Frontier Communications 2006 Annual Report Download - page 76

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
authorized for grant under these plans and 5,871,730 shares available for grant. No further awards may be
granted under the MEIP, the 1996 EIP and the Deferred Fee plan.
In connection with the Director Plans, compensation costs associated with the issuance of stock units was
$2,017,000, $1,069,000 and $2,222,000 in 2006, 2005 and 2004, respectively. Cash compensation associated
with this plan was $502,000, $434,000 and $642,000 in 2006, 2005 and 2004, respectively. These costs are
recognized in other operating expenses.
We have granted restricted stock awards to key employees in the form of our common stock. The number of
shares issued as restricted stock awards during 2006, 2005 and 2004 were 732,000, 352,000 and 2,172,000,
respectively. None of the restricted stock awards may be sold, assigned, pledged or otherwise transferred,
voluntarily or involuntarily, by the employees until the restrictions lapse, subject to limited exceptions. The
restrictions are time based. At December 31, 2006, 1,174,000 shares of restricted stock were outstanding.
Compensation expense, recognized in operating expense, of $6,034,000, $7,358,000 and $45,313,000, for the
years ended December 31, 2006, 2005 and 2004, respectively, has been recorded in connection with these grants.
Management Equity Incentive Plan
Prior to its expiration on June 21, 2000, awards of our common stock could have been granted under the
MEIP 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.
Since the expiration of the MEIP, no awards have been or may 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 were not ordinarily exercisable on the date of grant but vest over a period of
time (generally four years). 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.
1996 and 2000 Equity Incentive Plans
Since the expiration date of the 1996 EIP on May 22, 2006, no awards have been or may be granted under the
1996 EIP. Under the 2000 EIP, 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,
SAR’s, restricted stock or other stock-based awards. As discussed under the Non-Employee Directors’
Compensation Plans below, prior to May 25, 2006 directors received an award of stock options under the 2000 EIP
upon commencement of service.
At December 31, 2006, there were 27,389,711 shares authorized for grant under the 2000 EIP and 3,385,785
shares available for grant, as adjusted to reflect stock dividends. No awards will be granted more than 10 years
after the effective date (May 18, 2000) of the 2000 EIP plan. The exercise price of stock options and SARs under
the 2000 and 1996 EIP 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 not ordinarily exercisable on the date of grant but vest over a period
of time (generally four years).
Under the terms of the EIPs, 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
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