Exhibit 10.8
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (this “
Agreement ”) is made and entered into as of
June 11, 2009, by and between FAIRPOINT COMMUNICATIONS,
INC. , a Delaware corporation (together with its successors and
assigns permitted hereunder, the “ Company ”),
and DAVID L. HAUSER (the “ Executive
”).
RECITALS
:
WHEREAS, the Company desires to
employ the Executive as the Chairman and Chief Executive Officer of
the Company; 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 enter
into an Employment Agreement with the Executive to insure that the
Company will have the exclusive benefit of the Executive’s
knowledge and experience; and
WHEREAS, the Executive is willing to
commit himself to serve the Company in the capacities hereinafter
stated, subject to the terms and conditions herein provided;
and
WHEREAS, this Agreement reflects the
business judgment of the Company and the Board that
Executive’s services and leadership are fully necessary to
restoring the Company’s profitability, growth and efficiency,
and that the compensation, including the inducement awards set
forth herein, is fair, reasonable and necessary to induce Executive
to assume this role; and
WHEREAS, it is the intention of the
Company and the Board that the value of the compensation to
Executive, as set forth herein, including all inducement awards, be
fully preserved, including in the event of the restructuring or
recapitalization of the Company in any manner.
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 covenant and agree as follows:
1.
Employment
Period . The
Company hereby agrees to employ the Executive, and the Executive
hereby agrees to accept employment with the Company for a period
commencing on July 1, 2009, or such later date (but not later
than August 1, 2009) as shall be mutually agreed upon by the
Company and the Executive (the “ Employment Date
”) and ending immediately prior to the third anniversary of
the Employment Date (the “ Employment Period ”),
unless terminated earlier in accordance with Section 3.
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, unless otherwise mutually agreed in writing.
2.
Terms of
Employment .
(a)
Position and Duties
.
(i)
During the Employment Period, the
Executive shall serve as the Chairman and Chief Executive Officer
of the Company and shall perform and have the normal duties and
responsibilities associated with such positions.
(ii)
During the Employment Period
(excluding any periods of vacation and other leave to which the
Executive is entitled), the Executive shall devote substantially
all his business time to the business and affairs of the Company
and shall use his 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 (A) serve on industry,
trade, civic, educational or
charitable boards or committees,
(B) deliver lectures or fulfill speaking engagements,
(C) manage personal investments, (D) serve on the board
of directors of one additional public company selected by the
Executive, or (E) serve on the board of directors of other
public companies, as approved in advance by the Board, so long as
none of such activities materially interferes with the performance
of the Executive’s duties and responsibilities as an employee
of the Company.
(iv)
The Executive shall observe and
comply with the Company’s Code of Business Conduct and all
other rules and policies 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 $800,000 (the “ Annual Base Salary ”), which
shall be paid in substantially equal monthly or more frequent
installments in accordance with the customary payroll practices of
the Company. The Executive’s Annual Base Salary shall
be reviewed for an increase within 60 days after the
Company’s fiscal year ending December 31, 2010 and
annually thereafter.
(ii)
Annual Incentives
. The Executive shall be
eligible to participate in the FairPoint Communications, Inc.
2008 Annual Incentive Plan as described in this
Section 2(b)(ii). For the period beginning on the
Employment Date and ending December 31, 2010, the Compensation
Committee and the Board, in discussion with the Executive, will
develop a set of goals to be accomplished within such period and
the Executive shall be eligible to earn a bonus (up to 200% of the
total base salary paid to the Executive for such period) which
shall be paid, to the extent earned, within 2-½ months after
the Company’s fiscal year ending December 31,
2010. Beginning January 1, 2011, Executive shall be
eligible to earn a bonus each year (up to 200% of the
Executive’s Annual Base Salary), which bonus shall be paid,
to the extent earned, as provided in an objective bonus arrangement
set and documented by the Compensation Committee of the Board each
year. In the event the Executive resigns, retires or his
employment terminates for any reason other than Cause during a
performance period under the 2008 Annual Incentive Plan after the
third anniversary of the Employment Date, the Executive shall be
entitled to receive a pro-rata annual incentive for such
performance period and such pro-rata incentive shall be payable at
the end of such performance period.
(iii)
Long Term Incentives
. The Executive shall be
eligible to participate in the FairPoint Communications, Inc.
2008 Long Term Incentive Plan and receive awards of performance
units for performance periods beginning on or after January 1,
2010 on the same basis as other senior executives of the
Company. The Executive’s performance unit award for
each performance period shall be equal to (A) 80% of the
Executive’s Annual Base Salary for threshold performance,
(B) 200% of the Executive’s Annual Base Salary for
target performance, and (C) 400% of the Executive’s
Annual Base Salary for maximum performance. In the event the
Executive resigns, retires or his employment terminates for any
reason other than Cause during a performance period under the 2008
Long Term Incentive Plan after the third anniversary of the
Employment Date, the Executive shall be entitled to receive a
pro-rata long term incentive for such performance period and such
pro-rata incentive shall be payable at the end of such performance
period.
(iv)
Employment Inducement Equity
Awards . As
additional consideration for the Executive to enter into this
Agreement, the Company shall grant to the Executive
(A) options to purchase 1,600,000 shares of the
Company’s common stock (the
2
“ Options ”),
(B) $4,000,000 in restricted shares of the Company’s
common stock (the “ Restricted Stock ”) and
(C) performance units for two performance measurement periods
beginning on the Employment Date: one ending
December 31, 2010 and one ending December 31, 2011.
The Options shall be granted on the Employment Date and the
exercise price of the Options shall be equal to the average of the
closing prices of the Company’s common stock during the
thirty calendar days immediately preceding the Employment
Date. The Options shall vest and become exercisable in three
equal annual installments commencing one year from the Employment
Date, provided the Executive’s employment shall continue
through each such date. The Restricted Stock shall be awarded
in three installments as follows: (A) $500,000 on the
Employment Date, (B) $1,750,000 on the first anniversary of
the Employment Date and (C) $1,750,000 on the second
anniversary of the Employment Date. The value of the
Restricted Stock for purposes of determining the number of shares
to be awarded shall be equal to the average closing prices of the
Company’s common stock during the thirty calendar days
immediately preceding each award date. The Restricted Stock
shall become fully vested and released to the Executive immediately
prior to the third anniversary of the Employment Date, provided the
Executive’s employment with the Company shall continue
through such date. The performance units shall be earned by
the Executive and paid in shares of the Company’s common
stock based on the performance of the Company during the
performance periods. The Executive’s performance unit
award for each of the performance periods shall be equal to
(A) 80% of the Executive’s Annual Base Salary for
threshold performance, (B) 200% of the Executive’s
Annual Base Salary for target performance, and (C) 400% of the
Executive’s Annual Base Salary for maximum performance.
The other terms and conditions of the Options, the Restricted Stock
and the performance units shall be set forth in separate award
agreements entered into between the Company and the
Executive.
(v)
Savings and Retirement
Plans . During the
term of the Executive’s employment, the Executive shall be
entitled to participate in all savings and retirement plans,
practices, policies and programs applicable generally to other
senior executives of the Company, as in effect and as amended from
time to time.
(vi)
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, group life, accidental death and travel
accident insurance plans and programs, as amended from time to
time, on the terms applicable generally to other employees or other
senior executives of the Company. If a Disability (as defined
in Section 4) of the Executive occurs during the first year of
the Employment Period, the Company shall pay to the Executive the
cash equivalent of the long term disability benefits the Executive
would have received under the Company’s long term disability
plan if the Executive had been covered by such plan. Upon the
Executive’s retirement, resignation or termination of
employment with the Company after the third anniversary of the
Employment Date, the Executive shall be permitted to continue
medical coverage for the Executive and the Executive’s
spouse, at the Executive’s election and at the
Executive’s sole cost and expense, until age 65 under the
Company’s then existing group medical plan.
(vii)
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.
3
(viii)
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 in effect and as amended from time to time.
The Company shall also pay the reasonable costs and expenses for
legal services incurred by the Executive in the negotiation and
execution of this Agreement.
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 9(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 90th day
after receipt of such notice by the Executive (the “
Disability Effective Date ”), if, within 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 if the Executive is a participant in such 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. Prior to furnishing notice of
termination for Disability, the Company shall exercise its best
efforts to provide the Executive reasonable accommodation for any
such impairment, as required by the Americans With Disabilities
Act, and shall, if requested by the Executive, exercise its best
efforts to assist the Executive in obtaining benefits under any
short-term or long-term disability plan sponsored by the Company
and/or its insurers.
(b)
Termination with 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 the
Executive’s (i) knowing and willful misappropriation of
any funds or any material property of the Company,
(ii) 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,
(iii) willfully and deliberately taking any action that is
committed in bad faith, without reasonable belief that such action
is in the best interest of the Company, which act is materially
detrimental to the Company’s goodwill or materially damaging
to the Company’s relationships with its customers, suppliers
or employees, (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 that is detrimental to the Company or its good
will, or (v) intentional and continued failure (for a period
of at least 20 days) to comply with a
