EMPLOYMENT AGREEMENT
Exhibit 10.1
THIS
EMPLOYMENT AGREEMENT
(“Agreement”)
is made and entered into as of the 8th day of October, 2019 (the
“Execution
Date”) and shall automatically become effective when
it has been approved by the United States Bankruptcy Court for the
Southern District of New York (the
“Effective
Date”), by and
between Fusion Connect, Inc., a Delaware corporation (the
“Fusion”),
and Xxxxx Xxxxx (the “Executive”).
W I T N E S S E T H:
WHEREAS, on June 3, 2019, Fusion and
each of its U.S. subsidiaries (collectively, the
“Debtors”)
commenced voluntary cases under chapter 11 of title 11 of the
United States Code, 11 U.S.C. §§ 101 et seq.
(“Chapter
11”), in the United States Bankruptcy Court for the
Southern District of New York (the “Bankruptcy
Court”), which cases are being jointly administered
under the caption In re Fusion Connect, Inc., et al, Case No.
19-18111 (SMB);
WHEREAS, the Debtors filed the
Second Amended Joint Plan of
Reorganization of Fusion Connect, Inc. and Its Subsidiary
Debtors, dated as of October 7, 2019 [ECF No. 455] (as it
may be further amended, modified and supplemented from time to
time, the “Amended Plan”)
with the Bankruptcy Court;
WHEREAS, the Debtors expect the Amended
Plan to be approved by the Bankruptcy Court on or about November 7,
2019, and for the Debtors to emerge from Chapter 11 prior to
December 31, 2019;
WHEREAS, Executive currently serves as
Senior Vice President, Customer Experience for Fusion and each of
its subsidiaries (collectively, the “Companies”);
WHEREAS, Fusion wishes to promote
Executive to the position of President and Chief Operating Officer
of the Companies and for Executive to serve as interim Chief
Executive Officer of the Companies until a successor Chief
Executive Officer is retained by Fusion; and
WHEREAS, Executive is willing to assume
the roles of President and Chief Operating Officer and interim
Chief Executive Officer of the Companies.
NOW THEREFORE, Fusion and Executive,
intending to be legally bound, hereby mutually covenant and agree
as follows:
ARTICLE I
Employment and
Term
1.1
Employment and
Term. Fusion hereby agrees to employ Executive and Executive
hereby agrees to serve the Companies, on the terms and conditions
set forth herein, for the period commencing on the Effective Date
and expiring on December 31, 2022 (the “Initial
Term”), unless sooner terminated as hereinafter set
forth; provided, however, that the Initial Term shall automatically
be extended for an additional one (1) year period thereafter (the
“Term
Extension,” together with the
Initial Term, the “Employment
Period”) unless and until one party provides the other
party with written notice of its intent to terminate the Initial
Term no less than ninety (90) days prior to its expiration. This
Agreement shall supersede and replace any prior agreements
concerning the terms of Executive’s employment with any of
the Companies, including, for the avoidance of doubt the employment
agreement, dated October 30, 2017, by and between Fusion and
Executive, but excluding the Key Employee Retention Bonus, dated as
of May 28, 2019 (the “KERP
Agreement”), which shall remain in force and
effect.
1.2 Duties
of Executive. For the Employment Period, Executive shall
serve as the President and Chief Operating Officer of the Companies
and shall have powers and authority normally associated with that
position. In addition, Executive shall serve as Chief Executive
Officer of the Companies until such time as the Board of Directors
of Fusion (the “Board”)
hires a successor Chief Executive Officer. So long as Executive
serves as Chief Executive Officer, he shall have powers and
authority superior to any other officer or employee of the
Companies and shall be required to report solely to, and shall be
subject solely to the supervision and direction of, the Board and
no other person or group shall be given authority to supervise or
direct Executive in the performance of his duties. When a successor
Chief Executive Officer is retained by the Board, Executive shall
report to such person. Executive shall devote substantially all his
working time and attention to the business and affairs of the
Companies (excluding any vacation and sick leave to which the
Executive is entitled), render such services to the best of his
ability, and use his reasonable best efforts to promote the
interests of the Companies. It shall not be a violation of this
Agreement for Executive to (a) serve on corporate, civic or
charitable boards or committees, (b) deliver lectures, fulfill
speaking engagements or teach at educational institutions, and (c)
manage personal investments, so long as such activities do not
interfere in any material manner with the performance of the
Executive’s responsibilities hereunder.
1.3 Place
of Performance. In connection with his employment by Fusion,
the Executive shall be based at the principal executive offices for
the Companies located in Atlanta, Georgia, except for travel
reasonably necessary in connection with business performed on
behalf of the Companies.
ARTICLE II
Compensation and
Benefits
2.1 Base
Salary. With retroactive effect back to the Effective Date,
Executive shall receive an initial annual base salary of
$550,000.00, which amount shall remain in effective until either
(i) the United States Bankruptcy Court for the Southern District of
New York takes action to reject this Agreement or (ii) a successor
Chief Executive Officer is appointed by the Board at which time
Executive’s annual base salary shall be reduced to
$450,000.00 (the “Base
Salary”). The Base Salary shall be payable in
installments consistent with the normal payroll schedule of the
Companies, but in no event less frequently than monthly, and
subject to applicable withholding and other taxes. The Base Salary
shall be reviewed by the Board (or authorized committee thereof) on
an annual basis. Except for the reduction contemplated above, the
Base Salary, at the level indicated above or if subsequently
increased, shall not thereafter be decreased for any
reason.
2
2.2 Annual
Incentive Compensation. With effect from January 1, 2020,
for each calendar year during the Employment Period Executive shall
be entitled to receive annual bonus payments and/or incentive
compensation based upon the achievement of corporate and individual
performance targets, which shall be determined by the Board (or any
authorized committee thereof) within the first 90 days of each
calendar year. Such potential bonus payments and/or incentive
compensation shall be considered at least annually by the Board (or
committee, if applicable) and shall be determined in good faith by
the Board (or committee, if applicable) based upon actual corporate
and individual performance for such year and shall be payable in
accordance with the procedures specified by the Board (or
committee, if applicable). Executive’s annual bonus targeted
amount while serving as Chief Executive Officer shall be seventy
five percent (75%) of Executive’s Base Salary then in effect.
Once a successor Chief Executive Officer is appointed by the Board,
Executive’s annual bonus targeted amount while serving as
President and Chief Operating Officer shall be fifty percent (50%)
of Executive’s Base salary then in effect. During a year in
which Executive serves as both Chief Executive Officer and
President and Chief Operating Officer, his bonus percentage shall
be prorated based on days served in each role. Annual bonus
payments and/or incentive compensation shall be paid no later than
March 15th of the year following the end of the performance
period.
2.3 Equity
Compensation.
(a) Executive
shall be entitled to participate in all equity compensation plans
provided by any of the Fusion’s U.S. subsidiaries (the
“Plans”)
in effect during the term of this Agreement.
(b) Within
sixty (60) days following the effective date of the Amended Plan,
Fusion shall grant Executive either (i) options to purchase shares
of Fusion’s common stock, or (ii) shares of restricted common
stock of Fusion, which grant will be made pursuant to the terms of
a management incentive plan to be adopted by Fusion promptly
following the effective date of the Amended Plan. The methodology
for determining the amount, terms, conditions, and restrictions of
such equity-based awards will be comparable to the methodology used
by the Compensation Committee of the Board for other senior
executives of the Companies having a similar level title and/or
level of responsibility (which, at all times that Executive is
serving as Chief Executive Officer or President and Chief Operating
Officer, shall mean other direct reports to the Chief Executive
Officer) (“Comparable
Executives”). If the equity-based award contemplated
by this paragraph is granted while Executive is serving as Chief
Executive Officer, such equity-based award shall be in excess of
equity-based awards granted to any Comparable Executive and shall
represent an amount equal to, or in excess of, the percentage by
which Executive’s overall compensation exceeds the annual
overall compensation of the next highest paid Comparable
Executive.
(c) The
grant contemplated by clause (b) above as well as any subsequent
equity-based grants made to Executive shall have termination and
“Change in Control” (as hereinafter defined) vesting
terms comparable to equity-based grants made concurrently to
Comparable Executives. Moreover, all equity-based awards held by
Executive as of immediately prior to any “Change in
Control” shall vest in full immediately upon a
termination of Executive’s employment pursuant to
Section
3.5 within one (1) year following a Change in Control, with
all applicable performance-based vesting conditions, if any, deemed
fully satisfied.
3
(d) During
the Employment Period, Executive shall be eligible to receive, from
time to time, other equity-based awards in amounts, and subject to
such terms, conditions, and restrictions as determined by the
Compensation Committee of the Board in its sole discretion. The
methodology for determining the amount, terms, conditions, and
restrictions of Executive’s equity-based awards during the
Employment Period will be comparable to the methodology used by the
Compensation Committee of the Board for Comparable Executives,
subject to any market or performance adjustments.
2.4 Expense
Reimbursement. During the Employment Period, Fusion, upon
the submission of reasonable supporting documentation by Executive,
shall reimburse Executive for all reasonable expenses actually paid
or incurred by Executive in the course of, and pursuant to, the
business of the Companies, including expenses for travel and
entertainment, in accordance with the applicable policies of the
Companies as in effect from time to time. Expenses shall be
reimbursed under this Section
2.4 within sixty
(60) days of submission of reasonably supporting documentation by
Executive.
2.5 Incentive,
Savings and Retirement Plans. During the Employment Period,
Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs, in
effect from time to time, applicable to Comparable Executives. Such
plans, practices, policies and programs, in the aggregate, shall
provide Executive with compensation, benefits and reward
opportunities comparable to the compensation, benefits and reward
opportunities provided at any time hereafter to Comparable
Executives, subject to any market or performance
adjustments.
2.6 Welfare
Benefit Plans. During the Employment Period, Executive
and/or Executive’s spouse and eligible dependents, as the
case may be, shall be eligible for participation in, and shall
receive all benefits under, welfare benefit plans, practices,
policies and programs provided by the Companies (including, without
limitation, medical, prescription, dental, short term disability,
long term disability, salary continuance, employee life, group
life, accidental death and travel accident insurance plans and
programs), that are comparable to those in effect from time to time
provided to Comparable Executives.
2.7 Working
Facilities. During the Employment Period, Fusion shall
furnish the Executive with an office and such other facilities and
services suitable to his position and adequate for the performance
of his duties hereunder.
2.8 Vacation.
During the Employment Period, the Executive shall be entitled to
five (5) weeks paid vacation per year, subject to the practices of
the Companies as in effect from time to time. In the event the
Companies change to a paid time off policy, the number of days of
paid time off to which Executive shall be entitled shall be
increased to give effect to his vacation entitlement such that he
shall receive no less than five weeks of paid time
off.
2.9 Indemnification;
D&O Insurance. Fusion shall at all times maintain
directors’ and officers’ liability insurance coverage
in an amount determined to be commercially reasonable by the Board
based on such insurance coverage maintained by private companies
operating in the cloud computing or telecommunications sector and
comparable to Fusion in size, pursuant to which Executive shall be
covered on a basis that is comparable to the coverage provided to
any director or executive officer of the Companies, and Fusion
shall otherwise indemnify Executive to the fullest extent permitted
by applicable law, whether under Fusion’s governing documents
or otherwise.
4
ARTICLE III
Termination
3.1 Termination
for Cause. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated by
Fusion for Cause. As used in this Agreement, “Cause”
means (a) subject to the following sentences, an act or acts of
personal dishonesty taken by Executive and intended to result in
personal enrichment of Executive at the expense of the Companies
and that are not remedied within thirty (30) days after receipt of
written notice thereof from Fusion, (b) subject to the following
sentences, violation by Executive of any material obligations of
Executive under this Agreement which are demonstrably willful and
deliberate on Executive’s part and which are not remedied
promptly (but in any event within thirty (30) days) after receipt
of written notice thereof from Fusion, (c) the conviction of the
Executive for any criminal act which is a felony, (d) any willful
misconduct that is materially harmful to the business or reputation
of the Companies that is not remedied within thirty (30) days after
receipt of written notice from Fusion, or (e) Executive’s
willful and continued failure to follow reasonable lawful
directives of the person(s) to whom the Executive reports that is
not remedied within thirty (30) days after receipt of written
notice from Fusion. Upon any determination by the Board that Cause
exists under clauses (a), (b), (d), or (e) of the preceding
sentence, the Board shall cause a special meeting of the Board to
be called and held at a time mutually convenient to the Board and
Executive, but in no event later than ten (10) business days after
Executive’s receipt of the notice contemplated by clauses
(a), (b), (d) and (e). Executive shall have the right to appear
before such special meeting of the Board with legal counsel of his
choosing to refute any determination of Cause specified in such
notice, and any termination of Executive’s employment by
reason of such Cause determination shall not be effective until
Executive is afforded such opportunity to appear, unless Executive
fails to make himself available during such ten (10) business day
period. Any termination for Cause pursuant to clause (a), (b), (d)
or (e) of the first sentence of this Section 3.1
shall be made in writing by the Board to Executive, which notice
shall set forth in reasonable detail all acts or omissions upon
which the Board is relying for such termination. Upon notice to
Executive and pending the Board’s determination of Cause as
set forth herein, Executive may be suspended from his position and
duties with pay (and notwithstanding anything to the contrary, no
such suspension shall constitute grounds for Good Reason
hereunder). Upon any termination pursuant to this Section 3.1,
Executive shall be entitled to be paid his Base Salary to the date
of termination and Fusion shall have no further liability hereunder
(other than for reimbursement for reasonable business expenses
incurred prior to the date of such termination). For purposes of
this provision, no act or failure to act, on the part of Executive,
shall be considered “willful” unless it is done, or
omitted to be done, by Executive in bad faith or without reasonable
belief that Executive’s action or omission was in the best
interests of the Companies. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board
or based upon the advice of counsel for Fusion shall be
conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of the Companies.
If the Board does not deliver to Executive written notice of
termination within ninety (90) days after the Board has actual
knowledge that an event constituting Cause has occurred, the event
will no longer constitute Cause.
5
3.2 Disability.
Notwithstanding anything contained in this Agreement to the
contrary, the Board, by written notice to Executive, shall at all
times have the right to terminate this Agreement, and
Executive’s employment hereunder, as a result of
Executive’s Disability. As used in this Agreement,
“Disability”
means the absence of Executive from Executive’s duties and
responsibilities provided for herein for a period of more than
ninety (90) consecutive days in any 12-month period as a result of
incapacity due to mental or physical illness, which is reasonably
determined by a physician selected by Fusion and acceptable to
Executive to render Executive unable to perform his duties for an
additional period of ninety (90) or more days during the then
ensuing 12-month period. In such event, Executive’s
employment with Fusion shall terminate effective on the tenth
(10th) day
after receipt of such notice by Executive (the “Disability
Effective Date”), provided that, within the ten (10)
days after such receipt, Executive shall not have returned to
full-time performance of Executive's duties. Subject to Section
3.7, upon any termination pursuant to this Section 3.2,
Executive shall be entitled to be paid an amount equal to his Base
Salary for a period of six (6) months. In addition, Executive shall
be entitled to any earned but unpaid bonus payments, incentive
compensation and/or equity compensation pursuant to Article II
above, any accrued but unused vacation pay, reimbursement for
reasonable business expenses incurred prior to the date of
termination (collectively, the “Accrued
Obligations”), as well as any applicable disability
income payments under any disability income plan of the
Companies.
3.3 Death.
In the event of the death of Executive during the term of this
Agreement, Fusion shall pay the estate of Executive an amount equal
to six (6) months of Base Salary. In addition, Executive’s
estate shall be entitled to the Accrued Obligations, as well as any
applicable life insurance benefits under any life insurance plan of
the Companies.
3.4 Optional
Termination. Notwithstanding anything contained in this
Agreement to the contrary, Executive shall, by giving Fusion no
less than thirty (30) days prior written notice, have the right to
terminate this Agreement at his sole discretion. Upon any
termination pursuant to this Section 3.4,
the Executive shall be entitled to be paid his Base Salary to the
date of termination and Fusion shall have no further liability
hereunder (other than the Accrued Obligations), unless the
Executive and Fusion agree to a different arrangement.
6
3.5 Termination
Without Cause.
(a) At
any time during the Employment Period while Executive is serving as
Chief Executive Officer, Fusion shall have the right to terminate
Executive’s employment hereunder by written notice to
Executive; provided, however, that in addition to the Accrued
Obligations, Fusion shall (a) pay, or cause to be paid, to
Executive in cash, in twenty four (24) equal monthly installments,
after the effective date of the termination, the pro-rata portion
of his target annual bonus amount for the calendar year in which
his termination has occurred, (b) pay, or cause to be paid, to
Executive, in cash, in twenty four (24) equal monthly installments,
after the effective date of the termination, an amount equal to one
hundred fifty percent (150%) of his Base Salary then in effect
plus an amount equal to one
hundred fifty percent (150%) of the maximum annual bonus amount
contemplated by Section 2.2 as if Executive and the Company
achieved all targets and objectives for that year, in all cases
subject to Section 3.7,
and (c) use reasonable efforts to maintain Executive’s
coverage (and, where applicable, the coverage for his spouse and
eligible dependents) under the medical plan(s) maintained by the
Companies for the duration of the Post-Employment Restricted Period
(as defined below) on the same terms as immediately prior to the
termination of Executive’s employment, provided that, in the
event that such coverage cannot be maintained, Fusion shall, for
the duration of the Post-Employment Restricted Period, reimburse
Executive for premiums paid by Executive to continue such coverage
pursuant to COBRA. At any time during the Employment Period while
Executive is serving as President and Chief Operating Officer,
Fusion shall have the right to terminate Executive’s
employment hereunder by written notice to Executive; provided,
however, that in addition to the Accrued Obligations, Fusion shall
(a) pay, or cause to be paid, to Executive in cash, in twenty four
(24) equal monthly installments, after the effective date of the
termination, the pro-rata portion of his target annual bonus amount
for the calendar year in which his termination has occurred, (b)
pay, or cause to be paid, to Executive, in cash, in twenty four
(24) equal monthly installments, after the effective date of the
termination, an amount equal to one hundred percent (100%) of his
Base Salary then in effect plus an amount equal to one hundred
percent (100%) of his annual bonus contemplated by Section 2.2 as
if Executive and the Company achieved all targets and objectives
for that year, in all cases subject to Section 3.7,
and (c) use reasonable efforts to maintain Executive’s
coverage (and, where applicable, the coverage for his spouse and
eligible dependents) under the medical plan(s) maintained by the
Companies for the duration of the Post-Employment Restricted Period
(as defined below) on the same terms as immediately prior to the
termination of Executive’s employment, provided that, in the
event that such coverage cannot be maintained, Fusion shall, for
the duration of the Post-Employment Restricted Period, reimburse
Executive for premiums paid by Executive to continue such coverage
pursuant to COBRA. Fusion shall be deemed to have terminated the
Executive’s employment pursuant to this Section 3.5
if such employment is terminated (a) by Fusion without Cause, or
(b) by the Executive voluntarily for “Good Reason.” For
purposes of this Agreement, “Good
Reason” means the occurrence of any of the following
events, in each case without Executive’s consent;
provided that, in each
case, (A) Executive shall provide Fusion with written notice
specifying the circumstances alleged to constitute Good Reason
within ninety (90) days following the first occurrence of such
circumstances; (B) Fusion shall have an opportunity to promptly (in
any event within thirty (30) days following receipt of such notice)
cure such circumstances; and (C) if Fusion has not cured such
circumstances within such thirty (30)-day period, Executive shall
terminate his employment not later than sixty (60) days after the
end of such thirty (30)-day period:
(i) the
assignment to Executive of any duties inconsistent in any material
respect with his position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 1.2
of this Agreement, or any other action by the Companies that
results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by Fusion after receipt of notice thereof given
by Executive in accordance with the terms described
above;
(ii)
any material failure by the Companies to comply with any of the
provisions of Article II
or Section 5.9
of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Fusion after receipt of notice thereof given by
Executive in accordance with the terms described
above;
7
(iii) Fusion
requiring Executive to be based at any office or location more than
thirty (30) miles from the offices of the Companies located at 000
Xxxxxxxxxx Xxxxx Xxxxxxx, Xxxxxxx, Xxxxxxx, except for travel
reasonably required in the performance of Executive’s
responsibilities;
(iv) any
change in the designation of the position or role that Executive is
obligated to report to under Section 1.2
hereof;
(v) any
purported termination by Fusion of Executive’s employment
otherwise than as expressly permitted by this Agreement;
or
(vi) any
failure by the Companies to comply with and satisfy Section
5.3(c) of this Agreement.
(b) All
payments pursuant to Section 3.5
are conditioned upon Executive’s execution and delivery of a
release (the “Release”)
of any and all claims that Executive may have against the Companies
and their directors, officers or stockholders related to
Executive’s employment and/or termination of employment and
such release becoming effective and irrevocable in accordance with
its terms on or before the 30th day following
Executive’s termination of employment. If Executive fails to
execute and deliver the Release, or if the Release has not become
effective and irrevocable by the 30th day after the date
of Executive’s termination of employment, Executive shall not
be entitled to any payments pursuant to Section 3.5;
provided,
however, that if
the 30-day period begins in one taxable year and ends in a second
taxable year, such payments shall not commence until the second
taxable year. The Release shall be in a form satisfactory to Fusion
and shall be a general release of all claims, except that such
release shall not include and shall not limit or release (A)
Executive’s rights or claims relating to the obligations of
Fusion under this Agreement that are conditioned upon execution of
the Release; (B) Executive’s rights to indemnification from
the Companies in respect of Executive’s services as a
director, officer or employee of the Companies (or of any entity
for which Executive has served in any such capacity or a similar
capacity at the request of the Companies) as provided by law, any
indemnification agreement or similar agreement by and between
Fusion and Executive, the certificates of incorporation or bylaws
(or like constitutive documents), or any of Executive’s
rights to payment under any director’s and officer’s
liability insurance carried by the Companies; (C) Executive’s
entitlement, if any, to continued medical, dental and vision
insurance coverage under and pursuant to COBRA; (D) any rights of
Executive under any welfare benefit plan, practice or program
provided by the Companies (including medical, dental, short-term
and long-term disability, salary continuance, life insurance,
accidental death and travel accident insurance plans and programs)
in which Executive participated prior to the termination date; or
(E) any rights or claims of Executive that may arise out of events
occurring after the effective date of the Release. Fusion shall
promptly deliver the Release to Executive upon termination of his
employment.
3.6 Benefits.
Except as otherwise expressly provided herein or in the applicable
plan, Executive’s accrual of, or participation in plans
providing for, the benefits pursuant to Sections
2.6 and 2.7 shall
cease at the effective date of the termination of employment under
this Agreement, and Executive shall be entitled to accrued benefits
pursuant to such plans only as provided in such plans.
8
3.7 Section
409A.
(a) This
Agreement is intended to comply with or otherwise be exempt from
Section 409A and its corresponding regulations, to the extent
applicable, and shall be so construed. Notwithstanding anything in
this Agreement to the contrary, payments of “nonqualified
deferred compensation” subject to Section 409A may only be
made under this Agreement upon an event and in a manner permitted
by Section 409A, to the extent applicable. For purposes of Section
409A, all payments of “nonqualified deferred
compensation” subject to Section 409A to be made upon the
termination of Executive’s employment under this Agreement
may only be made upon a “separation from service” under
Section 409A. Each payment made under this Agreement shall be
treated as a separate payment and the right to a series of
installment payments under this Agreement is to be treated as a
right to a series of separate payments. In no event shall
Executive, directly or indirectly, designate the calendar year of
payment with respect to any amount that is “nonqualified
deferred compensation” subject to Section 409A. All
reimbursements provided under this Agreement that are
“nonqualified deferred compensation” that is subject to
Section 409A shall be made or provided in accordance with Section
409A, including, where applicable, the requirements that (a) any
reimbursement is for expenses incurred during the Employment Period
(or during such other time period specified in this Agreement), (b)
the amount of expenses eligible for reimbursement during a calendar
year may not affect the expenses eligible for reimbursement in any
other calendar year, (c) the reimbursement of an eligible expense
will be made on or before the last day of the taxable year
following the year in which the expense is incurred, and (d) the
right to reimbursement is not subject to liquidation or exchange
for another benefit. Nothing herein shall be construed as having
modified the time and form of payment of any amounts or payments of
“nonqualified deferred compensation” within the meaning
Section 409A that were otherwise payable pursuant to the terms of
any agreement between Fusion and Executive in effect prior to the
date of this Agreement.
(b) If
Executive is considered a “specified employee” (as
defined under Section 409A) and payment of any amounts under this
Agreement is required to be delayed for a period of six (6) months
after separation from service pursuant to Section 409A, payment of
such amounts shall be delayed as required by Section 409A, and the
accumulated postponed amounts shall be paid in a lump-sum payment
within five (5) days after the end of the six (6) month period. If
Executive dies during the postponement period prior to the payment
of benefits, the amounts postponed on account of Section 409A shall
be paid to the personal representative of Executive’s estate
within sixty (60) days after the date of Executive’s
death.
9
3.8 Definition
of “Change in Control”. For purposes of this
Agreement, a “Change in
Control” shall mean:
(i) Except
for the change in control contemplated by the Amended Plan and the
subsequent change in control that will result from the exercise of
Special Warrants (as defined in the Amended Plan) according to the
terms of the Amended Plan, the acquisition (other than by or from
Fusion) by any unaffiliated person, entity or “group”,
within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the “Exchange
Act”), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power
of Fusion’s then outstanding voting securities entitled to
vote generally in the election of directors; or
(ii) All
or any of the individuals appointed to the Board on the effective
date of the Amended Plan (the “Incumbent
Board”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the effective date of the Amended Plan whose
election, or nomination for election by Fusion’s
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the directors of Fusion, as
such terms are used in Rule 14a-l l of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent
Board; or
(iii) Following
the effective date of the Amended Plan, (A) a reorganization,
merger or consolidation with respect to which persons who were the
stockholders of Fusion immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more
than fifty percent (50%) of the combined voting power entitled to
vote generally in the election of directors of the reorganized,
merged or consolidated company’s then outstanding voting
securities, (B) a liquidation or dissolution of Fusion, or (C) the
sale of all or substantially all of the assets of the Companies;
or
(iv) Following
the effective date of the Amended Plan, the sale, distribution
and/or other transfer or action (and/or series of sales,
distributions and/or other transfers or actions from time to time
or over a period of time), that results in Fusion’s ownership
of less than fifty percent (50%) of consolidated assets of the
Companies.
10
ARTICLE IV
Restrictive
Covenants
4.1 Nondisclosure.
During the Employment Period and for twenty four (24) months
thereafter, Executive shall not divulge, communicate, use to the
detriment of the Companies or for the benefit of any other person
or persons, or misuse in any way, any Confidential Information
pertaining to the business of the Companies. Any Confidential
Information or data now or hereafter acquired by Executive with
respect to the business of the Companies shall be deemed a
valuable, special and unique asset of Fusion that is received by
the Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to Fusion with respect to all of such
information. For purposes of this Agreement, “Confidential
Information” means all material information about the
business of the Companies disclosed to the Executive or known by
the Executive as a consequence of or through his employment by
Fusion (including information conceived, originated, discovered or
developed by Executive) after the date hereof, and not generally
known or readily available to the public. The above restrictions
shall not apply to: (a) information that at the time of disclosure
is in the public domain through no fault of Executive; (b)
information received from a third party outside of Fusion that was
disclosed without a breach of any confidentiality obligation; (c)
information approved for release by a written authorization of
Fusion; or (d) information that may be required by law or an order
of any court, agency, or proceeding to be disclosed. For the
avoidance of doubt, nothing herein is intended to or shall prohibit
Executive from utilizing any knowledge, information, business
techniques and/or methods that Executive knew prior to his
affiliation with the Companies, or that are generally known and
used by persons with training and experience comparable to that of
Executive, or that are common knowledge in the industry. Moreover,
nothing in this Agreement is intended to or shall limit any
party’s ability to (x) report possible violations of federal
securities laws to the appropriate government enforcing agency and
make such other disclosures that are expressly protected under
federal or state “whistleblower” laws or (y) respond to
inquiries from, or otherwise cooperate with, any governmental or
regulatory investigation. Additionally, Executive shall not be held
criminally or civilly liable under any federal or state trade
secret law for the disclosure of a trade secret that is made (i) in
confidence to a federal, state, or local government official, or to
an attorney, solely for the purpose of reporting or investigating a
suspected violation of law, or (ii) in a complaint or other
document filed in a lawsuit or other proceeding, if such filing is
made under seal. If Executive files a lawsuit for retaliation by
Fusion for reporting a suspected violation of law, Executive may
disclose the trade secret to Executive’s attorney and use the
trade secret information in the court proceeding, if Executive
files any document containing the trade secret under seal and does
not disclose the trade secret, except pursuant to court
order.
4.2 Nonsolicitation
of Employees. During the Employment Period and for a period
of eighteen (18) months thereafter, Executive shall not directly or
indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or
enter into any contractual arrangement with any employee of the
Companies or former employee of the Companies, unless such employee
or former employee has not been employed by Fusion or one of its
subsidiaries for a period in excess of three (3) months.
Notwithstanding the foregoing, the provisions of this Section 4.2
shall not be violated by (a) general advertising or solicitation
not specifically targeted at employees of the Companies or (b)
actions taken by any person or entity with which Executive is
associated if Executive is not directly or personally involved in
any manner in such solicitation or recruitment and has not
identified such employee for recruiting or
solicitation.
11
4.3 Covenant
Not to Compete. Executive will not, at any time, during the
Employment Period, and for a period of twenty four (24) months
thereafter (the “Post-Employment
Restricted Period”), either directly or indirectly,
engage in, with or for any enterprise, institution, whether or not
for profit, business, or company, competitive with the Business (as
defined herein) of the Companies as such Business is conducted on
the date thereof, as a creditor, guarantor, or financial backer,
stockholder, director, officer, consultant, advisor, employee,
member, or otherwise of or through any corporation, partnership,
association, sole proprietorship or other entity; provided, that an
investment by Executive, his spouse or his children is permitted if
such investment is not more than one percent (1%) of the total debt
or equity capital of any such competitive enterprise or business.
As used in this Agreement, the “Business”
of the Companies shall be deemed to include the provision of any
form of traditional communications services, Internet based video
conferencing services, Unified communications as a service
(“UCaaS”),
clouding computing, cloud connectivity, cloud storage, cloud
security and software as a service (“SaaS”).
The foregoing prohibition shall not prevent Executive’s
employment or engagement after the Employment Period (a) by any
entity as long as the activities of such employment or engagement
do not involve work on matters related to the Business or (b) by an
investment fund that invests in entities engaged in the Business so
long as Executive is not employed or engaged as an executive
officer or director of such entity engaged in the Business. This
covenant not to compete for the Post-Employment Restricted Period
shall only be effective if Executive has received all compensation
and benefits due to him pursuant to this Agreement, including but
not limited to compensation and benefits under Section 3.5,
to the extent applicable. For the avoidance of doubt, in the event
of Fusion’s non-renewal of Executive’s employment
following expiration of the Initial Term or any Term Extension in
accordance with Section 1.1,
the covenant not to compete for twenty four (24) months shall only
apply if and to the extent that Fusion elects to pay severance to
Executive in an amount equivalent in all respects to that which he
would be entitled to receive as if he was terminated Without Cause
pursuant to Section 3.5.
Fusion shall have the right in its sole discretion to waive this
non-compete clause, in whole or in part.
4.4 Mutual
Non-disparagement. Executive agrees that he will not,
directly or indirectly, individually or in concert with others,
engage in any conduct or make any statement that is likely to have
the effect of undermining or disparaging the reputation of the
Companies, or their good will, products, or business opportunities,
or that is likely to have the effect of undermining or disparaging
the reputation of any officer, director, agent, representative or
employee, past or present, of the Companies. Fusion agrees that,
except for circumstances relating to a termination of
Executive’s employment by Fusion for Cause, its executive
officers or directors shall not directly or indirectly,
individually or in concert with others, engage in any conduct or
make any statement that is likely to have the effect of undermining
or disparaging the reputation of Executive.
4.5 Injunction.
It is recognized and hereby acknowledged by the parties that a
breach by Executive of any of the covenants contained in
Sections
4.1, 4.2,
4.3 or
4.4 of this
Agreement will cause irreparable harm and damage to Fusion or the
Companies, as the case may be, the monetary amount of which may be
virtually impossible to ascertain. As a result, Executive
recognizes and hereby acknowledges that Fusion shall be entitled to
seek an injunction from any court of competent jurisdiction in
Manhattan, New York enjoining and restraining any violation of any
or all of the covenants contained in this Article IV
by the Executive, and that such right to injunction shall be
cumulative and in addition to whatever other remedies Fusion may
possess.
4.6 Recoupment
upon Breach of Restrictive Covenants. In the event that
Executive violates any of the covenants set forth in this
Article IV, Fusion
shall have no obligation to pay Executive any unpaid portion of the
severance benefits pursuant to Sections 3.2, 3.3 or
3.5.
ARTICLE V
Miscellaneous
5.1 Governing
Law; Jurisdiction. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
New York without giving effect to any conflicts-of-law provisions.
In respect of any claim arising out of or relating to this
Agreement, the parties irrevocably submit to the exclusive
jurisdiction of the United States District Court for the Southern
District of New York, or any state court located in Manhattan, New
York.
12
5.2 Notices.
Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
|
If to
Fusion:
|
Fusion
Connect, Xxx.000 Xxxxxxxxxx Xxxxx Xxxxxxx, Xxxxx 000Xxxxxxx,
Xxxxxxx 30339Attention: General Counsel
|
|
|
|
|
If to
Executive:
|
Xxxxx
Xxxxx
0000
Xxxxxxxxx Xxxxx
Xxxxxxxx,
Xxxxxxx, 00000
(or his
last known address in the records of the Companies)
with a
copy to
Xxxxxxx
Sand
Weiner
& Sand LLC
000
Xxxxxxx Xxxxxx, XX
Xxxxx
000
Xxxxxxx,
Xxxxxxx 00000
|
or to
such other addresses as either party hereto may from time to time
give notice of to the other in the aforesaid manner.
5.3 Successors.
(a) This
Agreement is personal to Executive and without the prior written
consent of Fusion shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of, and be enforceable by,
Executive’s legal representatives.
(b) This
Agreement shall inure to the benefit of and be binding upon Fusion
and its successors and permitted assigns.
(c) Fusion
shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Fusion to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Fusion would be required to
perform if no such succession had taken place. As used in this
Agreement, “Fusion”
shall mean Fusion as hereinbefore defined and any successor to its
business and/or assets which assumes and agrees to perform this
Agreement by operation of law or otherwise.
13
5.4 Severability.
The invalidity of any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall not affect
the enforceability of the remaining portions of this Agreement or
any part thereof, all of which are inserted conditionally on their
being valid in law, and, in the event that any one or more of the
words, phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid word or words, phrase or phrases,
sentence or sentences, clause or clauses, or section or sections
had not been inserted. If such invalidity is caused by length of
time or size of area, or both, the otherwise invalid provision will
be considered to be reduced to a period or area which would cure
such invalidity.
5.5 Waivers.
The waiver by either party of a breach or violation of any term or
provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
5.6 Damages.
Nothing contained herein shall be construed to prevent Fusion or
the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his
breach of any term or provision of this Agreement, or any other
remedy available at law or in equity.
5.7 No
Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person (other than the parties hereto and, in the case
of Executive, his heirs, personal representative(s) and/or legal
representative) any rights or remedies under or by reason of this
Agreement.
5.8 Full
Settlement. Fusion’s obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which Fusion may have against Executive or others, or on account of
any remuneration or other benefit earned or received by Executive
after the termination of Executive’s employment hereunder. In
no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable
to Executive under any of the provisions of this Agreement. Fusion
agrees to pay, to the full extent permitted by law, all legal fees
and expenses which Executive may reasonably incur as a result of
any contest by Fusion or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to
Section
5.9 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the
Internal Revenue Code of 1986, as amended (the “Code”).
14
5.9 Section
280G of the Code.
Notwithstanding any other provision of this Agreement or any other
plan, arrangement or agreement to the contrary, if any of the
payments or benefits provided or to be provided by Fusion or its
affiliates to Executive or for Executive’s benefit pursuant
to the terms of this Agreement or otherwise (the
“Covered
Payments”) constitute parachute payments (the
“Parachute
Payments”) within the meaning of Section 280G of the
Code and, but for this Section 5.9,
would be subject to the excise tax imposed under Section 4999 of
the Code (or any successor provision thereto) or any similar tax
imposed by state or local law or any interest or penalties with
respect to such taxes (collectively, the “Excise
Tax”), then prior to making the Covered Payments, a
calculation shall be made comparing (i) the Net Benefit (as defined
below) to Executive of the Covered Payments after payment of the
Excise Tax to (ii) the Net Benefit to Executive if the Covered
Payments are limited to the extent necessary to avoid being subject
to the Excise Tax. Only if the amount calculated under (i) above is
less than the amount under (ii) above will the Covered Payments be
reduced to the minimum extent necessary to ensure that no portion
of the Covered Payments is subject to the Excise Tax (that amount,
the “Reduced
Amount”). “Net
Benefit” shall mean the present value of the Covered
Payments net of all federal, state, local, foreign income,
employment and excise taxes.
Any
such reduction shall be made in accordance with Section 409A and
the following:
(i) the
Covered Payments consisting of cash severance benefits that do not
constitute nonqualified deferred compensation subject to Section
409A shall be reduced first, in reverse chronological order;
and
(ii) all
other Covered Payments consisting of cash payments, and Covered
Payments consisting of accelerated vesting of equity based awards
to which Treas. Reg. § 1.280G-1 Q/A-24(c) does not apply, and
that in either case do not constitute nonqualified deferred
compensation subject to Section 409A, shall be reduced second, in
reverse chronological order;
(iii) all
Covered Payments consisting of cash payments that constitute
nonqualified deferred compensation subject to Section 409A shall be
reduced third, in reverse chronological order; and
(iv) all
Covered Payments consisting of accelerated vesting of equity-based
awards to which Treas. Reg. § 1.280G-1 Q/A-24(c) applies shall
be the last Covered Payments to be reduced.
Any
determination required under this Section 5.9
shall be made in writing in good faith by an independent accounting
firm selected by Fusion (the “Accountants”).
Fusion and Executive shall provide the Accountants with such
information and documents as the Accountants may reasonably request
in order to make a determination under this Section 5.9.
For purposes of making the calculations and determinations required
by this Section 5.9,
the Accountants may rely on reasonable, good-faith assumptions and
approximations concerning the application of Section 280G and
Section 4999 of the Code. The Accountants’ determinations
shall be final and binding on Fusion and Executive. Fusion shall be
responsible for all fees and expenses incurred by the Accountants
in connection with the calculations required by this Section
5.9.
(v) It
is possible that after the determinations and selections made
pursuant to this Section 5.9
Executive will receive Covered Payments that are in the aggregate
more than the amount intended or required to be provided after
application of this Section 5.9
(“Overpayment”)
or less than the amount intended or required to be provided after
application of this Section 5.9
(“Underpayment”).
15
(vi) In
the event that: (A) the Accountants determine, based upon the
assertion of a deficiency by the Internal Revenue Service against
either Fusion or Executive that the Accountants believe has a high
probability of success, that an Overpayment has been made or (B) it
is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that has been finally and
conclusively resolved that an Overpayment has been made, then
Executive shall pay any such Overpayment to Fusion together with
interest at the applicable federal rate (as defined in Section
7872(f)(2)(A) of the Code) from the date of Executive’s
receipt of the Overpayment until the date of
repayment.
(vii) In
the event that: (A) the Accountants, based upon controlling
precedent or substantial authority, determine that an Underpayment
has occurred or (B) a court of competent jurisdiction determines
that an Underpayment has occurred, any such Underpayment will be
paid promptly by Fusion to or for the benefit of Executive together
with interest at the applicable federal rate (as defined in Section
7872(f)(2)(A) of the Code) from the date the amount should have
otherwise been paid to Executive until the payment
date.
5.10 Post-Employment
Cooperation. Executive agrees to reasonably cooperate with
and provide assistance to the Companies and their legal counsel in
connection with any litigation (including arbitration or
administrative hearings) or investigation affecting the Companies,
in which, in the reasonable judgment of counsel to the Companies,
Executive’s assistance or cooperation is needed; provided, however, that in no event shall
Executive be required to cooperate pursuant to this Section 5.10
with respect to any matter that could reasonably be expected to be
materially adverse to Executive’s interests. Executive shall,
when reasonably requested by the Companies, provide truthful
testimony or other assistance and shall travel at the
Companies’ request in order to fulfill this obligation;
provided,
however, that, in
connection with such litigation or investigation, any such requests
of Executive’s time shall take into account Executive’s
then existing employment or other obligations and not place an
undue or unreasonable burden on Executive. The Companies shall
provide Executive with reasonable notice in advance of the times in
which Executive’s cooperation or assistance is needed and
shall advance or reimburse (as requested by Executive) reasonable
expenses (including for professional advisors) incurred by
Executive in connection with such matters, as well as for any
actual lost wages suffered as a result of absence from
employment.
5.11 Entire
Agreement; Amendments.
(a) This
Agreement contains the entire agreement between the parties with
respect to the subject matter hereof, and supersedes and replaces
all prior agreements and understandings, oral or written, among the
parties hereto with respect to Executive’s employment with
the Companies, including for the avoidance of doubt, the employment
agreement, dated October 30, 2017, by and between Fusion and
Executive, but excluding the KERP Agreement.
16
(b) Notwithstanding
any legal principle to the contrary, the parties expressly agree
that any oral amendment to or modification of this Agreement,
including any oral modification to this Section 5.11,
shall be ineffective, and that this Agreement, including this
Section 5.11,
may be amended only by an agreement in writing signed by the
parties hereto, it being the express intent of the parties that
such amendment in writing shall be the exclusive means of effecting
any amendment or modification of any provision of this Agreement
whatsoever.
5.12 Tax
Withholding. Fusion may withhold or, if applicable, cause
one or more of the Companies to withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as
shall be required to be with-held pursuant to any applicable law or
regulation. Executive is solely responsible for all taxes imposed
on him as a result of his receipt of any payment or benefit arising
under this Agreement, other than such taxes that are, by their
nature, obligations of Fusion (for example, and without limitation,
the employer portion of the Federal Insurance Contributions Act
(FICA) taxes, and any corporate taxes incurred by Fusion as a
result of the disallowance of any tax deduction for compensation
paid to Executive, and Fusion does not guarantee the tax treatment
or tax consequences associated with any payment or benefit arising
under this Agreement.
5.13 Section
Headings; Construction. The headings of Sections in this
Agreement are provided for convenience only and shall not affect
its construction or interpretation. All references to
“Sections” or “Articles” refer to the
corresponding Sections or Articles of this Agreement unless
otherwise specified. All words used in this Agreement shall be
construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word
“including” does not limit the preceding words or
terms.
5.14 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original copy of this Agreement and
all of which, when taken together, shall be deemed to constitute
one and the same agreement. Signatures transmitted by electronic
copies of e-mailed documents (e.g., in .pdf format) shall be deemed
originals for this purpose.
5.15 Survival.
The terms, conditions, rights and obligations of the parties shall
survive any termination or expiration of this Agreement to the
extent necessary to the intended preservation of such terms,
conditions, rights, and obligations, including, without limitation,
Articles
II, III,
and IV and
Section 5.10 of this Agreement.
[remainder of page
intentionally left blank]
17
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the Execution Date.
By:
/s/ Xxxxx X. Xxxxxxxx,
Xx.
Name:
Xxxxx X. Xxxxxxxx, Xx.
Title:
Executive Vice President and General Counsel
EXECUTIVE:
/s/ Xxxxx Xxxxx
Xxxxx
Xxxxx
18
