Frontier Communications 2009 Annual Report Download - page 86

exercise behavior of employees. The risk free interest rate is based on the U.S. Treasury yield curve in effect at
the time of the grant. Expected volatility is based on historical volatility for a period equal to the stock option’s
expected life, calculated on a monthly basis. No stock option grants were issued in 2007, 2008 and 2009 under
the EIP.
The following summary presents information regarding unvested restricted stock and changes with regard
to restricted stock under the EIP:
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Aggregate
Fair Value
Balance at January 1, 2007 . .............................. 1,174,000 $12.89 $16,864,000
Restricted stock granted . . .............................. 722,000 $15.04 $ 9,187,000
Restricted stock vested . . . .............................. (587,000) $12.94 $ 7,465,000
Restricted stock forfeited . .............................. (100,000) $13.95
Balance at December 31, 2007. ........................... 1,209,000 $14.06 $15,390,000
Restricted stock granted . . .............................. 887,000 $11.02 $ 7,757,000
Restricted stock vested . . . .............................. (367,000) $13.90 $ 3,209,000
Restricted stock forfeited . .............................. (27,000) $13.39
Balance at December 31, 2008. ........................... 1,702,000 $12.52 $14,876,000
Restricted stock granted . . .............................. 1,119,000 $ 8.42 $ 8,738,000
Restricted stock vested . . . .............................. (557,000) $12.77 $ 4,347,000
Restricted stock forfeited . .............................. (71,000) $11.02
Balance at December 31, 2009. ........................... 2,193,000 $10.41 $17,126,000
For purposes of determining compensation expense, the fair value of each restricted stock grant is
estimated based on the average of the high and low market price of a share of our common stock on the date of
grant. Total remaining unrecognized compensation cost associated with unvested restricted stock awards at
December 31, 2009 was $15.2 million and the weighted average period over which this cost is expected to be
recognized is approximately two years.
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. 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 Directors’ 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 2009, 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
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements