Frontier Communications 2008 Annual Report Download - page 81

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 2008, 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, 2008, there were 2,230,278 shares available for grant. There were 12 directors participating in
the Directors’ Plans during all or part of 2008. In 2008, the total options, plan units, and stock earned were 0,
102,673, and 0, respectively. 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.
Options granted prior to the adoption of the Directors’ Equity Plan were granted under the 2000 EIP. At
December 31, 2008, 182,951 options were outstanding and exercisable under the Director Plans at a weighted
average exercise price of $12.68.
For 2008, 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 2008 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. Effective January 1, 2009, the annual fee for the chairs of
the Compensation and Retirement Plan Committees were increased to $20,000 and $7,500, respectively. All
other fees and retainers remain the same.
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
considered equity-based awards is based on the market value of our common stock at the date of grant.
Compensation expense for stock units that are considered liability-based awards is based on the market value of
our common stock at the end of each period.
We had also maintained a Non-Employee Directors’ Retirement Plan providing for the payment of
specified sums annually to our non-employee directors, or their designated beneficiaries, starting at the
director’s retirement, death or termination of directorship. In 1999, we terminated this Plan. As of December
31, 2008, the liability for such payments was reduced to $0 as the obligation was fully settled during the second
quarter of 2007.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements