FairPoint Communications 2011 Annual Report Download - page 81

Table of Contents
on hand may not be less than $20.0 million (after taking into account the cash distributions to be made) and (iii) no proceeds of any borrowings under the
Revolving Facility may be used to fund such additional funding. The Litigation Trustee may prosecute the transferred claims and causes of action against
Verizon as described in and authorized by the Plan and the Litigation Trust Agreement, make timely and appropriate distributions to the beneficiaries of the
Litigation Trust and otherwise carry out the provisions of the Litigation Trust Agreement. During June 2011, the money in the Litigation Trust account was
distributed to the Litigation Trustee and is no longer held by the Company. On October 25, 2011, the Litigation Trust filed suit in the State of North Carolina
Business Court against Verizon Communications and certain of its subsidiaries.
Long Term Incentive Plan and Success Bonus Plan
As contemplated by the Plan, on the Effective Date, the Company was deemed to have adopted the Long Term Incentive Plan and the Success Bonus
Plan.
On the Effective Date, in accordance with the Plan, (i) certain of the Company’s employees and a consultant of the Company received (a) Success
Bonuses of approximately $1.8 million in the aggregate pursuant to the terms of the Success Bonus Plan and/or (b) New Common Stock awards, consisting
of restricted shares of New Common Stock and/or options to purchase shares of New Common Stock, pursuant to the terms of the Long Term Incentive Plan,
and (ii) members of the New Board received restricted shares of New Common Stock and options to purchase New Common Stock pursuant to the terms of
the Long Term Incentive Plan. The Success Bonuses were earned by the Company’s employees and were primarily based upon achieving certain performance
measures. 3,134,603 shares of New Common Stock were reserved for awards under the Long Term Incentive Plan, of which stock options and restricted
stock awards were granted to certain of the Company’s employees, a consultant of the Company, and members of the New Board on the Effective Date.
Specifically, on the Effective Date, (a) 460,294 shares of stock were distributed to management-level and other employees and a consultant of the Company,
with 120,000 restricted stock awards issued to the Company’s Chief Executive Officer, 34,000 restricted stock awards issued to the Company’s Chief
Financial Officer, 161,800 restricted stock awards issued to other members of the Company’s senior management and 66,794 unrestricted stock awards
issued to David L. Hauser, the Company’s former Chief Executive Officer, who was a consultant through the Effective Date, (b) 87,498 shares of restricted
stock were awarded to the members of the New Board and (c) stock options were granted with an exercise price of $24.29 for the purchase of (1) 859,000
shares of New Common Stock by management-level and other employees, with 125,000 options to purchase New Common Stock granted to the Company’s
Chief Executive Officer, 42,000 options to purchase New Common Stock granted to the Company’s Chief Financial Officer and 236,500 options to purchase
New Common Stock granted to other members of the Company’s senior management and (2) 132,012 shares of New Common Stock by members of the New
Board. Except for the unrestricted stock awarded to David L. Hauser, these stock option and restricted stock awards vested to the extent of 25% on the
Effective Date, and the remainder of these awards is expected 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 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). Mr. Hauser’s stock was 100% vested on the Effective Date.
Regulatory Settlements
In connection with the Chapter 11 Cases, the Company negotiated with representatives of the state regulatory authorities in each of Maine, New
Hampshire and Vermont with respect to (i) certain regulatory approvals relating to the Chapter 11 Cases and the Plan and (ii) certain modifications to the
requirements imposed by state regulatory authorities as a condition to approval of the Merger (each a “Merger Order,” and collectively, the “Merger Orders”).
The Company agreed to regulatory settlements with the representatives for each of Maine, New Hampshire and Vermont regarding modification of each state’s
Merger Order (each a “Regulatory Settlement,” and collectively, the “Regulatory Settlements”) which were then approved by the regulatory authorities in these
states.
Reporting Requirements
In connection with the Chapter 11 Cases, regardless of the Effective Date having occurred, the Company is required to continue to file quarterly
operating reports with the Bankruptcy Court until the Chapter 11 Cases have all closed. Such reports have been and will be prepared according to the
requirements of federal bankruptcy law and related rules. While these reports accurately provide then-current information required under the Bankruptcy
Code, they are nonetheless unaudited, are prepared in a format different from that used in our consolidated financial statements filed under the securities laws
and certain of this financial information may be prepared
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