Document:

Exhibit 10.2

 

Execution Copy

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”)
is made and entered into as of April [ 
], 2008 (the “Effective Date”), by and between MacroChem
Corporation, Inc., a  Delaware  corporation (the “Company”), and David
P. Luci, an individual who resides at 270 Benedict Road, Staten Island, New
York 10304 (the “Executive”).

 

RECITALS:

 

WHEREAS, the Company is engaged in
the business of acquiring and developing small molecule pharmaceuticals for
oncology indications (the “Business”); and

 

WHEREAS,
the Company and Executive entered into that certain employment agreement, dated
December 6, 2007 (the “Original Agreement”), pursuant to which the
Company engaged Executive to serve as the Company’s General Counsel &
Vice President, Corporate Development; and

 

WHEREAS,
the Company promoted Executive on March 19, 2008 to serve in the
additional capacity as the Company’s Chief Financial Officer, and Executive
agreed to serve in such capacity and has since served in said capacity; and

 

WHEREAS, the Company desires to continue
to employ the Executive, and the Executive desires to be employed by the
Company, in several new capacities, in each case, on the terms and subject to
the conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the
foregoing premises and of the respective covenants and agreements herein set
forth, the Company and the Executive agree as follows:

 

1.                                       Employment.  The Company
will employ the Executive, and the Executive will serve as the President &
Chief Business Officer of the Company. 
The Executive will also be a member of the Board of Directors of the
Company (the “Board”) so long as he is employed in this capacity or any
other capacity and Executive will report directly to the Board.  The Executive will be responsible for and perform
such services customary to these offices (e.g. services traditionally performed
by a Chief Operating Officer and Chief Financial Officer and General Counsel), and
such other duties and services as shall from time to time be reasonably
assigned to him by the Board, consistent with such positions and this Agreement,
including, without limitation, primary responsibility for day-to-day operating
activities as well as primary responsibility for the Company’s finance,
accounting and legal matters.  It is
understood that Executive may participate on up to three Boards of Directors or
Advisory Boards of other companies and otherwise participate in personal
investments, to the extent such activities do not materially interfere with the
performance of his duties with the Company and to the extent that the Executive
has the prior approval of the Board to participate in any such activity.  The Executive will perform his duties
hereunder faithfully and to the best of his abilities and in furtherance of the
business of the Company and its subsidiaries, and will devote his time and
energies to the business and affairs of the Company and its subsidiaries.

 

 

2.                                       Term.  The
Executive’s employment hereunder shall be “at will” and is terminable at any
time by either party, subject to the provisions of Sections 4, 5 and 6 hereof.

 

3.                                       Compensation and Other Related Matters.

 

(a)                                  Salary.  As
compensation for services rendered under this Agreement, the Executive shall
receive an annual salary of not less than $250,000 (as may be increased
pursuant to the immediately succeeding sentence, the “Base Salary”),
which salary shall be paid in accordance with the Company’s then prevailing
payroll practices.  The Executive’s
annual salary is eligible for increase annually in accordance with the Company’s
compensation practices and increases will be evaluated at the discretion of the
Compensation Committee of the Board.

 

(b)                                 Bonus.  During the
term of this Agreement, and at the sole discretion of the Compensation
Committee of the Board, the Executive shall be eligible to receive an annual
bonus up to fifty  percent (50%)  of
the Executive’s Annual Salary at the conclusion of each fiscal year based on
the Executive and the Company successfully achieving targeted annual
performance objectives (the “Annual Bonus” and, together with the Annual
Salary, the “Annual Compensation”).  To
receive such Annual Bonus, the Executive must still be employed with the
Company as of December 31 of the year for which the Annual Bonus is
payable and not be in breach of this Agreement. 
In addition, the parties agree that Executive shall be entitled to a
one-time bonus in the amount of seventy-five thousand dollars ($75,000) in the
event the Company consummates an equity financing of $5 million or more in
gross proceeds during the term of this Agreement; provided, however, the
parties acknowledge and agree such payment shall be a one-time payment only
which shall be due promptly upon consummation of the first equity financing so
consummated and such one-time bonus shall be prorated for any portion of such
equity financing which is consummated (for example, if the Company consummates
an equity financing in the amount of $3 million in gross proceeds such bonus
shall be equal to $45,000).

 

(c)                                  Equity Compensation.  In addition to the option grant in the
Original Agreement, as of the Effective Date, the Executive shall be granted
Stock Options pursuant to the terms and conditions of a Stock Option Award
Agreement in the form approved by the Company’s Board as of the date hereof and
subject to amendment as set forth therein. 
These options will be issued from a valid stock option plan approved by
the stockholders and registered under an S-8 within eighteen months from the
date hereof (the “Grant Date”).  The
Stock Option shall be for the purchase of 2,290,000 shares of the Company’s
common stock, no par value (the “Common Stock”) at a price per share equal to
the closing price on the OTC BB on the Grant Date.  Of the Stock Options to purchase 2,290,000
shares of the Company’s Common Stock, stock options to purchase 572,500 shares
of Common Stock shall vest immediately upon execution of this Agreement, and stock
options to purchase 143,124 shares of Common Stock shall vest and become
exercisable every 90 days following the Effective Date for the next three years
from the Effective Date and as fully defined in the Stock Option Award
Agreement; provided that Executive is employed by the Company on such vesting
date.

 

(d)                                 Other Benefits.  The
fringe benefits, perquisites and other benefits of employment to be provided to
the Executive shall be equivalent to such benefits and 

 

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perquisites
as are provided to other employees of the Company, as those benefits are
amended from time to time.  In addition,
the Executive shall be entitled to participate in any other executive
compensation or employee bonus plans implemented by the Company on such terms
and conditions as shall have been determined by the Board or the Compensation
Committee thereof.  Participation in any
such benefit programs shall be subject to any applicable probationary or
similar periods.

 

(e)                                  Expenses.  The
Executive will be reimbursed for all reasonable out-of-pocket expenses actually
incurred by him in the furtherance of his duties under this Agreement and
consistent with the Company’s policies concerning the reimbursement of such
expenses.  Such expenses shall be
reimbursed upon submission to the Company of invoices containing original
receipts for all such expenditures and upon review by the Company of the
reasonable nature of such expenditures.

 

4.                                       Termination.

 

All termination provisions
require a 60 day written notice.

 

(a)                                  Disability.  If, as a
result of the incapacity of the Executive due to physical or mental illness,
the Executive is unable to perform the duties of his or her position of
employment or any substantially similar position of employment by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of not less
than six months, the Executive will be deemed to have a Disability.  The Company may terminate the Executive’s
employment for Disability upon written notice to the Executive or the Executive’s
legal representative, and such termination shall not constitute termination
without Cause (as defined below) for purposes of this Agreement.

 

(b)                                 Death.  The
Executive’s employment shall terminate immediately upon the death of the
Executive.

 

(c)                                  Termination with Cause.  The Company shall be entitled to terminate
the Executive’s employment for Cause.  “Cause”
shall mean (i) the willful and continued failure by the Executive to perform
substantially his duties hereunder, other than by reasons of Disability, after
demand for substantial performance is delivered by the Company that identifies
the manner in which the Company believes the Executive has not substantially
performed his duties; (ii) the Executive will have been indicted by any
federal, state or local authority in any jurisdiction for, or will have pleaded
guilty or nolo contendere to, an act constituting a felony, (iii) the
Executive will have habitually abused any controlled substance (such as
narcotics or alcohol), or (iv) the Executive will have (A) engaged in
acts of fraud, material dishonesty or gross misconduct in connection with the
business of the Company, or (B) committed a material breach of this
Agreement which shall remain uncured for a period of at least thirty (30) days
following receipt of written notice thereof which sets forth in reasonable
detail the basis for such claim of material breach.

 

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(d)                                 Termination Without Cause.  The Company shall, in its sole discretion,
have the right to terminate the Executive’s employment without Cause at any
time.

 

(e)                                  Resignation for Good Reason.  The Executive shall have the right to
terminate his employment for “Good Reason,” which shall mean a resignation of
his employment and his Separation from Service (as defined for purposes of
§409A of the Internal Revenue Code) within less than one year following the
initial existence of one or more of the following conditions arising without
his consent:

 

(i) any material reduction in his Base Salary
under Section 3(a), above;

 

(ii) any other material breach by the Company
of any of its obligations to the Executive under this Agreement; or

 

(iii) any relocation of the Executive’s primary
place of employment more than 50 miles from Manhattan;

 

(iv) any failure of the Company to have any
successor to all or substantially all of the business and properties of the
Company assume all of the liabilities and obligations of the Company under this
Agreement (and any stock option or restricted stock agreement referred to
herein, under such awards as have fully vested);

 

provided,
in each case, that a prior written notice specifying the reasons within ninety
(90) after the initial existence of the condition and an opportunity to cure
such condition (if curable) shall be afforded the Company, and that “Good
Reason” shall exist only if the Company shall fail to cure such condition
within 31 days after its receipt of such prior written notice.

 

(f)                                    Resignation Without Good Reason.  The Executive shall have the right to resign
his employment without “Good Reason” at any time upon thirty (30) days’ prior
written notice to the Board (a “Resignation Notice”) in which case the
Executive’s employment shall terminate upon effectiveness of such Resignation
Notice unless otherwise terminated earlier pursuant to the terms of this
Agreement.

 

5.                                       Compensation Upon Termination or During Disability.

 

(a)                                  Disability.  During any
period of Disability, the Executive shall continue to receive his Annual
Salary, less any compensation payable to the Executive under any applicable
disability insurance plan during such period, until this Agreement is
terminated, but in no event longer than 12 months from the date the Disability
began, as determined by the Company. 
Thereafter, the Executive’s benefits shall be determined under the
Company’s insurance and other compensation programs then in effect, and the
Company shall have no further obligation to the Executive under this Agreement,
except that the Company shall pay to the Executive, or the Executive’s legal
representative, as appropriate, (i) any accrued but unpaid base salary and
vacation, (ii) any earned but unpaid bonus from a prior fiscal year 

 

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(subject,
if applicable, to the terms of any deferred compensation arrangements), and (iii) reimbursement
of business expenses incurred prior to the date of termination.

 

(b)                                 Death.  In the
event of the Executive’s death, the Company shall pay the Executive’s estate
his Annual Salary through the date of death. 
Thereafter, the Company shall have no further obligation to the
Executive or the Executive’s beneficiary under this Agreement, except that the
Company shall pay to the Executive’s estate (i) any earned but unpaid
bonus from a prior fiscal year (subject, if applicable, to the terms of any
deferred compensation arrangements), and (ii) reimbursement of business
expenses incurred prior to the date of the Executive’s death.

 

(c)                                  Cause.  If the
Company terminates the Executive’s employment for “Cause” as defined in
Paragraph 4(c) of this Agreement, the Company shall continue to pay the
Executive his Annual Salary through the date of termination of the Executive’s
employment and shall pay for all accrued but unused vacation time.  All Stock Options which have vested prior to
the effective time of the termination for “Cause” shall remain vested and
exercisable for the period of time set forth in Executive’s Option Award
Agreement. At the effective time of the termination for Cause, all unvested
Stock Options shall immediately be terminated.  Thereafter, the Company shall have no further
obligation to the Executive under this Agreement.

 

(d)                                 Termination Without Cause by the Company.  During the term of this Agreement, if the
Company terminates the Executive’s employment without Cause pursuant to
Paragraph 4(d) of this Agreement (a “Termination without Cause”), under
circumstances that constitute a Involuntary Separation from Service with the
Company (as defined for purposes of §409A of the Internal Revenue Code), the
Company shall pay the Executive the total amount of Executive’s Annual
Compensation (then-current base salary plus Executive’s target bonus level) (the
“Severance Payment”).  Executive shall
continue to participate in all other benefit plans during the twelve (12) month
period following the Termination without Cause (the “Severance Period”), except
to the extent prohibited by law or any applicable employee benefit plan.  All Stock Options granted to Executive which
have vested prior to the final day of Executive’s employment under this
Agreement (the “Termination Date”) shall remain vested and exercisable for the
exercise period set forth in Executive’s Option Award Agreement.  The Company will continue to vest Stock
Options and stock awards during the Severance Period in accordance with the
following vesting schedule:

 

(1)                      If a
Termination without Cause occurs during the first year of the term of this
Agreement, all unvested Stock Options that would have vested during the
calendar quarter within which the Termination without Cause occurs shall vest
and become exercisable on the Termination Date for the exercise period set
forth in Executive’s Option Award Agreement and, in addition, all unvested
Stock Options that would have vested during the calendar quarter after the
occurrence of the Termination without Cause also shall vest and become
exercisable for the exercise period set forth in Executive’s Option Award
Agreement; and

 

(2)                      If a
Termination without Cause occurs during the second year of the term of this
Agreement, all unvested Stock Options that would have vested during the
calendar quarter within which the Termination without Cause occurs shall vest
and become exercisable on the 

 

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Termination Date for the
exercise period set forth in Executive’s Option Award Agreement and, in
addition, all unvested Stock Options that would have vested during the two (2) calendar
quarters after the occurrence of the Termination without Cause also shall vest
and become exercisable for the exercise period set forth in Executive’s Option
Award Agreement; and

 

(3)                      If a
Termination without Cause occurs during the third year of the term of this
Agreement or thereafter, all unvested Stock Options that would have vested
during the calendar quarter within which the Termination without Cause occurs
shall vest and become exercisable on the Termination Date for the exercise
period set forth in Executive’s Option Award Agreement and, in addition, all
unvested Stock Options that would have vested during the three (3) calendar
quarters after the occurrence of the Termination without Cause also shall vest
and become exercisable for the exercise period set forth in Executive’s Option
Award Agreement.

 

Payment of the Executive’s
separation pay benefit under this Section 5(d) shall be made as
follows:

 

(i) 
Payment of the separation pay benefit shall commence as of the 30th day after
the Executive’s Separation from Service (as defined in the IRC, as amended),
and shall continue in monthly installments thereafter until all 6 payments are
made.

 

(ii) 
In the event the value of the separation pay benefit shall exceed two times the
lesser of the Executive’s annualized compensation or the maximum amount that
may be taken into account for qualified plan purposes (in each case, as
determined in accordance with Treas. Reg. §1.409A-1(b)(9)(iii)(A)), the excess
shall not be paid as provided in (i), above, but instead shall be paid in 6
equal monthly installments commencing as of the first of the month after the
date that is six months after the Executive’s Separation from Service date.

 

(iii) 
In no event shall payments be accelerated, nor shall the Executive be eligible
to defer payments to a later date.

 

(e)                                  Resignation With Good Reason.  If the Executive resigns his employment for “Good
Reason” pursuant to Paragraph 4(e) of this Agreement, then the Company
shall pay the Executive the Severance Payment described in Section 5(d) above.
..  Following the resignation for Good
Reason, Executive shall continue to participate in all other benefit plans of
the Company during the Severance Period, except to the extent prohibited by law
or any applicable employee benefit plan. All Stock Options granted to Executive
prior to Executive’s departure for “Good Reason” shall remain vested and
exercisable for the period of time set forth in Executive’s Option Award
Agreement.  The Company shall continue to
vest options and stock awards during the Severance Period in accordance with
the vesting schedule set forth in Section 5(d) above (e.g. the same
as if Executive were Terminated for Cause). 
Thereafter, the Company shall have no further obligation to the
Executive under this Agreement.  Payment
of the Executive’s separation pay benefit under this Section 5(e) shall
be made in accordance with the payment provisions of Section 5(d),
above.  Payment of the Executive’s
separation pay benefit under this Section 5(e) shall be made in
accordance with the payment provisions of Section 5(d), above.

 

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(f)                                    Resignation Without Good Reason.  If the Executive resigns his employment
without “Good Reason” pursuant to Paragraph 4(f) of this Agreement, the
Company shall continue to pay the Executive his Annual Salary through the
effective date of the Resignation Notice unless the Executive is otherwise
terminated earlier pursuant to the terms of this Agreement.  At that time, Stock Options which have been
granted and have vested prior to the date of the Resignation Notice shall
remain vested and exercisable for the period of time specified in Executive’s
Option Award Agreement.  At the effective
time of the resignation without Good Reason, all unvested Stock Options shall
immediately be terminated.  Thereafter,
the Company shall have no further obligation to the Executive under this
Agreement.

 

(g)                                 Release of Claims.  As a condition for the payments as provided
in Sections 5(d) and 5(e) above, the Executive
must execute a release of all claims (including but not limited to state,
federal and foreign laws) that the Executive has or may have against the
Company, its directors, officers, employees, agents, representatives, its
affiliated companies (incorporated or otherwise) and the members of its board
of directors.  Such release shall be in
such form and include such provisions as the Company may require in its
reasonable discretion.  The payments provided
for in Sections 5(d) and 5(e) shall not be made until such release is
effective and is no longer subject to rescission under any applicable law.

 

6.              Change in Control.

 

(a)                                  In the event that the Executive’s employment hereunder ends either
voluntarily or by termination, in each case, upon, in anticipation of, or
within six (6) months following, a Change in Control (defined in Appendix
A), then in lieu of the benefits described in Section 5, the Executive
shall be entitled to receive the following benefits, provided, however that for
purposes of this Section 6(a), a termination will be deemed to occur “in
anticipation of a Change in Control” only if it occurs after the date on which
a Change in Control is formally proposed to the Company’s Board of Directors:

 

(i)                         any outstanding Stock Options shall become fully vested and exercisable
at the effective time of the Change of Control and shall remain exercisable for
at least the lesser of one year following such event and the maximum stated
term of such Stock Option;

 

(ii)                      any outstanding Restricted Shares shall become fully vested;

 

(iii)                   the
Executive shall be entitled to additional or other benefits (if any) in
accordance with the applicable terms of applicable plans, programs and
arrangements of the Company and its Affiliates.

 

(iv)                  the
Company shall promptly pay the Executive two times Executive’s then-current
Annual Compensation (based upon Executive’s then-current base salary and target
bonus) (two years constituting the “Amended Severance Period”) in lieu of the
severance governed by Section 5(d) or 5(e).

 

7

 

(b)                                             Payment of the Executive’s separation pay benefit under this Section 6
shall be made as follows:

 

(i)  Payment of the separation pay benefit
shall commence as of the 30th day after the Executive’s Separation from Service,
and shall continue in monthly installments thereafter until all 18 payments are
made.

 

(ii)  In the event the value of the
separation pay benefit shall exceed two times the lesser of the Executive’s
annualized compensation or the maximum amount that may be taken into account
for qualified plan purposes (in each case, as determined in accordance with
Treas. Reg. §1.409A-1(b)(9)(iii)(A)), the excess shall not be paid as provided
in (i), above, but instead shall be paid in 18 equal monthly installments commencing
as of the first of the month after the date that is six months after the
Executive’s Separation from Service date.

 

(iii)  In no event shall payments be
accelerated, nor shall the Executive be eligible to defer payments to a later
date.

 

(c)                                  If any portion of the payments which the Executive has the right to
receive from the Company, or any affiliated entity or successor, hereunder
would constitute “excess parachute payments” (as defined in Section 280G
of the Internal Revenue Code) subject to the excise tax imposed by Section 4999
of the Internal Revenue Code, such excess parachute payments shall be reduced
to the largest amount that will result in no portion of such excess parachute
payments being subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code.

 

7.                          Agreement Not to Compete or Solicit

 

(a)                                  Covenant Not to Compete.  The Employee hereby covenants and agrees that
at no time during the Term of Employment nor for a period of six (6) months
(such period to be eighteen (18) months in the case of a termination resulting
in payments pursuant to Section 6(a)(iv) ) immediately following the
termination of the Employee’s employment will he for himself or on behalf of
any other person, partnership, company or corporation, directly or indirectly,
acquire any financial or beneficial interest in (except as provided in the next
sentence), provide consulting or other services to, be employed by, or own,
manage, operate or control any entity engaged in the Business.  Notwithstanding the preceding sentence, the
Employee will not be prohibited from owning less than five percent (5%) of any
corporation, whether or not such corporation is in competition with the
Company.

 

(b)                                 Non-Solicitation.  The Employee hereby covenants and agrees
that, at all times during the Term of Employment and for a period of six (6) months
(such period to be one (1) year in the case of a termination resulting in
payments pursuant to Section 6(a)(ii)) immediately following the
termination thereof, the Employee will not directly or indirectly employ or
seek to employ any person or entity employed at that time by the Company or any
of its subsidiaries, or otherwise encourage or entice such person or entity to
leave such employment.

 

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(c)                                  Intellectual Property.  The Executive assigns to the
Company, without additional compensation, all right, title and interest in all
creations, inventions, ideas, designs, copyrightable materials, trademarks, and
other technology and rights (and any related improvements or modifications),
whether or not subject to patent or copyright protection (collectively, “Inventions”),
relating to the Business or any other activities of the Company that are
conceived or developed by the Executive in the course of his employment,
whether alone or with others, and, if based on Confidential Information, after
the termination of this Agreement for any reason.  Such Inventions shall be the sole property of
the Company and, to the maximum extent permitted by applicable law, shall be
deemed “works made for hire” as the term is used in the United States
Copyright Act.   The Executive may list
specific technologies that are to be excluded from Intellectual Property, as
listed in Exhibit A. The Executive shall provide evidence to the Company
of any assignment of any specific Invention as may be requested by the Company
from time to time.

 

8.                          Confidential Information.

 

The Employee agrees to keep secret and retain
in the strictest confidence all confidential matters which relate to the
Company or any affiliate of the Company, including, without limitation,
customer lists, client lists, trade secrets, pricing policies and other
business affairs of the Company and any affiliate of the Company learned by him
from the Company or any such affiliate or otherwise before or after the date of
this Agreement, and not to disclose any such confidential matter to anyone
outside the Company, or any of its affiliates, whether during or after his
period of service with the Company, except as may be required in the course of
a legal or governmental proceeding.  Upon
request by the Company, the Employee agrees to deliver promptly to the Company
upon termination of his services for the Company, or at any time thereafter as
the Company may request, all Company or affiliate memoranda, notes, records,
reports, manuals, drawings, designs, computer files in any media and other
documents (and all copies thereof) relating to the Company’s or any affiliate’s
business and all property of the Company or any affiliate associated therewith,
which he may then possess or have under his control.

 

9.                           Remedy.

 

(a)                                  Should the Employee engage in or perform, either directly or
indirectly, any of the acts prohibited by Sections 7 or 8 hereof, it is agreed
that any and all severance payments and related benefits hereunder shall
immediately terminate and the Company will also be entitled to full injunctive
relief, to be issued by any competent court of equity, enjoining and
restraining the Employee and each and every other person, firm, organization,
association, or corporation concerned therein, from the continuance of such
violative acts. The foregoing remedies available to the Company will not be
deemed to limit or prevent the exercise by the Company of any or all further
rights and remedies which may be available to the Company hereunder or at law
or in equity.

 

(b)                                 The Employee acknowledges and agrees that the covenants contained in
this Agreement are fair and reasonable in light of the consideration paid
hereunder, and the invalidity or unenforceability of any particular provision,
or part of any provision, of this Agreement will not affect the other
provisions or parts hereof.  If any
provision hereof is 

 

9

 

determined to be invalid or unenforceable and
if any such provision will be so determined to be invalid or unenforceable by
reason of the duration or geographical scope of the covenants contained
therein, such duration or geographical scope, or both, will be reduced to a
duration or geographical scope solely to the extent necessary to cure such
invalidity.

 

10.                     Miscellaneous.

 

(a)                                  Successors; Binding Agreement.  This Agreement and the
obligations of the Company under this Agreement and all rights of the Executive
under this Agreement shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns; provided,
however, that the duties of the Executive under this Agreement are personal to
the Executive and may not be delegated or assigned by him.

 

(b)                                 Notice.  All notices of termination and other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or mailed by United
States registered mail, return receipt requested, addressed as follows:

 

If to the Company:

 

MacroChem Corporation

80 Broad Street, 22nd Floor

New York, NY 10004

Attn: 
General Counsel

Tel: (212) 514-8094

Fax: (212) 514-8613

 

with a copy to:

 

Luke P. Iovine, III, Esq.

Paul, Hastings, Janofsky & Walker LLP

75 East 55th Street

New York, NY 10022

Tel: (212) 318-6000

Fax: (212) 319-4090

 

If to Executive:

 

David P. Luci, Esq.

270 Benedict Road

Staten Island, NY 10304

 

10

 

With a copy to:

 

William J. McSherry, Jr.

Crowell & Moring LLP

153 East 53rd Street, 31st
Floor

New York, New York 10022

Tel: (212) 895-4200

Fax: (212) 895-4201

 

or to such other address as either party may
designate by notice to the other, which notice shall be deemed to have been
given upon receipt.

 

(c)                                  Choice of Law; Disputes.  The validity, interpretation,
construction and performance of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflict of law rules thereof. 
Regardless of which party hereto initiates any dispute which may arise
under this Agreement, the non-prevailing party in any dispute hereunder shall
promptly pay and/or reimburse the prevailing party for any and all reasonable
costs and expenses incurred in bringing or defending such dispute, as
applicable, upon receipt of an order provided by a court of competent
jurisdiction whether or not such order is subject to further appeal. Any
accrued but unpaid amounts under this section shall accrue interest at the rate
of 12% per annum until such amounts are fully paid.

 

(d)                                 Waivers.  The waiver of either party hereto of any
right under this Agreement or of any failure to perform or breach by the other
party hereto shall not be deemed a waiver of any other right under this
Agreement or of any other failure or breach by the other party hereto, whether
of the same or a similar nature or otherwise. 
No waiver shall be deemed to have occurred unless set forth in writing
executed by or on behalf of the waiving party. 
No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.

 

(e)                                  Severability.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall otherwise remain in full
force and effect.  Moreover, if any one
or more of the provisions contained in this Agreement is held to be excessively
broad as to duration, scope or activity, such provisions shall be construed by
limiting and reducing them so as to be enforceable to the maximum extent
compatible with applicable law.

 

(f)                                    Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

 

(g)                                 Entire Agreement.  This Agreement sets forth the entire
agreement and understanding of the parties in respect of the subject matter
contained herein, and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of either party in respect
of said subject matter.

 

11

 

(h)                                 Modifications.  This Agreement may only be modified in a
writing signed by both the Company and the Executive.

 

(i)                                     Headings Descriptive.  The headings of the several
paragraphs of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any of this Agreement.

 

(j)                                     Capacity.  The Executive represents and warrants that he
is not a party to any agreement that would prohibit him from entering into this
Agreement or performing fully his obligations under this Agreement.

 

(k)                                  Survival.  The obligations and rights set forth in
Paragraphs 6, 7 and 8 shall survive the termination of this Agreement for any
reason.

 

[Signature Page Follows]

 

12

 

IN WITNESS WHEREOF, the Company and the
Executive have executed this Agreement as of the date first written above.

 

	
  The Company:

  	
   

  
	
   

  	
   

  
	
  MACROCHEM CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jeffrey B. Davis

  	
   

  
	
  Name: 

  	
  Jeffrey B. Davis

  	
   

  
	
  Title:

  	
  Chairman, Compensation Committee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Executive:

  	
   

  
	
   

  	
   

  
	
  /s/ David P. Luci, Esq.

  	
   

  
	
   

  	
   

  
	
  David P. Luci, Esq.

  	
   

  
				

 

 

APPENDIX
A

 

(1)          “Affiliate”
of a Person shall mean any Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person.

 

(2)          “Agreement”
shall mean this Employment Agreement, which includes for all purposes its
Exhibits.

 

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

 

(4)          “Board
shall mean the Board of Directors of the Company.

 

(5)          “Change in Control” shall mean the occurrence of any of the following events:

 

a.                                       any “person,” as such term is currently used in Section 13(d) of
the 1934 Act, becomes (directly or indirectly) a “beneficial owner,” as
such term is currently used in Rule 13d-3 promulgated under that Act, of a
percentage of the Voting Securities of the Company, measured either by number
of Voting Securities or by number of votes entitled to be cast, that is at
least 30 percentage points larger
than the percentage (if any) of the Voting Securities of the Company, measured
in either fashion, that such person beneficially owned (directly or indirectly)
on the Effective Date, unless the acquisition of such Voting Securities is
approved by a majority of Incumbent Directors (as defined below);

 

b.                                      a majority of the Board consists of individuals other than “Incumbent
Directors,” which term means the members of the Board on the Effective
Date; provided that any individual becoming a director subsequent to
such date whose election or nomination for election was supported by two-thirds
of the directors who then comprised the Incumbent Directors shall be considered
to be an Incumbent Director; or

 

c.                                       (x) the Company combines with another entity and is the surviving
entity, or (y) all or substantially all of the assets or business of the
Company is disposed of pursuant to a sale, merger, consolidation, liquidation
or other transaction or series of transactions, in each of cases (x) or
(y), unless the holders of Voting Securities of the Company immediately
prior to such combination, sale, merger, consolidation, liquidation or other
transaction or series of transactions (collectively, a “Triggering Event”) own,
directly or indirectly and immediately following such Triggering Event, more
than fifty percent (50%) of the Voting Securities (measured both by number of
securities and by voting power) of: (q) in the case of a combination in
which the Company is the surviving entity, the surviving entity and (r) in
any other case, the entity (if any) that succeeds to substantially all of the
business and assets of the Company.

 

14

 

(6)          “Code”
shall mean the Internal Revenue Code of 1986, as amended.  Any reference to a particular section of the
Code shall include any provision that modifies, replaces or supersedes such
section.

 

(7)          “Company”
shall have the meaning set forth in the preamble to this Agreement.

 

(8)          “Effective Date”
shall have the meaning specified in the preamble of this Agreement.

 

(9)          “Executive”
shall have the meaning set forth in the preamble to this Agreement.

 

(10)    “Person”
shall mean any individual, corporation, partnership, limited liability company,
joint venture, trust, estate, board, committee, agency, body, employee benefit
plan, or other person or entity.

 

(11)    “Proceeding”
shall mean any actual, threatened or reasonably anticipated action, suit or
proceeding, whether civil, criminal, administrative, investigative, appellate,
formal, informal or other.

 

(12)    “Restricted Shares”
shall mean any compensatory restricted securities of the Company or any of its
Affiliates; any compensatory share units, phantom securities or analogous
rights granted by or on behalf of the Company or any of its Affiliates; and any
security or right received in respect of any of the foregoing securities or
rights.

 

 (13)                         “Stock Option”
or “Stock Options” shall mean any
compensatory option to acquire securities of the Company or of any of its
Affiliates; any compensatory stock appreciation right, phantom stock option or
analogous right granted by or on behalf of the Company or any of its Affiliates;
and any security or right received in respect of any of the foregoing options
or rights.

 

(14)    “Term of Employment”
shall mean the period specified in Section 2.

 

(15)    “Termination Date”
shall mean the date on which the Executive’s employment hereunder terminates in
accordance with this Agreement.

 

(16)    “Voting Securities”
shall mean issued and outstanding securities of any class or classes having
general voting power, under ordinary circumstances in the absence of
contingencies, to elect one or more members of the Board of the issuer.

 

15Exhibit
10.1

 

Employment
Agreement

 

This Employment Agreement (the “Agreement”)
dated as of May 9, 2008 and effective June 16, 2008 (the “Effective
Date”), is made by and between Hawaiian Telcom Holdco, Inc. (together
with any successor thereto, the “Company”) and Eric K. Yeaman (the “Executive”).

 

RECITALS

 

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

 

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

 

AGREEMENT

 

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

 

1.     Certain
Definitions.

 

(a)                                  “Affiliate”
shall mean, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with, such Person where “control”
shall have the meaning given such term under Rule 405 of the Securities
Act.  For the purpose of the Plan and
Agreement, Affiliates of Carlyle Partners III, L.P., a Delaware limited
partnership, shall include all Persons directly or indirectly controlled by TC
Group, LLC, a Delaware limited liability company.

 

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

 

(c)                                  “Board”
shall mean the Board of Directors of the Company.

 

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

 

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

 

(ii)           Executive’s gross
or willful misconduct in the performance of duties that causes or is reasonably
likely to cause damage to the Company;

 

(iii)          Executive’s  conviction of a felony or crime involving
material dishonesty or moral turpitude;

 

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

 

 

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

 

(e)                                  “Change
in Control” shall mean a change in ownership or control of the Company
effected through a transaction or series of transactions (other than an
offering of Common Stock to the general public through a registration statement
filed with the Securities and Exchange Commission) whereby any “person” or
related “group” of “persons” (as such terms are used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”))
(other than the Company, any of its subsidiaries, an employee benefit plan
maintained by the Company or any of its subsidiaries, a Principal Stockholder ,
any Affiliate of a Principal Stockholder or a “person” that, prior to such
transaction, directly or indirectly controls, is controlled by, or is under
common control with, the Company or a Principal Stockholder) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company possessing more than fifty percent
(50%) of the total combined voting power of the Company’s securities
outstanding immediately after such acquisition; provided, that the transaction
or event described in this subsection constitutes a “change in control event,”
as defined in Treasury Regulation §1.409A-3(i)(5).

 

(f)                                    “Common
Stock” shall mean the common stock, par value $0.01 per share, of the
Company.

 

(g)                                 “Company”
shall have the meaning set forth in the preamble hereto.

 

(h)                                 “Compensation
Committee” means the Compensation Committee of the Board.

 

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

 

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

 

(k)                                  “Executive”
shall have the meaning set forth in the preamble hereto.

 

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

 

2

 

(m)                               “Exit Event” shall mean any disposition of (a) a
debt interest in the Company by any of the Principal Stockholders, Carlyle
Partners IV, L.P. or Carlyle Partners V, L.P. or any of their respective
co-investment vehicles or (b) an
equity interest in the Company by any of the Principal Stockholders or any of
their Affiliates.

 

(n)                                 (i)            The
Executive shall have “Good Reason” to resign his employment during the six
month period which follows the occurrence of any of the following:

 

(A)          failure of
the Company to continue the Executive in the position of President and Chief
Executive Officer;

 

(B)           a material
diminution in the nature or scope of the Executive’s responsibilities, duties
or authority;

 

(C)           failure of
the Principal Stockholders to satisfy their requirements pursuant to Section 2(c)
of this Agreement;

 

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

 

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

 

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

 

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

 

(A)          the
Executive provided the Company with at least 30 days prior written notice of
his intent to resign for Good Reason (which notice must be provided within 90
days following the occurrence of the event(s) purported to constitute Good
Reason); and

 

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

 

(o)                                 “Qualified
Initial Public Offering” shall mean the consummation of an underwritten
public offering of Common Stock pursuant to an effective registration statement
under the Securities Act of 1933 (the “Securities Act”) on Form S-1
(as defined in the Securities Act) or any comparable or successor form or forms
with aggregate gross proceeds to the Company of not less than $100 million and
resulting in the listing of the Common Stock on a national securities
exchange.  For the avoidance of doubt,
there can only be one Qualified Initial Public Offering.

 

(p)                                 “Inventions”
shall have the meaning set forth in Section 8.

 

3

 

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

 

(r)                                    “Principal
Stockholder Proceeds” shall have the meaning set forth in Section 3(c).

 

(s)                                  “Principal
Stockholders” shall mean Carlyle Partners III, L.P. a Delaware limited
partnership and any of its related co-investment vehicles.

 

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

 

2.     Employment.

 

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

 

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

 

(c)                                  Position and
Duties.

 

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

 

(ii)           As of the Effective Date, the
Principal Stockholders shall cause the Executive to be appointed or elected to
the Board and the boards of directors of those subsidiaries of the Company set
forth on Exhibit A hereto.  During
the Term, the Board shall propose the Executive for re-election to the Board
and the 

 

4

 

Principal
Stockholders shall vote all of their shares of Common Stock in favor of such
re-election.

 

3.     Compensation
and Related Matters.

 

(a)                                  Annual Base
Salary.  During the Term, the
Executive shall receive a base salary at a rate of $600,000 per annum, which
shall be paid in accordance with the customary payroll practices of the
Company, subject to any increase as determined at least annually by the
Compensation Committee in its sole discretion (the “Annual Base Salary”).  Annual Base Salary may be increased, but not
decreased, from time to time by the Board.

 

(b)                                 Annual
Performance Bonus. 
During the Term, the Executive will participate in an annual performance-based
bonus plan (“Executive Bonus Plan”) established by the Compensation
Committee at a target level of 100% of the Executive’s Annual Base Salary paid
in the applicable year (“Target Level”), subject to a maximum level of
200% of the Executive’s Annual Base Salary. 
Such bonus (the “Annual Bonus”) shall be payable at such time as
bonuses are paid to other senior executive officers who participate
therein.  The
actual amount, if any, of such Annual Bonus for each such fiscal year shall be
determined based upon the Company’s attainment of reasonable performance goals
approved by the Board in its sole discretion. 
Notwithstanding the foregoing, the Annual Bonus with respect to the
fiscal year ending December 31, 2008 shall be calculated as though the
Executive had been employed by the Company for the full fiscal year 2008 and
shall be a minimum of $450,000.  Each
such Annual Bonus shall be payable on such date as is determined by the Board  after
the Board determines that the performance goals have been met; provided
that such bonus payment date shall be not later than 90 days following the end
of the applicable fiscal year. 
Notwithstanding any other provision of this Section 3(b), no
bonus shall be payable pursuant to this Section 3(b) unless the
Executive remains continuously employed with the Company through the applicable
bonus payment date or his employment has been terminated after the close of the
applicable fiscal year pursuant to Sections 4(a)(i), (ii), (iv) or
(v).

 

(c)                                  Realization
Bonus.

 

(i)            (A)          With respect to the first Change in
Control which closes prior to the closing of any Qualified Initial Public
Offering, Executive shall be paid a cash bonus (a “Realization Bonus”)
equal to the product of (1) 4.75% and (2) the Vested Percentage and (3) the
Principal Stockholder Proceeds with respect thereto.

 

                                (B)           With respect to each Exit Event which
follows a Change in Control but which closes prior the closing of a Qualified
Initial Public Offering, Executive shall be paid a Realization Bonus equal to
the product of (1) 4.75% and (2) the Vested Percentage and (3) the
Principal Stockholder Proceeds with respect thereto.

 

5

 

              (C)           If the Exit Event which constitutes the complete
disposition of the Principal Stockholders’ (or any of their Affiliates’) equity
and debt interest in the Company (i) occurs prior to any Qualified Initial
Public Offering and (ii) the total of the Realization Bonuses paid to the
Executive pursuant to that and all prior Exit Events (the “Realization Bonus
Total”) is less than $5 million, then with respect to such Exit Event,
Executive shall be paid an amount equal to the positive excess of (x) the
product of the Bonus Vested Percentage and 
$5 million over (y) the Realization Bonus Total. For the avoidance
of doubt, no Realization Bonus will be paid with respect to any Change in
Control or other Exit Event which follows a Qualified Initial Public
Offering.  If the Executive requests, the
Company will arrange for a third party guarantee of the payment described in
this Section 3(c)(i)(C).

 

(ii)           (x)            The “Vested Percentage” shall
(A) initially be zero and shall increase by 25% on each of the first four
anniversaries of the Effective Date on which Executive remains employed
hereunder; (B) if the Executive’s employment is terminated by the Company
without Cause or by the Executive for Good Reason, be increased by one-half of
the difference between the otherwise applicable Vested Percentage and 100%, and
(C) with respect to a Change in Control or Qualified Initial Public
Offering, be 100% if the Executive remains employed hereunder on the date of
such event.

 

                                (y)           The “Bonus Vested Percentage”
shall (A) initially be zero, (B) be 100% if the Executive is employed
hereunder on the earliest of (1) the third anniversary of the Effective
Date, (2) the Exit Event which constitutes the complete disposition of the
Principal Stockholders’ (or any of their Affiliates’) equity and debt interest
in the Company, and (3) any Change in Control or Qualified Initial Public
Offering, and (C) be equal to the Vested Percentage if, prior to the
earliest to occur of the events described in (B), the Executive’s employment is
terminated by the Company without Cause or by the Executive for Good Reason.

 

(iii)          The
Principal Stockholder Proceeds with respect to an Exit Event will be determined
pursuant to the following rules:

 

                                (A) The
Principal Stockholder Proceeds with respect to an Exit Event which is not a
Change in Control shall be equal to the excess
of (1) the aggregate fair market value of all consideration received
(excluding any management or similar fees, but including any transaction
bonuses) by the Principal Stockholders in connection with an Exit Event after
taking into account all post closing adjustments over (2) the value of
payments under Sections 3(c), and (d) hereof (and similar
provisions of agreements with other service providers to the Company) made or
to be made with respect to such Exit Event (treating the spread on stock
options which become exercisable by reason of such Exit Event as a “payment”
hereunder (calculated on the date the options first became exercisable)), provided,
however, that if the Executive terminates employment hereunder prior to the
last Exit Event, the Principal Stockholder Proceeds with 

 

6

 

respect
to any future Exit Events shall not be higher than the amount determined as if
the 100% of the Company’s equity were sold, as of the date of such termination,
to a third party in an arm’s length transaction (the “Value”).  If the parties cannot agree on the amount of
the Value, then the Value shall be determined by appraisal based on the
following procedure (the “Valuation Procedure”): (1) the Value shall be determined in good faith by the Board in its sole
discretion; (2) if the Executive disagrees with such determination by the
Company, he shall provide written notice of such disagreement to the Company
within 10 days of receipt of written notice of the Company’s determination; (3) the
Company shall engage an investment banking firm or independent appraiser
mutually acceptable to the Company and the Executive to determine the Value and
the determination of such firm or appraiser shall be final and binding upon the
Company and the Executive and shall not be subject to appeal or arbitration;
and (4) the costs and expenses incurred in connection with the
determination made by the investment banking firm or independent appraiser
shall be paid by the Company; provided, however, that if the Value as
determined by the investment banking firm or independent appraiser is not more
than 10% higher or lower than the Value as previously determined by the
Company, then all such costs and expenses shall be paid by the Executive.

 

                                (B) The
Principal Stockholder Proceeds with respect to the first Change in Control
shall be the sum of the Principal Stockholder Proceeds with respect to the Exit
Event which is such Change in Control and the Principal Stockholder Proceeds
with respect to any prior Exit Events which had not previously been taken into
account under this Section 3(c)(iii)(B).

 

                (iv)          Payment of the Realization Bonus with respect to the first
Change in Control or any other Exit Event shall be made within 30 days
following (but in no event later than the last day of the calendar year in
which occurs) the first day upon which the calculation of the amount of the
payment is administratively practicable.

 

(d)                                 Stock Option.        As of the Effective Date the Company
shall grant the Executive an option (a “Stock Option”) to purchase
42,800 shares of the Common Stock at a price of $100.00 per share, which shall
not be less than the fair market value of a share of Common Stock as of the
date of grant.  Such grant shall be made
pursuant to the Stock Option Plan of Hawaiian Telcom Holdco, Inc. and a
form of stock option grant agreement containing the Company’s customary terms
and the following terms:

 

(i)            The Stock
Option shall only become exercisable if a Qualified Initial Public Offering
occurs prior to the complete disposition of the Principal Stockholders’ (and
any of their Affiliates’) equity and debt interest in the Company. Upon such
Qualified Initial Public Offering, the Stock Option shall become exercisable
with respect to the lesser of (A) the total number of shares of Common
Stock covered by such option and (B) the number of shares of Common Stock
equal to the ratio of (1) the greater of (x) 4.75% of the Vested
Percentage of 

 

7

 

the
Deemed Proceeds and (y) the positive excess of (xx) the product of  the Bonus Vested Percentage and $5 million
over (yy) the total of all Realization Bonuses paid to Executive  to (2) the positive excess of (x) the
initial gross public offering price (i.e. without reduction for underwriting
discounts or commissions or any other reduction) over (y) $100.00; where “Deemed
Proceeds” are equal to the Principal Stockholder Proceeds that would have
obtained had 100% of the equity had been sold in a Change in Control
transaction at the price derived from the initial gross public offering price,
provided, however, that if the Executive’s employment is terminated hereunder
prior to a Qualified Initial Public Offering, the Deemed Proceeds with respect
to the Qualified Initial Public Offering shall not be higher than the amount
determined as if the Qualified Initial Public Offering closed as of the date of
such termination.  If the parties cannot
agree on this amount then it shall be determined by the Valuation Procedure
described in Section 3(c)(i)(A).

 

(ii)           The Stock
Option shall cease to be exercisable in any respect on the tenth anniversary of
the Effective Date and, for the avoidance of doubt, shall also cease to be
exercisable on the closing of any Qualified Initial Public Offering except to
the extent described in subsection (d)(ii).

 

(iii)          Example: Assume a Qualified Initial
Public Offering with a gross offering price of $11.00 per share (following a
100 to 1 stock split) which produces Deemed Proceeds of $400 million. Assume
further that the total of prior Realization Bonuses is $2 million and that the
Vested Percentage is 100%. The Option will become exercisable with respect to
the number of shares of Common Stock equal to the ratio of (A) the greater
of (1) $19 million [4.75% of $400 million] and (2) $3 million [the
excess of $5 million over $2 million] to (B) $10.00 [the excess of $11.00
over $1.00] , or 1.9 million shares of Common Stock [assuming that this number
is less than the total number of shares of Common Stock covered by the Option].
The Option will thereupon be forfeited with respect to any other shares of
Common Stock.

 

(e)                                  Benefits.  The Executive shall be entitled to
participate in all employee benefit plans, programs and arrangements of the
Company which are applicable to the senior officers of the Company at a level
commensurate with the Executive’s position, including
without limitation health insurance and retirement programs.

 

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

 

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

 

8

 

4.     Termination.

 

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

 

(a)                                  Circumstances.

 

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

 

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

 

(iii)                               Termination
for Cause.  The Board may
terminate the Executive’s employment for Cause.

 

(iv)                              Termination
without Cause.  The Board may
terminate the Executive’s employment without Cause.

 

(v)                                 Resignation
for Good Reason. 
The Executive may resign his employment for Good Reason.

 

(vi)                              Resignation
without Good Reason. 
The Executive may resign his employment without Good Reason.

 

(b)                                 Notice of
Termination.  Any
termination of the Executive’s employment by the Company or by the Executive
under this Section 4 (other than termination pursuant to paragraph
(a)(i)) shall be communicated by a written notice to the other party hereto
indicating the specific termination provision in this Agreement relied upon,
setting forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment under the
provision so indicated, and specifying a Date of Termination which, if
submitted by the Executive, shall be at least 30 days following the date of
such notice (a “Notice of Termination”) provided, however,
that the Company may, in its sole discretion, change the Date of Termination to
any date following the Company’s receipt of the Notice of Termination.  A Notice of Termination submitted by the
Company may provide for a Date of Termination on the date the Executive
receives the Notice of Termination, or any date thereafter elected by the
Company in its sole discretion.  The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Cause or
Good Reason shall not waive any right of the Executive or the Company hereunder
or preclude the Executive or the Company from asserting 

 

9

 

such
fact or circumstance in enforcing the Executive’s or the Company’s rights
hereunder.

 

(c)                                  Company
obligations upon termination. 
Subject to Section 5, upon termination of the Executive’s
employment, the Executive (or the Executive’s estate) shall be entitled to
receive a lump sum equal to the Executive’s Annual Base Salary through the Date
of Termination not theretofore paid, any bonus if declared or earned but not
yet paid for a completed fiscal year, any expenses owed to the Executive, any
accrued vacation pay owed to the Executive, and any amount arising from the
Executive’s participation in, or benefits under any employee benefit plans,
programs or arrangements, which amounts shall be payable in accordance with the
terms and conditions of such employee benefit plans, programs or arrangements.

 

5.     Severance Payments.

 

(a)                                  Termination
due to death, Disability, for Cause or resignation without Good Reason.  If the Executive’s employment shall terminate
pursuant to Sections 4(a)(i), (ii), (iii) or (vi), the Executive
shall not be entitled to any severance payment or benefits (other than as
expressly provided for herein or under any benefit plan).

 

(b)                                 Termination
without Cause or resignation for Good Reason .  If the Executive’s employment is terminated
by the Company without Cause pursuant to Section 4(a)(iv) or
the Executive resigns his employment for Good Reason pursuant to Section 4(a)(v),
the Company shall, so long as Executive executes and does not revoke a general
release in the Company’s customary form (the “Release”), pay the
Executive a lump-sum amount equal to three times the sum of the Executive’s
Annual Base Salary and his Target Level Annual Bonus. Additionally, if the
Executive is employed on the last day of the fiscal year and his employment is
terminated by the Company without Cause pursuant to Section 4(a)(iv) or
the Executive resigns his employment for Good Reason pursuant to Section 4(a)(v) following
such date but before the date of payment of the Annual Bonus and the Executive
has not yet been paid his Annual Bonus, such lump sum amount described in the
preceding sentence shall also include his earned but not yet paid Annual Bonus.
The payments described in this Section 5(b) will be made
within 30 days following the Date of Termination, but following the expiration
of Executive’s period to revoke the Release.

 

(c)                                  Notwithstanding
any provision to the contrary in this Agreement: (i) no amount shall be
payable pursuant to Section 5(b) unless the Executive’s
termination of employment constitutes a “separation from service” within the
meaning of Section 1.409A-1(h) of the Department of Treasury
Regulations.  If the Executive is deemed
at the time of his separation from service to be a “specified employee” for
purposes of Section 409A(a)(2)(B)(i) of the Internal Revenue Code of
1986, as amended (the “Code”), to the extent delayed commencement of any
portion of the termination benefits to which Executive is entitled under this
Agreement is 

 

10

 

required
in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of
the Code, such portion of Executive’s termination benefits shall not be
provided to Executive prior to the earlier of (i) the expiration of the
six-month period measured from the date of the Executive’s “separation from
service” with the Company (as such term is defined in the Treasury Regulations
issued under Section 409A of the Code) or (ii) the date of Executive’s
death.  Upon the earlier of such dates,
all payments deferred pursuant to this Section 5(c) shall be
paid in a lump sum to the Executive (together with interest for the period such
payments are deferred pursuant to this Section 5(c), with such
interest to accrue at the prime rate in effect at Citibank, N.A. at the time of
the separation from service), and any remaining payments due under the
Agreement shall be paid as otherwise provided herein.  The
determination of whether the Executive is a “specified employee” for
purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of
his separation from service shall made by the Company in accordance with the
terms of Section 409A of the Code and applicable guidance thereunder
(including without limitation Treasury Regulation Section 1.409A-1(i) and
any successor provision thereto).

 

(d)                                 Survival.  The expiration or termination of the Term
shall not impair the rights or obligations of any party hereto, which shall
have accrued prior to such expiration or termination.

 

(e)                                  Mitigation.  The Executive shall have no duty to mitigate
the amount of any payment provided for hereunder by seeking other employment,
and any income earned by the Executive from other employment or self-employment
shall not be offset against any obligations of the Company to the Executive
hereunder.

 

6.     Competition.

 

(a)                                  The
Executive shall not, at any time during the Term or during the 24-month period
following the later of the expiration of the Term or the Date of Termination
directly or indirectly engage in, have any equity interest in, or manage or
operate any person, firm, corporation, partnership or business (whether as
director, officer, employee, agent, representative, partner, security holder,
consultant or otherwise) that engages in any business which competes with any
business of the Company or any entity owned by the Company whose financial
results are material to the Company anywhere in the United States provided,
however, that the Executive shall be permitted to acquire a passive stock
or equity interest in such a business provided the stock or other equity
interest acquired is not more than five percent (5%) of the outstanding
interest in such business.  Nothing
herein shall prevent the Executive from engaging in any activity with, or
holding any financial interest in, a non-competitive division, subsidiary or
affiliate of an entity engaged in a business that competes with the Company.

 

(b)                                 During the
Term and during the term set forth in Section 6(a), the Executive
will not, except in the performance of his duties for the Company, and will not
knowingly permit any of his affiliates to, directly or indirectly, recruit or 

 

11

 

otherwise solicit or induce any non-clerical employee,
customer, subscriber or supplier of the Company to terminate its employment or
arrangement with the Company, otherwise change its relationship with the
Company, or establish any relationship with the Executive or any of his
affiliates for any business purpose that is prohibited by subsection (a)
above.  Nothing herein shall prevent the
Executive from serving as a reference.

 

(c)                                  In the event the terms of this Section 6
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time or over too great a
geographical area or by reason of its being too extensive in any other respect,
it will be interpreted to extend only over the maximum period of time for which
it may be enforceable, over the maximum geographical area as to which it may be
enforceable, or to the maximum extent in all other respects as to which it may
be enforceable, all as determined by such court in such action.

 

(d)                                 As used in this Section 6,
the term “Company” shall include the Company, its parent and any of its direct
or indirect subsidiaries whose financial results are material to the Company.

 

7.     Nondisclosure
of Proprietary Information.

 

(a)                                  Except as required in the faithful
performance of the Executive’s duties hereunder or pursuant to Section 7(c),
the Executive shall, in perpetuity, maintain in confidence and shall not
directly, indirectly or otherwise, use, disseminate, disclose or publish, or
use for his benefit or the benefit of any person, firm, corporation or other
entity any confidential or proprietary information or trade secrets of or
relating to the Company, including, without limitation, information with
respect to the Company’s operations, processes, products, inventions, business
practices, finances, principals, vendors, suppliers, customers, potential
customers, marketing methods, costs, prices, contractual relationships,
regulatory status, compensation paid to employees or other terms of employment,
or deliver to any person, firm, corporation or other entity any document,
record, notebook, computer program or similar repository of or containing any
such confidential or proprietary information or trade secrets.  The parties hereby stipulate and agree that
as between them the foregoing matters are important, material and confidential
proprietary information and trade secrets and affect the successful conduct of
the businesses of the Company (and any successor or assignee of the Company).

 

(b)                                 Upon termination of the Executive’s
employment with the Company for any reason, the Executive will promptly deliver
to the Company all correspondence, drawings, manuals, letters, notes,
notebooks, reports, programs, plans, proposals, financial documents, or any other
documents concerning the Company’s customers, business plans, marketing
strategies, products or processes that are in his possession, custody or
control. The Executive shall be permitted to retain his rolodex (and similar
address and telephone directories).

 

12

 

(c)                                  The Executive may respond to a
lawful and valid subpoena or other legal process but shall: (i) give the
Company the earliest reasonably possible notice thereof, (ii) as much
reasonably in advance of the return date as possible, make available to the
Company and its counsel the documents and other information sought, and (iii) reasonably
assist (the “Assistance”) such counsel in resisting or otherwise
responding to such process.  The Company
shall reimburse the Executive for all reasonable expenses he incurs in
providing such Assistance. 
Notwithstanding Section 7(a), the Executive may use or
disclose information that is public knowledge.

 

(d)                                 As used in this Section 7,
the term “Company” shall include the Company, its parent and any of its direct
or indirect subsidiaries.

 

8.     Inventions.

 

All rights to discoveries, inventions, improvements and innovations
(including all data and records pertaining thereto) directly related to the
Company’s business, whether or not patentable, copyrightable, registrable as a
trademark, or reduced to writing, that the Executive may discover, invent or
originate during the Term, either alone or with others and whether or not
during working hours or by the use of the facilities of the Company (“Inventions”),
shall be the exclusive property of the Company. The Executive shall promptly
disclose all Inventions to the Company, shall execute at the request of the
Company any assignments or other documents the Company may deem necessary to
protect or perfect its rights therein, and shall assist the Company, at the
Company’s expense, in obtaining, defending and enforcing the Company’s rights
therein. The Executive hereby appoints the Company as his attorney-in-fact to
execute on his behalf any assignments or other documents deemed necessary by
the Company to protect or perfect its rights to any Inventions.

 

9.     Non-Disparagement.

 

The Executive agrees not to disparage the Company, any of its products
or practices, or any of its directors, officers, agents, representatives,
stockholders or affiliates, either orally or in writing, at any time.  The Company agrees to instruct its executives
and the members of its Board not to disparage the Executive, either orally or
in writing, at any time. The foregoing provisions of this paragraph 9 shall not
preclude any party from giving truthful testimony in any proceeding or
otherwise complying with applicable law.

 

10.  Injunctive
Relief.

 

It is recognized and acknowledged by the Executive that a breach of the
covenants contained in Sections 6, 7, 8 and 9 will cause irreparable
damage to Company and its goodwill, the exact amount of which will be difficult
or impossible to ascertain, and that the remedies at law for any such breach
will be inadequate.  Accordingly, the
Executive agrees that in the event of a breach of any of the covenants
contained in Sections 6, 7, 8 and 9, in addition to any other remedy
which may be available at law or in equity, the Company will be entitled to
specific performance and injunctive relief.

 

13

 

11.  Assignment
and Successors.

 

The Company may assign its
rights and obligations under this Agreement to any entity, including any
successor to all or substantially all the assets of the Company, by merger or
otherwise, and may assign or encumber this Agreement and its rights hereunder
as security for indebtedness of the Company and its affiliates, provided said
successor entity assumes all of the obligations of the Company hereunder.  The Executive may not assign his rights or
obligations under this Agreement to any individual or entity, except his estate
upon his death.  This Agreement shall be binding
upon and inure to the benefit of the Company, the Executive and their respective
successors, assigns, personnel and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.

 

12.  Governing
Law.

 

This Agreement shall be
governed, construed, interpreted and enforced in accordance with the
substantive laws of the state of New York, without reference to the principles
of conflicts of law of New York or any other jurisdiction, and where
applicable, the laws of the United States.

 

13.  Notices.

 

Any notice, request, claim, demand, document and other communication
hereunder to any party shall be effective upon receipt (or refusal of receipt)
and shall be in writing and delivered personally or sent by telex, telecopy,
overnight courier service or certified or registered mail, postage prepaid, as
follows:

 

	
  (a)

  	
  If to
  the Company:

  
	
   

  	
   

  
	
   

  	
  The Carlyle
  Group

  
	
   

  	
  1001
  Pennsylvania Avenue, N.W.

  
	
   

  	
  Suite 200

  
	
   

  	
  Washington, D.C.
  20004

  
	
   

  	
  Fax: (202)
  347-1692

  
	
   

  	
  Attn: William E.
  Kennard

  
	
   

  	
   

  
	
   

  	
  The Carlyle
  Group

  
	
   

  	
  520 Madison
  Avenue

  
	
   

  	
  42nd
  Floor

  
	
   

  	
  New York, N.Y.
  10022

  
	
   

  	
  Fax: (212)
  381-4845

  
	
   

  	
  Attn: James A.
  Attwood, Jr.

  
	
   

  	
   

  
	
   

  	
  and a copy to:

  
	
   

  	
   

  
	
   

  	
  Latham &
  Watkins LLP

  
	
   

  	
  885 Third Avenue

  
	
   

  	
  New York, New
  York 10022

  

 

14

 

	
   

  	
  Fax: (212)
  751-4864

  
	
   

  	
  Attn: Jed W.
  Brickner

  
	
   

  	
   

  
	
  (b)

  	
  If to
  the Executive:

  
	
   

  	
   

  
	
   

  	
  Eric K. Yeaman

  
	
   

  	
  647 Ulumaika Street

  
	
   

  	
  Honolulu, Hawaii 96816

  

 

or at any other address as any party shall have specified by notice in
writing to the other party.

 

14.  Counterparts.

 

This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will constitute
one and the same Agreement.

 

15.  Entire
Agreement.

 

The terms of this Agreement and the other agreements and instruments
contemplated hereby or referred to herein (collectively the “Related
Agreements”) are intended by the parties to be the final expression of
their agreement with respect to the employment of the Executive by the Company
and may not be contradicted by evidence of any prior or contemporaneous
agreement.  The parties further intend
that this Agreement and the Related Agreements shall constitute the complete
and exclusive statement of their terms and that except as required by
applicable law no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding to vary the terms of this
Agreement and the Related Agreements.

 

16.  Amendments;
Waivers.

 

This Agreement may not be modified, amended, or terminated except by an
instrument in writing, signed by the Executive and a duly authorized officer of
Company.  By an instrument in writing
similarly executed, the Executive or a duly authorized officer of the Company
may waive compliance by the other party or parties with any provision of this
Agreement that such other party was or is obligated to comply with or perform, provided,
however, that such waiver shall not operate as a waiver of, or estoppel
with respect to, any other or subsequent failure.  No failure to exercise and no delay in
exercising any right, remedy, or power hereunder preclude any other or further
exercise of any other right, remedy, or power provided herein or by law or in
equity.

 

17.  No
Inconsistent Actions.

 

The
parties hereto shall not voluntarily undertake or fail to undertake any action
or course of action inconsistent with the provisions or essential intent of
this Agreement.  Furthermore, it is the
intent of the parties hereto to act in a fair and reasonable manner with
respect to the interpretation and application of the provisions of this
Agreement.

 

15

 

18.  Construction.

 

This
Agreement shall be deemed drafted equally by both the parties. Its language
shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the
language is to be construed against any party shall not apply.  The headings in this Agreement are only for
convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs,
sections or subsections are to those parts of this Agreement, unless the
context clearly indicates to the contrary. 
Also, unless the context clearly indicates to the contrary, (a) the
plural includes the singular and the singular includes the plural; (b) “and”
and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,”
“each,” or “every” means “any and all,” and “each and every”; (d) “includes”
and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder”
and other similar compounds of the word “here” refer to the entire Agreement
and not to any particular paragraph, subparagraph, section or subsection; and (f) all
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the entities or persons
referred to may require.

 

19.  Arbitration.

 

In
the event that any dispute arises between the Company and the Executive
regarding or relating to this Agreement and/or any aspect of the Executive’s
employment relationship with the Company, AND IN LIEU OF LITIGATION AND A TRIAL
BY JURY, the parties consent to resolve such dispute through mandatory
arbitration before a single arbitrator in New York, New York to be administered
by JAMS in accordance with its rules then in effect.  Judgment may be entered on the arbitration
award in any court having jurisdiction, provided, however, that
the Company shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any continuation of any violation of
the provisions of Sections 6, 7, 8 or 9 of the Agreement and the
Executive hereby consents that such restraining order or injunction may be
granted without requiring the Company to post a bond. In the event action is
brought to enforce the provisions of this Agreement pursuant to this Section 19,
the non-prevailing parties shall be required to pay the reasonable attorney’s
fees and expenses of the prevailing parties to the extent determined to be
appropriate by the arbitrator, acting in its sole discretion The parties hereby
consent to the exclusive jurisdiction in the state and Federal courts of or in
the State of New York for purposes of seeking such injunctive or equitable
relief as set forth above.  Within 20
days of the closure of the arbitration record, the arbitrator shall prepare
written findings of fact and conclusions of law.  It is mutually agreed that the written
decision of the arbitrator shall be valid, binding, final and non-appealable,
provided however, that the parties hereto agree that the arbitrator shall not
be empowered to award punitive damages against any party to such
arbitration.  The arbitrator shall
require the non-prevailing party to pay the arbitrator’s full fees and expenses
or, if in the arbitrator’s opinion there is no prevailing party, the arbitrator’s
fees and expenses will be borne equally by the parties thereto.

 

20.  Code Section 409A.

 

The parties hereto acknowledge and agree that, to the
extent applicable, this Agreement shall be interpreted in accordance with, and
incorporate the terms and conditions required by, Section 409A of the Code
and the Department of Treasury Regulations and other interpretive 

 

16

 

guidance issued thereunder, including without limitation any such
regulations or other guidance that may be issued after the Effective Date.  Notwithstanding any provision of this
Agreement to the contrary, in the event that the Company determines that any amounts
payable hereunder will be immediately taxable to the Executive under Section 409A
of the Code and related Department of Treasury guidance, the Company and the
Executive shall cooperate in good faith to (a) adopt such amendments to
this Agreement and appropriate policies and procedures, including amendments
and policies with retroactive effect, that they mutually determine to be
necessary or appropriate to preserve the intended tax treatment of the benefits
provided by this Agreement, to preserve the economic benefits of this Agreement
to both parties and/or (b) take such other actions as mutually determined
to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A
of the Code or to comply with the requirements of Section 409A of the Code
and thereby avoid the application of penalty taxes thereunder.

 

21.  Code Section 280G

 

(a)                                  If any payment or benefit (all such
payments and benefits, being hereinafter called “Total Payments”)
received or to be the received by the Executive in connection with a change in
the ownership or effective control of the Company or the ownership of a
substantial portion of the assets of the Company (all within the meaning of Section 280G(b)(2)(A)(i) of
the Code) (whether pursuant to the terms hereof or otherwise) (a “280G
Event”) would not be wholly deductible by the Company or other person
making such payment or providing such benefit as a result of Section 280G
of the Code, then, to the extent necessary to make such portion of the Total
Payments deductible (and after taking into account any reduction in the Total
Payments provided by reason of Section 280G of the Code in such
arrangement), (i) any cash portion of the Total Payments shall first be
reduced (if necessary, to zero), and (ii) all other non-cash Total
Payments shall next be reduced (if necessary, to zero).

 

(b)                                 The limitation of Section 21(a) shall
not apply to limit the Total Payments if (i) such payments or benefits, or
portion thereof which would cause any of the Total Payments to be subject to
disallowance of deductions under Section 280G of the Code absent
stockholder approval are approved by the stockholders of the Company in a
manner which satisfies the requirements of Code Section 280G(b)(5)(B); or (ii) immediately
prior to the consummation of the 280G Event, any stock of the Company is “readily
tradable on an established securities market or otherwise” (within the meaning
of Section 280G(5)(A)(ii)(I)) or the requirements of Section 280G(5)(A)(ii)(I) are
otherwise not met.

 

(c)                                  The Company agrees that, unless the
condition of Section 21(b)(ii) is satisfied, it will submit to
the stockholders of the Company for a separate vote a proposal to approve, in
compliance with the requirements of Section 280G(b)(5)(B) of the
Code, the Executive’s conditional right to receive the portion of the Total
Payments otherwise subject to reduction under Section 21(a).  Without limiting the foregoing, the Company
shall recommend to all holders of voting stock that such approval be granted;
provided that if the Company breaches this Section 21(c), then Sections
21(a) and (b) shall be null and void.  For the avoidance of 

 

17

 

doubt,
if the Company does not breach this Section 21(c), but the
Executive’s conditional right to receive the portion of the Total Payments
otherwise subject to reduction under Section 21(a) is rejected
by the stockholders, then Sections 21(a) and (b) shall
continue to apply in full force and effect.

 

22.  Validity;
Enforcement.

 

If
any provision of this Agreement is held to be illegal, invalid or unenforceable
under present or future laws effective during the term of this Agreement, such
provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a portion of this Agreement; and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

 

23.  Withholding.

 

The
Company shall be entitled to withhold from any amounts payable under this
Agreement any federal, state, local or foreign withholding or other taxes or
charges which the Company is required to withhold. The Company shall be
entitled to rely on an opinion of counsel if any questions as to the amount or
requirement of withholding shall arise.

 

24.  Sole
Employment Agreement.

 

The Executive acknowledges and agrees that he has taken all actions
required under the terms of any prior employment in order to terminate that
employment and that the provisions contained in that employment agreement, if
any, do not bind the Company.

 

25.  Indemnification
and Insurance.

 

The
Company shall indemnify the Executive to the fullest extent permitted by the
laws of the State of New York, as in effect at the time of the subject act or
omission, and he will be entitled to the protection of any insurance policies
the Company may elect to maintain generally for the benefit of its directors
and senior executive officers against all costs, charges and expenses incurred
or sustained by him in connection with any action, suit or proceeding to which
he may be made a party by reason of his being or having been a director,
officer or employee the Company or any of its subsidiaries or his serving or
having served any other enterprise, plan or trust as a director, officer,
employee or fiduciary at the request of the Company (other than any dispute,
claim or controversy arising under or relating to this Agreement (except for
this Section 25)).  The
provisions of this Section 25 shall survive any termination of
Executive’s employment or any termination of this Agreement.

 

26.  Principal
Stockholders’ Obligations.

 

Except
as provided in Section 2(c), the Principal Stockholders shall have
no obligations under this Agreement.

 

18

 

27.  Employee
Acknowledgement.

 

The
Executive acknowledges that he has read and understands this Agreement, is
fully aware of its legal effect, has not acted in reliance upon any
representations or promises made by the Company other than those contained in
writing herein, and has entered into this Agreement freely based on his own
judgment.

 

28.  Attorney’s
Fees.

 

Upon
presentation of invoices evidencing such, the Company will reimburse the
Executive for reasonable attorneys’ fees incurred by him in connection with the
negotiation of this Agreement and any related agreements contemplated hereunder
to a maximum amount of $15,000.

 

[signature page follows]

 

19

 

IN
WITNESS WHEREOF, the parties have executed this Agreement on the date and year
first above written.

 

	
   

  	
  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James A.
  Attwood, Jr.

  
	
   

  	
   

  	
  Name: James A.
  Attwood, Jr.

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric K. Yeaman

  
	
   

  	
   

  	
  Eric
  K. Yeaman

  
	
   

  	
   

  	
  Address:

  

 

20

 

EXHIBIT A

 

Hawaiian Telcom
Communications, Inc.

 

Hawaiian Telcom, Inc.

 

Hawaiian Telcom Services
Company, Inc.

 

Hawaiian Telcom Insurance
Company, Incorporated

 

21

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