Windstream 2006 Annual Report Download - page 43

PROPOSAL NO. 2
APPROVAL OF WINDSTREAM
PERFORMANCE INCENTIVE COMPENSATION PLAN
Introduction
At the 2007 Annual Meeting, the stockholders of Windstream will be asked to approve the Windstream
Performance Incentive Compensation Plan (the “Plan”). The Plan was adopted by the board of directors of
Spinco on June 1, 2006 and was assumed by Windstream in connection with the spin-off/merger transaction.
Even though the Plan continues to be in full force and effect after the spin-off/merger transaction, stockholder
approval is required to ensure that the annual awards granted under the Plan in 2008 and later comply with the
performance-based compensation exception to Section 162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code generally prevents a publicly held corporation from
claiming federal income tax deductions for compensation in excess of $1 million paid to certain of its senior
executives. Compensation is exempt from this limitation, however, if it qualifies as “performance-based
compensation.” Pursuant to a special transition rule applicable to spin-off transactions, awards paid under the
Plan prior to the 2008 annual meeting are eligible to qualify for the performance-based compensation exception.
In order for awards paid on or after that meeting to qualify for the performance-based compensation exception,
Windstream’s stockholders must approve the material terms of the Plan no later than the 2008 annual meeting. If
Windstream’s stockholders do not approve the Plan, then Windstream will not grant any awards to its named
executive officers under the Plan for performance periods beginning in 2008 or later. However, awards granted
under the Plan for the 2007 performance period will continue to be earned and paid in accordance with their
terms.
The following is a summary of the Plan and is qualified in its entirety by reference to the full text of the
Plan document, a copy of which is attached as Appendix A to this proxy statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR PROPOSAL NO. 2. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
FOR PROPOSAL NO. 2 UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
Summary of Plan
Purpose. The purpose of the Plan is to advance the interests of Windstream by strengthening the linkage
between its executives and stockholders, the decision-making focus of executives of Windstream upon improving
stockholder wealth, and the ability of Windstream to attract and retain those key employees.
Administration. The Compensation Committee administers the Plan and has full power and authority to
construe, interpret and carry out the provisions of the Plan. The Compensation Committee may delegate to the
CEO or other officers, subject to such terms as the Compensation Committee shall determine, authority to
perform certain functions, including administrative functions. However, the Compensation Committee must
retain the exclusive authority to determine matters relating to awards to the CEO and other key executives that
are intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code.
Nothing contained in the Plan shall be deemed to affect the authority of Windstream or the Compensation
Committee to grant annual or long-term bonuses or other benefits to employees.
Eligibility and Participation. Participation in the Plan will be available to officers or key management
employees of Windstream or its subsidiaries who are customarily employed more than 20 hours per week and at
least six months per year. At this time, however, the Compensation Committee anticipates that only its eight
executive officers and one other key employee will participate in the Plan.
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