Windstream 2006 Annual Report Download - page 23

In the event of a change-in-control, Windstream has also agreed to provide lump sum cash payments
equal to the value of medical and dental benefits for a period of 36 months for Mr. Gardner and the other named
executive officers and 24 months for all other executive officers. Windstream has also agreed to provide, at its
expense, outplacement services from a recognized outplacement provider, except that Windstream’s cost for such
services will not exceed $50,000 in the case of Mr. Gardner or other named executive officers and $25,000 in the
case of any other executive officer. Also, under the terms of Windstream’s agreements for its equity
compensation awards of restricted stock or performance-based restricted stock, the unvested equity awards held
by Mr. Gardner and other executive officers will vest on a “double-trigger” basis that is substantially similar to
the events that trigger the cash payments under the change-in-control agreements. The change-in-control
agreements also obligate Windstream to reimburse each executive officer for excise taxes imposed on such
individual pursuant to Section 4999 of the Internal Revenue Code as a result of the foregoing payments if the
payments exceed 110% of the greatest amount payable to the executive without triggering excise taxes.
Deferred Compensation Plans. Under the terms of the Employee Benefits Agreement with Alltel,
Windstream was required to establish non-qualified deferred compensation plans that were substantially similar
to the corresponding plans that had been maintained by Alltel for officers and key employees, including
employees of Spinco. As a result, Windstream created two separate non-qualified deferred compensation plans
and received cash into Windstream’s general funds from Alltel in the amount of Alltel’s obligations under its
corresponding plans as of the date of the spin-off. In order to honor participant elections made prior to 2006,
Windstream executive officers who participated in the Alltel plans prior to 2006 were able to continue to defer
compensation under the Windstream mirror plans following the spin-off. In November 2006, the Compensation
Committee froze any further deferrals of compensation under the Windstream mirror plans beginning January 1,
2007, and existing plan balances as of December 31, 2006 will continue to accrue benefits in accordance with the
terms of the mirror plans.
In November 2006, the Compensation Committee approved the creation of the Windstream 2007
Deferred Compensation Plan to provide a non-qualified deferred compensation plan for its executive officers and
other key employees. The Compensation Committee adopted this plan as part of its effort to provide a total
compensation package that was competitive with the compensation arrangements of other companies. The
Compensation Committee specifically engaged Watson Wyatt & Company, its compensation consultant, to assist
in the design of the Windstream plan, to compare its provisions against prevailing market practices, and to
provide recommendations on the final terms of the plan.
Perquisites and Other Benefits. During 2006, the primary perquisites available to Mr. Gardner and other
named executive officers were the personal use of corporate aircraft, the payment of the initiation and ongoing
fees at a country club, and the reimbursement of up to $3,000 in pre-tax dollars under a supplemental medical
reimbursement plan. In 2007, the Compensation Committee discontinued the $3,000 medical reimbursement
benefit and replaced it with a reimbursement of up to $5,000 in taxable dollars per year of financial planning and
related expenses. The Compensation Committee believes that the perquisites provided to senior management are
consistent with its overall efforts to provide a total compensation package that is competitive with the
compensation arrangements of other market participants.
Windstream permits limited personal use of Windstream’s corporate aircraft by Mr. Gardner and other
named executive officers. Under Windstream’s policy, this use cannot interfere with other required business use
of Windstream. Mr. Gardner reviews and approves all plane usage by other executive officers, and the
Compensation Committee monitors the use by Mr. Gardner and all executive officers to ensure the amount of
usage is reasonable. Windstream believes that personal use of aircraft for Mr. Gardner and other senior
executives is a reasonable benefit in light of the significant demands that are imposed on their schedules as a
result of the responsibilities to Windstream. Additionally, many of the trips involving personal usage are often
business-related trips in which a family member accompanies an executive on a trip that has a business purpose.
Windstream provides for the reimbursement of country club fees in order to encourage senior
management to belong to a club where they can increase their ties to the community. With respect to the
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