FairPoint Communications 2004 Annual Report Download - page 113

Stock option activity under the 1995 Plan is summarized as follows:






Outstanding at January 1: 112,265 112,265 112,265
Granted — — —
Exercised — — —
Forfeited — — —
Outstanding at December 31 112,265 112,265 112,265
Exercisable at December 31, 2004 112,265
Stock options available to grant at December 31, 2004 53,813
(c) MJD Communications, Inc. Stock Incentive Plan
In August 1998, the Company adopted FairPoint Communications, Inc. (formerly MJD Communications, Inc.) Stock
Incentive Plan (the "1998 Plan"). The 1998 Plan provides for grants of up to 1,317,425 nonqualified stock options to
executives and members of management, at the discretion of the compensation committee of the board of directors. Options
vest in 25% increments on the second, third, fourth, and fifth anniversaries of an individual grant. In the event of a change in
control, outstanding options will vest immediately.
Pursuant to the terms of the grant, options granted in 1998 and 1999 become exercisable only in the event that the
Company is sold, an initial public offering of the Company's common stock results in the principal shareholders holding less
than 10% of their original ownership, or other changes in control, as defined, occur. The number of options that may become
ultimately exercisable also depends upon the extent to which the price per share obtained in the sale of the Company would
exceed a minimum selling price of $22.59 per share. All options have a term of 10 years from date of grant. For those options
granted in 1998 and 1999, the Company will record compensation expense for the excess of the estimated market value of its
common stock over the exercise price of the options when and if a sale of the Company, at the prices necessary to result in
exercisable options under the grant, becomes imminent or likely. The initial public offering of the Company's common stock
that occurred on February 8, 2005, as described note 2, did not trigger exercisability of these options.
Pursuant to the terms of the grant, options granted in 2000 become exercisable immediately upon vesting. The per share
weighted average fair value of stock options granted under the 1998 Plan during 2000 was $58.95 on the date of grant using
the Black-Scholes option-pricing model. Input variables used in the model included no expected dividend yields, a risk-free
interest rate of 6.52%, and an estimated option life of 10 years. Because the Company was nonpublic on the date of the grant,
no assumption as to the volatility of the stock price was made.
109