FairPoint Communications 2006 Annual Report Download - page 110


In determining the long-term incentive component of the chief executive officer’s compensation, the compensation committee considers, among other
factors selected by the compensation committee, FairPoint’s performance and relative shareholder return, the value of similar incentive awards to chief
executive officers at comparable companies, and the awards given to the chief executive officer in past years. With respect to the amount of long-term incentive
awards for non-chief executive officer management and key employees, the compensation committee considers the recommendation of the chief executive officer
and takes into account the amount of long term incentive awards granted to peer executives among comparable companies. The compensation committee
obtains market compensation data from a compensation consultant.
The compensation committee determines the vesting schedule for future stock awards under the 2005 Stock Incentive Plan and considers past award
levels and their vesting when making current determinations.
The compensation committee is considering the adoption of a policy relating to the re-coupment of stock awards and their proceeds if an NEO’s fraud or
misconduct triggers a material financial restatement. No such policy currently exists. The Company does not in any way time its stock awards to the release of
material non-public information.

We maintain a nonqualified deferred compensation plan (the NQDC Plan) for NEOs and other select executives in order to enable them to defer
compensation in excess of the limits applicable to them under our 401(k) plan. Company matching contributions are made according to the same percentage of
deferrals as is made under our 401(k) plan, but only with respect to compensation that exceeds the limits for the 401(k).

Prior to 2007, certain of our executive officers received Company-provided supplemental life and disability insurance, use of a Company-provided
vehicle and, for our chief executive officer, payment of country club dues. The compensation committee provides perquisites to certain key executives that it
believes are reasonable and consistent with its overall compensation program to better enable us to attract and retain superior employees for key positions.

Our NEOs participate in our standard broad-based 401(k) and welfare plans, and thereby receive, for example, group health insurance, group term life
insurance and short-term and long-term disability insurance. The costs of these benefits constitutes only a small percentage of each of our executive officer’s
total compensation.

We provide post-employment severance and change-in-control benefits to Mr. Johnson, pursuant to an employment agreement, and to Mr. Leach,
Mr. Nixon, Mr. Crowley and Ms. Linn, pursuant to offer letters. The severance benefits for these executives are generally paid only if the executives are
terminated without cause and they do not voluntarily resign. The severance benefits are also provided if are termination of employment occurs because of a
change in control. In addition to severance payments, each executive is entitled to continued welfare benefits for a limited period. Mr. Johnson’s severance
benefits are also subject to a covenant not to compete with us.
108