Exhibit 10.31


 


FAIRPOINT
COMMUNICATIONS, INC.


PERFORMANCE
UNIT AWARD AGREEMENT


FOR
PERFORMANCE PERIOD


BEGINNING
JULY 1, 2009 AND ENDING DECEMBER 31, 2010


 


THIS PERFORMANCE UNIT AWARD
AGREEMENT (this “Agreement”), 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, 2010 (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 914,286 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,
2010, but no later than March 15, 2011 (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 eighteen (18).


 


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 


 

















 


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, 2010


 


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.


 

















 


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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