s Board may terminate or cause to be terminated
the Executive’s employment under this Agreement by written
notice to the Executive of the termination of the Executive’s
employment for Disability in accordance with this Section 7.2
given at least 10 business days prior to the effective date of such
termination. A termination for Disability shall become effective
upon the end of the 10-business-day notice period. Upon the
effective date of the Executive’s termination of employment
on account of Disability, Windstream shall pay or provide to the
Executive, in full satisfaction of all amounts due, the Ordinary
Termination Benefits.
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(B) The
Ordinary Termination Benefits shall be paid in a single cash lump
sum within 10 business days after the Termination Date, except as
otherwise required by law, by the terms of any applicable
compensation arrangement or employee benefit plan or by the terms
of this Agreement.
7.3 Termination
for Cause .
(A) Windstream’s
Board may terminate or cause to be terminated the Executive’s
employment under this Agreement for “Cause” in
accordance with this Section 7.3 at any time during the Term.
Upon a termination for Cause under this Section 7.3 during the
Term, Windstream shall pay or provide to the Executive, in full
satisfaction of all amounts due, the Ordinary Termination
Benefits.
(B) The
Ordinary Termination Benefits shall be paid in a single lump sum
within 10 business days after the Termination Date, except as
otherwise required by law, by the terms of any applicable
compensation arrangement or employee benefit plan or by the terms
of this Agreement.
(C)
“Cause” shall mean (i) the willful failure by the
Executive substantially to perform the Executive’s duties
with the Windstream Group, other than any failure resulting from
the Executive’s incapacity due to physical or mental illness
or any actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive in accordance with
Section 7.5, that continues for at least 30 calendar days after the
Board delivers to the Executive a written demand for performance
that identifies specifically and in detail the manner in which the
Board believes that the Executive willfully has failed
substantially to perform the Executive’s duties; (ii) a
conviction, guilty plea or plea of nolo contendere of the
Executive for any felony; (iii) gross negligence or willful
misconduct by the Executive that is intended to or does result in
the Executive’s substantial personal enrichment or a material
detrimental effect on the reputation or business of any member of
the Windstream Group; (iv) a material violation by the
Executive of the corporate governance board guidelines and code of
ethics of any member of the Windstream Group; (v) a material
violation by the Executive of the requirements of the
Sarbanes-Oxley Act of 2002 or other federal or state securities
law, rule or regulation; (vi) the repeated use of alcohol by
the Executive that materially interferes with the Executive’s
duties, the use of illegal drugs by the Executive, or a violation
by the Executive of the drug and/or alcohol policies of any member
of the Windstream Group; or (vii) a material breach by the
Executive of any Protective Covenants during the Term. For purposes
of this definition, no act, or failure to act, on the
Executive’s part shall be deemed “willful” unless
done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive’s act, or
failure to act, was in the best interest of the Windstream Group.
Whether an act or failure to act by the Executive constitutes
“Cause” shall be determined subject to the following
requirements:
(i) Written
notice shall be provided to the Executive not less than 10 business
days prior to the effective date of the termination setting forth
the intention of Windstream’s Board to consider terminating
the Executive for Cause, including a statement of the intended
effective date of termination and a description of the specific
facts believed to constitute Cause;
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(ii) None
of the acts or omissions of the Executive that the Board believes
to constitute Cause shall have occurred more than 365 calendar days
before the earliest date on which any member of the Board who is
not a party to the act or omission knew or should have known of
such act or omission;
(iii) The
Executive shall be offered an opportunity to respond to the
statement required by clause (i) above by appearing in person,
together with the Executive’s legal counsel, before the Board
prior to the date of termination;
(iv) By
the affirmative vote of at least 75 percent of the
non-employee members of the Board present at the Board meeting at
which the determination is made, the Board shall determine that the
specified facts constituted Cause and that the Executive’s
employment should accordingly be terminated for Cause;
and
(v) Windstream
shall provide the Executive a copy of the Board’s written
determination setting forth with specificity the basis of the
termination for Cause and stating the effective date of
termination.
Any purported
termination for Cause that does not satisfy each substantive and
procedural requirement of this Section 7.3(C) shall be treated
for all purposes under this Agreement as a termination of the
Executive’s employment under Section 7.5 (Termination by
Windstream Other Than for Cause or by Executive for Good
Reason).
(D) By
determination of the Board, Windstream (and any other member of the
Windstream Group then employing the Executive) may, upon written
notice to the Executive, suspend the Executive from his duties for
a period of up to 30 calendar days with full pay and benefits
hereunder during the period of time during which the Board is
making a determination under Section 7.3(C) whether to
terminate the Executive’s employment for Cause.
7.4 Voluntary
Termination by the Executive Other Than for Good Reason
.
(A) The
Executive may terminate his employment under this Agreement other
than for Good Reason in accordance with this Section 7.4 at
any time during the Term by giving the Board at least 30 calendar
days’ prior written notice of termination in accordance with
this Section 7.4. The termination automatically shall become
effective upon the expiration of the notice period. The
Executive’s right to terminate his employment under this
Section 7.4 shall not be affected by the Executive’s
disability or incapacity.
(B) Upon
a termination other than for Good Reason under this
Section 7.4 during the Term, Windstream shall pay or provide
to the Executive, in full satisfaction of all amounts due, the
Ordinary Termination Benefits.
(C) The
Ordinary Termination Benefits shall be paid in a single lump sum
within 10 business days after the Termination Date, except as
otherwise required by law, by the terms of any applicable
compensation arrangement or employee benefit plan or by the terms
of this Agreement.
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7.5 Termination
by Windstream Other Than for Cause or by Executive for Good
Reason .
(A) Windstream’s
Board may, in the exercise of its sole and absolute discretion,
terminate or cause to be terminated the Executive’s
employment under this Agreement other than for Cause in accordance
with this Section 7.5 at any time during the Term by written
notice to the Executive specifying the effective date of
termination, which effective date shall not be earlier than the
date on which the written notice of termination under this
Section 7.5 is given to the Executive. The Executive may
terminate his employment under this Agreement for Good Reason in
accordance with this Section 7.5 at any time during the Term
by giving the Board 30 calendar days’ written notice of
termination in accordance with this Section 7.5, which must
set forth in reasonable detail the facts and circumstances that are
claimed to provide a basis for the Good Reason termination. The
termination automatically shall become effective upon the
expiration of the notice period. The Executive’s right to
terminate his employment for Good Reason under this
Section 7.5 shall not be affected by the Executive’s
disability or incapacity. The Executive’s continued
employment under this Agreement shall not constitute consent to, or
a waiver of rights with respect to, any act or failure to act
constituting Good Reason.
(B) Upon
a termination by Windstream other than for Cause or by the
Executive for Good Reason under this Section 7.5 during the
Term, Windstream shall pay or provide or cause another member of
the Windstream Group to pay or provide to the Executive in full
satisfaction of all amounts due the Ordinary Termination Benefits
and the Severance Benefits.
(C) The
Ordinary Termination Benefits and the Severance Benefits shall be
paid in a single lump sum within 10 business days after the
Termination Date, except as otherwise required by law, by the terms
of any applicable compensation arrangement or employee benefit plan
or by the terms of this Agreement.
Notwithstanding
anything contained in this Agreement to the contrary, Windstream
shall not be obligated to pay or provide any Severance Benefits
(a) unless the Executive first executes and does not revoke a
release substantially in the form attached hereto as
Exhibit A ; and (b) to the extent such payment or
benefit is subject to the seven-day revocation period prescribed by
the Age Discrimination in Employment Act of 1967, as amended, or to
any similar revocation period in effect on the date of termination
of the Executive’s employment, such revocation period has
expired.
Section 8.
Protective Covenants by the Executive .
Within five
calendar days after the date of the termination of the
Executive’s employment with the Windstream Group, the
Executive shall deliver to Windstream all of the Windstream
Group’s property in his possession, custody or control,
including, without limitation, all keys and credit cards, all
computers and fax machines, and all files, documents, data and
information in
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any medium
relating in anyway to the Windstream Group or its employees,
suppliers, customers or business.
The Executive
acknowledges that in the course of his employment with the
Windstream Group he has had and will have access to confidential
information and trade secrets proprietary to the Windstream Group,
including, without limitation, information relating to the
Windstream Group’s products, suppliers, and customers, the
sources, nature, processes, costs and prices of the Windstream
Group’s products, the names, addresses, contact persons,
purchasing and sales histories, and preferences of the Windstream
Group’s suppliers and customers, the Windstream Group’s
business plans and strategies, and the names and addresses of,
amounts of compensation paid to, and the trading and sales
performance of the Windstream Group’s employees and agents
(hereinafter referred to as the “Confidential
Information”). The Executive further acknowledges that the
Confidential Information is proprietary to the Windstream Group,
that the unauthorized disclosure of any of the Confidential
Information to any person or entity will result in immediate and
irreparable competitive injury to the Windstream Group, and that
such injury cannot adequately be remedied by an award of monetary
damages. Accordingly, the Executive shall not at any time disclose
any Confidential Information to any person or entity who is not
properly authorized by the Windstream Group to receive the
information without the prior written consent of the Chairman of
the Board of Windstream (which consent may be withheld for any
reason or no reason) unless and except to the extent that such
disclosure is required by any subpoena or other legal process (in
which event the Executive will give the Chairman of the Board of
Windstream prompt written notice of such subpoena or other legal
process in order to permit Windstream to seek appropriate
protective orders), and that he shall not use any Confidential
Information for his own account without the prior written consent
of the Chairman of the Board of Windstream (which consent may be
withheld for any reason or no reason).
The Executive
shall not during his employment with the Windstream Group and
thereafter until the expiration of the Non-Interference/Assistance
Period, in any manner, directly or indirectly, through any person,
firm or corporation, alone or as a member of a partnership or as an
officer, director, shareholder, investor or employee of or in any
other corporation or enterprise or otherwise,
(i) engage
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