Exhibit 10.32

 

FAIRPOINT COMMUNICATIONS, INC.

PERFORMANCE UNIT AWARD AGREEMENT

FOR PERFORMANCE PERIOD

BEGINNING JULY 1, 2009 AND ENDING DECEMBER 31, 2011

 

THIS PERFORMANCE UNIT AWARD AGREEMENT (this “Agreement”) is made and entered
into this 1st day of July, 2009, by and between FairPoint Communications, Inc.
(the “Company”) and David L. Hauser (the “Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the Compensation Committee of the Board of Directors of the Company
(the “Committee”) desires to award the Executive Performance Units for the
Performance Period beginning July 1, 2009 and ending December 31, 2011 (the
“Performance Period”); and

 

WHEREAS, the Company and the Executive desire to enter into a written agreement
that sets forth the terms and provisions of the Executive’s Performance Unit
award.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the Company and the Executive hereby agree as follows:

 

1.                                       The Executive is awarded a target award
of 1,396,825 Performance Units.  The actual number of Performance Units earned
by the Executive for the Performance Period shall be determined in accordance
with this Agreement.

 

2.                                       The number of Performance Units earned
by the Executive shall be based on the levels of performance achieved during the
Performance Period as set forth on Exhibit A attached hereto.  The performance
levels achieved for the Performance Period (Threshold, Target or Maximum) and
the number of Performance Units earned by the Executive shall be determined by
the Committee following the expiration of the Performance Period.

 

3.                                       Except as provided in Paragraph 4
below, one Share of the Company’s Common Stock will be distributed to the
Executive for each whole Performance Unit earned by the Executive.  Dividends on
the Shares underlying the Performance Units will not accrue or be paid during
the Performance Period.

 

4.                                       Any Shares to be distributed in respect
of the Performance Units earned by the Executive will be delivered to the
Executive as soon as practicable after December 31, 2011, but no later than
March 15, 2012 (the date Shares are delivered, the “Payment Date”).  If the
Executive’s employment with the Company terminates prior to the Payment Date for
any reason other than the Executive’s death, Disability, early retirement with
the consent of the Committee or Normal Retirement, the Executive shall forfeit
the Performance Units and any Shares distributable in respect of such
Performance Units.  If the Executive’s employment with the Company terminates
during the Performance Period due to the Executive’s death, Disability, early
retirement with the consent of the Committee or Normal Retirement, the
Performance Units awarded to the Executive shall remain outstanding and shall be
earned by the Executive as set forth in Exhibit A attached hereto; provided,
however, the number of Shares to be distributed to the Executive in respect of
the Performance Units earned by the Executive will be determined by multiplying
such number of earned Performance Units by a fraction, the numerator of which is
the number of completed calendar months during the Performance Period that the
Executive was employed, and the denominator of which is thirty (30).

 

5.                                       In the event a Change in Control occurs
before the end of the Performance Period, Shares for one hundred percent (100%)
of the Performance Units awarded to the Executive hereunder shall be distributed
to the Executive at the Target Performance (as defined in Exhibit A) level
without any adjustment for the levels of performance actually achieved during
the Performance Period prior to or after the Change in Control.  Any Shares to
be distributed in respect of the Performance Units earned by

 

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the Executive upon a Change in Control will be delivered to the Executive
immediately prior to the Change in Control.

 

6.                                       Unless otherwise elected by the
Executive in accordance with procedures adopted by the Committee, the Company
shall deduct from any Shares otherwise distributable to the Executive that
number of Shares having a value equal to the amount of any taxes required by law
to be withheld from the award made under this Agreement.

 

7.                                       In the event of any Adjustment Event,
the Performance Units shall be adjusted in the same manner in which outstanding
performance units awarded under the FairPoint Communications, Inc. 2008 Long
Term Incentive Plan are adjusted pursuant to Section 3.4 of such Plan.

 

8.                                       The Executive may elect, by entering
into a Deferral Agreement with the Company, to defer delivery of all (or any
portion) of the Shares otherwise payable to the Executive in respect of the
Performance Units earned by the Executive.  To be effective, the Executive must
complete and return the Deferral Agreement to the Company in accordance with
procedures established by the Committee.

 

9.                                       The Performance Units awarded hereunder
to the Executive shall not entitle the Executive to any rights as a shareholder
of the Company.

 

10.                                 The Executive’s award under this Agreement
may not be assigned or alienated.  Subject to any limitations under this
Agreement on transferability, this Agreement will be binding upon and inure to
the benefit of the heirs, legatees, legal representatives, successors and
assigns of the parties hereto.  Neither this Agreement  nor any action taken
under this Agreement shall be construed as giving to the Executive the right to
be retained in the employ of the Company.

 

11.                                 Any distribution of Shares may be delayed
until the requirements of any applicable laws or regulations or any stock
exchange requirements are satisfied.  The Shares distributed to the Executive
shall be subject to such restrictions and conditions on disposition as counsel
for the Company shall determine to be desirable or necessary under applicable
law.

 

12.                                 The Executive may designate a beneficiary or
beneficiaries to receive all or part of the Shares to be distributed to the
Executive under this Award Agreement in the event of the Executive’s death.  If
no beneficiary is designated, such Shares shall be paid to the estate of the
Executive.

 

13.                                 This Agreement constitutes the entire
understanding of the parties with respect to the award of Performance Units to
the Executive for the Performance Period.  This Agreement can be amended only in
writing executed by the Executive and a duly authorized officer of the Company.

 

14.                                 All notices, requests, demands and other
communications which are required or permitted hereunder shall be sufficient if
given in writing and delivered personally or by reputable overnight courier or
registered or certified mail, postage prepaid, or by facsimile transmission
(with a copy simultaneously sent by registered or certified mail, postage
prepaid), as follows (or to such other address as shall be set forth in a notice
given in the same manner):

 

If to the Company, to:

 

FairPoint Communications, Inc.

521 East Morehead Street, Suite 500

Charlotte, North Carolina 28202

Facsimile:  (704) 344-1594

Attn:  Shirley J. Linn, Esq.

 

If to the Executive, to:

 

Most recent address on the Company’s

employment records for the Executive

 

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15.                                 Nothing in this Agreement, express or
implied, is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors or assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.

 

16.                                 This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, regardless of the
law that might be applied under principles of conflict of laws.

 

17.                                 The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.

 

18.                                 This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.

 

19.                                 Capitalized terms used herein without
definition shall have the meaning given in the FairPoint Communications, Inc.
2008 Long Term Incentive Plan.  However, the Performance Units shall not be
issued or granted under the FairPoint Communications, Inc. 2008 Long Term
Incentive Plan or otherwise be subject to the terms and conditions of such plan.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to
be executed in duplicate as of the date first above written.

 

 

 

FAIRPOINT COMMUNICATIONS, INC.

 

 

 

 

 

By:

/s/ Shirley J. Linn

 

Name:

Shirley J. Linn

 

Title:

Executive Vice President

 

 

 

EXECUTIVE

 

 

 

 

 

/s/ David L. Hauser

 

David L. Hauser

 

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EXHIBIT A

 

PERFORMANCE CRITERIA

FOR THE

PERFORMANCE PERIOD BEGINNING JULY 1, 2009 AND ENDING DECEMBER 31, 2011

 

Definitions:

 

“Adjusted EBITDA” means the Company’s net income (loss) before interest expense,
provision (benefit) for income taxes, depreciation and amortization, gain or
loss on derivative instruments and gain on early retirement of debt, and also
excludes unusual or one-time non-recurring items (including costs related to the
use of Verizon’s systems and services under the Transition Services Agreement as
well as other costs related to the cutover to FairPoint’s newly developed
systems platform), severance costs, non-cash items related to pension and OPEB,
stock based compensation and other costs and adjustments related to the
acquisition of the Northern New England business which are permitted under the
Company’s credit facility.

 

“Maximum Performance” means:

 

(a)                                  for the Total Shareholder Return
performance measure, the Company’s Total Shareholder Return for the Performance
Period is greater than or equal to the Total Shareholder Return of 60% of the
companies comprising the Telecommunications Peer Group.

 

(b)                                 for the Adjusted EBITDA performance measure,
the Company’s Adjusted EBITDA for the Performance Period exceeds the Target
Adjusted EBITDA by 5% or more.

 

“Target Adjusted EBITDA” means the cumulative, aggregate Adjusted EBITDA for the
Performance Period set forth in the business plan for the Company for such
period approved by the Board of Directors.

 

“Target Performance” means:

 

(a)                                  for the Total Shareholder Return
performance measure, the Company’s Total Shareholder Return for the Performance
Period is greater than or equal to the Total Shareholder Return of 40% of the
companies comprising the Telecommunications Peer Group; and

 

(b)                                 for the Adjusted EBITDA performance measure,
the Company’s Adjusted EBITDA for the Performance Period equals the Target
Adjusted EBITDA.

 

“Telecommunications Peer Group” means all of the companies included in the Dow
Jones Telecommunication Index on both the first and last day of the Performance
Period.

 

“Threshold Performance” means:

 

(a)                                  for the Total Shareholder Return
performance measure, the Company’s Total Shareholder Return for the Performance
Period is greater than or equal to the Total Shareholder Return of 20% of the
companies comprising the Telecommunications Peer Group; and

 

(b)                                 for the Adjusted EBITDA performance measure,
the Company’s Adjusted EBITDA for the Performance Period equals at least 95% of
the Target Adjusted EBITDA.

 

“Total Shareholder Return” means, with respect to a company for the Performance
Period, the percentage determined by dividing the sum of Amount A plus Amount B
by Amount C where:

 

Amount A is (i) the average of the closing prices for one share of such
company’s common stock during the 30 days trading period immediately preceding
the expiration of the Performance Period minus (ii) the average of the closing
prices for one share of such stock during the 30 day trading period immediately
preceding the beginning of the Performance Period.

 

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Amount B is (i) the number of shares of such company’s common stock that would
have been purchased during the Performance Period if all dividends paid during
the Performance Period had been reinvested in such stock multiplied by (ii) the
average of the closing prices for one share of such company’s common stock
during the 30 days trading period immediately preceding the expiration of the
Performance Period.

 

Amount C is the average of the closing prices for one share of such company’s
common stock during the 30 days trading period immediately preceding the
beginning of the Performance Period.

 

Performance Measures:

 

Adjusted EBITDA.  The Company’s Adjusted EBITDA for the Performance Period will
determine the extent to which 50% of the target number of Performance Units are
earned.

 

Adjusted EBITDA for the
Performance Period

 

Percentage of Target Performance Units
Earned Based on Adjusted EBITDA

 

Below Threshold Performance

 

0

%

Threshold Performance

 

40

%

Target Performance

 

100

%

Maximum Performance or Above

 

200

%

 

The percentage of target Performance Units earned for Adjusted EBITDA between
Threshold Performance (40%) and Maximum Performance (200%) will be determined by
linear interpolation.

 

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Total Shareholder Return.  The Company’s Total Shareholder Return for the
Performance Period will determine the extent to which the remaining 50% of the
target number of Performance Units are earned.

 

Company’s Total Shareholder
Return

 

Percentage of Target Performance Units Earned
Based on Total Shareholder Return

 

Below Threshold Performance

 

0

%

Threshold Performance

 

40

%

Target Performance

 

100

%

Maximum Performance or Above

 

200

%

 

The percentage of target Performance Units earned for Total Shareholder Return
between Threshold Performance (40%) and Maximum Performance (200%) will be
determined by linear interpolation.

 

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