Windstream 2006 Annual Report Download - page 21

Based on the foregoing process and the recommendations of the Alltel Compensation Committee and the
management of Windstream, the Compensation Committee approved the final grant values for such awards at its
August 2006 meeting. The economic value of each award was determined as follows:
• The annual awards were set at the 50th percentile of annual equity compensation awards to officers in
the market surveys.
• The one-time awards were set at the 50th percentile of equity compensation awards to officers in
comparable transactions in the market surveys.
• The forfeiture awards were set by calculating the in-the-money value of unvested Alltel stock options
held by each Windstream executive at July 17, 2006 in accordance with the spin-off transaction
documents.
The economic value (at the date of grant) of the equity awards granted to Mr. Gardner and to all other
Windstream named executive officers as a group was as follows during 2006:
Type of Award Mr. Gardner
Other Named
Executive Officers
Annual $2,500,000 $3,575,000
One-Time $3,000,000 $2,975,000
Forfeiture $2,063,880 $2,173,224
Total $7,564,800 $8,723,224
All equity awards to Windstream executive officers during 2006 were restricted stock awards, except for awards
to Mr. Gardner which were in the form of performance-based restricted stock in part to preserve the deductibility
of compensation related to such awards under Section 162(m) of the Internal Revenue Code. The performance-
based restricted stock granted to Mr. Gardner vests only if Windstream achieves a specified level of OIBDA. The
performance-based restricted stock vests in one-third (1/3) increments over a three-year period, and the initial
performance period for these grants was July 17, 2006 through December 31, 2006. During this period
Windstream had to achieve OIBDA equal to or greater than $681.3 million in order for the first tranche of the
shares to vest, and Windstream achieved this performance threshold with $772.8 million in OIBDA for the
period.In future periods the Compensation Committee will set the performance measure for these one-time grant
performance shares using an OIBDA measure no greater than 90% of the OIBDA goal established by the
Company for internal annual forecasting purposes. For the performance period from January 1 to December 31,
2007, the Compensation Committee has set the performance measure at 90% of the OIBDA goal established by
the Company for internal annual forecasting purposes. During 2007, the Compensation Committee determined
that 100% of the annual equity-based compensation award to Mr. Gardner, and 50% of the annual equity-based
compensation awards to all other executive officers, would be in the form of performance-based restricted stock
based on the achievement of a specified level of OIBDA.
As discussed above, Windstream has adopted minimum share ownership guidelines that apply to
Mr. Gardner and all other executive officers. The minimum share ownership guidelines are intended in part to
ensure that executive officers retain the shares of Windstream common stock (net of shares required to pay
applicable taxes) that the officers receive upon the vesting of equity compensation awards. In addition, under
Windstream’s insider trading compliance policy, directors and executive officers are prohibited from engaging in
any transaction involving derivative securities intended to hedge the market risk in equity securities of
Windstream other than purchases of long call options or the sale of short put options that are not closed prior to
their exercise or expiration date.
Severance Benefits. Except for Mr. Gardner, Windstream has no agreement or plan to provide
severance benefits to executive officers other than benefits that are generally available to all employees under
Windstream’s severance plan and benefits available under the change-in-control agreements discussed below.
During 2006, the Compensation Committee approved an employment agreement with Mr. Gardner that includes
a severance benefit of two times base salary (at the time of severance), or $1.4 million based on Mr. Gardner’s
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