Windstream 2007 Annual Report Download - page 20

During 2007, the Compensation Committee approved the following categories of equity compensation
awards to executive officers:
• Time Based Vesting Awards – For each executive officer other than Mr. Gardner, fifty percent
(50%) of each 2007 stock award vests ratably over three years.
• Performance Based Vesting Awards – Mr. Gardner received one hundred percent (100%), and each
other executive officer received fifty percent (50%), of his or her stock grants in the form of
performance-based restricted stock. The stock vests ratably over a three-year period with each year
set as a separate performance period. The stock vests only if the performance threshold is met and
the executive is still employed on the date of vesting. For 2007, the performance criteria was set at
90% of the OIBDA goal of $1,586 million, and this goal was achieved.
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 2007:
Type of Award Mr. Gardner
Other Named
Executive Officers
Time Based Vesting $ -0- $ 1,387,455
Performance Based Vesting $ 2,499,987 $ 1,137,467
Total $ 2,499,987 $ 2,524,922
In future periods the Compensation Committee will set the performance measure for the performance-based
restricted 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, 2008, the
Compensation Committee has set the performance measure at 90% of the OIBDA goal established by the
Company for internal annual forecasting purposes. During 2008, 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.
Retention is a key driver of the decision to grant time-based vesting restricted stock. In addition,
performance-based vesting restricted stock is also granted to align executive’s with key long-term company
objectives and to preserve the deductibility of compensation related to awards under Section 162(m) of the
Internal Revenue Code.
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 $1.8 million based on Mr. Gardner’s
base salary during 2007. The employment agreement provides that Mr. Gardner’s base salary will be no less than
$700,000 per year. If Mr. Gardner experiences a separation from service following a change of control, the
severance benefits provided under the terms of the change-in-control agreements discussed below will govern,
and no severance is available under the employment agreement in such circumstance. The Compensation
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