Windstream 2009 Annual Report Download - page 48

Incentive Stock Options. No income will be recognized by an optionee upon the grant of an ISO. In
general, no income will be recognized upon the exercise of an ISO. However, the difference between the option
price paid and the fair market value of the shares at exercise may constitute a preference item for the alternative
minimum tax. If shares of Windstream common stock are issued or delivered to the optionee pursuant to the
exercise of an ISO, and if no disqualifying disposition of such shares is made by such optionee within two years
after the date of the grant or within one year after the transfer of such shares to the optionee, then upon sale of
such shares, any amount realized in excess of the option price will be taxed to the optionee as a long-term capital
gain and any loss sustained will be a long-term capital loss.
If shares of Windstream common stock acquired upon the timely exercise of an ISO are disposed of prior to
the expiration of either holding period described above, the optionee generally will recognize ordinary income in
the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time
of exercise (or, if less, the amount realized on the disposition of such shares if a sale or exchange) over the option
price paid for such shares. Any further gain (or loss) realized by the participant generally will be taxed as short-
term or long-term capital gain (or loss) depending on the holding period.
SARs. No income will be recognized by a participant in connection with the grant of a tandem appreciation
right or a free-standing appreciation right. When the appreciation right is exercised, the participant normally will
be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash
received and the fair market value of any unrestricted shares of Windstream common stock received on the
exercise.
Performance Shares and Performance Units. No income generally will be recognized upon the grant of
performance shares or performance units. Upon payment in respect of the earn-out of performance shares or
performance units, the recipient generally will be required to include as taxable ordinary income in the year of
receipt an amount equal to the amount of cash received and the fair market value of any nonrestricted shares of
Windstream common stock received.
Restricted Shares. The recipient of restricted shares generally will not be subject to tax until the shares are
no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (“restrictions”).
At such time the recipient will be subject to tax at ordinary income rates on the fair market value of the restricted
shares (reduced by any amount paid by the participant for such restricted shares). However, a recipient who so
elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable
ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares
(determined without regard to the restrictions) over the purchase price, if any, of such restricted shares. Any
appreciation (or depreciation) realized upon a later disposition of such shares will be treated as long-term or
short-term capital gain depending upon how long the shares have been held. If a Section 83(b) election has not
been made, any dividends received with respect to restricted shares that are subject to the restrictions generally
will be treated as compensation that is taxable as ordinary income to the participant.
Restricted Stock Units. Generally, no income will be recognized upon the award of restricted stock units.
The recipient of a restricted stock unit award generally will be subject to tax at ordinary income rates on the fair
market value of unrestricted shares of Windstream common stock on the date that such shares are transferred to
the participant under the award (reduced by any amount paid by the participant for such restricted stock units),
and the capital gains/loss holding period for such shares also will commence on such date.
Other Share-Based Awards. The recipient of a share-based award other than an award described above
generally will be subject to tax at ordinary income rates on the fair market value of shares of Windstream
common stock on the date of grant of the share-based award, and the capital gains/loss holding period for such
shares also will commence on such date.
Dividend Equivalents. Any dividend equivalents awarded with respect to awards granted under the
Amended Plan and paid in cash or unrestricted shares of Windstream common stock will be taxed to the
participant at ordinary income rates when received by the participant.
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