Windstream 2013 Annual Report Download - page 59

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Where the Compensation Committee has established conditions to the exercisability or retention of certain
awards, the Equity Plan allows the Compensation Committee to take action in its sole discretion at or after the date
of grant to adjust such conditions in certain circumstances, including in the case of the death, disability or retirement
of a participant.
The Compensation Committee may not, without the further approval of Windstream’s stockholders, authorize
the amendment of any outstanding option right or appreciation right to reduce the option price or base price. No
option right or appreciation right may be cancelled and replaced with awards having a lower option price or base
price, respectively, without further approval of our stockholders.
Tax Consequences to Participants
Nonqualified Stock Options. In general, (i) no income will be recognized by an optionee at the time a
nonqualified option right is granted; (ii) at the time of exercise of the nonqualified option right ordinary income will
be recognized by the optionee in an amount equal to the difference between the option price paid for the shares of
Windstream common stock and the fair market value of the shares, if unrestricted, on the date of exercise; and (iii) at
the time of sale of shares of Windstream common stock acquired pursuant to the exercise of the nonqualified option
right, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term
or long-term capital gain (or loss) depending on how long the shares have been held.
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.