Exhibit 10.1

EXECUTIVE CONFIDENTIALITY, NON-SOLICITATION,

NON-COMPETITION AND SEVERANCE AGREEMENT

THIS EXECUTIVE CONFIDENTIALITY, NON-SOLICITATION, NON-COMPETITION AND SEVERANCE AGREEMENT (together with the annexes and exhibit attached hereto, this “Agreement”) is entered into as of the date set forth on the signature page hereto between PAETEC Holding Corp., a Delaware corporation (“PAETEC Holding”), and                                  (“you”).

WHEREAS, the Company (as defined herein) has developed and expects to continue to develop confidential and proprietary materials and highly sensitive information of significant value, which you recognize must be carefully protected as set forth below for the Company to be successful;

NOW, THEREFORE, to induce the Company to continue to employ you, and in consideration of your continued employment by the Company and for other good and valuable consideration, the receipt and sufficiency of which you hereby acknowledge, PAETEC Holding and you hereby agree, intending to be legally bound, as follows:

 

1.	Defined Terms

For purposes of this Agreement, the following capitalized terms have the meanings ascribed to such terms in this Section 1:

“Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act.

“Board” shall mean the board of directors of PAETEC Holding.

“Cause” shall mean termination of your employment with the Company due to any of the following: (a) your material failure or refusal to perform the duties assigned to you, provided that the Company gives you a written notice of your failure or refusal to perform such duties and 20 days to remedy such failure or refusal, and provided, further, that such duties are not materially inconsistent with those of other individuals who report directly to the officer of the Company to whom you directly report (or materially inconsistent with those of other individuals reporting directly to the Board, if you are the Chief Executive Officer of PAETEC Holding); (b) your refusal to follow the reasonable directives of the Board, the Chief Executive Officer or the other officer to whom you directly report, provided that the Company gives you a written notice of your refusal to perform such directives and 20

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days to remedy such refusal, and provided, further, that such directives are not materially inconsistent with those of other individuals who report directly to the officer of the Company to whom you directly report (or the Board, if you are the Chief Executive Officer of PAETEC Holding); or (c) your conviction of a felony.

“Change of Control Transaction” shall mean any of the following:

 

(a)

the dissolution or liquidation of PAETEC Holding;

 

(b)

a merger, consolidation, reorganization or similar transaction involving PAETEC Holding (i) in which PAETEC Holding is not the surviving corporation or other surviving Person or (ii) which results in PAETEC Holding becoming the wholly-owned subsidiary of another corporation or other Person (any transaction of the type specified in this clause (ii), a “Parent Transaction”), unless the Existing Stockholders beneficially own (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in the aggregate immediately following the consummation of such transaction more than 50% of the combined voting power of all classes of outstanding Voting Securities of the successor to PAETEC Holding (in the case of a transaction referred to in clause (i) above) or of the corporation or other Person whose Voting Securities are issued to the Existing Stockholders in such transaction (in the case of a transaction referred to in clause (i) or (ii) above);

 

(c)

a sale of all or substantially all of the assets of PAETEC Holding to another corporation or other Person, as determined in accordance with the applicable law of the State of Delaware;

 

(d)

any other transaction (including a merger, consolidation, reorganization or similar transaction) that results in any corporation or other Person, other than the Arunas A. Chesonis and his controlled Affiliates, beneficially owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act) immediately following the consummation of such transaction more than 50% of the combined voting power of all classes of outstanding Voting Securities of (i) the corporation (including, to the extent applicable, PAETEC Holding) or other Person whose Voting Securities are issued to the Existing Stockholders in such transaction or (ii) if no such issuance is made in such transaction, PAETEC Holding; or

 

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(e)

the Incumbent Board Members ceasing for any reason to constitute (i) at any time prior to the consummation of a Parent Transaction, a majority of the Board or a majority of the board of directors, board of managers or other governing body of any successor to PAETEC Holding or (ii) at any time following the consummation of a Parent Transaction, a majority of the board of directors, board of managers or other governing body of the corporation or other Person whose Voting Securities are issued to the Existing Stockholders in such transaction; provided, however, that any individual becoming a member of the Board or of such board of directors, board of managers or other governing body, as the case may be, subsequent to the date of this Agreement whose appointment or nomination for election was approved by a vote of at least a majority of the Incumbent Board Members shall be deemed to be an Incumbent Board Member for purposes of this clause (e), but excluding, for such purposes, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors (or managers or other members of any such governing body) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or such board of directors, board of managers or other governing body, as the case may be.

“Code” shall mean the Internal Revenue Code of 1986, as amended, as in effect on the date hereof or as hereafter amended.

“Company” shall mean (a) collectively, PAETEC Holding and its Subsidiaries, or (b) when express reference in this Agreement is made to your employment with the Company or when reference in this Agreement is made to any notice or other communication you are required or permitted to provide hereunder, PAETEC Holding, if you are employed by PAETEC Holding, or any Subsidiary of PAETEC Holding, if you are employed by such Subsidiary, and shall include the successors and assigns of PAETEC Holding and each Subsidiary.

“Company’s Business” shall mean the businesses in which PAETEC Holding and its Subsidiaries engage or plan to engage (even if they have not yet begun to engage in such businesses) at any time during the term of your employment with the Company, which businesses shall include research, development, manufacture, sale, resale and/or licensing of products and services related to

 

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communications, integrated communications, long-distance services, Internet access, eCommerce, hardware and software (whether owned or licensed by the Company), wireless networking and wireless last mile services, and data services, on a wholesale, resale and/or retail basis, including local, domestic, and international long-distance services, local exchange services, IP/ISP services, high-speed Internet access, MPLS services, DSL services, eCommerce, web hosting, ASP services, data networking, systems integration services, telecommunications hardware manufacturing and sale, internet telephony (VOIP) equipment and services, telecommunications expense management software and managed services, and data communications services.

“Disability” shall mean your “permanent and total disability” within the meaning of Section 22(e)(3) of the Code.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, as in effect on the date hereof or as hereafter amended.

“Existing Stockholders” shall mean, with respect to any transaction, all holders of all classes of Voting Securities of PAETEC Holding as of the time immediately preceding the consummation of such transaction.

“Good Reason” shall mean termination of your employment with the Company due to any of the following: (a) any action by the Company to reduce your base salary by a material amount at any time; (b) any action by the Company to reduce your “target” annual bonus opportunity (as opposed to your minimum or maximum annual bonus opportunity), expressed as a percentage of your annual base salary, by a material amount at any time; or (c) a requirement by the Company that you be based anywhere other than within 50 miles of your current location without your consent; provided, however, you must give written notice to the Company within 90 days of the occurrence of the condition that is the basis for such Good Reason; provided, further, that, if the basis for such Good Reason is correctible and the Company has corrected the basis for such Good Reason within 30 days after receipt of such notice, you may not then terminate your employment for Good Reason with respect to the matters addressed in such notice, and therefore your notice of termination with respect to such basis for Good Reason shall automatically become null and void.

“Incumbent Board Members” shall mean the individuals who, as of the date of this Agreement, constitute the Board.

 

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“Person” shall mean an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Subsidiary” shall mean any corporation, partnership, limited liability company, association or other business entity of which more than 50% of the voting power of the outstanding Voting Securities is owned, directly or indirectly, by PAETEC Holding and one or more other Subsidiaries of PAETEC Holding.

“Voting Securities” shall mean, with respect to any Person, capital stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

 

2.	Confidentiality

(a) You acknowledge that you have been and shall be provided access to the Company Confidential Information and occupy and shall occupy a position of trust and confidence with respect to the Company’s affairs and business. For purposes of this Agreement, “Company Confidential Information” shall have the meaning ascribed to such term on Annex A-1 attached hereto and made a part hereof.

(b) You acknowledge and agree that: (i) during your employment with the Company, you shall have access to and become acquainted with the Company Confidential Information and materials, including its trade secrets, and shall occupy a position of trust and confidence with respect to the Company’s affairs, business and customer goodwill, and the Company Confidential Information; (ii) the interests afforded protection by this Agreement are the Company’s legitimate business interests, deserving of protection; and (iii) the Company would not have entered into or continued its employment relationship with you without your execution of this Agreement. You agree to take the steps set forth on Annex A-2 attached hereto and made a part hereof to preserve the confidential and proprietary nature of the Company Confidential Information and materials and to preserve the Company’s goodwill.

 

3.	Non-Competition and Non-Solicitation

(a) Unless the following covenants are waived in whole or in part by the Company in accordance with Section 7, for a period of two years after the effective date of termination of your employment with the Company (the “Termination Date) (irrespective of the reason for, or manner of, such termination), you shall not, directly or indirectly:

 

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(i)

solicit, recruit or hire, or in any manner assist in the soliciting, recruitment or hiring of (A) any of the employees of PAETEC Holding or any Subsidiary or any individuals who were employed by PAETEC Holding or any Subsidiary within 12 months before the Termination Date, or (B) any of the sales agents or independent sales agents of PAETEC Holding or any Subsidiary, or any individual or Person that was a sales agent or independent sales agent of PAETEC Holding or any Subsidiary within 12 months before the Termination Date;

 

(ii)

individually or as an officer, director, employee, shareholder or equity owner (other than as a shareholder or other equity owner of less than 1% of the outstanding capital stock of a publicly traded company), consultant, contractor, partner, joint venturer, agent, manager, or other representative, work for, become employed by or perform services for any corporation or other Person that is competitive with the Company’s Business or that would divert business from PAETEC Holding or any Subsidiary in any geographical area in which PAETEC Holding or any Subsidiary is then conducting operations (such competitive corporation or other Person, an “Other Enterprise”), provided that you shall not be restricted from working for, becoming employed by or performing services for any Other Enterprise, even if another division, subsidiary or Affiliate of such Other Enterprise is competitive with the Company’s Business or would divert business from PAETEC Holding or any Subsidiary, so long as you do not perform any services for such division, subsidiary or Affiliate, and provided, further, that you shall not be restricted under this Section 3(b)(ii) from competing with any business of PAETEC Holding or any Subsidiary if you did not provide any services to such business of PAETEC Holding or such Subsidiary or did not possess or have knowledge of Company Confidential Information within the 24-month period before the Termination Date;

 

(iii)

solicit on behalf of any Other Enterprise, or accept on behalf of any Other Enterprise, business from any individual, business or organization that was known by you to be a customer of PAETEC Holding or any Subsidiary, or

 

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identified by PAETEC Holding or any Subsidiary as a prospective customer of PAETEC Holding or such Subsidiary, in each case as of or within 12 months before the Termination Date; or

 

(iv)

take any action to influence or attempt to influence customers, prospective customers, vendors or suppliers of PAETEC Holding or any Subsidiary known to you to divert their business to any Other Enterprise or take any action which is intended, or would reasonably be expected, to affect adversely PAETEC Holding or any Subsidiary, the Company’s Business, the reputation of PAETEC Holding or any Subsidiary, or the relationship of PAETEC Holding or any Subsidiary with its customers, prospective customers, vendors or suppliers.

(b) The parties agree that if a court of competent jurisdiction finds that any term of this Section 3 is for any reason unenforceable because it is overly broad in scope or duration, such term shall be modified to the minimum extent necessary to make it enforceable. Further, the covenants in this Section 3 shall be deemed to be a series of separate covenants and agreements, one for each and every region of each state, territory, possession or other political division of the United States of America and each other political division worldwide. If, in any judicial proceeding, a court of competent jurisdiction shall refuse to enforce any of the separate covenants deemed included herein, then, at the option of the Company, wholly unenforceable covenants shall be deemed eliminated from this Section 3 for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. In addition, if a court or other enforcement body finds that any provision of this Section 3 may not be enforced as written because of a public policy, you agree that such court or enforcement body shall modify and construe such provision to permit its enforcement to the maximum extent permitted by law.

(c) You acknowledge the highly competitive nature of the industry in which the Company is involved and further as follows: (i) your services to the Company are special and unique; (ii) your work for the Company shall allow you access to Company Confidential Information, including trade secrets, and customers; (iii) the Company’s business is conducted throughout the United States and over the Internet and World Wide Web, enabling the Company and you to regularly provide services to customers nationwide; (iv) PAETEC Holding would not have entered into this Agreement but for the covenants and agreements contained in this Section 3; and (v) the agreements and covenants contained in this Section 3 are reasonable and are necessary and essential to

 

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protect the business, Company Confidential Information, including trade secrets, and goodwill of the Company. You further acknowledge that this Agreement does not restrict your ability to be gainfully employed, and you acknowledge that the geographic boundaries, scope of prohibited activities, and duration of the covenants set forth in this Section 3 are reasonable in nature and no broader than are necessary to protect the legitimate business interests of the Company. You agree not to raise any objection to the reasonableness of this Section 3 in any action or proceeding to enforce the terms of this Agreement.

 

4.	Certain IP and Inventions

(a) During your employment with the Company, you agree that you shall not knowingly improperly use or disclose any proprietary information or trade secrets of any former employer or other Person intended by such employer or other Person not to be disclosed to the Company. You further agree that you shall not bring onto the Company’s premises any unpublished document or proprietary information belonging to any former employer or other Person unless consented to in writing by such employer or other Person. You agree to inform the Company of any conflicts between your work for the Company and any obligations you may have to preserve the confidentiality of another Person’s proprietary information or materials. If you do not so inform the Company, the Company may conclude that no such conflicts exist, and you agree that thereafter you shall make no claim against the Company that any such conflicts exist. The Company shall receive any such disclosures about any such conflicts in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

(b) Inventions directly relating and applicable and useful to the Company’s Business, if any, patented or unpatented, which you made prior to the commencement of your employment with the Company are excluded from the scope of this Agreement. To preclude any possible uncertainty, you have set forth on Exhibit 1 attached hereto a complete list of all such Inventions that you have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of your employment with the Company, that you consider to be your property or the property of third parties and that you wish to have excluded from the scope of this Agreement (collectively referred to as “Prior Inventions”). If disclosure of any such Prior Invention would cause you to violate any prior confidentiality agreement, you understand that you are not to list such Prior Inventions in Exhibit 1 attached hereto but are only to disclose a cursory name for each such invention, a listing of

 

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the party or parties to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason. A space is provided on Exhibit 1 attached hereto for such purpose. If no such disclosure is attached, you represent that there are no such Prior Inventions. If, in the course of your employment with the Company, you incorporate a Prior Invention into a Company product, test, service or process, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell such Prior Invention. Notwithstanding the foregoing, you agree that you shall not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions without the Company’s prior written consent.

(c) You represent that, to the best of your knowledge, your performance of all of the terms of this Agreement and as an employee of the Company does not and shall not breach any agreement to keep in confidence proprietary information acquired by you prior to your employment by the Company. Further, you represent that, to the best of your knowledge, the performance of your duties with the Company shall not breach any contractual or other legal obligation you have to any third Person.

(d) You agree that any and all intellectual properties, including all ideas, concepts, themes, inventions, designs, tests, procedures, research methods, improvements, discoveries, developments, formulas, patterns, devices, processes, software programs, hardware information, engineering and other information related to the integration of hardware and software, software program codes, logic diagrams, flow charts, decision charts, drawings, procedural diagrams, coding sheets, documentation manuals, technical data, client, customer and supplier lists, and compilations of information, records, and specifications, and other matters constituting Company Confidential Information (including trade secrets), that relate in any way to the actual or prospective business of the Company or to any experimental or developmental work carried on by the Company, and that are conceived, developed or written by you, individually or in collaboration with others during your employment, and all designs, plans, reports, specifications, drawings, inventions, processes, test data and/or other information or items produced by you while performing your duties for the Company, shall belong to and be the sole and exclusive property of the Company, and are “works for hire” by you in your capacity as an employee of the Company. To the extent any such tangible or intangible work product of yours is not a “work for hire,” you hereby assign and transfer to the Company, to the fullest extent permitted by law, all of your rights, title and interest in such intellectual properties, including all patent, copyright or trade secret rights therein.

 

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(e) You further agree to assist the Company in obtaining patents on all inventions, designs, improvements and discoveries that are patentable, or copyright registrations on all works of authorship, and to execute all documents and do all things necessary to vest the Company with full and exclusive title and protect against infringement by others. You agree to give the Company or its designees all assistance reasonably requested to perfect such rights, provided that following termination of your employment, the Company shall reimburse you for your reasonable time and expense in assisting with such matters. You further agree that if the Company is unable, after reasonable effort, to secure your signature on any such documents, any officer of the Company shall be entitled to execute any such documents as your agent and attorney-in-fact, and you hereby irrevocably designate and appoint each officer of PAETEC Holding and each Subsidiary as your agent and attorney-in-fact to execute any such documents on your behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any work, under the conditions described in this sentence. You agree that you shall promptly and fully inform the Company of and disclose to the Company all intellectual properties described in this Agreement that you make during your employment with the Company, whether individually or jointly in collaboration with others, that pertain or relate to the actual or potential business of the Company or to any experimental or developmental work carried on by the Company, whether or not conceived during regular working hours. You agree to make full disclosure to the Company immediately after creating or making any of the intellectual properties identified in this Agreement, and shall thereafter keep the Company fully informed at all times of all progress in connection therewith. You also agree that you shall promptly disclose to the Company all patent applications filed by you or on your behalf within 12 months after the Termination Date that relate to or concern the Company’s Business.

(f) You understand that the term “moral rights” shall mean any rights of attribution or integrity, including any right to claim authorship of a copyrightable work, to object to a modification of such copyrightable work, and any similar right existing under the judicial or statutory law of any country in the world or under any treaty, regardless of whether or not such right is denominated or generally referred to as a “moral right.” You forever hereby waive and agree never to assert any moral rights you may have in any copyrightable work that is a “work for hire” or is assigned to the Company as a result of this Agreement, even after any termination of your employment with the Company.

 

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5.	Consideration

As consideration for the covenants set forth in Section 3, the Company agrees as follows:

(a) In connection with the termination of your employment with the Company (irrespective of the reason for, or manner of, such termination), unless your employment is terminated due to your death or Disability, the Company, subject to the Company’s waiver right set forth in Section 7, shall: