Exhibit
10.3


 


FAIRPOINT
COMMUNICATIONS, INC.


PERFORMANCE UNIT AWARD AGREEMENT


FOR PERFORMANCE PERIOD


BEGINNING             


 


THIS
PERFORMANCE UNIT AWARD AGREEMENT (this “Agreement”), made and entered
into this          day of                             ,
            , by
and between FairPoint Communications, Inc. (the “Company”) and                                 
(the “Participant”).


 


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 Participant Performance Units under the Company’s 2008
Long Term Incentive Plan (the “Plan”) for the Performance Period
beginning                   
and ending                                       
(the “Performance Period”); and


 


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


 


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


 


1.             The
Participant acknowledges that the Performance Unit award is governed by this
Agreement and the terms of the Plan.  The
terms of the Plan are incorporated into this Agreement in their entirety and
made a part hereof by reference.  Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
set forth in the Plan.  In the event of
any conflict between the terms of the Plan and this Agreement, the terms of the
Plan shall govern and control.


 


2.             The Participant
is awarded a target award of
                          
Performance Units.  The actual number of
Performance Units earned by the Participant for the Performance Period shall be
determined in accordance with the Plan and this Agreement.


 


3.             The number of Performance
Units earned by the Participant 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 Participant shall be determined by the Committee following
the expiration of the Performance Period.


 


4.             Except
as provided in Paragraph 5 below, one Share of the Company’s Common Stock will
be distributed to the Participant for each whole Performance Unit earned by the
Participant.  Dividends on the Shares
underlying the Performance Units will not accrue or be paid during the Performance
Period.


 


5.             Any Shares to be distributed in respect of the Performance Units earned
by the Participant will be delivered to the Participant as soon as practicable
after                                   ,
but no later than                         
(the date Shares are delivered, the “Payment Date”).  If the Participant’s employment with the
Company terminates prior to the 


 

















 


Payment Date for any reason other than the Participant’s
death, Disability or Normal Retirement, the Participant shall forfeit the
Performance Units and any Shares distributable in respect of such Performance
Units.  If a Participant’s employment
with the Company terminates during the Performance Period due to the
Participant’s death, Disability or Normal Retirement, the Performance Units
awarded to the Participant shall remain outstanding and earned by the
Participant as set forth in Exhibit A attached hereto; provided,
however, the number of Shares to be distributed to the Participant in
respect of the Performance Units earned by the Participant 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 Participant was employed, and the denominator of
which is the total number of calendar months in the Performance Period.


 


6.             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
Participant hereunder shall be distributed to the Participant 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 the Participant upon a Change in Control will be delivered to the
Participant immediately prior to the Change in Control.


 


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


 


8.             Participants
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
Participant in respect of the Performance Units earned by the Participant.  To be effective, the Participant 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 Participant shall not entitle the Participant to any
rights as a shareholder of the Company.


 


10.           The Participant’s
award under this Agreement and the Plan may not be assigned or alienated.  Subject to any limitations under the Plan 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 the Plan, nor
this Agreement, nor any action taken under the Plan or this Agreement shall be
construed as giving to the Participant 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 Participant
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.


 


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


 


13.           This Agreement
and the Plan constitute the entire understanding of the parties with respect to
the award of Performance Units to the Participant for the Performance
Period.  Except with respect to
modifications of the Plan as provided therein, this Agreement can be amended
only in writing executed by the Participant and a duly authorized officer of
the Company.


 


14.           This Agreement shall be governed by the laws of the State of Delaware to
the extent not preempted by applicable federal law.


 


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:

  	
   

  
	
   

  	
   

  	
  Eugene
  B. Johnson

  
	
   

  	
   

  	
  Chairman
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



 


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EXHIBIT A


 


PERFORMANCE CRITERIA


 


FOR THE


 


PERFORMANCE PERIOD BEGINNING
                            
AND ENDING            


 


Definitions:


 


“Adjusted EBITDA” means the Company’s consolidated net income (including
distributions from investments) plus (a) the following to the extent
deducted from consolidated net income: provision for income taxes, consolidated
interest expense, depreciation, amortization, losses on sales of assets and
other extraordinary losses, certain one-time charges recorded as operating
expenses related to the transactions contemplated by the merger agreement,
non-cash retirement expenses, expenses incurred under the Transition Services
Agreement and certain other non-cash charges to the extent such charges will
not require cash payment in the future, and minus (b) gains on sales of
assets and other extraordinary gains and all non-cash items increasing
consolidated net income.


 


“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 cumulative, aggregate Adjusted EBITDA for the Performance Period
of $                    .


 


“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.


 


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 30% 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 70% 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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