Windstream 2006 Annual Report Download - page 44

As soon as practicable after the beginning of each plan year, the Compensation Committee shall designate
those eligible employees who will participate in the Plan for the current Plan year (each a “participant”). If a
person becomes an eligible employee after the beginning of the Plan year, he shall be designated as a participant
as soon as practicable after he becomes an eligible employee. An eligible employee who is a participant for a
given plan year is neither guaranteed nor assured of being selected for participation in any subsequent year.
Notwithstanding the foregoing, individuals who are “covered employees” (generally any officer whose
compensation would likely be non-deductible by Windstream under Section 162(m) of the Internal Revenue
Code if Windstream did not comply with the provisions of such section) must be designated by the
Compensation Committee to participate in the Plan no later than 90 days following the beginning of the Plan year
(or before 25% of the Plan year has elapsed, if earlier).
Determination of Awards. The Compensation Committee shall establish the performance objectives
(described below under “Performance Objectives”) and payout formulas for each participant during the first
quarter of each plan year and notify each participant in writing of its determination. The performance objectives
and payout formulas need not be uniform with respect to any or all participants and may be pro-rated in the case
of newly hired or newly promoted executives. The Compensation Committee must establish the performance
objectives and payout formulas for each “covered employee” (defined above) not later than 90 days following the
beginning of the Plan year (or before 25% of the Plan year has elapsed, if earlier). Participants must achieve the
performance objectives established by the Compensation Committee in order to receive an award under the Plan.
The Compensation Committee may determine that only the threshold level relating to a performance
objective must be achieved for awards to be paid under the Plan. Similarly, the Compensation Committee may
establish a minimum threshold performance level, a maximum performance level, and one or more intermediate
performance levels or ranges, with target award levels or ranges that will correspond to the respective
performance levels or ranges. The Compensation Committee may also establish multiple performance objectives
with respect to a single participant, which will be weighted by the Compensation Committee to reflect their
relative importance.
The Compensation Committee may in its sole discretion modify such payout formulas, performance
objectives or the related minimum acceptable level of achievement, in whole or in part, as the Compensation
Committee deems appropriate and equitable (i) to reflect a change in the business, operations, corporate structure
or capital structure of Windstream or its subsidiaries, the manner in which it conducts its business, or other
events or circumstances or (ii) in the event that a participant’s responsibilities materially change during a plan
year or a participant is transferred to a position that is not designated or eligible to participate in the Plan.
However, the Compensation Committee cannot take such action to the extent that it would result in the loss of
the otherwise available exemption of the award under Section 162(m) of the Internal Revenue Code. In no event
shall an award paid to any participant for a plan year exceed $7,000,000.
Performance Objectives. The Plan requires that the Compensation Committee establish “performance
objectives” for participants in the Plan. Performance objectives are generally measured over Windstream’s fiscal
year (or such other period as determined by the Compensation Committee). Performance objectives may be
described in terms of Windstream-wide objectives or objectives that are related to the performance of the
individual participant or of a subsidiary, division, department, region or function within Windstream or a
subsidiary in which the participant is employed. The performance objectives may be made relative to the
performance of other corporations. The performance objectives applicable to any award to a covered employee
(defined above) that is intended to qualify for the performance-based compensation exception to Section 162(m)
of the Internal Revenue Code shall be based on specified levels of growth in one or more of the following
criteria: revenues; weighted average revenue per unit; earnings from operations; operating income; earnings
before or after interest and taxes; operating income before or after interest and taxes; net income; cash flow;
earnings per share; debt to capital ratio; economic value added; return on total capital; return on invested capital;
return on equity; return on assets; total return to stockholders; earnings before or after interest, taxes,
depreciation, amortization or extraordinary or special items; operating income before or after interest, taxes,
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