Exhibit 10.35


 


FAIRPOINT COMMUNICATIONS, INC.


FORM OF ANNUAL
INCENTIVE PLAN


SECTION 1

PURPOSE


This FairPoint Communications, Inc. Annual Incentive
Plan is intended to permit FairPoint Communications, Inc. (the “Company”),
through awards of annual incentive compensation, to attract, retain and
motivate qualified executives and key employees.


SECTION 2

DEFINITIONS


“Award” shall mean, for any Performance Period,
the incentive opportunity granted to a Participant by the Committee for such
Performance Period.


“Board” shall mean the Board of Directors of
the Company, or the successor thereto.


“Code” shall mean the Internal Revenue Code of
1986, as amended.


“Committee” means the Compensation Committee of
the Board, or when section 162(m) of the Code or Rule 16b promulgated under the
Exchange 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.


“Covered Employee” shall have the meaning set
forth in Section 162(m) of the Code and the regulations promulgated thereunder.


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


“Participant” shall mean, for each Performance
Period, each (i) Covered Employee and (ii) each other executive
officer or key employee of the Company or a Subsidiary whom the Committee has
selected to participate in the Plan.


“Performance Period” shall mean the Company’s
fiscal year or any other period designated by the Committee with respect to
which an Award may be granted. 
Performance Periods may not overlap.


“Plan” shall mean this FairPoint
Communications, Inc. Annual Incentive Plan, as amended from time to time.





















“Stock Incentive Plans” shall mean the
FairPoint Communications, Inc. 2005 Stock Incentive Plan and any future equity
compensation plans approved by the shareholders of the Company.


“Subsidiary” shall mean any entity that is
directly or indirectly controlled by the Company or any entity, in which the
Company has at least a 50% equity interest.


SECTION 3

ADMINISTRATION


The Plan shall be administered by the Committee, which
shall have full authority to interpret the Plan, to establish rules and
regulations relating to the operation of the Plan, to select Participants, to
determine the amounts of any Awards and to make all determinations and take all
other actions necessary or appropriate for the proper administration of the
Plan.  The Committee’s interpretation of
the Plan, and all actions taken within the scope of its authority, shall be
final and binding on the Company, its stockholders, Participants, and former
Participants and their respective successors and assigns.  The Committee may delegate its authority
hereunder; provided that the Committee shall in no event delegate its
authority with respect to the compensation of any Covered Employee and any
other individual whose compensation the Board or Committee reasonably believes
may become subject to Section 162(m) of the Code.  No member of the Committee shall be eligible
to participate in the Plan.


SECTION 4

DETERMINATION OF AWARDS


(a)           Establishment
of Target Award.  Prior to the
beginning of each Performance Period, or at such later time as may be permitted
by applicable provisions of the Code, the Committee shall establish: (A)
the Covered Employees and other employees who will be Participants in the Plan;
(B) each Participant’s target Award for such Performance Period; and (C)
the applicable performance objective or objectives for such Performance Period.


(b)           Performance
Criteria.  Any performance objective
established pursuant to SECTION 4(a) will be based upon the achievement of one
or more of the following criteria, as 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; (xviii) debt reduction; or (xix)
any other criteria the Committee in its sole discretion deems appropriate.  Any of the performance objectives set forth
above may measure performance on a Company-wide basis or with respect to one or
more business


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units,
divisions or Subsidiaries, and either in absolute terms, relative to the
performance of one or more similarly situated companies, relative to the
performance of an index covering a peer group of companies, or other external
measures of the selected performance criteria. 
Any performance objective may measure performance on an individual
basis, as appropriate.


(c)           Adjustments.  In the application of performance objectives
to Award determinations under the Plan, the Committee may (i) make
adjustments it deems advisable in order to give consideration to changes made
in accounting rules, principles or methods, or extraordinary events, and make
adjustments to financial performance measures in recognition of such
occurrences and (ii) exclude special charges, restructuring charges,
discontinued operations and unusual or infrequent accounting adjustments,
restatements or reclassifications which they deem significant; provided
that such adjustments are identified in the Company’s financial statements or
management’s discussion and analysis of financial condition and results of
operations contained in the Company’s most recent annual report filed with the
U.S. Securities and Exchange Commission pursuant to the Exchange Act; and provided,
further, that any such adjustments or exclusions are stated and taken
into account at the time the performance objectives for a particular
Performance Period are determined in accordance with Section 4(a) hereof.


(d)           Certification
by Committee.  Except as otherwise
provided for herein, no payments shall be made hereunder in respect of any
Performance Period, unless the Committee shall certify in writing following the
end of each such Performance Period that the performance objectives applicable
to such Performance Period have been satisfied.


(e)           Partial
Year Participation.  If an employee
becomes a Participant with respect to any Performance Period after the
beginning of such Performance Period, the Committee may provide at the time
such person becomes a Participant that such Participant shall receive, if and
when payments with respect to Awards for such Performance Period are made under
Section 5 hereof, a payment equal to a pro rata portion of such Participant’s
Award (if any) with respect to such Performance Period.  Notwithstanding the foregoing, in the case of
a newly hired Participant, the Committee may provide for a guaranteed bonus, or
a bonus that would exceed the bonus that would otherwise be payable in the
Plan.


(f)            Termination
of Employment.  Unless otherwise
determined by the Committee in its sole discretion at the time the performance
criteria are selected for a particular Performance Period in accordance with
Section 4(a), if a Participant’s employment terminates for any reason prior to
the date on which the Peformance Period ends hereunder, such Participant shall
forfeit all rights to any and all Awards which have


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not yet
been paid under the Plan; provided that if a Participant’s employment
terminates as a result of death, disability or retirement (as defined under any
retirement plan of the Company or a Subsidiary) the Committee shall give
consideration at its sole discretion to the payment of a partial bonus with
regard to the portion of the Performance Period worked.  Notwithstanding the foregoing, if a
Participant’s employment terminates for any reason prior to the date on which
the Award is paid hereunder, the Committee, in its discretion, may waive any
forfeiture pursuant to Section 4 in whole or in part.


(g)           Maximum
Amount Payable.  The maximum award
payable hereunder for any Performance Period shall in no event exceed $3
million.


SECTION 5

PAYMENT OF AWARDS


Each Participant shall be eligible to receive, as soon
as practicable after the amount of such Participant’s Award for a Performance
Period has been determined in accordance with the terms of the Plan, payment of
the Award in cash, stock, options, other stock-based awards or any combination
thereof determined by the Committee subject to such restrictions and/or vesting
or deferred requirements as the Committee shall have determined prior to the
commencement of the applicable Performance Period (and communicated to the
Participant).  Equity or equity-based
awards shall be granted under the terms and conditions of one or more of the
Company’s Stock Incentive Plans.  Payment
of the award may be deferred in accordance with a written election by the
Participant pursuant to procedures established by the Committee.


SECTION 6

EFFECTIVENESS OF PLAN, AMENDMENT AND TERMINATION


The Plan shall be effective as of January 1, 2005.  The Committee may amend, suspend, discontinue
or terminate the Plan at any time and from time to time.  No action under this section which adversely
affects a Participant’s rights to, or interest in, an Award granted prior to
the date of such action shall be effective unless the Participant shall have
agreed thereto in writing.  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.


SECTION 7

OTHER PROVISIONS


(a)           No
Right to Awards.  No Participant or
other person shall have any claim or right to be granted an Award under this
Plan until such Award is actually granted. 
Neither the establishment of this Plan, nor any action taken hereunder,
shall be construed as giving any Participant any right to be retained in the
employ of the Company.  Nothing contained
in this Plan shall limit the ability of the Company to make payments or awards
to Participants under any other plan, agreement or arrangement.


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(b)           Non-transferability.  The rights and benefits of a Participant
hereunder are personal to the Participant and, except for payments made
following a Participant’s death, shall not be subject to any voluntary or
involuntary alienation, assignment, pledge, transfer, encumbrance, attachment,
garnishment or other disposition.


(c)           No
Impact on Benefits.  Awards under
this Plan shall not constitute compensation for the purpose of determining participation
or benefits under any other plan of the Company unless specifically included as
compensation in such plan.


(d)           Withholding
Taxes.  The Company shall have the
right to deduct from Awards any taxes or other amounts required to be withheld
by law.


(e)           No
Limitation on Corporation Action. 
Nothing contained in the Plan shall be construed to prevent the Company
or any Subsidiary from taking any corporate action which is deemed by it to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on any awards made under the Plan.  No Participant or other person shall have any
claim against the Company or any Subsidiary as a result of any such action.


(f)            Governing
Law.  The Plan shall be construed in
accordance with and governed by the laws of the State of Delaware.


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