Document:

EXHIBIT
10.16

 

THE KROGER CO.

2008

LONG-TERM BONUS PLAN

 

  1. 
PURPOSE OF THE LONG-TERM BONUS PLAN. 
The purpose of the Long-Term Bonus Plan is to reward participating
Kroger executive employees for improved Company long-term performance.

 

  2. 
ELIGIBILITY.  Awards under this
plan may be made only to employees who are  executives of The Kroger Co. and its
subsidiaries and affiliates at pay level 35 or higher and who are notified in
writing by the Compensation Committee (or Kroger’s CEO at the direction of the
Compensation Committee) of their participation in the Plan.

 

  3. 
ADMINISTRATION.  The Compensation
Committee of the Board of Directors will administer the Plan.  The Committee will construe and interpret the
Plan.  The Committee has full authority
and discretion to determine the timing of awards, to select from those eligible
the individuals that will participate in the Plan, and to establish such other
measures as may be necessary or appropriate to the objectives of the Plan.  All decisions regarding the vesting of awards
under the Plan will be made by the Committee. 
The Committee’s decisions will be final and binding on all parties,
including the Company and all participants.

 

  4. 
AWARD CYCLE.  The 2008 Plan will
include fiscal years 2008, 2009, 2010 and 2011. 
The last day of fiscal 2011 will be the end of the award cycle for the
2008 Plan It is contemplated that a new plan will be adopted every two years,
with each plan covering four years.

 

  5. 
LONG-TERM BONUS.  Each participant
is eligible to earn a long-term bonus based on actual Company performance
measured against the performance standards described below.

 

  6. 
COMPANY PERFORMANCE STANDARDS. Company performance will be measured in
three ways:  (i) improvement in
Customer 1st Tracker
scores, (ii) reductions in Total Operating Costs (excluding fuel) as a
percentage of sales, and (iii) improvement in Associate 1st Tracker scores.

 

(a)    Customer 1st Tracker: 
Customer 1st Tracker
is a measure of Company performance in four key areas (People, Shopping
Experience, Product and Price) based on results of customer surveys.  The Customer 1st Tracker methodology to be used under this Plan
is the one currently in use by the Company, subject to such modifications as
the Committee may approve from time to time. 
Fiscal year end 2007 results will be the base against which performance
under the Plan will be measured.

 

(b)    Total Operating Costs:  Total operating costs, for purposes of the
Plan, will be calculated by adding OG&A, depreciation, rent, warehouse and
transportation costs, shrink and advertising expenses.  The total operating costs, as a percentage of
sales, for fiscal year 2007 will be the base against which performance under
the Plan will be measured.

 

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(c)    Associate 1st Tracker: 
Associate 1st Tracker
is a measure of Company performance in eleven key attributes designed to
measure associate satisfaction (Our People are Great) and one key attribute
designed to measure how the Company’s focus on its values supports how
associates do business (Knowledge of Values), based on the results of associate
surveys.  The Associate 1st Tracker methodology to be used
under this Plan is the one currently in use by the Company, subject to such
modifications as the Committee may approve from time to time.  Fiscal year end 2007 results will be the
base against which performance under the Plan will be measured.

 

  7. 
DETERMINING AWARD PAYOUTS. 
Long-Term Bonus awards under the Plan will be calculated as of the end of
fiscal year 2011.  Provided that
improvement is achieved in each of the four key areas, for each one point
improvement in the Customer 1st Tracker score, a bonus amount equal to one
percent of the participant’s base salary as of February 2, 2008, will be
earned.  For each basis point reduction
in Total Operating Costs, an additional bonus amount equal to one-quarter of
one percent of the participant’s base salary as of February 2, 2008, will
be earned.  Under the Associate 1st Tracker, for each one point improvement
in the Our People are Great attributes, and for each one point improvement in
the Knowledge of Values attribute, a bonus amount equal to one percent of the
participant’s base salary as of February 2, 2008, will be earned.

 

  8. 
PAYMENT OF AWARDS.  Awards, if
any, earned under the terms of the Plan will be paid in cash.  Unless some other date is selected by the
Committee, awards will be paid in March of 2012 except for participants
who make deferral elections under the deferred compensation supplement in which
case the provisions of the deferred compensation supplement will control.  Amounts earned under the Plan will not be
taken into consideration in calculating earnings under any of the Company’s
pension plans.

 

  9. 
ADJUSTMENTS.  The Committee will
make such adjustments as it deems necessary or desirable based on changes in
accounting or tax law, or on account of any acquisition, disposition or other
developments that may affect the calculation of awards under the Plan.

 

  10. TERMINATION OF EMPLOYMENT, RETIREMENT, OR
DEATH OF PARTICIPANT.

 

     (a)  Participation in the Plan does
not create a contract of employment, or grant any employee the right to be
retained in the service of the Company. Any participant whose employment is
terminated by the Company for cause, including but not limited to violations of
The Kroger Co. Policy on Business Ethics; who voluntarily terminates his or her
employment (other than in accordance with paragraph (b) below); or whose
pay level drops below pay level 35, prior to the end of the 2008 Plan award
cycle, will forfeit all rights to payment under the Plan.

 

     (b)  If a participant voluntarily
terminates his or her employment after reaching age 55 with at least five years
of service with the Company, participation will continue, and that participant
will be paid a prorata share of the amount earned according to the terms of the
award proportionate to the period of active service during the 2008 Plan award
cycle.

 

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     (c) If a participant dies during the
2008 Plan award cycle, participation will continue, and the participant’s
designated beneficiary (or if none, then the participant’s estate) will be paid
a prorata share of the amount earned according to the terms of the award
proportionate to the period of service during the 2008 Plan award cycle before
the participant’s death.

 

  11. EFFECTIVE DATE OF PLAN. This plan will
take effect on February 3, 2008.

 

  12. AMENDMENT, SUSPENSION, OR TERMINATION OF
PLAN. The Committee or the Board of Directors of the Company may at any time
suspend, terminate or amend the plan in such respects as it deems to be in the
best interests of the Company. No amendment will adversely affect any right of
any participants, or their successors in interest, under the terms of any award
made hereunder before the effective date of the amendment.

 

  13. DEFERRED COMPENSATION SUPPLEMENT.  The Deferred Compensation Supplement attached
as Annex I hereto is adopted as a part of this Plan.

 

IN
WITNESS WHEREOF, The Kroger Co. has caused this Plan to be adopted this 26th
day of February, 2008.

 

	
   

  	
  THE
  KROGER CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Paul Heldman

  
	
   

  	
   

  	
  Paul
  Heldman

  
	
   

  	
   

  	
  Executive
  Vice President,

  
	
   

  	
   

  	
  Secretary
  and General Counsel

  
				

 

3

 

	
   

  	
  ANNEX I

  

 

DEFERRED COMPENSATION SUPPLEMENT TO

THE KROGER CO. 2008 LONG-TERM BONUS PLAN

 

Effective as
of February 26, 2008

 

1.            Establishment and Purpose of this Deferred
Compensation Supplement

 

Effective as
of the date set forth above, The Kroger Co. (the “Company”) adopts this
Deferred Compensation Supplement (the “Supplement”) to The Kroger Co. 2008
Long-Term Bonus Plan (the “Plan”). The purpose of the Supplement is to provide
supplemental deferred compensation to certain highly compensated employees of
the Company. The Supplement is intended to be unfunded and maintained primarily
for the purpose of providing deferred compensation to a select group of
management or highly compensated employees, within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income
Security Act of 1974 (“ERISA”). The Supplement is also intended to comply with
the requirements of Section 409A of the Internal Revenue Code (the “Code”).

 

2.            Definitions

 

As used in the
Supplement, in addition to the terms defined in Section 1 of the
Supplement, these words and phrases have the following meanings (all other
capitalized terms in the Supplement have the meanings ascribed to them in the
Plan, unless the context requires otherwise):

 

(a)           “Account” means a
bookkeeping account established on the records of the Company for a Participant
which is credited with amounts deferred by a Participant and interest on those
amounts under Section 4 of the Supplement.

 

(b)           “Affiliate” means an
organization that is (i) a member of the same controlled group of
corporations (as defined in Code Section 414(b)) as the Company, (ii) a
trade or business under common control (as defined in Code Section 414(c))
with the Company, (iii) an organization which is a member of an affiliated
service group (as defined in Code Section 414(m)) that includes the
Company, or (iv) otherwise required to be aggregated with the Company
under Code Section 414(o).

 

(c)           “Board” means the Board
of Directors of the Company.

 

(d)           “Committee” means the
Retirement Management Committee of the Company.

 

(e)           “Company” means The
Kroger Co., an Ohio corporation, or any successor.

 

(f)            “Compensation
Committee” means the Compensation Committee of the Board.

 

(g)           “Designated Beneficiary”
means the persons or entities designated by the Participant, in a form and
manner acceptable to the Committee, to receive payment of the remaining balance
of the Participant’s Account in the event the Participant dies before receiving
the entire interest credited to the Participant’s Account.

 

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(h)           “Election” means an
election by an Eligible Employee, consistent with the terms of the Supplement
and in a form and manner satisfactory to the Committee, to elect to defer a
Long-Term Bonus for a Performance Period and to specify a time and form of
payment for the portion of the Participant’s Account attributable to such
deferred amounts.

 

(i)            “Eligible Employee”
means any individual who has been designated as eligible to participate in the
Plan.

 

(j)            “Insolvency” means an
entity is unable to pay its debts as they become due, or is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.

 

(k)           “Long-Term Bonus” means
a bonus payable to an Eligible Employee under the Plan.

 

(l)            “Participant” means an
Eligible Employee who has elected to defer a Long-Term Bonus payable under the
Plan in accordance with Section 3 of the Supplement.

 

(m)          “Performance-Based
Compensation” means compensation where the amount of, or entitlement to, the
compensation is contingent on the satisfaction of pre-established
organizational or individual performance criteria relating to a Performance
Period in which a Participant performs services. In determining whether an
amount constitutes Performance-Based Compensation, the Committee shall apply
the rules set forth in Treasury Regulation Section 1.409A-1(e), or
any subsequent guidance.

 

(n)           “Performance Period”
means a period of at least twelve (12) months in which Performance-Based
Compensation is determined for the performance of services.

 

(o)           “Plan Year” means the
fiscal year of the Company.

 

(p)           “Unforeseeable
Emergency” means a severe financial hardship to the Participant resulting from
an illness or accident of the Participant, the Participant’s spouse, or a
dependent (as defined in Section 152(a) of the Code) of the
Participant, loss of the Participant’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. An Unforeseeable Emergency will
not include the need to send a Participant’s child to college or the desire to
purchase a home.

 

3.            Deferral Election.

 

(a)           Election to Defer Long-Term Bonus. A
Participant may file an Election to defer receipt of all or any portion of the
Participant’s Long-Term Bonus that becomes payable under the Plan. A
Participant’s Election to defer receipt of a Long-Term Bonus must be made no
later than six months prior to the end of the applicable Performance Period,
and is irrevocable once made, and must designate the time and manner in which
such deferred Long-Term Bonus, and interest on such deferred amount, is to be
later paid in accordance with the distribution options set forth in Section 5.

 

(b)           Designated
Beneficiary. A Participant shall, in the Participant’s Election,
name a Designated Beneficiary with respect to amounts credited to the
Participant’s Account. The Participant may change or revoke the designation of
a Designated Beneficiary by written notice to the Committee or the Committee’s
designee.

 

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(c)           Termination of Participation. An individual
shall cease to be a Participant in this Supplement when all amounts allocated
to the Participant’s Account have been paid under the terms of this Supplement.

 

4.            Benefits.

 

(a)           Crediting of Deferred Amounts. As of the
date a Long-Term Bonus would otherwise be payable to a Participant under Section 8
of the Plan, a Participant’s Account shall be credited with an amount equal to
the portion of the Long-Term Bonus deferred under this Supplement pursuant to
the Participant’s Election for the Performance Period in question.

 

(b)           Crediting of Interest. A Participant’s
Account for each Performance Period shall be credited with interest based upon
the interest rate established for the Plan Year by the Board, or by the
Compensation Committee, before the beginning of each Plan Year. Once
established by the Board or the Compensation Committee, such interest rate shall
apply for subsequent Plan Years, unless changed by the Board or the
Compensation Committee. For each Plan Year, a Participant’s Account shall be
credited with interest on a quarterly basis pursuant to the following
provisions:

 

(i)            The interest for a
calendar quarter shall be credited effective as of the last day of the calendar
quarter.

 

(ii)           The interest for a
calendar quarter shall be in an amount equal to (A) 1⁄4 of the applicable
interest rate for the Plan Year, multiplied by (B) the average of the
beginning and ending balances of the Participant’s Account for the calendar
quarter.

 

(c)           Effect upon
the Kroger Consolidated Retirement Benefit Plan. Amounts deferred
under the Supplement are not taken into account in computing the monthly
benefits to which a Participant and/or Participant’s spouse or beneficiary is
entitled under the Kroger Consolidated Retirement Benefit Plan or any other
pension plan of the Company.

 

5.            Time and Form of Distribution.

 

(a)           Distribution following Termination of Employment.
A Participant, in the Participant’s Election for a Performance Period, shall
specify the time and manner that the Participant’s Account attributable to the
Performance Period is to be paid to the Participant upon the Participant’s
termination of employment with the Company (for any reason other than death)
from among the following choices:

 

(i)            Immediate Lump Sum.
The Account shall be paid to the Participant in a single cash lump sum payment
as soon as administratively possible after the first day of the calendar
quarter that occurs six months after the Participant’s termination of
employment. The amount of the lump sum payment shall be equal to the balance of
the Account as of the last day of the calendar quarter preceding the date of
payment to the Participant.

 

(ii)           Deferred (Next Year)
Lump Sum. The Account shall be paid to the Participant in a single cash
lump sum payment as soon as administratively possible after the later of (A) six
months after the Participant’s termination of employment or (B) the first
day of the calendar year following the date of the Participant’s termination of
employment. The amount of the lump sum 

 

6

 

payment shall
be equal to the balance of the Account as of the last day of the calendar
quarter preceding the date of payment to the Participant.

 

In the event
that the Participant dies before the date of actual payment of the lump sum
payment, the Participant’s Designated Beneficiary shall receive the Participant’s
lump sum payment at the same time and manner prescribed by subsection (i) or
(ii), as applicable.

 

(iii)          Immediate Quarterly
Installments. The Account shall be paid to the Participant in quarterly
installment payments (not less than 4 nor more than 40) commencing as soon as
administratively possible after the first day of the calendar quarter that
occurs six months after the Participant’s termination of employment. The amount
of each quarterly installment shall be determined by dividing (A) the
balance of the Account as of the last day of the calendar quarter preceding the
quarterly installment payment to the Participant, by (B) the number of the
remaining quarterly installment payments to be made to the Participant plus the
payment currently being made.

 

(iv)          Deferred (Retirement
Age) Quarterly Installments. The Account shall be paid to the Participant
in quarterly installment payments (not less than 4 nor more than 40) commencing
as soon as administratively possible after the first day of the calendar
quarter that occurs six months after the later of (A) the Participant’s
termination of employment or (B) the date of the Participant’s retirement
age specified in the Participant’s Election. The amount of each quarterly
installment shall be determined by dividing (A) the balance of the Account
as of the last day of the calendar quarter preceding the quarterly installment
payment to the Participant, by (B) the number of the remaining quarterly
installment payments to be made to the Participant plus the payment currently
being made.

 

In the event
that the Participant dies before commencement of the Participant’s quarterly
installment payments, or the Participant dies after commencement of the
Participant’s quarterly installment payments, the Participant’s Designated
Beneficiary shall receive the Participant’s quarterly installment payments, at
the election of the Participant in the Participant’s Election, either (A) at
the same time and manner prescribed by subsections (iii) or (iv), as
applicable, as if the quarterly installment payments were being made to the
Participant or (B) in a single lump sum payment as soon as
administratively possible after the first day of the calendar quarter following
the date of the Participant’s death in an amount equal to the balance of the
Account as of the last day of the calendar year preceding the date of payment
to the Designated Beneficiary.

 

(b)           Distribution upon the Death of a Participant.
A Participant, in the Participant’s Election, shall specify the time and manner
that the Account is to be paid to the Participant’s Designated Beneficiary upon
the Participant’s death.

 

(i)           Time
and Manner of Payment. The Participant may elect one of the following time
and manner of payments with respect to payments to the Participant’s Designated
Beneficiary:

 

(A)          Immediate (Next
Quarter) Lump Sum. The Account shall be paid to the Participant’s
Designated Beneficiary in a single cash lump sum payment as soon as
administratively possible after the first day of the calendar quarter following
the date of the Participant’s death. The amount of the lump sum payment shall
be equal to the balance of the Account as of the last day of the calendar
quarter preceding the date of payment to the Designated Beneficiary.

 

7

 

(B)           Deferred (Next Year)
Lump Sum. The Account shall be paid to the Participant’s Designated
Beneficiary in a single cash lump sum as soon as administratively possible
after the first day of the calendar year following the date of the Participant’s
death. The amount of the lump sum payment shall be equal to the balance of the
Account as of the last day of the calendar year preceding the date of payment
to the Designated Beneficiary.

 

(C)           Immediate (Next
Quarter) Quarterly Installments. The Account shall be paid to the
Participant’s Designated Beneficiary in quarterly installment payments (not
less than 4 nor more than 40) commencing as soon as administratively possible
after the first day of the calendar quarter following the date of the
Participant’s death. The amount of each quarterly installment shall be
determine by dividing (1) the balance of the Account as of the last day of
the calendar quarter preceding the quarterly installment payment to the
Designated Beneficiary, by (2) the number of the remaining quarterly
installment payments to be made to the Designated Beneficiary plus the payment
currently being made.

 

(ii)          Special
Death Distribution Provisions. In the event of the death of the
Participant, the Committee must receive written notice and verification of the
death of the Participant and reserves the right to delay distribution of a
Participant’s Account to the Participant’s Designated Beneficiary until the
Committee’s receipt and acceptance of such notice and verification.

 

The
distribution options elected by the Participant in Sections 5(a) and (b) shall
apply to and be binding upon any subsequent Designated Beneficiary, including
any such subsequent Designated Beneficiary arising by a change by the
Participant or by operation of any contingency provisions of the Participant’s
beneficiary designation.

 

The
Participant’s written designation of a Designated Beneficiary and its
contingency provisions (if any) shall govern the determination of the proper
person entitled to benefits under the Plan following the death of the
Participant and the Participant’s Designated Beneficiary. However, in the
absence of a specific contingency provision therefore with respect to the
Account, the following default provisions shall apply:

 

(A)          In the event that the
Participant dies without any Designated Beneficiary, the Participant’s
Designated Beneficiary shall be deemed the Participant’s estate.

 

(B)           In the event that the
Participant’s Designated Beneficiary dies after the Participant and with
outstanding benefits under the Plan, such Designated Beneficiary’s own
beneficiary designated in writing to the Committee (or, if none, the Designated
Beneficiary’s estate) shall thereafter be considered the Participant’s
Designated Beneficiary.

 

(C)           In the event that the
Participant and the Designated Beneficiary die simultaneously or under
circumstances such that the order of death cannot be determined, the
Participant, for purposes of the Plan, shall be deemed to have survived the
Designated Beneficiary.

 

(c)           Changes to
Distribution Elections. The Committee may, in its discretion, allow
a Participant to elect to defer the time of payment or change the form of
payment of the Participant’s Account; provided, however, that no such election
shall be effective unless:

 

8

 

(i)           The
election will not take effect until at least twelve (12) months after the date
on which the election is made,

 

(ii)          Except
in the case of a payment as the result of the Participant’s death or the
occurrence of an Unforeseeable Emergency, the first payment with respect to
such election is deferred for not less than five years from the date on which
such payment would otherwise have been made, and

 

(iii)         Any
election which is related to a payment at a specified time or pursuant to a
fixed schedule may not be made less than twelve months prior to the date of the
first scheduled payment under that election.

 

(d)           Unforeseeable
Emergency. If a Participant has an Unforeseeable Emergency, the
Participant may apply in writing to the Committee for an emergency payment
under this Section 5(d). The Company will pay to the Participant that
portion of the Participant’s Account under the Plan as necessary to meet the
Unforeseeable Emergency. For purposes of this Section 5(d), a payment due
to an Unforeseeable Emergency will not exceed the amount that the Committee
determines is reasonably necessary to satisfy the need created by the
Unforeseeable Emergency, plus amounts reasonably necessary to pay taxes
reasonably anticipated as the result of the payment, after taking into account
the extent to which such need is or may be relieved through reimbursement or
compensation by insurance or otherwise, or by liquidation of the Participant’s
assets (to the extent that such liquidation would not itself cause severe
financial hardship). Upon application for a payment due to Unforeseeable
Emergency, the Participant will furnish to the Committee all information as the
Participant deems appropriate and as the Committee deems necessary and appropriate
to make a determination on the application.

 

(e)           Tax Withholding. The Company may withhold
income or other taxes from any distribution of a Participant’s Account if the
Company determines that withholding is necessary or appropriate to comply with
any Federal, State or local tax withholding or similar requirements of law.

 

(f)            Payments to Legal Incompetents. Upon proof
satisfactory to the Committee that any person entitled to receive a payment
under the Supplement is legally incompetent to receive the payment, the
Committee may direct the payment to be made to a guardian or conservator of the
estate of the person. Any payment made under the preceding sentence will
release the Company from all further liability to the extent of the payment
made.

 

(g)           Discharge of Obligation. Any payment made
by the Company pursuant to the Supplement shall, to the extent of the payments
made, constitute a complete discharge of all obligations under the Supplement
of the Company and the Committee The Committee may require the payee, as a
condition precedent to any payment, to execute a receipt and release in a form
satisfactory to the Committee. The Committee may also require the payee, as a
condition precedent to any payment, to execute an acknowledgement or agreement
in a form satisfactory to the Committee concerning repayment of erroneous or
duplicate benefits.

 

(h)           Correction of Mistakes. Any mistake in the
amount of a Participant’s benefits under the Supplement may be corrected by the
Committee when the mistake is discovered. The mistake 

 

9

 

may be
corrected in any reasonable manner authorized by the Committee. In appropriate
circumstances (such as where the mistake is not material or is not timely
discovered), the Committee may in its sole and absolute discretion waive the
making of any correction.

 

6.            Fully Vested; Forfeiture for Cause.

 

All amounts
credited to the Participant’s Account shall be fully vested and nonforfeitable
at all times. Notwithstanding the foregoing, any Participant, regardless of
age, who is terminated for theft or embezzlement of Company assets, or for
accepting bribes from suppliers, or who resigns during the pendency or carrying
out of an investigation which established such conduct, shall forfeit 100% of
the interest credited to his Account.

 

7.            Funding Policy and Method.

 

This
Supplement shall be unfunded within the meaning of Section 201(2) of
ERISA, and all payments under the Supplement shall be made from the general
assets of the Company, including, at the sole option of the Company, from any
assets held in any trust established by the Company the assets of which are
subject to the claims of the Company’s general, unsecured creditors in the
event of the Company’s Insolvency. No assets shall be irrevocably set aside to
pay benefits under the Supplement in a manner making the assets unreachable by
the Company’s general, unsecured creditors in the event of the Company’s
Insolvency. Participants and Designated Beneficiaries shall have no right to
any specific assets of the Company by virtue or the existence or terms of the
Supplement and shall be general, unsecured creditors of the Company at all
times with respect to any claim for benefits under the Supplement.

 

8.            Administration

 

(a)           Committee
Authority. The Committee shall be responsible for the operation and
administration of the Supplement and for carrying out the provisions of the
Supplement. The Committee shall have discretionary authority to make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Supplement, and to decide or resolve any and all
questions, including interpretations of the Supplement. Any action taken by the
Committee in its discretion shall be final and conclusive on all parties. The Committee’s prior exercise of discretionary
authority shall not obligate it to exercise its authority in a like fashion in
the future. The Committee may, from time to time, delegate to others,
including employees of the Company, administrative duties as it sees fit.

 

(b)           Account
Statements. As soon as administratively possible after the end of
each calendar year, the Company shall prepare and furnish to each Participant a
statement of the status of each of his Account of the Plan effective as of the
last day of the calendar year, and such other information as the Committee may
prescribe.

 

(c)           Indemnification.
The Company shall indemnify, through insurance or otherwise, each member of the
Committee against any claims, losses, expenses, damages or liabilities arising
out of the performance (or failure of performance) of their responsibilities
under the Plan.

 

10

 

9.            Claims and Appeals.

 

(a)           Payment of Benefits. The payment of
benefits due under the Supplement shall be made at such times and in such
amounts as provided for under the terms of the Supplement. Each Participant and
Designated Beneficiary shall be obligated to provide the Company a current
address so that payments may be made as required. The mailing of a payment to
the last known mailing address of a Participant or Designated Beneficiary shall
be deemed full payment of the amount so mailed.

 

(b)           Written Claim for Benefits. If a
Participant or Designated Beneficiary does not receive payment of benefits under
the Supplement which the Participant or Designated Beneficiary believes are due
under the Supplement, the Participant or Designated Beneficiary may file a
written claim for benefits with the Committee. The written claim shall be in a
form satisfactory to, and with such supporting documentation and information as
may be required by, the Committee.

 

(c)           Denial of Claim. If a Participant’s or
Designated Beneficiary’s claim for benefits is denied in whole or in part by
the Committee, a written notice will be furnished to the claimant within 90
days after the date the claim was received. If circumstances require a longer
period, the claimant will be notified in writing, prior to the expiration of
the 90 day period, of the reasons for an extension of time; provided, however,
that no extensions will be permitted beyond 90 days after the expiration of the
initial 90 day period.

 

(d)           Reasons for Denial. A denial or partial
denial of a claim will clearly set forth:

 

(i)           the specific reason or
reasons for the denial;

 

(ii)          a specific reference to
pertinent Supplement provisions on which the denial is based;

 

(iii)         a description of any
additional material or information necessary for the claimant to perfect the
claim and an explanation of why such material or information is necessary; and

 

(iv)         an explanation of the procedure for review of the denied or partially
denied claim, including the claimant’s right to bring a civil action under Section 502(a) of
ERISA following an adverse benefit determination on review.

 

(e)           Review of Denial. Upon denial of a claim,
in whole or in part, a claimant or a duly authorized representative of the
claimant may request a full and fair review of the denied claim by filing a
written notice of appeal with the Committee. Any appeal must be received by the
Committee within 60 days of the date that the notice of the denied claim was
received. A claimant or the claimant’s authorized representative will have,
upon request and free of charge, reasonable access to, and copies of, all
documents, records, and other information relevant to the claimant’s claim for
benefits and may submit issues and comments in writing, except for privileged
or confidential documentation. The review will take into account all comments,
documents, records, and other information submitted by the claimant relating to
the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.

 

11

 

If the
claimant fails to file a request for review within 60 days of the notification
of denial, the claim will be deemed abandoned and the claimant precluded from
reasserting it. If the claimant does file a request for review, the request
must include a description of the issues and evidence the claimant deems
relevant. Failure to raise issues or present evidence on review will preclude
those issues or evidence from being presented in any subsequent proceeding or
judicial review of the claim.

 

(f)            Decision Upon Review. The Committee will provide
a written decision on review. If the claim is denied on review, the decision
shall set forth:

 

(i)           the specific reason or
reasons for the adverse determination;

 

(ii)          specific reference to
pertinent Supplement provisions on which the adverse determination is based;

 

(iii)         a statement that the
claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and other information
relevant to the claimant’s claim for benefits; and

 

(iv)         a statement describing
any voluntary appeal procedures offered by the Supplement and the claimant’s
right to obtain the information about such procedures, as well as a statement
of the claimant’s right to bring a civil action under Section 502(a) of
ERISA.

 

A decision
will be rendered by the Committee as soon as practicable. Ordinarily decisions
will be rendered within 60 days following receipt of the request for review. If
the need to hold a hearing or special circumstances require additional
processing time, the decision shall rendered as soon as possible, but not later
than 120 days following receipt of the request for review.

 

(g)           Finality of Determinations; Exhaustion of Remedies.
To the extent permitted by law, decisions reached under the claims procedures
set forth in this Section shall be final and binding on all parties. No
legal action for benefits under the Supplement shall be brought unless and
until the claimant has exhausted all remedies under this Section. In any such
legal action, the claimant may only present evidence and theories which the
claimant presented during the claims procedure. Any claims which the claimant
does not in good faith pursue through the review stage of the procedure shall
be treated as having been irrevocably waived. Judicial review of a claimant’s
denied claim shall be limited to a determination of whether the denial was an
abuse of discretion based on the evidence and theories the claimant presented
during the claims procedure. Any suit or legal action initiated by a claimant
under the Supplement must be brought by the claimant no later than one year
following a final decision on the claim for benefits. Notwithstanding the
foregoing, in no event may a claimant initiate suit or legal action more than
two years after the facts giving rise to the action occurred. These limitations
on suits or legal actions for benefits will apply in any forum where a claimant
initiates the suit or legal action.

 

10.          Amendment and Termination of this Supplement.

 

The Company
reserves the right to amend or terminate this Supplement at any time by
resolution of the Board or the Compensation Committee. No amendment or
termination of this Supplement shall deprive a Participant or Designated
Beneficiary of any portion of the Participant’s 

 

12

 

or Designated
Beneficiary’s vested benefit accrued under the Supplement as of the date of the
amendment or termination.

 

11.          General Provisions.

 

(a)           Definition and Supplement Interpretation.
The capitalized words and phrases used throughout the Supplement shall have the
meanings in Section 2, unless the context requires otherwise. Unless
otherwise plainly required by the context, any gender may be construed to
include all genders, and the singular or plural may be construed to include the
plural or singular, respectively. The section headings in the Supplement have
been inserted for the convenience of reference only and are not to be
considered in the interpretation of the Supplement.

 

(b)           Interpretation and Savings Clause. The
Supplement is intended to comply with Code Section 409A and guidance
issued under Code Section 409A. Notwithstanding any other provision of
this Supplement, the Supplement shall be interpreted and administered
accordingly. If any provision of the Supplement is held invalid or
unenforceable, that invalidity or unenforceability shall not affect any other
provision, and the Supplement shall be construed and enforced as if the
affected provision had not been included.

 

(c)           No Employment Rights. Neither the Plan or
the Supplement, nor the action of the Company in establishing or continuing the
Plan or the Supplement, nor any action taken by the Committee, nor
participation in the Plan or the Supplement, shall be construed as giving any
person any right to remain in the employ of the Company or an Affiliate or,
except as provided in the Plan and the Supplement, the right to any payment or
benefit. Nothing in the Plan or the Supplement shall affect the right of the
Company or an Affiliate to terminate a person’s employment at any time, with or
without cause.

 

(d)           Assignment or Alienation of Benefits.

 

(i)           General Rule. Except as expressly provided
in the Supplement, the benefits payable under the Plan or the Supplement shall
not be subject to assignment or alienation, and any attempt to do so shall be
void.

 

(ii)          Domestic Relations Orders. Notwithstanding
any other provision of the Supplement, all or a portion of a Participant’s
Account may be paid to another person as specified in a domestic relations order
that the Committee determines is a Qualified Domestic Relations Order. For this
purpose, a “Qualified Domestic Relations Order” means a judgment, decree, or
order (including the approval of a property settlement agreement) that:

 

(A)          is issued pursuant to a
State’s domestic relations law;

 

(B)           relates to the
provision of child support, alimony payments or marital property rights to a
spouse, former spouse, child or other dependent of a Participant; and

 

(C)           creates or recognizes
the existence of an alternate payee’s right to, or assigns to the alternate
payee the right to, receive all or a portion of the Participant’s benefits
under the Supplement;

 

13

 

The Committee
shall determine in its sole and absolute discretion whether any document
received by it is a Qualified Domestic Relations Order. In making this
determination, the Committee may consider the rules applicable to “domestic
relations orders” under Code Section 414(p) and Section 206(d) of
ERISA, and other rules and procedures it deems relevant. If an order is
determined to be a Qualified Domestic Relations Order, the amount to which the
alternate payee is entitled under the Qualified Domestic Relations Order shall
be paid in a single lump-sum payment as soon as practicable after the
determination.

 

(e)           Governing Law. To the extent not preempted
by federal law, this Supplement shall be interpreted and construed in
accordance with the laws of the State of Ohio (determined without regard to
choice of laws principles).

 

IT WITNESS
WHEREOF, The Kroger Co. has caused this Deferred
Compensation Supplement to The Kroger Co. 2008 Long-Term Bonus Plan to be
executed as of the 26th day of February, 2008.

 

	
   

  	
  THE KROGER CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/ Paul Heldman

  
	
   

  	
   

  
	
   

  	
  Title: Executive Vice President, Secretary

  
	
   

  	
  and General Counsel

  

 

14

 

DEFERRAL AGREEMENT

 

THIS FORM APPLIES ONLY TO DEFERRALS MADE
WITH RESPECT TO LONG-TERM BONUSES THAT MAY BECOME PAYABLE UNDER THE 2008
LONG-TERM BONUS PLAN

 

	
  PARTICIPANT:

  	
   

  
	
   

  
	
  DATE OF
  BIRTH:

  	
   

  
	
   

  
	
  SOCIAL
  SECURITY NO.:

  
	
   

  
	
  CURRENT
  ADDRESS:

  
	
   

  
			

 

DEFERRAL
ELECTION (FISCAL YEARS 2008-2011)

 

The Long-Term Bonus that may become payable
to you under The Kroger Co. 2008 Long-Term Bonus Plan (the “Plan”), which
includes the Company’s 2008-2011 Fiscal Years, may be deferred under the
Deferred Compensation Supplement to the Plan (the “Supplement”), provided the Company
receives your properly completed Deferral Agreement no later than six months prior to the end of fiscal year 2011.

 

o           I elect to defer all or
a portion of the Long-Term Bonus that may become payable to me under the Plan,
as designated below. I understand that this deferral election is irrevocable,
and is subject to all of the terms of the Plan and Supplement.

 

	
  DEFERRAL

  AMOUNT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  %

  	
   

  	
  (enter percentage of Long-Term
  Bonus to be deferred)

  

 

PAYMENT
ELECTION FOR AMOUNTS DEFERRED

 

I elect to have the amount of my Long-Term
Bonus (Fiscal Years 2008-2011) deferred, and earnings on such amounts, paid as
follows:

 

o           Immediate
Lump Sum Payment.  Lump sum
payment after the first day of the calendar quarter that occurs six (6) months
after my termination of employment.

 

15

 

o           Deferred
(Next Year) Lump Sum Payment. 
Lump sum payment after the later of (i) the first day of the
calendar year following my termination of employment or (ii) six (6) months
after my termination of employment.

 

o           Immediate
(Next Quarter) Installment Payments. 
Quarterly installment payments of                         
payments [specify number of payments - no less than four (4) and
no more than forty (40)] commencing after the first day of the
calendar quarter that occurs six (6) months after my termination of
employment.

 

o           Deferred
(Retirement Age) Installment Payments.  Quarterly installment payments of                         
payments [specify number of payments - no less than four (4) and
no more than forty (40)] commencing after the first day of the
calendar quarter that occurs six (6) months following the later of (i) my
termination of employment or (ii) my                     
birthday [specify birthday for which payments shall commence].

 

DESIGNATION OF BENEFICIARY

 

Pursuant to the Supplement to the Plan, I
designate the following person(s) to receive payment of the amounts in my
Account that are attributable to deferrals (and earnings on such deferrals) in
the event of my death prior to complete distribution of such amounts.  I understand that if I do not have a valid
Designation of Beneficiary on file, the amounts credited to my Account that are
attributable to deferrals (and earnings on such deferrals) shall be distributed
to the executor or administrator of my estate.

 

	
  Beneficiary(ies)

  	
   

  	
  Percentage
  of Death Benefit:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
   

  	
  % (must equal 100%)

  

 

Please attach any contingent Designated Beneficiary provisions.

 

PAYMENT TO DESIGNATED BENEFICIARY

 

I elect to have the amounts in my Account
that are attributable to deferrals (and earnings on such deferrals) that are
unpaid as of the date of my death, paid to my Designated Beneficiary as
follows:

 

o           Immediate
(Next Quarter) Lump Sum Payment. 
Lump sum payment after the first day of the calendar quarter following
the date of my death.

 

o           Deferred
(Next Year) Lump Sum Payment. 
Lump sum payment after the first day of the calendar year following the
date of my death.

 

16

 

o           Immediate
(Next Quarter) Installment Payments. 
Quarterly installment payments of                         
payments [specify number of payments - no less than four (4) and
no more than forty (40)] commencing after the first day of the
calendar quarter following the date of my death.

 

PARTICIPANT’S ACKNOWLEDGEMENTS

 

I acknowledge that I have received a copy of
the Plan and Supplement, and agree that the deferral of any portion of my
Long-Term Bonus that may become payable to me under the Plan is subject to the
terms and conditions of the Plan and Supplement.

 

	
   

  	
   

  
	
  Participant’s Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Participant’s Name (Printed)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date

  	
   

  

 

	
   

  	
  Committee

  
	
   

  	
   

  
	
  2008
  Long-Term Bonus Plan

  	
  By:

  
	
  Deferred
  Compensation Supplement  

  	
   

  
	
  Deferral
  Agreement

  	
   

  
	
   

  	
  Date:

  

 

17

 

ALTERNATIVE REPORTING AND DISCLOSURE STATEMENT

FOR PENSION PLANS FOR CERTAIN SELECTED EMPLOYEES

 

To the Secretary of Labor:

 

In compliance
with the requirements of the alternative method of reporting and disclosure
under Part 1 of Title I of the Employee Retirement Income Security Act of
1974 for unfunded or insured pension plans for a select group of management or
highly compensated employees, specified in Department of Labor Regulations, 29
C.F.R. §2520.104-23, the following information is provided by the undersigned
employer.

 

	
  Name and Address of Employer:

  	
   

  	
  The Kroger Co.

  
	
   

  	
   

  	
  1014 Vine Street

  
	
   

  	
   

  	
  Cincinnati, Ohio 45202-1141

  
	
   

  	
   

  	
   

  
	
  Employer Identification Number:

  	
   

  	
  31-0345740

  

 

The Employer
maintains a plan (or plans) primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees.

 

Number of Plans and

Participants in Each

	
  Plan:

  	
                       Plan
  covering
                      
  Employees (or

  
	
   

  	
            Plans
  covering                                   and

  
	
   

  	
  Employees, respectively.)

  

 

Dated                                                       ,
20    .

 

	
   

  	
  THE KROGER CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

This
form should be mailed to:

 

Top
Hat Plan Exemption

Employee
Benefits Security Administration

Room N-1513

U.S.
Department of Labor

200
Constitution Avenue, NW

Washington,
DC 20210

 

(Send
certified mail to evidence filing requirement satisfied)

 

18Exhibit 10.1

 

AMENDED
AND RESTATED

EMPLOYMENT  AGREEMENT

 

THIS AMENDED AND RESTATED
EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of April 1,
2008, by and between FAIRPOINT
COMMUNICATIONS, INC., a Delaware corporation (together with its
successors and assigns permitted hereunder, the “Company”), and EUGENE B. JOHNSON (the “Executive”).

 

RECITALS:

 

WHEREAS, the Executive is
currently employed by the Company as its Chief Executive Officer pursuant to an
Employment Agreement dated as of December 31, 2002, as amended on March 17,
2006 to extend the term through December 31, 2008 (as so amended, the “Existing
Employment Agreement”);

 

WHEREAS, immediately
prior to the execution of this Agreement, the Company consummated a series of
transactions resulting in the Company’s acquisition of certain wireline
telecommunications businesses formerly conducted by Verizon Communications Inc.
in Maine, New Hampshire and Vermont; and

 

WHEREAS, the Board of
Directors of the Company (the “Board”) has determined that it is
desirable and in the best interests of the Company to amend and restate the
Existing Employment Agreement to insure that the Company will continue to have
the exclusive benefit of the Executive’s knowledge and experience during the
integration of the acquired businesses with the Company’s existing operations;

 

NOW, THEREFORE, in
consideration of the agreements and covenants set forth herein and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree that the Existing
Employment Agreement is amended and restated in its entirety to read as
follows:

 

1.             Employment Period. 
The Company hereby agrees to continue to employ the Executive, and the
Executive hereby agrees to continue his employment with the Company for a
period commencing on the date hereof and ending on December 31, 2009
unless terminated earlier in accordance with Section 3 (the “Employment
Period”).  In the event the Executive
continues to perform services for the Company as an employee after the
Employment Period for any reason, such services shall constitute employment for
an unspecified term, terminable at will, with or without cause or reason, with
or without advance notice, and with or without pay in lieu of advance notice.

 

 

2.             Terms of Employment.

 

(a)           Position and Duties.

 

(i)            During
the Employment Period through the date the Board appoints a successor to the
Executive (the “Transition Date”), the Executive shall serve as the
Chairman and/or Chief Executive Officer of the Company and shall perform and
have the normal duties and responsibilities associated with such
positions.  For the remainder of the
Employment Period following the Transition Date, the Executive shall perform
and have such duties and responsibilities as shall be assigned to him from time
to time by the Board.

 

(ii)           During
the Employment Period (excluding any periods of vacation and other leave to
which the Executive is entitled), the Executive agrees to devote substantially
all his business time to the business and affairs of the Company and to use the
Executive’s best efforts to perform faithfully, effectively and efficiently his
duties and responsibilities.

 

(iii)          Notwithstanding
Section 2(a)(ii) hereof, it shall not be a violation of this
Agreement for the Executive to (1) serve on industry, trade, civic,
educational or charitable boards or committees, (2) deliver lectures or
fulfill speaking engagements, or (3) manage personal investments, so long
as none of such activities interfere with the performance of the Executive’s
duties and responsibilities as an employee of the Company.

 

(iv)          Executive
agrees to observe and comply with the Company’s rules and policies as
adopted by the Company from time to time.

 

(b)           Compensation.

 

(i)            Base Salary.  During the Employment Period, the Executive
shall receive base salary at an annual rate of $600,000 (the “Annual Base
Salary”), which shall be paid in substantially equal installments in
accordance with the customary payroll practices of the Company but no less
frequently than monthly.

 

(ii)           Bonus. 
Executive shall be eligible for a bonus each year (up to 200% of
Executive’s Annual Base Salary), which bonus shall be paid if fully earned, all
as provided in an objective bonus arrangement set and documented by the
Compensation Committee of the Board each year.

 

2

 

(iii)          Incentive,
Savings and Retirement Plans.  During the
term of the Executive’s employment, the Executive shall be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other senior executives of the Company, as
amended from time to time.

 

(iv)          Performance
Unit Award.  Concurrently with the execution of this
Agreement, the Company shall award the Executive a target award of 245,000
performance units under the 2008 FairPoint Long Term Incentive Plan, the terms
of which award shall be set forth in a separate award agreement between the
Company and the Executive.  The actual
number of performance units that shall be earned by the Executive and paid in
shares of the Company’s common stock shall be determined by the terms of the
award agreement and the 2008 FairPoint Long Term Incentive Plan.

 

The
Executive acknowledges that the performance unit award shall be subject to
approval of the 2008 FairPoint Long Term Incentive Plan by the stockholders of
the Company at the 2008 annual stockholders meeting, provided that in the event
such approval is not obtained, the Company shall pay to the Executive in cash
the value of the performance units that would have been earned by the Executive
and paid in shares of the Company’s common stock.

 

(v)           Welfare
Benefit Plans.  During the Employment Period, the Executive
and the Executive’s eligible dependents shall be eligible for participation in
and shall receive all benefits under the welfare benefit plans, practices,
policies and programs provided by the Company, including medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs, as amended from time to
time, to the extent applicable generally to other employees of the Company.

 

(vi)          Perquisites. 
During the Employment Period, the Executive shall be entitled to
receive, in addition to the benefits described above, such perquisites and
fringe benefits appertaining to his position in accordance with any policies,
practices and procedures established by the Board, as amended from time to
time.

 

(vii)         Expenses. 
During the Employment Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by the
Executive in accordance with the Company’s policies, practices and procedures,
as amended from time to time.

 

3

 

3.             Termination of Employment and
Employment Period.

 

(a)           Death
or Disability.  The Executive’s employment and the Employment
Period shall terminate automatically upon the Executive’s death.  If a Disability (as defined below) of the
Executive occurs, the Company may give to the Executive written notice in
accordance with Section 8(e) hereof of its intention to terminate the
Executive’s employment and the Employment Period.  In such event, the Executive’s employment with
the Company and the Employment Period shall terminate effective on the
ninetieth (90th) day after receipt of such notice by the Executive (the “Disability
Effective Date”), if, within ninety (90) days after such receipt, the
Executive shall not have returned to perform, with reasonable accommodation,
the essential functions of his position. 
For purposes of this Agreement, at any time the Company or any of its
affiliates sponsors a long-term disability plan for the Company’s employees, “Disability”
shall mean disability as defined in such long-term disability plan.  The determination of whether the Executive
has a Disability shall be made by the person or persons required to render
disability determinations under the long-term disability plan.  At any time the Company does not sponsor a
long-term disability plan for its employees, “Disability” shall mean the
Executive’s inability to perform, with reasonable accommodation, the essential
functions of his position hereunder for a period of 180 days in any 360
consecutive day period due to mental or physical incapacity, as determined by a
physician selected by the Company or its insurers.

 

(b)           Cause
or Without Cause.  The Company may terminate the Executive’s
employment and the Employment Period for Cause or without Cause.  For purposes of this Agreement, “Cause”
shall mean (a) misappropriating any funds or any material property of the
Company, (b) obtaining or attempting to obtain any material personal
profit from any transaction in which the Executive has an interest which is
adverse to the interest of the Company unless the Company shall first give its
consent to such transaction, (c) (i) the willful taking of actions
which directly impair the Executive’s ability to perform the duties required by
the terms of his employment, or (ii) 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, (d) 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 (e) any material
intentional failure to comply with applicable laws or governmental regulations
within the scope of employment as defined by this Agreement.  For purposes of this Agreement, “without
Cause” shall mean a termination by the Company of the Executive’s
employment and the Employment Period for any reason other than a termination
based upon Cause, death or Disability.

 

4

 

(c)           Notice
of Termination.  Any termination by the Company for Cause or
without Cause shall be communicated by a Notice of Termination to the Executive
given in accordance with Section 8(e). 
For purposes of this Agreement, the term “Notice of Termination”
means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable,
sets forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive’s employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is
other than the date of receipt of such notice, specifies the Date of
Termination.  The failure by the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Cause shall not waive any right of the Company
hereunder or preclude the Company from asserting such fact or circumstance in
enforcing the Company’s rights hereunder.

 

(d)           Date
of Termination.  The term “Date of Termination” means (i) if
the Executive’s employment is terminated by the Company for Cause, the date of
receipt of the Notice of Termination or any later date specified therein
pursuant to Section 3(c), as the case may be, (ii) if the Executive’s
employment is terminated by the Executive, thirty (30) days from the date of
receipt of the Notice of Termination, (iii) if the Executive’s employment
is terminated by the Company other than for Cause, the date on which the
Company notifies the Executive of such termination, and (iv) if the Executive’s
employment is terminated by reason of death or Disability, the date of death of
the Executive or the Disability, as the case may be.

 

4.             Obligations of the Company upon
Termination.

 

(a)           If
the Company shall terminate the Executive’s employment for Cause or the
Executive shall voluntarily resign, the Executive shall not be entitled to any
future benefits pursuant to this Agreement.

 

(b)           Upon
the earlier of (1) expiration of the Employment Period, or (2) termination
of the Executive’s employment without Cause, the Executive shall be entitled to
receive from the Company the following, effective as of the date of occurrence
of such event (the “Termination Event”), subject to the following being
suspended for a breach of the Executive’s covenant not to compete set forth in Section 6
hereof:

 

(i)            Continued
medical coverage for Executive and Executive’s spouse, at Executive’s election,
for the life of each under the Company’s then existing health insurance plan
upon continued timely payment by Executive or Executive’s spouse of the then
applicable employee and spouse premium. 
This coverage shall continue to be available to Executive’s spouse upon
the death of Executive.  Following the
time each of which Executive or Executive’s spouse is eligible for Medicare, 

 

5

 

ongoing retiree health
coverage shall be calculated on the assumption that each of Executive or
Executive’s spouse had enrolled in all available parts of Medicare.

 

(ii)           Extension of the Executive’s right to exercise all of
his vested options under the Company’s 2000 Employee Stock Option Plan until
the earlier of (A) March 12, 2012, or (B) a Sale of the Company
(as defined in the Company’s 1998 Stock Incentive Plan).

 

(iii)          Continued
vesting of all restricted stock granted through the Termination Event under the
Company’s 2005 Stock Incentive Plan as provided in the restricted stock
agreement applicable to each grant of such restricted stock.  The Executive acknowledges that this Section 4(b)(iii) shall
not apply to any of the performance units awarded to the Executive pursuant to Section 2(b)(iv).

 

5.             Protection of Confidential
Information.  Executive acknowledges that by reason of his
position with the Company, he has had and will continue to have 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 which relates to its business affairs,
including but not limited to trade secrets, proprietary information or 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 or acquisition
plans, financing or 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. 
Executive agrees to use the Confidential Information only for the
purpose of or in connection with the business of the Company, 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 conducting the business of the Company, both during the term of
Executive’s employment with the Company (both during the Employment Period and
any continuation period thereafter) and thereafter for a period of five (5) years.  Executive will return all Confidential
Information to the Company immediately upon termination of his employment with
the Company.

 

6.             Non-Competition.

 

(a)           Non-Competition
Agreement.  Executive agrees that, without the prior
written consent of the Company’s Board of Directors, during the term of his employment
with the Company, including any continued employment after the Employment
Period, and for a period of one (1) year thereafter, he will not “Compete”
with the Company in the “Prohibited Territory.”

 

6

 

(b)           Definition
of “Compete”.  For purposes of this Section 6, 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 or operation of, investment in, or the provision of
services or 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
or wholesale distribution of long distance services, Internet portal services,
web casting and web hosting, dedicated service lines (DSL), broadband, voice or
video conferencing, voice mail services, voice, data or video transmissions,
cellular or wireless telephone, data, paging or 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.

 

(c)           Definition
of “Prohibited Territory”.  For purposes of this Section 6,
the term “Prohibited Territory” shall mean and include each of the
following defined areas: (i) the United States, and (ii) any State
within the United States where the Company is engaged in business in the
Communications Industry.  For purposes of
this Section 6, a person or entity is considered to be Competing in the
Prohibited Territory if 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.

 

(d)           Acknowledgments
by Executive.  Executive acknowledges that the terms of this
Section 6, including the definitions of Compete, Communications Industry
and Prohibited Territory, and the three (3) year post employment term are
reasonable, and are no broader than necessary to protect the Company’s
legitimate business interests.  Executive
specifically acknowledges and agrees that (i) he has received adequate and
valuable consideration for entering into this noncompetition agreement, (ii) the
Company is currently engaged in business in the Communications Industry, and is
either actively engaged in each aspect thereof set out in the definition set
forth in Section 6(b) above, or it reasonably anticipates that it
will be engaged in each such aspect or activity competitive with it, during the
Employment Period, and that part of Executive’s responsibilities as Chief
Executive Officer of the Company and as Chairman of the Board of Directors of
the Company are and will continue to be to explore and expand the Company into
each aspect of the Communications Industry where it can 

 

7

 

profitably do so, (iii) the
nature of the 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 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/or ISPs is
highly competitive, and (v) by reason of his responsibilities as Chief
Executive Officer of the Company and/or as Chairman of the Board of Directors
of the Company, he will be intimately familiar with and engaged in developing
the Company’s business, financial 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.

 

(e)           Governing
Law; Enforcement; Survival. 
Notwithstanding the provisions of Section 8(c), the provisions of Section 5
and the provisions of this Section 6 shall be construed and enforced in
accordance with the laws of the State of North Carolina, without regard to
principles of conflict of laws. 
Executive agrees that the Company would suffer irreparable harm in the
event of any violation of Sections 5 or 6 hereof, and the Company is therefore entitled
to injunctive relief to enforce the provisions thereof.  The provisions of Sections 5 and 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.

 

(f)            Severability.  In the event that any provision contained in
this Section 6 is held to be invalid, prohibited or unenforceable because
of the scope, duration or area of applicability, such provision shall be
ineffective only to the extent of such invalidity, prohibition or
unenforceability.  Executive and the
Company agree that it is each of their intent and desire that the provisions of
Section 6 be enforced to the absolute greatest extent permissible by law,
and they each therefore agree and request that, to the extent a court
determines these provisions or any part thereof are unenforceable to any
extent, such court may and should limit the enforcement to discrete geographic
territories set forth in Section 6(c), or to specific states in which the
Company is doing business, or to specific aspects of the Communications
Industry as listed in Section 6(b), as the court deems necessary to the
enforceability of the letter and intent of this Agreement.

 

7.             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 

 

8

 

affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.  This Section 7 is intentionally in
addition to but not in replacement of Section 6(f) above.

 

8.             Miscellaneous.

 

(a)           Counterparts. 
This Agreement may be executed in several counterparts each of which is
an original.  This Agreement and any
counterpart so executed shall be deemed to be one and the same instrument.  It shall not be necessary in making proof of
this Agreement or any counterpart hereof to produce or account for any of the
other counterparts.

 

(b)           Contents
of Agreement; Parties-In-Interest.  This
Agreement sets forth the entire understanding of the parties regarding the
subject matter hereof.  Any previous
agreements or understandings between the parties regarding the subject matter
hereof are merged into and superseded by this Agreement.  All representations, warranties, covenants,
terms, conditions and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs, legal
representatives, successors and permitted assigns of the Company and the
Executive.  Neither this Agreement nor
any rights, interests or obligations hereunder may be assigned by any party
without the prior written consent of the other party hereto.

 

(c)           NEW YORK LAW TO GOVERN.  EXCEPT AS PROVIDED IN SECTION 6(e), THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.

 

(d)           Section Headings. 
The section headings herein have been inserted for convenience of
reference only and shall in no way modify or restrict any of the terms or
provisions hereof.

 

(e)           Notices. 
All notices, requests, demands and other communications which are
required or permitted hereunder shall be sufficient if given in writing and
delivered personally or by registered or certified mail, postage prepaid, or by
facsimile transmission (with a copy simultaneously sent by registered or
certified mail, postage prepaid), as follows (or to such other address as shall
be set forth in a notice given in the same manner):

 

9

 

If to the Company, to:

 

FairPoint Communications, Inc.

521 East Morehead Street, Suite 250

Charlotte, North Carolina 28202

Facsimile:       (704)
344-1594

Attn:     Shirley J. Linn, Esq.

 

If to
the Executive, to:

 

Eugene B.  Johnson

Most recent address on
the Company’s

employment records for
the Executive

 

(f)            Modification and Waiver.  Any of the
terms or conditions of this Agreement may be waived in writing at any time by
the party which is entitled to the benefits thereof, and this Agreement may be
modified or amended at any time by the Company and the Executive.  No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by each of the
parties hereto.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof nor shall such waiver constitute a continuing
waiver.

 

(g)           Third
Party Beneficiaries.  Except as otherwise expressly set forth herein,
no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.

 

(h)           Termination
of Prior Arrangements.  The parties hereto acknowledge
and agree that this Agreement supersedes and terminates all existing employment
and severance agreements or arrangements between the Company or any of its
affiliates and the Executive, including but not limited to the Existing
Employment Agreement.

 

(i)            Executive’s Legal Fees.  The reasonable
costs and expenses for legal services incurred by Executive in the negotiation
and execution of this Agreement shall be paid by the Company.

 

(j)            Compliance with Code Section 409A. 
Notwithstanding anything in this Agreement to the contrary, if any amount
or benefit that the Company determines would constitute non-exempt “deferred
compensation” for purposes of Section 409A of the Internal Revenue Code of
1986 (the “Code”) would otherwise be payable or distributable under this
Agreement by reason of the Executive’s separation from service, then to the
extent necessary to comply with Code Section 409A:  (i) if the payment or distribution is
payable in a lump sum, 

 

10

 

the Executive’s right to
receive payment or distribution of such non-exempt deferred compensation will
be delayed until the earlier of the Executive’s death or the first day of the
seventh month following the Executive’s separation from service, and (ii) if
the payment, distribution or benefit is payable or provided over time, the
amount of such non-exempt deferred compensation or benefit that would otherwise
be payable or provided during the six-month period immediately following the
Executive’s separation from service will be accumulated, and the Executive’s
right to receive payment or distribution of such accumulated amount or benefit
will be delayed until the earlier of the Executive’s death or the first day of
the seventh month following the Executive’s separation from service and paid or
provided on the earlier of such dates, without interest, and the normal payment
or distribution schedule for any remaining payments, distributions or benefits
will commence.  For purposes of this
Agreement, the term “separation from service” shall be defined as provided in
Code Section 409A and applicable regulations.

 

11

 

IN
WITNESS WHEREOF,
the parties hereto have executed or have caused this Agreement to be duly
executed as of the date first above written.

 

	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Eugene B. Johnson

  
	
   

  	
   

  	
  Eugene B. Johnson

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FAIRPOINT
  COMMUNICATIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ John P. Crowley

  
	
   

  	
   

  	
  Name:

  	
  John P. Crowley

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President and

  Chief Financial Officer

  
						

 

12

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