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Employment Agreement

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 This Employment Agreement involves

Hawaiian Telcom MergerSub, Inc.

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Title: Employment Agreement
Governing Law: New York     Date: 1/19/2006
Law Firm: Latham Watkins    

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Exhibit 10.31


Employment Agreement


This Employment Agreement (the “ Agreement ”) dated as of December 14, 2004 and effective as of December 13, 2004 (the “ Effective Date ”), is made by and between Harvey A. Plummer (the “ Executive ”) and Hawaiian Telcom MergerSub, Inc. and any of its subsidiaries and affiliates as may employ Executive from time to time (collectively, and together with any successor thereto, the “ Company ”). Notwithstanding anything herein to the contrary, this Agreement shall be void and of no force and effect if within 20 days of the Effective Date the Company or the Principal Stockholders are not, acting reasonably and in good faith, satisfied with the results of a background check on the Executive.





It is the desire of the Company to assure itself of the services of the Executive by engaging the Executive to perform services under the terms hereof.



The Executive desires to provide services to the Company on the terms herein provided.




NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows:


1. Certain Definitions.




Agreement of Merger ” shall mean the certain Agreement of Merger by and among GTE Corporation, Verizon HoldCo LLC, Paradise MergerSub Inc. and the Company dated May 21, 2004.




Annual Base Salary ” shall have the meaning set forth in Section 3(a) .




Base Case Performance Target ” for an applicable year shall have the meaning set forth on Exhibit B .




Board ” shall mean the Board of Directors of the Company.




The Company shall have “ Cause ” to terminate the Executive’s employment hereunder upon:




the Executive’s failure to follow a legal order of the Board, other than any such failure resulting from the Executive’s Disability, and such failure is not remedied within 30 days after receipt of written notice;




Executive’s gross or willful misconduct to the Company;




Executive’s conviction of a felony or of a crime involving material dishonesty or moral terpitude;



Executive’s fraud or personal dishonesty involving the Company’s assets; or




the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the Executive’s duties and responsibilities under this Agreement.




Company ” shall have the meaning set forth in the preamble hereto.




Compensation Committee ” means the Compensation Committee of the Board.




Closing Date ” shall have the meaning set forth in the Agreement of Merger.




Date of Termination ” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated pursuant to Section 4(a)(ii) – (vi)  either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b) , whichever is earlier; (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(vii) or Section 4(a)(viii) , the expiration of the then-applicable Term.




Disability ” shall mean the absence of the Executive from the Executive’s duties to the Company on a full-time basis for a total of six months during any 12-month period as a result of incapacity due to mental or physical illness which is determined to be reasonably likely to extend beyond the completion of the Term and which determination is made by a physician selected by the Company and acceptable to the Executive or the Executive’s legal representative (such agreement as to acceptability not to be withheld unreasonably). A Disability shall not be “incurred” hereunder until, at the earliest, the last day of the sixth month of such absence.




Executive ” shall have the meaning set forth in the preamble hereto.




Executive Bonus Plan ” shall have the meaning set forth in Section 3(c) .



(m)    (i)

The Executive shall have “ Good Reason ” to resign his employment upon the occurrence of any of the following:


(A) failure of the Company to continue the Executive in the position of Senior Vice President, Operations and Engineering;


(B) failure of the Principal Stockholders to satisfy their requirements under the last sentence of Section 3(b) of the Agreement;


(C) the Company’s material breach of this Agreement;



(D) the relocation of the Executive’s principal office, without his consent, to a location that is in excess of 100 miles from Honolulu, Hawaii; or


(E) failure of the Company to make any payment or provide any benefit in accordance with this Agreement.




The Executive may not resign his employment for Good Reason unless:


(A) the Executive provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason; and


(B) the Company has not remedied the alleged violation(s) within the 30-day period.




Inventions ” shall have the meaning set forth in Section 8 .




Notice of Termination ” shall have the meaning set forth in Section 4(b) .




Outside Closing Date ” shall mean the later to occur of (i) date of termination set forth in Section 10.1 of the Agreement of Merger or (ii) a date selected by the Principal Stockholders in their sole discretion.




Principal Stockholders ” shall mean Carlyle Partners III, L.P. a Delaware limited partnership and its affiliates.




Term ” shall have the meaning set forth in Section 2(b) .


2. Employment.




The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b) , in the position set forth in Section 2(c) , and upon the other terms and conditions herein provided.




The initial term of employment under this Agreement (the “ Initial Term ”) shall be for the period beginning on the Effective Date of this Agreement and ending on the third anniversary thereof, unless earlier terminated as provided in Section 4 . The employment term hereunder shall automatically be extended for successive one-year periods (“ Extension Terms ” and, collectively with the Initial Term, the “ Term ”) unless either party gives notice of non-extension to the other no later than 90 days prior to the expiration of the then-applicable Term.




Position and Duties . The Executive shall serve as Senior Vice President, Operations and Engineering of the Company and shall have the authorities duties and responsibilities customarily commensurate with such position and such additional customary responsibilities, duties and authority, as may from time to time be reasonably assigned to the Executive by the Board. The Executive shall report to the Chief Operations Officer, or if such position does not exist, the Chief




Executive Officer. The Executive shall devote his full working time, attention and efforts to the business and affairs of the Company. The Executive agrees to observe and comply with the Company’s rules and policies as adopted by the Company from time to time. During the Term, it shall not be a violation of this Agreement for the Executive to (i) serve on industry trade, civic or charitable boards or committees; (ii) deliver lectures or fulfill speaking engagements; or (iii) manage personal investments, as long as such activities do not materially interfere with the performance of the Executive’s duties and responsibilities. The Executive shall be permitted to serve on for-profit corporate boards of directors and advisory committees if approved in advance by the Board, which approval shall not unreasonably be withheld.


3. Compensation and Related Matters.




Annual Base Salary . During the portion of the Term which follows the Closing Date, the Executive shall receive a base salary at a rate of $225,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to any increase as determined in accordance with the customary compensation practices or policies of the Company (the “ Annual Base Salary ”). Annual Base Salary may be increased, but not decreased, from time to time by the Board.




Interim Period . During the period between the Effective Date and the Closing Date,


(i) Executive shall receive monthly payments of a salary at the rate of his Annual Base Salary;


(ii) Subject to the submission to the Company by the Executive of appropriate documentation and/or vouchers in accordance with the customary procedures of the Company for reimbursement, the Company shall reimburse Executive for any reasonable premiums paid in connection with the Executive’s purchase of (A) health care insurance coverage (including an election to receive COBRA continuation health care coverage from his previous employer), and (B) a one-year term life insurance policy that would pay the Executive’s beneficiary up to $337,500 upon the death of the Executive, provided , however , that such reimbursements under subsections (A), and (B) of this Section 3(b) shall cease once the Executive becomes eligible for coverage under the Company’s health and life insurance plans. Upon Executive becoming so eligible, he shall cancel such policies and return the refunded premium, if any, to the Company; and;


(iii) the Executive shall be entitled to participate in The Carlyle Group’s long-term disability insurance plan in a manner and level of benefit consistent with his job title and duties in accordance with the terms of such disability plan for any period prior to the Executive becoming eligible for any long-term disability coverage under the Company’s applicable long-term disability insurance plan.



The Principal Stockholders shall make any payments described in this Section 3(b) that the Company is unable to make.




Annual Performance Bonus . During the Term, the Executive will participate in an annual performance-based bonus plan (“ Executive Bonus Plan ”) established by the Compensation Committee at a target level of $168,750 (“ Target Level ”). Such bonus shall be payable at such time as bonuses are paid to other senior executive officers who participate therein. Notwithstanding the foregoing, with respect to each of the Company’s fiscal years that ends during the Term other than the fiscal year ending December 31, 2004, the amount of the Executive’s annual bonus payable pursuant to such plan shall be determined as set forth on Exhibit A . With respect to the fiscal year ending December 31, 2004, the Executive shall not be entitled to an annual performance bonus under this Section 3(c) . Notwithstanding anything herein to the contrary, no bonus shall be paid if the Closing Date does not occur prior to the Outside Closing Date.




Equity Participation . During the Term, the Executive shall be entitled to participate in the Stock Option Plan of the Company and on the Closing Date shall be granted options to purchase a percentage of the Company’s common stock (“ Common Stock ”) (such percentage shall be calculated on the Closing Date in a manner agreed upon by the parties and calculated prior to considering any dilution of such stock) at an exercise price per share equal to the per share cost paid by the Principal Stockholders to acquire the Company. During the Executive’s employment with the Company, one-quarter of such stock options shall become vested and exercisable based on the passage of time and three-quarters shall become vested and exercisable based on the Company’s achievement of the performance targets set forth in Exhibit A to the Stock Option Agreement. The grant of stock options shall be governed by the terms of the Stock Option Plan to be adopted by the Company and Stock Option Agreement substantially in the form attached hereto as Exhibit C .




Benefits . The Executive shall be entitled to participate in all employee benefit plans, programs and arrangements of the Company which are applicable to the senior officers of the Company at a level commensurate with the Executive’s position.








Expenses . During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by his in the performance of his duties to the Company in accordance with the Company’s expense reimbursement policy.




Housing Allowance . During the Term, the Company shall pay the Executive a reasonable housing allowance at a rate of up to $4,000 per month, as determined based on the Company’s good faith independent verification and analysis of the Executive’s housing requirements and needs and subject to applicable




withholding taxes. Such allowance shall be paid in lump-sum or periodically, in accordance with the Company’s policies and procedures and may be applied, inter alia , to pay temporary lodging expenses in Hawaii. With respect to any such allowance paid to the Executive under this Section 3(i) which is taxable to the Executive, the Executive shall be entitled to receive an additional payment from the Company in an amount such that, after payment by the Executive of all income taxes imposed on the housing allowance and the additional payment, the Executive would retain an amount equal to such housing allowance.




Vacation . During the Term, the Executive shall be entitled to three weeks paid vacation each calendar year. Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive. Paid vacation for a calendar year that has not been taken by Executive during such calendar year shall carry over to any subsequent period up to a maximum accumulated six weeks.


4. Termination.


The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:




Circumstances .




Death . The Executive’s employment hereunder shall terminate upon his death.




Disability . If the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment. In that event, the Executive’s employment with the Company shall terminate effective on the 30 th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.




Termination for Cause . The Company may terminate the Executive’s employment for Cause.




Termination without Cause . The Company may terminate the Executive’s employment without Cause.




Resignation for Good Reason . The Executive may resign his employment for Good Reason.




Resignation without Good Reason . The Executive may resign his employment without Good Reason.




Non-extension of Term by the Company . The Company may give notice of non-extension to the Executive pursuant to Section 2(b) .





Non-extension of Term by the Executive. The Executive may give notice of non-extension to the Company pursuant to Section 2(b) .




Failure to Close. The Executive’s employment hereunder shall terminate in the event that the Closing Date does not occur prior to the Outside Closing Date.




Notice of Termination . Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to paragraph (a)(i)and (a)(ix)) shall be communicated by a written notice to the other party hereto indicating the specific termination provision in this Agreement relied upon, setting 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 specifying a Date of Termination which, if submitted by the Executive, shall be at least 30 days following the date of such notice (a “ Notice of Termination ”) provided, however, that the Company may, in its sole discretion, change the Date of Termination to any date following the Company’s receipt of the Notice of Termination. A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter

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