FairPoint Communications 2010 Annual Report Download - page 120

Table of Contents
(i) the Inducement Options; (ii) the Inducement Restricted Stock; and (iii) performance units for two performance periods beginning on July 1, 2009 and
ending on December 31, 2010 and December 31, 2011, respectively (the “Inducement Performance Units”). The Inducement Options, totaling 1,600,000, were
granted on July 1, 2009, at an exercise price of $0.95 per share. The Inducement Options will vest and become exercisable in three equal annual installments
commencing on July 1, 2010, provided that Mr. Hauser remains employed by the Company through each such date. The Inducement Restricted Stock will be
awarded in the following three installments: (i) $500,000 on July 1, 2009; (ii) $1,750,000 on July 1, 2010; and (iii) $1,750,000 on July 1, 2011, and will be
valued based on the average closing prices of the Company’s common stock during the thirty calendar days immediately preceding the applicable award date.
Accordingly, on July 1, 2009, 523,810 shares of restricted stock were awarded to Mr. Hauser. The Inducement Restricted Stock will become fully vested on
July 1, 2012, provided that Mr. Hauser remains employed by the Company through such date. The Inducement Performance Units will be earned and paid in
shares of the Company’s common stock, based on the Company’s performance during the performance periods, with a target amount of 200% of
Mr. Hauser’s base salary and a maximum of 400% of Mr. Hauser’s base salary. The number of shares subject to the Inducement Options and the option
exercise price would have been adjusted, and additional shares of Inducement Restricted Stock would have been awarded, as necessary, to preserve the value
of the Inducement Options and the Inducement Restricted Stock awarded on July 1, 2009 if, prior to December 31, 2010, the Company had completed a
restructuring of its indebtedness.
The grant date fair value of the Inducement Options was determined using the Black-Scholes model. Key assumptions used for determining the fair value
of the Inducement Options were as follows: risk-free rate—3.54%; expected term—10 years; expected volatility—5.70%.
All of Mr. Hauser’s non-vested Inducement Options and Inducement Restricted Stock were cancelled upon his resignation, effective August 24, 2010. The
following table presents information regarding non-vested stock granted to Mr. Hauser under the FairPoint Communications Inc. 2009 CEO Compensation
Plan:
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Non-vested at December 31, 2008 — $ —
Granted 523,810 0.64
Vested — —
Forfeited — —
Non-vested at December 31, 2009 523,810 $ 0.64
Granted — —
Vested — —
Forfeited (523,810) 0.64
Non-vested at December 31, 2010 — $ —
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Prior to the Merger, the Verizon Northern New England business participated in the Verizon Communications Long Term Incentive Plan (the Verizon Plan).
The Verizon Plan permitted the granting of nonqualified stock options, incentive stock options, restricted stock, restricted stock units, performance shares,
performance share units and other awards.
Restricted Stock Units
The Verizon Plan provided for grants of restricted stock units (“RSUs”) that vested at the end of the third year of the grant. The RSUs are classified as
liability awards in the balance sheets for all periods prior to the Merger, because the RSUs were paid in cash upon vesting. The RSU award liability is
measured at its fair value at the end of each reporting period prior to the Merger and, therefore, fluctuated based on the price of Verizon’s stock.
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