Document:

Exhibit 10.2

 

FAIRPOINT COMMUNICATIONS, INC.

 

2008 LONG TERM INCENTIVE PLAN

 

1

 

TABLE OF CONTENTS

 

	
   

  	
  
  Page

  

  
	
   

  	
   

  
	
  ARTICLE
  I PURPOSES

  	
  5

  
	
   

  	
   

  
	
  ARTICLE
  II POWERS OF THE COMMITTEE

  	
  5

  
	
   

  	
   

  
	
  2.1
  POWER TO GRANT AWARDS

  	
  5

  
	
   

  	
   

  
	
  2.2
  ADMINISTRATION

  	
  5

  
	
   

  	
   

  
	
  2.3
  PROHIBITION AGAINST REPRICING

  	
  5

  
	
   

  	
   

  
	
  2.4
  DELEGATION BY THE COMMITTEE

  	
  5

  
	
   

  	
   

  
	
  2.5
  PARTICIPANTS BASED OUTSIDE THE UNITED STATES

  	
  6

  
	
   

  	
   

  
	
  ARTICLE
  III STOCK SUBJECT TO PLAN

  	
  6

  
	
   

  	
   

  
	
  3.1
  NUMBER

  	
  6

  
	
   

  	
   

  
	
  3.2
  CANCELED, TERMINATED, OR FORFEITED AWARDS; AWARDS SETTLED FOR CASH

  	
  6

  
	
   

  	
   

  
	
  3.3
  INDIVIDUAL AWARD LIMITATIONS

  	
  6

  
	
   

  	
   

  
	
  3.4
  ADJUSTMENT IN CAPITALIZATION

  	
  6

  
	
   

  	
   

  
	
  ARTICLE
  IV STOCK OPTIONS

  	
  7

  
	
   

  	
   

  
	
  4.1
  GRANT OF OPTIONS

  	
  7

  
	
   

  	
   

  
	
  4.2
  EXERCISE PRICE

  	
  7

  
	
   

  	
   

  
	
  4.3
  VESTING AND EXERCISABILITY

  	
  7

  
	
   

  	
   

  
	
  4.4
  PAYMENT

  	
  7

  
	
   

  	
   

  
	
  4.5
  TERMINATION OF EMPLOYMENT

  	
  7

  
	
   

  	
   

  
	
  ARTICLE
  V STOCK APPRECIATION RIGHTS

  	
  8

  
	
   

  	
   

  
	
  5.1
  GRANT OF STOCK APPRECIATION RIGHTS

  	
  8

  
	
   

  	
   

  
	
  5.2
  TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

  	
  8

  
	
   

  	
   

  
	
  5.3
  PAYMENT OF STOCK APPRECIATION RIGHT AMOUNT

  	
  8

  
	
   

  	
   

  
	
  ARTICLE
  VI RESTRICTED STOCK AND RESTRICTED UNITS

  	
  8

  
	
   

  	
   

  
	
  6.1
  GRANT OF RESTRICTED STOCK AND RESTRICTED UNITS

  	
  8

  
	
   

  	
   

  
	
  6.2
  VESTING OF RESTRICTED STOCK AND RESTRICTED UNITS

  	
  8

  
	
   

  	
   

  
	
  6.3
  DIVIDENDS; DIVIDEND EQUIVALENTS

  	
  9

  
	
   

  	
   

  
	
  6.4
  TERMINATION OF EMPLOYMENT

  	
  9

  
	
   

  	
   

  
	
  6.5
  SETTLEMENT OF RESTRICTED UNITS

  	
  9

  
	
   

  	
   

  
	
  ARTICLE
  VII PERFORMANCE AWARDS

  	
  9

  
	
   

  	
   

  
	
  7.1
  GRANT OF PERFORMANCE STOCK AND PERFORMANCE UNITS

  	
  9

  

 

2

 

	
  7.2
  PERFORMANCE CRITERIA

  	
  10

  
	
   

  	
   

  
	
  7.3
  DIVIDENDS; DIVIDEND EQUIVALENTS

  	
  10

  
	
   

  	
   

  
	
  7.4
  TERMINATION OF EMPLOYMENT

  	
  11

  
	
   

  	
   

  
	
  7.5
  SETTLEMENT OF PERFORMANCE UNITS

  	
  11

  
	
   

  	
   

  
	
  7.6
  NEWLY ELIGIBLE PARTICIPANTS

  	
  11

  
	
   

  	
   

  
	
  ARTICLE
  VIII DEFERRED SHARES

  	
  11

  
	
   

  	
   

  
	
  8.1
  DEFERRED SHARE AWARDS

  	
  11

  
	
   

  	
   

  
	
  8.2
  VESTING OF DEFERRED SHARES AND SUPPLEMENTAL UNITS

  	
  12

  
	
   

  	
   

  
	
  8.3
  DIVIDEND EQUIVALENTS

  	
  12

  
	
   

  	
   

  
	
  8.4
  TERMINATION OF EMPLOYMENT

  	
  12

  
	
   

  	
   

  
	
  8.5
  SETTLEMENT OF DEFERRED SHARES

  	
  12

  
	
   

  	
   

  
	
  8.6
  FURTHER DEFERRAL ELECTIONS

  	
  13

  
	
   

  	
   

  
	
  ARTICLE
  IX CHANGE IN CONTROL

  	
  13

  
	
   

  	
   

  
	
  9.1
  ACCELERATED VESTING AND PAYMENT

  	
  13

  
	
   

  	
   

  
	
  9.2
  ALTERNATIVE AWARDS

  	
  13

  
	
   

  	
   

  
	
  9.3
  TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL

  	
  14

  
	
   

  	
   

  
	
  ARTICLE
  X STOCKHOLDER RIGHTS

  	
  14

  
	
   

  	
   

  
	
  ARTICLE
  XI FORFEITURE AND RECOUPMENT FOR FINANCIAL REPORTING MISCONDUCT

  	
  14

  
	
   

  	
   

  
	
  ARTICLE
  XII SECTION 409A OF THE CODE

  	
  14

  
	
   

  	
   

  
	
  ARTICLE
  XIII AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

  	
  15

  
	
   

  	
   

  
	
  ARTICLE
  XIV DEFINITIONS

  	
  15

  
	
   

  	
   

  
	
  14.1
  CERTAIN DEFINITIONS

  	
  15

  
	
   

  	
   

  
	
  14.2
  GENDER AND NUMBER

  	
  18

  
	
   

  	
   

  
	
  ARTICLE
  XV MISCELLANEOUS PROVISIONS

  	
  18

  
	
   

  	
   

  
	
  15.1
  NONTRANSFERABILITY OF AWARDS

  	
  18

  
	
   

  	
   

  
	
  15.2
  BENEFICIARY DESIGNATION

  	
  18

  
	
   

  	
   

  
	
  15.3
  NO GUARANTEE OF EMPLOYMENT OR PARTICIPATION

  	
  19

  
	
   

  	
   

  
	
  15.4
  TAX WITHHOLDING

  	
  19

  
	
   

  	
   

  
	
  15.5
  COMPLIANCE WITH LEGAL AND EXCHANGE REQUIREMENTS

  	
  19

  
	
   

  	
   

  
	
  15.6
  INDEMNIFICATION

  	
  19

  

 

3

 

	
  15.7
  LEGEND

  	
  19

  
	
   

  	
   

  
	
  15.8
  EFFECTIVE DATE

  	
  20

  
	
   

  	
   

  
	
  15.9
  NO LIMITATION ON COMPENSATION

  	
  20

  
	
   

  	
   

  
	
  15.10
  GOVERNING LAW

  	
  20

  
	
   

  	
   

  
	
  15.11
  SEVERABILITY; BLUE PENCIL

  	
  20

  
	
   

  	
   

  
	
  15.12
  NO IMPACT ON BENEFITS

  	
  20

  
	
   

  	
   

  
	
  15.13
  NO CONSTRAINT ON CORPORATE ACTION

  	
  20

  
	
   

  	
   

  
	
  15.14
  HEADINGS AND CAPTIONS

  	
  20

  

 

4

 

FAIRPOINT COMMUNICATIONS, INC.

 

2008 LONG TERM INCENTIVE PLAN

 

ARTICLE I

 

Purposes

 

This FairPoint
Communications, Inc. 2008 Long Term Incentive Plan is intended to foster
and promote the long term financial success of the Company and the Subsidiaries
and increase total stockholder 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,
officers and directors upon whose judgment, interest and special effort the
successful conduct of its operations is largely dependent. Capitalized terms
are defined in Article XIV.

 

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  Prohibition
Against Repricing.  Except to the extent (i) approved in
advance by holders of a majority of the shares of the Company entitled to vote
generally in the election of directors or (ii) as a result of any
Adjustment Event, the Committee shall not have the power or authority to
reduce, whether through amendment or otherwise, the exercise price of any
outstanding Option or base price of any outstanding Stock Appreciation Right or
to grant any new Award, or make any cash payment, in substitution for or upon
the cancellation of Options or Stock Appreciation Rights previously granted.

 

2.4  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 any “covered employee” (as determined under Section 162(m) of
the Code and the regulations thereunder) of the Company or any other individual
whose compensation the Board or Committee reasonably believes may become
subject to Section 162(m) of the Code.

 

5

 

2.5  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 9,500,000
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.

 

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 (including Shares tendered by a
Participant to pay the exercise price of any Options or to satisfy any tax
withholding obligations) shall be available for further Awards under this Plan.
Any Shares repurchased by the Company with Option proceeds shall be available
for Awards under this Plan. For purposes of this Article III, if a Stock
Appreciation Right is granted in tandem with an Option so that only one may be
exercised with the other being surrendered on such exercise, the number of
Shares subject to the tandem Option and Stock Appreciation Right award shall
only be taken into account once (and not as to both Awards).

 

3.3  Individual
Award Limitations.  Subject to Sections 3.1 and 3.4, (a) 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; (b) the maximum number of Shares available for grant as ISOs
pursuant to the Plan shall not exceed $100,000 in value in any calendar year;
and (c) the maximum number of Shares available for grant as Restricted
Stock, Restricted Units, Performance Stock or Performance Units to any one
Participant in any calendar year shall be 500,000.

 

3.4  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 (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 for a fractional Share. The
number of Shares subject to any Option or other Award shall always be a whole
number.

 

6

 

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 a 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.

 

4.2  Exercise
Price.  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 Participant (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 XII, in the event a Participant’s
employment terminates by reason of death or 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 Participant’s employment terminates for any reason other than death, 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 90-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.

 

7

 

ARTICLE V

 

Stock Appreciation Rights

 

5.1  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.

 

5.2  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.

 

5.3  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.

 

ARTICLE VI

 

Restricted Stock and Restricted Units

 

6.1  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.

 

6.2  Vesting of
Restricted Stock and Restricted Units.  Restricted Stock or Restricted Units granted
pursuant to Section 6.1 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; provided that with
respect to any Award of Restricted Stock or Restricted Units to any Participant
other than a member of the Board who is not employed by the Company or a
Subsidiary, the Period of Restriction shall not lapse (i) on any portion
of such Award prior to the first anniversary of the grant date, (ii) with
respect to more than one third of the shares or units underlying such Award
prior to the second anniversary of the grant date, and (iii) with respect
to more than two thirds of the shares or units underlying such Award prior to
the third anniversary of the grant date.

 

8

 

6.3  Dividends;
Dividend Equivalents.

 

(a)           Restricted
Stock.  The Committee will
determine at the time of grant whether and to what extent Participants holding
outstanding Restricted Stock shall be entitled to receive any dividends paid
with respect to such Shares of Restricted Stock.

 

(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.

 

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 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
Restricted Stock or Restricted Units 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 because of the
Participant’s death during the Period of Restriction, any Shares related to a
Restricted Stock or Restricted Unit held by such Participant shall become
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 death or 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.

 

6.5  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 VII

 

Performance Awards

 

7.1  Grant of
Performance Stock and Performance Units.  The Committee shall have the authority to
grant Performance Stock or Performance Units to any Participant and to
determine (a) the number of Performance Stock and the number of
Performance 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 7.2
not being met in whole or in part and (c) the other terms and conditions
of such Awards. Each grant of Performance Stock or Performance Units shall be
evidenced by a written agreement setting forth the terms of such Award.

 

9

 

7.2  Performance
Criteria.

 

(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 stockholder return; (xvi) improvement
in or attainment of expense levels; (xvii) improvement in or attainment of
working capital levels; or (xviii) debt reduction. Any of the performance
objectives set forth above may measure performance on a Company-wide basis or
with respect to one or more business 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.

 

(b)           When establishing performance
objectives for the applicable Performance Period, the Committee may exclude any
or all “extraordinary items” as determined under U.S. generally acceptable
accounting principles including, without limitation, the charges or costs
associated with restructurings of the Company, discontinued operations, other
unusual or nonrecurring items, and the cumulative effects of accounting
changes, and as identified in the Company’s financial statements, notes to 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.

 

(c)           The Performance Criteria related to
Performance Stock or Performance 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.
The Committee shall have the right to reduce or eliminate the portion of an
Award that might otherwise vest hereunder based on individual performance or
any other factors that the Committee, in its discretion, shall deem
appropriate.

 

7.3  Dividends;
Dividend Equivalents.

 

(a)           Performance
Stock.  The Committee will
determine whether and to what extent Participants who are granted Performance
Stock shall be entitled to receive cash dividends.

 

(b)           Performance
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 Performance 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 Performance 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
Performance 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 Performance Unit credited
in respect of Dividend Equivalents shall become vested and nonforfeitable, if
at all, on the same terms and conditions as are

 

10

 

applicable in respect of the Performance Unit with respect to which
such Dividend Equivalents were payable.

 

7.4  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
Performance Stock or Performance Units shall become vested and nonforfeitable
at the end of the Performance Period as to that number of such Performance
Stock or Performance 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 that a Participant’s
employment terminates because of death during the Performance Period, any award
of Performance Stock or Performance Units shall become vested and
nonforfeitable at the end of the Performance Period as to that number of such
Performance Stock or Performance 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. 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 death or a Qualifying Termination of Employment during the
Performance Period, any Performance Stock or Performance Units held by such
Participant shall be forfeited and cancelled as of the date of such termination
of employment.

 

7.5  Settlement of Performance Units.  Unless otherwise determined by the Committee
at or after the date of grant, when the Performance Criteria with respect to an
Award of Performance Units is achieved and the Performance Units become vested
and nonforfeitable, the Participant shall receive (i) one Share for each
such Performance Unit (including additional Performance Units credited in
respect of Dividend Equivalents, if any) or (ii) such form of Award as
elected by the Participant and approved by the Committee at or after the time
of grant, including without limitation, cash, Common Stock, other awards, or
other property, or any combination, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case determined in
accordance with rules adopted by, and at the discretion of, the Committee.

 

7.6  Newly Eligible Participants.  Notwithstanding anything in this Article VII
to the contrary, the Committee shall be entitled to make such rules,
determinations and adjustments as it deems appropriate with respect to any
Participant who becomes eligible to receive an Award of Performance Stock or
Performance Units after the commencement of a Performance Period.

 

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

 

11

 

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 (“Deferral Agreement”).

 

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 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 death or 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 death, a Qualifying Termination
of Employment or without 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.

 

12

 

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.

 

ARTICLE IX

 

Change in Control

 

9.1  Accelerated Vesting and Payment.  Subject to the provisions of Section 9.2,
in the event of a Change in Control, (a)(i) all Options and Stock
Appreciation Rights shall become exercisable, (ii) the Period of
Restriction on all Restricted Stock, Restricted Units and freestanding Deferred
Stock shall lapse immediately prior to such Change of Control, (iii) shares
of Common Stock underlying Awards of Restricted Units and Deferred Stock shall
be issued to each Participant then holding such Award immediately prior to such
Change in Control or, at the discretion of the Committee (as constituted
immediately prior to the Change in Control), (iv) any Performance Period
in progress at the time of the Change in Control for which Performance Stock or
Performance Units are outstanding shall end effective upon the occurrence of
such Change in Control and all Participants granted such Awards shall be deemed
to have earned in full such Participant’s Target Performance award opportunity
with respect to such Award for the Performance Period in question and (b) in
connection with the foregoing the Committee (as constituted immediately prior
to the Change in Control) may provide that each such Option, Stock Appreciation
Right, Restricted Unit, Deferred Stock and/or vested Performance Unit shall be
canceled in exchange for an amount equal to the product of (X)(I) in the
case of Options and Stock Appreciation Rights, the excess, if any, of the
product of the Change in Control Price over the exercise price for such Award,
and (II) in the case of other such Awards, the Change in Control Price,
multiplied by (Y) the aggregate number of Shares covered by such Award.

 

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

 

13

 

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
(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 stockholders 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

 

Forfeiture and
Recoupment for Financial Reporting Misconduct.

 

If within
twelve months of the payment of any Award made under the Plan, the Company is
required to prepare an accounting restatement due to material noncompliance by
the Company with any financial reporting requirement under the securities laws,
then the Participant, whether or not he engaged in any misconduct, shall
forfeit and disgorge to the Company the payment of any Award or portion thereof
that would not have been earned hereunder absent such materially non-complying
financial reporting.

 

ARTICLE XII

 

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.

 

14

 

ARTICLE XIII

 

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 tenth anniversary of
the date it is approved by the Company’s stockholders.

 

ARTICLE XIV

 

Definitions

 

14.1  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.

 

“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, Performance Stock, Performance 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:

 

(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

 

15

 

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 benefit plan of the
Company or the Subsidiaries of 35% 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 35% 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.

 

Notwithstanding
the foregoing, a “Change in Control” shall not be deemed to occur (1) in
the event the Company files for bankruptcy, liquidation or reorganization under
the United States Bankruptcy Code and (2) upon the consummation of the
merger contemplated to occur pursuant to the Agreement and Plan of Merger dated
as of January 15, 2007 by and among Verizon Communications Inc.,
Northern New England Spinco Inc. and FairPoint Communications, Inc.

 

“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.

 

“Deferral Agreement” has the meaning given
in Section 8.1.

 

“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

 

16

 

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 or employee,
including a member of the Board, employed by the Company or a Subsidiary on a
regular, full time basis, 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.

 

“ISOs” has the meaning given in Section 4.1.

 

“Normal Retirement” means a termination of
the Participant’s employment after attaining age 60 and completing at least
10 years of service.

 

“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 7.2.

 

“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; provided, that the duration of any Performance Period shall be at
least twelve months.

 

“Performance Stock” shall mean an award of
Common Stock that is forfeitable until the achievement of specified Performance
Criteria as provided for in Section 7.1.

 

“Performance Unit” shall mean a contractual
right to receive Common Stock, or, at the discretion of the Committee, cash
based on the Fair Market Value of Common Stock, made pursuant to Section 7.1
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.

 

“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 15.1.

 

“Plan” means this FairPoint Communications, Inc.
2008 Long Term Incentive Plan, as the same may be amended from time to time.

 

“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 Disability, early retirement
with the consent of the Committee or Normal Retirement.

 

17

 

“Restricted Stock” means an award of Common
Stock made pursuant to Section 6.1 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, at the discretion of the Committee, cash based on
the Fair Market Value of Common Stock, made pursuant to Section 6.1 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.

 

“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 V 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.

 

14.2  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 XV

 

Miscellaneous Provisions

 

15.1  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.

 

15.2  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 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.

 

18

 

15.3  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.

 

15.4  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).

 

15.5  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.

 

15.6  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.

 

15.7  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.

 

19

 

15.8  Effective Date.  The Plan shall be effective upon its approval
by the Company’s stockholders.

 

15.9  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.

 

15.10  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.

 

15.11  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.

 

15.12  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.

 

15.13  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.

 

15.14  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.

 

20Exhibit
10.3

 

FAIRPOINT
COMMUNICATIONS, INC.

PERFORMANCE UNIT AWARD AGREEMENT

FOR PERFORMANCE PERIOD

BEGINNING             

 

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

 

W I T N E S S E T H:

 

WHEREAS,
the Compensation Committee of the Board of Directors of the Company (the “Committee”)
desires to award the Participant Performance Units under the Company’s 2008
Long Term Incentive Plan (the “Plan”) for the Performance Period
beginning                   
and ending                                       
(the “Performance Period”); and

 

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

 

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

 

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

 

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

 

3.             The number of Performance
Units earned by the Participant shall be based on the levels of performance
achieved during the Performance Period as set forth on Exhibit A
attached hereto.  The performance levels achieved for the
Performance Period (Threshold, Target or Maximum) and the number of Performance
Units earned by the Participant shall be determined by the Committee following
the expiration of the Performance Period.

 

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

 

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

 

 

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

 

6.             In the
event a Change in Control occurs before the end of the Performance Period,
Shares for one hundred percent (100%) of the Performance Units awarded to the
Participant hereunder shall be distributed to the Participant at the Target
Performance (as defined in Exhibit A) level without any adjustment
for the levels of performance actually achieved during the Performance Period
prior to or after the Change in Control. 
Any Shares to be distributed in respect of the Performance Units earned
by the Participant upon a Change in Control will be delivered to the
Participant immediately prior to the Change in Control.

 

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

 

8.             Participants
may elect, by entering into a Deferral Agreement with the Company, to defer
delivery of all (or any portion) of the Shares otherwise payable to the
Participant in respect of the Performance Units earned by the Participant.  To be effective, the Participant must
complete and return the Deferral Agreement to the Company in accordance with
procedures established by the Committee.

 

9.             The Performance Units
awarded hereunder to the Participant shall not entitle the Participant to any
rights as a shareholder of the Company.

 

10.           The Participant’s
award under this Agreement and the Plan may not be assigned or alienated.  Subject to any limitations under the Plan on
transferability, this Agreement will be binding upon and inure to the benefit
of the heirs, legatees, legal representatives, successors and assigns of the
parties hereto.  Neither the Plan, nor
this Agreement, nor any action taken under the Plan or this Agreement shall be
construed as giving to the Participant the right to be retained in the employ
of the Company.

 

11.           Any distribution
of Shares may be delayed until the requirements of any applicable laws or
regulations or any stock exchange requirements are satisfied.  The Shares distributed to the Participant
shall be subject to such restrictions and conditions on disposition as counsel
for the Company shall determine to be desirable or necessary under applicable
law.

 

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

3

 

EXHIBIT A

 

PERFORMANCE CRITERIA

 

FOR THE

 

PERFORMANCE PERIOD BEGINNING
                            
AND ENDING            

 

Definitions:

 

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

 

“Maximum Performance” means:

 

(a)           for the Total Shareholder Return performance measure, the Company’s Total
Shareholder Return for the Performance Period is greater than or equal to the
Total Shareholder Return of 60% of the companies comprising the
Telecommunications Peer Group.

 

(b)           for the Adjusted EBITDA performance measure, the Company’s Adjusted
EBITDA for the Performance Period exceeds the Target Adjusted EBITDA by 5% or
more.

 

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

 

“Target Performance” means:

 

(a)           for the Total Shareholder Return performance measure, the Company’s Total
Shareholder Return for the Performance Period is greater than or equal to the
Total Shareholder Return of 40% of the companies comprising the
Telecommunications Peer Group; and

 

(b)           for the Adjusted EBITDA performance measure, the Company’s Adjusted
EBITDA for the Performance Period equals the Target Adjusted EBITDA.

 

“Telecommunications Peer Group” means all of the companies included in the Dow Jones Telecommunication
Index on both the first and last day of the Performance Period.

 

“Threshold Performance”
means:

 

 

(a)           for the Total Shareholder Return performance measure, the Company’s Total
Shareholder Return for the Performance Period is greater than or equal to the
Total Shareholder Return of 20% of the companies comprising the
Telecommunications Peer Group; and

 

(b)           for the Adjusted EBITDA performance measure, the Company’s Adjusted
EBITDA for the Performance Period equals at least 95% of the Target Adjusted
EBITDA.

 

“Total Shareholder Return” means, with respect to a company for the Performance Period, the
percentage determined by dividing the sum of Amount A plus Amount B
by Amount C where:

 

Amount A is (i) the
average of the closing prices for one share of such company’s common stock
during the 30 days trading period immediately preceding the expiration of the
Performance Period minus (ii) the
average of the closing prices for one share of such stock during the 30 day
trading period immediately preceding the beginning of the Performance Period.

 

Amount B is (i) the
number of shares of such company’s common stock that would have been purchased
during the Performance Period if all dividends paid during the Performance
Period had been reinvested in such stock multiplied by (ii) the
average of the closing prices for one share of such company’s common stock
during the 30 days trading period immediately preceding the expiration of the
Performance Period.

 

Amount C is the average of the closing prices for one share of such company’s common
stock during the 30 days trading period immediately preceding the beginning of
the Performance Period.

 

Performance Measures:

 

Adjusted EBITDA. 
The Company’s Adjusted EBITDA for the Performance Period will determine
the extent to which 30% of the target number of Performance Units are earned.

 

	
  Adjusted EBITDA for the

  Performance Period

  	
   

  	
  Percentage of Target Performance Units

  Earned Based on Adjusted EBITDA

  	
   

  
	
  Below Threshold Performance

  	
   

  	
  0

  	
  %

  
	
  Threshold Performance

  	
   

  	
  40

  	
  %

  
	
  Target Performance

  	
   

  	
  100

  	
  %

  
	
  Maximum Performance or Above

  	
   

  	
  200

  	
  %

  

 

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

 

2

 

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.

 

3

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