(10) Stock Plans:

At December 31, 2014, we had six stock-based compensation plans under which grants were made and awards remained outstanding. No further awards may be granted under four of the plans: the 1996 Equity Incentive Plan (the 1996 EIP), the Amended and Restated 2000 Equity Incentive Plan (the 2000 EIP), the 2009 Equity Incentive Plan (the 2009 EIP) and the Non-Employee Directors’ Deferred Fee Equity Plan (the Deferred Fee Plan). At December 31, 2014, there were 22,540,761 shares authorized for grant and 14,253,934 shares available for grant under the 2013 Equity Incentive Plan (the 2013 EIP and together with the 1996 EIP, the 2000 EIP and the 2009 EIP, the EIPs) and the Non-Employee Directors’ Equity Incentive Plan (the Directors’ Equity Plan, and together with the Deferred Fee Plan, the Director Plans). Our general policy is to issue shares from treasury upon the grant of restricted shares and the exercise of options.

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, 2014, there were 20,000,000 shares authorized for grant under the 2013 EIP and 13,442,932 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.

In 2012, the Compensation Committee granted approximately 979,000 performance shares under the LTIP and set the operating cash flow performance goal for the first year in the 2012-2014 Measurement Period and the TSR modifier for the three-year Measurement Period. In 2013, the Compensation Committee granted approximately 1,124,000 performance shares under the LTIP 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. On February 17, 2014, the Compensation Committee granted approximately 1,028,000 performance shares under the LTIP and set the operating cash flow performance goal for 2014, which applies to the first year in the 2014-2016 Measurement Period, the second year of the 2013-2015 Measurement Period and the third year of the 2012-2014 Measurement Period. 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.

The following summary presents information regarding LTIP target performance shares as of December 31, 2014 and changes with regard to LTIP shares awarded under the 2009 EIP and the 2013 EIP:



		Number of
		Shares
Balance at January 1, 2012		-
LTIP target performance shares granted		979,000
LTIP target performance shares forfeited		-
Balance at December 31, 2012		979,000
LTIP target performance shares granted		1,124,000
LTIP target performance shares forfeited		(354,000)
Balance at December 31, 2013		1,749,000
LTIP target performance shares granted		1,037,000
LTIP target performance shares forfeited		(104,000)
Balance at December 31, 2014		2,682,000

The Company recognized an expense of $4 million and $1 million during 2014 and 2013, respectively, for the LTIP.

Restricted Stock

The following summary presents information regarding unvested restricted stock as of December 31, 2014 and changes with regard to restricted stock under the 2009 EIP and the 2013 EIP:



		Weighted
		Average
	Number of	Grant Date		Aggregate
	Shares	Fair Value		Fair Value
Balance at January 1, 2012	4,847,000	$	8.40	$	24,962,000
Restricted stock granted	3,976,000	$	4.18	$	17,017,000
Restricted stock vested	(1,387,000)	$	8.78	$	5,937,000
Restricted stock forfeited	(387,000)	$	5.99
Balance at December 31, 2012	7,049,000	$	6.08	$	30,169,000
Restricted stock granted	3,360,000	$	4.10	$	15,626,000
Restricted stock vested	(3,097,000)	$	6.78	$	14,403,000
Restricted stock forfeited	(1,078,000)	$	5.26
Balance at December 31, 2013	6,234,000	$	4.80	$	28,988,000
Restricted stock granted	4,314,000	$	4.91	$	28,778,000
Restricted stock vested	(2,372,000)	$	5.22	$	15,821,000
Restricted stock forfeited	(369,000)	$	4.55
Balance at December 31, 2014	7,807,000	$	4.75	$	52,074,000

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, 2014 was $24 million and the weighted average period over which this cost is expected to be recognized is approximately 1.4 years.

We have granted restricted stock awards to employees in the form of our common stock. None of the restricted stock awards may be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the employees until the restrictions lapse, subject to limited exceptions. The restrictions are time-based. Compensation expense, recognized in “Selling, general and administrative expenses”, of $16 million, $14 million and $16 million, for the years ended December 31, 2014, 2013 and 2012, respectively, has been recorded in connection with these grants.

Stock Options

The following summary presents information regarding outstanding stock options as of December 31, 2014 and changes with regard to options under the EIPs:



		Weighted		Weighted
	Shares	Average		Average	Aggregate
	Subject to	Option Price		Remaining	Intrinsic
	Option	Per Share		Life in Years	Value
Balance at January 1, 2012	895,000	$	9.94	1.3	$	-
Options granted	-	$	-
Options exercised	-	$	-
Options canceled, forfeited or lapsed	(355,000)	$	8.35
Balance at December 31, 2012	540,000	$	10.99	0.9	$	-
Options granted	-	$	-
Options exercised	-	$	-
Options canceled, forfeited or lapsed	(457,000)	$	10.59
Balance at December 31, 2013	83,000	$	13.23	1.8	$	-
Options granted	-	$	-
Options exercised	-	$	-
Options canceled, forfeited or lapsed	-	$	-
Balance at December 31, 2014	83,000	$	13.23	0.8	$	-

The number of options exercisable at December 31, 2014, 2013 and 2012 were 83,000, 83,000 and 540,000, with a weighted average exercise price of $13.23, $13.23 and $10.99, respectively.

There were no stock options granted or exercised during 2014, 2013 and 2012. There is no remaining unrecognized compensation cost associated with unvested stock options at December 31, 2014.

Non-Employee Directors’ Compensation Plans

Prior to October 1, 2010, non-employee directors received stock options upon joining the Board of Directors. These options were awarded under the Directors’ Equity Plan commencing May 25, 2006. Prior thereto, these options were awarded under the 2000 EIP. Options awarded to directors under the 2000 EIP are included in the above tables.

Prior to October 1, 2013, each non-employee director was entitled to receive an annual retainer of (1) $75,000 in cash, which he or she had the right to elect to receive in the form of stock units, and (2) $75,000 in the form of stock units. In addition, the Lead Director, the chair of the Audit Committee and the chair of the Compensation Committee each received an annual stipend of $20,000, the chair of the Nominating and Corporate Governance Committee received an annual stipend of $10,000 and the chair of the Retirement Plan Committee received an annual stipend of $7,500.

Beginning October 1, 2013, we revised our non-employee director compensation program in accordance with best practices. Each non-employee director is now entitled to receive an annual retainer of (1) $90,000 in cash, which he or she has the right to elect to receive in the form of stock units, as described below, and (2) $90,000 in the form of stock units, in each case payable in advance in quarterly installments on the first business day of each quarter. In addition, the Lead Director and the chair of the Audit Committee each receives an additional annual cash stipend of $25,000, the chair of the Compensation Committee receives an additional annual cash stipend of $20,000, the chair of the Nominating and Corporate Governance Committee receives an additional annual cash stipend of $15,000 and the chair of the Retirement Plan Committee receives an additional annual cash stipend of $10,000, which in each case he or she may elect to receive in the form of stock units. The annual stipend paid to the Lead Director and each of the committee chairs is payable in arrears in equal quarterly installments on the last business day of each quarter. Each director is required to irrevocably elect by December 31 of the prior year whether to receive the cash portion of his or her retainer and/or his or her stipend in stock units.

As of October 1, 2013, stock units are credited to the director’s account in an amount that is determined as follows: the total cash value of the fees payable to the director is divided by the closing prices of Frontier common stock on the grant date of the units. Prior to October 1, 2013, stock units were credited to the director’s account in an amount that was determined as follows: the total cash value of the fees payable to the director divided by 85% of the closing prices of Frontier common stock on the grant date of the units. Units are credited to the director’s account quarterly. Directors must also elect to convert the units to either common stock (convertible on a one-to-one basis) or cash upon retirement or death.

Dividends are paid on stock units held by directors at the same rate and at the same time as we pay dividends on shares of our common stock. Dividends on stock units are paid in the form of additional stock units.

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, 2014, there were 811,002 shares available for grant. There were 12 directors participating in the Directors’ Plans during all or part of 2014. The total plan units earned were 237,607, 374,383 and 306,634 in 2014, 2013 and 2012, respectively. Options granted prior to the adoption of the Directors’ Equity Plan were granted under the 2000 EIP. At December 31, 2014, 105,000 options were outstanding and exercisable under the Director Plans at a weighted average exercise price of $12.10.

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.

In connection with the Director Plans, compensation costs associated with the issuance of stock units were $4 million, $2 million and $1 million in 2014, 2013 and 2012, respectively. Cash compensation associated with the Director Plans was $1 million in 2014, 2013 and 2012, respectively. These costs are recognized in “Selling, general and administrative expenses”.