Frontier Communications 2013 Annual Report Download - page 83

1996, 2000, 2009 and 2013 Equity Incentive Plans
Since the expiration dates of the 1996 EIP, the 2000 EIP and the 2009 EIP on May 22, 2006, May 14,
2009 and May 8, 2013, respectively, no awards have been or may be granted under the 1996 EIP, the 2000 EIP
and the 2009 EIP. Under the 2013 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, SARs, restricted stock, performance shares or other stock-based awards. As discussed under the
Non-Employee Directors’ Compensation Plans below, prior to May 25, 2006 non-employee directors received
an award of stock options under the 2000 EIP upon commencement of service.
At December 31, 2013, there were 20,000,000 shares authorized for grant under the 2013 EIP and
17,384,055 shares available for grant. No awards may be granted more than 10 years after the effective date
(May 8, 2013) of the 2013 EIP plan. The exercise price of stock options and SARs under the EIPs generally are
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.
Performance Shares
On February 15, 2012, the Company’s Compensation Committee, in consultation with the other non-
management directors of the Company’s Board of Directors and the Committee’s independent executive
compensation consultant, adopted the Frontier Long-Term Incentive Plan (the LTIP). LTIP awards are granted
in the form of performance shares. The LTIP is currently offered under the Company’s 2009 EIP and 2013 EIP,
and participants consist of senior vice presidents and above. The LTIP awards have performance, market and
time-vesting conditions.
Beginning in 2012, during the first 90 days of a three-year performance period (a Measurement Period), a
target number of performance shares are awarded to each LTIP participant with respect to the Measurement
Period. The performance metrics under the LTIP are (1) annual targets for operating cash flow based on a goal
set during the first 90 days of each year in the three-year Measurement Period and (2) an overall performance
“modifier” set during the first 90 days of the Measurement Period, based on the Company’s total return to
stockholders (i.e., Total Shareholder Return or TSR) relative to the Integrated Telecommunications Services
Group (GICS Code 50101020) for the three-year Measurement Period. Operating cash flow performance is
determined at the end of each year and the annual results will be averaged at the end of the three-year
Measurement Period to determine the preliminary number of shares earned under the LTIP award. The TSR
performance measure is then applied to decrease or increase payouts based on the Company’s three year
relative TSR performance. LTIP awards, to the extent earned, will be paid out in the form of common stock
shortly following the end of the three-year Measurement Period.
On February 15, 2012, the Compensation Committee granted 930,020 performance shares under the LTIP
for the 2012-2014 Measurement Period and set the operating cash flow performance goal for the first year in
that Measurement Period and the TSR modifier for the three-year Measurement Period. On February 27, 2013,
the Compensation Committee approved 1,123,966 target performance shares under the LTIP for the 2013-2015
Measurement Period and set the operating cash flow performance goal for 2013, which applies to the first year
of the 2013-2015 Measurement Period and the second year of the 2012-2014 Measurement Period. The
performance share awards approved in February 2013 were granted upon stockholder approval of the
Company’s 2013 EIP at the Annual Meeting of Stockholders held on May 8, 2013. The number of shares of
common stock earned at the end of each three-year Measurement Period may be more or less than the number
of target performance shares granted as a result of operating cash flow and TSR performance. An executive
must maintain a satisfactory performance rating during the Measurement Period and must be employed by the
Company at the end of the three-year Measurement Period in order for the award to vest. The Compensation
Committee will determine the number of shares earned for each three year Measurement Period in February of
the year following the end of the Measurement Period.
F-21
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements