Frontier Communications 2007 Annual Report Download - page 82

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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. Options granted to non-employee directors under the 2000 EIP expire on the
tenth anniversary of the grant date.
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 were 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. For 2007, 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 and to receive meeting fees and Lead Director and committee chair stipends in the form of cash
or stock units. Stock units are awarded under the Directors’ Equity Plan. 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.
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, 2007, there were 2,370,718 shares available for grant. There were 13 directors participating in the
Directors’ Plans during all or part of 2007. In 2007, the total options, plan units, and stock earned were 10,000,
98,070, and 0, respectively. 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.
Options granted prior to the adoption of the Directors’ Equity Plan were granted under the 2000 EIP. At
December 31, 2007, 177,952 options were outstanding and 172,952 options were exercisable under the Director
Plans at a weighted average exercise price of $12.59.
For 2007, 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 2007 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.
We account for the Deferred Fee Plan and Directors’ Equity Plan in accordance with SFAS No. 123R. To
the extent directors elect to receive the distribution of their stock unit account in cash, they are considered
liability-based awards. To the extent directors elect to receive the distribution of their stock unit accounts in
common stock, they are considered equity-based awards. Compensation expense for stock units that are
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