Frontier Communications 2005 Annual Report Download - page 73

F-24
CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1,456,000 shares of restricted stock were outstanding. Compensation expense, recognized in operating expense, of
$7,358,000, $45,313,000 and $8,552,000, for the years ended December 31, 2005, 2004 and 2003, respectively, has
been recorded in connection with these grants.
Management Equity Incentive Plan
Under the MEIP, awards of our common stock may be granted to eligible officers, management employees and
non-management employees in the form of incentive stock options, non-qualified stock options, stock appreciation
rights (SARs), restricted stock or other stock-based awards. The Compensation Committee of the Board of Directors
administers the MEIP.
Since the expiration date of the MEIP plan on June 21, 2000, no awards can be granted under the MEIP. The
exercise price of stock options issued was equal to or greater than the fair market value of the underlying common
stock on the date of grant. Stock options are generally not exercisable on the date of grant but vest over a period of
time. Under the terms of the MEIP, subsequent stock dividends and stock splits have the effect of increasing the
option shares outstanding, which correspondingly decreases the average exercise price of outstanding options.
Equity Incentive Plans
In May 1996, our shareholders approved the 1996 EIP and in May 2001, our shareholders approved the 2000
EIP. Under the EIP plans, awards of our common stock may be granted to eligible officers, management employees
and non-management employees in the form of incentive stock options, non-qualified stock options, SARs, restricted
stock or other stock-based awards. Directors may receive awards under the 2000 EIP (other than options for annual
retainer fees). SARs may be granted under the 1996 EIP. The Compensation Committee of the Board of Directors
administers the EIP plans.
The maximum number of shares of common stock, which may be issued pursuant to awards at any time for both
plans, is 25,358,000 shares, which has been adjusted for subsequent stock dividends. No awards will be granted more
than 10 years after the effective dates (May 23, 1996 and May 18, 2000) of the EIP plans. The exercise price of stock
options and SARs generally shall be equal to or greater than the fair market value of the underlying common stock
on the date of grant. Stock options are generally not exercisable on the date of grant but vest over a period of time.
Under the terms of the EIP plans, subsequent stock dividends and stock splits have the effect of increasing the
option shares outstanding, which correspondingly decrease the average exercise price of outstanding options.
In connection with the payment of the special, non-recurring dividend of $2.00 per common share on
September 2, 2004, the exercise price and number of all outstanding options was adjusted such that each option had
the same value to the holder after the dividend as it had before the dividend. In accordance with FASB Interpretation
No. 44 (FIN 44), “Accounting for Certain Transactions Involving Stock Compensation” and EITF 00-23, “Issues
Related to the Accounting for Stock Compensation under APB No. 25 and FIN 44,” there is no accounting consequence
for changes made to the exercise price and the number of shares of a fixed stock option or award as a direct result of
the special, non-recurring dividend.