**Exhibit 10.37**

 

**MUTUAL RELEASE ANDSEVERANCE AGREEMENT**

 

This Mutual Release andSeverance Agreement (hereafter “Agreement”) dated as of February 22, 2008,is hereby entered into between Michael S. Ruley (“Executive”), and HawaiianTelcom Holdco, Inc., a Delaware corporation (the “Employer”).

 

WHEREAS, Employer and Executive entered into anEmployment Agreement dated October 1, 2004 (the “Employment Agreement”);

 

WHEREAS, Employer and Executive entered into aNon-Qualified Stock Option Agreement dated November 8, 2005 (the “StockOption Agreement”) pursuant to the terms of the Stock Option Plan of HawaiianTelcom Holdco, Inc. (the “Stock Option Plan”);

 

WHEREAS, Employer, Executive and certain other partiesthereto entered into an Amended and Restated Limited Partnership Agreementdated May 13, 2005 (the “LP Agreement”); and

 

WHEREAS, Executive and Employer have agreed thatExecutive shall terminate his employment from the Employer under the termshereof.

 

NOW THEREFORE, inexchange for the good and valuable consideration set forth herein, the adequacyof which is specifically acknowledged, Executive and Employer (the “parties”)hereby agree as follows:

 

# 1.                                       Terminationof Employment. Executive acknowledges that his employment with Employershall terminate effective as of February 4, 2008 (the “Termination Date”).Executive’s termination will be classified by Employer as a voluntaryresignation.

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# 2.                                       SeverancePayments.

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# (a)                                  Nolater than fifteen days after Executive tenders to the Employer a signed MutualRelease in the form of Exhibit A, provided that such tender occurs noearlier than the Termination Date and no later than February 28, 2008 andthat such Mutual Release has not been revoked by Executive, the Employer willpay Executive the following amounts, less applicable withholdings:

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# (1)                                  $1,117,272;

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# (2)                                  Anybonus which has been declared or earned but not yet paid for fiscal year 2007;

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# (3)                                  $71,340(with respect to Executive’s annual COLA payment for 2007);

 

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# (4)                                  Anybusiness expenses incurred by the Executive in accordance with the Employer’spolicies not yet paid to the Executive;

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# (5)                                  Thevalue of all accrued, unused vacation days based on Executive’s service to theEmployer which the parties agree is 320.33 hours;

 

# (6)                                  Anyother amounts due to the Executive arising from the Executive’s participationin, or benefits under, any employee benefit plans, programs or arrangements;plus

 

# (7)                                  $20,000(with respect to accrued but unused airfare between Honolulu and the UnitedStates mainland) (the “Airfare Payment”).

 

(b)                                 Noearlier than thirty days after Executive tenders to the Employer a signedMutual Release in the form of Exhibit A, provided that such tender occursno earlier than the Termination Date and no later than February 28, 2008and that such Mutual Release has not been revoked by Executive, the Employerwill pay Executive within 30 days of Executive submitting expenses to Employerfor payment the following amounts, less applicable withholdings:

 

# (1)                                  Pursuantto Section 3(f) of the Employment Agreement and as outlined in theCompany’s Executive Relocation Benefits Plan, reimbursement for all relocationexpenses (“Relocation Reimbursement”) incurred by the Executive due to hisrelocation back to the mainland United States at a location of his choice,including payment  of up to a 6% realestate broker commission fee (“Hawaiian Broker Fee”) paid by the Executive onthe sale of his Hawaiian residence, plus an additional payment in an amountsuch that, after payment by the Executive of all the income taxes imposed onthe Relocation Reimbursement and the additional payment, the Executive wouldretain an amount equal to Relocation Reimbursement; and

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(2)                                  Reimbursementfor any lease termination penalties (“Lease Reimbursement”) incurred byExecutive pursuant to Section 3(i) of the Employment Agreement (butsubject to the limitations contained therein) plus an additional payment in anamount such that, after payment by the Executive of all the income taxesimposed on the Lease Reimbursement and the additional payment, the Executivewould retain an amount equal to Lease Reimbursement.

 

# 3.                                       ContinuedMedical Benefits. Following the Termination Date, Employer shall continuecoverage (at the Company’s expense) forExecutive and his dependents under all Company group health benefit plans inwhich Executive and any dependents were entitled to participate immediatelyprior to the Termination Date (under the same terms as during employment),including HMSA medical plan, HDS dental plan, HMSA vision plan, and Exec U Caresupplemental plan, for twelve months from the Termination Date, which periodshall be co-extensive with the period of coverage with respect to Executiveunder COBRA. . Thereafter, Executive shall be eligible for suchcontinued coverage at his own expense for the remainder of the applicable COBRAcoverage period. Except as provided in Sections 1, 2, 3, 5 and 7 hereof or byapplicable law or plan documents, all other compensation, benefits orperquisites shall cease upon the Termination Date.

 

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# 4.                                       ContinuedEffect of Employment Agreement. The terms and conditions of Sections 6through 10 of the Employment Agreement shall remain in full force and effectfor the applicable periods of time indicated.

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# 5.                                       Equityin Employer. Executive shall be entitled to exercise all of his vestedstock options through the thirtieth day following the Termination Date inaccordance with the terms of the Stock Option Agreement and Stock Option Plan.

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# 6.                                       ResidualDuties. The parties agree and intend that any and all duties of loyalty,fidelity, and confidentiality running from Executive to Employer and arisingout of the common law as a consequence of the parties’ employment relationshipshall continue in full force and effect between the parties until theTermination Date; provided, however, that neither this paragraph nor any otherportion of this Agreement shall be interpreted to diminish any residual dutiesor obligations of Executive to Employer that may arise or continue in effect underthe common law after the Termination Date.

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# 7.                                       Attorneys’Fees. Executive shall be reimbursed for reasonable attorneys’ fees andcosts incurred in connection with the negotiation and execution of thisAgreement in an amount not to exceed $4,500.

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# 8.                                       NoOther Payments. Executive understands and agrees that Employer shall makeno other payments to Executive, and shall have no other obligations toExecutive except as described in this Agreement or as otherwise required by lawor plan documents.

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# 9.                                       Taxes.To the extent any taxes may be due on the payments to Executive provided inthis Agreement beyond any withheld by Employer, Executive agrees to pay themhimself and to indemnify and hold Employer and other entities released byExecutive pursuant to the terms hereof (including Exhibit A)  harmless for any tax claims or penaltiesresulting from such payments. Executive further agrees to provide any and allinformation pertaining to Executive upon request as reasonably necessary forEmployer and other entities so released to comply with applicable tax laws.

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# 10.                                 Severability.Except as otherwise specified below, should any portion of this Agreement befound void or unenforceable for any reason by a court of competentjurisdiction, the court should attempt to limit or otherwise modify suchprovision so as to make it enforceable, and if such portion cannot be modifiedto be enforceable, the unenforceable portion shall be deemed severed from theremaining portions of this Agreement, which shall otherwise remain in fullforce and effect. If any portion of this Agreement is so found to be void orunenforceable for any reason in regard to any one or more persons, entities, orsubject matters, such portion shall remain in full force and effect withrespect to all other persons, entities, and subject matters. In the eventExecutive should in the future contend that Executive’s release of claimspursuant to Exhibit A is for any reason void, imperfect, or incomplete,Executive may not pursue any claim against Employer (or any other partyintended to be released thereby) to establish the invalidity of the release orpremised (in whole or in part) on the invalidity of the release before orwithout repaying to Employer the full amount of such cash payments he hasreceived, less the reasonable value of services actually provided pursuant tothis Agreement, and applicable statutes of limitations shall be deemed to runin regard to Executive’s claims without regard to the parties’ entry into thisAgreement. The preceding sentence shall not operate to limit the scope oreffect of Executive’s covenant not to sue.

 

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# 11.                                 Understandingand Authority. The parties understand and agree that all terms of thisAgreement are contractual and are not a mere recital, and represent and warrantthat they are competent to covenant and agree as herein provided.

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# 12.                                 InternalRevenue Code Section 409A. Certain payments and benefits payable underthis Agreement are intended to comply with the requirements of Section 409Aof the Internal Revenue Code of 1986, as amended (the “Code”). Certain paymentsand benefits payable under this Agreement are intended to be exempt from therequirements of Section 409A of the Code. This Agreement shall beinterpreted in accordance with the applicable requirements of, and exemptionsfrom, Section 409A of the Code and the Treasury Regulations thereunder. Tothe extent the payments and benefits under this Agreement are subject to Section 409Aof the Code, this Agreement shall be interpreted, construed and administered ina manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) ofthe Code and the Treasury Regulations thereunder (subject to the transitionalrelief under Internal Revenue Service Notice 2005-1, the Proposed Regulationsunder Section 409A of the Code, Internal Revenue Service Notice 2006-79,Internal Revenue Service Notice 2007-78 and other applicable authority issuedby the Internal Revenue Service). As provided in Internal Revenue Notice 2007-78,notwithstanding any other provision of this Agreement, with respect to anelection or amendment to change a time or form of payment under this Agreementmade on or after January 1, 2008 and on or before December 31, 2008,the election or amendment shall apply only with respect to payments that wouldnot otherwise be payable in 2008 and shall not cause payments to be paid in2008 that would not otherwise be payable in 2008. If the Employer and theExecutive determine that any compensation, benefits or other payments that arepayable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and(4) of the Code do not comply with Section 409A of the Code, theTreasury Regulations thereunder and other applicable authority issued by theInternal Revenue Service, the Employer and the Executive agree to amend thisAgreement, or take such other actions as the Employer and the Executive deemreasonably necessary or appropriate, to comply with the requirements of Section 409Aof the Code, the Treasury Regulations thereunder and other applicable authorityissued by the Internal Revenue Service, while preserving the economic agreementof the parties. In the case of any compensation, benefits or other paymentsthat are payable under this Agreement and intended to comply with Sections409A(a)(2), (3) and (4) of the Code, if any provision of theAgreement would cause such compensation, benefits or other payments to fail toso comply, such provision shall not be effective and shall be null and voidwith respect to such compensation, benefits or other payments, and suchprovision shall otherwise remain in full force and effect. Consistent with theforegoing, the parties intend that the Termination Date shall be the date ofthe Executive’s “separation from the service” with the Employer within themeaning of Code Section 409A(a)(2)(A)(i).

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# 13.                                 MutualRelease. Executive understands, agrees and represents that the covenantsmade herein and the Mutual Release to be executed by both parties pursuant to Exhibit Amay affect rights and liabilities of substantial extent and agrees that thecovenants and releases provided herein are in Executive’s best interest. Executiverepresents and warrants that in negotiating and executing this AgreementExecutive has had an adequate opportunity to consult with competent legalcounsel of his choosing concerning the meaning and effect of each term andprovision hereof, and that there are no representations, promises, oragreements between Employer and Executive other than those expressly set forthin writing herein.

 

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14.                                 GoverningLaw. This Agreement shall be governed by the laws of the State of New York,without reference to conflicts of law principles.

 

15.                                 EntireAgreement. This Agreement, including Exhibit A attached hereto, andthe Consulting Agreement of even date, embody the entire agreement between theparties with regard to its subject matter. This Agreement supersedes any andall prior agreements and understandings between the parties with respect to itssubject matter.

 

16.                                 Amendments.This Agreement may not be amended or changed except by a written agreementsigned by both parties.

 

17.                                 Successorsand Assigns. This Agreement shall be binding on the parties and theirrespective successors and assigns.

 

The parties havecarefully read this Agreement in its entirety; fully understand and agree toits terms and provisions; and intend and agree that it is final and binding onall parties.

 

[*signature page follows*]

 

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IN WITNESS WHEREOF, andintending to be legally bound, the parties have executed the foregoing on thedates shown below.

 

 
| HAWAIIAN TELECOM  HOLDCO, INC. | MICHAEL S. RULEY                      |
|--------------------------------|---------------------------------------|
|                           |                                  |
|                           |                                  |
| By:                            | /s/ Alan M.  Oshima                   |   | /s/ Michael S.  Ruley |
|                           |                                  |
|                           |                                  |
| Print Name:                    | Alan M. Oshima                        |   | Date: | February 22,  2008 |
|                           |                                  |
|                           |                                  |
| Title:                         | SVP, General  Counsel & Secretary |   |   |
|                           |                                  |
|                           |                                  |
| Date:                          | February 25,  2008                    |   |   |
|                                |                                       |  |  |  |  |  |

 

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**EXHIBIT A**

 

**MUTUALRELEASE**

 

This Mutual Release(hereafter “Agreement”), dated February         ,2008 is hereby entered into between Michael S. Ruley (“Executive”), andHawaiian Telcom Holdco, Inc., a Delaware corporation (the “Employer”).

 

WHEREAS, Employer and Executive entered into a MutualRelease and Severance Agreement (the “Severance Agreement”) dated February 22,2008, which Agreement contemplates the Execution of this Mutual Release.

 

THEREFORE, in exchangefor the good and valuable consideration set forth herein, the adequacy of whichis specifically acknowledged, Executive and Employer (the parties”) herebyagree as follows:

 

# 1.                                       GeneralRelease of Claims by Executive. Executive agrees for Executive, Executive’sspouse and child or children (if any), Executive’s heirs, beneficiaries,devisees, executors, administrators, attorneys, personal representatives,successors and assigns, hereby forever to release, discharge, and covenant notto sue Employer, Employer’s past, present, or future parent, affiliated,related, and/or subsidiary entities (collectively “Affiliates”), and all oftheir past and present directors, shareholders, officers, general or limitedpartners, employees, agents, and attorneys, and agents and representatives ofsuch entities, and employee benefit plans in which Executive is or has been aparticipant by virtue of his employment with Employer, from any and all claims,debts, demands, accounts, judgments, rights, causes of action, equitablerelief, damages, costs, charges, complaints, obligations, promises, agreements,controversies, suits, expenses, compensation, responsibility and liability ofevery kind and character whatsoever (including attorneys’ fees and costs),whether in law or equity, known or unknown, asserted or unasserted, suspectedor unsuspected, which Executive has or may have had against such entities basedon any events or circumstances arising or occurring on or prior to theTermination Date (or, with respect to claims of disparagement, arising oroccurring on or prior to the date this Agreement is executed), arising directlyor indirectly out of, relating to, or in any other way involving in any mannerwhatsoever, (a) Executive’s employment with Employer or the terminationthereof or (b) the Executive’s status at any time as a holder of anysecurities of Employer, and any and all claims arising under federal, state, orlocal laws relating to employment, or securities, including without limitationclaims of wrongful discharge, breach of express or implied contract, fraud,misrepresentation, defamation, or liability in tort, claims of any kind thatmay be brought in any court or administrative agency, any claims arising underTitle VII of the Civil Rights Act of 1964, the Age Discrimination in EmploymentAct, the Americans with Disabilities Act, the Fair Labor Standards Act, theEmployee Retirement Income Security Act, the Family and Medical Leave Act, theSecurities Act of 1933, the Securities Exchange Act of 1934, and similar stateor local statutes, ordinances, and regulations, provided, however,notwithstanding anything to the contrary set forth herein, that this releaseshall not extend to (i) benefit claims under employee pension benefitplans in which Executive is a participant by virtue of his employment with  Employer or to benefit claims under employeewelfare benefit plans for occurrences (e.g., medical care, death, or onset ofdisability) arising 

 

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# after theexecution of this Agreement by Executive, (ii) any obligation assumedunder this Agreement by any party hereto, and (iii) any claim forindemnification or insurance coverage pursuant to Section 23 of theEmployment Agreement.

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# 2.                                       GeneralRelease of Claims by the Employer. The Employer agrees, for the Employer,its Affiliates, and all of their past and present directors, shareholders,officers, general or limited partners, employees, agents, and attorneys, andagents and representatives of such entities, and employee benefit plans inwhich Executive is or has been a participant by virtue of his employment withEmployer and all of their respective predecessors, successors and assigns, tohereby forever to release, discharge, and covenant not to sue Executive, fromany and all claims, debts, demands, accounts, judgments, rights, causes ofaction, equitable relief, damages, costs, charges, complaints, obligations,promises, agreements, controversies, suits, expenses, compensation,responsibility and liability of every kind and character whatsoever (includingattorneys’ fees and costs), whether in law or equity, known or unknown,asserted or unasserted, suspected or unsuspected, which the Employer has or mayhave had against Executive based on any events or circumstances arising oroccurring on or prior to the Termination Date, including without limitation anyand all claims arising out of Executive’s employment with the Company or thetermination thereof provided, however, notwithstanding anything to the contraryset forth herein, that this release shall not extend to (a) any claimwhich relates to or arises from any criminal activity of Executive, and (b) anyobligation assumed under this Agreement by any party hereto.

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# 3.                                       Releaseof Age Discrimination Claims; Periods for Review and Reconsideration.

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## (a)                                  Executive understandsthat this Agreement includes a release of claims arising under the AgeDiscrimination in Employment Act (ADEA). Executive understands and warrantsthat he has been given a period of twenty-one (21) days to review and considerthis Agreement. Executive is hereby advised to consult with an attorney prior toexecuting the Agreement. By his signature below, Executive warrants that he hashad the opportunity to do so and to be fully and fairly advised by that legalcounsel as to the terms of the Agreement. Executive further warrants that heunderstands that he may use as much or all of his 21-day period as he wishesbefore signing, and warrants that he has done so.

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## (b)                                 Executive furtherwarrants that he understands that he has seven (7) days after signing thisAgreement to revoke the Agreement by notice in writing to Jed W. Brickner,Latham & Watkins, 885 Third Avenue, Suite 1000, New York, N.Y.10022. This Agreement shall be binding, effective, and enforceable upon bothparties upon the expiration of this seven-day revocation period without Mr. Bricknerhaving received such revocation, but not before such time.

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[*signature page follows*]

 

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IN WITNESS WHEREOF, andintending to be legally bound, the parties have executed the foregoing on thedates shown below.

 

 
| HAWAIIAN TELCOM  HOLDCO, INC. | MICHAEL S. RULEY                      |
|-------------------------------|---------------------------------------|
|                          |                                  |
|                          |                                  |
| By:                           | /s/ Alan M.  Oshima                   |   | /s/ Michael S.  Ruley |
|                          |                                  |   |   |
|                          |                                  |   |   |
| Print Name:                   | Alan M. Oshima                        |   | Date: | February 22,  2008 |
|                          |                                  |   |   |
|                          |                                  |   |   |
| Title:                        | SVP, General  Counsel & Secretary |   |   |
|                          |                                  |   |   |
|                          |                                  |   |   |
| Date:                         | February 25,  2008                    |   |   |
|                               |                                       |  |  |  |  |  |  |

 

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