Exhibit 10.23
Frontier Communications Corporation
3 High Ridge Park
Stamford, Connecticut 06905
(203) 614-5600
December 24, 2008
Ms. Cecilia K. McKenney
24 Stone Paddock Place
Bedford, NY 10506
Dear Cecilia:
Reference is made to the Offer Letter dated January 13, 2006 ("Offer
Letter") between you and Frontier Communications Corporation (formerly Citizens
Communications Company) (the "Company").
The terms of the Enhanced Severance Benefit referred to in the Offer Letter
are hereby amended as follows:
If, within one year following a "Change in Control" (as defined below) of
the Company, you have a "Separation from Service" (as defined below) either
because (a) your employment is terminated by the Company without "Cause" (as
defined below) or (b) you terminate your employment as a result of (i) a
material decrease in your base salary, target bonus or long term incentive
compensation target from those in effect immediately prior to the Change in
Control for any reason other than Cause; (ii) a material relocation of your
principal office location (for this purpose, a relocation more than 50 miles
from the Company's Stamford, Connecticut headquarters area will be automatically
deemed material) or (iii) a material decrease in your responsibilities or
authority for any reason other than Cause (and prior to your terminating your
employment you provide the Company with notice of the decrease or relocation
within 90 days of the occurrence of such condition, the Company does not remedy
the condition within 30 days of such notice, and you Separate from Service
within two years of the initial occurrence of one or more such conditions), you
shall be entitled to a lump sum payment equal to one year's base salary and
bonus target (based on the then current level of salary and bonus target or, if
greater, that in effect immediately prior to the Change in Control) and all
restrictions on restricted shares held by you shall immediately lapse and such
restricted shares shall become fully-vested and non-forfeitable. The lump sum
payment will be made on the Expiration Date, as defined below.
A "Change in Control" shall be deemed to have occurred:
Ms. Cecilia K. McKenney
December 24, 2008
Page 2 of 5
(A) When any "person" as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section
13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the
Exchange Act (but excluding the Company and any subsidiary and any employee
benefit plan sponsored or maintained by the Company or any subsidiary (including
any trustee of such plan acting as trustee)), directly or indirectly, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
(B) Upon the consummation of any merger or other business combination
involving the Company, a sale of substantially all of the Company's assets,
liquidation or dissolution of the Company or a combination of the foregoing
transactions (the "Transactions") other than a Transaction immediately following
which the shareholders of the Company immediately prior to the Transaction own,
in the same proportion, at least 51% of the voting power, directly or
indirectly, of (i) the surviving corporation in any such merger or other
business combination; (ii) the purchaser of or successor to the Company's
assets; (iii) both the surviving corporation and the purchaser in the event of
any combination of Transactions; or (iv) the parent company owning 100% of such
surviving corporation, purchaser or both the surviving corporation and the
purchaser, as the case may be.
"Cause" shall mean your (a) willful and continued failure (other than as a
result of physical or mental illness or injury) to perform your material duties
in effect immediately prior to the Change in Control which continues beyond 10
days after a written demand for substantial performance is delivered to you by
the Company, which demand shall identify and describe each failure with
sufficient specificity to allow you to respond, (b) willful or intentional
conduct that causes material and demonstrable injury, monetary or otherwise, to
the Company or (c) conviction of, or a plea of nolo contendere to, a crime
constituting (i) a felony under the laws of the United States or any State
thereof, or (ii) a misdemeanor involving moral turpitude. For these purposes, no
act or failure to act on your part shall be considered "willful" or
"intentional" unless it is done, or omitted to be done by you in bad faith and
without reasonable belief that your action or inaction was in the best interests
of the Company. Any act or failure to act based upon authority given pursuant to
a resolution duly adopted by the Board of Directors or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by you in good faith and in the best interests of the Company.
Ms. Cecilia K. McKenney
December 24, 2008
Page 3 of 5
If it is determined (as hereafter provided) that any payment or
distribution by the Company to or for your benefit, whether paid or payable or
distributed or distributable pursuant to the terms of this letter agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without limitation any stock option, restricted stock
award, stock appreciation right or similar right, or the lapse or termination of
any restriction on or the vesting or exercisability of any of the foregoing (a
"Severance Payment"), would be subject to the excise tax imposed by Section 4999
of the Code (or any successor provision thereto) by reason of being "contingent
on a change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any similar
tax imposed by state or local law, or any interest or penalties with respect to
such excise tax (such tax or taxes, together with any such interest and
penalties, are hereafter collectively referred to as the "Excise Tax"), then the
Severance Payment shall be payable either (i) in full or (ii) as to such lesser
amount which would result in no portion of the Severance Payment being subject
to the Excise Tax ("Capped Payment"), whichever of the foregoing amounts, taking
into account the applicable federal, state and local income taxes and the Excise
Tax, results in your receipt on an after-tax basis, of the greatest amount of
economic benefits to you, notwithstanding that all or some portion of such
benefits may be taxable under Section 4999 of the Code.
Subject to the provisions of immediately preceding paragraph, all
determinations required to be made pursuant to this letter agreement, including
whether an Excise Tax is payable by you and the amount of such Excise Tax, shall
be made by the nationally recognized firm of certified public accountants (the
"Accounting Firm") used by the Company prior to the Change in Control (or, if
such Accounting Firm declines to serve, the Accounting Firm shall be a
nationally recognized firm of certified public accountants selected by you). The
Accounting Firm shall be directed by the Company or you, as applicable, to
submit its preliminary determination and detailed supporting calculations to
both the Company and you within 15 calendar days after the date of your
termination of employment, if applicable, and any other such time or times as
may be requested by the Company or you. If the Accounting Firm determines that
any Excise Tax is payable by you, the Company shall either (x) make payment of
the Severance Payment, or (y) reduce the Severance Payment by the amount which,
based on the Accounting Firm's determination and calculations, would provide you
with the Capped Payment (except that any portion of the Severance Payment that
constitutes deferred compensation that is subject to Section 409A shall not be
reduced, and its time and form of payment shall not be altered as a result of
this process), and pay to you such reduced amount, in each case, less any Excise
Taxes, federal, state, and local income and employment withholding taxes and any
other amounts required to be deducted or withheld by the Company under
applicable statute or regulation. If the Accounting Firm determines that no
Excise Tax is payable by you, it shall, at the same time as it makes such
determination, furnish you with an opinion that you have substantial authority
not to report any Excise Tax on your federal, state, local income or other tax
return. All fees and expenses of the Accounting Firm and opinion letter shall be
paid by the Company in connection with the calculations required by this letter.
Ms. Cecilia K. McKenney
December 24, 2008
Page 4 of 5
The provisions in this letter regarding lapsing of restrictions on
restricted stock in certain circumstances in the event of a Change in Control
will remain in effect as long as you are a member of the Senior Leadership Team
("SLT"). If at any time you are no longer a member of the SLT, such provisions
will not apply.
You shall not receive any payments or benefits to which you may be entitled
hereunder unless you agree to execute a release of all then existing claims
against the Company, its subsidiaries, affiliates, shareholders, directors,
officers, employees and agents in relation to claims relating to or arising out
of your employment or the business of the Company; provided, however, that any
such release shall not bar or prevent you from responding to any litigation or
other proceeding initiated by a released party and asserting any claim or
counterclaim you have in such litigation or other proceeding as if no such
release had been given as to such party, nor shall it bar you from claiming
rights that arise under, or that are preserved by, this letter agreement. To
comply with this paragraph, you must sign and return the release within 45 days
of the termination of your employment, and you must not revoke it during a
seven-day revocation period that begins when the release is signed and returned
to the Company. Then following the expiration of this revocation period, there
shall occur the "Expiration Date," which is the 53rd day following the date of
termination of your employment.
To the extent that a payment of Section 409A compensation under this letter
agreement is based upon your having a termination of employment, "termination of
employment" shall have the same meaning as "Separation from Service" under
Section 409A(a)(2)(A)(i) of the Code. In addition, to avoid having such a
separation from service occur after your termination of employment, you shall
not have (after your termination of employment) any duties or responsibilities
that are inconsistent with the termination of employment being treated as such a
separation from service as of the date of such termination.
This letter agreement sets forth the entire agreement and understanding
between the Company and you relating to the subject matter hereof and supersedes
and replaces all prior discussions and agreements between us regarding the
subject matter hereof, including, without limitation, the memorandum, dated
September 7, 2007, addressed to you from Maggie Wilderotter entitled "Terms of
Restricted Stock Award" and the terms of the Offer Letter relating to the
Enhanced Severance Benefit. This letter agreement can only be modified by a
subsequent written agreement executed by the Company and you. This letter
agreement shall be governed by and interpreted in accordance with the laws of
the State of Connecticut, without regard to its conflicts of laws or principles.
It is the intention of the parties that the lump sum described in the third
paragraph of this letter should be exempt from Section 409A as a short-term
deferral, and that the restricted stock should also be exempt from Section 409A,
and this letter agreement in the normal course is to be interpreted accordingly.
Nonetheless, if you are a "specified employee" within the meaning of Section
409A and any amounts or other compensation are (i) payable under this letter
agreement, (ii) subject to Section 409A as deferred compensation and (iii)
payable on account of your Separation from Service, then such amounts or
compensation may not be paid until six months after your Separation from Service
date. Finally, the parties intend at all times that no payment or entitlement
pursuant to this letter agreement will give rise to any adverse tax consequences
to either party pursuant to Section 409A, and this letter agreement shall be
interpreted consistently with this paragraph. The term "Separation from Service"
shall have the meaning given to it by Section 409A (or any successor provision)
("Section 409A") of the Internal Revenue Code of 1986, as amended (the "Code").
Ms. Cecilia K. McKenney
December 24, 2008
Page 5 of 5
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this letter agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place. "Company"
means the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this letter
agreement by operation of law or otherwise.
To acknowledge your acceptance of the terms and conditions of this letter
agreement, please sign the bottom of this letter agreement and fax it to me
directly at (203) 614-4627. Also, please return the originally signed offer
letter to my attention.
Sincerely,
/s/ Hilary E. Glassman
Hilary E. Glassman
Senior Vice President, General Counsel
and Secretary
Agreed to and acknowledged:
/s/ Cecilia K. McKenney December 29, 2008
----------------------------------- ----------------------
Cecilia K. McKenney Date