Document:

Exhibit 10.2

 

EARTHLINK, INC.

 

SEVERANCE PLAN

 

AND SUMMARY PLAN DESCRIPTION

 

(Effective as of January 1, 2012)

 

 

EarthLink, Inc.
 Severance Plan
 (Effective as of January 1, 2012)

 

EarthLink, Inc. (the “Company”) hereby adopts the EarthLink, Inc. Severance Plan (the “Plan”), effective as of January 1, 2012, to provide eligible employees with certain severance pay and benefits in the event their employment is terminated by the Company and its Affiliates due to a reduction in the workforce, layoff, sale or discontinuance of a business operation or other job or position elimination caused by a lack of work, as described herein.  For purposes of the Plan, “Affiliate” means any entity that is part of a controlled group of corporations or is under a common control with the Company within the meaning of Sections 1563(a), 414(b) or 414(c) of the Internal Revenue Code of 1986, as amended (the “Code”), except that, in making any such determination, fifty percent (50%) shall be substituted for eighty percent (80%) each place it appears under such Code Sections and related regulations.  The Company and its Affiliates have the responsibility of maintaining business practices that are within the bounds of local, state and federal laws, applying the same practices consistently to all employees and treating individuals with dignity, respect, fairness and compassion.

 

The Plan is an unfunded welfare benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and a severance pay plan within the meaning of United States Department of Labor Regulations Section 2510.3-2(b).  This document serves as both the Plan document and the summary plan description for the Plan.  The Plan supersedes any prior Company severance plans, programs or policies covering employees eligible under this Plan, both formal and informal, including without limitation the Company’s (i) Position Elimination and Severance Plan for Eligible Employees Continuously Employed Since December 31, 2007, (ii) Position Elimination and Severance Plan for Eligible Employees Whose Current Employment Started on or after January 1, 2008, and (iii) Executives’ Position Elimination and Severance Plan, other than those severance plans, programs or policies the terms of which specifically provide that they cannot be superseded or terminated.

 

Eligible Employees

 

The Plan applies to regular employees of the Company and its Affiliates (as denoted on the payroll records of the Company and its Affiliates) whose employment with the Company and its Affiliates is terminated by the Company and its Affiliates due to a reduction in the workforce, layoff, sale or discontinuance of a business operation or other job or position elimination caused by lack of work, except as otherwise provided herein.  The Company, as the Administrator of the Plan, shall in its sole discretion determine in all cases whether an employee is eligible for severance pay and benefits under the Plan.  If an eligible employee regularly works less than forty (40) hours per week, severance pay and benefits under the Plan will be prorated according to the employee’s established workweek.  Independent contractors, consultants, individuals performing services through an independent contractor, consulting or similar agreement, leased employees and temporary or seasonal employees are not eligible to participate under the Plan.

 

 

Conditions of Ineligibility

 

An otherwise eligible employee shall not be eligible for severance pay and benefits under the Plan if:

 

·              the employee ceases to be an eligible employee as described above, other than as a result of a reduction in the workforce, layoff, sale or discontinuance of a business operation or other job or position elimination caused by lack of work;

 

·              the employee is involuntarily terminated for reasons other than a reduction in the workforce, layoff, sale or discontinuance of a business operation or other job or position elimination caused by lack of work, including without limitation any involuntary termination because of performance issues or any other employer-initiated termination or discharge of an at-will employee other than as the result of a reduction in work force, layoff, sale or discontinuance of a business operation or other job or position elimination caused by lack of work;

 

·              the employee retires, resigns, quits, dies, terminates employment on account of a disability or abandons his or her position;

 

·              the employee accepts another position with the Company or with an Affiliate of the Company;

 

·              the employee is offered another position with the Company or an Affiliate of the Company, with the same or a higher level of salary or wages, at the employee’s current location of employment or at another location within fifty (50) miles of the employee’s current location of employment, whether or not employee accepts such offer;

 

·              the employee is eligible for sick or short-term disability benefits or workers’ compensation;

 

·              the employee is eligible for long-term disability benefits and/or Social Security benefits;

 

·              the employee is on an approved leave of absence;

 

·              the employee becomes eligible under the Plan as the direct result of the acquisition by the Company or any Affiliate of the business, assets or ownership interest of a non-Affiliate entity (regardless of the structure or method of such acquisition) and such employee is receiving severance pay or other similar amounts under any employment or other agreement, policy, plan, program or arrangement covering such employee’s previous employment with such non-Affiliate entity;

 

·              in case of a sale of a business operation, or part of a business operation, the employee is offered employment with the purchaser with the same or higher level salary or wages at employee’s current location or at another location within fifty (50)

 

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miles of employee’s current location of employment, whether or not employee accepts such offer;

 

·              the employee terminates employment due to his or her employer outsourcing that employee’s job or function if the employee is offered employment with the vendor that will continue to provide the job or function that employee previously provided, with the same or higher level salary or wages, at employee’s current location or at another location within fifty (50) miles of employee’s current location of employment, whether or not employee accepts such offer;

 

·              the termination of the employee’s employment entitles the employee to benefits under any employment agreement, severance agreement or other termination or separation agreement between the employee and the Company or an Affiliate;

 

·              the termination of the employee’s employment entitles the employee to benefits under the EarthLink, Inc. Change-in-Control Accelerated Vesting and Severance Plan, the EarthLink Network, Inc. Key Employee Compensation Continuation Plan, the EarthLink Accelerated Vesting and Compensation Continuation Plan, or any other similar severance or compensation continuation plan of the Company, its Affiliates or any of their predecessors; or

 

·              the Plan is terminated prior to the employee’s right to the severance pay and benefits becoming vested hereunder.

 

Termination of Employment

 

From time to time, individual Business Divisions within the Company or an Affiliate will identify an employee whose employment will be terminated, and will provide this information to Human Resources (“HR”).

 

The Business Divisions will provide HR with the reasons for the termination of employee’s employment.  HR will document the business reasons for the termination of employment.  The Company is committed to the practice of non-discrimination.

 

Termination Categories

 

When the eligible employee’s employment is terminated, there are four potential scenarios for the eligible employee.

 

I.                                         The eligible employee’s current employment is to be terminated due to one or more of the reasons covered by this Plan and the employee is offered another position with the Company or an Affiliate with the same or a higher level salary or wages at the employee’s current location of employment or at another location within fifty (50) miles of the employee’s current location of employment.  If the employee accepts the new position, the employee’s employment relationship with the Company or an Affiliate continues.  If the employee declines the position offered, the employee will not be entitled to any severance pay or benefits under the Plan.

 

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II.                                     The eligible employee’s current employment is to be terminated for one or more of the reasons covered by this Plan, and the employee is offered another position with the Company or an Affiliate with lower salary or wages at the same or another location of employment.  The employee will have the option of accepting the new position or taking the severance package.  If the employee accepts the new position, the employee’s employment relationship with the Company or an Affiliate continues.  If the employee declines the offered position, the employee will be given the severance package as stated below.

 

III.                                 The eligible employee’s current employment is to be terminated for one or more of the reasons covered by this Plan, and the employee is offered another position with the Company or an Affiliate with the same or a higher salary or wages at another location that is more than fifty (50) miles from the employee’s current location of employment.  The employee will have the option of accepting the new position or taking the severance package.  If the employee accepts the new position, the employee’s employment relationship with the Company or an Affiliate continues.  If the new position entitles the employee to relocation benefits under the Company’s Corporate Relocation Policy, the employee will be offered the Corporate Relocation Package.  The expense of the relocation then will be paid by the employee’s new department.  If the employee declines the offered position, the employee will be given the severance package as stated below.

 

IV.                                 The eligible employee’s current employment is to be terminated for one or more of the reasons covered by this Plan, and no other position is offered.  In this case, the employee will be given the severance package as stated below.

 

Severance Pay and Benefits

 

In exchange for providing the Company and its Affiliates with an enforceable Waiver and Release Agreement in a form acceptable to the Company, and for not later revoking that Waiver and Release Agreement, each eligible employee shall be entitled to receive the severance pay and benefits stated below, except that the severance pay and benefits described below will be prorated for those eligible employees who work a regular schedule of less than forty (40) hours per week.

 

I.                                         Eligible Employees in Executive Vice President or Executive Officer Positions.  Eligible employees who are in Executive Vice President or Executive Officer positions will receive, after any applicable notice period, the following severance pay and benefits:

 

·              Twelve (12) months base salary paid in a lump sum as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests.  Base salary excludes overtime, incentive compensation, bonuses, and any other forms of compensation over and above the employee’s base salary rate.

 

·              For employees eligible and participating in the Company’s medical, dental and vision plans, the Company will pay to the eligible employees an amount equal to the

 

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employer portion of the employees’ premiums for those plans, plus the two percent COBRA administration fee, for twelve (12) months of COBRA benefits coverage.  The Company will make this payment in a single lump sum as soon as administratively practicable following termination of the employee’s employment but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests.  The Company shall withhold or obtain payment for applicable income and employment taxes from any payments for COBRA benefits.  Such ex-employees may continue COBRA for the COBRA eligibility period by paying 100 percent of the COBRA premium.

 

·              Twelve (12) months of executive-level outplacement services provided by a vendor selected by the Company with a value of up to $20,000, beginning immediately following the termination of employee’s employment with the Company and all Affiliates.  No cash payment is available in lieu of the outplacement services.

 

·              Employees given notice that their positions are being eliminated after the first quarter of any calendar year will be eligible for the pro-rata bonus, if any, otherwise payable under the applicable Company bonus plan in which they participated for that year, based on regular earnings for that year and actual business results, payable at the normal time of the bonus payout; provided, however, that such pro-rata bonus will be paid no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to such pro-rata bonus vests.  Severance pay is not considered regular earnings.  Employees given notice that their positions are being eliminated during the first quarter of any calendar year will not be eligible for any bonus otherwise payable under the applicable Company bonus plan in which they participated for that year.

 

II.                                     Eligible Employees in Senior Vice President Positions.  Eligible employees in Senior Vice President positions (who are not also in Executive Officer positions) will receive, after any applicable notice period, the following severance pay and benefits:

 

·              Nine (9) months base salary paid in a lump sum as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests.  Base salary excludes overtime, incentive compensation, bonuses, and any other forms of compensation over and above the employee’s base salary rate.

 

·              For employees eligible and participating in the Company’s medical, dental, and vision plans, the Company will pay to eligible employees an amount equal to the employer portion of active employees’ premiums for those plans, plus the two percent COBRA administration fee, for nine (9) months of COBRA benefits coverage.  The Company will make this payment in a single lump sum as soon as administratively practicable following termination of the employee’s employment but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests.  The Company shall withhold or obtain payment for applicable income and employment taxes from any payments for COBRA benefits.

 

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Such ex-employees may continue COBRA for the COBRA eligibility period by paying 100 percent of the COBRA premium.

 

·              Nine (9) months of outplacement services provided by a vendor selected by the Company, with a value of up to $15,000, beginning immediately following the termination of employee’s employment with the Company and all Affiliates.  No cash payment is available in lieu of the outplacement services.

 

·              Employees given notice that their positions are being eliminated after the first quarter of any calendar year will be paid the pro-rata bonus, if any, otherwise payable under the applicable Company bonus plan in which they participated for that year, based on regular earnings for that year and actual business results, payable at the normal time of the bonus payout; provided, however, that such pro-rata bonus will be paid no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to such pro-rata bonus vests.  Severance pay is not considered regular earnings.  Employees given notice that their positions are being eliminated during the first quarter of any calendar year will not be eligible for any bonus otherwise payable under the applicable Company bonus plan in which they participated for that year.

 

III.                                 Eligible Employees in Vice President Positions.  Eligible employees who are in Vice President positions will receive, after any applicable notice period, the following severance pay and benefits:

 

·              Six (6) months base salary paid in a lump sum as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests.  Base salary excludes overtime, incentive compensation, bonuses, and any other forms of compensation over and above the employee’s base salary rate.

 

·              For employees eligible and participating in the Company’s medical, dental and vision plans, the Company will pay to the eligible employees an amount equal to the employer portion of the employees’ premiums for those plans, plus the two percent COBRA administration fee, for six (6) months of COBRA benefits coverage.  The Company will make this payment in a single lump sum as soon as administratively practicable following termination of the employee’s employment but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests.  The Company shall withhold or obtain payment for applicable income and employment taxes from any payments for COBRA benefits.  Such ex-employees may continue COBRA for the COBRA eligibility period by paying 100 percent of the COBRA premium.

 

·              Six (6) months of executive-level outplacement services provided by a vendor selected by the Company with a value of up to $12,000, beginning immediately following the termination of employee’s employment with the Company and all Affiliates.  No cash payment is available in lieu of the outplacement services.

 

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·              Employees given notice that their positions are being eliminated after the first quarter of any calendar year will be eligible for the pro-rata bonus, if any, otherwise payable under the applicable Company bonus plan in which they participated for that year, based on regular earnings for that year and actual business results, payable at the normal time of the bonus payout; provided, however, that such pro-rata bonus will be paid no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to such pro-rata bonus vests.  Severance pay is not considered regular earnings.  Employees given notice that their positions are being eliminated during the first quarter of any calendar year will not be eligible for any bonus otherwise payable under the applicable Company bonus plan in which they participated for that year.

 

IV.                                 Eligible Employees Who Are Not in Executive Vice President, Executive Officer, Senior Vice President or Vice President Positions.  Eligible employees who are not in Executive Vice President, Executive Officer, Senior Vice President or Vice President positions will receive, after any applicable notice period, the following severance pay and benefits, except as otherwise set forth below:

 

·              The weeks of base salary set forth below paid in either (i) equal installments in accordance with the Company’s normal payroll procedures (but no less frequently than monthly) beginning as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than thirty (30) days following the effective date of the employee’s Waiver and Release Agreement described below or (ii) a lump sum as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests, in either case as the Company in its sole discretion shall determine.  Similarly-situated employees need not be treated the same with respect to how their severance will be paid. Base salary excludes overtime, incentive compensation, bonuses, and any other forms of compensation over and above the employee’s base salary rate.

 

	
Employee Category
    	
 
    	
Weeks of Base Salary
    
	
 
    	
 
    	
 
    
	
Directors
    	
 
    	
Eight   (8) weeks (minimum) plus one (1) week for each full year of   continuous employment with the Company and its Affiliates from the employee’s   most recent date of hire; with a maximum of sixteen (16) weeks.
    
	
 
    	
 
    	
 
    
	
Salaried Employees (other than Directors)
    	
 
    	
Six   (6) weeks (minimum) plus one (1) week for each full year of   continuous employment with the Company and its Affiliates from the employee’s   most recent date of hire; with a maximum of twelve (12) weeks.
    
	
 
    	
 
    	
 
    
	
Hourly Employees
    	
 
    	
Four   (4) weeks (minimum) plus one (1) week
    

 

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for   each full year of continuous employment with the Company and its Affiliates   from the employee’s most recent date of hire; with a maximum of eight   (8) weeks.
    

 

·              For employees eligible and participating in the Company’s medical, dental and vision plans, the Company will pay to the eligible employees an amount equal to the employer portion of the employees’ premiums for those plans, plus the two percent COBRA administration fee, for the number of months of COBRA benefits coverage set forth below.  The Company will make this payment in either (i) equal installments in accordance with the Company’s normal payroll procedures (but no less frequently than monthly) beginning as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than thirty (30) days following the effective date of the employee’s Waiver and Release Agreement described below or (ii) a single lump sum as soon as administratively practicable following termination of the employee’s employment but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests, in either case as the Company in its sole discretion shall determine.  Similarly-situated employees need not be treated the same with respect to how their COBRA benefits will be paid. The Company shall withhold or obtain payment for applicable income and employment taxes from any payments for COBRA benefits.  Such ex-employees may continue COBRA for the COBRA eligibility period by paying 100 percent of the COBRA premium.

 

	
Employee Category
    	
 
    	
Months of COBRA
    
	
 
    	
 
    	
 
    
	
Directors
    	
 
    	
Four (4) months
    
	
 
    	
 
    	
 
    
	
Salaried Employees (other than Directors)
    	
 
    	
Two (2) months
    
	
 
    	
 
    	
 
    
	
Hourly Employees
    	
 
    	
One (1) month
    

 

·              Directors, salaried employees and hourly employees will not be entitled to receive any outplacement services under IV hereof.

 

·              Employees given notice that their positions are being eliminated after the first quarter of any calendar year will be eligible for the pro-rata bonus, if any, otherwise payable under the applicable Company bonus plan in which they participated for that year, based on regular earnings for that year and actual business results, payable at the normal time of the bonus payout; provided, however, that such pro-rata bonus will be paid no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to such pro-rata bonus vests.  Severance pay is not considered regular earnings.  Employees given notice that their positions are being eliminated during the first quarter of any calendar year will not be eligible for any bonus otherwise payable under the applicable Company bonus plan in which they participated for that year.

 

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·              Employees participating in sales commission or sales bonus plans will be paid any commissions or bonuses that have been earned prior to their termination date.  The Company will make such payments in a single lump sum as soon as administratively practicable following the termination of the employee’s employment but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to such amounts vests.

 

·              Notwithstanding the foregoing, however, in no event will the aggregate of the weeks of base salary and COBRA benefits to be paid to any eligible employee who is not in an Executive Vice President, Executive Officer, Senior Vice President or Vice President position (i) exceed two times the lesser of (a) the employee’s annual compensation for the preceding calendar year (adjusted for any increase during that year that was expected to continue indefinitely if the employee had not terminated employment) and (b) the Code Section 401(a)(17) qualified plan compensation limit for the calendar year in which the employee terminates employment (i.e., $245,000 for 2011), or (ii) be paid later than December 31 of the second calendar year following the year in which the employee terminates employment.  The Company in its sole discretion will determine what adjustments will be made to comply with the foregoing limitations.

 

V.                                     Legacy Employees.  Notwithstanding the foregoing, eligible employees who are not in Executive Vice President, Executive Officer, Senior Vice President or Vice President positions, and who have been continuously employed since December 31, 2007 and designated by the Plan Administrator as “Legacy Employees” for purposes of the Plan, will receive, after any applicable notice period, no less than the following severance pay and benefits, except as otherwise set forth below:

 

·              The weeks of base salary set forth below paid in either (i) equal installments in accordance with the Company’s normal payroll procedures (but no less frequently than monthly) beginning as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than thirty (30) days following the effective date of the employee’s Waiver and Release Agreement described below or (ii) a lump sum as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests, in either case as the Company in its sole discretion shall determine.  Similarly-situated employees need not be treated the same with respect to how their severance will be paid.  Base salary excludes overtime, incentive compensation, bonuses, and any other forms of compensation over and above the employee’s base salary rate.

 

	
Employee Category
    	
 
    	
Weeks of   Base Salary
    
	
 
    	
 
    	
 
    
	
Employees   Earning Annual Base Salary or Wages of $75,000 or more
    	
 
    	
Sixteen   (16) weeks (minimum) plus one (1) week for each full year of continuous   employment with the Company and its Affiliates from the employee’s most   recent
    

 

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date   of hire; with a maximum of twenty-four (24) weeks.
    
	
 
    	
 
    	
 
    
	
Employees   Earning Annual Base Salary or Wages of $35,000 to $74,999
    	
 
    	
Eight   (8) weeks (minimum) plus one (1) week for each full year of continuous   employment with the Company and its Affiliates from the employee’s most   recent date of hire; with a maximum of sixteen (16) weeks.
    
	
 
    	
 
    	
 
    
	
Employees   Earning Annual Base Salary or Wages of less than $35,000
    	
 
    	
Four   (4) weeks (minimum) plus one (1) week for each full year of continuous   employment with the Company and its Affiliates from the employee’s most   recent date of hire; with a maximum of twelve (12) weeks.
    

 

·              For employees eligible and participating in the Company’s medical, dental and vision plans, the Company will pay to the eligible employees an amount equal to the employer portion of the employees’ premiums for those plans, plus the two percent COBRA administration fee, for the number of months of COBRA benefits coverage set forth below.  The Company will make this payment in either (i) equal installments in accordance with the Company’s normal payroll procedures (but no less frequently than monthly) beginning as soon as administratively practicable following the termination of employee’s employment with the Company and all Affiliates but no later than thirty (30) days following the effective date of the employee’s Waiver and Release Agreement described below or (ii) a single lump sum as soon as administratively practicable following termination of the employee’s employment but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to the payment vests, in either case as the Company in its sole discretion shall determine.  Similarly-situated employees need not be treated the same with respect to how their COBRA benefits will be paid.  The Company shall withhold or obtain payment for applicable income and employment taxes from any payments for COBRA benefits.  Such ex-employees may continue COBRA for the COBRA eligibility period by paying 100 percent of the COBRA premium.

 

	
Employee   Category
    	
 
    	
Months of COBRA
    
	
 
    	
 
    	
 
    
	
Employees Earning Annual   Base Salary or Wages of $75,000 or more
    	
 
    	
Four (4) months
    
	
 
    	
 
    	
 
    
	
Employees Earning Annual   Base Salary or Wages of $35,000 to $74,999
    	
 
    	
Two (2) months
    
	
 
    	
 
    	
 
    
	
Employees Earning Annual   Base Salary or Wages of less than $35,000
    	
 
    	
One (1) month
    

 

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·              One (1) month of outplacement services for eligible employees earning annual base salary or wages of $75,000 or more, provided by a vendor selected by the Company with a value of up to $2,400, beginning immediately following the termination of employee’s employment with the Company and all Affiliates.  No cash payment is available in lieu of the outplacement services.  No outplacement services will be provided for eligible employees earning annual base salary or wages of less than $75,000.

 

·              Employees given notice that their positions are being eliminated after the first quarter of any calendar year will be eligible for the pro-rata bonus, if any, otherwise payable under the applicable Company bonus plan in which they participated for that year, based on regular earnings for that year and actual business results, payable at the normal time of the bonus payout; provided, however, that such pro-rata bonus will be paid no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to such pro-rata bonus vests.  Severance pay is not considered regular earnings.  Employees given notice that their positions are being eliminated during the first quarter of any calendar year will not be eligible for any bonus otherwise payable under the applicable Company bonus plan in which they participated for that year.

 

·              Employees participating in sales commission or sales bonus plans will be paid any commissions or bonuses that have been earned prior to their termination date.  The Company will make such payments in a single lump sum as soon as administratively practical following the termination of the employee’s employment but no later than the 15th day of the third month of the calendar year following the calendar year in which the employee’s right to such amounts vests.

 

·              Notwithstanding the foregoing, however, in no event will the aggregate of the weeks of base salary and COBRA benefits to be paid to any eligible employee who is not in an Executive Vice President, Executive Officer, Senior Vice President or Vice President position and who has been continuously employed since December 31, 2007 and designated by the Plan Administrator as a “Legacy Employee” for purposes of the Plan, (i) exceed two times the lesser of (a) the employee’s annual compensation for the preceding calendar year (adjusted for any increase during that year that was expected to continue indefinitely if the employee had not terminated employment) and (b) the Code Section 401(a)(17) qualified plan compensation limit for the calendar year in which the employee terminates employment (i.e., $245,000 for 2011), or (ii) be paid later than December 31 of the second calendar year following the year in which the employee terminates employment.  The Company in its sole discretion will determine what adjustments will be made to comply with the foregoing limitations.

 

VI.                                 Reduction in Severance of All Eligible Employees.  Notwithstanding any other provision of this Plan, the aggregate severance pay that an eligible employee might otherwise receive under I, II, III, IV or V above will be reduced, on a dollar-for-dollar basis, for any severance pay or compensation continuation the employee previously received under any severance or compensation continuation plan of the Company or any of its Affiliates, including, without limitation, the Company’s (i) Executives’ Position Elimination and

 

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Severance Plan, (ii) Position and Elimination and Severance Plan for Eligible Employees Whose Current Employment Started on or after January 1, 2008, (iii) Change-in-Control Accelerated Vesting and Severance Plan, (iv) Key Employee Compensation Continuation Plan, (v) Accelerated Vesting and Compensation Continuation Plan, (vi) Position Elimination and Severance Plan for Eligible Employees Continuously Employed Since December 31, 2007, or any other similar severance or compensation continuation Plan of the Company or any of its Affiliates or any of their predecessors or any employment, severance, compensation continuation, separation or other termination agreement between the employee and the Company or an Affiliate, if the eligible employee was rehired by the Company or an Affiliate within one (1) year of the employee’s termination of employment with respect to which the employee received such severance or compensation continuation; it being the intent of this Plan not to provide severance pay to an otherwise eligible employee to the extent the eligible employee previously received severance pay or compensation continuation from the Company or any of its Affiliates in connection with the employee’s prior termination of employment and the employee was then rehired within one (1) year of such prior termination of employment.  The foregoing reduction shall be applied to the aggregate severance pay that otherwise would be paid to such employee after the application of the maximum limit of severance that might be paid to the employee.

 

The consideration for the voluntary Waiver and Release Agreement shall be the severance pay and benefits provided under this Plan that the eligible employee would otherwise not be eligible to receive.

 

The Company may, in its sole discretion, enhance the amount of severance pay that an eligible employee is entitled to receive under this Plan in addition to the amount of severance described above or make available additional or other forms of severance benefits hereunder.  Furthermore, the Company or an Affiliate may, in its sole discretion, award severance pay to an employee who is not otherwise eligible to receive it under this Plan provided the employee is not otherwise entitled to any severance or similar benefits under any employment agreement, severance agreement or other termination or severance agreement or under any other severance or compensation continuation plan of the Company or any of its Affiliates.  To the extent the Company in its sole discretion enhances the amount of severance pay or provides any additional forms of severance benefits under this Plan, such enhanced severance pay and additional forms of severance benefits shall be provided under the Plan and pursuant to the terms and other conditions hereof.  Notwithstanding the foregoing, however, no other severance or other benefits provided an employee shall be deemed enhanced severance pay or additional or other forms of severance benefits provided under this Plan unless such other arrangements specifically reference that they are being provided under this Plan.  All legally required federal, state and local withholding taxes and any sums owing to the Company shall be deducted from severance pay and benefits due under this Plan.

 

Delay in Payment for Specified Employees

 

Notwithstanding any other provision of this Plan, if an otherwise eligible employee is a Specified Employee (as defined below), and if the severance package payable to such Specified Employee hereunder is not otherwise exempt from Section 409A of the Code, then, to the extent necessary

 

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to comply with Section 409A of the Code, no payments may be made hereunder (including, if necessary, any payments for COBRA benefits) before the date which is six months after the Specified Employee’s separation from service within the meaning of Section 409A or, if earlier, the date of death of the Specified Employee.  Because the amounts to be paid pursuant to this Plan should satisfy one or more exceptions to treatment as nonqualified deferred compensation subject to Code Section 409A, these Specified Employee six-month delay provisions should only be applicable if it is subsequently determined that the amounts to be paid pursuant to this Plan are not exempt from Section 409A.

 

For purposes of this Plan, “Specified Employee” means an employee who is (i) an officer of the Company having annual compensation greater than $135,000 (with certain adjustments for inflation after 2005), (ii) a five-percent owner of the Company or (iii) a one-percent owner of the Company having annual compensation greater than $150,000.  For purposes of this Section, no more than 50 employees (or, if lesser, the greater of three or 10 percent of the employees) shall be treated as officers.  Employees who (i) normally work less than 17 1/2 hours per week, (ii) normally work not more than 6 months during any year, (iii) have not attained age 21 or (iv) are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the Company (except as otherwise provided in regulations issued under the Code) shall be excluded for purposes of determining the number of officers.  For purposes of this Section, the term “five- percent owner” (“one-percent owner”) means any person who owns more than five percent (One percent) of the outstanding stock of the Company or stock possessing more than five percent (one percent) of the total combined voting power of all stock of the Company.  For purposes of determining ownership, the attribution rules of Section 318 of the Code shall be applied by substituting “five percent” for “50 percent” in Section 318(a)(2) and the rules of Sections 414(b), 414(c) and 414(m) of the Code shall not apply.  For purposes of this Section, the term “compensation” has the meaning given such term by Section 414(q)(4) of the Code.  The determination of whether the employee is a Specified Employee will be based on a December 31 identification date such that if the employee satisfies the above definition of Specified Employee at any time during the 12-month period ending on December 31, he will be treated as a Specified Employee if he has a termination of employment during the 12-month period beginning on the first day of the fourth month following the identification date.  This definition is intended to comply with the specified employee rules of Section 409A(a)(2)(B)(i) of the Code and shall be interpreted accordingly.

 

Compliance with Code Section 409A

 

This Plan and all payments to be made or benefits to be provided hereunder are intended to be exempt from the applicable requirements of Section 409A of the Code and shall be construed and interpreted in accordance therewith.  All rights to the payments and benefits under the Plan shall be treated as rights to receive a series of separate payments and benefits to the fullest extent permitted by Section 409A of the Code.  The Company may at any time amend, suspend or terminate this Plan, or any payments to be made hereunder, as necessary to maintain such exemption or be in compliance with Section 409A.  Notwithstanding the preceding, the Company and its Affiliates shall not be liable to any employee or any other person if the Internal Revenue Service or any court or other authority having jurisdiction over such matter determines

 

13

 

for any reason that any amount under this Plan is subject to taxes, penalties or interest as a result of failing to comply with Code Section 409A.

 

Reemployment and Death

 

In the event a former employee receiving severance pay or benefits under the Plan is subsequently rehired by the Company or an Affiliate, the employee shall not be required to repay any severance pay or benefits previously received under the Plan and shall still be entitled to receive the payment of any pro-rata bonus payable under the Plan; provided, however, that payment of such prorated bonus under the Plan shall be reduced (but not below zero) to the extent the rehired employee is entitled to receive all or any portion of such bonus after rehire under the applicable Company bonus plan in which such employee previously participated or the hired employee is entitled to receive all or any portion of a similar bonus alternative by the Company or an Affiliate; there being no intent to provide duplicate payments to such employee with respect to such bonus.  However, such employee will not be entitled to receive under this Plan any severance pay or benefits not yet paid.  In the event a former employee receiving severance pay or benefits under the Plan is offered and rejects another position with the Company or an Affiliate, all unpaid severance pay and benefits shall continue.  In the event a former employee receiving severance pay or benefits under the Plan dies, all unpaid severance pay and benefits shall continue and shall be paid to the employee’s designated beneficiary or estate.

 

Waiver and Release Agreement

 

In order to receive the severance pay and benefits available under the Plan, an eligible employee must submit a signed Waiver and Release Agreement, in a form acceptable to the Company, to the Plan Administrator on or within 21 days (45 days in the event of a group termination) after the employee’s date of termination of employment, but not prior to the date of termination of employment.

 

An eligible employee may revoke a signed Waiver and Release Agreement within seven (7) days of signing the Waiver and Release Agreement.  Any such revocation must be made in writing and must be received by the Plan Administrator within such seven (7) day period.  An eligible employee who does not submit a signed Waiver and Release Agreement or, having submitted one, timely revokes the Waiver and Release Agreement shall not be eligible to receive severance pay or benefits under the Plan.  An eligible employee who timely submits a signed Waiver and Release Agreement and who does not exercise his or her right of revocation shall be eligible to receive severance pay and benefits under the Plan only after the applicable period for revoking such Waiver and Release Agreement has expired.

 

Eligible employees are advised to contact their personal attorneys at their own expense to review the Waiver and Release Agreement if they so desire.

 

No Duplicate Payments

 

The severance pay and benefits available under the Plan are the maximum to which an employee is entitled from the Company and its Affiliates in the event of involuntary termination of employment.  The Company or an Affiliate and an eligible employee may be parties to other

 

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agreements, policies, plans, programs or arrangements relating to the employee’s employment which do not specifically disqualify the employee from participation in this Plan.  In such an event, this Plan shall be construed and interpreted so that severance pay and benefits are provided under this Plan only to the extent that similar amounts of severance and benefits are not paid or provided to such employee under any other agreements, policies, plans, programs or arrangements; it being the intent of this Plan not to provide to the employee any duplicative payments of severance pay or other benefits.  The Company or Affiliate, as applicable, in its sole discretion, shall determine whether payments or other benefits to the employee under any other such agreements, policies, plans, programs or arrangements shall constitute duplicative payments of severance pay or benefits hereunder.  In the event the Company or Affiliate determines that payments or other benefits to the employee under any other such agreements, policies, plans, programs or arrangements constitute duplicative payments, the severance pay or benefits otherwise payable under this Plan shall be reduced to the extent of such duplicative payments.

 

To the extent that a federal, state or local law requires the Company or Affiliate to provide notice and/or make a payment to an eligible employee because of involuntary termination of employment, or in accordance with a plant closing law, such as the WARN Act, the severance pay and benefits available under the Plan for periods for which the employee is not required to report to work shall be reduced by the amount of any such mandated payment.

 

Confidentiality

 

The terms and conditions of this Plan and the employees’ severance pay and benefits under the Plan shall remain strictly confidential.  Employees may not discuss or disclose any terms of this Plan or its benefits with anyone except their attorneys, accountants and immediate family members who shall be instructed to maintain the confidentiality agreed to under this Plan, except as may be required by law.  In the event employee or employee’s attorneys, accountants or immediate family members breach the terms of this provision, employee shall forfeit any and all rights to receive the severance pay and benefits under the Plan and shall be required to return the aggregate amount of severance pay and benefits received previously under the Plan.

 

Confidential Information/Cooperation

 

In order to receive severance pay and benefits under the Plan, eligible employees shall be required (i) to confirm in the Waiver and Release Agreement the terms of their Employee Confidentiality and Invention Assignment Agreement or other employee confidentiality agreement(s) with the Company or Affiliate and, at the Company’s or Affiliate’s discretion, and (ii) to agree in the Waiver and Release Agreement to such other terms relating to the protection and return of the Company’s or Affiliate’s confidential and proprietary business information and other Company or Affiliate property as the Company or Affiliate deems appropriate.

 

After an employee’s termination of employment with the Company and its Affiliates, he or she shall, with reasonable notice, furnish information as may be in his or her possession, control or knowledge and to otherwise cooperate with and assist the Company or Affiliate as reasonably may be requested in connection with any claims or legal actions in which the Company or Affiliate is or may become a party, or in any matter in which he or she was involved or of which he or she had knowledge while employed by the Company or Affiliate.  No employee shall be

 

15

 

entitled to any compensation for such cooperation except for reimbursement by the Company or Affiliate for his or her actual out-of-pocket expenses or costs incurred with this cooperation as soon as administratively practicable after the expenses are incurred.

 

Return of Company Property

 

Upon termination of employment, employees shall return to the Company or Affiliate all property of the Company or Affiliate in their possession, custody or control, including keys, credit cards, identification cards, laptop computers, Personal Digital Assistants (PDAs), car and mobile telephones, pagers, parking stickers, correspondence, notes, memoranda, reports, manuals, notebooks, drawings, sketches, blueprints, formulae, prototypes, models, computer disks, computer printouts, information stored electronically on computers, and the trade secrets and other confidential information of the Company or Affiliate.  Employees shall not make any copies, nor shall they retain any originals or copies of such property.

 

Plan Administration

 

The Company shall act as the Plan Administrator of the Plan (or shall have the power to appoint a Plan Administrator of the Plan) and the “named fiduciary” within the meaning of such terms as defined in ERISA.  It shall be the principal duty of the Plan Administrator to see that the Plan is carried out, in accordance with its terms, and operated uniformly for similarly situated individuals.

 

Authority of Plan Administrator

 

The Plan Administrator shall have sole discretionary power to administer the Plan, subject to applicable requirements of law.  The Plan Administrator shall have the authority to interpret the Plan and to determine all questions arising under or in connection with the Plan, including all questions of fact and questions of eligibility to participate and obtain benefits under the Plan.  The Plan Administrator shall pay benefits under the Plan, in accordance with its terms, but only if it determines in its sole discretion that the claimant is entitled to them.

 

The Plan Administrator may delegate to other persons responsibilities for performing certain of the duties of the Plan Administrator under the Plan and may seek expert advice as the Plan Administrator deems reasonably necessary with respect to the Plan.  The Plan Administrator shall be entitled to rely upon the information and advice furnished by such persons and experts, unless actually knowing such information and advice to be inaccurate or unlawful.

 

All actions and determinations of the Plan Administrator shall be final, binding and conclusive on all parties.  Neither the Plan Administrator nor anyone acting on its behalf shall be liable in any manner for any action taken or determination made under the Plan in good faith.  Nevertheless, as permitted by law, the Company will indemnify and save the Plan Administrator’s designees harmless against expenses, claims and liabilities arising out of his or their actions on behalf of the Company in connection with the administration of the Plan, except expenses, claims and liabilities arising out of such person’s own gross negligence or bad faith or for which applicable law does not permit such indemnification.

 

16

 

Claim Procedures

 

Employees do not need to complete a claim for benefits to obtain benefits under the Plan.  However, employees who dispute the amount of, or their entitlement to, Plan benefits must file a claim with the Plan Administrator to obtain Plan benefits.  Any claim by an employee who disputes the amount of, or his or her entitlement to, Plan benefits must be filed in writing within ninety (90) days of the event that the employee is asserting constitutes an entitlement to such Plan benefits.  Failure by the employee to submit such claim within the ninety (90)-day period shall bar the employee from any claim for benefits under the Plan as a result of the occurrence of such event.

 

Claims for benefits shall be filed in writing with the Plan Administrator.  Written notice of the decision on such claim shall be furnished to the claimant within ninety (90) days of receipt of such claim unless special circumstances require an extension of time for processing the claim.  If the Plan Administrator needs an extension of time to process a claim, written notice will be delivered to the claimant before the end of the initial ninety (90) day period.  The notice of extension will include a statement of the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render its final decision.  However, that extension may not exceed ninety (90) days after the end of the initial period.  If the Plan Administrator rejects a claim for failure to furnish necessary material or information, the written notice to the claimant will explain what more is needed and why, and will tell the claimant that the claimant may refile a proper claim.

 

The Plan Administrator shall provide payment for the claim only if the Plan Administrator determines, in its sole discretion, that the claimant is entitled to the claimed benefit.

 

If any part of a claim for benefits under this Plan is denied, the Plan Administrator will provide the claimant with a written notice stating (i) the specific reason or reasons for the denial; (ii) the specific reference to pertinent Plan provisions on which the denial was based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) appropriate information as to the steps to be taken if the claimant wishes to submit a claim for review, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

 

The full value of any payment made according to the Plan satisfies that much of the claim and all related claims under the Plan.

 

Appeal Procedures

 

If a claim is denied, the claimant may appeal the denial by delivering a written notice to the Plan Administrator specifying the reasons for the appeal.  That notice must be delivered within sixty (60) days after receiving the notice of denial.  The claimant may submit written comments, documents, records and other information relating to the claimant’s claim for benefits.  The claimant will be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits.  The Plan Administrator’s review will take into account all such written comments, documents,

 

17

 

records and other information the claimant submits relating to the claim, without regard to whether such information was submitted or considered initially.

 

The Plan Administrator will advise the claimant in writing of the final determination after review.  The decision on review will be written in a manner calculated to be understood by the claimant, and it will include specific reasons for the decision and specific references to the pertinent provisions of the Plan or related documents on which the decision is based.  Such written notification also will include a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits, the claimant’s right to obtain the information about such procedures and a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review.  The written decision will be rendered within sixty (60) days after the request for review is received, unless special circumstances require an extension of time for processing.  If an extension is necessary the Plan Administrator will furnish written notice of the extension to the claimant before the end of the 60-day period and indicate the special circumstances requiring the extension of time.  The extension notice will indicate the date by which the Plan Administrator expects to render a decision.  The decision will then be rendered as soon as possible, but no later than one hundred twenty (120) days after receipt of the request for review.

 

If the Plan Administrator holds regularly scheduled meetings at least quarterly, the time periods for rendering the written decision described in the preceding paragraph shall not apply and the Plan Administrator shall instead make a benefit determination no later than the date of the meeting of the Plan Administrator that immediately follows the Plan’s receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting.  In such case, a benefit determination may be made by no later than the date of the second meeting following the Plan’s receipt of the request for review.  If special circumstances require a further extension of time for processing, a benefit determination will be rendered no later than the third meeting of the Plan Administrator following the Plan’s receipt of the request for review.  If such an extension of time for review is required because of special circumstances, the Plan Administrator will provide the claimant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension.  The Plan Administrator will notify the claimant of the benefit determination as soon as possible, but not later than five days after the benefit determination is made.

 

In no event shall an employee or other claimant be entitled to challenge a decision of the Plan Administrator in court or in any other administrative proceeding unless and until these claim review and appeal procedures have been complied with and exhausted.  The claimant shall have ninety (90) days from the date of receipt of the Plan Administrator’s decision on review in which to file suit regarding a claim for benefits under the Plan.  If suit is not filed within such 90-day period, it shall be forever barred.  The decisions made hereunder shall be final and binding on participants, employees and any other party.

 

18

 

Amendment / Termination / No Vesting

 

Eligible employees do not have any vested right to severance pay and benefits under the Plan.  The Company reserves the right, in its sole discretion, to amend or terminate the Plan at any time by written action of its Chief Executive Officer, Chief Financial Officer or Chief People Officer or any of their designees or by such other action as the Company may determine.  On and after the termination of the Plan, no further awards of severance pay or other benefits shall be made or accrue under the Plan; provided, however, that any such termination of the Plan shall not materially and adversely affect any award of severance pay or other benefits made or accrued before the effective date of termination of the Plan.

 

No Representations Contrary to the Plan

 

The terms of an employee’s severance pay and benefits are as set forth in this document, which cannot be changed by the promises of any individual employee or manager.  Only the Company may change the terms of the Plan, and then only through a written amendment.  No promises (oral or written) that are contrary to the terms of the Plan and its written amendments are binding upon the Plan, the Plan Administrator or the Company or any of its Affiliates.

 

Plan Funding

 

The Plan is funded entirely through Company or Affiliate payments from its operating assets.  Severance pay and benefits are not held under any trust, are paid from the general assets of the Company or Affiliate, are unsecured, and are subject to the claims of the Company’s or Affiliate’s general creditors.  The rights of eligible employees are no greater than those of an unsecured general creditor of the Company or Affiliate, as applicable.

 

Coordination With Other Benefits

 

Severance pay and benefits under the Plan are not considered eligible earnings for the Company’s 401(k) Plan or any other benefit program.

 

Restriction Against Assignment

 

Severance pay and benefits under the Plan may not be assigned, pledged or encumbered in any manner, and any attempt to do so shall be void.  The Company and its Affiliates shall make deductions from Plan severance payments to the extent required by court-ordered garnishment, wage assignment or similar law.

 

Controlling Law

 

Except to the extent superseded by laws of the United States, the laws of the State of Delaware shall be controlling in all matters relating to the Plan.

 

Reemployment Other Than As An Employee

 

The Company or Affiliate may, in its sole discretion, determine how an employee whose employment is terminated but who is offered another position as an independent contractor or

 

19

 

consultant with the Company or with an Affiliate shall be treated for purposes of the Plan.  In that respect, the Company or Affiliate, in its sole discretion, may make all such determinations under the Plan, including without limitation, determining (i) whether a regular employee whose employment is terminated but who is rehired as an independent contractor or consultant is an eligible employee, (ii) whether an otherwise eligible employee will be eligible for severance pay if the employee is retained, or hired by the Company or an Affiliate, as an independent contractor or consultant under any agreement that provides for severance or similar benefits on termination of service, (iii) whether an employee whose employment is terminated but who is offered work by the Company or an Affiliate as an independent contractor or consultant qualifies for severance pay and benefits under any of the position elimination categories set forth under the Plan, and (iv) whether any employee whose employment is terminated is deemed to be re-employed to the extent the employee is retained, or hired by the Company or an Affiliate, as an independent contractor or consultant.  Notwithstanding the foregoing, an eligible employee will not be given a severance package under the Plan if the eligible employee continues to provide services to the Company or any of its Affiliates in a capacity other than as an eligible employee and such services are provided at an annual rate that is 50 percent or more of the services rendered, on average, during the immediately preceding thirty-six (36) months of employment (or, if employed less than thirty-six (36) months, such lesser period).

 

Temporary Leave of Absence

 

An eligible employee will not be considered to have had a termination of employment and will not be entitled to the severance pay and benefits under this Plan if the otherwise eligible employee goes on military leave, sick leave or other bona fide leave of absence (such as temporary employment by the government) for a period of less than six months, or for a longer period if the employee’s right to reemployment is provided either by statute or by contract; provided, however, if the eligible employee otherwise meets the requirements for receiving severance pay and benefits under this Plan and if the period of leave (i) ends or (ii) exceeds six months and the employee’s right to reemployment is not provided either by statute or by contract, then the eligible employee will be considered to have had a termination of employment and will be entitled to the severance pay and benefits as of the first date immediately following such time if the eligible employee otherwise would be entitled to such benefits if the eligible employee terminated employment as of such time.

 

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General Plan Information

 

Plan Name

 

EarthLink, Inc. Severance Plan

 

Plan Sponsor

 

EarthLink, Inc.

1375 Peachtree Street

Atlanta, Georgia 30309

(404) 815-0770

 

Employer Identification Number (BIN

 

58-2511877

 

Plan Number

 

508

 

Plan Type

 

The Plan is a welfare benefit plan that pays severance benefits.

 

Plan Administrator

 

Plan Administrator, EarthLink, Inc. Executives’ Position Elimination and Severance Plan

 

c/o EarthLink, Inc.

1375 Peachtree Street

Atlanta, Georgia 30309

(404) 815-0770

 

Agent for Service of Legal Process

 

c/o EarthLink, Inc.

Chief People Officer

1375 Peachtree Street

Atlanta, Georgia 30309

(404) 815-0770

 

Plan Year

 

The calendar year.

 

21

 

ERISA Rights Statement

 

As participant in this Plan, you are entitled to certain rights and protections under ERISA.  ERISA provides that all Plan participants shall be entitled to:

 

·              examine, without charge at the Plan Administrator’s office and at other specified locations, such as worksites and union halls, all documents governing the Plan, including collective bargaining agreements, and a copy of the latest Annual Report (Form 5500 series), if any, filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration (f/k/a the Pension Welfare Benefits Administration).

 

·              obtain copies of all documents governing the operation of the Plan including collective bargaining agreements and copies of the latest Annual Report (Form 5500 series), if any, and an updated summary plan description, by making a written request to the Plan Administrator and paying a reasonable charge for the copies.

 

·              receive a summary of the Plan’s annual financial report.  The Plan Administrator is required by law to furnish each participant under the Plan with a copy of this summary annual report.

 

In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the Plan.  The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in your interest and in the interest of the other Plan participants and beneficiaries.

 

No one, including your employer, your union, or any other person may fire you or otherwise discriminate against you, in any way solely to prevent you from getting a benefit or exercising your rights under ERISA.  If your claim for a benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

 

Under ERISA, there are steps you can take to enforce the above rights.  For instance, if you request a copy of Plan documents or the latest Annual Report from the Plan and do not receive them within thirty (30) days, you may file suit in federal court.  In such a case, the court may require the Plan Administrator to provide the documents and pay you up to $110 a day until you receive them, unless they were not sent because of reasons beyond the control of the Plan Administrator.

 

If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court.  If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or you may file suit in a federal court.  The court will decide who should pay court costs and legal fees.  If your suit is successful, the court may order the person you have sued to pay costs and fees.  If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

 

22

 

If you have any questions about the Plan, you should contact the Plan Administrator.  If you have any questions about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20210.  You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

 

23Exhibit 10.3

 

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) between EARTHLINK, INC., a Delaware corporation (the “Company”), and ROLLA HUFF (referred to herein as “You”) is entered into on October 19, 2011.  This Agreement amends, restates and supersedes the Amended and Restated Employment Agreement between the Company and You dated December 30, 2008 (the “Previous Agreement”).

 

RECITALS

 

1.             The Company is engaged in the business of providing integrated communication services and related value added services to individual consumers and business customers throughout the States of the United States; and

 

2.             The Company has determined that, in view of Your knowledge, expertise and experience in the integrated communication services and related value-added services industries, Your services as the Chief Executive Officer of the Company are of great value to the Company, and accordingly, the Company desires to enter into this Agreement with You on the terms set forth herein in order to continue to secure Your services; and

 

3.             You desire to continue to serve as the Chief Executive Officer of the Company on the terms set forth in this Agreement; and

 

4.             The Company and You now desire to amend and restate the Previous Agreement, as set forth herein.

 

NOW, THEREFORE, in consideration of Your employment by the Company, the above premises and the mutual agreements hereinafter set forth, You and the Company agree as follows:

 

1.             Definitions.

 

(a)           “Affiliate” means any trade or business with whom the Company would be considered a single employer under Sections 414(b) or 414(c) of the Code (except that, for purposes of determining Your Termination of Employment, the language “at least fifty percent (50%)” shall be used instead of “at least eighty percent (80%)” each place it appears in Sections 414(b) or 414(c) of the Code).

 

(b)           “Beneficial Ownership” means beneficial ownership as that term is used in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended.

 

(c)           “Business Combination” means a reorganization, merger or consolidation of the Company.

 

(d)           “Business of the Company” means the business of providing integrated communication services and related value added services to individual consumers and business customers.

 

 

(e)           “Cause” means (i) Your commission of any act of fraud or dishonesty relating to and adversely affecting the business affairs of the Company; (ii) Your conviction of any felony; or (iii) Your willful and continued failure to perform substantially Your duties owed to the Company after written notice specifying the nature of such non-performance and a reasonable opportunity to cure such non-performance.  No act or omission shall be considered “willful” unless it is done or omitted in bad faith or without reasonable belief that the action or omission was in the best interests of the Company.

 

(f)            “Change in Control Event” of the Company means the occurrence of any of the following events:

 

(1)           The accumulation in any number of related or unrelated transactions by any Person of Beneficial Ownership of more than fifty percent (50%) of the combined voting power of the Company’s Voting Stock; provided that for purposes of this subparagraph (1), a Change in Control Event will not be deemed to have occurred if the accumulation of more than fifty percent (50%) of the voting power of the Company’s Voting Stock results from any acquisition of Voting Stock (a) by the Company, (b) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, or (c) by any Person pursuant to a Business Combination that complies with clauses (a) and (b) of subparagraph (2) below; or

 

(2)           Consummation of a Business Combination, unless, immediately following that Business Combination, (a) all or substantially all of the Persons who were the beneficial owners of Voting Stock of the Company immediately prior to that Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then outstanding shares of common stock and more than fifty percent (50%) of the combined voting power of the then outstanding Voting Stock entitled to vote generally in the election of directors of the entity resulting from that Business Combination (including, without limitation, an entity that as a result of that transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to that Business Combination, of the common stock and Voting Stock of the Company, and (b) at least sixty percent (60%) of the members of the Board of Directors of the entity resulting from that Business Combination holding at least sixty percent (60%) of the voting power of such Board of Directors were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for that Business Combination and as a result of or in connection with such Business Combination, no Person has a right to dilute either of such percentages by appointing additional members to the Board of Directors or otherwise without election or other action by the stockholders; or

 

2

 

(3)           A sale or other disposition of all or substantially all of the assets of the Company, except pursuant to a Business Combination that complies with clauses (a) and (b) of subparagraph (2) above; or

 

(4)           Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clauses (a) and (b) of subparagraph 2 above.

 

(g)           “Code” means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.

 

(h)           “Company” shall mean EarthLink, Inc.

 

(i)            “Confidential Information” means any and all non-public information concerning, relating to and/or in the possession of the Company and/or its Affiliates and/or the Business of the Company treated as confidential or secret by the Company and/or its Affiliates (that is, such business information is subject to efforts by the Company and/or its Affiliates that are reasonable under the circumstances to maintain its secrecy) that does not constitute a Trade Secret, including, without limitation, information concerning the Company’s or an Affiliate’s financial position and results of operations (including revenues, assets, net income, etc.), annual and long range business plans, product and service plans, marketing plans and methods, employee lists and information, in whatever form and whether or not computer or electronically accessible.

 

(j)            “Eligible Earnings” has the same meaning given to that term in the Company’s bonus plan and payroll policies.

 

(k)           “Good Reason” means, with respect to Your Termination of Employment, any of the following acts or omissions that are not cured within thirty (30) days after written notice of such act or omission is delivered to the Company, the Chairman of the Board of Directors and the Chairman of the Leadership and Compensation Committee of the Board of Directors (which notice must be given no later than ninety (90) days after the initial occurrence of such event):

 

(1)           without Your express written consent (i) the assignment to You of any duties materially inconsistent in any respect with Your position, authority, duties or responsibilities as contemplated by Section 2, (ii) the requirement by the Company that You report to any officer or employee other than directly to the Board of Directors of the Company, or (iii) any other action by the Company that results in a significant diminution in such position, authority, duties or responsibilities, provided, however, that, without limiting the foregoing, the occurrence of a Non-Public Change in Control Event (regardless of your consent thereto) shall in and of itself be deemed to result in a significant diminution in your position, authority, duties and/or responsibilities as contemplated by Section 2;

 

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(2)           without Your express written consent, any failure by the Company to comply in any material respect with any of the provisions of Sections 4(a), (b) and (d) of this Agreement;

 

(3)           without Your express written consent, any requirement by the Company that You be based more than thirty-five (35) miles from the location where You were based immediately prior to the date of this Agreement, except for travel on the Company’s business that is required or necessary to the performance of Your job and substantially consistent with Your business travel obligations prior to the date of this Agreement; or

 

(4)           any notice given by the Company pursuant to Section 3 of this Agreement of its intent not to extend the Term of this Agreement, but only if You have not also given notice of non-extension of the Term; or

 

(5)           any breach by the Company of any other material provision of this Agreement.

 

A termination by You shall not constitute termination for Good Reason unless You resign within two (2) years after the initial occurrence of such uncured event.

 

(l)            “Incumbent Board” means a Board of Directors consisting of individuals who either are (a) members of the Company’s Board of Directors on the date hereof or (b) members who become members of the Company’s Board of Directors subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least sixty percent (60%) of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which that person is named as a nominee for director, without objection to that nomination), but excluding, for that purpose, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Securities Exchange Act of 1934, as amended) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors.

 

(m)          “Non-Public Change in Control Event” means any Change in Control Event that is not a Public Change in Control Event.

 

(n)        “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended.

 

(o)        “Public Change in Control Event” means any Change in Control Event as defined in clause (f) above where (i) the Person that accumulates Beneficial Ownership of more than fifty percent (50%) of the combined voting power of the Company’s Voting Stock has, or such Person is a direct or indirect subsidiary of a Person that has, a class of common stock (or depositary receipts or other certificates representing common equity interests) traded on a U.S. national securities exchange or quoted on NASDAQ or another established over-the-counter trading market in the United States or which will be so

 

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traded or quoted when issued or exchanged in connection with such Change in Control Event or (ii) upon the consummation of such Change in Control Event, the Voting Stock of the Company will remain trading on a U.S. national securities exchange or quoted on NASDAQ or another established over-the-counter trading market in the United States.

 

(p)        “Specified Employee” means an employee who is (i) an officer of the Company or an Affiliate having annual compensation greater than $145,000 (with certain adjustments for inflation after 2008), (ii) a five-percent owner of the Company or (iii) a one-percent owner of the Company having annual compensation greater than $150,000.  For purposes of this Section, no more than 50 employees (or, if lesser, the greater of three or 10 percent of the employees) shall be treated as officers.  Employees who (i) normally work less than 17 1/2 hours per week, (ii) normally work not more than 6 months during any year, (iii) have not attained age 21, (iv) are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the Company or an Affiliate (except as otherwise provided in regulations issued under the Code) or (v) who have not completed six months of service shall be excluded for purposes of determining the number of officers for this determination.  For purposes of this Section, the term “five-percent owner” (“one-percent owner”) means any person who owns more than five percent (one percent) of the outstanding stock of the Company or stock possessing more than five percent (one percent) of the total combined voting power of all stock of the Company.  For purposes of determining ownership, the attribution rules of Section 318 of the Code shall be applied by substituting “five percent” for “50 percent” in Section 318(a)(2) and the rules of Sections 414(b), 414(c) and 414(m) of the Code shall not apply.  For purposes of this Section, the term “compensation” has the meaning given such term by Section 414(q)(4) of the Code.  The determination of whether You are a Specified Employee will be based on a December 31 identification date such that if You satisfy the above definition of Specified Employee at any time during the 12-month period ending on December 31, You will be treated as a Specified Employee if You have a Termination of Employment during the 12-month period beginning on the first day of the fourth month following the identification date.  This definition is intended to comply with the “specified employee” rules of Section 409A(a)(2)(B)(i) of the Code and shall be interpreted accordingly.

 

(q)           “Termination of Employment” means the termination of Your employment and service with the Company and all Affiliates.  You will not be considered as having had a Termination of Employment if (i) You continue to provide services to the Company or any Affiliate as an employee or independent contractor at an annual rate that is more than 20 percent of the services rendered, on average, during the immediately preceding 36 months of employment (or, if employed less than 36 months, such lesser period) or (ii) You are on military leave, sick leave or other bona fide leave of absence so long as the period of such leave does not exceed six months, or if longer, so long as Your right to reemployment with the Company or any Affiliate is provided either by statute or by contract.  If the period of leave (i) ends or (ii) exceeds six months and Your right to reemployment is not provided either by statute or by contract, the Termination of Employment will be deemed to occur on the first date immediately following such six-month period if not reemployed by the Company or any Affiliate before such time and

 

5

 

eligibility for payments and benefits hereunder will be determined as of that time.  Termination of Employment shall be construed consistent with the meaning of a “separation from service” under Section 409A of the Code.

 

(r)            “Total Disability” means Your inability, through physical or mental illness or accident, to perform the majority of Your usual duties and responsibilities hereunder (as such duties are constituted on the date of the commencement of such disability) in the manner and to the extent required under this Agreement for a period of at least ninety (90) consecutive days.  Total Disability shall be deemed to have occurred on the first day following the expiration of such ninety (90) day period.

 

(s)        “Trade Secrets” means any and all information concerning, relating to and/or in the possession of, the Company and/or its Affiliates and/or the Business of the Company that qualifies as a trade secret as defined by the laws of the State of Georgia on the date of this Agreement and as such laws are amended from time to time thereafter.

 

(t)            “Voting Stock” means the then outstanding securities of an entity entitled to vote generally in the election of members of that entity’s Board of Directors.

 

2.             Employment; Duties.

 

(a)           The Company agrees to employ You as Chief Executive Officer of the Company with the duties and responsibilities generally associated with such position and such other reasonable additional responsibilities and positions as may be added to Your duties from time to time by the Board of Directors consistent with Your position.

 

(b)           During Your employment hereunder, You shall (i) diligently follow and implement all Company employee policies and all management policies and decisions communicated to You by the Board of Directors; and (ii) timely prepare and forward to the Board of Directors all reports and accountings as may be reasonably requested of You.

 

3.             Term.  The term hereof shall continue until December 31, 2012 unless terminated earlier pursuant to the terms and conditions of this Agreement (the “Term”).  Thereafter, the Term will renew hereunder automatically for successive one-year periods unless either party gives written notice to the other not less than ninety (90) days prior to the end of the Term hereof (or any subsequent anniversary, as the case may be) that such party does not wish the Term to be so extended, and under such circumstances, the Term and this Agreement will terminate by its terms on December 31, 2012 (or such subsequent anniversary, as the case may be).  Notwithstanding the foregoing, upon the occurrence of a Change in Control Event, the Term shall be automatically extended so that the Term shall continue in full force and effect until the date which is twenty-four (24) months from the date of a Change in Control Event and thereafter will renew automatically as of such date and successive one-year periods thereafter, unless prior notice is given, as provided above.

 

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4.             Compensation.

 

(a)           (1)  You shall be paid an annual base salary of not less than Eight Hundred And Twenty Five Thousand Dollars ($825,000) per year (the “Base Salary”).  The Base Salary shall accrue and be due and payable in equal, or as nearly equal as practicable, biweekly installments and the Company may deduct from each such installment all amounts required to be deducted and withheld in accordance with applicable federal and state income, FICA and other withholding tax requirements.

 

(2)           The Base Salary shall be reviewed by the Board of Directors at least once during each year of the Term and may be increased from time to time and at any time by the Board of Directors.  The Base Salary shall in no event be reduced or decreased below the highest level attained at any time by You, unless You and the Board of Directors agree to implement a salary reduction program for cost abatement purposes.

 

(b)           For each fiscal year of the Company, You shall be entitled to receive an annual target bonus opportunity in an amount equal to one hundred percent (100%) of Your Eligible Earnings (the “Annual Target Bonus”), with the ability to earn 50 percent (50%) (threshold) to at least One Hundred Fifty Percent (150%)  (maximum) of Your Annual Target Bonus if the bonus criteria for such annual period, as set by the Board of Directors of the Company, are satisfied (the “Target Bonus Payment”); provided that if such bonus criteria are not satisfied at the threshold level or higher, no Annual Target Bonus shall be payable.  The criteria to earn Your Annual Target Bonus and other levels between the threshold and maximum for each year of the Term shall be based upon good faith negotiations between You and the Board of Directors.  All Target Bonus Payments that become payable shall be paid to You in accordance with the applicable bonus plan but in no event later than 21⁄2 months after the end of the fiscal year of the Company to which Your Target Bonus Payments relate.

 

(c)           While You are performing the services described herein, the Company shall reimburse You for all reasonable and necessary expenses incurred by You in connection with the performance of Your duties of employment hereunder in accordance with the Company’s expense reimbursement policy, as applied to the Company’s executive officers, as soon as administratively practicable but no later than 2 1⁄2 months after the end of the year in which You incur the reimbursable expense.

 

5.             Equity Rights.

 

(a)        The stock options and restricted stock units granted by the Company to You from time to time are hereinafter collectively called the “Stock Options and RSUs.”  You shall be given the period permitted under Your respective Stock Option agreements to exercise Your Stock Options after Your termination of employment, except as otherwise provided in Section 5(b) below.

 

(b)        Vested Stock Options shall be exercisable for ninety (90) days following termination of employment, provided that if You are prohibited from exercising vested

 

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stock options during such ninety (90) day period due to having material non-public information about the Company, such exercise period shall be extended until ten (10) days following the date that You no longer have material non-public information about the Company, but in no event shall the vested Stock Options be exercisable beyond their latest expiration date as set forth in the respective Stock Option agreements.

 

(c)        In the event no provision is made for the continuance, assumption or substitution by the Company or its successor in connection with a Change in Control Event of Your outstanding Stock Options and RSUs, then contemporaneously with the Change in Control Event, Your outstanding Stock Options and RSUs shall become immediately vested in full provided You have not previously incurred a Termination of Employment prior to such Change in Control Event, except that if any of Your RSUs contain performance criteria for payment (either alone or in combination with any continued employment or other requirements), then any tranche of such award for which the performance period shall have ended prior to the date of the Change in Control Event shall not be affected by the provisions of this Section 5(c).  For example, if an RSU had separate performance periods for each of three tranches and the Change in Control Event occurred during the second such performance period, the second and third tranches would fully vest upon the Change in Control Event and the first tranche would vest (or not) based on the actual achievement of the performance goals applicable to the first performance period.

 

6.             Termination.

 

(a)           A Termination of Employment shall occur only as follows:

 

(1)           For Cause immediately by the Company; or

 

(2)           At Your option for Good Reason; or

 

(3)           At Your option upon thirty (30) days prior written notice of termination delivered by You to the Company; or

 

(4)           For any reason (other than for Cause or Your death or Total Disability) by the Company upon three (3) calendar months prior written notice of termination delivered to You; or

 

(5)           By the Company upon Your death; or

 

(6)           By the Company because of Your Total Disability upon thirty (30) days prior written notice of termination delivered to You.

 

(b)           If You have a Termination of Employment that is (i) by the Company (other than for Cause, Your death or Your Total Disability), or (ii) by You for Good Reason, then the following terms shall apply:

 

(i) You shall be paid an amount equal to (A) two hundred percent (200%) of the sum of (x) Your Base Salary as of the effective date of Your Termination of

 

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Employment and (y) Your Annual Target Bonus for the year in which Your Termination of Employment occurs, less (B) the amount of the Non-Compete Payment (as defined in Section 9(d)).  Subject to Section 19 below, such amount shall be paid in a lump sum as soon as administratively practicable (and within thirty (30) days) after Your Termination of Employment.

 

(ii) You shall become immediately vested in all Your outstanding Stock Options and RSUs, except that if any of Your RSUs contain performance criteria for payment (either alone or in combination with any continued employment or other requirements), then any tranche of such award for which the performance period shall have ended prior to the date of the date of Your Termination of Employment shall not be affected by the provisions of this Section 6(b)(ii).  For example, if an RSU had separate performance periods for each of three tranches and Your Termination of Employment occurred during the second such performance period, the second and third tranches would fully vest upon Your Termination of Employment and the first tranche would vest (or not) based on the actual achievement of the performance goals applicable to the first performance period.

 

(iii) You shall be paid an amount equal to the monthly cost to provide the group medical, dental, vision and/or prescription drug plan benefits sponsored by the Company and in which You participated as of Your Date of Termination, if any, multiplied by 18 months (the “COBRA Payment”).  For purposes of this clause (iii), the cost of such benefits will be calculated based on the “applicable premium” determined in accordance with Code Section 4980B(f)(4) and the regulations issued thereunder (less the 2% administrative fee but including the active-employee rate for such coverage) for the year in which Your Date of Termination occurs.  Subject to Section 19 below, the COBRA Payment shall be paid in a lump sum as soon as administratively practicable (and within thirty (30) days) after Your Termination of Employment.

 

(iv) You shall be paid a pro-rata Annual Target Bonus for the year in which Your Termination of Employment occurs (the “Final Year Bonus”), equal to the product of (A) the amount You would have earned, if any, under the annual bonus plan for such year based on actual financial performance (without regard to personal performance metrics), and (B) a fraction, the numerator of which is the number of days in the fiscal year through Your Termination of Employment, and the denominator of which is 365.  Subject to Section 19 below, the Final Year Bonus shall be paid in a lump sum on the date bonus awards are paid to other participants in the applicable bonus plan (but in no event later than 21⁄2 months after the end of the fiscal year of the Company to which the Final Year Bonus relates).

 

(v) You shall be paid Your Base Salary through the Date of Termination to the extent not theretofore paid (“Accrued Salary”) on the Company’s normal payroll date next following Your Termination of Employment and, to the extent not theretofore paid or provided, the Company shall timely pay or provide to You any other vested amounts or benefits required to be paid or provided or which You are

 

9

 

eligible to receive under any retirement, death, disability or similar plan or program of the Company outside the scope of this Agreement (“Other Vested Benefits”) in accordance with the terms of the plan or program under which they are otherwise payable.

 

(c)           If You have a Termination of Employment on account of Your death or Your Total Disability, You shall be paid (i) one hundred percent (100%) of Your Base Salary as of the effective date of Your Termination of Employment, such amount to be paid in a lump sum as soon as administratively practicable (and within thirty (30) days) after Your Termination of Employment (subject to any delay in payments that may be required by Section 19), and (ii) Your Annual Target Bonus for the year in which Your Termination of Employment occurs, such Annual Target Bonus to be determined in accordance with Section 4(b) and to be payable in accordance with the last sentence of Section 4(b).  The Company shall also pay You any Accrued Salary on the Company’s normal payroll date next following Your Termination of Employment and any Other Vested Benefits in accordance with the terms of the plan or program under which they are otherwise payable.

 

(d)           If You have a Termination of Employment by the Company for Cause or by You other than for Good Reason, the Company will have no obligations to pay You any amount beyond the effective date of such Termination of Employment whether as Base Salary, Annual Target Bonus or otherwise or to provide You with any benefits arising hereunder or otherwise except for the timely payment of Accrued Salary and Other Vested Benefits or as required by law.

 

7.             Confidential Information and Trade Secrets.  You acknowledge that the nature of Your engagement by the Company is such that You shall have access to the Confidential Information and the Trade Secrets, each of which has great value to the Company, provides the Company a competitive advantage, and constitutes the foundation upon which the Business of the Company is based.  You agree to hold all of the Confidential Information and the Trade Secrets in confidence and to not use, disclose, publish or otherwise disseminate any of such Confidential Information and the Trade Secrets to any other person, except to the extent such disclosure is (i) necessary to the performance of this Agreement and in furtherance of the Company’s best interests, (ii) required by applicable law, (iii) as a result of portions of the Confidential Information and/or the Trade Secrets becoming lawfully obtainable from other sources, (iv) authorized in writing by the Company, or (v) necessary to enforce this Agreement.  The restrictions set forth in this Section 7 shall remain in full force and effect (a) with respect to the Confidential Information, for the three (3) year period following the effective date of Your Termination of Employment, and with respect to the Trade Secrets, until the Trade Secrets no longer retain their status or qualify as trade secrets under applicable law.  Upon Your Termination of Employment, You shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing Confidential Information and Trade Secrets, whether prepared by You, the Company or anyone else.

 

8.             Inventions and Patents.  All inventions, designs, improvements, patents, copyrights and discoveries conceived by You during the term of this Agreement which are useful in or directly or indirectly relate to the business of the Company or to any experimental work

 

10

 

carried on by the Company, shall be the property of the Company.  You agree to promptly and fully disclose to the Company all such inventions, designs, improvements, patents, copyrights and discoveries (whether developed individually or with other persons) and at the Company’s expense, to take all steps necessary and reasonably required to assure the Company’s ownership thereof and to assist the Company in protecting or defending the Company’s proprietary rights therein.

 

9.             Restrictive Covenants.

 

(a)        Non-Competition.  You agree that during Your employment, and for a period of eighteen (18) calendar months following Termination of Employment, You shall not perform within the 50 states of the United States of America any services which are in competition with the Business of the Company during Your employment, or following Your Termination of Employment any services which are in competition with a Material line of Business engaged in by the Company at the time of Your Termination of Employment, and which are the same as or similar to those services You performed for the Company under this Agreement; provided, however, if the other business competitive with the Business of the Company has multiple lines, divisions, segments or units, some of which are not competitive with the Business of the Company, nothing herein shall prevent You from being employed by or providing services to such line, division, segment or unit that is not competitive with the Business of the Company.  For purposes of this Section 9(a), “Material” means a line of Business that represents 20% or more of the Company’s consolidated revenues or adjusted EBITDA for the four fiscal quarters immediately preceding Your Termination of Employment.

 

(b)        Non-Recruitment.  You agree that during Your employment and for a period of eighteen (18) calendar months following Termination of Employment, You will not, directly or indirectly:  (1) solicit, induce, recruit, or cause a Restricted Employee to resign employment with the Company or its Affiliates, or (2) participate in making hiring decisions, encourage the hiring of, or aid in the hiring process of a Restricted Employee on behalf of any employer other than the Company and its Affiliates.  As used herein, “Restricted Employee” means any employee of the Company or its Affiliates with whom You had material business-related contact while performing services under this Agreement, and who is:  (1) a member of executive management; (2) a corporate officer of the Company or any of its Affiliates, or (3) any employee of the Company or any of its Affiliates engaged in product or service development or product or service management.

 

(c)        Effect of Breach.  The obligation of the Company to continue to fulfill its payment and benefit obligations to You pursuant to Sections 6(b), 6(c) and 9(d) is conditioned upon Your compliance with the provisions of this Section 9 and Sections 7 and 8.  Accordingly, in the event that You shall materially breach the provisions of this Section 9 and/or Sections 7 and/or 8 and not cure or cease (as appropriate) such material breach within ten (10) days of receipt of notice thereof from the Company (the “Default Date”), the Company’s obligations under Sections 6(b), 6(c) and 9(d) shall terminate and You shall promptly (within thirty (30) days after the Default Date) refund to the Company a pro rata portion of the amounts previously paid to You pursuant to Sections 6(b), 6(c) and 9(d) equal to a fraction, the numerator of which is the number of full 

 

11

 

months from the Default Date to the eighteen-month (18-month) anniversary of Your Termination of Employment, and the denominator of which is eighteen (18).  Termination of the Company’s obligations under Sections 6(b), 6(c) or 9(d) shall not be the Company’s sole and exclusive remedy for a breach of this Section 9 and/or Sections 7 and/or 8.  In addition to the remedy provided in this Section 9(c), the Company shall be entitled to seek damages and injunctive relief to enforce this Section 9 and Sections 7 and 8, in the event of a breach by You of this Section 9 and/or Sections 7 and/or 8.

 

(d)        Compensation for Restrictive Covenants.  In consideration of Your obligations under this Section 9, upon Your Termination of Employment (A) by the Company (other than for Cause, Your death or Your Total Disability) or (B) by You for Good Reason, You shall be paid an amount equal to the sum of (i) Your Base Salary as of the effective date of Your Termination of Employment and (ii) Your Annual Target Bonus for the year in which Your Termination of Employment occurs (the “Non-Compete Payment”).  Subject to Section 19 below, such amount shall be paid in a lump sum as soon as administratively practicable (and within thirty (30) days) after Your Termination of Employment.

 

10.          Remedies.

 

(a)        The parties hereto agree that the services to be rendered by You pursuant to this Agreement, and the rights and privileges granted to the Company pursuant to this Agreement, are of a special, unique, extraordinary and intellectual character, which gives them a peculiar value; the loss of which cannot be reasonably or adequately compensated in damages in any action at law, and that a breach by You of any of the terms of this Agreement will cause the Company great and irreparable injury and damage.  You hereby agree that the definition of the Business of the Company set forth in Section 1 is correct, that the Company and its Affiliates conduct business throughout the 50 states of the United States of America and beyond, and that these restrictions are reasonably necessary to protect the legitimate business interests of the Company.  You hereby expressly agree that the Company shall be entitled to the remedies of injunction, specific performance and other equitable relief to prevent a breach of this Agreement by You.  This Section 10 shall not be construed as a waiver of any other rights or remedies which the Company may have for damages or otherwise.

 

(b)        In the event of any dispute over the interpretation or application of this Agreement, the Company shall reimburse You for Your reasonable attorneys’ fees and costs incurred in connection with that dispute unless the Company is determined, by final judgment of a court of competent jurisdiction, to be the prevailing party on all or substantially all of the issues in dispute, which reimbursement shall be made promptly (and within thirty (30) days) following final judgment.

 

11.          Construction and Severability.  The parties hereto agree that the provisions of this Agreement shall be presumed to be enforceable, and any reading causing unenforceability shall yield to a construction permitting enforcement.  In the event a court should determine not to enforce a provision of this Agreement due to overbreadth, violation of public policy, or similar reasons, the parties specifically authorize such reviewing court to enforce said covenant to the

 

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maximum extent reasonable, whether said revisions be in time, territory, scope of prohibited activities, or other respects.  If any single covenant, provision, word, clause or phrase in this Agreement shall be found unenforceable, it shall be severed and the remaining covenants and provisions enforced in accordance with the tenor of the Agreement.

 

12.          Assignment.  This Agreement and the rights and obligations of the hereunder may not be assigned by either party hereto without the prior written consent of the other party hereto.

 

13.          Notices.  Except as otherwise specifically provided herein, any notice required or permitted to be given to You pursuant to this Agreement shall be given in writing, and personally delivered or mailed to You by certified mail, return receipt requested, at the address set forth below Your signature on this Agreement or at such other address as You shall designate by written notice to the Company given in accordance with this Section 13, and any notice required or permitted to be given to the Company, the Chairman of the Board of Directors or the Chairman of the Leadership and Compensation Committee of the Board of Directors shall be given in writing, and personally delivered or mailed to that recipient by certified mail, return receipt requested, addressed to the appropriate recipient at the address set forth under the signature of the Executive Vice President of the Company or his designee on this Agreement or at such other address as the Company shall designate by written notice to You given in accordance with this Section 13.  Any notice complying with this Section 13 shall be deemed received upon actual receipt by the addressee.

 

14.          Waiver.  The waiver by either party hereto of any breach of this Agreement by the other party hereto shall not be effective unless in writing, and no such waiver shall operate or be construed as the waiver of the same or another breach on a subsequent occasion.

 

15.          Governing Law.  This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Georgia.

 

16.          Beneficiary.  All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, heirs, executors, administrators and permitted assigns.

 

17.          Entire Agreement.  This Agreement embodies the entire agreement of the parties hereto relating to Your employment by the Company in the capacity herein stated and, except as specifically provided herein, no provisions of any employee manual, personnel policies, Company directives or other agreement or document shall be deemed to modify the terms of this Agreement.  No amendment or modification of this Agreement shall be valid or binding upon You or the Company unless made in writing and signed by the parties hereto.  All prior understandings and agreements relating to Your employment by the Company, in whatever capacity, are hereby expressly terminated.

 

18.          Excise Tax.

 

(a)           If any payment or distribution by the Company and/or any Affiliate of the Company to or for Your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any

 

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other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the “Excise Tax”), then the payments and benefits payable or provided under this Agreement (or other Payments as described below) shall be reduced (but not below the amount of the payments or benefits provided under this Agreement) if, and only to the extent that, such reduction will allow You to receive a greater Net After Tax Amount than You would receive absent such reduction.

 

(b)           The Accounting Firm will first determine the amount of any Parachute Payments (as defined below) that are payable to You.  The Accounting Firm also will determine the Net After Tax Amount (as defined below) attributable to Your total Parachute Payments.

 

(c)           The Accounting Firm will next determine the largest amount of Payments that may be made to You without subjecting You to the Excise Tax (the “Capped Payments”).  Thereafter, the Accounting Firm will determine the Net After Tax Amount attributable to the Capped Payments.

 

(d)           You then will receive the total Parachute Payments or the Capped Payments or such other amount less than the total Parachute Payments, whichever provides You with the higher Net After Tax Amount, but in no event will any such reduction imposed by this Section 18 be in excess of the amount of payments or benefits payable or provided under this Agreement.  If You will receive the Capped Payments or some other amount lesser than the total Parachute Payments, the total Parachute Payments will be adjusted by first reducing the amount of any noncash benefits under this Agreement or any other plan, agreement or arrangement on a pro rata basis and then by reducing the amount of any cash benefits under this Agreement or any other plan, agreement or arrangement on a pro rata basis.  The Accounting Firm will notify You and the Company if it determines that the Parachute Payments must be reduced and will send You and the Company a copy of its detailed calculations supporting that determination.

 

(e)           As a result of the uncertainty in the application of Code Sections 280G and 4999 at the time that the Accounting Firm makes its determinations under this Section 18, it is possible that amounts will have been paid or distributed to You that should not have been paid or distributed under this Section 18 (“Overpayments”), or that additional amounts should be paid or distributed to You under this Section 18 (“Underpayments”).  If the Accounting Firm determines, based on either the assertion of a deficiency by the Internal Revenue Service against the Company or You, which assertion the Accounting Firm believes has a high probability of success or controlling precedent or substantial authority, that an Overpayment has been made, that Overpayment will be treated for all purposes as a debt ab initio that You must repay to the Company together with interest at the applicable Federal rate under Code Section 7872; provided, however, that no debt will be deemed to have been incurred by You and

 

14

 

no amount will be payable by You to the Company unless, and then only to the extent that, the deemed debt and payment would either reduce the amount on which You are subject to tax under Code Section 4999 or generate a refund of tax imposed under Code Section 4999.  If the Accounting Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the Accounting Firm will notify You and the Company of that determination and the amount of that Underpayment will be paid to You by the Company promptly (and no later than thirty (30) days) after the final determination of the Underpayment, which is when Your legally binding right to such Underpayment first arises.

 

(f)            For purposes of this Section 18, the following terms shall have their respective meanings:

 

(i)            “Accounting Firm” means the· independent accounting firm engaged by the Company in the Company’s sole discretion.

 

(ii)           “Net After Tax Amount” means the amount of any Parachute Payments, Capped Payments or other payments described in this Section 18, as applicable, net of taxes imposed under Code Sections 1, 3101(b) and 4999 and any State or local income taxes applicable to You on the date of payment.  The determination of the Net After Tax Amount shall be made using the highest combined effective rate imposed by the foregoing taxes on income of the same character as the Parachute Payments or Capped Payments, as applicable, in effect on the date of payment.

 

(iii)          “Parachute Payment” means a payment that is described in Code Section 280G(b)(2), determined in accordance with Code Section 280G and the regulations promulgated or proposed thereunder.

 

(g)           The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by the preceding subsections shall be borne by the Company.  If such fees and expenses are initially paid by You, the Company shall reimburse You the full amount of such fees and expenses within five business days after receipt from You of a statement therefore and reasonable evidence of Your payment thereof but in no event later than the end of the year immediately following the year in which You incur such reimbursable fees and expenses.

 

(h)           The Company and You shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or You, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by the preceding subsections.  Any determination by the Accounting Firm shall be binding upon the Company and You.

 

(i)            The federal, state and local income or other tax returns filed by You shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by You.  You, at the request of the Company,

 

15

 

shall provide the Company true and correct copies (with any amendments) of Your federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such conformity.

 

19.          Tax Liabilities and Code Section 409A.  Any payments or benefits that You receive pursuant to this Agreement shall be subject to reduction for any applicable employment or withholding taxes.  Notwithstanding any other provision of this Plan, if You are a Specified Employee as of Your Termination of Employment, and if the amounts that You are entitled to receive pursuant to Section 6 or Section 9 are not otherwise exempt from Section 409A of the Code, then to the extent necessary to comply with Section 409A, no payments for such amounts may be made under this Agreement (including, if necessary, any payments for welfare or other benefits in which case You may be required to pay for such coverage or benefits and receive reimbursement when payment is no longer prohibited) before the first day of the seventh (7th) month after Your Termination of Employment or, if earlier, Your date of death (as applicable, the “Section 409A Delay Period”).  All such amounts that would have otherwise been required to be paid during the Section 409A Delay Period shall be paid to You in one lump sum payment as soon as administratively feasible (but no more than thirty (30) days) after the end of the Section 409A Delay Period.  All such remaining payments shall be made as if they had begun as set forth in this Agreement.  For purposes of this Agreement, Your rights to payments shall be treated as rights to receive a series of separate payments as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.  This Agreement is intended to comply with the applicable requirements of Section 409A of the Code and shall be construed and interpreted in accordance therewith.  The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to You of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4). The Company may at any time amend, suspend or terminate this Agreement, or any payments to be made hereunder, as necessary to be in compliance with Section 409A of the Code to avoid the imposition on You of any potential excise taxes relating to Section 409A.  To the extent that You incur liability for excise taxes, penalties or interest under Section 409A of the Code because any nonqualified deferred compensation plan of the Company fails to comply with Section 409A, the Company will make a special reimbursement payment to You equal to the sum of (i) Your liability for excise taxes, penalties or interest under Section 409A and (ii) all taxes attributable to the special reimbursement payment, at the time such taxes, penalties and interest are required to be remitted to the applicable authorities and by the end of Your taxable year next following the year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authorities or, where no such taxes are remitted, the end of Your taxable year following the year in which the audit is completed or there is a final and non-appealable settlement or resolution of the litigation.

 

16

 

IN WITNESS WHEREOF, You and the Company have executed and delivered this Agreement as of the date first shown above.

 

	
YOU:
    	
THE   COMPANY:
    
	
 
    	
 
    
	
ROLLA   HUFF
    	
EARTHLINK, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ Rolla Huff
    	
 
    	
By:   
    	
/s/   Susan D. Bowick
    
	
 
    	
 
    
	
Address:
    	
1375   Peachtree Street
    	
Name:
    	
Susan   D. Bowick
    
	
 
    	
Atlanta,   GA 30309
    	
Title:
    	
Chairperson   - Leadership and Compensation Committee
    
	
 
    	
 
    
	
 
    	
Address:
    	
1375   Peachtree Street
    
	
 
    	
 
    	
Atlanta,   GA 30309
    
							

 

17

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