Frontier Communications 2006 Annual Report Download - page 79

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Non-Employee Directors’ Compensation Plans
Upon commencement of his or her service on the Board of Directors, each non-employee director receives a
grant of 10,000 stock options. These options are currently awarded under the Directors’ Equity Plan. Prior to
effectiveness of the Directors’ Equity Plan on May 25, 2006, these options were awarded under the 2000 EIP.
The exercise price of these options, which become exercisable six months after the grant date, is the fair market
value (as defined in the relevant plan) of our common stock on the date of grant. Options granted under the
Directors’ Equity Plan expire on the earlier of the tenth anniversary of the grant date or the first anniversary of
termination of service as a director.
Each non-employee director also receives an annual grant of 3,500 stock units. These units are currently
awarded under the Directors’ Equity Plan and prior to effectiveness of that plan, were awarded under the Deferred
Fee plan. Since the effectiveness of the Director’s Equity Plan, no further grants have been made under the Deferred
Fee Plan. Prior to April 20, 2004, each non-employee director received an award of 5,000 stock options. The
exercise price of such options was set at 100% of the fair market value on the date 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, each year, each non-employee director is also entitled to receive a retainer, meeting fees, and,
when applicable, fees for serving as a committee chair or as Lead Director, which are awarded under the
Directors’ Equity Plan. For 2006, each non-employee director had to elect, by December 31 of the preceding
year, to receive $40,000 cash or 5,760 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.
The number of shares of common stock authorized for issuance under the Directors’ Equity Plan is
2,540,761, which includes 540,761 shares that were available for grant under the Deferred Fee Plan on the
effective date of the Directors’ Equity Plan. In addition, if and to the extent that any “plan units” outstanding on
May 25, 2006 under the Deferred Fee Plan are forfeited or if any option granted under the Deferred Fee Plan
terminates, expires, or is cancelled or forfeited, without having been fully exercised, shares of common stock
subject to such “plan units” or options cancelled shall become available under the Directors’ Equity Plan. At
December 31, 2006, there were 2,485,945 shares available for grant. There were 13 directors participating in the
Directors’ Plans during all or part of 2006. In 2006, the total options, plan units, and stock earned were 20,000,
81,000 and 0, respectively. In 2005, the total options, plan units, and stock earned were 70,000, 64,000 and 0,
respectively. In 2004, the total options, plan units, and stock earned were 50,000, 57,226 and 0, respectively.
Options granted prior to the adoption of the Director’s Equity Plan were granted under the 2000 EIP. At
December 31, 2006, 157,908 options were exercisable at a weighted average exercise price of $11.97.
For 2006, each non-employee director received fees of $2,000 for each in-person Board of Directors and
committee meeting attended and $1,000 for each telephone Board 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 $15,000. 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 2006 were paid quarterly. 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 closing prices of our common stock on the last
business day of the calendar quarter in which the fees or stipends were earned. Units are credited to the director’s
account quarterly.
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