Windstream 2013 Annual Report Download - page 61

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issuance under the Plan will increase by 15,000,000 shares, which will increase the total potential dilution to our
outstanding common stock (as of December 31, 2013) from our equity-based compensation program from 2.3% to
4.8%.
Share Utilization Rate. In fiscal years 2011, 2012 and 2013, the Company granted equity awards (gross equity
grants, which do not reflect the impact of cancellations) representing a total of approximately 1,833,541, 2,322,601,
and 3,376,273 shares, respectively. These awards reflect a three-year average burn rate of 1.01%. The burn rate is
calculated by dividing the number of shares subject to equity awards granted under equity plans during the period by
the weighted-average number of shares outstanding during the period.
Notwithstanding circumstances not currently accounted for in our projections, such as significant market
value fluctuations or acquisitions, and assuming stockholder approval of this proposal, the Board and Compensation
Committee expect to continue to grant awards under the Equity Plan consistent with the Company’s historic share
utilization rate. However, the amount and timing for future grants is not currently known, and the potentially
dilutive effect and historic share utilization rate described above may not be indicative of the amount and timing of
future grants.
Amendment to Increase the Number of Shares Available under the Equity Plan
If stockholders approve this proposal, a total of 35,000,000 shares would be authorized for issuance under the
Equity Plan, of which approximately 19,819,043 shares (4,819,043 shares available for grant under the Equity Plan
as of December 31, 2013 plus the additional 15,000,000 shares requested under this proposal) would be available for
new awards as of May 7, 2014. Based on a review of the Company’s historical practice, if this proposal is approved,
the Board believes the shares available for grant under the Equity Plan will be sufficient to cover awards for the next
three to five years.
If the stockholders do not approve this proposal, the Equity Plan will continue in full force and effect, except
that the existing number of authorized shares will not be increased. If stockholders do not approve this proposal, the
Company expects to exhaust the existing reserve of shares authorized for issuance under the Equity Plan within the
year. Without the additional shares, the Board believes its ability to attract and retain the most qualified employees
may be greatly impaired.
Amendment to Extend Term of the Equity Plan
If the stockholders approve this proposal, the term of the Equity Plan will be extended through February 12, 2019.
If the stockholders do not approve this proposal, no awards may be granted under the Equity Plan after July 17, 2016.
Description of the Other Amendments
Stockholders are only being asked to approve the increase in the number of shares available for issuance under
the Equity Plan. The Equity Plan, however, includes other technical amendments that do not require stockholder
approval which were effective upon the Compensation Committee’s approval on February 12, 2014, including an
amendment to remove a sub-limit on the awards that can be granted in the form of restricted shares.
Re-approval of the Management Objectives
As noted above, we are submitting to stockholders for re-approval of the material terms of the performance
goals under the Equity Plan, including the annual maximum limits per individual, the eligible employees and
the list of Management Objectives set forth above in the description of the Equity Plan. See “Individual Limits,”
“Eligible Participants” and “Management Objectives.” Section 162(m) of the Code generally denies a corporation’s
federal income tax deduction for compensation it pays to certain executive officers in excess of $1 million per year
for each such officer, other than compensation that qualifies as “performance-based compensation.” To qualify
as performance-based compensation under Section 162(m) of the Code, the compensation must (among other
requirements) be granted under the Equity Plan by a committee consisting solely of two or more “outside directors”
(as defined under Section 162 regulations), satisfy the Equity Plan’s limit on the total number of shares that may
be awarded or compensation paid to any one participant during any calendar year, and be subject to attainment of
performance goals that have been disclosed to stockholders and approved by a majority stockholder vote.