FairPoint Communications 2009 Annual Report Download - page 185

Table of Contents
units will be earned over the performance period beginning January 1, 2009 and ending December 31, 2011. One share of the Company's common
stock will be delivered to each performance unit holder for each earned performance unit as soon as administratively feasible after the end of the
performance period.
The extent to which the units are earned will be determined based on the following two performance metrics:
• The Company's Adjusted EBITDA for the performance period will determine how 50% of the units will be earned.
The number of units earned will be based on a comparison of the Company's Adjusted EBITDA for the performance period compared to
a cumulative, aggregate Adjusted EBITDA target for the performance period set by the compensation committee at the time of the award.
• The Company's percentile ranking for total stockholder return performance in comparison to a peer group will
determine the extent to which the remaining 50% of units are earned. The peer group is composed of the companies included in the Dow
Jones Telecommunications Index.
The compensation committee selected Adjusted EBITDA as a performance metric because Adjusted EBITDA measures the efficiency of the
Company's operations better than the Company's reported net earnings. The compensation committee selected the relative total stockholder return
performance metric because it will provide compensation to the executive officers based on the return delivered by the Company to its stockholders in
comparison to the Company's peers.

The Company and Mr. Hauser negotiated and subsequently entered into an employment agreement that sets forth the terms and conditions of
Mr. Hauser's employment as Chairman and CEO for a three-year term commencing July 1, 2009. Under the agreement, Mr. Hauser will receive an
annual base salary of $800,000. Mr. Hauser will also be eligible to participate in the Annual Incentive Plan and earn a performance-based bonus
thereunder for an 18-month performance period beginning July 1, 2009 and for annual performance periods thereafter. Mr. Hauser's target bonus under
the Annual Incentive Plan will be 100% of the base salary payable to him during the performance period. Mr. Hauser's maximum bonus will be 200%
of the base salary payable to him during the performance period.
As an inducement to accept employment with the Company, Mr. Hauser received (i) the Inducement Options, (ii) the Inducement Restricted Stock
and (iii) the Inducement Performance Units. The Inducement Options were granted on July 1, 2009 at an exercise price equal to $0.95 (the average of
the closing prices of the Company's common stock during the thirty calendar days immediately preceding the grant date). The Inducement Options will
vest and become exercisable in three equal annual installments commencing on July 1, 2010, provided Mr. Hauser remains employed through each such
date. The Inducement Restricted Stock will be awarded in three installments as follows: (i) $500,000 on July 1, 2009, (ii) $1,750,000 on July 1, 2010
and (iii) $1,750,000 on July 1, 2011, in each case valued based on the average closing prices of the Company's common stock during the thirty calendar
days immediately preceding each award date. The Inducement Restricted Stock will become fully vested on July 1, 2012, provided Mr. Hauser remains
employed through such date. The Inducement Performance Units will be earned and paid in shares of the Company's Common Stock, based on the
Company's performance during the performance periods, with a target amount of 200% of base salary and a maximum of 400% of base salary. The
number of shares subject to the Inducement Options and the option exercise price will be adjusted, and additional shares of Inducement Restricted Stock
will be awarded, as necessary to preserve the value of the Inducement Options and the Inducement Restricted Stock awarded on July 1, 2009 if, prior to
December 31, 2010, the Company completes a restructuring of its indebtedness.
172