Document:

Exhibit 10.35

 

FAIRPOINT COMMUNICATIONS, INC.

FORM OF ANNUAL
INCENTIVE PLAN

SECTION 1

PURPOSE

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

SECTION 2

DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

SECTION 3

ADMINISTRATION

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

SECTION 4

DETERMINATION OF AWARDS

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

(b)           Performance
Criteria.  Any performance objective
established pursuant to SECTION 4(a) will be based upon the achievement of one
or more of the following criteria, as determined by the Committee: (i)
revenue growth; (ii) earnings before interest, taxes, depreciation and
amortization; (iii) earnings before interest, taxes and amortization; (iv)
operating income; (v) pre- or after-tax income; (vi) cash flow; (vii)
cash flow per share; (viii) net earnings; (ix) earnings per
share; (x) return on equity; (xi) return on invested capital; (xii)
return on assets; (xiii) economic value added (or an equivalent metric);
(xiv) share price performance; (xv) total shareholder return; (xvi)
improvement in or attainment of expense levels; (xvii) improvement in or
attainment of working capital levels; (xviii) debt reduction; or (xix)
any other criteria the Committee in its sole discretion deems appropriate.  Any of the performance objectives set forth
above may measure performance on a Company-wide basis or with respect to one or
more business

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

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

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

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

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

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

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

SECTION 5

PAYMENT OF AWARDS

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

SECTION 6

EFFECTIVENESS OF PLAN, AMENDMENT AND TERMINATION

The Plan shall be effective as of January 1, 2005.  The Committee may amend, suspend, discontinue
or terminate the Plan at any time and from time to time.  No action under this section which adversely
affects a Participant’s rights to, or interest in, an Award granted prior to
the date of such action shall be effective unless the Participant shall have
agreed thereto in writing.  Unless
earlier terminated, the Plan shall terminate on the day immediately prior to
the first meeting of the stockholders of the Company in 2009 at which directors
will be elected.

SECTION 7

OTHER PROVISIONS

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

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

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

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

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

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

5Exhibit 10.36

FORM OF RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement, dated as of the Grant
Date set forth on the signature page hereof, between FairPoint Communications,
Inc., a Delaware corporation (the “Company”), and the grantee whose name
appears on Schedule A hereto (the “Grantee”), is being entered into
pursuant to the FairPoint Communications, Inc. 2005 Stock Incentive Plan (the “Plan”).  Capitalized
terms used herein without definition have the meaning given in the Plan.

1.  Grant of Restricted
Stock.  The Company hereby evidences
and confirms its grant to the Grantee, effective as of the date hereof (the “Grant
Date”), of the number of Shares specified on Schedule A hereto under the
heading “Restricted Stock.”  All Shares
received by the Grantee under this Agreement are subject to the restrictions
contained herein and are referred to as “Restricted Stock.”  This Agreement is subordinate to, and the
terms and conditions of the Restricted Stock granted hereunder are subject to,
the terms and conditions of the Plan, which are incorporated by reference
herein.  If there is any inconsistency
between the terms hereof and the terms of the Plan, the terms of the Plan shall
govern.

2.  Vesting of Restricted Stock.

(a)  Restricted
Period.  Except for transfers to
Permitted Transferees approved by the Committee and transfers by will or by the
laws of descent and distribution, the Restricted Stock granted hereby may not
be sold, assigned, transferred, pledged, hypothecated or otherwise directly or
indirectly encumbered or disposed of until the end of the Period of
Restriction.  Subject to the Grantee’s
continuous employment with the Company or a Subsidiary, and except as provided
in Section 2(b)(i) or Article IX of the Plan, the Period of Restriction shall
lapse, and the Restricted Stock shall become vested, according to the schedule
set forth below:

	
  Date

  	
   

  	
  % of
  Restricted Stock Becoming Vested

  	
   

  
	
  April 1, 2006

  	
   

  	
  25%

  	
   

  
	
  April 1, 2007

  	
   

  	
  25%

  	
   

  
	
  April 1, 2008

  	
   

  	
  25%

  	
   

  
	
  April 1, 2009

  	
   

  	
  25%

  	
   

  

 

(b)  Termination
of Employment.  Notwithstanding
anything contained in this Agreement to the contrary, (i) if the Grantee’s
employment is terminated by reason of a Qualifying Termination of Employment
during the Period of Restriction, a pro rata portion of any Shares underlying
the Restricted Stock shall become vested and nonforfeitable, based upon the
percentage of which the numerator is the portion of the Period of Restriction
that expired prior to the Grantee’s termination and the denominator is the
number of days in the Period of Restriction., and the remaining Restricted
Stock for

 

 

which
the Period of Restriction has not then expired shall be forfeited and canceled
as of the date of such termination, and (ii) if the Grantee’s employment
is terminated for any other reason during the Period of Restriction, any
Restricted Stock held by the Grantee for which the Period of Restriction has
not then expired shall be forfeited and canceled as of the date of such
termination.

(c)  Committee
Discretion.  Notwithstanding anything
contained in this Agreement to the contrary, the Committee, in its sole
discretion, may accelerate the expiration date of the Period of Restriction
with respect to any Restricted Stock under this Agreement, at such times and
upon such terms and conditions as the Committee shall determine.

3.  Grantee’s
Representations, Warranties and Covenants.

(a)  Investment
Intention.  The Grantee represents
and warrants that the Restricted Stock has been, and any Shares will be,
acquired by the Grantee solely for the Grantee’s own account for investment and
not with a view to or for sale in connection with any distribution
thereof.  The Grantee further
understands, acknowledges and agrees that the Restricted Stock, and any Shares,
may not be transferred, sold, pledged, hypothecated or otherwise disposed of
except to the extent expressly permitted hereby and at all times in compliance
with the U.S. Securities Act of 1933, as amended, and the rules and regulations
of the Securities Exchange Commission thereunder, and in compliance with
applicable state securities or “blue sky” laws and non-U.S. securities laws.

4.  Grantee’s
Rights with Respect to Restricted Stock.

(a)  Rights
as Stockholder.  The Grantee shall
have, with respect to all Restricted Stock, the right to vote such Restricted
Stock, but shall otherwise enjoy none of the rights of a stockholder (including
the right to receive dividends and Dividend Equivalents) unless and until the
expiration of the Period of Restriction with respect to such Restricted Stock.  Any securities issued to or received by the
Grantee with respect to Restricted Stock as a result of a stock split, a
combination of shares or any other change or exchange of the Restricted Stock
for other securities, by reclassification, reorganization, distribution,
liquidation, merger, consolidation, or otherwise, shall have the same status,
be subject to the same restrictions and bear the same legend as the Shares of
Restricted Stock such securities are issued for, and shall be held by the
Company for as long as the Shares of 
Restricted Stock such securities are issued for are so held, unless
otherwise determined by the Committee.

(b)  Legend.  Until the expiration of the Period of
Restriction, each certificate evidencing Shares subject to the Grantee’s
Restricted Stock shall be registered in the Grantee’s name and shall bear the
following legend: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS

2

 

(INCLUDING
FORFEITURE) CONTAINED IN THE FAIRPOINT COMMUNICATIONS, INC. 2005 STOCK
INCENTIVE PLAN AND A RESTRICTED STOCK AGREEMENT ENTERED INTO THEREUNDER, AND
NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR
OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH SUCH PLAN AND AGREEMENT,
COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY.”

5.  Change in
Control.  In the event of a Change in
Control, all of the Grantee’s Shares of Restricted Stock shall be treated in
accordance with the provisions of Article IX of the Plan.

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

7.  Miscellaneous.

(a)  Binding Effect; Benefits.  This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns.  Nothing in this
Agreement, express or implied, is intended or shall be construed to give any
person other than the parties to this Agreement or their respective successors
or assigns any legal or equitable right, remedy or claim under or in respect of
any agreement or any provision contained herein.

(b)  Amendment.  This Agreement may not be amended, modified
or supplemented orally, but only by a written instrument executed by the
Grantee and the Company.

(c)  Assignability.  Neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or
by reason hereof shall be assignable by the Company or Grantee without the
prior written consent of the other party; provided that the Company may assign
all or any portion of its rights or obligations under this Agreement to one or
more persons or other entities designated by it.

3

 

(d)  Applicable
Law.  This Agreement 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.

(e)  Severability;
Blue Pencil.  In the event that any
one or more of the provisions of this Agreement 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.

(f)  Consent
to Electronic Delivery.  By executing
this Agreement, Grantee hereby consents to the delivery of information
(including, without limitation, information required to be delivered to the
Grantee pursuant to applicable securities laws) regarding the Company and the
Subsidiaries, the Plan, and the Restricted Stock via Company web site or other
electronic delivery.

(g)  Section
and Other Headings, etc.  The section
and other headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.

(h)  Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.

— Signature page follows —

 

4

IN WITNESS WHEREOF, the Company and Grantee have
executed this Agreement as of the Grant Date.

	
   

  	
  FAIRPOINT
  COMMUNICATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANTEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  

 

5

 

Schedule
A

 

	
  Grantee

  	
   

  
	
  Grantee’s
  Address

  	
   

  
	
  Grant
  Date

  	
   

  
	
  Total Number of Shares of Restricted

  Stock
  Which Have Been Granted

  	
   

  

 

6

 

STOCK POWER

 

FOR VALUE RECEIVED,
the undersigned,                                                                                              ,

hereby assigns and transfers
to the Secretary of FairPoint Communications, Inc., a Delaware corporation (the
“Company”), ____ shares of common stock, par value $.01 per share, of the
Company, standing in the undersigned’s name on the books of the Company,
represented by Certificate No. ____ herewith and does hereby irrevocably
constitute and appoint the Secretary of the Company attorney to transfer said
stock on the books of the Company with full power of substitution in the
premises.

 

 

	
   

  	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

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