Exhibit 10.31


 





 


	
   

  	
  July 19,
  2010

  
	
  521 East
  Morehead Street

  	
   

  
	
  Suite 500

  	
   

  
	
  Charlotte,
  NC 28202

  	
   

  
	
  704.227.3612
  Direct Line

  	
   

  
	
  704.344.1594
  Fax

  	
   

  



 


Ajay Sabherwal


5105 N. Primrose Court


Peoria, IL  61615


 


Re:          Change in Control and Severance Agreement


 


Dear Ajay:


 


This letter
agreement (the “Agreement”) between you and FairPoint Communications, Inc.
(the “Company”) sets forth certain rights and obligations with respect
to the payment of severance and receipt of certain benefits (the “Severance
Benefits”) in the event of the termination of your employment for any of
the circumstances described in Paragraph 1, below.  This Agreement shall supersede any other
arrangements between you and the Company or its affiliates concerning the
receipt of payment or benefits upon your employment termination  or  in accordance
with the Company’s published or unpublished policies.


 


1.             Events That Trigger Severance Benefits.


 


(a)           Termination After a Change in Control.  You will receive Severance Benefits under
this Agreement if, within two years after a Change in Control has occurred, the
Company terminates your employment without Cause.


 


(b)           Termination  Without Cause.  You will
receive Severance Benefits under this Agreement if  the
Company terminates your employment without Cause (as defined herein below) from
and after the date hereof but prior to a Change in Control or after the second
anniversary of a Change in Control.


 


(c)           Resignation for Good Reason After a
Change in Control.  You will receive Severance
Benefits under this Agreement if, within two years after a Change in Control
has occurred, you resign your employment for Good Reason (as defined herein
below).


 


(d)           Alternative Source for Payments. 
Notwithstanding the foregoing, you shall participate in the Company’s
principal severance plan for employees for any period during which the
Company’s payment of severance benefits under this Agreement is restricted or
prohibited by applicable law. Any severance benefits that you collect in
cash or in kind under said Company severance plan shall offset and reduce, on a
dollar-for-dollar basis, any and all benefits that you are or become entitled
to collect under this Agreement.


 

















 


2.             Events That Do Not Trigger Severance Benefits


 


You shall not
be entitled to receive Severance Benefits under this Agreement if the Company
terminates your employment for Cause or your employment terminates on account
of death or Disability (as defined herein below), or if you resign without Good
Reason.


 


3.             Obligations
of the Company Upon Termination


 


(a)           Severance Benefits Following a Change
in Control.  Subject to the provisions of
Paragraphs 5 and 6 below, if you become entitled to Severance Benefits under
Paragraph 1(a) or 1(c) of this Agreement, the Company will provide
you the following:


 


(i)            any unpaid base salary as of the date
of separation, expense reimbursements, accrued benefits, and any earned but
unpaid bonus or incentive payment for the fiscal year before the year of
termination, provided that any unpaid vested amounts or benefits under the Company’s
compensation, incentive or benefits plans will be paid in accordance with the
terms of those plans;


 


(ii)           a lump sum cash payment of two times
your Annual Base Salary (as defined herein below) in effect as of the
termination date;


 


(iii)          a lump sum cash payment of two times
your Annual Incentive Payment (as defined herein below);


 


(iv)          a lump sum cash payment equivalent to
twenty-four (24) months of COBRA premiums (as customarily charged to other
individuals who have terminated from the Company), grossed up for applicable
federal and state taxes.  The COBRA
premiums shall be based on your coverage election in effect as of the date of
termination.  If you elect to continue
coverage under the Company’s health care plans pursuant to COBRA, you hereby
agree that such coverage will continue only for so long as allowed under COBRA
or until you become eligible for another group health plan by virtue of
employment; and you shall notify the Company as soon as you become eligible for
coverage under another group health plan;


 


(v)           a lump sum cash payment equivalent to
twenty-four (24) months of LTD and Group Term Life Insurance and any other
benefit plan premiums, grossed up for applicable federal and state taxes.  The LTD and Group Term Life Insurance and
other benefit plan premiums shall be based on your coverage election in effect
as of the date of termination; and


 


(vi)          all non-vested and/or unearned
long-term incentive awards previously granted to you, including but not limited
to restricted stock units, deferred share awards, and stock options shall fully
vest and become nonforfeitable; provided, however, that any applicable
performance requirement under any long-term incentive awards must be satisfied
and will not be deemed waived as a result of this provision.


 


(b)           Severance Benefits Prior to or Two
Years after a Change in Control.  Subject to the
provisions of Paragraphs 5 and 6 below, if you become entitled to Severance 


 

















 


Benefits under
Paragraph 1(b) of this Agreement, the Company will provide you with all of
the same Severance Benefits as described in Paragraph 3(a) above.


 


(c)           Timing of Payment. 
The payment of the Severance Benefits will occur no later than ten (10) days
after the effective date of the Release (as specified therein), unless the
Company institutes a 409A Suspension Period (as defined below).


 


(d)           Release.  The Severance
Benefits are conditioned upon your signing and making effective a general
release of claims in a form designated by the Company in its sole discretion
(the “Release”).  The Company
shall not have any obligation to provide the Severance Benefits in the event
you do not sign and make effective the Release.


 


(e)           Other Amounts. 
Regardless of whether you sign and make effective the Release, the
Company shall pay you any unpaid base salary, expense reimbursements, and any
earned but unpaid bonus or incentive payment for the fiscal year before the
year of termination within ten (10) days of your termination date.  Any unpaid vested amounts or benefits under
the Company’s compensation, incentive or benefits plans will be paid in
accordance with the terms of those plans.


 


4.             Definitions


 


(a)           “Annual Base Salary” shall mean
the average monthly salary in effect during the twelve (12) months immediately
preceding the date of termination, multiplied by a factor of twelve (12).


 


(b)           “Cause” shall mean, as
reasonably and in good faith determined by the Company’s Board of Directors, (i) misappropriating any funds or any
material property of the Company; (ii) obtaining
or attempting to obtain any material personal profit from any transaction in
which you have an interest which is adverse to the interest of the Company
unless the Company shall first give its consent to such transaction; (iii)(x) the willful taking of actions
which directly impair your ability to perform the duties required by the terms
of your employment; or (y) taking any action detrimental to the Company’s
goodwill or damaging to the Company’s relationships with its customers,
suppliers or employees; provided that such neglect or refusal, action or breach
shall have continued for a period of twenty (20) days following written notice
thereof; (iv) being convicted of or
pleading nolo contendere to any crime or
offense constituting a felony under applicable law or any crime or offense
involving fraud or moral turpitude; or (v) any
material failure to comply with applicable laws or governmental regulations
within the scope of your employment or any material breach of Company policies
and procedures, including a material breach of the Company’s Code of Business
Conduct and Ethics.


 


(c)           “Change in Control” shall have
the same meaning as in section 14.1 of the FairPoint Communications, Inc.
2008 Long Term Incentive Plan as in effect on the date hereof; provided,
however, that there shall be no provision for any threatened or anticipated
Change in Control that does not actually occur.


 


(d)           “Disability” shall mean a
long-term disability within the meaning of the long-term disability or other
similar program applicable to employees at the Company.  At any 


 

















 


time the
Company does not sponsor a long-term disability plan for its employees, “Disability”
shall mean your inability to perform, with reasonable accommodation, the
essential functions of your position for a period of 180 days in any 360
consecutive day period due to mental or physical incapacity, and determined by
an independent physician, selected by joint agreement by you and the Company.


 


(e)           “Good Reason” means your
resignation from employment within forty-five days after notice of the
occurrence of any of the following without your express written consent:


 


(i)            Your key responsibilities or duties as
Executive Vice President and Chief Financial Officer  (and
ignoring for such purpose any temporary responsibilities) are significantly and
materially reduced or if you are downgraded to a career band level that is
lower than the career band level you are currently in; provided, however, that
a “Good Reason” shall not occur merely because of a change in the individual
(or position) to whom (or to which) you report;


 


(ii)           A reduction in your overall
compensation opportunities (as contrasted with overall compensation actually
paid or awarded), other than if the Company for business reasons has to reduce
bonus opportunities or base salaries of all executives;


 


(iii)          The diminishment or elimination of
your rights hereunder to the Severance Benefits; or


 


(iv)          any material breach by the Company of
this Agreement.


 


You may resign
from your employment for Good Reason so long as you tender your written
resignation to the CEO or to the Board of Directors within forty-five (45) days
after the occurrence of the event that forms the basis for your resignation for
Good Reason, and as long as your resignation describes in reasonable detail
your objection to any of the matters described in this paragraph 4(e) and
provides the Company an opportunity to cure such action or breach within
fourteen (14) calendar days after receiving your written resignation.


 


(f)            “Annual Incentive Payment”
shall mean your target annual incentive award for the calendar year of your
termination.


 


5.             Golden Parachute


 


Your total payments and benefits
under this Agreement may exceed the relevant limitations under the “golden
parachute” provisions of Code Section 280G.  However, nothing in this Agreement will cause
the Company to be required to pay to you any amount in excess of the Severance
Benefits provided for in this Agreement. 
Notwithstanding the foregoing, in the event any payment or benefit to
you under this Agreement or otherwise would (a) constitute
a “parachute payment” within the meaning of Code Section 280G and (b) but for this sentence, be subject to
the excise tax imposed by Section 4999 of the Code (or any comparable
successor or state law provision) and any related interest or penalties (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then you shall receive
either (i) the largest portion of
such payments and benefits that would result in no portion 


 

















 


of such payments and benefits being
subject to the Excise Tax or (ii) the
full amount of such payments and benefits; whichever of the amounts under (i) and (ii),
when taking into account all applicable federal, state, local and foreign
income and employment taxes, the Excise Tax and any other applicable taxes (all
computed at the highest applicable marginal rate), results in your receipt, on
an after-tax basis, of the greatest amount of payments and benefits,
notwithstanding that all or some portion thereof may be subject to the Excise
Tax.  In the event of a reduction
hereunder, you will be given the choice of which payments or benefits to reduce
to the extent practicable for the Company. 
The foregoing calculations shall be made at the Company’s expense by an
accounting firm selected by the Company. 
You shall remain solely liable for all income taxes, Excise Taxes, or
other amounts assessed on any payments or benefits to which you are entitled
and nothing in this Agreement or otherwise shall be interpreted as obligating
the Company to pay (or reimburse you for) any income taxes, Excise Taxes, or
other taxes or amounts assessed against or incurred by you in connection with
your receipt of such payments and benefits.


 


6.             409A


 


The terms of
this Agreement (and the terms of any and all other agreements which
cover you and are deferred compensation plans subject to Code Section 409A) are
intended to comply, and shall be interpreted so as to comply,
with Code Section 409A so as to not subject you to any excise tax or
penalty under Code Section 409A by virtue of any payment or benefit
related to that agreement.  In the event
it is determined that any term or provision of this Agreement (and/or
of any other agreements covering you which are subject to Code Section 409A)
does not so comply with Code Section 409A, then any and all such
non-compliant terms or provisions are amended so as to delay payments and
benefits (of whatever kind, including stock options, dividends and any
other equity-related payments that may be subject to Code Section 409A) in
a manner that will comply with all of the following three requirements: (1) conform
to Section 409A of the Code; (2) to the extent possible under Code Section 409A, preserve
the original intent of that provision; and (3) otherwise be without any
reduction in the amount of such payments or benefits ultimately paid or
provided to you.  Without limitation of the foregoing, if you are a “specified
employee” under Code Section 409A(a)(2)(B), then, except as permitted by
Code Section 409A, any payments subject to Code Section 409A will be
delayed until the date that is six months after your separation from service
(the “409A Suspension Period”), and any such payments or benefits to
which you would otherwise be entitled during the first six months after your
separation from service will be accumulated and paid or provided on the date
that is six months after such separation form service.


 


7.             Non-Competition/Non-Solicitation


 


(a)           Acknowledgements.   You acknowledge and agree that in
the course of your employment with the Company, you have been and will be given
access to, become familiar with, develop, maintain, and acquire knowledge of
the Company’s client, employment and other relationships and confidential
information relating to those relationships. 
You acknowledge and agree that you will comply with the Company’s
confidentiality policies.


 


(b)           Non-competition.  You agree that for a period of twelve (12)
months after you leave the employ of the Company for any reason, you shall not,
directly or indirectly, for 


 

















 


your own benefit or for the benefit
of any other person or entity, whether as an owner, director, officer, partner,
employee, agent, consultant, for pay or otherwise, perform any supervisory,
managerial, marketing, sales, administrative, executive, financial, or research
and development or similar services for a rural local exchange carrier business
which is headquartered in the Southeastern United States, which shall mean the
states of Florida, Georgia, North Carolina and South Carolina or which has
substantial business operations in the states of Maine, New Hampshire or
Vermont.


 


(c)           Non-solicitation.  You agree that for a  period of twelve (12) months after you
leave the employ of the Company for any reason, you shall not, directly or
indirectly, for your own benefit or for the benefit of any other person or
entity, whether as an owner, director, officer, partner, employee, agent,
consultant, for pay or otherwise solicit the service of or solicit, induce,
encourage, identify or target any person who was employed by the Company during
the last year of your employment with the Company, to terminate his or her
employment with the Company.


 


(d)           Injunctive Relief.  You recognize that breach of this paragraph 7
may severely and irreparably injure the Company in an amount that cannot be
readily calculated.  Therefore, you agree that the Company may, in
addition to all other remedies to which it is entitled (including recovery of
attorneys’ fees), obtain equitable relief, including a temporary restraining
order and/or preliminary injunction, from any court having personal
jurisdiction over you.


 


(e)           Reasonable Restrictions.  You acknowledge and agree that the
restrictions and covenants contained in this paragraph 7 are reasonably
necessary to protect the goodwill and legitimate business interests of the
Company, including without limitation the Company’s confidential information
and customer, employment and other relationships and that the restrictions are
not overbroad, overlong, or unfair (including in duration or scope).


 


(f)            Reformation.  Whenever possible, each provision of this
paragraph 7 will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this paragraph 7 is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this paragraph 7 or this Agreement.  If a court determines that at the time this
Agreement is presented for enforcement any provisions are overly broad or
unenforceable, the parties agree that the court shall reform paragraph 7 to
make it enforceable to the maximum extent possible and shall enforce the other
terms as written.


 


8.             Severability


 


If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable, this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement.


 

















 


9.             Entire Agreement


 


This Agreement
is the entire agreement between you and the Company and its affiliates with
respect to any payments or benefits upon termination of employment.  This Agreement supersedes any prior or
contemporaneous oral or written agreements or understandings on the
subject.  No party is relying on any
representations, oral or written, on the subject of the effect, enforceability
or meaning of this Agreement, except as specifically set forth in this
Agreement.


 


10.          Governing Law


 


The statutes
and common law of the State of North Carolina (excluding its choice of laws
provisions) will apply to this Agreement, its interpretation and
enforceability, except as provided by the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”).


 


We look
forward to your and the Company’s continued success.


 


	
  Sincerely,

  	
   

  
	
   

  	
   

  
	
  /s/ David L.
  Hauser

  	
   

  
	
  David L.
  Hauser

  	
   

  
	
  Chairman and
  Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed:

  	
  /s/ Ajay
  Sabherwal

  	
   

  
	
   

  	
  Ajay Sabherwal