Exhibit 10.3
SEPARATION AND TRANSITION SERVICES AGREEMENT
This Separation and Transition Services
Agreement is made by and between Arbinet-thexchange, Inc., a
Delaware corporation with its headquarters located in New
Brunswick, New Jersey (the “Company”), and William
M. Freeman (the “Executive”), effective as of the
Effective Date (as that term is defined in Section 8, below). This
agreement summarizes the severance, transition and other
arrangements between the Executive and the Company
(the “Separation Agreement”). In consideration of
the mutual covenants contained in this Separation Agreement, the
Company and the Executive agree as follows:
1. Termination . The Executive’s employment with the
Company is hereby terminated without cause as of the Effective Date
in accordance with Section 6(c) of that certain Employment
Agreement (the “Employment Agreement”) made as of
November 16, 2007, by and between the Company and the Executive and
the parties hereby acknowledge and agree that the Employment
Agreement is terminated as of the Effective Date.
2. Transition Services . Subject to the terms and conditions of this
Separation Agreement, the Executive shall serve the Company as the
Chairman of the Board of Directors of the Company (the “Board
of Directors”) through the Company’s 2009 Annual
Meeting of Stockholders (the “2009 Annual Meeting”).
The Executive shall also provide the Company with such additional
transition assistance incidental to such position as the Executive
may be reasonably requested by the Board of Directors, including,
but not limited to, working on various matters related to (a)
evaluating potential merger, stock purchase, asset purchase,
recapitalization, reorganization, consolidation, amalgamation or
other transaction opportunities for the Company and (b) significant
members of the Company’s exchange. In such capacity or
capacities, the Executive shall provide such transition services in
connection with the business, affairs and operations of the Company
as may be reasonably assigned or delegated to the Executive from
time to time by or under the authority of the Board of
Directors.
3. Transition Period . The Executive agrees to serve as a Class I
Director until the 2009 Annual Meeting (the “Transition
Period”). The Executive further agrees that, effective as of
the date of the 2009 Annual Meeting, the Executive shall no longer
be a member of the Board of Directors and Chairman of the Board of
Directors, and such resignation shall be effective as of that
date.
4. Severance Payments; Director Compensation;
Benefits :
(a) Severance Payments . The Company shall pay you severance pay in
the aggregate of Four Hundred Seventy-Eight Thousand One Hundred
Twenty Five Dollars ($478,125), which is comprised of:
(i) Aggregate payments of Thirty-One Thousand Two
Hundred Fifty ($31,250), which is equal to the salary which would
otherwise be payable under the Employment Agreement from the date
hereof until October 1, 2008 (the “Initial Transition
Period”), at the annual rate of Three Hundred Seven-Five
Thousand Dollars ($375,000) (the “Initial Severance
Payment”) payable in periodic installments during the Initial
Transition Period in accordance with the Company’s ordinary
payroll periods;
(ii) One (1) lump sum payment the salary which would
otherwise be payable under the Employment Agreement from October 2,
2008 and November 16, 2008, equal to Forty-Six Thousand
Eight Hundred Seventy-Five ($46,875), payable within ten (10) days
of execution of this Separation Agreement;
(iii) One (1) lump sum payment of Four Hundred
Dollars ($400,000) (the “Severance Payment” and,
together with the Initial Severance Payment, the “Severance
Payments”) payable on the earlier of (A) six (6) months and
one (1) day following October 1, 2008 and (B) the death of the
Executive consisting of:
(1) Twelve (12) months’ base salary, equal to
Three Hundred Seventy-Five Hundred Dollars ($375,000);
and
(2) Reimbursement for payments under the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) for a period of one (1) year following the
Effective Date, plus an amount equal to potential employer
contributions to Arbinet’s retirement plan for one year,
which amount cannot exceed Twenty-Five Thousand Dollars
($25,000).
(b) Director Compensation . The Executive hereby waives the right to any
compensation under the Company’s non-employee director
compensation policy during the Transition Period.
(c) Benefits . The Company will present the Executive with
information on COBRA under separate cover. If the Executive timely
elects continuation of coverage under COBRA, the Executive shall be
entitled to coverage under the Company’s group medical and
dental plans in which the Executive is currently participating
(“Group Health Plans”) at the coverage levels that
currently apply to the Executive, subject to payment solely by the
Executive of any premiums at the then current rate required for
active employees with the same coverage levels, effective until the
COBRA continuation period ends.
(d) Additional Benefits . The Company shall provide the following
additional benefits to the Executive during the Transition
Period:
(i) Reimbursement of Business Expenses
. The Company shall reimburse the
Executive for all reasonable expenses incurred by him in performing
services during the Transition Period, including any expenses
resulting from any travel at the direction of and/or preapproved by
the Company’s Chief Executive Officer, including but not
limited to travel to New Jersey, all such reimbursements to be made
in accordance with the Company’s policies and procedures for
its senior executive officers, as in effect from time to
time.
(ii) Reimbursement of Living Expenses.
In addition to reimbursements
pursuant to Section 4(d)(i) above, the Company shall also reimburse
the Executive for the cost of temporary housing in the New Jersey
area, which amounts shall not exceed One Thousand Five Hundred
Dollars ($1,500) per month.
(iii) Indemnification . During the Transition Period, Executive will
be included under the Company’s directors and officers
liability insurance policy, with the same coverage as is provided
to other directors or officers of the Company in respect of their
service to the Company, and such coverage will continue thereafter
without interruption for so long as the Company, or its successors
and assigns, maintains such coverage or any similar coverage for
its officers and directors.
(iv) Legal Fees . The Company shall reimburse the Executive for
all reasonable and documented attorney and professional fees
incurred by the Executive in connection with the negotiation and
review of the terms of this Separation Agreement.
(v) Options . During the Transition Period (and for so long
as the Executive continues to serve as an employee, officer or
director, or consultant or advisor to, the Company), the Executive
shall be deemed an “Eligible Participant” under the
terms of the Executive’s Non-Qualified Stock Option Agreement
granted under the Company’s 2004 Stock Inventive Plan and the
options granted thereunder shall continue to vest during such
period in accordance with the terms thereunder.
(e) Exclusivity of Payments and Benefits
. During the Transition Period, the
Executive shall not be entitled to any payments or benefits other
than those provided under this Separation Agreement.
5. Extent of Service . The Executive shall, subject to the direction
and supervision of the Chief Executive Officer of the Company,
devote (a) during the Initial Transition Period, the
Executive’s full business time and (b) from expiration of the
Initial Transition Period until the expiration of the Transition
Period, no minimum amount of time, but in any event not to exceed
five (5) hours a week or, in the aggregate, 20% of the average
weekly hours worked by the Executive under the Employment
Agreement, including service as a member of the Board of Directors,
in each case, as well as his best efforts and business judgment,
skill and knowledge, to the discharge of the Executive’s
duties and responsibilities under this Separation Agreement;
provided that nothing in this Agreement shall be construed
as preventing the Executive from:
(a) investing the Executive’s assets in any
company or other entity in a manner not prohibited by Section 6(d)
and, during the Initial Transition Period, in such form or manner
as shall not require any material activities on the
Executive’s part in connection with the operations or affairs
of the companies or other entities in which such investments are
made;
(b) engaging in religious, charitable or other
community or non-profit activities that do not impair the
Executive’s ability to fulfill the Executive’s duties
and responsibilities under this Agreement; or
(c) serving as a member of the board of directors
of the companies listed on Exhibit A attached hereto or any
other one or more private companies, subject to Section 6(d)
below.
6. Confidential Information, Noncompetition and
Cooperation .
(a) Confidential Information . As used in Separation Agreement,
“Confidential Information” means information belonging
to the Company which is of value to the Company in the course of
conducting its business and the disclosure of which could result in
a competitive or other disadvantage to the Company. Confidential
Information includes, without limitation, financial information,
reports, and forecasts; inventions, improvements and other
intellectual property; trade secrets; know-how; designs, processes
or formulae; software; market or sales information or plans;
customer lists; and business plans, prospects and opportunities
(such as possible acquisitions or dispositions of businesses or
facilities) which have been discussed or considered by the
management of the Company. Confidential Information includes
information developed by the Executive in the course of the
Executive’s employment under Employment Agreement (the
“Employment Services”) and the performance of the
Executive’s performance of the services under this Separation
Agreement (the “Transition Services,” and together with
the Employment Services, the “Services”), as well as
other information to which the Executive may have access in
connection with the Services. Confidential Information also
includes the confidential information of others with which the
Company has a business relationship. Notwithstanding the foregoing,
Confidential Information does not include (i) information in the
public domain, unless due
