FairPoint Communications 2011 Annual Report Download - page 117

Table of Contents
At December 31, 2011, the Company had $8.3 million of stock-based compensation cost related to non-vested awards that will be recognized over a
weighted average period of 2.1 years, all of which is related to awards granted under the Long Term Incentive Plan.
Stock-Based Compensation Plans of the Successor Company
The Long Term Incentive Plan provides for grants of up to 3,134,603 shares of New Common Stock awards, of which stock options and restricted
stock awards can be granted. Stock options generally have a term of 10 years from the date of grant. On the Effective Date, certain of the Company’s
employees, a consultant of the Company and members of the New Board were granted stock options and/or restricted stock awards. Except for the
unrestricted stock awarded to a consultant of the Company, the stock options and restricted stock awards granted on the Effective Date vested 25% on the
Effective Date, with the remainder of these awards to vest in three equal annual installments, commencing on the first anniversary of the Effective Date, with
accelerated vesting upon (x) a change in control, or (y) a termination of an award holder’s employment either without cause (but only to the extent the vesting
becomes at least 50%, plus an additional 25% for each full year of the award holder’s employment after the first full year after the Effective Date) or due to the
award holder’s death or disability (but, for stock options, only to the extent vesting would have otherwise occurred within one year following such termination
of employment). Stock of a consultant of the Company was 100% vested on the Effective Date. Subsequent to the Effective Date, through December 31, 2011,
the Company granted an additional 13,800 restricted stock and 26,600 stock options. These grants generally have the same terms as the grants that occurred
on the Effective Date except the restricted stock and stock options vest over three equal annual installments, with the first third vesting on the first anniversary
of the grant date. As of December 31, 2011, there are 1,642,924 shares still available to be granted under the Long Term Incentive Plan.
Stock option activity under the Long Term Incentive Plan is summarized as follows:

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

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Outstanding at January 24, 2011 (Predecessor Company) — —
Granted 991,012 $ 24.29
Exercised — —
Forfeited — —
Expired — —
Outstanding at January 24, 2011 (Successor Company) 991,012 $ 24.29
Granted 26,600 $ 24.29
Exercised — —
Forfeited (69,875) 24.29
Expired — —
Outstanding at December 31, 2011 947,737 $ 24.29
Vested at December 31, 2011 250,403 $ 24.29
During the 24 days ended January 24, 2011 and 341 days ended December 31, 2011, the weighted average grant date fair value of stock options granted
was $8.1 million and $0.1 million, respectively. For purposes of determining compensation expense, the grant date fair value per share of the stock options
under the Long Term Incentive Plan was estimated using the Black-Scholes option pricing model which requires the use of various assumptions including the
expected life of the option, expected dividend rate, expected volatility, and risk-free interest rate. Key assumptions used for determining the fair value of stock
options granted during 2011 were as follows: expected life – 5.75 and 10.00 years; expected dividend rate – 0.00%; expected volatility – 45.0%; and risk-free
interest rate – ranging from 2.29% to 3.17%. The 5.75-year expected life (estimated period of time outstanding) of stock options granted on the Effective Date
was estimated using the ‘Simplified Method’ which utilizes the midpoint between the vesting date and
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