Windstream 2011 Annual Report Download - page 45

PROPOSAL NO. 2
APPROVAL OF WINDSTREAM
PERFORMANCE INCENTIVE COMPENSATION PLAN
Introduction
The Board previously adopted the Windstream Corporation Performance Incentive Compensation Plan
(the “Plan”), which was approved by stockholders on May 9, 2007. In order to allow for awards under the Plan to
qualify as tax-deductible “performance-based compensation” within the meaning of Section 162(m) of the
Internal Revenue Code (which is sometimes referred to in this Proxy Statement as “Section 162(m)”),
Windstream is asking stockholders to re-approve the material terms of the performance goals under the Plan.
Stockholders are not being asked to approve any amendment to the Plan.
Section 162(m) generally prevents a publicly held corporation from claiming federal income tax
deductions for compensation in excess of $1 million paid to certain of its senior executives. Compensation is
exempt from this limitation, however, if it qualifies as “performance-based compensation.”
Awards granted under the Plan are intended to qualify as “performance-based compensation” within the
meaning of Section 162(m). One requirement for compensation to be performance-based is that the material
terms of the performance goals be disclosed to and approved by stockholders every five years. For purposes of
Section 162(m), the material terms include (i) the employees eligible to receive awards, (ii) a description of the
business criteria on which the performance goals may be based and (iii) the maximum amount of compensation
that can be paid to an employee under the Plan during any period. Each of these aspects is discussed below.
If the Plan is not approved by the stockholders, we will not make any payments under the Plan for the
2012 Plan year. We may, however, grant discretionary cash bonuses or other compensation outside of the Plan to
the individuals who would have been eligible to participate in the Plan, although no employee has a right to any
bonus or other compensation as a substitute in the event stockholders do not approve the Plan. Any such bonuses
paid outside the Plan would not qualify as performance-based compensation under Section 162(m) of the Code,
and, accordingly, all or a portion of any such bonuses might not be deductible by Windstream for federal income
tax purposes.
The following is a summary of the Plan and is qualified in its entirety by reference to the full text of the
Plan document, a copy of which is attached as Appendix A to this proxy statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR PROPOSAL NO. 2. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED FOR PROPOSAL NO. 2 UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
Summary of Plan
Purpose. The purpose of the Plan is to advance the interests of Windstream by strengthening the linkage
between its executives and stockholders, the decision-making focus of executives of Windstream upon improving
stockholder wealth, and the ability of Windstream to attract and retain those key employees.
Administration. The Compensation Committee administers the Plan and has full power and authority to
construe, interpret and carry out the provisions of the Plan. The Compensation Committee may delegate to the
CEO or other officers, subject to such terms as the Compensation Committee shall determine, authority to
perform certain functions, including administrative functions. However, the Compensation Committee must
retain the exclusive authority to determine matters relating to awards to the CEO and other key executives that
are intended to qualify as performance-based compensation under Section 162(m). Nothing contained in the Plan
shall be deemed to affect the authority of Windstream or the Compensation Committee to grant annual or long-
term bonuses or other benefits to employees.
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