Frontier Communications 2005 Annual Report Download - page 75

F-26
CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Non-Employee Directors’ Compensation Plan
Upon commencement of his or her service on the Board of Directors, each non-employee director receives a
grant of 10,000 stock options, which is awarded under our 2000 EIP. The price of these options, which are immediately
exercisable, is set at the average of the high and low market prices of our common stock on the effective date of the
director’s initial election to the board.
Annually, each non-employee director also receives a grant of 3,500 stock units under our Formula Plan, which
commenced in 1997 and continues through May 22, 2007. Prior to April 20, 2004, each non-employee director
received an award of 5,000 stock options. The exercise price of the options granted under the Formula Plan was set
at 100% of the average of the high and low market prices of our common stock on the third, fourth, fifth, and sixth
trading days of the year in which the options were granted. The options are exercisable six months after the grant
date and remain exercisable for ten years after the grant date. In addition, on September 1, 1996, each non-employee
director received a grant, under the Formula Plan, of options to purchase 2,500 shares of common stock. These
options granted under the Formula Plan became exercisable six months after the grant date and remain exercisable
for ten years after the grant date.
Effective April 2004, the Formula Plan was amended to replace the annual grant of stock options with an
annual grant of 3,500 stock units. The stock units are awarded on the first business day of each calendar year. Each
non-employee director must elect, by December 31 of the preceding year, whether the stock units awarded under the
Formula Plan will be redeemed in cash or stock upon the director’s retirement or death, whichever occurs first.
In addition, each non-employee director is also entitled to annually receive a retainer, meeting fees, and, when
applicable, fees for serving as a committee chair or as Lead Director, which are awarded under the Non-Employee
Directors’ Deferred Fee Equity Plan. For 2005, each non-employee director had to elect, by December 31 of the
preceding year, to receive $30,000 cash or 5,000 stock units as an annual retainer. Directors making a stock unit
election must also elect to convert the units to either common stock (convertible on a one-to-one basis) or cash upon
retirement or death. Prior to June 30, 2003, a director could elect to receive 20,000 stock options as an annual
retainer in lieu of cash or stock units. The exercise price of the stock options was set at the average of the high and
low market prices of our common stock on the date of grant. The options were exercisable six months after the date
of grant and had a 10-year term.
As of any date, the maximum number of shares of common stock which the Non-Employee Directors’ Deferred
Fee Equity Plan is obligated to deliver shall not be more than one percent (1%) of the total outstanding shares of our
common stock as of June 30, 2003, subject to adjustment in the event of changes in our corporate structure affecting
capital stock. There were 14 directors participating in the Directors’ Plan during all or part of 2005. In 2005, the total
options, plan units, and stock earned were 0, 64,000 and 0, respectively. In 2004, the total options, plan units, and stock
earned were 50,000, 57,226 and 0, respectively. In 2003, the total options, plan units, and stock earned were 83,125,
46,034 and 0, respectively. At December 31, 2005, 473,252 options were exercisable at a weighted average exercise price
of $9.80.
For 2005, each non-employee director received fees of $2,000 for each Board of Directors and committee
meeting attended. The chairs of the Audit, Compensation, Nominating and Corporate Governance and Retirement
Plan Committees were paid an additional annual fee of $25,000, $15,000, $7,500 and $5,000, respectively. In addition,
the Lead Director, who heads the ad hoc committee of non-employee directors, received an additional annual fee of
$17,000 (based on an annual fee that was changed from $20,000 to $15,000 mid-year). A director must elect, by
December 31 of the preceding year, to receive meeting and other fees in cash, stock units, or a combination of both. All
fees paid to the non-employee directors in 2005 were paid quarterly (except for the retainer which was paid at the
beginning of the year. If the director elects stock units, the number of units credited to the director’s account is
determined as follows: the total cash value of the fees payable to the director are divided by 85% of the average of the
high and low market prices of our common stock on the first trading day of the year the election is in effect. Units are
credited to the director’s account quarterly.