Citizens Communications Company
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
[ ] Citizens Communications Company
[ ] (Name of Registrant as Specified in Its Charter)
[ ] (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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Administrative Offices
[GRAPHIC OMITTED] Three High Ridge Park, Stamford, CT 06905
(203) 614-5600
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March 22, 2002
Dear Fellow Stockholder:
I am pleased to invite you to attend the 2002 Annual Meeting of the
Stockholders of Citizens Communications Company, which will be held at the
Prudential Center for Learning and Innovation, Weed Avenue, Norwalk, CT 06850,
on Thursday, May 16, 2002, at 10:00 a.m., Eastern Time.
At last year's Annual Meeting, almost 89% of Citizens' outstanding shares
were represented. We hope that the percentage will be even higher at the
upcoming meeting. It is important that your shares be represented whether or
not you attend the meeting. In order to ensure that you will be represented, we
ask that you sign, date, and return the enclosed proxy. If present, you may
revoke your proxy and vote in person.
Attendance at the Annual Meeting will be limited to stockholders as of the
record date, or their authorized representative, and employees. Registered
stockholders planning to attend the meeting should so indicate by marking the
appropriate box on the proxy.
We look forward to seeing and meeting with you at the Annual Meeting.
Cordially,
/s/ Leonard Tow
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Leonard Tow
Chairman and Chief Executive Officer
Administrative Offices
[GRAPHIC OMITTED] Three High Ridge Park, Stamford, CT 06905
(203) 614-5600
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March 22, 2002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To the Stockholders of
CITIZENS COMMUNICATIONS COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Citizens
Communications Company will be held at the Prudential Center for Learning and
Innovation, Weed Avenue, Norwalk, CT 06850, on Thursday, May 16, 2002, at 10:00
a.m., Eastern Time, for the following purposes:
1. To elect directors;
2. To approve the appointment of KPMG LLP as our independent public
accountants for 2002; and
3. To transact any other business that may properly be brought before the
meeting or any adjournment or postponement of the meeting.
The board of directors fixed the close of business on March 18, 2002, as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting or any adjournment or postponement of the meeting.
A complete list of stockholders entitled to vote at the meeting will be
open to the examination of stockholders during ordinary business hours, for a
period of ten days prior to the meeting, at the offices of the company, Three
High Ridge Park, Stamford, CT 06905, and at the site of the meeting on the
meeting date.
By Order of the Board of Directors
/s/ L. Russell Mitten
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L. Russell Mitten
Secretary
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
by the board of directors of Citizens Communications Company to be voted at our
annual meeting of stockholders. The mailing address of our administrative
offices is Three High Ridge Park, Stamford, CT 06905. The approximate date on
which this proxy statement and form of proxy are first being sent or given to
stockholders is March 31, 2002.
Only holders of record of our common stock, par value $0.25 per share, as
of the close of business on March 18, 2002, the record date, will be entitled
to notice of and to vote at the annual meeting. As of the record date, there
were 281,586,466 shares of common stock outstanding, each of which is entitled
to one vote at the annual meeting. As of the record date, an additional
11,555,868 shares of common stock were held by us as treasury shares. We have
no other class of voting securities issued and outstanding. The presence in
person or by proxy of the holders of a majority of the outstanding shares of
common stock will be necessary to constitute a quorum for the transaction of
business at the Annual Meeting.
Directors will be elected by a majority vote of the shares of common stock
present or represented by proxy at the meeting and entitled to vote at the
meeting. The selection of our independent public accountants for 2002 will be
approved by a majority vote of the shares of common stock present or
represented by proxy and entitled to vote at the meeting. Abstentions by
stockholders present in person or by proxy will have the effect of a negative
vote with respect to the election of directors and the approval of the
appointment of our independent public accountants. Under the rules of the New
York Stock Exchange, brokers who hold shares in street name for customers that
have not given instructions to such brokers have the authority to vote on the
election of directors and approval of auditors; accordingly, unless contrary
instructions are given, all proxies received pursuant to this solicitation will
be voted in favor of the election of the nominees and the approval of the
appointment of our independent public accountants. Stockholders may not
cumulate their votes. Stockholders who execute proxies may revoke them at any
time before they are voted.
Stock Ownership of Certain Beneficial Owners, Directors and Executive Officers
As of February 28, 2002, no person or group of persons, except for FMR
Corp. and Wallace Weitz & Co., is known by us to own beneficially more than 5%
of our common stock. All information regarding the number of our shares
beneficially owned, and regarding voting and investment power with respect
thereto, by any person or group that owns beneficially more than 5% of our
common stock, is based solely on our review of Schedules 13G filed with the
Securities and Exchange Commission as of February 28, 2002.
According to the Schedule 13G jointly filed by FMR Corp.; Edward C.
Johnson, 3rd; Abigail P. Johnson, and Fidelity Management & Research Company on
February 14, 2002, FMR Corp.; Edward C. Johnson, 3rd, and Abigail P. Johnson
beneficially own an aggregate of 41,582,801 shares of our common stock,
representing approximately 14.782% of our outstanding common stock. Mr. Edward
C. Johnson, 3rd, and Abigail P. Johnson have offices at 82 Devonshire Street,
Boston, MA 02109. Members of the family of Edward C. Johnson, 3rd, hold
approximately 49% of the voting power of FMR Corp. Mr. Johnson, 3rd, owns 12%
and Abigail Johnson owns 24.5% of the outstanding stock of FMR Corp. Mr.
Johnson, 3rd, is Chairman of FMR Corp. and Abigail Johnson is a director of
that company. Approximately 13.434% of our outstanding common stock, or
37,791,825 shares, is held by Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp. Mr. Johnson, 3rd, and FMR Corp. each have
sole investment power with respect to those shares. Fidelity Management &
Research Company has the sole power to vote these shares. Approximately 1.109%
of our outstanding common stock, or 3,119,376 shares, is held by Fidelity
Management Trust Company, a wholly-owned subsidiary of FMR Corp. Mr. Johnson,
3rd, and FMR Corp. each has sole investment power with respect to all of these
shares and sole power to vote 2,924,376 shares and no power to vote 195,000
shares. Approximately 0.239% of our outstanding common stock, or 671,600
shares, is held by Fidelity International Limited, approximately 40% of the
voting stock of which is controlled by Mr. Johnson, 3rd, and members of his
family. Fidelity International Limited has sole investment power and sole
voting power with respect to these shares.
According to the Schedule 13G that Wallace R. Weitz & Company and Wallace
R. Weitz, President and Primary Owner of Wallace R. Weitz & Company, jointly
filed with the Securities and Exchange Commission on February 4, 2002, Wallace
R. Weitz & Company and Wallace R. Weitz, with offices at 1125 South 103rd
Street, Suite 600, Omaha, Nebraska 68124-6008, beneficially owned 27,139,400
shares of our common stock, representing approximately 9.8% of our outstanding
common stock. Wallace R. Weitz & Company and Wallace R. Weitz hold shared
dispositive power and shared voting power over these shares, and they disclaim
beneficial ownership of these shares under Rule 13d-4 of the Securities
Exchange Act of 1934.
The following table reflects shares of common stock beneficially owned (or
deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of February 28, 2002, by each of our directors, each of
the executive officers named in the Summary Compensation Table included
elsewhere herein, and all of our current directors and all our executive
officers as a group. Except as otherwise described below, each of the persons
named in the table has sole voting and investment power with respect to the
securities beneficially owned and has an address at our executive offices.
Common Acquirable Percentage
Stock Within Of Common
Name Position Owned (1) 60 Days (2) Stock (3)
---- ------------------------------ --------- ------------- -----------
Norman I. Botwinik .................. Director 119,695(4) 94,275 *
Robert Braden ....................... Vice President and Chief 106,421(5) 75,000 *
Executive Officer of the
Electric Lightwave Sector and
Executive Vice President of
the ILEC Division
John H. Casey, III .................. Vice President and President 258,239(6) 54,167 *
and Chief Operating Officer
of the ILEC Division
Aaron I. Fleischman ................. Director 133,754(7) 98,069 *
Rudy J. Graf ........................ Vice Chairman, Chief 428,356(8) 200,000 *
Operating Officer and
President and Director
Stanley Harfenist ................... Director 112,024(9) 98,068 *
Andrew N. Heine ..................... Director 108,229 108,070 *
Scott N. Schneider .................. Vice Chairman and Executive 278,524(10) 199,999 *
Vice President and Director
John L. Schroeder ................... Director 102,204 95,204 *
Robert D. Siff ...................... Director 103,530(11) 97,347 *
Robert A. Stanger ................... Director 110,605 108,068 *
Edwin Tornberg ...................... Director 47,424(12) 38,376 *
Claire L. Tow ....................... Director 10,579,863(13)(14) 2,622,023(15) 3.8%
Leonard Tow ......................... Chairman of the Board 10,579,863(13)(16) 2,622,023(17) 3.8%
of Directors and Chief
Executive Officer
All Executive Officers and Directors 13,675,579 4,848,250 4.9%
as a group (25 persons)(18) .........
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* Represents less than 1% of our outstanding common stock.
(1) Pursuant to rules of the Securities and Exchange Commission, includes
shares acquirable as further described in footnote (2). Shares owned as
of February 28, 2002, may be determined by subtracting the number under
"Acquirable Within 60 Days" from that under "Common Stock Owned."
(2) Reflects number of shares that could be purchased by exercise of options
as of February 28, 2002, or within 60 days thereafter under our
Management Equity Incentive Plan, the Equity Incentive Plan, the Amended
and Restated 2000 Equity Incentive Plan or the Non-Employee Directors'
Deferred Fee Equity Plan, as applicable.
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(3) Based on number of shares outstanding at, or acquirable within 60 days
of, February 28, 2002.
(4) Includes 11,406 shares of common stock owned by Mr. Botwinik's wife. Mr.
Botwinik disclaims beneficial ownership of such shares.
(5) Includes 13,333 restricted shares over which Mr. Braden has sole voting
power but no dispositive power.
(6) Includes 66,666 restricted shares over which Mr. Casey has sole voting
power but no dispositive power.
(7) Includes 30,733 shares held by the Aaron I. Fleischman Foundation of
which Mr. Fleischman is the sole trustee. Mr. Fleischman disclaims
beneficial ownership of these shares.
(8) Includes 100,000 restricted shares over which Mr. Graf has sole voting
power but no dispositive power.
(9) Consists of shares held by the Harfenist Family Trust of which Stanley
and Jean Lippka Harfenist are the trustees.
(10) Includes 33,333 restricted shares over which Mr. Schneider has sole
voting but no dispositive power.
(11) Mr. Siff disclaims beneficial ownership of the 6,183 shares of common
stock and all of the 68,970 options held by M.R. Sidebore Limited
Partnership, which is beneficially owned by him.
(12) Includes 651 shares of common stock held by Mr. Tornberg's wife.
(13) Includes 5,394,022 shares of common stock owned by Lantern Investment
Company, LLC, of which Leonard Tow is the sole member. Claire Tow is the
wife of Leonard Tow. These shares of common stock are included in the
above table for Leonard Tow and Claire Tow, as required by the definition
of beneficial ownership in Rule 13d-3 under the Securities Exchange Act
of 1934. Therefore, each of Leonard Tow and Claire Tow is deemed to have
a beneficial interest in these 5,394,022 shares of our common stock.
Leonard Tow has sole voting and investment power with respect to the
5,394,022 shares of our common stock owned by Lantern Investment Company,
LLC. Except to the extent of this interest, both Leonard Tow and Claire
Tow disclaim beneficial ownership of any of these shares of our common
stock. Includes 88 shares held in a joint account by Claire Tow and
Leonard Tow.
(14) Includes 32,369 shares of common stock held by Claire Tow as custodian
for her minor grandchildren; 5,032,555 shares of common stock or options
exercisable therefor owned by her husband, Leonard Tow, 1,559,974 shares
of which are performance shares over which Leonard Tow has sole voting
power but no dispositive power; and 1,946 shares of common stock held in
an individual retirement account, and 16,369 shares held in a 401(k)
account, each for the benefit of her husband, Leonard Tow. Claire Tow
disclaims beneficial ownership of all of these shares.
(15) Includes 2,523,954 shares of common stock acquirable by Leonard Tow
within 60 days. Claire Tow disclaims beneficial ownership of all of these
shares.
(16) Includes 32,369 shares of common stock held by his wife, Claire Tow, as
custodian for her minor grandchildren and 2,860 owned by his wife, Claire
Tow; and 1,586 shares of common stock held in an individual retirement
account for the benefit of his wife, Claire Tow. Leonard Tow disclaims
beneficial ownership of all of these shares. Includes 1,559,974
restricted shares over which Leonard Tow has sole voting power but no
dispositive power.
(17) Includes 98,069 shares of common stock acquirable by Claire Tow within 60
days. Leonard Tow disclaims beneficial ownership of all of these shares.
(18) Citizens (through its wholly-owned subsidiary CU CapitalCorp.)
beneficially owns all of the Class B Common Stock and 27,571,332 shares
of the Class A Common Stock of Electric Lightwave, Inc. ("ELI"), one of
our subsidiaries. Together these shares represent 85% of all the issued
and outstanding common stock of ELI and 96% of the voting power
attributable thereto. All of our directors and officers are deemed to
have an indirect beneficial interest in the 27,571,332 shares of ELI
Class A Common Stock and the shares of ELI Class B Common Stock. Except
to the extent of such indirect interest, each of the named individuals
disclaims beneficial ownership of any of such 27,571,332 shares of Class
A Common Stock and the shares of Class B Common Stock. All of our
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directors and executive officers as a group also own beneficially 469,941
shares of ELI Class A Common Stock (179,941 of which are acquirable within
60 days), which represents less than 1% of ELI Class A Common Stock
outstanding as of February 28, 2002, or acquirable within 60 days
thereafter.
ELECTION OF DIRECTORS
At the meeting, 11 directors are to be elected to hold office until the
next annual meeting and until their successors have been elected and qualified.
All of the nominees are currently serving as our directors. Directors will be
elected by a majority of the votes of the holders of shares of common stock
present in person or represented by proxy at the meeting and entitled to vote
at the meeting. Robert D. Siff, who is currently a director and a member of our
Audit and Employee Development Committees, is retiring from the board of
directors and such Committees and accordingly is not standing for reelection.
It is the intention of the persons named in the enclosed proxy to vote for the
election as directors of the nominees specified. In case any of these nominees
should become unavailable for any reason, the proxy holders reserve the right
to substitute another person of their choice. The information concerning the
nominees and their security holdings has been furnished to us by the nominees.
Leonard Tow and Claire Tow are husband and wife. There are no other family
relationships between any of the nominees.
Norman I. Botwinik Director Emeritus, Board of Governors, Director since 1968
University of New Haven. Age 85.
Aaron I. Fleischman Senior Partner of Fleischman and Walsh, L.L.P., Director since 1989
Washington, DC, law firm specializing in
regulatory, corporate-securities, legislative, and
litigation matters for telecommunications,
regulated utility and transportation companies,
since 1976. Director, Southern Union Company.
Age 63.
Rudy J. Graf Vice Chairman of the Board of Directors of Director since 2000
Citizens Communications Company since 2001;
President, Chief Operating Officer of Citizens
Communications Company, 1999 to present;
Director, President and Chief Operating Officer,
Centennial Cellular Corp., 1990 to 1999; Director,
Electric Lightwave, Inc. Mr. Graf has announced
his intention to retire as the President and Chief
Operating Officer of Citizens Communications
Company effective June 30, 2002, but, if
reelected, will remain on the Board of Directors.
Age 53.
Stanley Harfenist President and Chief Executive Officer of Adesso, Director since 1992
Inc., manufacturer of hardware for the Macintosh
computer, 1993 through 1999. Director of Electric
Lightwave, Inc. Age 70.
Andrew N. Heine Private investor; Of Counsel, Gordon Altman Director since 1975
Butowsky Weitzen Shalov & Wein,
September 1995 to December 1999; practicing
attorney/investor, 1989 to present; Director of
Orleans Home Builders, Inc., 1994 to present.
Age 73.
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Scott N. Schneider Vice Chairman of the Board of Directors of Director since 2000
Citizens Communications Company since 2001;
Executive Vice President of Citizens
Communications Company and of Electric
Lightwave, Inc. since 1999; Director from 1996
to October 1999, Chief Financial Officer from
1996 to October 1999 and Senior Vice President
and Treasurer of Century Communications Corp.
from 1991 to October 1999; Director, Chief
Financial Officer, Senior Vice President and
Treasurer of Centennial Cellular Corp., 1991 to
1999; Director, Electric Lightwave, Inc. Effective
July 1, 2002, Mr. Schneider will become President
and Chief Operating Officer of Citizens
Communications Company. Age 44.
John L. Schroeder Director, Morgan Stanley Dean Witter Funds, Director since 1980
1994 to present. Chartered Financial Analyst.
Age 71.
Robert A. Stanger Chairman, Robert A. Stanger & Company, Director since 1992
investment banking and consulting services, 1978
to present; Publisher, The Stanger Report;
Director, Callon Petroleum Company, Inc.,
exploration and production of oil and natural
gas; Director, Electric Lightwave, Inc. Age 62.
Edwin Tornberg President and Director, Edwin Tornberg & Director since 1992
Company, brokers, management consultants and
appraisers serving the communications industry,
1957 to present. President and Director, Radio
780, Inc. (Washington, DC), 1977 to 2001;
President and Director, Radio One Five
Hundred, Inc. (Indianapolis, IN), 1959 to present.
Chairman and Director, New World Radio Inc.
(Washington, DC), 1992 to present; Chairman,
Treasurer and Director, Global Radio, LLC.
(Philadelphia, PA), 1997 to present; Chairman
and Director, Nations Radio LLC (Annapolis,
MD) since 1999. Age 76.
Claire L. Tow President, The Tow Foundation; Senior Vice Director since 1993
President from 1992 and Vice President and
Director from 1988 of Century Communications
Corp., a cable television company, in each case
until October 1999. Age 71.
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Leonard Tow Chairman and Chief Executive Officer, Citizens Director since 1989
Communications Company, 1990 to present;
Chief Financial Officer, 1991 to 1997. Chief
Executive Officer and Director of Century
Communications Corp., a cable television
company, since its organization in 1973 to
October 1999, and Chairman of the Board from
1989 to 1999; Director and Chairman of the
Board, Electric Lightwave, Inc. Director,
Hungarian Telephone and Cable Corp. Director,
United States Telephone Association. Age 73.
Our board of directors recommends that you vote "FOR" the election of all
nominees for director.
The board of directors held seven meetings in 2001. Each director attended
at least 75% of the aggregate of these meetings and the total number of
meetings held by all committees of the board on which he or she served, as
described below under "Committees of the Board."
Committees of the Board
The board has standing Executive, Audit, Compensation, Employee
Development, Nominating, Retirement Plan, and Welfare Benefit Committees.
Executive Committee. Our Executive Committee is composed of Dr. Tow, as
Chairman, and Messrs. Fleischman, Graf, Harfenist, Schneider, and Stanger. The
Executive Committee held two meetings in 2001. During intervals between
meetings of the board, the Executive Committee has the power and authority of
the board over the management of our business affairs and property, except for
powers specifically reserved by Delaware law or by our Restated Certificate of
Incorporation.
Audit Committee. Our Audit Committee is composed of four directors and
operates under a written charter adopted by the board of directors, a copy of
which is included in this proxy statement as Appendix A. The members of the
Audit Committee are Mr. Heine, as Chairman, and Messrs. Schroeder, Siff, and
Stanger, each of whom is independent, as required by the listing standards of
the New York Stock Exchange. The Audit Committee met five times in 2001. Mr.
Siff is retiring as director and from this committee effective as of the date
of our annual meeting.
The Audit Committee recommends to the board of directors the selection of
our independent accountants. Management is responsible for our internal
controls and the financial reporting process. Our independent accountants are
responsible for performing an independent audit of our consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America, for issuing a report thereon, and for reviewing our
Quarterly Reports on Form 10-Q. The Audit Committee's responsibility is to
review these processes.
Compensation Committee. The Compensation Committee is composed of Mr.
Stanger, as Chairman, and Messrs. Botwinik, Harfenist, and Tornberg. The
Compensation Committee met five times in 2001. The Committee reviews our
general compensation strategies, acts as the Committee for the Citizens
Incentive Plan, the Management Equity Incentive Plan, the Equity Incentive
Plan, the Amended and Restated 2000 Equity Incentive Plan, the Employee Stock
Purchase Plan, and the Non-Employee Directors' Deferred Fee Equity Plan, and
establishes and reviews compensation for our Chief Executive Officer and other
executive officers.
Employee Development Committee. The Employee Development Committee is
chaired by Mrs. Tow and Messrs. Harfenist and Siff are its other members. Its
function is to foster a high level of cooperation and exchange among members of
the management team. The Employee Development Committee met twice in 2001. Mr.
Siff is retiring as director and from this committee effective as of the date
of our annual meeting.
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Nominating Committee. The Nominating Committee is chaired by Mr.
Harfenist, and Messrs. Botwinik and Fleischman are its other members. The
Nominating Committee did not meet in 2001. The committee's function is to
recommend candidates for election to the board of directors. The Nominating
Committee will entertain written suggestions for nominees from stockholders so
long as they are addressed to Mr. Harfenist at our address, on or before the
date specified under "Stockholder Proposals" and include a description of the
qualifications of the suggested nominee and any information that is required by
the regulations of the Securities and Exchange Commission concerning the
suggested nominee and his or her direct or indirect securities holdings or
other interests in us.
Retirement Plan Committee. The Retirement Plan Committee is composed of
Mr. Schroeder, as Chairman, and Messrs. Botwinik and Tornberg. The Retirement
Plan Committee oversees our retirement plans. The Committee met two times in
2001.
Welfare Benefits Committee. The Welfare Benefits Committee is composed of
Messrs. Graf and Schneider and Ms. Jean DiSturco, our Vice President, Human
Resources. The Welfare Benefits Committee oversees our employee benefit plans.
The Committee met four times in 2001.
AUDIT COMMITTEE REPORT
The Audit Committee has met and held discussions with management and our
independent accountants and has reviewed and discussed the audited consolidated
financial statements with management and our independent accountants.
The Audit Committee has also discussed with our independent accountants
the matters required to be discussed by Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards, AU Section 380).
Our independent accountants also provided the Audit Committee with the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and the Audit Committee discussed with our
independent accountants that firm's independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the board of directors that the audited consolidated
financial statements be included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, for filing with the Securities and
Exchange Commission.
Submitted by:
Andrew H. Heine, Chairman
John L. Schroeder
Robert D. Siff
Robert A. Stanger
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DIRECTORS' COMPENSATION
As of July 1, 2001, each non-employee director is entitled to receive
annual compensation in the form of 5,000 stock units (which are more
particularly described below), 20,000 stock options, or an annual retainer of
$30,000. In addition, each non-employee director will continue to receive a fee
of $2,000, plus reasonable expenses, for each meeting attended in person or by
telephone. Committee chairs will be entitled to a $5,000 retainer. A director
may elect to have either 50% or 100% of his or her fees, or in the case of
committee chairs their annual retainer, payable in cash, shares of our common
stock, or stock units. If a director elects payment of his or her fees in
shares of our common stock, those shares will be purchased at the average of
the high and low prices on the first trading day of the year in which they are
earned, subject to adjustment. If a director elects payment of his or her fees
in stock units, units will be purchased at 85% of the average of the high and
low prices on the first trading day of the year in which they are earned,
subject to adjustment. These stock units, which are payable either in cash or
in shares of our common stock, as per the director's irrevocable election, will
be held by us until the earlier of the director's retirement or death (or
earlier in the case of hardship approved by the board of directors) at which
time they will be paid to the director in accordance with his or her election.
Directors will continue to receive an annual stock option award under the
Non-Employee Directors' Deferred Fee Equity Plan, which is currently fixed at
5,000 options.
At this time, Messrs. Stanger and Harfenist are non-employee directors of
both us and ELI. Directors who are also our employees or employees of ELI are
not entitled to receive compensation for services rendered as directors.
Effective July 1, 2001, each director of ELI who is neither our employee nor an
employee of ELI became entitled to receive annual compensation for the year
2001 in the form of 5,000 stock units or 20,000 stock options or an annual
retainer of $30,000. The awards of stock units and stock options are made
pursuant to ELI's Equity Incentive Plan. In addition, each non-employee
director is entitled to receive a fee of $2,000, plus reasonable expenses, for
each meeting attended in person or by telephone. Committee chairs are paid an
annual retainer of $5,000. All of these fees, or in the case of committee
chairs, the annual retainers, are payable in cash, shares of Class A Common
Stock of ELI, or stock units representing Class A Common Stock of ELI similar
to those stock units representing our common stock for our directors'
compensation described above. If a director elects payment of his fees or
retainer in stock or stock units, those shares will be purchased at fair market
value, and units will be purchased at 85% of the fair market value, subject to
adjustment. Each director of ELI who is not our employee or an employee of ELI
will also receive an annual grant of options for 7,500 shares of Class A Common
Stock of ELI, exercisable at an exercise price per share equal to the market
price of the Class A Common Stock on the first trading day of each year.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the board of directors is composed of four
independent directors who are responsible for setting and administering
compensation, including base salaries, annual incentives and stock-based awards
paid or awarded to our executive officers. The Compensation Committee oversees
and approves incentive plan, design, costs and administration. This report
discusses the Compensation Committee's activities as well as its development
and implementation of policies regarding compensation paid to our executive
officers for 2001.
COMPENSATION OF THE EXECUTIVE GROUP
This section discusses our 2001 strategy for our compensation programs.
The compensation of our Chief Executive Officer is discussed separately in this
report.
COMPENSATION STRATEGY
o Offer a competitive mix of total compensation relative to the communications
industry.
o Ensure plans enable us to attract and retain employees of outstanding ability
by having flexibility based on the various labor market demands for critical
skill sets.
8
o Align the compensation plans across the company in order to recognize that
achievement of financial goals contribute to the overall success of
Citizens.
o Continue to increase performance-based compensation so that rewards to
employees have a direct correlation to shareholder value. Continue to
transition to more pay at risk for certain levels in the organization by
holding base salaries flat and increasing the cash incentive opportunities at
certain levels of the organization.
o Create stock ownership at all levels in the organization.
Base Salary
The Compensation Committee reviews recommendations and sets the salary
levels of executive officers in the spring of each year. This review is based
on the duties and responsibilities which we expect each executive to discharge
during the current year, the executive's performance during the previous year
and the executive's total cash compensation opportunity. We perform external
market comparisons relative to industry-specific peers, based on individual job
responsibility.
Annual Cash Incentives
To retain and motivate employees, the Citizens Incentive Plan offers a
competitive mix of total cash compensation relative to comparable industry
norms. Under the Citizens Incentive Plan, target incentives are assigned for
each level based on an analysis of incentive pay practices in the various
industries in which we operate. The criteria for payout of awards is financial
performance. The financial measures used are revenue and adjusted Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA). The Public
Services Sector uses one additional measure, which is safety. Goals are
established no later than the first quarter of the year for the full year. The
plan criteria may be revised each year to reflect changes in our business
strategy.
On June 29, 2001, we purchased from Global Crossing LTD. 100% of the stock
of Frontier Corp.'s ("Frontier") local exchange carrier subsidiaries. The
incentive plan for transferred Frontier employees was based on what was in
place prior to the sale and is based on performance between July 1, 2001 and
December 31, 2001 and on adjusted EBITDA, revenue and service measures.
2001 Annual Cash Incentive Awarded in 2002
The annual cash incentives approved by the Compensation Committee in March
2002 were based on 2001 performance. The company achieved its financial goals
and overall the incentive pools were funded at 88.9% for Citizens employees and
71.4% for the acquired Frontier employees. A total of 2,476 employees received
cash incentive awards, representing 100% of the employees eligible to receive
an award.
Common Stock Long-Term Incentives
The purpose of the Equity Incentive Plan is to provide common
stock-related compensation to ensure that we can effectively attract, motivate
and retain executives and employees in our business sectors. Stock options are
awarded only if the adjusted EBITDA target is achieved. All stock options
awarded are non-qualified, awarded at fair market value and vest over four
years.
Within the Equity Incentive Plan, there are two separate award programs,
the Management Stock Option Plan and the Distinguished Performance Award. The
Management Stock Option Plan is designed to grant stock options to executives
and other key management employees for their individual contributions toward
achievement of financial goals. Target awards are based on the employee's level
and are designed to compensate our employees consistent with the long-term
incentive compensation of companies in comparable industries.
The Distinguished Performance Award is designed to recognize and reward
key employees below the management level who are considered to have high
potential and who have made significant contributions. Recommendations can be
made for up to 10% of the eligible population and are at the discretion of the
employee's manager.
9
In May 2001, the Compensation Committee granted stock option awards to 339
executives/managers under the Management Stock Option Plan. 357 employees
received stock option awards under the Distinguished Performance Award
representing 10.8% of the eligible employees. Based on the achievement of the
prior year's adjusted EBITDA target the pool was funded at 95%.
The Compensation Committee will consider Equity Incentive Plan Awards for
2001 performance in the spring of 2002.
Other
The Compensation Committee approves terms of employment offers to new
executives and other officers.
10
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
An employment agreement effective as of October 1, 2000, as amended,
between Dr. Tow and us establishes his base annual salary and other items
included in the "Other Annual Compensation" and "All Other Compensation"
columns in the Summary Compensation Table or referred to under the heading
"Employment Agreement." The employment agreement referred to in this section is
summarized in a later section of the proxy statement under the heading
"Employment Agreement."
In 1999 and 2000, in lieu of Annual Cash Incentives for 1998 and 1999
performance, respectively, the Compensation Committee agreed to grant Dr. Tow
225,000 and 72,727 shares of our common stock, respectively, which will be
awarded on January 1 of the year after his retirement. On January 1, 2001, Dr.
Tow was granted an option to purchase 250,000 shares of our common stock. The
options vest at a rate of 33 1/3% per year beginning on January 1, 2002, with
an exercise price of $12.907 per share. The options expire on December 31,
2010. In addition, on June 18, 2001, Dr. Tow was granted an option to purchase
195,000 shares of our common stock. The options vest at a rate of 25% per year
beginning on June 18, 2002, with an exercise price of $12.37 per share. The
options expire on June 17, 2011. Also on June 18, 2001, Dr. Tow was granted
phantom stock units for 100,000 shares of our common stock. These phantom stock
units will settle the day after Dr. Tow's retirement and, upon settlement, Dr.
Tow will receive 100,000 shares of our common stock. The Compensation Committee
in 2000 also agreed to grant Dr. Tow 1,518,750 shares of our common stock,
which will be awarded on January 1 of the year after his retirement. Such award
was in recognition of Dr. Tow's investment foresight that enabled us to realize
significant gains on our investments in certain cable television and cellular
telephone companies.
The Compensation Committee will consider awards under the Amended and
Restated 2000 Equity Incentive Plan for 2001 performance in the spring of 2002.
In reviewing Dr. Tow's incentive compensation for 2001, the Compensation
Committee will also consider the implementation of our long-term objectives, as
established by the board of directors. Principal among these is the mandate to
expand and enlarge the scope and size of our communications activities through
acquisitions, viewed by the board as vital to our success.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
company's chief executive officer or any of the four most highly compensated
executive officers (other than the chief executive officer). Section 162(m)
provides that qualifying performance-based compensation will not be subject to
the tax deduction limit if certain requirements are met. While our incentive
compensation programs are designed to facilitate compliance with Section
162(m), and in most cases the Compensation Committee intends to maximize the
corporate tax deduction, the Committee believes that the Company must attract
and retain qualified executives to manage the Company and that in some
instances, the Compensation Committee may need the flexibility to offer
compensation that exceeds the Section 162(m) threshold for deductibility. Total
compensation paid to Dr. Tow in 2001, and total compensation scheduled to be
paid to Dr. Tow in 2002, may cause the Section 162(m) limitation to be exceeded
for those years. In addition, if Dr. Tow's employment terminates prior to the
end of the term of employment, payments required to be made to him are expected
to exceed $1 million but, depending on the year of payment and depending on
deferral arrangements, may not be subject to the limitation on tax
deductibility.
Employment Agreement
We and Dr. Tow entered into a new employment agreement, dated as of
October 1, 2000, which was subsequently amended, as of that date, by letter
agreement. The 2000 agreement replaces the then effective 1996 employment
agreement and provides for Dr. Tow to continue to serve as our Chairman and
Chief Executive Officer through the end of 2005 and as an advisor-consultant
for an additional five-year period thereafter. Dr. Tow will be paid an annual
base salary of $900,000 through 2005, which is the same base salary provided
under the 1996 agreement. After 2005, he will receive compensation of $500,000
per year for advisory services. While he is performing these services, Dr. Tow
is restricted from engaging in
11
competition that is materially detrimental to us. He is, however, permitted to
serve as a director or a non-working partner, officer, or stockholder of other
businesses. The 2000 agreement also provides for Dr. Tow to receive additional
risk-based compensation, as described below. During their lifetimes, Dr. Tow
and his wife will continue to participate in our health and other benefit
plans. After his retirement from full-time employment, we will provide Dr. Tow
with offices and support staff.
The 1996 agreement included a grant of 500,000 restricted performance
shares of common stock (which increased to 559,974 shares due to stock
dividends). In consideration of Dr. Tow entering into the 2000 agreement, we
increased these restricted shares by 250,000, to 809,974, and we granted him
750,000 additional restricted shares. Restrictions on transfer will lapse on
January 1, 2006, or upon death, earlier termination of employment, or certain
corporate events. The restricted shares are subject to reduction under certain
circumstances in accordance with a formula based on our EBITDA, as adjusted in
accordance with the definition of EBITDA in the 2000 agreement, and to further
proportionate reductions as set forth below. We also granted to Dr. Tow options
to purchase 2.5 million shares of common stock. These options vest at the rate
of 250,000 shares per year beginning on December 31, 2000, which vesting would
accelerate upon early termination of the combined employment and advisory term
for any reason other than good cause. The exercise price for the first 500,000
options was set at the fair market value of the Company's shares on October 1,
2000. The exercise price for each additional increment of 500,000 options is
$2.00 above the exercise price of the immediately preceding increment. The
options have a 10-year term.
To compensate for tax code limitations on the amount that Dr. Tow can be
paid under the company's pension plan, the 2000 agreement provides for $15
million in additional life insurance coverage through a second-to-die,
split-dollar arrangement with a trust created by Dr. Tow as beneficiary; and a
single life insurance arrangement on Dr. Tow's life, with a face amount of
$5.75 million, with death benefits to be paid in part to us and in part to the
trust; provided, that the aggregate payable to the trust under all applicable
policies may not exceed $15 million. The insurance coverage provided in the
2000 agreement is in addition to a $7.5 million second-to-die policy that was
part of the 1996 agreement and that continues in effect. All of the insurance
arrangements purchased by us have been structured so that all premiums paid by
us in providing such benefits should be recovered from insurance proceeds.
All payments due to Dr. Tow under his employment agreement will accelerate
in the event we merge, consolidate with, or transfer all or substantially all
of our assets or stock to another entity whose net worth, immediately preceding
such transaction, is less than ours. Additionally, Dr. Tow may terminate the
agreement in the event of a merger in which we are not the surviving company or
in the event of a consolidation or transfer of all or substantially all of our
assets or stock. If an actual change of control, as defined in the 2000
agreement, occurs that includes, among other events, (1) the acquisition by a
person or group of 15% or more of our voting securities and (2) certain changes
in the board of directors, then Dr. Tow will thereafter have the option to
acquire, after notice to the company, up to 10 million shares of the company's
common stock at a price per share equal to the fair market value of the stock
on the date notice is given.
All shares covered by the 2000 agreement will be adjusted to reflect the
occurrence, after October 1, 2000, of stock dividends, stock splits, new
issuances to holders of common stock or options, warrants, rights to acquire
additional shares, or similar events.
If Dr. Tow's employment is terminated for good cause, as defined in the
2000 agreement, he will be entitled to receive his base salary through
termination. In addition, he will be entitled to exercise all vested options;
the restrictions on a portion of his restricted shares, which will be
determined based on duration of his employment through termination and the
adjusted EBITDA test, would lapse; and his split-dollar life insurance benefits
would continue, subject to certain reductions. If Dr. Tow's employment
terminates for any reason other than good cause, he would be entitled to
receive his base salary for the remainder of the five-year term plus a bonus
based on his average annual bonus prior to termination; all of his unvested
options would immediately vest; and all restrictions on his restricted shares
would lapse. If we elect to eliminate the advisory services for any reason
other than good cause, we will be required
12
to: (1) provide life insurance coverage of $7 million, through a split-dollar
arrangement, payable to Dr. Tow's estate, his family, or a trust for their
benefit or (2) pay Dr. Tow the sum of $3.2 million less the sum of all advisory
payments made to him through termination.
In the event that Dr. Tow's entitlements under the 2000 agreement are
deemed to constitute excess parachute payments for tax purposes, we will pay
him any tax obligation.
As of May 30, 2001, we entered into additional agreements with Dr. Tow in
which: (1) he relinquished his fully-vested interest in $6.516 million on
account in the Citizens Incentive Program; (2) a second-to-die split-dollar
life insurance arrangement was created with a face amount of $15 million and
with Dr. Tow and his wife as the insured, and with a trust created by Dr. Tow
as the owner of the policies; and (3) a single life insurance arrangement was
created on Dr. Tow's life, with a face amount of $5.75 million, with death
benefits to be paid in part to us and in part to the trust; provided, that the
aggregate amount payable to the trust under all applicable policies may not
exceed $15 million. In all material respects, these insurance arrangements are
similar to the split-dollar insurance arrangements provided in the 2000
agreement. As in the 2000 agreement, the insurance arrangements have been
structured so that all premiums paid by us in providing the benefits should be
recovered from insurance proceeds.
13
SUMMARY COMPENSATION TABLE
The following table sets forth, for services rendered to us and our
subsidiaries for each of the fiscal years ended December 31, 2001, 2000 and
1999, the compensation awarded to, earned by or paid to (i) our Chief Executive
Officer; and (ii) the four other most highly compensated executive officers for
2001 who were serving as our executive officers on December 31, 2001.
Annual Compensation Long-term Compensation
-------------------------------------------- ------------------------------------
Awards Payouts
------------ ----------
Securities
Underlying Long-term
Other Restricted Options/ Incentive
Annual Stock SARs Plan All Other
Name and Current Position Year Salary Bonus(1) Compensation Awards (#)(2) Payouts Compensation
------------------------------- ------ ----------- ---------- -------------- ------------ ------------ ---------- -----------------
Leonard Tow ................... 2001 $900,000 $ 0 0 (3) 445,000 0 $649,908(4)(5)
Chief Executive Officer 2000 900,000 0 0 (3) 2,500,000 0 485,501(6)(7)
and Chairman 1999 900,000 0 0 (3) 350,000 0 162,631(8)
Rudy J. Graf .................. 2001 $500,000 $437,500 0 95,000 0 $ 5,100(4)
Vice Chairman, President 2000 500,000 475,000 0 100,000 0 11,539(6)
and Chief Operating Officer 1999 150,000 600,000 0 (9) 250,000 0 0
Scott N. Schneider ............ 2001 $400,000 $350,000 0 95,000 0 $ 0
Vice Chairman and 2000 300,000 285,000 0 100,000 0 0
ExecutiveVice President 1999 50,000 300,000 0 (10) 250,000 0 0
John H. Casey, III ............ 2001 $250,000 $218,800 0 50,000 0 $ 0
Vice President and 2000 236,538 237,500 0 112,500 0 0
President and Chief 1999 26,923 210,000 0 (11) 50,000 0 0
Operating Officer of the
ILEC Division
Robert Braden ................. 2001 $246,968 $250,000 0 100,000 0 $ 7,492(4)
Vice President, Chief 2000 194,231 200,000 0 75,000 0 3,938(13)
Executive Officer of the 1999 29,167 100,000 0 (12) 50,000 0 0
Electric Lightwave Sector
and Executive Vice
President, ILEC Division,
ELI employee from
January 10 to December 31,
2001
----------
(1) All amounts in the column, unless otherwise indicated, were paid under
the Citizens Incentive Plan. Amounts granted are for performance for the
stated Salary Year, but are determined and awarded in the subsequent
year.
(2) Number of shares underlying options adjusted to reflect subsequent stock
dividends. All awards shown are options; we have not awarded any SARs.
(3) On May 1, 2001, Dr. Tow was granted, pursuant to his 2000 employment
agreement, 250,000 and 750,000 performance shares of common stock. See
"Compensation of the Chief Executive Officer." The restricted shares are
subject to partial reduction under certain circumstances in accordance
with a formula based on our adjusted EBITDA and to further proportionate
reductions in certain circumstances. As of February 28, 2002, the total
number of performance shares held by Dr. Tow was 1,559,974 with a market
value of $14,211,363. On June 18, 2001, Dr. Tow was granted phantom stock
units for 100,000 shares of our common stock. These phantom stock units
will settle the day after Dr. Tow's retirement and, upon settlement, Dr.
Tow will receive 100,000 shares of our common stock. In addition, in 1999
and 2000, in lieu of Annual Cash Incentives for his 1998 and 1999
performance, respectively, the Compensation Committee agreed to grant Dr.
Tow 225,000 and 72,727 shares of our common stock, respectively, which
will be awarded on January 1 of the year after his retirement. The
Compensation Committee in 2000 also agreed to grant Dr. Tow 1,518,750
shares of our common
14
stock, which will be awarded on January 1 of the year after his
retirement. Such award was in recognition of Dr. Tow's investment
foresight that enabled us to realize significant gains on our investments
in certain cable television and cellular telephone companies. As of
February 28, 2002, the total number of shares to be awarded to Dr. Tow
after his retirement was 1,916,477 with a market value of $17,459,105.
(4) Represents our matching contribution to the named executive officer's
401(k) plan ($5,100 for each executive officer so noted) and also
includes the matching contribution to our Executive Deferred Savings Plan
of $23,042 and $2,392 for Dr. Tow and Mr. Braden, respectively. Also
included is $224,634, which represents the 2001 economic benefit of
split-dollar life insurance for Dr. Tow. We used the premium ratio method
to calculate the economic benefit of split-dollar life insurance for
2001.
(5) Includes $258,489, which represents the pre-tax cost to us under Dr.
Tow's employment agreement of the term portion of split-dollar insurance
arrangements, and $82,507, which represents a financial services payment
to Dr. Tow. Includes $56,136, which represents the imputed benefit of Dr.
Tow's use of the Citizens aircraft in 2001.
(6) Represents our matching contribution to the named executive officer's
401(k) plan ($5,100 for each executive officer so noted) and also
includes the matching contribution to our Executive Deferred Savings Plan
of $23,145, and $6,439 for Dr. Tow, and Mr. Graf, respectively. Also
included is the 2000 economic benefit of split-dollar life insurance for
Dr. Tow of $155,093. We used the premium ratio method to calculate the
economic benefit of split-dollar life insurance for 2000.
(7) Includes $226,050, which represents the pre-tax cost to us under Dr.
Tow's employment agreement of the term portion of split-dollar insurance
arrangements. Includes $76,113 which represents a financial services
payment to Dr. Tow.
(8) Represents our matching contribution to the named executive officer's
401(k) plan ($4,800 for each executive officer so noted) and for Dr. Tow
also represents the matching contribution to our Executive Deferred
Savings Plan of $22,200. Additionally, $135,631 represents the 1999
economic benefit of split-dollar life insurance for Dr. Tow. We used the
premium ratio method to calculate the economic benefit of split-dollar
life insurance for 1999.
(9) On September 9, 1999, Mr. Graf was granted 300,000 restricted shares,
which vest in three equal annual installments beginning on September 9,
2000. As of February 28, 2002, the total number of restricted shares held
by Mr. Graf was 100,000 shares with a market value of $911,000.
Recipients of restricted shares have the right to vote and receive
dividends, if paid, on such shares.
(10) On November 1, 1999, Mr. Schneider was granted 100,000 restricted shares,
which vest in three equal annual installments beginning on November 1,
2000. As of February 28, 2002, the total number of restricted shares held
by Mr. Schneider was 33,333 shares with a market value of $303,664.
Recipients of restricted shares have the right to vote and receive
dividends, if paid, on such shares.
(11) On November 1, 1999, Mr. Casey was granted 200,000 restricted shares,
which vest in three equal annual installments beginning on November 1,
2000. As of February 28, 2002, the total number of restricted shares held
by Mr. Casey was 66,666 shares with a market value of $607,327.
Recipients of restricted shares have the right to vote and receive
dividends, if paid, on such shares.
(12) On November 1, 1999, Mr. Braden was granted 40,000 restricted shares
which vest in three equal annual installments beginning on November 1,
2000. As of February 28, 2002, the total number of restricted shares held
by Mr. Braden was 13,333 shares with a market value of $121,464.
Recipients of restricted shares have the right to vote and receive
dividends, if paid, on such shares.
(13) Represents our matching contribution to Mr. Braden's 401(k) plan.
15
2001 OPTION GRANTS
The following table sets forth certain information concerning all options
to purchase our common stock granted to named executive officers in 2001. No
stock appreciation rights were granted in 2001. Option totals are as of the
grant date.
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees Price Expiration Present
Name Granted(#)(1) Fiscal Year ($/Sh) Date Value $(2)
---- --------------- -------------- ------------ ---------------- -------------
Leonard Tow ................ 445,000(3) 11.4% (3) (3) $2,426,500
Rudy J. Graf ............... 95,000(4) 2.4% 13.71 5/16/11 576,650
Scott N. Schneider ......... 95,000(4) 2.4% 13.71 5/16/11 576,650
John H. Casey, III ......... 50,000(4) 1.3% 13.71 5/16/11 303,500
Robert Braden .............. 100,000(5) 2.6% (5) (5) 605,500
----------
(1) With the exception of the January 1, 2001 grant of 250,000 options to
Leonard Tow, which become exercisable at the rate of 331/3% per year, all
options become exercisable at the rate of 25% per year, on the
anniversary of their date of grant in 2002, 2003, 2004, and 2005.
(2) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The actual value, if any, an executive
may realize will depend on the excess, if any, of the stock price over
the exercise price on the date the option is exercised. There is no
assurance the value realized, if any, by an executive will be at or near
the value estimated by the Black-Scholes model. The estimated values
under that model are based on arbitrary assumptions as to variables such
as interest rates, stock price volatility, and future dividend yield. The
pricing model assumes a dividend yield of 0.00%, a riskless rate of
return of 4.865% for the options granted on January 1, 2001, 4.960% for
the options granted on January 10, 2001, 5.14% for the options granted on
May 17, 2001, and 4.915% for the options granted on June 18, 2001, a
six-year term to exercise, and volatility of 0.35942.
(3) Represents two separate grants on January 1 and June 18, 2001,
respectively, of options exercisable for 250,000 and 195,000 shares,
respectively, with the exercise prices of $12.91 and $12.37, expiring on
December 31, 2010, and June 17, 2011, respectively. On June 18, 2001, Dr.
Tow was granted phantom stock units for 100,000 shares of our common
stock. These phantom stock units will settle the day after Dr. Tow's
retirement and, upon settlement, Dr. Tow will receive 100,000 shares of
our common stock.
(4) These options were granted on May 17, 2001.
(5) Represents two separate grants on January 10, 2001, and May 17, 2001,
respectively, of options exercisable for 50,000 shares with the exercise
prices of $13.75 and $13.71, respectively, expiring on January 9, 2011,
and May 16, 2011, respectively.
AGGREGATED 2001 OPTION EXERCISES AND VALUE OF
OUTSTANDING OPTIONS AT DECEMBER 31, 2001
The following table sets forth certain information concerning options
exercised by the named executive officers during 2001 and the number and value
of options held by them at December 31, 2001. There were no outstanding stock
appreciation rights at December 31, 2001.
Shares
Acquired Number of Unexercised Value of Unexercised
On Options/SARs at In-the-money-Options/SARs at
Exercise(#) Fiscal Year End(#) Fiscal Year End($)
Common Value ------------------------------- ------------------------------
Name Stock Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ----------- ------------- --------------- ------------- --------------
Leonard Tow ................ 258,926 $632,297 2,323,954 2,561,666 $1,179,715 $343,581
Rudy J. Graf ............... 0 0 200,000 245,000 0 0
Scott N. Schneider ......... 0 0 199,999 245,000 0 0
John H. Casey, III ......... 0 0 54,167 108,332 0 0
Robert Braden .............. 0 0 58,334 166,666 0 0
16
All quantities and amounts are as of December 31, 2001, and reflect
adjustment for stock splits and stock dividends paid subsequent to the date of
grant. The fair market value of the common stock on December 31, 2001 was
$10.665 per share. Dollar amounts shown under all columns other than "Value
Realized" have not been, and may never be, realized. The underlying options
have not been, and may never be, exercised, and actual gains, if any, on
exercise will depend on the value of our stock on the date of exercise.
CITIZENS COMMUNICATIONS COMPANY PENSION PLAN
We have a noncontributory qualified retirement plan covering substantially
all employees that provides benefits based on formulas related to base salary
and years of service. Benefits shown are not subject to reduction for Social
Security payments. The following table illustrates the estimated annual plan
pension benefits (ten year certain for those who became participants prior to
1976) available to all covered employees (other than Kauai Electric Division
employees, acquired Frontier Communications employees and certain
telecommunications bargaining unit employees covered by separate benefit
formulas) upon a participant's retirement at age 65 with a spouse age 62 or
older. The table also assumes a preretirement death election of 100% joint and
survivorship benefits. The remuneration classifications are based on the
highest five-year average annual salary and the years of service represent
years of credited service. Under federal tax law, remuneration above a
specified annual limit may not be credited in the computation of retirement
benefits under qualified plans. For 2001, this limit was $170,000. For this
reason, remuneration above $170,000 has not been included in the table below.
Pension Plan Table
Remuneration (in thousands) Years of Service
--------------------------- ---------------------------------------------------
5 10 15 20 25 30
------ ------ ------ ------ ------ ------
$170 ................... $13 $26 $39 $52 $65 $78
The number of full years of credited service for individuals participating
in the plan and listed in the Summary Compensation Table are ten for Dr. Tow,
one for Mr. Graf, one for Mr. Schneider, and one for Mr. Casey.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Mr. Stanger, as Chairman,
and Messrs. Botwinik, Harfenist, and Tornberg. None of our executive officers
served as: (i) a member of the Compensation Committee (or other board committee
performing equivalent functions or, in the absence of any such committee, the
entire board of directors) of another entity, one of whose executive officers
served on our Compensation Committee; (ii) a director of another entity, one of
whose executive officers served on our Compensation Committee; or (iii) a
member of the Compensation Committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served as one
of our directors.
17
STOCK PRICE PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CITIZENS COMMUNICATIONS COMPANY, THE DOW JONES INDUSTRIALS INDEX,
THE S & P 500 INDEX, THE DOW JONES UTILITIES INDEX
AND THE S & P TELEPHONE INDEX
Cumulative Total Return
-----------------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
CITIZENS COMMUNICATIONS COMPANY 100.00 91.10 78.02 138.37 128.00 103.96
DOW JONES INDUSTRIAL AVERAGE 100.00 124.87 147.51 187.65 178.55 168.84
S & P 500 100.00 133.36 171.47 207.56 188.66 166.24
DOW JONES UTILITIES AVERAGE 100.00 123.00 146.22 137.41 207.17 152.75
S & P TELEPHONE 100.00 139.64 205.14 216.85 194.09 161.24
*$100 invested on 12/31/96 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
Copyright (Copyright) 2002, Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
The graph above compares our common stock performance with the performance
of the Dow Jones Industrials Index, the S&P 500 Index, the Dow Jones Utilities
Index and the S&P Telephone Index by valuing the annual changes in common stock
prices from December 31, 1996, through December 31, 2001, as required by
Securities and Exchange Commission rules. The chart above assumes, in each
case, an initial investment of $100 on December 31, 1996, and that all
quarterly dividends were reinvested at the average of the closing stock prices
at the beginning and end of the quarter.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, officers, and
persons holding more than 10% of a registered class of our equity securities to
file with the Securities and Exchange Commission and the New York Stock
Exchange initial reports of ownership, reports of changes in ownership, and
annual reports of ownership of common stock and other equity securities. Such
directors, officers, and 10% stockholders are also required to furnish us with
copies of all such filed reports.
18
Based solely upon a review of the copies of such reports furnished to us,
or representations that no reports were required, we believe that with the
exception of an amended Form 4 filed by Dr. Tow on July 17, 2001, a Form 4
filed by Steven Ward on March 9, 2001, and two Forms 4 filed by Norman Botwinik
on December 6, 2001, all of our directors, officers and 10% shareholders timely
filed all required reports under Section 16(a) in 2001. The amended Form 4
filed by Dr. Tow reflected five transactions. Each of the Form 4s filed by
Steven Ward and Norman Botwinik reflected one transaction.
AGREEMENTS WITH ELI
General
We own, through our wholly-owned subsidiary CU CapitalCorp., 100% of the
outstanding Class B Common Stock of Electric Lightwave, Inc. ("ELI") and
27,571,332 shares of Class A Common Stock of ELI. CU CapitalCorp. acquired the
shares of Class A Common Stock in the open market through brokerage
transactions in the ordinary course of business, solely as an investment and to
ensure that we maintain a sufficient economic interest in ELI to permit the
continued filing of consolidated tax returns. On June 29, 2001, ELI filed an
application for listing Class A Common Stock on the Nasdaq SmallCap Market
because it no longer met the criteria for inclusion on the Nasdaq National
Market System. As a part of that application process, on August 24, 2001, we
converted 25,283,688 shares of ELI's Class B Common Stock that we owned into
the same number of shares of Class A Common Stock. Leonard Tow, our Chairman of
the Board and Chief Executive Officer, is the Chairman of the Board of ELI.
Scott N. Schneider, our Executive Vice President and Vice Chairman of our board
of directors, is Executive Vice President and a director of ELI. Donald B.
Armour, our Vice President, Finance and Treasurer, is Vice President, Finance
and Treasurer of ELI. Robert Braden, our Vice President, Chief Executive
Officer of the Electric Lightwave Sector, and Executive Vice President of the
ILEC Division, is also Chief Executive Officer and a director of ELI. Jerry
Elliott, our Vice President and Chief Financial Officer, is also Vice President
and Chief Financial Officer of ELI. Robert J. Larson, our Vice President and
Chief Accounting Officer, is also Vice President and Chief Accounting Officer
of ELI. Daniel J. McCarthy, our Vice President and President and Chief
Operating Officer of the Electric Lightwave Sector, is also President and Chief
Operating Officer of ELI. L. Russell Mitten, our Vice President, General
Counsel and Secretary, is also the Secretary of ELI. Rudy J. Graf, our
President, Chief Operating Officer and Vice Chairman of our board of directors,
is also a director of ELI. Stanley Harfenist and Robert Stanger, our directors,
are also directors of ELI.
Our relationship with ELI is governed by agreements entered into with ELI
in connection with its initial public offering and certain other agreements,
the material terms of which are described below.
Administrative Services Agreement
The Administrative Services Agreement provides for us to render certain
financial management services, information services, legal and contract
services, human resources services, and corporate planning services to ELI.
Under the terms of the Administrative Services Agreement, all of the services
rendered by us are subject to the oversight, supervision, and approval of ELI,
acting through its board of directors.
The administrative costs payable by ELI to us pursuant to the
Administrative Services Agreement are not expected to exceed the fees that
would be paid if such services were to be provided by an independent third
party.
The Administrative Services Agreement will terminate on December 31, 2005,
unless earlier terminated by us or by ELI. The Administrative Services
Agreement will be renewed automatically for additional terms of two years
unless either party gives at least six months written notice before a scheduled
termination date. The Administrative Services Agreement can be terminated upon
a material breach and will be terminated upon a change of control of ELI.
Pursuant to the Administrative Services Agreement, $7,985,000 in fees were
payable to us for 2001 by ELI, excluding reimbursements for costs.
19
Tax Sharing Agreement
As ELI is included in our consolidated income tax group, ELI's federal
income tax liability is included in the consolidated federal income tax
liability of us and our subsidiaries. ELI is also included with some
subsidiaries in combined, consolidated, or unitary income tax groups for state
and local tax purposes. We and ELI are parties to a federal, state, and local
Tax Sharing Agreement. Pursuant to the Tax Sharing Agreement, we and ELI make
payments between us such that, with respect to any period, the amount of taxes
to be paid by ELI, subject to certain adjustments, will generally be determined
as though ELI were to file separate federal, state and local income or
franchise tax returns (including, except as provided below, any amounts
determined to be due as a result of a redetermination of our tax liability
arising from an audit or otherwise). ELI is responsible for any tax liability
due any foreign jurisdiction arising from its business activities. The Tax
Sharing Agreement will remain in effect so long as any taxing jurisdiction
requires the filing of a combined tax return by both ELI and us.
We have sole and exclusive responsibility for (i) preparing any tax
returns (including amended returns or claims for refund) of ELI; (ii)
representing ELI with respect to any tax audit or tax contest; (iii) engaging
outside counsel and accountants with respect to tax matters regarding ELI; and
(iv) performing such other acts and duties with respect to ELI's tax returns as
we determine is appropriate. The amounts that ELI will pay under the
Administrative Services Agreement will encompass reimbursement to us for all
direct and indirect costs and expenses incurred with respect to ELI's share of
the overall costs and expenses incurred by us with respect to tax related
services.
Each member of a consolidated group is jointly and severally liable for
the federal income tax liability of each other member of the consolidated
group. Accordingly, although the Tax Sharing Agreement allocates tax
liabilities between us and ELI, during the period in which ELI is included in
our consolidated group, ELI could be liable in the event that any federal tax
liability is incurred, but not discharged, by any other member of our
consolidated group.
Indemnification Agreement
We and ELI are parties to an Indemnification Agreement. The
Indemnification Agreement provides that ELI will indemnify us for any
liabilities incurred by us under any guarantees of ELI's obligations or
liabilities of ELI and that ELI will pay us for our direct costs, if any, of
maintaining such guarantees.
Registration Rights Agreement
We and ELI are parties to a Registration Rights Agreement. The
Registration Rights Agreement provides that, upon our request, ELI, at its
expense, will use its best efforts to effect the registration under the
applicable federal and state securities laws of any of the shares of common
stock (and any other securities issued in respect of or in exchange therefor)
held by us for sale in accordance with ELI's intended method of disposition
thereof and will take such other actions necessary to permit the sale thereof
in other jurisdictions, subject to certain specified limitations. We will also
have the right, at our expense, to include the shares of common stock held by
us in certain other registrations of common equity securities of ELI initiated
by ELI on its own behalf or on behalf of its other shareholders.
Customers and Service Agreement
We and ELI are parties to a Customers and Service Agreement. The Customers
and Service Agreement contains provisions prohibiting ELI from competing with
us for customers in our existing service areas and in certain new lower density
territories that we were or will be first to enter after ELI's initial public
offering. We have agreed that we will not compete with ELI in the service
territories where we provided services prior to ELI's initial public offering
and in certain new higher density territories where ELI was or will be first to
provide services after ELI's initial public offering. Neither we nor ELI may
solicit an existing wholesale customer of the other company for services that
such customer is currently receiving under contract from the other company. The
relevant provisions were intended to permit ELI to continue all activities that
it engaged in prior to its initial public offering and to expand into
20
related markets. The Customers and Service Agreement will remain in effect
until we cease to own a majority of the voting interest of the capital stock of
ELI or our designees cease to constitute a majority of ELI's directors.
Citizens' Guarantees of ELI's Obligations
Lease. In June 1995, ELI entered into agreements to lease certain
equipment to be constructed for ELI. The lessor has agreed to commit up to a
maximum of $110,000,000 of the cost of purchasing and installing the equipment.
In January 2002, ELI exercised its option to purchase the facilities at the end
of the lease term. Payments under the lease depend on current interest rates.
Assuming continuation of current interest rates, payments would approximate
$872,000 from January 1, 2002 through April 30, 2002 and a final payment of
approximately $110,000,000 in April 2002. We have guaranteed all obligations of
ELI under the Lease and ELI is required to pay us a guarantee fee of 3.25% per
year of the amount of the lessor's investment in the leased assets. At December
31, 2001, $110,000,000 was outstanding on the lease.
Credit Facility. On November 2, 1997, ELI entered into a five-year, $400
million revolving credit facility with Citibank, as agent for a group of
lending banks. We have agreed to guarantee all debt obligations under the
credit facility. The credit facility requires that we maintain a minimum net
worth of at least $1 billion and continue to own at least 51% of the
outstanding common stock of ELI. ELI has agreed to pay us a guarantee fee at a
rate of 3.25% per year based on the average balance outstanding. At December
31, 2001, ELI had outstanding loans payable to Citibank in the amount of $400
million.
ELI Senior Unsecured Notes. In April 1999, ELI completed an offering of
$325 million of five-year senior unsecured notes. The notes have an annual
interest rate of 6.05% and will mature on May 15, 2004. We have guaranteed the
payment of principal, any premium, and interest on the notes when due. ELI has
agreed to pay us a guarantee fee at a rate of 4.0% per year based on the
average outstanding balance. At December 31, 2001, ELI had $325 million of
these notes outstanding.
For 2001, the amount payable to us by ELI was $29.6 million in fees for
guarantees to ELI under the lease, the revolving credit facility and the senior
unsecured notes.
License Agreement Guaranty. ELI has entered into a license agreement with
the Bonneville Power Administration whereby ELI will obtain a license to use
fiber optic cable on Bonneville's transmission system. On May 15, 2000, we
entered into a guaranty agreement with Bonneville under which we guarantee the
payment of the license fee, annual maintenance fee and any liquidated damages
provided for in the license agreement.
Refinancing of Obligations
We and ELI have agreed that, if we intend to reduce our economic interest
in ELI to less than 51%, we will be entitled to request ELI to refinance its
obligations under the lease and the credit facility and ELI will be obligated
to use its best efforts to do so. This refinancing would occur when we reduce
our economic interest in ELI to less than 51%.
Telecommunications Services
Citizens Communications has transactions in the normal course of business
with ELI. Our communications sector is an Incumbent Local Exchange Carrier
("ILEC") in certain markets in which ELI provides services. In order to provide
services in those markets, ELI purchases access from our communications sector.
ELI is charged the full-tariffed rate for those services, which was $1,193,000
in 2001, representing usage-based charges for the services provided. Our
communications sector purchases certain services from ELI at prevailing market
rates. In 2001, ELI recognized revenue in the amount of $2,924,000 for these
related party transactions.
Network Capacity Lease
In 1996, ELI entered into an agreement to lease rights to fiber optic
lines on ELI's network to us over 10 years for a monthly fee of $30,000.
21
In 1999, ELI entered into an agreement to lease certain capacity on its
network to us over 20 years. Performance under this agreement began when
services were activated during 2000. We paid ELI $6.5 million under this
agreement in 1999.
Intercompany Agreement
We, along with ELI, desire to provide compensation incentives for certain
employees of ELI for high levels of performance and productivity. Therefore, we
entered into an Intercompany Agreement dated as of September 11, 2000 with ELI
whereby we granted to certain employees of ELI an aggregate of 205,000 shares
of our common stock in the form of restricted stock awards pursuant to the
Citizens Communications Company Equity Incentive Plan. In consideration for our
restricted stock awards, ELI has agreed to grant us 263,425 shares of
restricted ELI Class B Common Stock. The 263,425 shares of restricted ELI Class
B Common Stock had on September 11, 2000, a fair market value equivalent to the
fair market value of our restricted stock awards. The restrictions on a
proportionate number of ELI Class B Common Stock will lapse with the lapse of
restrictions on our stock. Our Compensation Committee and the Compensation
Committee of ELI have approved the Intercompany Agreement.
Intercompany Revolving Credit Agreement
On October 30, 2000, we entered into a revolving credit facility with ELI
for $450 million with an interest rate of 15% and a final maturity of October
30, 2005. Funds of $350 million for general corporate purposes are available to
be drawn by ELI until December 31, 2002. The remaining balance may be drawn by
ELI to pay interest expense due under the facility. At December 31, 2001, the
outstanding balance under this facility was $194.5 million.
Other
In the future, additional transactions may occur and agreements may be
reached between us and ELI in a number of areas relating to our past and
ongoing relationships, including potential acquisitions of businesses or
properties or other corporate opportunities, potential competitive business
activities, payment of dividends, incurrence of indebtedness, guarantees, tax
matters, financial commitments, marketing functions, indemnity arrangements,
registration rights, administrative and services arrangements, and issuances or
sales of capital stock of ELI.
CERTAIN OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
Fleischman and Walsh, LLP, of which Aaron Fleischman (a director) is
Senior Partner, performed legal services for us for which it was paid
approximately $3.3 million in 2001. We propose to retain Fleischman and Walsh
during the current year.
Mr. Livingston E. Ross, our Vice President, Reporting and Audit, is
currently indebted to us in the amount of $157,500, which was the largest
amount outstanding in 2001. The rate of interest of such indebtedness is 5%.
Mr. Kenneth L. Cohen, our Vice President and President and Chief Operating
Officer of the Public Services Sector, is currently indebted to us in the
amount of $113,597. The largest amount outstanding in 2001 was $170,000. The
rate of interest of such indebtedness is 5%.
Mr. Daniel J. McCarthy, our Vice President and President and Chief
Operating Officer of the Electric Lightwave Sector, is currently indebted to us
in the amount of $56,139. The largest amount outstanding in 2001 was $150,000.
The rate of interest of such indebtedness is 5%.
22
INDEPENDENT PUBLIC ACCOUNTANTS
Audit and Other Fees
The aggregate fees paid to KPMG LLP, our independent public accountants,
for professional services rendered for the audit of our annual consolidated
financial statements for 2001 and for the reviews of our quarterly financial
statements included in our Forms 10-Q for 2001 were approximately $2,750,000
(including fees for the stand-alone audit of the annual financial statements
and reviews of the quarterly financial statements of Electric Lightwave, Inc.,
the company's publicly traded consolidated subsidiary and fees in connection
with the Frontier companies). All other fees paid to KPMG LLP were
approximately $1,206,000, which fees included audit-related services of
$1,043,000 and non-audit-related services of $163,000. Audit-related services
generally included fees for review of registration statements, issuances of
consents and letters to underwriters, subsidiary and regulatory audits,
business acquisitions, accounting consultations, and audits of employee benefit
plans. Non-audit-related services included fees for tax services.
KPMG LLP has served as our independent public accountants for many years.
Approval
Our appointment of KPMG LLP to be our independent public accountants for
2002 will be presented for approval at the annual meeting.
Our board of directors recommends a vote "FOR" the approval of our
appointment of KPMG LLP as our independent public accountants for 2002.
General
Our Audit Committee has considered whether the provision of KPMG LLP's
services other than for the annual audit and quarterly reviews is compatible
with KPMG LLP's independence and has concluded that it is.
One or more representatives of KPMG LLP will be present at our annual
meeting of stockholders. The representatives will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
OTHER MATTERS
Our management does not know of matters other than the foregoing that will
be presented for consideration at the meeting
STOCKHOLDER PROPOSALS
For proposals, if any, to be considered for inclusion in the proxy
materials for the 2003 annual meeting, they must be received by November 22,
2002. Under our bylaws, if any stockholder intends to propose at the annual
meeting a nominee for director or the adoption or approval of any other matter
by the stockholders, other than matters included in the proxy statement in
accordance with the foregoing sentence, the proponent must give written notice
to us not earlier than January 1, 2003, nor later than February 15, 2003.
The entire cost of soliciting management proxies will be borne by us.
Proxies will be solicited by mail and may be solicited personally by our
directors, officers or regular employees, who will not be compensated for these
services. Morrow & Co. has been retained to assist in soliciting proxies at a
fee of $6,000, plus distribution costs and other expenses.
By Order of the Board of Directors
/s/ L. Russell Mitten
----------------------------------
L. Russell Mitten
Secretary
23
Appendix A
CITIZENS COMMUNICATIONS COMPANY
Audit Committee Charter
Status
The Audit Committee is a committee of the Board of Directors.
Membership
The Committee shall consist of three or more directors all of whom in the
judgment of the Board of Directors shall be independent. Each member shall have
the ability to read and understand the Company's basic financial statements or
shall at the time of appointment undertake training for that purpose. At least
one member of the Committee shall, in the judgment of the Board of Directors,
have accounting or financial management expertise. Independence and financial
ability is to be determined by the Board of Directors in its business judgment.
Powers and Responsibilities
1. Receive from the outside auditors on a periodic basis, as required by
Independence Standards, a written report delineating all relationships
between the auditors and the Company and discuss with the outside auditors
any disclosed relationships or services that may impact their objectivity
and independence, and recommend that the Board of Directors take necessary
action in response to this report to satisfy the Board of the outside
auditors' independence. The Audit Committee is to be the Company's
principal agent in monitoring this independence.
2. Review with members of the Company's outside auditing firm, the scope of the
prospective audit, the estimated fees therefor, the extent to which Company
resources were or can be used in the future, and such other matters
pertaining to such audit as the Committee may deem appropriate. Receive
copies of the annual comments from the outside auditors on accounting
procedures and systems of internal control and audit, and review with them
the significant matters and any suggestions they may have relating to the
systems of internal control and audit.
3. Review, at least annually, the then current and future programs of the
Company's internal audit department, including the procedure for assuring
implementation of accepted recommendations made by the auditors and the
department. Receive summaries of all formal audit reports issued by the
internal audit department; and review the significant matters contained in
such reports.
4. Make or cause to be made, from time to time, such other examinations or
reviews as the Committee may deem necessary with respect to the accounting
practices and systems of internal control of the Company and with respect
to current accounting trends and developments, and recommend such action
with respect thereto as may be deemed necessary.
5. Recommend annually the public auditing firm to be outside auditors for the
Company and recommend their compensation, for approval by the Board of
Directors. Among the Board of Directors, Audit Committee and the outside
auditors, the outside auditors are ultimately accountable to the Board of
Directors. The Board of Directors has the ultimate authority and
responsibility to select, evaluate and, when appropriate, replace the
outside auditors (or, if the outside auditors are approved by the
stockholders, to nominate the outside auditors to be proposed for
shareholder approval in any proxy statement).
6. Review with management and the outside auditors for the Company the annual
and quarterly financial statements of the Company and any material changes
in accounting principles or practices used in preparing the financial
statements incorporated in Form 10-K and Form 10-Q prior to the filing of
these forms with the Securities and Exchange Commission (SEC). Such review
is to include items brought to the Committee's attention as required by
Auditing Standards.
A-1
7. Review matters that have come to the attention of the Committee through
reports of management, legal counsel and others, that relate to the status
of compliance and anticipated future compliance with laws, regulations,
internal controls, and that may be expected to be material to the Company's
financial statements.
8. Recommend to the Board the retention of persons with professional or expert
competence, or with special knowledge or experience.
Meetings
The Committee shall meet at least four times each year and at such other
times as it deems necessary to fulfill its responsibilities.
Reports and Other Requirements
The Committee shall prepare all reports concerning this charter and the
activities of the Committee required by regulations of the SEC or the New York
Stock Exchange ("NYSE"). The Company acknowledges that the Company and the
Committee operate under regulations promulgated by the SEC and the NYSE.
Amendment
This Charter may be amended only by the affirmative vote of the Board of
Directors.
A-2
Citizens Communications Company
3 High Ridge Park
Stamford, CT 06905
2002 Annual Meeting of Stockholders
10:00 a.m., Eastern Time, May 16, 2002
Prudential Center for Learning and Innovation
Norwalk CT
ADVANCE REGISTRATION
Attendance at the Annual Meeting is limited to Citizens' stockholders, or their
authorized representatives, and our guests and employees. If you plan to attend
or send a representative to the Annual Meeting, please notify us marking the
Advance Registration box on your proxy.
You may view this proxy statement and our Annual Report at the following
Internet web site: www.onlineproxy.com/citizens/index.asp. An advance
registration form may be submitted (for registered stockholders only)* by
selecting the proxy statement, the advance registration form and then clicking
on the submit button once you have completed the form.
C/O PROXY SERVICES
P.O. BOX 9142
FARMINGDALE, NY 11735
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting instructions
and for electronic delivery of information up until 11:59
P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you
access the web site. You will be prompted to enter
your 12-digit Control Number, which is located below,
to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your proxy
card in hand when you call. You will be prompted to
enter your 12-digit Control Number, which is located
below, and then follow the simple instructions the Vote
Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the
postage-paid envelope we have provided or return it to
Citizens Communications Company, c/o ADP,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: CITCOM KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
--------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
--------------------------------------------------------------------------------
CITIZENS COMMUNICATIONS COMPANY
Proposal 1--Election of Directors
---------------------------------
Nominees:
--------
01) Norman I. Botwinik 07) John L. Schroeder For Withhold For All To withhold authority to vote for
02) Aaron I. Fleischman 08) Robert A. Stanger All All Except individual(s), mark "For All Except" and
03) Rudy J. Graf 09) Edwin Tornberg write the number(s) of the nominee(s) on
04) Stanley Harfenist 10) Claire L. Tow [ ] [ ] [ ] the line below.
05) Andrew N. Heine 11) Leonard Tow
06) Scott N. Schneider ----------------------------------------
Proposal 2 For Against Abstain
----------
Approve the appointment of KPMG LLP as our
independent public accountants for 2002. [ ] [ ] [ ]
This proxy, when properly executed, will be voted in the manner directed by
the signatory stockholder. If no direction is made, this proxy will be voted
in the same proportion as the voted shares in the Citizens 401(k) Savings
Plan.
If you plan to attend the meeting, please check the box to the right. [ ]
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. See reverse for additional
Proxy information.
------------------------------------------ ------- ------------------------------------------ -------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
--------------------------------------------------------------------------------
Information about Delivery of Shareholder Materials
"Householding"
In an effort to minimize costs and the amount of duplicate material a household
receives, we are sending one annual report to accounts sharing the same last
name and address. A copy of Citizens' 2001 Annual Report, if not included in
this package, has been sent to your address in another proxy package and should
have already arrived. If you have not yet received an annual report, would like
another copy, and/or wish to receive financial reports for each account in your
household in the future, please contact Citizens' shareholder services
department by phone at 1.800.248.8845, by mail at 3 High Ridge Park, Stamford,
Conn., 06905, or by email at Citizens@czn.com.
Vote Your Proxy Online
To vote your shares via the Internet, visit www.proxyvote.com. Enter the
12-digit control number located on the reverse of this proxy card to access your
information and complete your electronic voting instructions. There is no charge
to you for this service, but there may be costs associated with access to the
Internet, such as usage charges for your Internet service provider and/or
telephone companies.
Electronic Delivery of Future Proxy Material
After submitting your proxy vote online, you may elect to receive future proxy
material (annual report, proxy statement, etc.) from Citizens electronically.
Before exiting www.proxyvote.com, click the button for "Electronic Delivery" and
enter your email address. Then click the button indicating your consent to
receive future information in an electronic format. Next year, you will receive
an email providing information about where to locate the annual report and proxy
statement online and how to vote your shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
401(k) Savings Plan
Proxy Solicited on Behalf of Board of Directors
The undersigned hereby authorizes and directs Putnam Fiduciary Trust Company, as
the Trustee under the Citizens 401(k) Savings Plan, to vote all shares of stock
allocable to the undersigned under the provisions of the Plan and appoints
Andrew N. Heine, John L. Schroeder, and Robert D. Siff, or any of them, with
full power of substitution, proxies to vote at the Annual Meeting of
Stockholders of Citizens Communications Company (the "Company") to be held on
Thursday, May 16, 2002, at 10:00 a.m., Eastern Time, and at any adjournments
thereof. Said Trustee is authorized and directed to execute and deliver a
written proxy appointing such individuals to act as proxies as directed.
--------------------------------------------------------------------------------
C/O PROXY SERVICES
P.O. BOX 9142
FARMINGDALE, NY 11735
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting instructions
and for electronic delivery of information up until 11:59
P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you
access the web site. You will be prompted to enter
your 12-digit Control Number, which is located below,
to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your proxy
card in hand when you call. You will be prompted to
enter your 12-digit Control Number, which is located
below, and then follow the simple instructions the Vote
Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the
postage-paid envelope we have provided or return it to
Citizens Communications Company, c/o ADP,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: CITCO3 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
--------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
--------------------------------------------------------------------------------
CITIZENS COMMUNICATIONS COMPANY
Proposal 1--Election of Directors
---------------------------------
Nominees:
--------
01) Norman I. Botwinik 07) John L. Schroeder For Withhold For All To withhold authority to vote for
02) Aaron I. Fleischman 08) Robert A. Stanger All All Except individual(s), mark "For All Except" and
03) Rudy J. Graf 09) Edwin Tornberg write the number(s) of the nominee(s) on
04) Stanley Harfenist 10) Claire L. Tow [ ] [ ] [ ] the line below.
05) Andrew N. Heine 11) Leonard Tow
06) Scott N. Schneider ----------------------------------------
Proposal 2 For Against Abstain
----------
Approve the appointment of KPMG LLP as our
independent public accountants for 2002. [ ] [ ] [ ]
This proxy, when properly executed, will be voted in the manner directed by
the signatory stockholder. If no direction is made, this proxy will be voted
"FOR" Proposal 1 and "FOR" Proposal 2.
If you plan to attend the meeting, please check the box to the right. [ ]
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. See reverse for additional
Proxy information.
------------------------------------------ ------- ------------------------------------------ -------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
--------------------------------------------------------------------------------
Information about Delivery of Shareholder Materials
"Householding"
In an effort to minimize costs and the amount of duplicate material a household
receives, we are sending one annual report to accounts sharing the same last
name and address. A copy of Citizens' 2001 Annual Report, if not included in
this package, has been sent to your address in another proxy package and should
have already arrived. If you have not yet received an annual report, would like
another copy, and/or wish to receive financial reports for each account in your
household in the future, please contact Citizens' shareholder services
department by phone at 1.800.248.8845, by mail at 3 High Ridge Park, Stamford,
Conn., 06905, or by email at Citizens@czn.com.
Vote Your Proxy Online
To vote your shares via the Internet, visit www.proxyvote.com. Enter the
12-digit control number located on the reverse of this proxy card to access your
information and complete your electronic voting instructions. There is no charge
to you for this service, but there may be costs associated with access to the
Internet, such as usage charges for your Internet service provider and/or
telephone companies.
Electronic Delivery of Future Proxy Material
After submitting your proxy vote online, you may elect to receive future proxy
material (annual report, proxy statement, etc.) from Citizens electronically.
Before exiting www.proxyvote.com, click the button for "Electronic Delivery" and
enter your email address. Then click the button indicating your consent to
receive future information in an electronic format. Next year, you will receive
an email providing information about where to locate the annual report and proxy
statement online and how to vote your shares.
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CITIZENS COMMUNICATIONS COMPANY
Proxy Solicited on Behalf of Board of Directors
The undersigned hereby appoints Andrew N. Heine, John L. Schroeder, and Robert
D. Siff, or any of them with full power of substitution, proxies to vote at the
Annual Meeting of Stockholders of Citizens Communications Company
(the "Company") to be held on Thursday, May 16, 2002, at 10:00 a.m., Eastern
Time, and at any adjournments thereof, hereby revoking any proxies heretofore
given, to vote all shares of common stock of the Company held or owned by the
undersigned as directed, and in their discretion upon such other matters as may
come before the meeting.
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