Windstream 2009 Annual Report Download - page 23

stock to award to any individual under the 2006 Equity Incentive Plan, the Compensation Committee divides the
approved grant value for such individual by the closing stock price of Windstream common stock on the date that
the Compensation Committee approves the award (rounded down to the nearest whole share). As a matter of
policy, the Compensation Committee does not approve awards of equity compensation through the adoption of a
unanimous written consent in lieu of a meeting.
During 2009, 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 2009 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 2009, the performance criteria was set at 90% of
the OIBDA goal of $1,604 million, and this goal was achieved.
The Compensation Committee will set the performance measure for fiscal years 2011 and 2012 using an OIBDA
measure no greater than 90% of the OIBDA goal established by the Company for the short-term incentive plan.
For the performance period from January 1 to December 31, 2010, the Compensation Committee has set the
performance measure at 90% of the OIBDA goal established by the Company for the internal forecast.
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 executives 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 such that they continue to have a
material financial interest in Windstream which is aligned with the shareholders. 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. The policy also prohibits the purchase of shares on loan or margin and short sales.
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 2009, the Compensation Committee approved an extension of the employment agreement with
Mr. Gardner that includes a severance benefit of three times base salary (at the time of severance), or $2.973
million based on Mr. Gardner’s base salary during 2009. The employment agreement provides for no gross up of
taxes for severance outside of a change-in-control situation. 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 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.
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