Exhibit 10.2


 


FAIRPOINT COMMUNICATIONS, INC.


PERFORMANCE UNIT AWARD AGREEMENT


FOR PERFORMANCE PERIOD


BEGINNING JANUARY 1, 2009 THROUGH DECEMBER 31, 2011


 


THIS
PERFORMANCE UNIT AWARD AGREEMENT (this “Agreement”), made and entered
into this          day of             ,
2009, by and between FairPoint Communications, Inc. (the “Company”)
and «Name»  (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 January 1, 2009 and ending December 31, 2011 (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 «Target Award» 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 December 31, 2011, 


 

















 


but
no later than March 15, 2012 (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.


 


2

















 


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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  «Name»

  



 


3

















 


EXHIBIT A


 


PERFORMANCE CRITERIA


FOR THE


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


 


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 50% of the target number
of Performance Units are earned.


 


	
  Adjusted EBITDA for the

  Performance Period

  	
   

  	
  Percentage of Target Performance Units

  Earned Based on Adjusted EBITDA

  	
   

  
	
  Below Threshold Performance

  	
   

  	
  0

  	
  %

  
	
  Threshold Performance

  	
   

  	
  40

  	
  %

  
	
  Target Performance

  	
   

  	
  100

  	
  %

  
	
  Maximum Performance or Above

  	
   

  	
  200

  	
  %

  



 


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


 

















 


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


 


	
  Company’s Total Shareholder

  Return

  	
   

  	
  Percentage of Target Performance Units

  Earned Based on Total Shareholder Return

  	
   

  
	
  Below Threshold Performance

  	
   

  	
  0

  	
  %

  
	
  Threshold Performance

  	
   

  	
  40

  	
  %

  
	
  Target Performance

  	
   

  	
  100

  	
  %

  
	
  Maximum Performance or Above

  	
   

  	
  200

  	
  %

  



 


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