EXHIBIT 10.16
EXECUTION COPY
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EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is made as of this 17th
day of April, 2000 by and between KMC TELECOM HOLDINGS, INC., a Delaware
corporation with its principal place of business located at 0000 Xxxxx 000,
Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("KMC") and Xxxxxxx X. Xxxxxxx, an
individual, residing at 0 Xxxxxxx Xxxxx, Xxxxx Xxxx, Xxx Xxxxxx 00000 ("Xx.
Xxxxxxx").
W I T N E S S E T H :
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WHEREAS, KMC is engaged in, among other things, the business of a
competitive local exchange carrier providing telecommunications services
principally in Tier III and Tier IV Markets, including, but not limited to,
providing on-net, special access and private line and Internet access services
and, primarily on a resale basis, switchboard-based local and long distance
services; and
WHEREAS, KMC and Xx. Xxxxxxx wish to enter into an agreement pursuant
to which Xx. Xxxxxxx will serve as the Chief Executive Officer of KMC and a
member of the Board of Directors ("KMC Board").
NOW, THEREFORE, in consideration of the mutual promises, agreements
and covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which hereby is acknowledged, KMC and Xx. Xxxxxxx
agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
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terms shall have the meanings set forth below:
"Business" shall mean the business conducted by KMC or a majority
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owned subsidiary ("Subsidiary"), controlled affiliate ("Affiliate") or KMC
controlled joint venture ("Joint Venture") since 1996 and as of the date of
execution of this Agreement, including business activities under substantial
review or in substantial development, all business activities which emanate
therefrom by a reasonable expansion of the present activities of KMC or a
Subsidiary, Affiliate or Joint Venture thereof during the Term (as defined in
Section 2(a) hereof), including all business activities which may hereafter be
developed by KMC or a Subsidiary, Affiliate or Joint Venture thereof, including
without limitation: providing telecommunications and data services to business,
government and institutional end users and Internet service providers, long
distance companies and wireless service providers (including, without
limitation, providing on-net special access and private line and Internet access
services, switch-based local and long distance services, wireless, Centrex-type,
frame relay ISDN and ATM services for applications including LAN-to-LAN
interconnect, Internet access, WAN and high speed video conferencing).
"Good Reason" shall mean (i) any reduction in the Base Salary or
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opportunity for an annual bonus (ii) failure by KMC to provide life, medical,
dental, hospitalization plan or other benefits for Xx. Xxxxxxx on the same basis
as other senior management of KMC or (iii) material diminution in Xx. Xxxxxxx'x
reporting authority, function or position in KMC which continues after 20 days
of the date notice is given to KMC's Board by Xx. Xxxxxxx.
"Person" shall mean any individual, firm, corporation, partnership,
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limited liability company, trust, governmental agency or authority, court,
tribunal, arbitrator or other entity.
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Wherever from the context it appears appropriate, each word or phrase
stated in either the singular or the plural shall include the singular and the
plural, and each pronoun stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
2. EMPLOYMENT AND DUTIES.
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(a) Employment and Term. KMC hereby agrees to employ Xx. Xxxxxxx, and
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Xx. Xxxxxxx hereby agrees to be employed by KMC, as KMC's Chief Executive
Officer, upon and subject to the terms and conditions set forth herein. Xx.
Xxxxxxx shall be a member of the KMC Board at all times during the Term of this
Agreement. The term of Xx. Xxxxxxx'x employment hereunder (the "Term") shall
become effective as of May 1, 2000 and, unless earlier terminated in accordance
with this Agreement, shall continue for a period of five (5) consecutive years,
ending on April 30, 2005, provided, however, that the Term shall automatically
be extended for successive two year periods unless either party provides notice
to the other, at least ninety (90) days prior to the end of the Term, that the
Agreement shall not be extended.
(b) Duties and Responsibilities. As Chief Executive Officer, Mr.
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Xxxxxxx shall report and be accountable to the KMC Board. Xx. Xxxxxxx shall
have such duties and responsibilities consistent with his position as may from
time to time be assigned by the KMC Board, including, without limitation, the
responsibility and authority to:
(i) supervise and administer the implementation of all aspects of
the Business with a view to meeting KMC's short-term and long-term targets,
including, but not limited to, (A) the management of all operations relating to
the Business, and in particular KMC's wireless strategy, (B) the preparation,
review, recommendation and implementation of areas for modification of KMC's
business plans, including the submission to the KMC Board of
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a business plan for each fiscal year not later than thirty (30) days prior to
the commencement of such fiscal year, and (C) the development and implementation
of the Business as it relates to KMC and its Subsidiaries, Affiliates or Joint
Ventures; and
(ii) perform such other duties and responsibilities as are
usually incumbent upon a chief executive officer.
(c) Performance of Services. During the term of his employment
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hereunder, Xx. Xxxxxxx shall:
(i) perform and discharge, faithfully, diligently and competently
the duties and responsibilities assigned to him hereunder to the best of his
ability;
(ii) devote his full and undivided business time, other than
during vacations taken in accordance with KMC's established policies and in
accordance with this Agreement, to the performance and discharge of such duties
and responsibilities, provided that Xx. Xxxxxxx may devote a reasonable amount
of time to charitable, civic and professional organizations (including serving
on boards of companies not in the Business) and activities so long as they do
not interfere with the performance and discharge of his duties and
responsibilities;
(iii) not engage, without the prior written approval of the
Chairman of KMC, in any business or activities which interfere or are reasonably
likely to interfere with the proper performance and discharge of such duties or
responsibilities, other than passive, personal investments in a Person (A) all
of whose business or activities are not in competition with the Business;
provided that if such Person is engaged in any such business or activity, this
clause (A) shall not preclude Xx. Xxxxxxx from beneficially owning or
controlling not more than two percent (2%) of any class of securities issued by
such Person which class is registered under
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Section 12 of the Securities Exchange Act of 1934, as amended, and (B) in which
Xx. Xxxxxxx has no managerial or active role; and
(iv) if requested by the KMC Board, perform the responsibilities
assigned to him hereunder or related services for the benefit of joint ventures,
subsidiaries or affiliates of KMC, or other Persons with which KMC may have a
business relationship, including without limitation acting as an officer or
director thereof.
(d) Place of Employment. The principal place of employment of Mr.
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Xxxxxxx shall be in Bedminster, New Jersey or such other location within 50
miles of Bedminster, New Jersey, established as the corporate headquarters of
KMC. If KMC relocates its corporate headquarters outside of 50 miles of
Bedminster, New Jersey then Xx. Xxxxxxx shall be entitled to full relocation
costs in connection with moving his home to within 50 miles of the new
headquarters. Notwithstanding the foregoing, Xx. Xxxxxxx acknowledges that he
will be required, in connection with the performance and discharge of his duties
and responsibilities hereunder to travel elsewhere.
3. NONCOMPETITION; PROPRIETARY RIGHTS; CONFIDENTIAL INFORMATION;
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UNIQUE SERVICES.
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(a) Noncompetition. During the Term and for a period of twenty-four
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(24) months after the date of termination of Xx. Xxxxxxx'x employment hereunder
(unless such termination occurs pursuant to Section 7 (a)(ii) or Section 7
(a)(iii), in which case the period shall be twelve (12) months), Xx. Xxxxxxx
shall not within the United States (i) directly or indirectly, whether
individually or as an employee, agent, manager, director, officer, stockholder,
partner, investor, consultant, advisor or in any other capacity whatsoever, own,
manage, operate, control, be employed by, participate in or be connected in any
manner whatsoever with the
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ownership, management, operation or control of, or have any financial interest
in, any Person, business or venture in competition with the Business at the time
of the termination of Xx. Xxxxxxx'x employment, (ii) recruit, solicit or
otherwise seek to induce any individual employed by KMC or any of its
subsidiaries, affiliates or joint ventures in a managerial or higher position to
terminate his or her employment with or to violate any agreement, duty or
responsibility with or to any of the foregoing, (iii) solicit from any Person
with which KMC, any of its Subsidiaries, Affiliates or Joint Ventures, or any
individual employed by any of the foregoing, has a business relationship
relating to the Business, any business relating to services similar to the
services which are or were performed for such Person by KMC or its Subsidiaries,
Affiliates or Joint Ventures during the Term or (iv) solicit, induce, influence
or encourage any joint venture, customer, supplier or other Person having a
business relationship with KMC or any of its subsidiaries, affiliates or joint
ventures to terminate, discontinue, reduce or materially diminish or change its
relationship with KMC or any of its subsidiaries, affiliates or joint ventures.
This Section 3 (a) shall not apply in the event this Xx. Xxxxxxx serves the full
Term of this Agreement and is not re-employed by KMC.
(b) Proprietary Rights. Xx. Xxxxxxx (i) shall promptly and fully
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disclose to KMC, and with all necessary detail for development, marketing, sale
and installation, any and all know-how, discoveries, inventions, compositions,
works, improvements, ideas, concepts, writings, patents, copyrights,
intellectual property, methods, plans, customer lists, supplier lists and other
data and information directly or indirectly relating to in the Business (whether
copyrightable, patentable or otherwise) made, developed, created, received,
conceived, acquired or written by Xx. Xxxxxxx (whether or not at the request or
upon the suggestion of KMC) during the Term and for twelve (12) months
thereafter, solely or jointly with others
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(collectively "Proprietary Rights"), and (ii) hereby acknowledges and agrees
that all of such Proprietary Rights are and will be works made for hire and are
and will be the sole and exclusive property of KMC. Without limiting the
foregoing, Xx. Xxxxxxx hereby (x) assigns and transfers, and agrees to assign
and transfer, to KMC all of his right, title and interest in and to all present
and future Proprietary Rights, (y) agrees promptly to deliver to KMC all papers,
drawings, models, data and other material relating to or embodying any of the
Proprietary Rights and (z) agrees to execute, acknowledge and deliver all such
further agreements, documents and instruments, including, without limitation,
applications for copyrights and patents, and do all other acts and things as may
be necessary or reasonably requested by KMC to obtain copyrights or patents for
any thereof in any and all countries, to register, confirm and vest title and
ownership thereto to KMC and further to effectuate the purposes of this Section
3(b). Xx. Xxxxxxx shall reasonably assist KMC in obtaining such copyrights or
patents during the Term and any time thereafter and agrees to testify in any
prosecution or litigation involving any of the Proprietary Rights; provided that
KMC shall pay or reimburse Xx. Xxxxxxx for all ordinary, necessary, reasonable
and proper expenses actually incurred or paid by him in connection therewith.
(c) Confidential Information. Xx. Xxxxxxx acknowledges that from time
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to time he shall receive information concerning KMC, its subsidiaries,
affiliates and joint ventures, the Business which involves, trade secrets,
proprietary information or other confidential information, including without
limitation, the Proprietary Rights, names of actual or potential customers which
have been solicited or are on any mailing lists, rolodexes, files, information
relating to agreements, research, methods, writings, manuals, developments and
marketing and any embodiments of any of the foregoing (all of which is
collectively called
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"Confidential Information"). Except as is necessary within the scope of and in
connection with the performance and discharge of his duties and responsibilities
hereunder, Xx. Xxxxxxx shall not, during the Term or at any time thereafter,
directly or indirectly, disclose to any Person any Confidential Information.
Notwithstanding the foregoing, Confidential Information shall not include any
information that can be established by reasonable written evidence (i) is in the
public domain other than by reason of a breach by Xx. Xxxxxxx of this Agreement;
or (ii) was in the possession of Xx. Xxxxxxx at the time of the disclosure; or
(iii) was obtained by Xx. Xxxxxxx in good faith from a third party entitled to
disclose it; or (iv) was required to be disclosed by a court of competent
jurisdiction or a governmental authority with authority over Xx. Xxxxxxx or KMC,
in which case Xx. Xxxxxxx shall use his reasonable best efforts, prior to such
disclosure, to give timely notice of such requirement to the KMC Board, in order
to permit KMC to object to such disclosure or seek confidential treatment of the
Confidential Information.
(d) Return of Confidential Information. Upon termination of Mr.
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Xxxxxxx'x employment with KMC, Xx. Xxxxxxx shall forthwith return to KMC all
Confidential Information in his possession or control, including without
limitation, all documents, records, reports, writings and other documents
containing or embodiments of Confidential Information and all copies thereof.
(e) Remedies. Xx. Xxxxxxx and KMC acknowledge that the services to be
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rendered hereunder are of a special, unique, unusual, extraordinary and
intellectual character involving a high degree of skill and having a peculiar
value, the loss of which may cause KMC immediate and irreparable harm which
cannot be adequately compensated in monetary damages. Accordingly, in the event
of a breach or threatened breach by Xx. Xxxxxxx of this Section 3, and following
20 days notice to Xx. Xxxxxxx to cease such activity and his
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failure to do so, Xx. Xxxxxxx consents that KMC shall be entitled to injunctive
or other equitable relief, both preliminary and permanent, without posting a
bond or other security, and Xx. Xxxxxxx will not raise the defense that KMC has
an adequate remedy at law. In addition, KMC shall be entitled to any other legal
or equitable remedies as may be available. The rights and remedies provided in
this Agreement shall be deemed cumulative, and not exclusive, and the exercise
of one shall not preclude the exercise of any other right or remedy at law or in
equity for the same event or any other event.
(f) Invalidity. If any portion of the restrictions set forth in this
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Section 3 should, for any reason whatsoever, be declared invalid by a court of
competent jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(g) Reasonable Scope and Limitations. Xx. Xxxxxxx acknowledges and
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agrees that the scope, area and time limitations set forth in this Section 3 are
reasonable and customary, and properly required for the adequate protection of
the Business of KMC and its subsidiaries, affiliates, joint ventures and
employees. If at the time of enforcement, any such scope, area or time
limitation is deemed to be unreasonable under circumstances then existing by a
court of competent jurisdiction, then the parties agree that the maximum scope,
area or time limitation which said court shall deem reasonable under such
circumstances shall be substituted for the stated scope, area or time
limitation.
(h) Claim not a Defense. The existence of any claim or cause of
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action by Xx. Xxxxxxx against KMC, whether or not under this Agreement, shall
not constitute a defense to the enforcement by KMC of this Section 3.
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(i) Survival. The provisions of this Section 3 shall survive the
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termination of Xx. Xxxxxxx'x employment for any reason whatsoever.
4. COMPENSATION; BENEFITS.
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As full compensation to Xx. Xxxxxxx, KMC shall pay or provide, or
cause to be paid or provided, to Xx. Xxxxxxx the following compensation and
benefits:
(a) Base Salary. Xx. Xxxxxxx shall receive base salary (the "Base
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Salary") at the rate of $500,000 per year which shall be earned by and payable
to Xx. Xxxxxxx in arrears in consecutive semi-monthly installments, each of
which shall be approximately equal, in accordance with KMC's standard payroll
practices, as such practices may be amended from time to time.
(b) Annual Bonus. In addition to the Base Salary, Xx. Xxxxxxx shall
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be entitled to be eligible and considered for a bonus each year in the sole
discretion of the Compensation Committee of the KMC Board in an amount up to one
hundred percent (100%) (or such higher amount as may be applicable to other
members of KMC's senior management but not duplicative of Section 4(c)) of the
Base Salary.
(c) Public Capital Event Bonuses. In addition to the annual bonus,
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Xx. Xxxxxxx will be entitled to receive a total of Three Million Dollars
($3,000,000) in bonus payments at the following milestones. Within thirty 30
days after the closing of (i) the initial public offering of KMC's common
stock ("IPO") and (ii) the first two public capital equity or debt events
subsequent to the IPO, including, but not limited to, a secondary offering of
the common stock of KMC, or a high yield debt issuance, Xx. Xxxxxxx will be
entitled to receive a bonus for each such event equal to One Million Dollars
($1,000,000). Upon agreement by KMC, Xx. Xxxxxxx may elect, upon sixty (60)
days notice to KMC, to receive any of the
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foregoing bonus payments in common stock of KMC, such amount of common stock to
be calculated at the then fair market value as of the date of the event giving
rise to the bonus. Xx. Xxxxxxx shall also have the right to defer the payment of
any of the bonuses payable pursuant to this section at his sole discretion.
(d) Stock Options; Group Plans. Xx. Xxxxxxx shall be eligible to
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participate, on terms and conditions at least comparable with all other senior
executives of KMC, in (i) any stock option plan KMC adopts, (ii) KMC's 401(k)
plan for salaried employees of KMC, subject to any eligibility requirements
thereof, (iii) KMC's group life, medical, dental, hospitalization or
accident/disability insurance plans and health programs, but in all events,
subject to applicable terms of the plans, and (iv) and any other benefits
generally accorded to employees of KMC. KMC will use its reasonable efforts to
assist Xx. Xxxxxxx in obtaining sufficient funds to exercise the stock options
granted to him as of the date hereof and pay any applicable tax relating to a
Section 83 (b) election under the United States tax code. KMC shall not be
obligated to loan or guarantee any funds obtained by Xx. Xxxxxxx for this
purpose.
(d) Vacation. Xx. Xxxxxxx shall be entitled to three (3) weeks'
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vacation and one (1) week illness allowance with pay in each calendar year on
terms comparable to that afforded other senior executives of KMC. In the event
KMC's vacation or illness allowance policy is increased for such senior
executives generally, then Xx. Xxxxxxx will be entitled to any increase in
vacation or illness allowance such modification provides. There will be no
carryover of unused vacation time or pay or illness allowance from year to year.
Xx. Xxxxxxx shall also be entitled to all holiday privileges regularly observed
by KMC during the Term.
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(e) Makeup Bonus. In the event (i) Xx. Xxxxxxx is terminated without
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Cause or (ii) the Term of this Agreement expires, prior to an IPO or a Change
in Control, Xx. Xxxxxxx will be entitled to receive a cash bonus equal to Five
Million Dollars ($5,000,000) ("Makeup Bonus") within thirty (30) days following
either the event specified in (i) or (ii) of this sentence. Upon payment of the
Makeup Bonus, all stock options, stock or other rights which Xx. Xxxxxxx then
may have with regard to KMC's equity, accrued, vested or otherwise shall,
without further action by KMC or Xx. Xxxxxxx, be terminated; however, at Xx.
Xxxxxxx'x sole discretion, he may waive the Makeup Bonus and retain all rights
he then has to stock options, stock and equity in KMC.
(f) Automobile Lease. Xx. Xxxxxxx shall be entitled to the use of a
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leased automobile acceptable to KMC, including payment by KMC of lease payments,
insurance, maintenance and repair expenses and the cost of gasoline used by Xx.
Xxxxxxx, not to exceed six hundred dollars ($600.00) per month. In addition, at
Company expense subject only to reasonable cost, Xx. Xxxxxxx shall have the
right to use a car service between his home in Colts Neck and the Company's
headquarters in Bedminster from time to time as he sees fit.
(f) Reimbursement of Expenses. KMC shall pay or reimburse Xx. Xxxxxxx
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for all ordinary, necessary, reasonable and proper expenses actually incurred or
paid by him during the Term in the performance and discharge of his duties and
responsibilities under this Agreement in accordance with the policies and
procedures established by KMC from time to time for its senior management
generally. As part of such policies and procedures, the KMC Board may from time
to time for members of senior management generally require prior approval for
individual expense items in excess of pre-established aggregate amounts for a
fixed period or in excess of pre-established amounts for any type of expenditure
during any fixed
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period. Xx. Xxxxxxx will not incur expenses other than in accordance with KMC's
policies and procedures both as to the nature and amount of such expenses.
5. KEY MAN LIFE POLICY.
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In addition to any life insurance policy provided by KMC for the
benefit of Xx. Xxxxxxx pursuant to Section 4, KMC shall be permitted, at its own
expense, to maintain a "key man life insurance policy", in such amount and on
such terms as KMC shall in its sole discretion determine, on the life of Xx.
Xxxxxxx for so long as this Agreement remains in effect. Xx. Xxxxxxx shall
fully cooperate with and assist KMC in obtaining or maintaining any such
insurance, including without limitation, submitting to medical examinations and
providing information to insurance brokers, agents or carriers. Any proceeds
from any such "key man" policy shall be payable solely to KMC; Xx. Xxxxxxx'x
legal representatives, heirs, successors, assigns and beneficiaries shall have
no rights with respect thereto. Xx. Xxxxxxx represents and warrants that to the
best of his knowledge he is in good health and has no reason to believe that
such insurance will not be available to KMC at standard rates.
6. REPRESENTATIONS AND WARRANTIES BY XX. XXXXXXX. Xx. Xxxxxxx
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hereby represents and warrants, the same being part of the essence of this
Agreement, that he is not, and during the Term will not be, a party to any
agreement, contract or understanding, and that he has no knowledge of any
physical or mental illness, condition, impairment, restriction or incapacity,
which in any way restrict or prohibit or will restrict or prohibit him from
undertaking or performing or discharging any of his duties and responsibilities
under this Agreement.
7. TERMINATION.
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(a) This Agreement, and Xx. Xxxxxxx'x employment, shall terminate
prior to the scheduled termination date set forth in Section 2(a) hereof upon
the following terms and conditions:
(i) If Xx. Xxxxxxx dies or becomes permanently disabled, this
Agreement shall terminate effective upon his death or when his Disability (as
hereinafter defined) is deemed to have become permanent. If Xx. Xxxxxxx is
unable to perform his normal duties for KMC and/or its subsidiaries, affiliates
or joint ventures because of Disability for a period of at least ninety (90)
consecutive days, or for shorter periods totaling more than one hundred and
eighty (180) days during any period of three hundred and sixty five (365) or
fewer consecutive days for the same cause, the KMC Board may at its option deem
such Disability to have become permanent. For purposes of this Agreement, the
term "Disability" shall mean the physical or mental illness, condition,
impairment, restriction or incapacity of Xx. Xxxxxxx, such that Xx. Xxxxxxx
shall be substantially unable to perform and discharge his duties and
responsibilities under this Agreement, as certified by a physician, psychiatrist
or other medical practitioner satisfactory to KMC if KMC so requests.
(ii) KMC may terminate this Agreement other than for reasons
specified in Section 7(a)(i) or (iii), upon ninety (90) days' prior written
notice to Xx. Xxxxxxx.
(iii) Xx. Xxxxxxx may terminate this Agreement for Good Reason
upon notice to the KMC Board of his intent to resign for Good Reason provided
Xx. Xxxxxxx, with his counsel, shall have met with the KMC Board, if requested
by the KMC Board, during the twenty (20) day period required for notice of his
intent to resign for Good Cause.
(iv) KMC may terminate this Agreement for Cause (as defined
below), by notice to Xx. Xxxxxxx. The term "Cause" shall mean any of the
following: (A) Xx. Xxxxxxx
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commits malfeasance towards KMC and/or any of its subsidiaries, affiliates or
joint ventures (including without limitation misappropriation of funds, acts of
fraud or dishonesty, or a material violation of corporate policy), or is
convicted of any crime or offense involving dishonesty, or improper taking of
monies or other property, or any felony offense, or any crime of moral
turpitude, or commits fraud or embezzlement, or any other violation of law which
materially impairs his ability to perform and discharge his duties or
responsibilities hereunder or which otherwise materially adversely affects KMC
and/or its subsidiaries, affiliates or joint ventures; (B) Xx. Xxxxxxx has
breached any of his material duties to KMC and/or its subsidiaries, affiliates
or joint ventures or otherwise violated any other material provision of this
Agreement or has made a material misrepresentation which breach, violation or
misrepresentation adversely affects the business of KMC and/or its subsidiaries
or affiliates or joint ventures and, if such breach, violation or
misrepresentation can reasonably be expected to be cured within twenty (20)
days, such breach, violation or misrepresentation has not been cured to KMC's
satisfaction within twenty (20) days after it notifies Xx. Xxxxxxx thereof; or
(C) Xx. Xxxxxxx has neglected or failed to discharge any of his material duties
or responsibilities under this Agreement or failed to obey appropriate
directions from KMC and/or its subsidiaries, affiliates or joint ventures
consistent with this Agreement, and if such neglect or failure can reasonably be
expected to be cured within twenty (20) days, such neglect or failure has not
been cured to KMC's satisfaction within twenty (20) days after it notifies Xx.
Xxxxxxx thereof.
(b) Upon any termination pursuant to this Section 7, all rights of Xx.
Xxxxxxx under this Agreement shall cease to be effective as of the date of
termination, Xx. Xxxxxxx shall be removed from his position and Xx. Xxxxxxx
shall have no right to receive any payments or benefits hereunder except for (i)
installments of Base Salary which have been earned in
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accordance with Section 4(a) hereof up to the effective date of such
termination, (ii) reimbursement of ordinary, reasonable and necessary expenses
incurred in accordance with Section 4(f) hereof and, to the extent permitted by
law, accrued vacation and illness allowance, in each case up to the effective
date of such termination, (iii) all other benefits due Xx. Xxxxxxx under benefit
programs in which he participated and under which he is due a benefit, (iv) if
the termination is pursuant to Section 7(a)(i) by reason of Xx. Xxxxxxx'x
Disability, KMC shall pay the greater of (x) sixty percent (60%) of the Base
Salary and (y) the amount payable to Xx. Xxxxxxx under any disability plan
adopted by KMC from time to time, (v) if the termination is pursuant to Section
7 (a)(i) by reason of Xx. Xxxxxxx'x death, Section 7(a)(ii) or Section 7 (a)
(iii), KMC shall pay to Xx. Xxxxxxx a xxxxxxxxx payment in an amount equal to
the two times the annual Base Salary and (v) continuation of Xx. Xxxxxxx'x
health and dental benefits at the same level as all other senior management of
KMC for the period for which the severance is paid. If the termination is
pursuant to Section 7(a)(ii) one-half of any severance payment will be payable
in a lump sum on the date the termination becomes effective, with the balance
being payable in arrears in approximately equal consecutive semi-monthly
installments in accordance with KMC's standard payroll practices, as such
practices may be amended from time to time, over the period beginning on KMC's
first payroll payment date after the termination becomes effective and ending on
the earlier of (x) the first anniversary of such date and (y) April 30, 2005,
subject to Xx. Xxxxxxx'x compliance with the provisions of Section 3 hereof.
(c) (i) If Xx. Xxxxxxx'x employment is terminated pursuant to Section
7(a)(iv) or (ii) if Xx. Xxxxxxx at any time permits or suffers to exist any act,
event or circumstances which violates, or would violate if occurring within the
time periods set forth in Section 3 hereof violate, any provision of Section 3
hereof, then (x) any loans, extensions of credit or other
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amounts owed by Xx. Xxxxxxx to KMC or any of its subsidiaries or affiliates
(including without limitation, any interest thereon) shall automatically and
immediately be accelerated and become due and payable, without any further
notice, protest, demand or formality of any kind, and be paid by Xx. Xxxxxxx on
the date his employment is terminated or such violation occurs and (y) Xx.
Xxxxxxx shall automatically and immediately, without any further notice, demand
or formality of any kind, forfeit all of his rights with respect to, and further
deliver or pay to KMC, (A) (x) any unexercised stock options, whether vested or
unvested, and (y) and unvested or callable stock pursuant to any stock option
plan of KMC or any of its subsidiaries or affiliates, (B) any stock which he
acquired within the twelve (12) month period ending on the date the termination
of his employment becomes effective pursuant to the exercise of options granted
by KMC or any of its subsidiaries or affiliates and (C) the proceeds (net of any
ordinary, reasonable and customary brokerage commissions and expenses of sale
actually paid or incurred by Xx. Xxxxxxx) derived from the sale, pledge or other
disposition of any such stock or any interest therein. If Xx. Xxxxxxx disposes
of any such stock or any interest therein by gift, bequest or other means by
which he did not receive cash in an amount reasonably equivalent to the fair
market value of such stock or interest and is thereafter required to make a
payment to KMC under the foregoing clause (C), he shall pay to KMC in cash an
amount equal to the fair market value of such stock at the time of the
disposition, as reasonably and conclusively determined by the KMC Board.
(d) In the event there is a Change in Control of KMC, and as a result
thereof Xx. Xxxxxxx is terminated from his employment by KMC, then,
notwithstanding such termination, he shall receive the remaining payments of
Base Salary at the times set forth in Section 4(a) for the unexpired Term of
this Agreement unless the parties otherwise agree to a
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lesser amount. In addition, following a Change in Control one hundred percent
(100%) of the shares subject to the options granted to Xx. Xxxxxxx pursuant to
that certain Non-Qualified Executive Stock Option Agreement dated the date
hereof between KMC and Xx. Xxxxxxx ("Stock Option Agreement") or otherwise
during the Term shall automatically be deemed "Vested" pursuant to Section 3.1
of the Stock Option Agreement and not subject to repurchase or call. Prior to an
IPO KMC shall use its reasonable efforts to obtain the agreement of more than
seventy five (75%) percent of its shareholders for any payments payable to Xx.
Xxxxxxx by reason of any Change in Control. Following an IPO and in the event of
a Change in Control, to the extent that a nationally recognized accounting firm
certifies to KMC that Xx. Xxxxxxx is and will be subject to any excise tax
pursuant to Code Section 4999, KMC shall pay to Xx. Xxxxxxx an amount equal to
such excise tax and any income, excise or employment tax payable by Xx. Xxxxxxx
by reason of such payment of tax by KMC; provided, however that the total amount
of such payments shall not exceed $3,000,000. Further, to the extent it would
reduce the excess parachute payments (as defined in Code Section 280G), KMC
shall have the right to require Xx. Xxxxxxx to exercise any vested stock options
prior to the year of the Change in Control. For purposes of this Agreement and
the options granted to Xx. Xxxxxxx under the Non-Qualified Stock Option
Agreement, dated the date hereof, "Change in Control" shall mean in the event
(A) Xxxxxx Xxxxxx and Nassau Capital LLC do not own or control (i) greater than
35% of the outstanding voting stock of KMC on a fully diluted basis or (ii) a
combined percentage of voting stock of KMC which is greater than that owned by
any other single shareholder or group of shareholders and (B) Xxxxxx Xxxxxx is
not the Chairman of KMC or Xx. Xxxxxx and Nassau do not have the ability,
directly or indirectly, to elect a majority of the KMC Board or the individuals
comprising the KMC Board on the commencement date of Xx. Xxxxxxx'x
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employment, or individuals selected or nominated by the existing members do not
constitute a majority of the KMC Board.
(e) In the event this Agreement is terminated pursuant to Section 7
(a)(ii) or Section 7(a)(iii), Xx. Xxxxxxx shall be entitled to permanently
retain all options or stock on the date of termination then not subject to any
repurchase or call pursuant to Section 3.1 of the Stock Option Agreement and, in
addition, that amount of options or stock which would have no longer been
subject to repurchase or call pursuant to Section 3.1 of the Stock Option
Agreement on the six month anniversary of the termination of this Agreement. In
the event there is a Change in Control within six months of the termination of
this Agreement pursuant to Section 7(a) ii) or Section 7(a)(iii) one hundred
percent (100%) percent of the shares subject to the Option shall not be subject
to any repurchase or call right by KMC and any shares purchased by KMC pursuant
to Section 5.3 of the Stock Option Agreement will be returned to Xx. Xxxxxxx in
exchange for the proceeds previously paid to him by KMC for such shares.
(f) In the event of the termination of this Agreement pursuant to
Section 7(a)(i) by reason of Xx. Xxxxxxx'x death, one hundred percent (100%) of
the shares subject to the Option (as defined in the Stock Option Agreement)
shall not be subject to any repurchase or call right by KMC.
(g) In the event of the termination of this Agreement pursuant to
Section 7 (a)(i) by reason of Xx. Xxxxxxx'x Disability, Xx. Xxxxxxx shall be
entitled to permanently retain all options or stock not subject to repurchase or
call as of the date of termination pursuant to Section 3.1 of the Stock Option
Agreement and, in addition, that amount of options or stock which would have no
longer been subject to repurchase or call pursuant to Section 3.1 of the Stock
Option Agreement on the twelve month anniversary of the termination of this
Agreement.
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8. ASSIGNABILITY; SUCCESSORS. The obligations of Xx. Xxxxxxx
-------------------------
hereunder are personal and may not be delegated, assigned or transferred by him
to any Person in any manner whatsoever. Any such purported delegation,
assignment or transfer shall be null and void. This Agreement may be assigned
by KMC to any parent, subsidiary or affiliate of KMC or any Person which
succeeds to the business of KMC, if the obligations of KMC hereunder are
expressly assumed by, and shall be binding upon such Person, and such Person is
or will then be engaged in the Business. Subject to the foregoing, this
Agreement shall be binding on and inure to the benefit of the legal
representatives, heirs and permitted successors and assigns of the parties
hereto.
9. WITHHOLDING. All payments made by KMC under this Agreement shall
-----------
be net of any tax or other amounts required to be withheld by KMC under any
applicable law or legal requirement.
10. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes
-----------------------------------
the entire agreement of KMC and Xx. Xxxxxxx with respect to the subject matter
hereof and supersedes all prior written and oral agreements and understandings
with respect to such subject matter, except for (to the extent not inconsistent
with this Agreement, and in such event this Agreement shall govern) stock
options granted in connection with KMC's Stock Option Plan and stock option
agreements entered in connection therewith. Neither this Agreement nor any of
the terms hereof may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by both parties. No failure
or delay of either party in exercising any right or remedy under this Agreement
or at law or equity shall operate as a waiver hereof or thereof, nor shall any
single or partial exercise of any such right or
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remedy, or any abandonment or discontinuance of steps to enforce such a right or
remedy, preclude any other or further exercise thereof or the exercise of any
other right or remedy.
11. NOTICES. Any notice, request or communication required or
-------
permitted to be given hereunder shall be deemed to have been properly given if
it is given in writing and is delivered personally or sent by registered or
certified mail, return receipt requested. If to Xx. Xxxxxxx, such notice shall
be sent to him at the address set forth in the first paragraph hereof, with a
copy to Xxxxxx X. Xxxxxxxxxxxx, Esq., Xxxxxx Xxxxx Bokius LLP, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000. If to KMC, such notice shall be
directed to the attention of Xxxxxx X. Xxxxxx at the address of KMC set forth in
the first paragraph hereof, with a copy Xxxx X. Xxxxxxx, Esq., Xxxxxx Xxxx &
Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Either party may change
the address to which notices, requests or communications are to be directed by a
notice to the other party in accordance with this Section 11.
12. SEVERABILITY. Any provision of this Agreement that shall be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, KMC and Xx. Xxxxxxx hereby waive any provision of law that
renders any provision hereof prohibited or unenforceable in any respect;
provided that any final decision of any court of competent jurisdiction in the
State of New York that is not subject to appeal with respect to Section 3 shall
be binding on the parties in all jurisdictions. Following a Change in Control,
in the event of a dispute between Xx. Xxxxxxx and KMC with regard to his
employment by KMC, and should Xx. Xxxxxxx prevail in the proceedings concerning
such dispute on any
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material issue, Xx. Xxxxxxx shall be entitled to his counsel fees in connection
with such proceedings.
13. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED
-------------
BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW
(EXCLUDING PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT APPLICATION THEREOF
WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION) OF THE
STATE OF NEW YORK.
14. COUNTERPARTS. This Agreement may be executable in counterparts,
------------
each of which, for all purposes, shall be deemed an original.
15. Counsel Fees. KMC shall, upon presentation of an appropriate
------------
statement, pay the reasonable costs and expenses, up to Ten Thousand Dollars
($10,000), of Xxxxxx Xxxxx & Bockius LLP in connection with the negotiation and
preparation of this Agreement and related agreements.
16. Ambiguity in Drafting. Each party shall be deemed to have
---------------------
participated equally in the drafting of this Agreement and any ambiguity in this
Agreement shall not be construed against any purported author thereof. Xx.
Xxxxxxx acknowledges that he is capable of evaluating the merits of entering
into this Agreement from a professional and financial perspective and has been
given the opportunity to make such inquiries and investigations as Xx. Xxxxxxx
has deemed appropriate under the circumstances and that, at all times during the
course of the negotiations and execution of this Agreement, Xx. Xxxxxxx has been
advised by counsel.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
EMPLOYEE EMPLOYER
-------- --------
/s/ Xxxxxxx X. Xxxxxxx
------------------------------ KMC TELECOM HOLDINGS, INC.
Xxxxxxx X. Xxxxxxx
/s/ XXXXXX X. XXXXXX
By: ---------------------------------
Title: Chairman
------------------------------
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