FairPoint Communications 2009 Annual Report Download - page 155

Table of Contents
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Effective on January 1, 2006, the Company adopted the provisions of SFAS 123(R). At December 31, 2009, the Company had $2.1 million of
total unearned compensation cost related to non-vested share-based payment arrangements granted under the Company's five stock-based compensation
plans. That cost is expected to be recognized over a weighted average period of 1.7 years. Compensation cost for awards is recognized on a straight-line
basis over the requisite service period of each award. Any future share awards under any of these plans will be made using newly issued shares.
Amounts recognized in the financial statements with respect to these plans are as follows (in thousands):
(a) 1998 Stock Incentive Plan
In August 1998, the Company adopted the FairPoint Communications, Inc. (formerly MJD Communications, Inc.) Stock Incentive Plan (the 1998
Plan). The 1998 Plan provided 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. All options have a term of 10 years from date of grant. In the event of a change in control, outstanding options will vest immediately.
Effective in February 2005, the Company may no longer grant awards under the 1998 Plan.
Pursuant to the terms of the grant, options granted in 1998 and 1999 would have become exercisable only in the event that the Company was sold,
an initial public offering of the Company's common stock resulted in the principal shareholders holding less than 10% of their original ownership, or
other changes in control, as defined, were to have occurred. The number of options that would have become ultimately exercisable also depended 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. The initial public
offering did not trigger exercisability of these options.
In February 2007, all the options outstanding under the 1998 Plan were cancelled, except the 47,373 options with a $36.94 exercise price. This
cancellation was triggered by certain events noted in the 1998 Plan.
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). As of December 31, 2009, options to purchase 47,373 shares of common stock were outstanding
with a weighted average exercise price of $36.94. These remaining options outstanding are time-based vesting only and are fully vested and exercisable
as of December 31, 2009.
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Amounts charged against income, before income tax
benefit $ 2,052 $ 4,408 $ —
Amount of related income tax benefit recognized in
income (825) (1,758) —
Total net income impact $ 1,227 $ 2,650 $ —