Windstream 2014 Annual Report Download - page 38

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The Compensation Committee sets the performance measures for PBRSUs each year during the three-year
vesting period. It is the Compensation Committee’s goal to set such amounts at levels that it believes are difficult
but achievable and designed to drive industry leading results. For fiscal 2014, the Committee selected Adjusted
OIBDA as the baseline performance measure and included an overachievement measure (the “Overachievement
Measure”) based on Windstream total stockholder return. The reasons the Compensation Committee selected
Adjusted OIBDA are outlined above in the section titled “Short-Term Cash Incentive Payments”. The Compensation
Committee selected total stockholder return for the Overachievement Measure because it is an objective metric that
the Committee believes will further align compensation opportunity of our NEOs to stockholder interests.
The target Adjusted OIBDA metric for the 2014 performance period was set at 97% of an Adjusted OIBDA
goal of $2.271 billion and the threshold was 95% of this amount. No shares are awarded under these grants if actual
Adjusted OIBDA is less than the threshold and no additional amounts are awarded if actual Adjusted OIBDA exceeds
the target.
Overachievement Measure. For the Overachievement Measure, each NEO is entitled to receive an additional
number of shares up to 50% of his/her target payout amount if (1) Windstream achieves the Total Stockholder
Return goal (as described below) over the three-year vesting period of the PBRSUs, and (2) at least the minimum
threshold of the Adjusted OIBDA goal is met in each of the three fiscal performance periods covered by the vesting
schedule. The Total Stockholder Return goal is measured by comparing Windstream total stockholder return against
the cumulative total return of the S&P 500 index. The Compensation Committee chose the broader S&P 500 index
over the S&P telecom index because the telecom index is comprised of only eight (8) companies, including AT&T
and Verizon, which are not impacted by the same issues and environment given their larger size and their focus
on wireless businesses. Pursuant to the Overachievement Measure, an additional 25% of shares will be issued if
Windstream total stockholder return is between the 50-75th percentile of the S&P 500 and an additional 50% of
shares will be issued for performance over the 75th percentile.
2014 Performance Period Actual Results. Actual Adjusted OIBDA for fiscal 2014 fell below the threshold
amount. As such, PBRSUs for the 2014 performance period (specifically, the 2012, 2013 and 2014 grants) did not vest
in accordance with their terms. Also, these PBRSUs are no longer eligible for the overachievement measure because
the 2014 threshold was not met.
The unvested and cancelled PBRSUs were granted in fiscal years 2012, 2013 and 2014 and represented
approximately 50% of each named executive officer’s (other than Mr. Gardner) total equity awards that were eligible
to vest during the 2014 performance period. PBRSUs represented 100% of Mr. Gardner’s total equity awards eligible
to vest during the 2014 performance period.
Employment Agreements and Severance Arrangements
Anthony W. Thomas. Windstream entered into an employment agreement with Mr. Thomas on
December 11, 2014 in connection with his appointment as President and Chief Executive Officer. The employment
agreement provides that Mr. Thomas will be employed as President and Chief Executive Officer for the period
beginning on December 11, 2014 and ending on December 31, 2019, subject to annual renewals thereafter. During
the term of his employment, Mr. Thomas’s annual base salary will be not less than $1,000,000 and his target annual
bonus opportunity, commencing with the 2015 fiscal year, will not be less than 125% of his base salary. Under
the terms of the agreement, Mr. Thomas received a time-based restricted share award with a grant date value of
$1,000,000, which award will vest in full on the third anniversary of the date of grant. Additionally, the contract
provides that Mr. Thomas will be eligible to participate in equity incentive, employee benefits and perquisite
programs and arrangements that are no less favorable than those provided to other senior executives of Windstream.
The agreement also provides that if Mr. Thomas’s employment is terminated without “Cause” (as defined in the
employment agreement) or Mr. Thomas terminates his employment for “Good Reason” (as defined in the employment
agreement), then Windstream will pay to Mr. Thomas, in a lump sum, the following amounts:
 his annual base salary through the date of termination and any other vested benefits, in each case to the
extent not previously paid, and
 three times his annual base salary.