Document:

Exhibit
10.28

 

EXECUTION
VERSION

 

CONSULTING AGREEMENT AND GENERAL RELEASE

 

This
CONSULTING AGREEMENT AND GENERAL RELEASE
(this “Agreement”), by and between FairPoint Communications, Inc.
(the “Company”), and David L. Hauser (“Hauser”), is being
offered to Hauser on August 16, 2010, and may be accepted by Hauser by
signing the Agreement without change and returning it by mail to the Company at
521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202, Attn: General Counsel, or by telecopy to (704) 344-1594, Attn: General Counsel, with a copy by mail, so that it is
received by no later than the close of business on September 6, 2010 (the “Release
Expiration Date”).

 

RECITALS

 

WHEREAS, Hauser and
the Company are parties to an employment agreement dated June 11, 2009,
pursuant to which Hauser has served as Chairman and Chief Executive Officer of
the Company, as well as the Restricted Stock Award Agreement, the Non-Qualified
Stock Option Award Agreement, the Performance Unit Award Agreement for Performance
Period Beginning July 1, 2009 and Ending December 31, 2010, and the
Performance Unit Award Agreement for Performance Period Beginning July 1,
2009 and Ending December 31, 2011, in each case dated July 1, 2009,
pursuant to which Hauser was granted equity-based incentive awards
(collectively, the “Employment Agreement”);

 

WHEREAS, subject to Section 3(a) below,
Hauser and the Company desire to enter into a mutually satisfactory arrangement
concerning Hauser’s separation from service as an employee and director of the
Company and his commencement of a consulting arrangement with the Company;

 

WHEREAS, this
Agreement contains a mutual general release of claims, and by delivery hereof,
Hauser is hereby notified and acknowledges his understanding that Hauser’s
execution of this Agreement is required for Hauser to receive any of the
payments and benefits set forth herein; and

 

WHEREAS, the parties
intend for this Agreement to supersede all prior agreements that Hauser has
with the Company, including without limitation the Employment Agreement.

 

NOW, THEREFORE, in consideration of the promises and mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are mutually acknowledged, Hauser and the
Company hereby agree as follows:

 

Section 1.               Conditions to Agreement.  The terms, conditions and obligations set
forth in this Agreement shall be subject to the approval of the United States
Bankruptcy Court for the Southern District of New York (the “Bankruptcy
Court”).  The date of such approval
is referred to herein as the “Approval Date”.

 

Section 2.               Opportunity for Review; Acceptance.  Hauser shall have until the Release
Expiration Date to review and consider this Agreement.  Should Hauser execute this Agreement and
deliver it to the Company prior to the Release Expiration Date (the date on
which

 

 

this Agreement is executed and delivered to the
Company being the “Execution Date”), he shall have an additional
seven (7) days from the Execution Date to revoke this Agreement by
providing written notice to the Company’s General Counsel prior to the
expiration of such seven (7) day period. 
Absent any such revocation, this Agreement shall become effective on the
later of the Approval Date and the eighth (8th) day following the Execution Date (the “Release
Effective Date”).  In the event of
Hauser’s failure to execute and deliver this Agreement prior to the Release
Expiration Date, or his revocation of this Agreement during the applicable
revocation period, this Agreement will be null and void and of no effect,
neither the Company nor Hauser will have any further obligations under this
Agreement, Hauser shall not be entitled to the Consideration (as defined
below), and Hauser’s and the Company’s rights vis-à-vis Hauser’s employment
with the Company and any termination thereof shall be governed by the terms of
the Employment Agreement and the Bankruptcy Code.

 

Section 3.               Consulting Arrangement.

 

(a)           Termination of Employment; Commencement of
Consulting Services.  Hauser
hereby acknowledges the mutually agreed termination of his employment with the
Company and each other subsidiary and affiliate thereof (collectively, the “Company
Group”) in all capacities, including without limitation as Chief Executive
Officer of the Company, and the commencement of his services as a consultant,
in each case effective as of the Release Effective Date.  Hauser also hereby agrees to take all
necessary action pursuant to the Company’s Amended and Restated By-Laws to
resign, effective as of the Release Effective Date, as Chairman and a member of
the Company’s Board of Directors and to withdraw his name from the slate of
directors to be considered for election to the Company’s Board of Directors and
from the Board of Directors of Reorganized FairPoint (as such term is defined
in the Debtors’ Modified Second Amended Joint Plan of Reorganization filed in
the Bankruptcy Court (together with any further amended Joint Plan of
Reorganization confirmed by the Bankruptcy Court, the “Plan”)).  Except as specifically set forth herein, the
Release Effective Date shall be the termination date of Hauser’s employment for
purposes of determining participation in and coverage under all equity and
option vesting and other benefit plans and programs sponsored by or through the
Company or any other member of the Company Group.  Within ten (10) days following the
Release Effective Date, Hauser shall be paid any unpaid annual base salary for
days worked through the Release Effective Date and any reimbursements for business
expenses incurred and submitted to the Company prior to the Release Effective
Date in accordance with the Company’s expense reimbursement policies
(collectively, the “Accrued Obligations”).

 

(b)           Consulting Period.  The “Consulting Period” shall mean the
period commencing on the Release Effective Date and expiring on the earlier of
(i) March 31, 2011, and (ii) the effective date of the Plan (the “Plan
Effective Date”).

 

(c)           Consulting Services.  During the Consulting Period, Hauser shall
render such assistance to the Company as a consultant as requested by the
Company’s Chief Executive Officer, being available on a full-time basis and
giving at all times the full benefit of his knowledge, expertise, technical
skill, and ingenuity, in all matters involved in or relating to the business of
the Company (the “Consulting Services”).

 

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(d)           Consideration.  In consideration of the Consulting Services,
Hauser’s release and waiver of claims set forth in Section 4(b) below,
and Hauser’s agreement to comply with the restrictions set forth in Section 6
below, and subject to both Hauser’s compliance with the other provisions of
this Agreement and to any tax withholding that the Company determines to be
appropriate, as well as the occurrence of the Approval Date, the Company will
pay Hauser consideration consisting of:

 

(i)            Cash consulting fees in the amount of $3,450,000,
which shall be paid in monthly installments as of the first day of the month in
the amount of $300,000 until, and with the remaining balance, if any, to be
paid upon, the later of (i) March 31, 2011, and (ii) the Plan
Effective Date (the later of (i) and (ii) being the “Final Payment
Date”); provided, however,
that if the Release Effective Date is not the first day of a calendar month,
then a proportional payment shall be due on the Release Effective Date in an
amount equal to $300,000 times the number of days after the Release Effective
Date to the last day of the month in which the Release Effective Date occurs,
divided by the number of days in such calendar month; provided
further, however, that
in no event shall the sum of such monthly installments exceed $3,450,000, and
in the event that the Final Payment Date has not occurred prior to the payment
of the final installment, such installment shall be reduced from $300,000 as
necessary such that Hauser shall have received $3,450,000 in the aggregate as
of the payment of such final installment pursuant to this Section 3(d)(i).

 

(ii)           Pursuant to the 2010 Long Term Incentive Plan of
Reorganized FairPoint (the “LTIP”), a one-time issuance of 133,588
Shares (as such term is defined in the LTIP), granted as soon as practicable
following the Plan Effective Date, which Shares shall be fully vested as of the
date of grant and shall be otherwise subject to the terms and conditions of the
LTIP; provided, that if the Board decides to
change the number of Shares to be issued pursuant to the Plan on the Plan
Effective Date to some amount other than the 51,444,788 contained in the Plan
dated March 10, 2010, Hauser shall, in lieu of the number of Shares set
forth above, be issued one Share for every 385.10 shares to be issued to the
holders of Allowed Claims under Sections 5.4 and 5.7 of the Plan;

 

(iii)          Continued participation in the Company’s health
insurance plan on the same basis as active employees of the Company for ninety
(90) days following the Release Effective Date, or until such earlier time as
his participation is no longer permitted by the terms of such plan (the “Participation
End Date”), and thereafter an additional amount in cash equal to
$31,131.84, representing Hauser’s cost of COBRA medical insurance, group life
insurance, and long-term disability insurance coverage during the period
commencing upon the Participation End Date and ending upon the second (2nd) anniversary of the
Participation End Date, such amount to be payable together with the first
monthly installment of the cash consulting fees set forth in Section 3(d)(i) above;
and

 

(iv)          Reimbursement, in an amount not to exceed $30,000,
for his professional fees and expenses incurred in the negotiation and
preparation of this Agreement, payable within 60 days after Hauser submits
reasonable documentation thereof (which documentation shall be submitted within
90 days after the Release Effective Date).

 

3

 

The
consideration payable pursuant to this Section 3(d) shall be referred
to herein as the “Consideration”. 
During the Consulting Period, Hauser will also be entitled to
reimbursement for reasonable expenses incurred in connection with providing the
Consulting Services, subject to timely submission for reimbursement in
accordance with the Company’s expense reimbursement policies.

 

(e)           Status as Consultant.  Hauser agrees to perform the Consulting
Services as an independent contractor, and not as an employee, agent, or
representative of the Company or any other member of the Company Group, and
unless authorized in writing by the Company, Hauser shall not have the power or
authority to act on behalf of, or bind in any way, the Company or any other
member of the Company Group.  As an
independent contractor, Hauser will be solely responsible for payment of all
applicable taxes payable in respect of amounts payable to him under this
Agreement, and neither the Company nor any other member of the Company Group
will withhold for taxes from any such amounts.

 

(f)            No Further Entitlements.  Hauser acknowledges and agrees that the
payment of the Accrued Obligations and the Consideration is in full discharge
of any and all liabilities and obligations of the Company Group, monetarily or
with respect to employee benefits or otherwise, including but not limited to
any and all obligations arising under any alleged written or oral employment
agreement, arrangement, policy, plan, or procedure of any member of the Company
Group, including without limitation the Employment Agreement.  Further, Hauser acknowledges and agrees that
in no event shall any member of the Company Group have any further obligations
under the Employment Agreement after the Release Effective Date.

 

(g)           Indemnification.  Notwithstanding anything in paragraph (f) above
to the contrary, Hauser will continue to be eligible after the Release
Effective Date to the same indemnification rights as any former officer or
director of the Company; provided, however, that such indemnification rights shall be not less
than those rights provided to former officers and directors of the Company
pursuant to the Plan dated March 10, 2010.

 

Section 4.               Release and Waiver of Claims.

 

(a)           Definition.  As used in this Agreement, the term “claims”
will include all claims, covenants, warranties, promises, undertakings,
actions, suits, causes of action, obligations, debts, accounts, attorneys’
fees, judgments, losses, and liabilities, of whatsoever kind or nature, in law,
equity, or otherwise.

 

(b)           Hauser’s Release and Waiver of Claims.

 

(i)            For and in consideration of good and valuable
consideration, including the Company’s release and waiver of claims described
in Section 4(c) below and the Consideration described in Section 3(a) above,
Hauser, for and on behalf of Hauser and Hauser’s heirs, administrators,
executors, and assigns, effective as of the Release Effective Date, does fully
and forever release, remise, and discharge the members of the Company Group,
together with each of their respective officers, directors, partners,
shareholders, employees, agents, attorneys, and advisors (collectively, the “Company
Released Parties”), and the Lender Steering Committee (as defined in the
Plan), the DIP Lenders (as defined in the Plan),

 

4

 

the Prepetition Credit Agreement Lenders (as defined
in the Plan), the DIP Agent (as defined in the Plan), and the Prepetition
Credit Agreement Agent (as defined in the Plan), together with each of their
respective officers, directors, partners, shareholders, employees, agents,
attorneys, and advisors (collectively, the “Lender Released Parties”),
from any and all claims whatsoever up to and including the Execution Date that
Hauser had, may have had, or now has against any of the Company Released
Parties or the Lender Released Parties, for or by reason of any matter, cause,
or thing whatsoever arising out of or attributable to Hauser’s employment or
the termination of Hauser’s employment with the Company, whether for tort,
breach of express or implied employment contract, intentional infliction of
emotional distress, wrongful termination, unjust dismissal, defamation, libel,
or slander, or under any federal, state, or local law or regulation dealing
with discrimination based on race, sex, national origin, handicap, religion,
disability, or sexual orientation.  This
release of claims includes, but is not limited to, all claims arising under any
applicable law or regulation, including under the following statutes:  the Age Discrimination in Employment Act (“ADEA”),
the Employee Retirement Income Security Act of 1974, as amended, Title VII of
the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act
of 1991, the Family Medical Leave Act, the Equal Pay Act, the Genetic
Information Nondiscrimination Act, the North Carolina Equal Employment
Practices Act, and the North Carolina Persons with Disabilities Act, each as
may be amended from time to time, and all other United States federal, state,
and local laws, the common law, and any other purported restriction on an
employer’s right to terminate the employment of an employee.  The parties intend the release contained
herein to be a general release of any and all claims to the fullest extent
permissible by law.

 

(ii)           Hauser acknowledges and agrees that as of the
Execution Date, Hauser has no knowledge of any facts or circumstances that give
rise or could give rise to any claims under any of the laws listed in the
preceding paragraph.

 

(iii)          By executing this Agreement, Hauser is specifically
releasing all claims relating to his employment and its termination under ADEA,
a federal statute that, among other things, prohibits discrimination on the
basis of age in employment and employee benefit plans.

 

(iv)          Notwithstanding the foregoing, nothing in this
Agreement shall be a waiver of Hauser’s claims for indemnification as a former
officer or director of the Company as stated in Section 3(g) above or
Hauser’s rights with respect to payment of amounts and other benefits under
this Agreement or any claims that cannot be waived by law.

 

(c)           The Company’s and Lenders’ Release and Waiver of
Claims.  For and in consideration of
Hauser’s continuing obligations to the Company pursuant to this Agreement, as
well as Hauser’s waiver and release of claims described in Section 4(b) above,
the Company, on behalf of itself and the other Company Released Parties, and
Bank of America, N.A., as Administrative Agent for the Pre-Petition and
Post-Petition Lenders (the “Agent”), on behalf of the Lender
Released Parties, hereby release and forever discharge Hauser from any and all
claims whatsoever up to and including the Execution Date that the Company
Released Parties or the Lender Released Parties had, may have had, or now have
for or by reason of any claim arising out of or attributable to Hauser’s
employment, or the termination of Hauser’s employment, with the Company, or
pursuant to any federal, state, or local law or regulation

 

5

 

(excluding in all events any claims that any of the
Company Released Parties or the Lender Released Parties may have in the future
for a breach of this Agreement or the Employment Agreement, or based on any
criminal actions by Hauser).

 

Section 5.               Knowing and
Voluntary Waiver.  Hauser
expressly acknowledges and agrees that Hauser:

 

(a)           Is able to read the language, and understand the
meaning and effect, of this Agreement;

 

(b)           Has no physical or mental impairment of any kind
that has interfered with Hauser’s ability to read or understand the meaning of
this Agreement or its terms, and that Hauser is not acting under the influence
of any medication, drug, or chemical of any type in entering into this
Agreement;

 

(c)           Is specifically agreeing to the terms of the release
contained in this Agreement because the Company has agreed to provide Hauser
with the Consideration and because of the Company Released Parties’ and the
Lender Released Parties’ agreement to waive and release Hauser from claims as
set forth in Section 4(c) above, which the Company Released Parties
and the Lender Released Parties have agreed to provide because of Hauser’s
agreement to accept it in full settlement of all possible claims Hauser might
have or ever had that are released hereunder, and because of Hauser’s execution
of this Agreement;

 

(d)           Acknowledges that but for Hauser’s execution of this
Agreement, Hauser would not be entitled to the Consideration, which is
conditioned upon the execution of a release, or the Company Released Parties’
and the Lender Released Parties’ waiver and release of claims described in Section 4(c) above;

 

(e)           Understands that, by entering into this Agreement,
Hauser does not waive rights or claims under ADEA that may arise after the
Execution Date;

 

(f)            Had or could have had until the Release Expiration
Date in which to review and consider this Agreement, and that if Hauser
executes this Agreement prior to the Release Expiration Date, Hauser has
voluntarily and knowingly waived the remainder of the period for review ending
on the Release Expiration Date;

 

(g)           Was advised to consult, and has consulted, with
Hauser’s attorney regarding the terms and effect of this Agreement; and

 

(h)           Has signed this Agreement knowingly and voluntarily.

 

Section 6.               Restrictions.

 

(a)           Confidential Information.  Hauser acknowledges that by reason of his
position with the Company, he has had complete access to and knowledge of the
Company’s Confidential Information.  The
Company’s “Confidential Information,” as used in this Agreement, means
any form of data or information in the possession or control of the Company
that relates to its business affairs, including but not limited to trade secrets,
proprietary

 

6

 

information, and other information not in the public
domain.  Confidential Information
includes, but is not limited to, product or service concepts and designs,
marketing insights, technology related to the Company’s business, business
methods and strategies, all financial information and plans of the Company,
acquisition targets and potential targets, strategic business plans, pricing
terms and methods, growth, expansion, and acquisition plans, financing and
venture capital sources and plans, and all similar information that the Company
holds in confidence or that competitors of the Company would be desirous of
obtaining.  Hauser agrees to use the Confidential
Information only for the purpose of or in connection with the Consulting
Services and to keep the Company’s Confidential Information in strictest
confidence and secrecy and not to use or disclose Confidential Information to
any person or entity except for purposes of performing the Consulting Services
and thereafter for a period of five (5) years.  Hauser will return all Confidential
Information to the Company promptly upon the expiration of the Consulting
Period.

 

(b)           Non-Compete.  Hauser agrees that, without the prior written
consent of the Board, from the Release Effective Date until the Final Payment
Date, he will not “Compete” with the Company in the “Prohibited
Territory.”  For purposes of this
Agreement, the term “Compete” means to be employed or engaged in any
capacity, whether as an employee, as a consultant, or by self-employment,
individually or on behalf of others, or to have any ownership interest in, any
business or entity engaged in business in the “Communications Industry”;
provided, however,
that the purchase and ownership of capital stock of less than two percent (2%)
in a publicly traded entity within the Communications Industry shall not
constitute competing.  As used herein,
the term “Communications Industry” shall have its broadest definition,
as generally understood by the investing public, and includes, but is not
necessarily limited to, the ownership, acquisition, and operation of,
investment in, and the provision of services and technology related to Rural
Local Exchange Carriers (RLECs), Incumbent Local Exchange Carriers
(ILECs), Competitive Local Exchange Carriers (CLECs), Internet Service
Providers (ISPs), cable television services, retail and wholesale distribution
of long distance services, Internet portal services, web casting and web
hosting, dedicated service lines (DSL), broadband, voice and video
conferencing, voice mail services, voice, data, and video transmissions,
cellular and wireless telephone, data, paging, and Internet access services,
prepaid calling cards and other prepaid communication services, electronic mail
services, directory and operator assistance services, facsimile and data
services, and other similar and related services and products.  For purposes of this Agreement, the term “Prohibited
Territory” shall mean and include any State within the United States where
the Company is engaged in business in the Communications Industry.  For purposes of this Agreement, a person or
entity is considered to be Competing in the Prohibited Territory if he or it is
engaged in offering or providing products or services related to the
Communications Industry within the Prohibited Territory, regardless of the
geographic location of the Competing individual or entity.

 

(c)           Acknowledgement.  Hauser acknowledges that the terms of this Section 6,
including the definitions of Compete, Communications Industry, and Prohibited
Territory, and the restricted period set forth in Section 6(b) above
(which may extend beyond the Consulting Period) are reasonable, and are no
broader than necessary to protect the Company’s legitimate business
interests.  Hauser specifically
acknowledges and agrees that (i) he has received adequate and valuable
consideration for entering into this Agreement, (ii) the Company is
currently engaged in business in the Communications Industry, (iii) the
nature of the

 

7

 

Communications Industry is such that the range of
business and competition is not necessarily contained within easily definable
geographic territories, and that, in many respects, otherwise unrelated aspects
of the Communications Industry are competitive with each other (for example,
cable television providers, telephone companies, wireless providers, and ISPs
all compete with each other to provide Internet access and services to consumers
and businesses), (iv) the business of investing in and operating RLECs, ILECs,
CLECs, and ISPs is highly competitive, and (v) by reason of his
responsibilities as Chairman and Chief Executive Officer of the Company, Hauser
was intimately familiar with and engaged in developing the Company’s business,
financial, strategic, and growth plans and other Confidential Information, and
that if he engages in any of the activity prohibited by this Section 6, it
is inevitable that he would use or disclose Confidential Information of the
Company.

 

(d)           Enforcement.  Hauser agrees that the Company would suffer
irreparable harm in the event of any violation of this Section 6, and the
Company is therefore entitled to injunctive relief to enforce the provisions
hereof.  The provisions of Section 6
shall survive the termination of this Agreement in accordance with their terms,
and shall inure to the benefit of the Company and its affiliates, and each of
their successors and assigns.

 

Section 7.               Other Obligations, Commitments, and
Representations of Hauser.

 

(a)           No Suit.  Hauser, the Company, on behalf of itself and
the Company Released Parties, and the Agent, on behalf of the Lender Released
Parties, represent and warrant that they have not previously filed, and to the
maximum extent permitted by law agree not to file, a claim against the other
party, respectively, regarding any of the claims respectively released
herein.  If, notwithstanding this
representation and warranty, either Hauser or any of the Company Released Parties
or the Lender Released Parties has filed or files such a claim, the filing
party agrees to cause such claim to be dismissed with prejudice and shall pay
any and all costs required in obtaining dismissal of such claim, including
without limitation the attorneys’ fees and expenses of any of the parties
against whom such a claim has been filed.

 

(b)           Cooperation.

 

(i)            Hauser agrees to provide reasonable cooperation to
the Company and/or any other member of the Company Group and its or their
respective counsel in connection with any investigation, administrative
proceeding, or litigation relating to any matter that occurred during his
employment in which he was involved or of which he has knowledge.  The Company agrees to reimburse Hauser for
reasonable out-of-pocket expenses incurred at the request of the Company with
respect to his compliance with this paragraph.

 

(ii)           Hauser agrees that, in the event he is subpoenaed by
any person or entity (including, but not limited to, any government agency) to
give testimony or provide documents (in a deposition, court proceeding or
otherwise) which in any way relates to his employment by the Company and/or any
other member of the Company Group, he will give prompt notice of such request
to the Company’s General Counsel and will make no disclosure until the Company
and/or the other member of the Company Group has had a reasonable opportunity
to contest the right of the requesting person or entity to such disclosure.

 

8

 

(c)           No Violations.  Hauser represents that he has not informed
any member of the Company Group of, and that he is unaware of, any alleged
violations of law or other misconduct by any member of the Company Group.

 

(d)           Return of Property.  Hauser agrees that he will promptly return to
the Company on or within five (5) days after the Release Effective Date
all property belonging to the Company and/or any other member of the Company
Group, including but not limited to all proprietary and/or confidential
information and documents (including any copies thereof) in any form belonging
to the Company, cell phone, Blackberry, beeper, keys, card access to the
building and office floors, phone card, computer user name and password, disks,
and/or voicemail code.  Hauser further
acknowledges and agrees that the Company shall have no obligation to provide
the Consideration unless and until he has satisfied all of his obligations
pursuant to this paragraph.

 

(e)           Non-Disparagement.  Hauser agrees that he will make no disparaging
or defamatory comments regarding the Company in any respect, any aspect of his
relationship with the Company, or the conduct or events that precipitated his
termination of employment.  Similarly,
the Company shall instruct its executive officers and directors to refrain from
making any disparaging or defamatory comments regarding Hauser in any respect,
any aspect of Hauser’s relationship with any member of the Company Group, or
the conduct or events that precipitated Hauser’s termination of employment from
any member of the Company Group (it being understood that the foregoing shall
not prevent any representative of the Company Group from verifying Hauser’s
employment to any potential subsequent employer).  The obligations of Hauser and the Company
under this Agreement shall not apply to disclosures required by applicable law,
regulation, or order of a court or governmental agency.

 

Section 8.               Employee Charges.  Subject to the conditions of this section,
Hauser authorizes the Company to deduct from Hauser’s pay or business expense
reimbursements and to reduce any payments and benefits owing to Hauser by the
amount of any outstanding and unpaid Employee Charges (as defined below),
except to the extent such offset is not permitted under Section 409A of
the Internal Revenue Code without the imposition of additional taxes or
penalties on Hauser.  Hauser further
agrees that if any Employee Charges remain outstanding and unpaid after such
deduction or reduction, Hauser shall be indebted to the Company for such amount
and shall promptly repay such amount.  “Employee
Charges” are any amounts Hauser owes to the Company for advances,
overpayments, and any other charges due from Hauser to the Company, including
without limitation charges for personal telephone calls or travel or
entertainment expenses, travel or entertainment advances, personal courier and
postal charges, personal copying charges, and other charges that may arise out
of the application of Company policies. 
Notwithstanding the foregoing, no such deduction or reduction shall be
made and no such indebtedness shall be created with respect to items
(i) not identified by the Company to Hauser in writing prior to the date
that is thirty (30) days prior to the Final Payment Date; (ii) for which
Hauser was not given a minimum of fourteen (14) days after receipt of the
writing identifying the items to respond; and (iii) that Hauser was not
given a substantive opportunity to reasonably contest, provided that any final
determination as to the imposition of Employee Charges shall be made by the
Board, in good faith, after taking into account Hauser’s arguments.  Any dispute arising out of or relating to
this Section 8 that is not resolved by Hauser and the Company shall be
submitted to arbitration in Charlotte, North Carolina in accordance with North

 

9

 

Carolina law and the procedures of the American
Arbitration Association with a single arbitrator, but only to the extent that
the aggregate amount in dispute exceeds $100,000.  The determination of the arbitrator shall be
conclusive and binding on the Company and Hauser and judgment may be entered on
the arbitrator’s awards in any court having competent jurisdiction.

 

Section 9.               No Admission of Liability.  Hauser understands and agrees that this
Agreement does not in any manner constitute an admission of liability or
wrongdoing by any member of the Company Group, but that any such liability or
wrongdoing is expressly denied, and that, except to the extent necessary to
enforce this Agreement, neither the Agreement nor any part of it may be
construed as, used, or admitted into evidence in any judicial, administrative,
or arbitral proceeding, as an admission of any kind by any of the parties.

 

Section 10.             Notices.  Unless otherwise provided in this Agreement,
any notices required or permitted under this Agreement shall be in writing and
delivered by hand, messenger, courier, or by registered or certified mail:

 

(a)           if to Hauser, at Hauser’s last address on record
with the Company;

 

(b)           if to any member of the Company Group, to FairPoint
Communications, Ltd., 521 East Morehead Street, Suite 500, Charlotte,
North Carolina 28202, Attn: General Counsel.

 

Section 11.             Assignment; Binding Obligations.  Hauser’s obligations, rights, and benefits
under this Agreement are personal to Hauser and shall not be assigned to any
person or entity without written consent from the Company.  The parties acknowledge and agree that this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, legal representatives, successors, and permitted
assigns.

 

Section 12.             Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.

 

Section 13.             Entire Agreement.  This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding Hauser’s separation
from service.  This Agreement supersedes
all prior negotiations, discussions, correspondence, communications,
understandings, and agreements between the parties relating to the subject
matter of this Agreement, including without limitation the Employment
Agreement.

 

Section 14.             Governing Law; Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH NORTH CAROLINA LAW (WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW PRINCIPLES THEREOF) APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN THAT STATE.  EACH PARTY TO
THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY
SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

 

(Signature Page to Follow)

 

10

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth below.

 

	
   

  	
   

  	
  FAIRPOINT
  COMMUNICATIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Shirley J. Linn

  
	
   

  	
   

  	
   

  	
  Name:
  Shirley J. Linn

  
	
   

  	
   

  	
   

  	
  Title:
  Executive Vice President

  
	
   

  	
   

  	
   

  	
  Date:
  August 16, 2010

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  David L. Hauser

  
	
   

  	
   

  	
   

  	
  David
  L. Hauser

  
	
   

  	
   

  	
   

  	
  Date:
  August 16, 2010

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged
  and agreed, solely in respect of

  Section 4(c) and Section 7(a) of this Agreement:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BANK
  OF AMERICA, N.A., as

  Administrative Agent for the Pre-Petition

  and Post-Petition Lenders

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Christopher Post

  	
   

  	
   

  
	
   

  	
  Name:
  Christopher Post

  	
   

  	
   

  
	
   

  	
  Title:
  Vice President

  	
   

  	
   

  

 

[Signature Page to Hauser Consulting Agreement and General Release]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

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