Document:

Exhibit 10.37

 

MUTUAL RELEASE AND
SEVERANCE AGREEMENT

 

This Mutual Release and
Severance Agreement (hereafter “Agreement”) dated as of February 22, 2008,
is hereby entered into between Michael S. Ruley (“Executive”), and Hawaiian
Telcom Holdco, Inc., a Delaware corporation (the “Employer”).

 

WHEREAS, Employer and Executive entered into an
Employment Agreement dated October 1, 2004 (the “Employment Agreement”);

 

WHEREAS, Employer and Executive entered into a
Non-Qualified Stock Option Agreement dated November 8, 2005 (the “Stock
Option Agreement”) pursuant to the terms of the Stock Option Plan of Hawaiian
Telcom Holdco, Inc. (the “Stock Option Plan”);

 

WHEREAS, Employer, Executive and certain other parties
thereto entered into an Amended and Restated Limited Partnership Agreement
dated May 13, 2005 (the “LP Agreement”); and

 

WHEREAS, Executive and Employer have agreed that
Executive shall terminate his employment from the Employer under the terms
hereof.

 

NOW THEREFORE, in
exchange for the good and valuable consideration set forth herein, the adequacy
of which is specifically acknowledged, Executive and Employer (the “parties”)
hereby agree as follows:

 

1.                                       Termination
of Employment. Executive acknowledges that his employment with Employer
shall terminate effective as of February 4, 2008 (the “Termination Date”).
Executive’s termination will be classified by Employer as a voluntary
resignation.

 

2.                                       Severance
Payments.

 

(a)                                  No
later than fifteen days after Executive tenders to the Employer a signed Mutual
Release in the form of Exhibit A, provided that such tender occurs no
earlier than the Termination Date and no later than February 28, 2008 and
that such Mutual Release has not been revoked by Executive, the Employer will
pay Executive the following amounts, less applicable withholdings:

 

(1)                                  $1,117,272;

 

(2)                                  Any
bonus which has been declared or earned but not yet paid for fiscal year 2007;

 

(3)                                  $71,340
(with respect to Executive’s annual COLA payment for 2007);

 

 

(4)                                  Any
business expenses incurred by the Executive in accordance with the Employer’s
policies not yet paid to the Executive;

 

(5)                                  The
value of all accrued, unused vacation days based on Executive’s service to the
Employer which the parties agree is 320.33 hours;

 

(6)                                  Any
other amounts due to the Executive arising from the Executive’s participation
in, or benefits under, any employee benefit plans, programs or arrangements;
plus

 

(7)                                  $20,000
(with respect to accrued but unused airfare between Honolulu and the United
States mainland) (the “Airfare Payment”).

 

(b)                                 No
earlier than thirty days after Executive tenders to the Employer a signed
Mutual Release in the form of Exhibit A, provided that such tender occurs
no earlier than the Termination Date and no later than February 28, 2008
and that such Mutual Release has not been revoked by Executive, the Employer
will pay Executive within 30 days of Executive submitting expenses to Employer
for payment the following amounts, less applicable withholdings:

 

(1)                                  Pursuant
to Section 3(f) of the Employment Agreement and as outlined in the
Company’s Executive Relocation Benefits Plan, reimbursement for all relocation
expenses (“Relocation Reimbursement”) incurred by the Executive due to his
relocation back to the mainland United States at a location of his choice,
including payment  of up to a 6% real
estate broker commission fee (“Hawaiian Broker Fee”) paid by the Executive on
the sale of his Hawaiian residence, plus an additional payment in an amount
such that, after payment by the Executive of all the income taxes imposed on
the Relocation Reimbursement and the additional payment, the Executive would
retain an amount equal to Relocation Reimbursement; and

 

(2)                                  Reimbursement
for any lease termination penalties (“Lease Reimbursement”) incurred by
Executive pursuant to Section 3(i) of the Employment Agreement (but
subject to the limitations contained therein) plus an additional payment in an
amount such that, after payment by the Executive of all the income taxes
imposed on the Lease Reimbursement and the additional payment, the Executive
would retain an amount equal to Lease Reimbursement.

 

3.                                       Continued
Medical Benefits. Following the Termination Date, Employer shall continue
coverage (at the Company’s expense) for
Executive and his dependents under all Company group health benefit plans in
which Executive and any dependents were entitled to participate immediately
prior to the Termination Date (under the same terms as during employment),
including HMSA medical plan, HDS dental plan, HMSA vision plan, and Exec U Care
supplemental plan, for twelve months from the Termination Date, which period
shall be co-extensive with the period of coverage with respect to Executive
under COBRA. . Thereafter, Executive shall be eligible for such
continued coverage at his own expense for the remainder of the applicable COBRA
coverage period. Except as provided in Sections 1, 2, 3, 5 and 7 hereof or by
applicable law or plan documents, all other compensation, benefits or
perquisites shall cease upon the Termination Date.

 

2

 

4.                                       Continued
Effect of Employment Agreement. The terms and conditions of Sections 6
through 10 of the Employment Agreement shall remain in full force and effect
for the applicable periods of time indicated.

 

5.                                       Equity
in Employer. Executive shall be entitled to exercise all of his vested
stock options through the thirtieth day following the Termination Date in
accordance with the terms of the Stock Option Agreement and Stock Option Plan.

 

6.                                       Residual
Duties. The parties agree and intend that any and all duties of loyalty,
fidelity, and confidentiality running from Executive to Employer and arising
out of the common law as a consequence of the parties’ employment relationship
shall continue in full force and effect between the parties until the
Termination Date; provided, however, that neither this paragraph nor any other
portion of this Agreement shall be interpreted to diminish any residual duties
or obligations of Executive to Employer that may arise or continue in effect under
the common law after the Termination Date.

 

7.                                       Attorneys’
Fees. Executive shall be reimbursed for reasonable attorneys’ fees and
costs incurred in connection with the negotiation and execution of this
Agreement in an amount not to exceed $4,500.

 

8.                                       No
Other Payments. Executive understands and agrees that Employer shall make
no other payments to Executive, and shall have no other obligations to
Executive except as described in this Agreement or as otherwise required by law
or plan documents.

 

9.                                       Taxes.
To the extent any taxes may be due on the payments to Executive provided in
this Agreement beyond any withheld by Employer, Executive agrees to pay them
himself and to indemnify and hold Employer and other entities released by
Executive pursuant to the terms hereof (including Exhibit A)  harmless for any tax claims or penalties
resulting from such payments. Executive further agrees to provide any and all
information pertaining to Executive upon request as reasonably necessary for
Employer and other entities so released to comply with applicable tax laws.

 

10.                                 Severability.
Except as otherwise specified below, should any portion of this Agreement be
found void or unenforceable for any reason by a court of competent
jurisdiction, the court should attempt to limit or otherwise modify such
provision so as to make it enforceable, and if such portion cannot be modified
to be enforceable, the unenforceable portion shall be deemed severed from the
remaining portions of this Agreement, which shall otherwise remain in full
force and effect. If any portion of this Agreement is so found to be void or
unenforceable for any reason in regard to any one or more persons, entities, or
subject matters, such portion shall remain in full force and effect with
respect to all other persons, entities, and subject matters. In the event
Executive should in the future contend that Executive’s release of claims
pursuant to Exhibit A is for any reason void, imperfect, or incomplete,
Executive may not pursue any claim against Employer (or any other party
intended to be released thereby) to establish the invalidity of the release or
premised (in whole or in part) on the invalidity of the release before or
without repaying to Employer the full amount of such cash payments he has
received, less the reasonable value of services actually provided pursuant to
this Agreement, and applicable statutes of limitations shall be deemed to run
in regard to Executive’s claims without regard to the parties’ entry into this
Agreement. The preceding sentence shall not operate to limit the scope or
effect of Executive’s covenant not to sue.

 

3

 

11.                                 Understanding
and Authority. The parties understand and agree that all terms of this
Agreement are contractual and are not a mere recital, and represent and warrant
that they are competent to covenant and agree as herein provided.

 

12.                                 Internal
Revenue Code Section 409A. Certain payments and benefits payable under
this Agreement are intended to comply with the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”). Certain payments
and benefits payable under this Agreement are intended to be exempt from the
requirements of Section 409A of the Code. This Agreement shall be
interpreted in accordance with the applicable requirements of, and exemptions
from, Section 409A of the Code and the Treasury Regulations thereunder. To
the extent the payments and benefits under this Agreement are subject to Section 409A
of the Code, this Agreement shall be interpreted, construed and administered in
a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of
the Code and the Treasury Regulations thereunder (subject to the transitional
relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations
under Section 409A of the Code, Internal Revenue Service Notice 2006-79,
Internal Revenue Service Notice 2007-78 and other applicable authority issued
by the Internal Revenue Service). As provided in Internal Revenue Notice 2007-78,
notwithstanding any other provision of this Agreement, with respect to an
election or amendment to change a time or form of payment under this Agreement
made on or after January 1, 2008 and on or before December 31, 2008,
the election or amendment shall apply only with respect to payments that would
not otherwise be payable in 2008 and shall not cause payments to be paid in
2008 that would not otherwise be payable in 2008. If the Employer and the
Executive determine that any compensation, benefits or other payments that are
payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and
(4) of the Code do not comply with Section 409A of the Code, the
Treasury Regulations thereunder and other applicable authority issued by the
Internal Revenue Service, the Employer and the Executive agree to amend this
Agreement, or take such other actions as the Employer and the Executive deem
reasonably necessary or appropriate, to comply with the requirements of Section 409A
of the Code, the Treasury Regulations thereunder and other applicable authority
issued by the Internal Revenue Service, while preserving the economic agreement
of the parties. In the case of any compensation, benefits or other payments
that are payable under this Agreement and intended to comply with Sections
409A(a)(2), (3) and (4) of the Code, if any provision of the
Agreement would cause such compensation, benefits or other payments to fail to
so comply, such provision shall not be effective and shall be null and void
with respect to such compensation, benefits or other payments, and such
provision shall otherwise remain in full force and effect. Consistent with the
foregoing, the parties intend that the Termination Date shall be the date of
the Executive’s “separation from the service” with the Employer within the
meaning of Code Section 409A(a)(2)(A)(i).

 

13.                                 Mutual
Release. Executive understands, agrees and represents that the covenants
made herein and the Mutual Release to be executed by both parties pursuant to Exhibit A
may affect rights and liabilities of substantial extent and agrees that the
covenants and releases provided herein are in Executive’s best interest. Executive
represents and warrants that in negotiating and executing this Agreement
Executive has had an adequate opportunity to consult with competent legal
counsel of his choosing concerning the meaning and effect of each term and
provision hereof, and that there are no representations, promises, or
agreements between Employer and Executive other than those expressly set forth
in writing herein.

 

4

 

14.                                 Governing
Law. This Agreement shall be governed by the laws of the State of New York,
without reference to conflicts of law principles.

 

15.                                 Entire
Agreement. This Agreement, including Exhibit A attached hereto, and
the Consulting Agreement of even date, embody the entire agreement between the
parties with regard to its subject matter. This Agreement supersedes any and
all prior agreements and understandings between the parties with respect to its
subject matter.

 

16.                                 Amendments.
This Agreement may not be amended or changed except by a written agreement
signed by both parties.

 

17.                                 Successors
and Assigns. This Agreement shall be binding on the parties and their
respective successors and assigns.

 

The parties have
carefully read this Agreement in its entirety; fully understand and agree to
its terms and provisions; and intend and agree that it is final and binding on
all parties.

 

[signature page follows]

 

5

 

IN WITNESS WHEREOF, and
intending to be legally bound, the parties have executed the foregoing on the
dates shown below.

 

 

	
  HAWAIIAN TELECOM
  HOLDCO, INC.

  	
  MICHAEL S. RULEY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Alan M.
  Oshima

  	
   

  	
  /s/ Michael S.
  Ruley

  
	
   

  	
   

  
	
   

  	
   

  
	
  Print Name:

  	
  Alan M. Oshima

  	
   

  	
  Date:

  	
  February 22,
  2008

  
	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  SVP, General
  Counsel & Secretary

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 25,
  2008

  	
   

  	
   

  
							

 

6

 

EXHIBIT A

 

MUTUAL
RELEASE

 

This Mutual Release
(hereafter “Agreement”), dated February         ,
2008 is hereby entered into between Michael S. Ruley (“Executive”), and
Hawaiian Telcom Holdco, Inc., a Delaware corporation (the “Employer”).

 

WHEREAS, Employer and Executive entered into a Mutual
Release and Severance Agreement (the “Severance Agreement”) dated February 22,
2008, which Agreement contemplates the Execution of this Mutual Release.

 

THEREFORE, in exchange
for the good and valuable consideration set forth herein, the adequacy of which
is specifically acknowledged, Executive and Employer (the parties”) hereby
agree as follows:

 

1.                                       General
Release of Claims by Executive. Executive agrees for Executive, Executive’s
spouse and child or children (if any), Executive’s heirs, beneficiaries,
devisees, executors, administrators, attorneys, personal representatives,
successors and assigns, hereby forever to release, discharge, and covenant not
to sue Employer, Employer’s past, present, or future parent, affiliated,
related, and/or subsidiary entities (collectively “Affiliates”), and all of
their past and present directors, shareholders, officers, general or limited
partners, employees, agents, and attorneys, and agents and representatives of
such entities, and employee benefit plans in which Executive is or has been a
participant by virtue of his employment with Employer, from any and all claims,
debts, demands, accounts, judgments, rights, causes of action, equitable
relief, damages, costs, charges, complaints, obligations, promises, agreements,
controversies, suits, expenses, compensation, responsibility and liability of
every kind and character whatsoever (including attorneys’ fees and costs),
whether in law or equity, known or unknown, asserted or unasserted, suspected
or unsuspected, which Executive has or may have had against such entities based
on any events or circumstances arising or occurring on or prior to the
Termination Date (or, with respect to claims of disparagement, arising or
occurring on or prior to the date this Agreement is executed), arising directly
or indirectly out of, relating to, or in any other way involving in any manner
whatsoever, (a) Executive’s employment with Employer or the termination
thereof or (b) the Executive’s status at any time as a holder of any
securities of Employer, and any and all claims arising under federal, state, or
local laws relating to employment, or securities, including without limitation
claims of wrongful discharge, breach of express or implied contract, fraud,
misrepresentation, defamation, or liability in tort, claims of any kind that
may be brought in any court or administrative agency, any claims arising under
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the
Employee Retirement Income Security Act, the Family and Medical Leave Act, the
Securities Act of 1933, the Securities Exchange Act of 1934, and similar state
or local statutes, ordinances, and regulations, provided, however,
notwithstanding anything to the contrary set forth herein, that this release
shall not extend to (i) benefit claims under employee pension benefit
plans in which Executive is a participant by virtue of his employment with  Employer or to benefit claims under employee
welfare benefit plans for occurrences (e.g., medical care, death, or onset of
disability) arising 

 

7

 

after the
execution of this Agreement by Executive, (ii) any obligation assumed
under this Agreement by any party hereto, and (iii) any claim for
indemnification or insurance coverage pursuant to Section 23 of the
Employment Agreement.

 

2.                                       General
Release of Claims by the Employer. The Employer agrees, for the Employer,
its Affiliates, and all of their past and present directors, shareholders,
officers, general or limited partners, employees, agents, and attorneys, and
agents and representatives of such entities, and employee benefit plans in
which Executive is or has been a participant by virtue of his employment with
Employer and all of their respective predecessors, successors and assigns, to
hereby forever to release, discharge, and covenant not to sue Executive, from
any and all claims, debts, demands, accounts, judgments, rights, causes of
action, equitable relief, damages, costs, charges, complaints, obligations,
promises, agreements, controversies, suits, expenses, compensation,
responsibility and liability of every kind and character whatsoever (including
attorneys’ fees and costs), whether in law or equity, known or unknown,
asserted or unasserted, suspected or unsuspected, which the Employer has or may
have had against Executive based on any events or circumstances arising or
occurring on or prior to the Termination Date, including without limitation any
and all claims arising out of Executive’s employment with the Company or the
termination thereof provided, however, notwithstanding anything to the contrary
set forth herein, that this release shall not extend to (a) any claim
which relates to or arises from any criminal activity of Executive, and (b) any
obligation assumed under this Agreement by any party hereto.

 

3.                                       Release
of Age Discrimination Claims; Periods for Review and Reconsideration.

 

(a)                                  Executive understands
that this Agreement includes a release of claims arising under the Age
Discrimination in Employment Act (ADEA). Executive understands and warrants
that he has been given a period of twenty-one (21) days to review and consider
this Agreement. Executive is hereby advised to consult with an attorney prior to
executing the Agreement. By his signature below, Executive warrants that he has
had the opportunity to do so and to be fully and fairly advised by that legal
counsel as to the terms of the Agreement. Executive further warrants that he
understands that he may use as much or all of his 21-day period as he wishes
before signing, and warrants that he has done so.

 

(b)                                 Executive further
warrants that he understands that he has seven (7) days after signing this
Agreement to revoke the Agreement by notice in writing to Jed W. Brickner,
Latham & Watkins, 885 Third Avenue, Suite 1000, New York, N.Y.
10022. This Agreement shall be binding, effective, and enforceable upon both
parties upon the expiration of this seven-day revocation period without Mr. Brickner
having received such revocation, but not before such time.

 

[signature page follows]

 

8

 

IN WITNESS WHEREOF, and
intending to be legally bound, the parties have executed the foregoing on the
dates shown below.

 

 

	
  HAWAIIAN TELCOM
  HOLDCO, INC.

  	
  MICHAEL S. RULEY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Alan M.
  Oshima

  	
   

  	
  /s/ Michael S.
  Ruley

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
  Alan M. Oshima

  	
   

  	
  Date:

  	
  February 22,
  2008

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  SVP, General
  Counsel & Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  February 25,
  2008

  	
   

  	
   

  
								

 

9Exhibit
10.38

 

CONSULTING AGREEMENT

 

This Consulting Agreement
(the “Agreement”) dated as of February 22, 2008, and effective March 1,
2008 (the “Effective Date”) is made by and between Hawaiian Telcom Holdco, Inc.
a Delaware corporation (together with any successor thereto, the “Company”),
and Michael S. Ruley (the “Consultant”).

 

WHEREAS, the Company
desires to engage the Consultant to provide services to the Company pursuant to
this Agreement and the Consultant desires to provide such services to the Company
pursuant to this Agreement.

 

NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein, the
Company and the Consultant agree as follows:

 

1.             Services. The Company agrees to engage the
Consultant, and the Consultant agrees to provide services to the Company, as
requested by the Company from time to time, under the terms and conditions
herein provided, including making himself reasonably available for consultation
with the Company and the Company’s agents and employees regarding his prior
work for the Company and its affiliates. During the Consulting Term (as defined
below) the Consultant shall be a Special Advisor to the Chairman. The
Consultant will not (a) perform any services for the Company except as
explicitly and specifically authorized by the Company’s Chief Executive Officer
(the “CEO”) and agreed to by the Consultant, (b) enter the premises of the
Company or any of its subsidiaries or communicate with government agencies,
labor unions, adverse parties in actual or potential litigation, suppliers,
service providers, customers, or employees of the Company or any of its
affiliates regarding any the business of the Company or any of its affiliates
or the Consultant’s employment or directorship status without the express written
authorization of the CEO or as otherwise required by law or in a proceeding to
enforce this Agreement, and (c) incur any financial or legal obligation or
liability on behalf of or binding upon the Company or any of its affiliates. The
Consultant agrees that he will notify the Company of all pertinent facts if he
is contacted by any government agency with reference to the business of the
Company or any of its affiliates, or by any person contemplating or maintaining
any claim or legal action against the Company or any of its affiliates, or by
any agent or attorney of such person.

 

2.             Term. This Agreement shall be effective as of the
Effective Date and shall continue through the six month anniversary of the
Effective Date. The Consultant’s period of services under this Agreement is
hereinafter referred to as the “Consulting Term.”

 

3.             Compensation. During the Consulting Term, the
Company shall pay to the Consultant for his services hereunder a monthly
consulting fee in the amount of $23,830, with the first monthly payment due 7
days after the Effective Date, and subsequent monthly payments due every 30
days thereafter until the end of the Consulting Term. During the Consulting
Term, consistent with past practice, (a) the Company shall provide the
Consultant with reasonable access to communications equipment and services
(i.e. a blackberry and personal computer connected to the Company’s network),
and (b) so long as she is employed by the Company, Carol Maunakea shall be
reasonably available, consistent with her other duties to 

 

 

serve as the Consultant’s assistant. The Consultant
shall be reimbursed in accordance with the Company’s applicable policies and
procedures for any ordinary, necessary and reasonable business expenses which
are approved in advance by the CEO. The Company shall not be obligated to
provide the Consultant with any retirement, welfare, or other fringe benefits
under this Agreement.

 

4.             Amendments. This Agreement may not be amended or
changed except by the written agreement of the Company and the Consultant.

 

5.             Not an Employment Contract. This Agreement is not
a contract of employment between the Consultant and the Company, and the
Consultant and the Company hereby agree and acknowledge that this Agreement
does not impose any obligation on the Company to offer employment to the
Consultant at any time.

 

6.             Governing Law. This Agreement, and any dispute
arising under or relating to any provision of this Agreement, shall be governed
by and construed in accordance with the laws of the state of Delaware.

 

7.             Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to
be an original, and such counterparts together shall constitute and be one and
the same instrument.

 

8.             Relationship of the Parties. The Company and the
Consultant agree that under this Agreement, the Consultant is an independent
contractor who has contracted with the Company. The Company shall not withhold
or in any way be responsible for the payment of any federal, state, or local
income or occupational taxes, FICA taxes, FUTA, unemployment compensation, or
workers’ compensation contributions, vacation pay, sick leave, retirement
benefits, or any other fringe benefits or payments for or on behalf of the
Consultant. All such payments, withholdings and benefits are the sole
responsibility of the Consultant and the Consultant hereby indemnifies and
holds the Company harmless from any and all loss, damage or liability arising
with respect to such payments, withholdings and benefits.

 

[signature page follows]

 

 

The parties hereto have
executed this Agreement as of the date and year first above written.

 

HAWAIIAN TELCOM HOLDCO,
INC.

 

 

	
  By:

  	
  /s/ Alan M.
  Oshima

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
  SVP, General
  Counsel & Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CONSULTANT

  	
   

  
	
   

  	
   

  
	
  /s/
  Michael S. Ruley

  	
   

  
	
   

  	
   

  
	
  Michael S. Ruley

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