Exhibit 10.34


 


FORM
OF FAIRPOINT COMMUNICATIONS, INC. 2005 STOCK INCENTIVE PLAN


ARTICLE I

PURPOSES


This FairPoint Communications, Inc. 2005 Stock
Incentive Plan is intended to foster and promote the long-term financial
success of the Company and the Subsidiaries and increase total shareholder
returns by (i) motivating superior performance by means of
performance-related incentives, (ii) encouraging and providing for
the acquisition of an ownership interest in the Company by its employees and
directors and (iii) enabling the Company and its Subsidiaries to
attract and retain the services of outstanding employees, consultants and
directors upon whose judgment, interest and special effort the successful
conduct of its operations is largely dependent. 
Capitalized terms are defined in Article XIII.


ARTICLE II

POWERS OF THE COMMITTEE


2.1           Power
to Grant Awards.  The Committee shall
determine the Participants to whom Awards shall be granted, the type or types
of Awards to be granted and the terms and conditions of any and all such
Awards.  The Committee may establish
different terms and conditions for different types of Awards, for different
Participants receiving the same type of Award and for the same Participant for
each Award such Participant may receive, whether or not granted at different
times.


2.2           Administration.  The Committee shall be responsible for the
administration of the Plan, including, without limitation, determining which
Participants receive Awards, what kind of Awards are made under the Plan and for
what number of shares, and the other terms and conditions of each such
Award.  The Committee shall have the
responsibility of construing and interpreting the Plan and of establishing,
amending and rescinding such rules and regulations as it may deem necessary or
desirable for the proper administration of the Plan.  Any decision or action taken or to be taken
by the Committee, arising out of or in connection with the construction,
administration, interpretation and effect of the Plan and of its rules and regulations,
shall, to the greatest extent permitted by applicable law, be within its
absolute discretion (except as otherwise specifically provided herein) and
shall be conclusive and binding upon the Company and its Subsidiaries, all
Participants and any person claiming under or through any Participant.  No term of this Plan relating to ISOs shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
section 422 of the Code.


2.3           Delegation
by the Committee.  The Committee may
delegate its authority under this Plan; provided that the Committee
shall in no event delegate its authority with respect to the compensation of
the Chief Executive Officer of the Company, the other four most highly
compensated executive officers (as determined under Section 162(m) of the Code
and regulations thereunder) of the Company and any other individual whose


 





















 


compensation
the Board or Committee reasonably believes may become subject to Section 162(m)
of the Code.


2.4           Participants
Based Outside the United States.  The
Committee, in order to conform with provisions of local laws and regulations in
foreign countries in which the Company or its Subsidiaries operate, shall have
sole discretion to (i) modify the terms and conditions of Awards granted
to Participants employed outside the United States, (ii) establish
subplans with modified exercise procedures and such other modifications as may
be necessary or advisable under the circumstances presented by local laws and
regulations, and (iii) take any action which it deems advisable to
obtain, comply with or otherwise reflect any necessary governmental regulatory
procedures, exemptions or approvals with respect to the Plan or any subplan established
hereunder.


ARTICLE III

STOCK SUBJECT TO PLAN


3.1           Number.  Subject to the provisions of this Article
III, the number of Shares subject to Awards under the Plan may not exceed
947,441 Shares.  The Shares to be
delivered under the Plan may consist, in whole or in part, of treasury stock or
authorized but unissued Common Stock not reserved for any other purpose.  The maximum number of Shares with respect to
which Options or Stock Appreciation Rights may be granted to any one
Participant in any calendar year shall be 500,000.


3.2           Canceled,
Terminated, or Forfeited Awards; Awards Settled for Cash.  Any Shares subject to any Award granted
hereunder that for any reason is canceled, terminated or otherwise settled
without the issuance of any Common Stock after the effective date of this Plan
shall be available for further Awards under this Plan.


3.3           Adjustment
in Capitalization.  In the event of
any Adjustment Event such that an adjustment is required to preserve, or to
prevent enlargement of, the benefits or potential benefits made available under
this Plan, the Committee shall, in such manner as the Committee shall deem
equitable, adjust any or all of (a) the number and kind of Shares which
thereafter may be awarded or optioned and sold under the Plan (including,
without limitation, adjusting the limits on the number and types of certain
Awards that may be made under the Plan), (b) the number and kinds of
Shares subject to outstanding Options and other Awards and (c) the
grant, exercise or conversion price with respect to any of the foregoing, provided
that any adjustment to the exercise or conversion price of, or the number and
kind of Shares subject to, outstanding Options or Stock Appreciation Rights
that the Committee intends to be excluded from the coverage of Section 409A of
the Code shall be made in accordance with the requirements of Section 409A of
the Code.  In addition, the Committee may
make provisions for a cash payment to a Participant or a person who has an
outstanding Option or other Award.  The
number of Shares subject to any Option or other Award shall always be a whole
number.


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ARTICLE IV

STOCK OPTIONS


4.1           Grant
of Options.  The Committee shall have
the power to grant Options that are “incentive stock options” within the
meaning of section 422 of the Code (“ISOs”) or that are non-statutory
stock options (“NSOs”) to any Participant and to determine (a) the
number of ISOs and the number of NSOs to be granted to each Participant and (b) the
other terms and conditions of such Awards. 
An Option shall be an NSO unless otherwise specified by the Committee at
the time of grant.  Each Option shall be
evidenced by an Option agreement that shall specify (a) the type of
Option granted, (b) the number of Shares to which the Option
pertains, (c) the exercise price, (d) the period in
which the Option may be exercised and (e) such terms and conditions
not inconsistent with the Plan as the Committee shall determine.  The maximum number of Shares that may be
issued under the Plan through ISOs is 500,000.


4.2           Exercise
Price.  Unless otherwise determined
by the Committee, Options granted pursuant to the Plan shall have an exercise
price that is not less than the Fair Market Value of a Share on the date the
Option is granted.


4.3           Vesting
and Exercisability.  Options awarded
under the Plan shall vest and become exercisable in accordance with the vesting
schedule determined by the Committee, subject to the Participant’s continuous
employment with the Company or a Subsidiary from the date of grant through the
applicable vesting date.  No Option shall
be exercisable for more than 10 years after the date on which it is granted.


4.4           Payment.  The Committee shall establish procedures
governing the exercise of Options. 
Without limiting the generality of the foregoing, the Committee may
provide that payment of the exercise price may be made (a) in cash
or its equivalent, (b) by exchanging Shares owned by the optionee
(which are not the subject of any pledge or other security interest), (c) through
an arrangement with a broker approved by the Company whereby payment of the
exercise price is accomplished with the proceeds of the sale of Common Stock or
(d) by any combination of the foregoing; provided that the
combined value of all cash and cash equivalents paid and the Fair Market Value
of any such Common Stock so tendered to the Company, valued as of the date of
such tender, is at least equal to such exercise price.  No Shares shall be delivered pursuant to any
exercise of an Option unless arrangements satisfactory to the Committee have
been made to assure full payment of the exercise price therefor and any
required withholding or other similar taxes or governmental charges.


4.5           Termination
of Employment.  Unless otherwise
determined by the Committee at or after the date of grant and except as
provided in Article XI, in the event a Participant’s employment terminates by
reason of a Qualifying Termination of Employment, the Participant (or the
Participant’s beneficiary or legal representative) may exercise any Options
(regardless of whether then exercisable) until the earlier of (a) the
twelve-month anniversary of the date of such termination of employment and (b) the
date such Options would otherwise expire but for the operation of this Section
4.5.  Unless otherwise determined by the
Committee at or after the date of grant, in the event a


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Participant’s
employment terminates for any reason other than a Qualifying Termination of
Employment or Cause, the Participant may exercise any Option that is
exercisable at the time of such termination of employment until the earlier of
(a) the 60-day anniversary of the date of such termination of employment
and (b) the date such Options would otherwise expire but for the
operation of this Section 4.5, and any Option that is not then exercisable
shall be forfeited and cancelled as of the date of such termination of
employment.  In the event that a
Participant’s employment is terminated for Cause (or, following the date the
Participant’s employment terminates, the Committee determines that circumstances
exist such that the Participant’s employment could have been terminated for
Cause), any Options granted to such Participant, whether or not then vested,
shall be forfeited and cancelled as of the date of such termination of
employment.


4.6           Certain
NSO’s. If at the time of grant the Committee intends a grant of NSOs to any
Participant to be excluded from the coverage of Section 409A of the Code, then,
notwithstanding any other provision of the Plan, such grant of NSOs shall (i)
have an exercise price that is not less than the Fair Market Value of a Share
on the date the NSOs are granted and (ii) not include any feature for
the deferral of compensation other than the deferral of recognition of income
until the exercise or other disposition of the NSOs.


ARTICLE V

RESTRICTED STOCK AND RESTRICTED UNITS


5.1           Grant
of Restricted Stock and Restricted Units. 
The Committee shall have the power to grant Restricted Stock or
Restricted Units to any Participant and to determine (a) the number
of shares of Restricted Stock and the number of Restricted Units to be granted
to each Participant, (b) the Period(s) of Restriction and (c) the
other terms and conditions of such Awards. 
The Committee shall require that the stock certificates evidencing any
Restricted Stock or Restricted Units be held in the custody of the Secretary of
the Company until the Period of Restriction lapses, and that, as a condition of
any Restricted Stock award, the Participant shall have delivered a stock power,
endorsed in blank, relating to the Shares covered by such award.  Each grant of Restricted Stock or Restricted
Units shall be evidenced by a written agreement setting forth the terms of such
Award.


5.2           Vesting
of Restricted Stock and Restricted Units. 
Restricted Stock or Restricted Units granted pursuant to Section 5.1
shall vest and become nonforfeitable, and the Period of Restriction with
respect to such Restricted Stock or Restricted Units will lapse, in accordance
with the vesting schedule determined by the Committee.


5.3           Dividend Equivalents.


(a)           Restricted Stock.  Unless otherwise determined by the Committee
at the time of grant, Participants holding outstanding Restricted Stock shall
not be entitled to receive any dividends or Dividend Equivalents paid with
respect to such shares of Restricted Stock.


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(b)           Restricted
Units.  The Committee will determine
whether and to what extent to credit to the account of, or to pay currently to,
each recipient of a Restricted Unit, any Dividend Equivalents.  To the extent provided by the Committee at or
after the date of grant, any cash Dividend Equivalents credited to a
Participant’s account shall be deemed to have been invested in Shares on the
record date established for the related dividend and, accordingly, a number of
Restricted Units shall be credited to such Participant’s account equal to the
greatest whole number which may be obtained by dividing (i) the
value of such Dividend Equivalents on the record date by (ii) the
Fair Market Value of a Share on such date. 
Any additional Restricted Units credited in respect of Dividend
Equivalents shall become vested and nonforfeitable, if at all, on the same
terms and conditions as are applicable in respect of the Restricted Units with
respect to which such Dividend Equivalents were payable.


5.4           Termination
of Employment.  Unless otherwise
determined by the Committee at or after the date of grant and except as
provided in Article XI, in the event a Participant’s employment terminates by
reason of a Qualifying Termination of Employment during the Period of
Restriction, a pro rata portion of any Shares related to a Restricted Stock or
Restricted Unit held by such Participant shall become nonforfeitable, based
upon the percentage of which the numerator is the portion of the Period of
Restriction that expired prior to the Participant’s termination and the
denominator is the number of days in the Period of Restriction.  Unless otherwise determined by the Committee
at or after the date of grant, in the event a Participant’s employment
terminates for any reason other than a Qualifying Termination of Employment
during the Period of Restriction, any Restricted Stock or Restricted Units held
by such Participant shall be forfeited and cancelled as of the date of such
termination of employment.


5.5           Settlement
of Restricted Units.  Unless
otherwise determined by the Committee at or after the date of grant, when a
Period of Restriction with respect to an Award of Restricted Units lapses and
the Restricted Units become vested and nonforfeitable, the Participant shall
receive (i) one Share for each such Restricted Unit (including
additional Restricted Units credited in respect of Dividend Equivalents) or (ii) if
the Committee so determines, the Committee may direct the Company to pay to the
Participant the Fair Market Value of such Shares as of such payment date.


ARTICLE VI

INCENTIVE AWARDS


6.1           Grant
of Incentive Stock and Incentive Units. 
The Committee shall have the authority to grant Incentive Stock or
Incentive Units to any Participant and to determine (a) the number
of Incentive Stock and the number of Incentive Units to be granted to each
Participant, (b) the restrictions pursuant to which such Award is
subject to forfeiture by reason of the Performance Criteria established by the
Committee pursuant to Section 6.2 not being met in whole or in part and (c) the
other terms and conditions of such Awards. 
Each grant of Incentive Stock or Incentive Units shall be evidenced by a
written agreement setting forth the terms of such Award.


6.2           Performance
Criteria.


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(a)           Within
90 days after each Performance Period begins (or such other date as may be
required or permitted under Section 162(m) of the Code, if applicable), the
Committee shall establish the performance objective or objectives for the
applicable Performance Period that must be satisfied in order for an Award to
be vested and nonforfeitable (the “Performance Criteria”).  Any such Performance Criteria will be based
upon the relative or comparative achievement of one or more of the following
criteria, or such other criteria, as may be determined by the Committee: (i)
revenue growth; (ii) earnings before interest, taxes, depreciation and
amortization; (iii) earnings before interest, taxes and amortization; (iv)
operating income; (v) pre- or after-tax income; (vi) cash flow; (vii)
cash flow per share; (viii) net earnings; (ix) earnings per
share; (x) return on equity; (xi) return on invested capital; (xii)
return on assets; (xiii) economic value added (or an equivalent metric);
(xiv) share price performance; (xv) total shareholder return; (xvi)
improvement in or attainment of expense levels; (xvii) improvement in or
attainment of working capital levels; or (xviii) debt reduction.


(b)  The
Performance Criteria related to Incentive Stock or Incentive Units shall be achieved
upon the determination by the Committee that the objective or objectives for
the applicable Performance Period have been attained, in whole or in part.  The Committee may provide at the time of
grant that in the event the objective or objectives are attained in part, a
specified portion (which may be zero) of the Award will vest and become
nonforfeitable and the remaining portion shall be forfeited.


6.3           Dividend Equivalents.


(a)           Incentive
Stock.  Unless otherwise determined
by the Committee at or after the date of grant, Participants granted Incentive
Stock shall not be entitled to receive cash dividends or Dividend Equivalents.


(b)           Incentive
Units.  The Committee will determine
whether and to what extent to credit to the account of, or to pay currently to,
each recipient of an Incentive Unit, any Dividend Equivalents.  To the extent provided by the Committee at or
after the date of grant, any cash Dividend Equivalents with respect to the
Incentive Units credited to a Participant’s account shall be deemed to have
been invested in Shares on the record date established for the related dividend
and, accordingly, a number of Incentive Units, as the case may be, shall be
credited to such Participant’s account equal to the greatest whole number which
may be obtained by dividing (i) the value of such Dividend
Equivalents on the record date by (ii) the Fair Market Value of a
Share on such date.  Any additional
Incentive Unit credited in respect of Dividend Equivalents shall become vested
and nonforfeitable, if at all, on the same terms and conditions as are
applicable in respect of the Incentive Unit with respect to which such Dividend
Equivalents were payable.


6.4           Termination
of Employment.  Unless otherwise
determined by the Committee at or after the date of grant and except as
provided in Article XI, in the event that a Participant’s employment terminates
by reason of a Qualifying Termination of Employment during the Performance
Period, any award of Incentive Stock or Incentive Units shall become vested and
nonforfeitable at the end of the Performance Period as to


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that
number of such Incentive Stock or Incentive Units, as the case may be, that is
equal to that percentage, if any, of such Award that would have been earned had
the Participant’s employment not so terminated prior to the expiration of the
Performance Period times a fraction, the numerator of which is the number of
days employed during the Performance Period and the denominator of which is the
total number of days during the Performance Period.  Unless otherwise determined by the Committee
at or after the date of grant, in the event a Participant’s employment
terminates for any reason other than a Qualifying Termination of Employment
during the Performance Period, any Incentive Stock or Incentive Units held by
such Participant shall be forfeited and cancelled as of the date of such
termination of employment.


6.5           Settlement
of Incentive Units.  Unless otherwise
determined by the Committee at or after the date of grant, when the Performance
Criteria with respect to an Award of Incentive Units is achieved and the
Incentive Units become vested and nonforfeitable, the Participant shall receive
(i) one Share for each such Incentive Unit (including additional
Incentive Units credited in respect of Dividend Equivalents, if any) or (ii) if
the Committee so determines, the Committee may direct the Company to pay to the
Participant the Fair Market Value of such Shares as of such payment date.


ARTICLE VII

STOCK APPRECIATION RIGHTS


7.1           Grant
of Stock Appreciation Rights.  Stock
Appreciation Rights may be granted to any Participants, all Participants or any
class of Participants at such time or times as shall be determined by the
Committee.  Stock Appreciation Rights may
be granted only on a freestanding basis, and not related to any Option.  A grant of a Stock Appreciation Right shall
be evidenced by a written agreement containing such provisions not inconsistent
with the Plan as the Committee shall approve.


7.2           Terms
and Conditions of Stock Appreciation Rights.  Unless otherwise determined by the Committee
at or after the date of grant, the terms and conditions (including, without
limitation, the exercise period of the Stock Appreciation Right, the vesting
schedule applicable thereto and the impact of any termination of service on the
Participant’s rights with respect to the Stock Appreciation Right) applicable
with respect to Stock Appreciation Rights shall be substantially identical (to
the extent possible taking into account the differences related to the character
of the Stock Appreciation Right) to the terms and conditions that would have
been applicable under Article IV above were the grant of the Stock Appreciation
Rights a grant of an Option.


7.3           Payment
of Stock Appreciation Right Amount. 
Upon exercise of a Stock Appreciation Right, the holder shall be
entitled to receive payment, in cash, in Shares or in a combination thereof, as
determined by the Committee, of an amount determined by multiplying the excess,
if any, of the Fair Market Value of a Share at the date of exercise over the
Stock Appreciation Right’s base value or exercise price, by the number of
Shares with respect to which the Stock Appreciation Rights are then being
exercised.


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7.4           Certain
Stock Appreciation Rights.  If at the
time of grant the Committee intends a grant of Stock Appreciation Rights to any
Participant to be excluded from the coverage of Section 409A of the Code, then,
notwithstanding any other provision of the Plan, such grant of Stock
Appreciation Rights shall (i) have a base value or exercise price that
is not less than the Fair Market Value of a Share on the date the Stock
Appreciation Rights are granted, (ii) be payable upon exercise only with Shares
and (iii) not include any feature for the deferral of compensation other
than the deferral of recognition of income until the exercise or other
disposition of the Stock Appreciation Rights.


ARTICLE VIII

DEFERRED SHARES


8.1           Deferred
Share Awards.  The Committee shall
have the authority to grant Deferred Shares to any Participant and to determine
(i) the number of Deferred Shares granted to each Participant, (ii) the
date such Deferred Shares shall become vested and (iii) the date such
Deferred Shares will be payable to the Participant.  In addition, on such date or dates as shall
be established by the Committee and subject to such terms and conditions as the
Committee shall determine, a Participant may be permitted to elect to defer
receipt of all or a portion of his annual compensation and/or annual incentive
bonus (“Deferred Amount”) payable by the Company or a Subsidiary and
receive in lieu thereof a number of Deferred Shares equal to the greatest whole
number which may be obtained by dividing (i) the Deferred Amount by
(ii) the Fair Market Value of a Share on the date such compensation
or bonus would otherwise have been payable to the Participant.  No Shares will be issued at the time an award
of Deferred Shares is made and the Company shall not be required to set aside a
fund for the payment of any such award. 
The Company will establish a separate account for the Participant and
will record in such account the number of Deferred Shares awarded to the
Participant.  To the extent the Committee
so determines, a Participant who elects to defer receipt of his or her
compensation or bonus and receive Deferred Shares may also receive that number
of supplemental Deferred Shares (“Supplemental Units”) equal to the
greatest whole number which may be obtained by dividing (i) such
percentage of the Deferred Amount as is determined by the Committee by (ii) the
Fair Market Value of a Share on the date of grant.  Each grant of Deferred Shares and
Supplemental Units shall be evidenced by a written agreement setting forth the
terms of such Award.


8.2           Vesting
of Deferred Shares and Supplemental Units. 
Unless otherwise determined by the Committee at or after the date of
grant, the Deferred Shares together with any Dividend Equivalents credited with
respect thereto, shall be fully vested at all times.  The Supplemental Units together with any
Dividend Equivalents credited with respect thereto,  will become vested in accordance with the vesting schedule
determined by the Committee, subject to the Participant’s continuous employment
with the Company or a Subsidiary through such vesting date.


8.3           Dividend
Equivalents.  The Committee will
determine whether and to what extent Dividend Equivalents will be credited to
the account of, or paid currently to, a recipient of Deferred Shares or
Supplemental Units.  To the extent
provided by the Committee at or after the date of grant, any cash Dividend
Equivalents with respect to the


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Deferred
Shares and Supplemental Units deemed credited to a Participant’s account shall
be deemed to have been invested in Shares on the record date established for
the related dividend and, accordingly, a number of Deferred Shares or
Supplemental Units, as the case may be, shall be credited to such Participant’s
account equal to the greatest whole number which may be obtained by dividing (i) the
amount of such Dividend Equivalent on the record date by (ii) the
Fair Market Value of a Share on such date.


8.4           Termination
of Employment.  Unless otherwise
determined by the Committee at or after the date of grant and except as
provided in Article XI, in the event that a Participant’s employment terminates
by reason of a Qualifying Termination of Employment during the vesting period,
any Supplemental Units (and related Dividend Equivalents, if any) granted to a
Participant shall become vested and nonforfeitable.  Unless otherwise determined by the Committee
at or after the date of grant, in the event a Participant’s employment
terminates for any reason other than a Qualifying Termination of Employment or
Cause during the vesting period, any Supplemental Units (and related Dividend
Equivalents, if any) held by such Participant, to the extent unvested, shall be
forfeited and cancelled as of the date of such termination of employment.  In the event that a Participant’s employment
is terminated for Cause (or, following the date the Participant’s employment
terminates, the Committee determines that circumstances exist such that the
Participant’s employment could have been terminated for Cause), any
Supplemental Units (and related Dividend Equivalents, if any) granted to such
Participant, whether or not then vested, shall be forfeited and cancelled as of
the date of such termination of employment.


8.5           Settlement
of Deferred Shares. Unless otherwise determined by the Committee at or
after the date of grant and except as provided in Article XI, a Participant
shall receive as of the date of such Participant’s termination of employment
(or such other date as may be elected by the Participant or required by the
Committee in accordance with the rules and procedures of the Committee) (i) one
Share for each Deferred Share credited to such Participant’s account and (ii) subject
to Section 8.4, one Share for each Supplemental Unit that shall have become
vested.  The Committee may provide in the
Award agreement applicable to any Deferred Shares or Supplemental Units that,
in lieu of issuing Shares, the Committee may direct the Company to pay to the
Participant the Fair Market Value of such Shares as of such payment date.


8.6           Further
Deferral Elections.  A Participant
may elect to further defer receipt of Shares issuable in respect of Deferred
Shares (or an installment of an Award) for a specified period or until a
specified event, subject in each case to the Committee’s approval and to such
terms as are determined by the Committee, all in its sole discretion.  Subject to any exceptions adopted by the
Committee, such election must generally be made at least 12 months prior to the
original settlement date of such Deferred Shares (or any such installment
thereof) and such election may not take effect until the expiration of such 12
month period.  A further deferral
opportunity does not have to be made available to all Participants, and
different terms and conditions may apply with respect to the further deferral
opportunities made available to different Participants.


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ARTICLE IX

CHANGE IN CONTROL


9.1           Accelerated
Vesting and Payment.  Subject to the
provisions of Section 9.2 below, in the event of a Change in Control, each
Option shall be, at the discretion of the Committee, either canceled in
exchange for a payment in cash of an amount equal to the excess, if any, of the
Change in Control Price over the exercise price for such Option, or fully
exercisable regardless of the exercise schedule otherwise applicable to such
Option.  All other Awards shall become
nonforfeitable and be immediately transferable or payable, as the case may be.


9.2           Alternative
Awards.  Notwithstanding Section 9.1,
no cancellation, acceleration of exercisability, vesting, cash settlement or
other payment shall occur with respect to any Award or any class of Awards if
the Committee reasonably determines in good faith prior to the occurrence of a
Change in Control that such Award or Awards shall be honored or assumed, or new
rights substituted therefor (such honored, assumed or substituted award an “Alternative
Award”), by a Participant’s employer (or the parent or a Subsidiary of such
employer) immediately following the Change in Control, provided that any
such Alternative Award must:


(i)            be based on stock that is traded on an established
U.S. securities market, or that will be so traded within 60 days of the Change
in Control;


(ii)           provide such Participant (or each
Participant in a class of Participants) with rights and entitlements
substantially equivalent to or better than the rights, terms and conditions
applicable under such Award, including, but not limited to, an identical or
better exercise or vesting schedule and identical or better timing and methods
of payment;


(iii)          have substantially equivalent economic
value to such Award (determined at the time of the Change in Control); and


(iv)          have terms and conditions which
provide that in the event that the Participant’s employment is involuntarily
terminated or constructively terminated, any conditions on a Participant’s
rights under, or any restrictions on transfer or exercisability applicable to,
each such Alternative Award shall be waived or shall lapse, as the case may be.


For this purpose, a constructive termination shall
mean a termination by a Participant following (i) a material reduction
in the Participant’s base salary or a Participant’s incentive compensation
opportunity, (ii) a material reduction in the Participant’s
responsibilities or (iii) the relocation of the Participant’s principal
place of work to a location that is more than 50 miles from the Participant’s
principal place of work immediately prior to the Change in Control, in each
case without the Participant’s written consent.


9.3           Termination
of Employment Prior to Change in Control. 
In the event that any Change in Control occurs as a result of any
transaction described in subclause (iii) or


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(v) of
the definition of such term, any Participant whose employment is terminated due
to death or Disability or by the Company for any reason other than Cause on or
after the date, if any, on which the shareholders of the Company approve such
transaction, but prior to the consummation thereof, shall be treated, solely
for purposes of this Plan (including, without limitation, this Article IX), as
continuing in the Company’s employment until the occurrence of such Change in
Control, and to have been terminated immediately thereafter.


ARTICLE X

STOCKHOLDER RIGHTS


A Participant (or a Permitted Transferee) shall have
no rights as a stockholder with respect to any Shares covered by an Award until
he or she shall have become the holder of record of such Share(s), and no
adjustments shall be made for dividends in cash or other property or
distribution or other rights in respect to any such Shares, except as otherwise
specifically provided for in this Plan.


ARTICLE XI
 SECTION 409A OF THE CODE


In connection with a Participant’s termination of
employment, the payment, settlement or exercisability of an Award held by a
Participant who the Committee reasonably believes is a “specified employee”
(within the meaning of Section 409A of the Code) shall not be made before the
first business day that is six months and one day after the date of such
Participant’s termination of employment (or, if earlier, upon death) if the
Committee reasonably believes an Award to be subject to Section 409A(a)(2)(B)
of the Code.  Notwithstanding anything to
the contrary in the Plan, the Committee may in its absolute discretion alter or
amend any of the provisions of this Plan if such alteration or amendment would
be required to comply with Section 409A of the Code or any regulations
promulgated thereunder.


ARTICLE XII

AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN


The Board or the Committee at any time may terminate
or suspend the Plan, and from time to time may amend or modify the Plan, provided
that no amendment, modification, or termination of the Plan shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
consent of the Participant.  Unless
earlier terminated, the Plan shall terminate on the day immediately prior to
the first meeting of the stockholders of the Company in 2009 at which directors
will be elected.


ARTICLE XIII

DEFINITIONS


13.1         Certain
Definitions.  Capitalized terms used
herein without definition shall have the respective meanings set forth below:


“Act” means the Securities Exchange Act of
1934, as amended.


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“Adjustment Event” means any stock dividend,
stock split, share combination, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination,
exchange of shares or other similar event affecting the Common Stock.


“Affiliate” means, with respect to any person,
any other person controlled by, controlling or under common control with such
person.


“Alternative Award” has the meaning given in
Section 9.2.


“Award” means any Option, Restricted Stock,
Restricted Unit, Stock Appreciation Right, Incentive Stock, Incentive Unit,
Deferred Share, or Supplemental Unit granted under the Plan or any combination
thereof, including Awards combining two or more types of Awards in a single
grant.


“Board” means the Board of Directors of the
Company.


“Cause” means, unless otherwise provided in an
Award, (i) the refusal or neglect of the Participant to perform
substantially his or her employment-related duties, (ii) the Participant’s
personal dishonesty, incompetence, willful misconduct or breach of fiduciary
duty, (iii) the Participant’s conviction of a crime constituting a
felony (or a crime or offense of equivalent magnitude in any jurisdiction) or
his or her willful violation of any other law, rule, or regulation (other than
a traffic violation or other offense or violation outside of the course of
employment which in no way adversely affects the Company or its reputation or
the ability of the Participant to perform his or her employment related duties
or to represent the Company) or (iv) the material breach by the
Participant of any applicable written policy of the Company or any Subsidiary; provided
that, with respect to any Participant who is party to an employment agreement
with the Company or a Subsidiary, “Cause” shall have the meaning specified in
such Participant’s employment agreement. 
The determination as to whether “Cause” has occurred shall be made by
the Committee, which shall have the authority to waive the consequences under
the Plan of the existence or occurrence of any of the events, acts or omissions
constituting “Cause.”


“Change in Control” means the first occurrence
of any of the following events (other than a Public Offering):


(i)            the
members of the Board (the “Incumbent Directors”) cease for any reason
other than due to death to constitute at least a majority of the members of the
Board, provided that any director whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a
majority of the members of the Board other than as a result of a proxy contest,
or any agreement arising out of an actual or threatened proxy contest, shall be
treated as an Incumbent Director;


(ii)           the
acquisition by any person, entity or “group” (as defined in Section 13(d) the
Act), other than the Company, the Subsidiaries, any employee


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benefit plan of the
Company or the Subsidiaries, any Kelso Entity or any Affiliate of any Kelso
Entity, any THL Entity or any Affiliate of any THL Entity, of 50% or more of
the combined voting power of the Company’s then outstanding voting securities;


(iii)          the
merger or consolidation of the Company, as a result of which persons who were
stockholders of the Company immediately prior to such merger or consolidation,
do not, immediately thereafter, own, directly or indirectly, more than 50% of
the combined voting power entitled to vote generally in the election of
directors of the merged or consolidated company;


(iv)          the
liquidation or dissolution of the Company other than a liquidation into the
Company or into any Subsidiary; and


(v)           the
sale, transfer or other disposition of all or substantially all of the assets
of the Company to one or more persons or entities that are not, immediately
prior to such sale, transfer or other disposition, Affiliates of the Company,
any Kelso Entity or any THL Entity.


Notwithstanding the foregoing, a “Change in Control”
shall not be deemed to occur in the event the Company files for bankruptcy,
liquidation or reorganization under the United States Bankruptcy Code.


“Change in Control Price” means the price per
Share offered in conjunction with any transaction resulting in a Change in
Control on a fully-diluted basis (as determined in good faith by the Committee
as constituted before the Change in Control, if any part of the offered price
is payable other than in cash) or, in the case of a Change in Control occurring
solely by reason of a change in the composition of the Board, the highest Fair
Market Value of a Share on any of the 30 trading days immediately preceding the
date on which a Change in Control occurs.


“Code” means the Internal Revenue Code of 1986,
as amended, and the regulations thereunder.


“Committee” means the Compensation Committee of
the Board, or when section 162(m) of the Code or Rule 16b promulgated under the
Act would require action to be taken by a committee of “outside directors” or “Non-Employee
Directors,” as the case may be, the “Committee” shall, if appropriate, be
deemed to refer to a subcommittee of the Compensation Committee that consists
of two or more members meeting such requirements, or the full Board in the
absence of such a subcommittee.


“Common Stock” means the common stock of the
Company, par value $.01 per share.


“Company” means FairPoint Communications, Inc.,
a Delaware corporation, and any successor thereto.


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“Deferred Amount” has the meaning given in
Section 8.1.


“Deferred Share” means the deferred share units
that confer upon a Participant the right to receive Shares at the end of a
specified deferral period as set forth in Article VIII.


“Disability” means, unless otherwise provided
in an Award, a long-term disability within the meaning of the long-term
disability or other similar program then applicable to a Participant or, in the
absence of any such program, as determined by the Committee; provided
that with respect to any Participant who is a party to an employment agreement
with the Company or a Subsidiary, “Disability” shall have the meaning, if any,
specified in such agreement.


“Dividend Equivalents” means dividends paid by
the Company with respect to Shares corresponding to Awards awarded under the
Plan.


“Employee” means any officer, employee or
consultant of the Company or any Subsidiary, or any director of the Company or
any Subsidiary.


“Fair Market Value” means, as of any date of
determination, the closing price of a Share on the New York Stock Exchange (or
on such other recognized market or quotation system on which the trading prices
of Common Stock are traded or quoted at the relevant time).  In the event that there are no Common Stock
transactions reported on such exchange or system on such date, Fair Market
Value shall mean the closing price of a Share on the immediately preceding day
on which Common Stock transactions were so reported.


“Incentive Stock” shall mean an award of Common
Stock that is forfeitable until the achievement of specified Performance
Criteria as provided for in Section 6.1.


“Incentive Unit” shall mean a contractual right
to receive Common Stock, or cash based on the Fair Market Value of Common
Stock, made pursuant to Section 6.1 that is forfeitable by the Participant
until the achievement of specified Performance Criteria or until otherwise
determined by the Committee or in accordance with the terms of the Plan.


“ISOs” has the meaning given in Section 4.1.


“Kelso” means
Kelso Investment Associates V, L.P. and any successor investment vehicle
managed by Kelso.


“Kelso Entities” means collectively, Kelso and
Kelso Equity Partners V, L.P.


“Normal Retirement” means a termination of the
Participant’s employment under circumstances that the Committee determines as
qualifying as retirement at normal retirement age for purposes of the Plan.


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“NSOs” has the meaning given in Section 4.1.


“Option” means the right to purchase Common
Stock at a stated price for a specified period of time.


“Participant” means any Employee or prospective
Employee of the Company designated by the Committee to receive an Award under
the Plan.


“Performance Criteria” has the meaning given in
Section 6.2(a).


“Performance Period” means the period, as
determined by the Committee, during which the performance of the Company, any
Subsidiary, any business unit and any individual is measured to determine whether
and the extent to which the applicable performance measures have been achieved.


“Period of Restriction” means the period during
which a Restricted Stock or Restricted Unit is subject to forfeiture.


“Permitted Transferees” has the meaning given
in Section 14.1.


“Plan” means this FairPoint Communications,
Inc. 2005 Stock Incentive Plan, as the same may be amended from time to time.


“Public Offering” means a public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, that covers (together with prior registrations) (a) not
less than 20% of the outstanding Shares, on a fully diluted basis, or (b) Shares
that, after the closing of such public offering, will be traded on the New York
Stock Exchange, the American Stock Exchange or the National Association of
Securities Dealers Automated Quotation System.


“Qualifying Termination of Employment” means a
termination of a Participant’s employment with the Company or any of its
Subsidiaries by reason of the Participant’s death, Disability, early retirement
with the consent of the Committee or Normal Retirement.


“Restricted Stock” means an award of Common
Stock made pursuant to Section 5.1 that is forfeitable by the Participant until
the completion of a specified period of future service or until otherwise
determined by the Committee or in accordance with the terms of the Plan.


“Restricted Unit” means a contractual right to
receive Common Stock, or cash based on the Fair Market Value of Common Stock,
made pursuant to Section 5.1 that is forfeitable by the Participant until the
completion of a specified period of future service or until otherwise
determined by the Committee or in accordance with the terms of the Plan.


“Share” means a share of Common Stock.


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“Stock Appreciation Right” means the right to
receive a payment from the Company, in cash or Common Stock, in an amount to be
determined under Article VII of the Plan.


“Subsidiary” means any corporation in which the
Company owns, directly or indirectly, stock representing 50% or more of the
voting power of all classes of stock entitled to vote and any other business
organization, regardless of form, in which the Company possesses directly or
indirectly 50% or more of the total combined equity interests in such organization.


“Supplemental Unit” has the meaning given in
Section 8.1.


“THL Entity” means Thomas H. Lee Equity Fund
IV, L.P. and its Affiliates.


13.2         Gender
and Number.  Except when otherwise
indicated by the context, words in the masculine gender used in the Plan shall
include the feminine gender, the singular shall include the plural, and the
plural shall include the singular.


 


ARTICLE XIV

MISCELLANEOUS PROVISIONS


14.1         Nontransferability
of Awards.  No Award shall be
assignable or transferable except by will or the laws of descent and
distribution; provided that the Committee may permit (on such terms and
conditions as it shall establish) a Participant to transfer an Award for no
consideration to the Participant’s child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Participant’s household (other than a tenant or employee), a trust in which
these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the Participant) control the management
of assets, and any other entity in which these persons (or the Participant) own
more than fifty percent of the voting interests (“Permitted Transferees”).  Except to the extent required by law, no
right or interest of any Participant shall be subject to any lien, obligation
or liability of the Participant.  All
rights with respect to Awards granted to a Participant under the Plan shall be
exercisable during the Participant’s lifetime only by such Participant or, if
applicable, his or her Permitted Transferee(s). 
The rights of a Permitted Transferee shall be limited to the rights
conveyed to such Permitted Transferee, who shall be subject to and bound by the
terms of the agreement or agreements between the Participant and the
Company.  Notwithstanding the foregoing,
no ISO shall be assignable or transferable except by will or the laws of
descent and distribution, and during a Participant’s lifetime, shall be
exercisable only by the Participant.


14.2         Beneficiary
Designation.  Each Participant under
the Plan may from time to time name any beneficiary or beneficiaries (who may
be named contingently or successively) to whom any benefit under the Plan is to
be paid or by whom any right


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under
the Plan is to be exercised in case of his death.  Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his lifetime. 
In the absence of any such designation, benefits remaining unpaid at the
Participant’s death shall be paid to or exercised by the Participant’s
surviving spouse, if any, or otherwise to or by his or her estate.


14.3         No
Guarantee of Employment or Participation. 
Nothing in the Plan shall interfere with or limit in any way the right
of the Company or any Subsidiary to terminate any Participant’s employment at
any time, nor to confer upon any Participant any right to continue in the
employ of the Company or any Subsidiary. 
No Employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Awards.


14.4         Tax
Withholding.  The Company shall have
the right to deduct from all amounts paid to a Participant in cash (whether
under this Plan or otherwise) any taxes required by law to be withheld in
respect of Awards under this Plan.  In
the case of any Award satisfied in the form of Shares, no Shares shall be
issued unless and until arrangements satisfactory to the Committee shall have
been made to satisfy any withholding tax obligations applicable with respect to
such Award.  Without limiting the
generality of the foregoing, the Company shall have the right to retain, or the
Committee may, subject to such terms and conditions as it may establish from
time to time, permit Participants to elect to tender Shares (including Shares
issuable in respect of an Award) to satisfy, in whole or in part, the amount
required to be withheld (but no greater amount).


14.5         Compliance
with Legal and Exchange Requirements. 
The Plan, the granting and exercising of Awards thereunder, and any
obligations of the Company under the Plan, shall be subject to all applicable
federal and state laws, rules, and regulations, and to such approvals by any
regulatory or governmental agency as may be required, and to any rules or
regulations of any exchange on which the Shares are listed.  The Company, in its discretion, may postpone
the granting and exercising of Awards, the issuance or delivery of Shares under
any Award or any other action permitted under the Plan to permit the Company,
with reasonable diligence, to complete such stock exchange listing or
registration or qualification of such Shares or other required action under any
federal or state law, rule, or regulation and may require any Participant to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Shares in compliance
with applicable laws, rules, and regulations. 
The Company shall not be obligated by virtue of any provision of the
Plan to recognize the exercise of any Award or to otherwise sell or issue
Shares in violation of any such laws, rules, or regulations, and any
postponement of the exercise or settlement of any Award under this provision
shall not extend the term of such Awards. 
Neither the Company nor its directors or officers shall have any
obligation or liability to a Participant with respect to any Award (or Shares
issuable thereunder) that shall lapse because of such postponement.


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14.6         Indemnification.  Each person who is or shall have been a
member of the Committee or of the Board shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be made a party or
in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company’s approval, or paid by him in satisfaction
of any judgment in any such action, suit, or proceeding against him, provided
he shall give the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own behalf.  The foregoing right of indemnification shall
not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the Company’s
Articles of Incorporation or By-laws, by contract, as a matter of law, or otherwise.


14.7         Legend.  To the extent any stock certificate is issued
to a Participant in respect of shares of Restricted Stock prior to the
expiration of the Period of Restriction, such certificate shall be registered
in the name of the Participant and shall bear such restrictive legend as the
Committee determines appropriate.  Upon
the lapse of the Period of Restriction with respect to such Restricted Stock,
the Company shall issue or have issued in exchange for those certificates
previously issued new share certificates without such legend herein in respect
of any Shares that have become vested.


14.8         Effective
Date.  The Plan shall be effective
immediately prior to the consummation date of the initial public offering of
Shares.


14.9         No
Limitation on Compensation.  Nothing
in the Plan shall be construed to limit the right of the Company to establish
other plans or to pay compensation to its employees, in cash or property, in a
manner which is not expressly authorized under the Plan.


14.10       Governing
Law.  The Plan shall be construed in
accordance with and governed by the laws of the State of Delaware, without
reference to principles of conflict of laws which would require application of
the law of another jurisdiction, except to the extent that the corporate law of
the State of Delaware specifically and mandatorily applies.


14.11       Severability;
Blue Pencil.  In the event that any
one or more of the provisions of this Plan shall be or become invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.  If, in the opinion of any court of competent
jurisdiction such covenants are not reasonable in any respect, such court shall
have the right, power and authority to excise or modify such provision or
provisions of these covenants as to the court shall appear not reasonable and
to enforce the remainder of these covenants as so amended.


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14.12       No
Impact On Benefits.  Except as may
otherwise be specifically stated under any employee benefit plan, policy or
program, no amount payable in respect of any Award shall be treated as
compensation for purposes of calculating a Participant’s right under any such
plan, policy or program.


14.13       No
Constraint on Corporate Action.  Nothing in
this Plan shall be construed (i) to limit, impair or otherwise
affect the Company’s right or power to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets or (ii) to limit the right or power of the
Company, or any Subsidiary to take any action which such entity deems to be
necessary or appropriate.


14.14       Headings and Captions.  The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan,
and shall not be employed in the construction of this Plan.


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