EXHIBIT 10.18
EXECUTION COPY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
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This Amended and Restated Employment Agreement (the "Agreement") is made as
of this 6th day of March, 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 Xxxxxx X. Xxxxx, XX, an
individual, residing at 00 Xxxxxxxxxx Xxxxx, Xxxxxxxxxxxxx, XX 00000 ("Xx.
Xxxxx").
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. Xxxxx wish to enter into an agreement pursuant to
which Xx. Xxxxx will serve as the President and Chief Operating Officer of KMC
and a member of the Board of Directors ("KMC Board"); and
WHEREAS, this Agreement supersedes that certain Employment Agreement dated
as of January 1, 1999 by and between Xx. Xxxxx and KMC.
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. Xxxxx agree
as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
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shall have the meanings set forth below:
"Business" shall mean the business conducted by KMC or a majority owned
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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. Xxxxx on the same basis
as other senior management of KMC or (iii) material diminution in Xx. Xxxxx'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. Xxxxx, provided, however, (a)
the failure of Xx. Xxxxx to remain a member of the KMC Board or (b) any change
in Xx. Xxxxx'x reporting responsibility described in Section 2(b) with respect
to the KMC Board shall not constitute Good Reason.
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"Person" shall mean any individual, firm, corporation, partnership, limited
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liability company, trust, governmental agency or authority, court, tribunal,
arbitrator or other entity.
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. Xxxxx, and
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Xx. Xxxxx hereby agrees to be employed by KMC, as KMC's President and Chief
Operating Officer, upon and subject to the terms and conditions set forth
herein. Xx. Xxxxx shall be a member of the KMC Board at all times during the
Term of this Agreement, provided, however, (a) the failure of Xx. Xxxxx to
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remain a member of the KMC Board or (b) any change in Xx. Xxxxx'x reporting
responsibility described in Section 2(b) with respect to the KMC Board shall not
constitute a breach of this Agreement by KMC. The term of Xx. Xxxxx'x employment
hereunder (the "Term") shall become effective as of March 6, 2000 and, unless
earlier terminated in accordance with this Agreement, shall continue until March
31, 2005.
(b) Duties and Responsibilities. As President and Chief Operating
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Officer, Xx. Xxxxx shall report and be accountable to the KMC Board. Xx. Xxxxx
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
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areas for modification of KMC's business plans, including the submission to the
KMC Board of 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 president and chief operating officer.
(c) Performance of Services. During the term of his employment
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hereunder, Xx. Xxxxx 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. Xxxxx 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. Xxxxx from beneficially owning or controlling
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not more than two percent (2%) of any class of securities issued by such Person
which class is registered under Section 12 of the Securities Exchange Act of
1934, as amended, and (B) in which Xx. Xxxxx 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 Xx.
Xxxxx 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. Xxxxx 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. Xxxxx 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; UNIQUE
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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. Xxxxx'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. Xxxxx 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,
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control, be employed by, participate in or be connected in any manner whatsoever
with the 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. Xxxxx'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. Xxxxx serves the full
Term of this Agreement and is not re-employed by KMC.
(b) Proprietary Rights. Xx. Xxxxx (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. Xxxxx (whether or not at the request or
upon the suggestion of KMC)
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during the Term and for twelve (12) months thereafter, solely or jointly with
others (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. Xxxxx 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. Xxxxx 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. Xxxxx for all ordinary, necessary, reasonable and
proper expenses actually incurred or paid by him in connection therewith.
(c) Confidential Information. Xx. Xxxxx acknowledges that from time to
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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. Xxxxx 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. Xxxxx of this Agreement;
or (ii) was in the possession of Xx. Xxxxx at the time of the disclosure; or
(iii) was obtained by Xx. Xxxxx 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. Xxxxx or KMC,
in which case Xx. Xxxxx 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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Young's employment with KMC, Xx. Xxxxx 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. Xxxxx 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. Xxxxx of this Section 3, and following
20 days notice to Xx. Xxxxx to cease such activity and his failure to do so, Xx.
Xxxxx
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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. Xxxxx 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. Xxxxx 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 action
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by Xx. Xxxxx against KMC, whether or not under this Agreement, shall not
constitute a defense to the enforcement by KMC of this Section 3.
(i) Survival. The provisions of this Section 3 shall survive the
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termination of Xx. Xxxxx'x employment for any reason whatsoever.
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4. COMPENSATION; BENEFITS.
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As full compensation to Xx. Xxxxx, KMC shall pay or provide, or cause to be
paid or provided, to Xx. Xxxxx the following compensation and benefits:
(a) Base Salary. Xx. Xxxxx 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. Xxxxx 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. Xxxxx shall be
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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) Other Bonuses. In addition to the annual bonus, Xx. Xxxxx will be
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entitled to receive a total of Three Million Dollars ($3,000,000) in bonus
payments at the following milestones. Within 30 days after the closing of a
private equity issuance of at least $200 million ("Private Equity Issuance"),
Xx. Xxxxx will be entitled to receive a bonus equal to Five Hundred Thousand
Dollars ($500,000). Within 30 days after the closing of the initial public
offering of KMC's common stock ("IPO"), if the IPO occurs after a Private Equity
Issuance, Xx. Xxxxx will be entitled to receive a bonus equal to Five Hundred
Thousand Dollars ($500,000). Within thirty 30 days after the closing of (i) the
IPO if a Private Equity Issuance has not yet occurred 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
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debt issuance, Xx. Xxxxx will be entitled to receive a bonus for each such event
equal to One Million Dollars ($1,000,000). Upon agreement by KMC, Xx. Xxxxx may
elect, upon sixty (60) days notice to KMC, to receive any of the 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. Xxxxx 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. Xxxxx 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. Xxxxx 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. Xxxxx for this purpose.
(e) Vacation. Xx. Xxxxx shall be entitled to three (3) weeks' vacation
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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. Xxxxx 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. Xxxxx
shall also be entitled to all holiday privileges regularly observed by KMC
during the Term.
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(f) Automobile Lease. Xx. Xxxxx 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.
Xxxxx, not to exceed six hundred dollars ($600.00) per month.
(g) Reimbursement of Expenses. KMC shall pay or reimburse Xx. Xxxxx
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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 period. Xx. Xxxxx 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. Xxxxx 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. Xxxxx for so long
as this Agreement remains in effect. Xx. Xxxxx 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. Xxxxx'x legal representatives, heirs,
successors, assigns and
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beneficiaries shall have no rights with respect thereto. Xx. Xxxxx 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. XXXXX.
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Xx. Xxxxx 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. Xxxxx'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. Xxxxx 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. Xxxxx 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. Xxxxx, such
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that Xx. Xxxxx 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 (iv), upon ninety (90) days' prior written
notice to Xx. Xxxxx.
(iii) Xx. Xxxxx may terminate this Agreement for Good Reason upon
notice to the KMC Board of his intent to resign for Good Reason provided Xx.
Xxxxx, 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 Reason.
(iv) KMC may terminate this Agreement for Cause (as defined
below), by notice to Xx. Xxxxx. The term "Cause" shall mean any of the
following: (A) Xx. Xxxxx 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. Xxxxx 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
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(20) days, such breach, violation or misrepresentation has not been cured to
KMC's satisfaction within twenty (20) days after it notifies Xx. Xxxxx thereof;
or (C) Xx. Xxxxx 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.
Xxxxx thereof.
(b) Upon any termination pursuant to this Section 7, all rights of Xx.
Xxxxx under this Agreement shall cease to be effective as of the date of
termination, Xx. Xxxxx shall be removed from his position and Xx. Xxxxx shall
have no right to receive any payments or benefits hereunder except for (i)
installments of Base Salary which have been earned in 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. Xxxxx 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. Xxxxx'x Disability, KMC shall pay the greater of (x)
sixty percent (60%) of the Base Salary and (y) the amount payable to Xx. Xxxxx
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. Xxxxx'x death,
Section 7(a)(ii) or Section 7 (a) (iii), KMC shall pay to Xx. Xxxxx a xxxxxxxxx
payment in an amount equal to the two times the annual Base Salary and (v)
continuation of Xx. Xxxxx'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
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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) March
31, 2005, subject to Xx. Xxxxx'x compliance with the provisions of Section 3
hereof.
(c) (i) If Xx. Xxxxx'x employment is terminated pursuant to Section
7(a)(iv) or (ii) if Xx. Xxxxx 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 amounts owed by Xx.
Xxxxx 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. Xxxxx on the date his
employment is terminated or such violation occurs and (y) Xx. Xxxxx 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
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actually paid or incurred by Xx. Xxxxx) derived from the sale, pledge or other
disposition of any such stock or any interest therein. If Xx. Xxxxx 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. Xxxxx 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 lesser amount. In
addition, following a Change in Control one hundred percent (100%) of the shares
subject to the options granted to Xx. Xxxxx pursuant to that certain
Non-Qualified Executive Stock Option Agreement dated the date hereof between KMC
and Xx. Xxxxx ("Stock Option Agreement") 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. Xxxxx 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. Xxxxx is and
will be subject to any excise tax pursuant to Code Section 4999 on account of
the options granted pursuant to the Stock Option Agreement, KMC shall pay to Xx.
Xxxxx an amount equal to such excise tax and any income, excise or employment
tax payable by Xx. Xxxxx by reason of such payment of tax by
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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. Xxxxx
to exercise any vested stock options granted pursuant to the Stock Option
Agreement prior to the year of the Change in Control. For purposes of this
Agreement and the options granted to Xx. Xxxxx 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. Xxxxx'x 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. Xxxxx shall be entitled to permanently retain
all options or stock granted pursuant to the Stock Option Agreement 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 granted pursuant to the Stock Option Agreement 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
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the Option granted pursuant to the Stock Option Agreement 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. Xxxxx 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. Xxxxx'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. Xxxxx'x Disability, Xx. Xxxxx shall be
entitled to permanently retain all options or stock granted pursuant to the
Stock Option Agreement 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 granted pursuant to the Stock Option
Agreement 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.
8. ASSIGNABILITY; SUCCESSORS. The obligations of Xx. Xxxxx hereunder are
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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
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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. Xxxxx with respect to the subject matter hereof
and supersedes all prior written and oral agreements and understandings with
respect to such subject matter, including the Employment Agreement dated as of
January 1, 1999, 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, provided, however, that this Agreement shall not supersede
that certain Non-Qualified Stock Option Agreement dated as of December 16, 1998
by and between Xx. Xxxxx and KMC with respect to the options granted thereunder.
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 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
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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
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Xx. Xxxxx, such notice shall be sent to him at the address set forth in the
first paragraph hereof, with a copy to Xxxxxxx X. Xxxxxxxxxxx, Esq., Xxxxxx
Flyer, P.C., 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000-0000. 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. Xxxxx 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. Xxxxx and KMC with regard to his
employment by KMC, and should Xx. Xxxxx prevail in the proceedings concerning
such dispute on any material issue, Xx. Xxxxx 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
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CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW (EXCLUDING
PRINCIPLES OF CONFLICTS OF LAW
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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
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which, for all purposes, shall be deemed an original.
15. COUNSEL FEES. KMC shall, upon presentation of an appropriate statement,
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pay the reasonable costs and expenses, up to Ten Thousand Dollars ($10,000), of
Xxxxxx Flyer, P.C. 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
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equally in the drafting of this Agreement and any ambiguity in this Agreement
shall not be construed against any purported author thereof. Xx. Xxxxx
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. Xxxxx has deemed
appropriate under the circumstances and that, at all times during the course of
the negotiations and execution of this Agreement, Xx. Xxxxx has been advised by
counsel.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
EMPLOYEE EMPLOYER
/s/ Xxxxxx X. Xxxxx, XX
------------------------------------ KMC TELECOM HOLDINGS, INC.
Xxxxxx X. Xxxxx, XX
/s/ XXXXXX X. XXXXXX
By: -----------------------------------
Title: Chairman
--------------------------------