FairPoint Communications 2006 Annual Report Download - page 90
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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 did not trigger exercisability of these options. Upon termination of a plan
participant’s employment with the Company, the Company may repurchase all or any portion of the vested options for a cash payment equal to the excess of
the fair market value of the shares over the option exercise price. The Company has not previously exercised this right and does not currently intend to exercise
this right in the future.
These stock options were granted by the Company prior to becoming a public company and therefore the Company is accounting for these options under
the prospective method under SFAS 123(R). The per share weighted average fair value of stock options granted under the 1998 Plan 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 yield, a risk-free interest rate of
6.52%, and an estimated option life of 10 years. Because the Company was not public on the date of the grant, no assumption as to the volatility of the stock
price was made. As of December 31, 2006 and December 31, 2005, options to purchase 832,888 shares of common stock were outstanding with a weighted
average exercise price of $10.80.
Stock option activity under the 1998 Plan is summarized as follows:
Outstanding at December 31, 2003 and 2004 836,356 $10.87
Granted — —
Exercised (3,468)17.31
Forfeited — —
Outstanding at December 31, 2005 832,888 10.80
Granted — —
Exercised — —
Forfeited — —
Outstanding at December 31, 2006 832,888 $10.80
Stock options available to grant at December 31, 2006 —
$ 9.02 756,332 1.6 7,510 —
14.46 29,183 2.5 131 —
36.94 47,373 5.0 — —
832,888 7,641 —
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