FairPoint Communications 2004 Annual Report Download - page 133

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In February 2005, the Company adopted the FairPoint Communications, Inc. Annual Incentive Plan, or the annual incentive plan, that
provides for the award of incentive bonuses to our named executive officers and certain of our other officers and employees. Each year our
compensation committee will establish target incentive bonuses for participants in the annual incentive plan and will select the eligible
participants and performance criteria for that year for a participant or group of participants.
The actual bonus payable to a participant, which may equal, exceed or be less than the target bonus, will be determined based on
whether the applicable performance targets are met, exceeded or not met. Performance targets may be based on one or more of the following
criteria: (i) revenue growth; (ii) earnings before interest, taxes, depreciation and amortization; (iii) operating income; (iv) pre- or after-tax
income; (v) cash flow; (vi) cash flow per share; (vii) net earnings; (viii) earnings per share; (ix) return on equity; (x) return on invested capital;
(xi) return on assets; (xii) economic value added (or an equivalent metric); (xiii) share price performance; (xiv) total shareholder return;
(xv) improvement in or attainment of expense levels; (xvi) improvement in or attainment of working capital levels; (xvii) debt reduction; or
(xviii) any other criteria our compensation committee in its sole discretion deems appropriate. The maximum bonus payable to a participant
in any plan year is $1,000,000.
Bonuses will generally be payable as soon as practicable after our compensation committee certifies that the applicable performance
criteria have been obtained, and will generally be payable only if the participant remains employed with us through the end of the plan year,
subject to the discretion of our compensation committee to allow payment after a participant's termination of employment.
If a participant in the plan dies, becomes disabled or retires prior to the end of any plan year, our compensation committee may award to
the participant (or his or her estate or legal representative) a partial bonus as it determines appropriate based on the portion of the year the
participant worked. In addition, our compensation committee may require that a portion of a participant's annual incentive bonus be payable
in shares of common stock, options or other stock-based awards granted under our 2005 stock incentive plan described above, which awards
may also be subject to additional vesting or other restrictions determined by our compensation committee.
The annual incentive plan will be administered by our compensation committee, which may delegate its authority except to the extent
that it relates to the compensation of our named executive officers or any other individual whose compensation the board of directors or the
compensation committee reasonably believes may become subject to Section 162(m) of the Internal Revenue Code. The annual incentive
plan will expire one day prior to the date of the first meeting of our stockholders in 2009 at which directors will be elected. However, our
compensation committee may at any time amend, suspend, discontinue or terminate the annual incentive plan, provided that any such
amendment, suspension, discontinuance or termination does not adversely affect participants' rights without their consent. The
determination of our compensation committee on all matters relating to the annual incentive plan will be final and binding on us, participants
and all other interested parties.
Section 162(m) of the Internal Revenue Code generally limits the ability of a public corporation to deduct compensation greater than
$1,000,000 paid with respect to a particular year to an individual who is, on the last day of that year, the corporation's chief executive officer or
one of its four other most highly compensated executive officers, other than compensation that is "performance based" within the meaning of
Section 162(m). Under a special rule that applies to corporations that become public through an initial public offering, this limitation generally
will not apply to compensation that is paid pursuant to the plans described above before the first meeting of our stockholders in 2009 at which
directors will be elected.
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