Windstream 2007 Annual Report Download - page 21

Committee approved the foregoing severance benefit to Mr. Gardner to recognize the importance of his service
and contributions to Windstream, to recognize that it would be difficult for him to find comparable employment
during a short period of time following a separation, and to reflect market practice of providing similar severance
benefits to the CEO position. Prior to approving the agreement in 2006, the Compensation Committee
specifically engaged Watson Wyatt & Company, its compensation consultant, to review Mr. Gardner’s severance
benefits and other provisions of the employment agreement, to compare such provisions against prevailing
market practices, and to provide recommendations on the final terms of the agreement.
Retirement Plans. Windstream maintains a defined benefit pension plan and a qualified 401(k) defined
contribution plan for its executive officers and employees. Prior to 2007, Windstream also maintained a separate
qualified profit sharing plan, but effective March 1, 2007 this plan was merged into and consolidated with the
401(k) plan. Participation in the pension plan is frozen except for a 5 year transition period for participants who
were above the age of 40 with at least two years of service at the end of 2005 and bargaining unit employees.
Messrs. Gardner and Clancy and Ms. Bradley continue to be eligible to accrue benefits under the pension plan
until 2010.
Windstream maintains a 401(k) plan which provides for potential matching employer contributions of up
to 6% of a participant’s compensation. The Compensation Committee maintains the 401(k) plan in order to
provide employees with an opportunity to save for retirement with pre-tax dollars. The 401(k) plan also allows
Windstream to expense and fund its contributions to this plan in a predictable, consistent manner.
Deferred Compensation Plans. Windstream maintains the 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 plan also offers participants the ability
to defer compensation above the IRS qualified plan limits.
Change-In-Control Agreements. During 2006, the Compensation Committee approved
change-in-control agreements for Mr. Gardner and each executive officer in order to provide some protection to
those individuals from the risk and uncertainty associated with a potential change-in-control. The Compensation
Committee also adopted the change-in-control agreements as part of its efforts to provide a total compensation
package that was competitive with the compensation arrangements of other market participants. Prior to
approving the change-in-control agreements in 2006, the Compensation Committee specifically engaged Watson
Wyatt & Company, its compensation consultant, to review the payment multiples and other terms of the
change-in-control agreements, to compare such provisions against prevailing market practices, and to provide
recommendations on the final terms of the agreements. When it approved the change-in-control agreements, the
Compensation Committee considered the total amount of compensation that Mr. Gardner and each other
executive officer would receive in a hypothetical termination under all of the change-in-control benefits
described below.
Based on the foregoing, the Compensation Committee approved the payment of change-in-control
benefits to Mr. Gardner and the other executive officers on a “double-trigger” basis, which means that a
change-in-control of Windstream must occur and the officer must terminate employment with Windstream
through either a resignation for “good reason” or a termination without “cause” (as those terms are defined in the
change-in-control agreement). Upon a qualifying separation from service, the executive officers are eligible for a
cash, lump sum payment based upon a multiple of base salary and target bonus of three times for
Messrs. Gardner, Whittington, and Fletcher and two times for all other executive officers.
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 Messrs. Gardner, Whittington, and
Fletcher 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 Messrs. Gardner, Whittington, and Fletcher and $25,000 in the case of any
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