Document:

EX-10.2

 

Exhibit 10.2

AGREEMENT

     This Settlement Agreement (the “Agreement”) is entered into as of this 17th day of February,
2006, between MCI, LLC (formerly known as MCI, Inc.) and all of its subsidiaries (collectively
herein “MCI”), including but not limited to MCI Network Services, Inc. (formerly known as MCI
WORLDCOM Network Services, Inc.) and MCI Communications Services, Inc. (formerly known as MCI
WORLDCOM Communications, Inc.) and US LEC Corp., and all of its affiliates (including
subsidiaries), including but not limited to US LEC Communications Inc., US LEC of Alabama Inc., US
LEC of Florida Inc., US LEC of Georgia Inc., US LEC of Maryland Inc., US LEC of North Carolina
Inc., US LEC of South Carolina Inc., US LEC of Pennsylvania Inc., US LEC of Tennessee Inc., and US
LEC of Virginia LLC (collectively “US LEC”). (MCI and US LEC are referred to together as the
“Parties” and individually as a “Party.”)

     WHEREAS, disputes have arisen among the Parties regarding US LEC’s charges to MCI for certain
Switched Access Services in connection with 8YY Traffic sent by US LEC to MCI for delivery to MCI’s
8YY customers; and

     WHEREAS, on or about April 26, 2005, US LEC filed an action in the United States District
Court for the Western District of North Carolina, Charlotte Division, Civil Action No.
3:05-CV-171-MU against MCI, alleging that MCI wrongfully has refused to pay US LEC for Switched
Access Services US LEC has rendered to MCI (the “Litigation”); and

     WHEREAS, MCI filed an Answer and Counterclaim in the Litigation on or about May 17, 2005 and
filed an Amended Counterclaim on or about October 3, 2005, alleging that US LEC wrongfully had
billed it certain access charges in connection with 8YY Traffic, to which US LEC filed Answers on
June 8, 2005 and October 21, 2005, respectively; and

 

 

     WHEREAS, the Parties desire to enter into this Agreement to resolve all disputes between MCI
and US LEC relating to US LEC’s Switched Access Services billed by US LEC to MCI, without any
admission of wrongdoing or liability on the part of either Party, and to set certain future rights,
obligations and other business arrangements of the Parties, and to settle the Litigation.

     NOW, THEREFORE, in consideration of the mutual benefit of the exchanges detailed below, the
Parties agree as follows:

1. Definitions.

     For purposes of this Agreement the following definitions, in addition to any other definitions
specified herein, shall control:

     a. “Proprietary Information” means information that is marked or otherwise specifically
identified in writing as proprietary, confidential or trade secret by the disclosing Party.
Proprietary Information includes, but is not limited to, all documents and testimony identified or
marked as “Confidential” during the course of the Litigation, the terms of this Agreement, and the
discussions, correspondence and negotiations that led to this Agreement.

     b. “Switched Access Service” means a service providing access to the switched network of a
Telecommunications Carrier for the purpose of originating or terminating interexchange interstate
and intrastate telecommunications between MCI’s interexchange carrier network and an MCI customer
or subscriber placing or receiving an interexchange call. Switched Access Service does not include
local exchange service. Switched Access Service includes (i) access service for traffic in which
(A) the interexchange call originates and terminates on the public switched telephone network, (B)
both the called party and the calling party use ordinary customer premises equipment, and (C) no
net protocol conversion occurs and

2

 

no enhanced functionality to either the calling or the called party is provided by the
provider’s use of IP technology, even-though the call may at some point in the transmission be
converted to Internet Protocol (“IP”); (ii) (prospectively from the effective date of any such FCC
orders) services that the FCC orders shall be subject to switched access charges; and (iii)
interexchange access service for 8YY Traffic sent by US LEC to MCI regardless of whether US LEC
provides the local dial tone to the end user calling the MCI 8YY customer provided that no carrier
other than US LEC performs and actually assesses MCI a charge, for which MCI is liable, for an
originating end office local switching function to a given call.

     c. “8YY Traffic” and “8YY Calls” mean interstate and intrastate calls intended to terminate to
a telephone number for which there is no charge to the calling party by an interexchange carrier
for making and completing the calls, and includes, but is not limited to, calling parties making
calls from businesses, institutions or other entities that may obtain local dial tone from carriers
other than US LEC.

     d. “Act” means the Communications Act of 1934, as amended by the Telecommunications Act of
1996.

     e. “Telecommunications Carrier” means any provider of telecommunications services (as such
term is defined as of the Effective Date in Section 3(46) of the Act (47 U.S.C. § 153(46)))
regulated under Title II of the Act, except that such term shall not include aggregators of
telecommunications services as defined as of the Effective Date by Section 226 of the Act.

     f. “CMRS Provider” means an entity that provides mobile service, as defined as of the
Effective Date in Section 3(27) of the Act (47 U.S.C. § 153(27)), for profit (i.e., with the intent
of receiving compensation or monetary gain), where the mobile service is an

3

 

interconnected service and is available to the public, or to such classes of eligible users as
to be effectively available to a substantial portion of the public, or that provides the functional
equivalent service of such mobile service.

     g. “Wireless 8YY Traffic” or “Wireless 8YY Calls” means interstate and intrastate 8YY Calls
from CMRS Providers’ subscribers.

     h. “Effective Date” means the date of execution of this Agreement by the second of the two
Parties to execute it.

     i. “Government Agency” means a federal or state board, agency, authority, commission, or other
entity with jurisdiction over the traffic which is the subject of this Agreement, including but not
limited to the Federal Communications Commission (“FCC”).

     j. “US LEC End Users” means customers of US LEC that are not Telecommunications Carriers or
CMRS Providers, and who subscribe to US LEC services or facilities either through US LEC tariffs or
contracts, which services include, among other services, direct connectivity with US LEC for
delivery of 8YY Calls to the appropriate interexchange carriers. US LEC End Users specifically
include businesses, institutions, and other entities that may obtain local dial tone from carriers
other than US LEC, but deliver outbound 8YY Calls to US LEC via a direct connection where no other
carrier performs and actually assesses MCI a charge, for which MCI is liable, for an originating
end office local switching function on a given call.

     2. Consideration.

     a. Without either Party admitting any wrongdoing with respect to any invoice sent to MCI by US
LEC for Switched Access Service or the non-payment of any such invoice, within ten (10) business
days of the Effective Date, MCI will pay to US LEC the total sum of
[***]

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

4

 

by check (with the check to be received by US LEC within the
ten (10) business day period) in full settlement of all claims released in this Agreement.

     b. Upon payment by MCI to US LEC in accordance with paragraph 2.a., US LEC agrees that it will
take all necessary actions to credit, or otherwise extinguish, the billed and outstanding amounts
due from MCI on the accounts listed on Schedule 1 attached hereto and incorporated herein (or any
account(s) subsequently discovered by a Party with notice of such additional account(s) provided to
the other Party with sufficient information to demonstrate that the account included Switched
Access Service charges [***] and the entity to which the bill was directed was a former or existing MCI company or
subsidiary [***]) for any Switched Access Service for the usage period from
[***] associated with any such outstanding balances for Switched Access Services. Both Parties represent
that they share a good faith belief as of the Effective Date that the carrier accounts listed on
the attached Schedule 1 (which include as part of the carrier account, the various Carrier
Identification Codes (“CICs”) assigned to MCI and used by US LEC for billing purposes) are the
carrier accounts of the MCI companies and subsidiaries and comprise all the MCI accounts and
reflect all the MCI CICs for which US LEC has assessed any unpaid or disputed Switched Access
Service charges upon MCI companies and subsidiaries for [***], though this representation does not preclude either Party from
subsequent discovery in good faith and notice as provided in this paragraph.

     c. The Parties agree further that for services provided to MCI by any current or future US LEC
company, affiliate, subsidiary, successor or assign:

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

5

 

     (i) [***];

     (ii) [***];

     (iii)
[***];

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

6

 

     (iv)
The parties agree that [***], and such services include but are not limited
to [***] and
all database queries including database queries for Wireless 8YY Calls. Unless expressly
stated in this Agreement, the rules and regulations from the applicable US LEC tariff will
govern the provision of Switched Access Services by US LEC, subject to MCI’s right to
challenge the validity or applicability of the rules and regulations of US LEC’s tariff,
unless the challenge is inconsistent with the terms of this Agreement.

     d. [***], MCI will retain the right to
dispute in good faith, in accordance with the process set forth in the applicable US LEC tariff, US
LEC’s invoices for Switched Access Services, but not on any basis that challenges US LEC’s right to
bill for Wireless 8YY Calls or otherwise is inconsistent with this Agreement.

     e. [***], MCI will retain the right to challenge US LEC’s rates for
intrastate Switched Access Service, but only as part of a general challenge to competitive carrier
intrastate switched access rates or the applicability of the rate elements for

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

7

 

intrastate Wireless 8YY Calls in a proceeding before a Government Agency, so long as US LEC’s
right to bill for Wireless 8YY Calls is not challenged. In the event a Government Agency enters an
order in such a proceeding which expressly directs that competitive carrier intrastate access rates
for Wireless 8YY Calls be reduced, both retroactively and prospectively, [***] then, as between MCI and US LEC, the provisions of such order and
any changes mandated thereby will apply prospectively only, except as set forth in this subsection
(e). To the extent that US LEC’s aggregate billings (i.e. for all states) for intrastate Wireless
8YY Traffic (“Aggregate Intrastate Wireless 8YY Charges”) to MCI [***] at the
time the Government Agency order becomes effective, the changes
mandated thereby may be [***];

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

8

 

     f. US LEC shall cooperate with MCI’s requests for, and shall use all commercially reasonable
efforts to provide either separately or on US LEC’s invoices for interstate and intrastate access
traffic, such data as is reasonably necessary to permit [***] and to
[***]
in the industry Local Number Portability Databases or other industry databases that reflect
assignment of the telephone numbers (a “US LEC Number”) [***] in the industry Local Number Portability Databases (a “non-US
LEC Number”); provided, however, that MCI agrees that it will cooperate with US LEC, and shall use
commercially reasonable efforts, to identify the type of data needed by MCI and any data already
available, or made available, to MCI that would permit [***]. This paragraph does not obligate US LEC to purchase or
upgrade its billing systems in any way, nor to take extraordinary measures to provide such data.

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

9

 

     g. Notwithstanding any other provision of this Agreement, a Party may file or otherwise
disclose this Agreement or portion thereof with any governmental person or body to the extent
required by law, provided that such Party shall do so only to the extent necessary (in whole or in
part) and shall take all reasonable steps otherwise to preserve the confidentiality of this
Agreement as provided by Section 8 of this Agreement, including where appropriate disclosure under
seal. In addition, if, and to the extent, necessary to give effect to the terms of this Agreement,
US LEC shall amend any of its tariffs.

3. Releases.

     a. Except as set forth in this Agreement, MCI releases US LEC and its and their directors,
officers, shareholders, employees, representatives, agents, independent contractors, and attorneys
from

	 	(i)	 	any claims, counterclaims or defenses that were made in the
Litigation relating to the time period [***];
	 
	 	(ii)	 	any claims, counterclaims, or defenses arising from the nucleus
of operative facts at issue in the Litigation that occurred
[***];
	 
	 	(iii)	 	any claims arising from the conduct of the Litigation; and
	 
	 	(iv)	 	any claims, counterclaims or defenses related to the services
provided by US LEC to MCI, including but not limited to the billing of Switched
Access Service for 8YY Traffic, provided during the usage period [***],

regardless of whether any of the foregoing in subparagraphs a. i-iv is known or unknown, accrued or
inchoate.

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

10

 

     b. Except as set forth in this Agreement, upon receipt of the payment required by Paragraph
2.a hereof, US LEC releases MCI and its and their directors, officers, shareholders, trustees,
employees, representatives, agents, independent contractors, and attorneys from

	 	(i)	 	any claims, counterclaims or defenses that were made in the
Litigation relating to the time period [***];
	 
	 	(ii)	 	any claims, counterclaims, or defenses arising from the nucleus
of operative facts at issue in the Litigation that occurred [***];
	 
	 	(iii)	 	any claims arising from the conduct of the Litigation; and
	 
	 	(iv)	 	any claims, counterclaims or defenses related to the services
provided by US LEC to MCI, including but not limited to the billing of Switched
Access Service for 8YY Traffic, [***],

regardless of whether any of the foregoing in subparagraphs b. i-iv is known or unknown, accrued or
inchoate.

     c. MCI hereby represents, warrants and agrees that (i) it has not assigned or otherwise
divested itself of any part of the claims being released hereby, (ii) no person or entity has any
interest or ownership of the claims covered by this Agreement, and (iii) MCI will indemnify, defend
and hold US LEC harmless from and against any or all of any part of the claims so assigned or
otherwise divested which is or are brought against US LEC.

     d. US LEC hereby represents, warrants and agrees that (i) it has not assigned or otherwise
divested itself of any part of the claims being released hereby, (ii) no person or entity

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

11

 

has any interest ownership of the claims covered by this Agreement, and (iii) US LEC will
indemnify, defend and hold MCI harmless from and against any or all of any part of the claims so
assigned or otherwise divested which is or are brought against MCI.

     e. Notwithstanding anything to the contrary contained in this Section 3, nothing in this
Agreement shall release any claims for amounts due (if any) for direct end office trunks purchased
by MCI from US LEC pursuant to US LEC’s FCC switched access tariff.

     4. Dispute Resolution.

     a. In the event that a dispute should arise concerning the interpretation of or performance of
this Agreement, the Parties agree that resolving the dispute(s) as promptly and efficiently as
possible will best serve their respective interests. The disputing Party must submit in writing to
the other Party the basis of the dispute in sufficient detail to permit the other Party to respond
to the dispute.

     b. If the Parties cannot resolve a dispute concerning the interpretation of or performance of
this Agreement through negotiation within sixty (60) days after one Party notifies the other Party
of the dispute, then the dispute shall be referred to one designated representative from MCI at the
director level or above and one representative from US LEC at the director level or above. If the
Parties remain unable to resolve their dispute within sixty (60) days after the referral set forth
above, then the dispute shall be referred to one designated representative from MCI at the vice
president level or above (or their designee) and one representative from US LEC at the vice
president level or above.

     c. If the dispute is not resolved at the vice president level or above within 30 days after
the final escalation set forth in paragraph 4.b above, then either Party may seek resolution of the
dispute by binding arbitration administered by the American Arbitration Association in

12

 

accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The arbitration shall be held in
Charlotte, North Carolina.

     (d) The provisions of this Paragraph 4 shall not be construed to prohibit either Party from
seeking preliminary injunctive relief in any court of competent jurisdiction after exhaustion of
the escalation procedures, provided that no court action may supersede a binding arbitration
initiated under subsection 4.c. above for resolution of the merits of such dispute. Any litigation
seeking a preliminary injunction may be brought only with notice to the other Party, and each Party
hereby waives the right to seek ex parte relief.

5. Dismissal of Pending, Litigation and Return of Discovery Material.

     a. Immediately upon receipt of the payment to US LEC required in Paragraph 2.a hereof, the
Parties shall file a Stipulation of Dismissal, with prejudice, of the Litigation.

     b. Within five (5) business days of the filing of the Stipulation of Dismissal, and to the
extent permitted by applicable law, the Parties shall each return to the producing Party all
material produced during discovery, including deposition transcripts and exhibits, and neither
Party nor its counsel shall keep any copy of any document produced in discovery by the other party
for any reason, except with respect to a copy of any such document produced to a Government Agency
in response to a duly authorized request from such Agency, and only for as long as such Agency
requires such document to be kept. Neither Party has any obligation to retrieve any document which
was filed with the Court, either under seal or as an attachment or an exhibit. To the extent that
any information exchanged in discovery may have been used by counsel and become part of attorney
work product, that work product shall be destroyed by

13

 

counsel within the time period contemplated by this paragraph, and such counsel shall so
certify to the other Party in writing.

     (c) The Parties agree to execute and exchange any such further documentation as may be
reasonably required to give effect to the Agreement

6. Fees and Expenses.

     Each Party will pay its own attorneys’ fees and expenses associated with the Litigation and
this Agreement, except to any extent otherwise provided for herein.

7. Successors and Assigns.

     This Agreement shall be binding upon, and inure to the benefit of, the Parties’ successor and
assigns.

8. Confidential Nature of Settlement.

     a. The Parties agree to hold in the strictest confidence the substance of any and all
settlement negotiations, documents exchanged during settlement discussions, or information learned
or acquired during settlement discussions, as well as the terms of any final agreement that may be
reached as a result of settlement discussions (collectively, “Settlement Information”), and not to
reveal any such Settlement Information to any person except as provided herein. The existence of
this Agreement is not confidential, but the terms of this Agreement are confidential.

     b. Each Party will hold in confidence Proprietary Information disclosed by the other Party
except if it (a) was previously known by the receiving Party prior to the beginning of the
Litigation free from any obligation to keep it confidential, (b) is independently developed by the
receiving Party, (c) becomes publicly available except through a breach of this provision by the
receiving Party, and/or (d) is disclosed to the receiving Party by a third party without breach of

14

 

any confidentiality obligation. Only the exception in clause (c) of the prior sentence shall
apply to the Settlement information. Proprietary Information or Settlement Information may be
disclosed to an entity or person that controls a Party (including such controlling party’s
directors officers and controlling shareholders), to a Party’s legal counsel, senior lenders and
their counsel and auditors, provided that such representatives are bound by appropriate
confidentiality obligations, and in such regulatory filings as may by required, and then only to
the extent required, by the securities laws as the Parties’ respective securities counsel may
advise. No Proprietary Information or Settlement Information can be used or introduced by either
Party as evidence in any other litigation, arbitration or state or agency proceeding of any kind,
except that Proprietary Information or this Agreement and its terms may be used in any proceeding
between the Parties to establish rights and obligations under this Agreement if such information is
properly filed with the Court under seal and subject to a protective order protecting it from
disclosure to persons other than the Parties and court personnel.

     c. If, after the Effective Date of this Agreement, either Party is required to disclose
Proprietary Information or Settlement Information or this Agreement in judicial or administrative
proceedings, such Party will, unless prohibited by applicable law or the terms of the applicable
order, (i) give the other Party prompt written notice and the opportunity, sufficiently in advance
of such disclosure, if feasible, to seek protective arrangements and will cooperate reasonably with
the other Party (at such other Party’s expense) in that regard, and (ii) disclose only that portion
of the Proprietary Information or Settlement Information or Agreement required to be disclosed.

     d. Either Party may issue a press release regarding the settlement that may include any
information that may be required to be included in any filing with the Securities and

15

 

Exchange Commission by the securities laws as their respective securities advisors may advise,
except the release may state that the Parties have settled this dispute concerning Switched Access
Service and the Litigation but shall not include the specific financial terms of the settlement.
The Parties agree to exchange a copy of such portion of the press release that relates to the
discussion of the settlement of this dispute concerning Switched Access Service or the Litigation
with reasonable time for review prior to its publication, and shall obtain the consent of the other
Party to the text of the press release prior to the publication of the press release, which consent
shall not unreasonably be withheld.

     e. The Parties acknowledge and agree that any breach of the obligations of this Paragraph 8
will cause damage to the other Party and the breaching party shall be liable to the non-breaching
party for such damages and subject to any other remedies at law or equity.

9. Non-Disparagement.

     a. Beginning as of the Effective Date of this Agreement, MCI and US LEC agree to use
reasonable efforts to ensure that their respective directors, officers, senior management
personnel, attorneys, or lobbyists (collectively “Representatives”) do not make any untrue,
misleading, or defamatory statements or representations, either orally or in writing, to any third
persons [***] relating to the nucleus of operative facts at issue in the Litigation, or if
either Party becomes aware of such conduct by its Representatives, to make reasonable efforts to
stop the conduct.

     b. The Parties acknowledge and agree that any breach of the obligations of this Paragraph 9
may cause harm to the other Party and its affiliates, and that therefore either US LEC or MCI,
whichever is harmed, shall be entitled to injunctive relief prohibiting the breaching

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

16

 

Party from any further violation or threatened future violation of this Paragraph 9. The
Parties agree that it is not a violation of this Paragraph 9 for a Party to participate in a
challenge to competitive carrier switched access rates or the applicability of the rate elements
for 8YY Wireless Calls, or in a proceeding before a Government Agency, or in a lawsuit before a
court or arbitration panel, provided that no untrue, misleading or defamatory statements or
representations [***] are
made (which provision does not preclude a Party from referring to prior orders or other prior
official statements of a court or Government Agency addressing such topics) and that, in such
proceeding, no claims are asserted against US LEC that are in any way inconsistent with the
provisions of this Agreement.

10. No Third Party Beneficiaries.

     This Agreement does not provide and is not intended to provide third parties not expressly
enumerated in this Agreement with any remedy, claim, liability, reimbursement, cause of action, or
other privilege.

11. Entire Agreement.

     This Agreement contains the entire understanding between MCI and US LEC with respect to the
resolution of the matters addressed in this Agreement.

12. Preparation of Documents and Effectiveness.

     Each Party has participated in the creation of this Agreement. No legal principle
interpreting the Agreement against the drafter will apply. Each Party in entering into this
Agreement has completely read and fully understood the terms and conditions of the Agreement. The
Parties acknowledge that they have had the opportunity to consult with legal counsel of their

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

17

 

choosing prior to entering into this Agreement, that they know and understand this Agreement’s
contents, and that they are executing this Agreement knowingly and voluntarily.

13. No Admission.

     Neither any provision of this Agreement taken individually nor the Agreement taken as a whole
is to be construed as an admission of liability by any of US LEC, MCI, or their directors,
stockholders, officers, employees, representatives, agents, assignors or assignees or as an
admission of any allegation or argument made by any person in the Litigation, all of which
liabilities, allegations, and argument have been expressly denied.

14. Counterparts.

     The parties agree that this Agreement may be executed in a number of counterparts, each of
which shall be considered an original instrument, but all of which together shall be considered but
one and the same instrument, and may be delivered by facsimile from one Party to the other when
executed. This Agreement shall be binding on all signatories hereto, even if executed in any
number of counterparts.

15. Notices.

     All notices required or permitted under this Agreement and all requests for approvals,
consents, and waivers must be in writing and must be delivered via hand-delivery or overnight
cornier delivery and will be deemed delivered when actually received. Fax and e-mail delivery
methods do not constitute written notice. Any notice or request will be delivered to the addresses
specified below.

     If to US LEC:

Thomas Gooley

Vice President-Treasurer

US LEC Corp.

6801 Morrison Boulevard

18

 

Morrocroft III

Charlotte, NC 28211

Fax number: 704-602-1133

e-mail: tgooley@uslec.com

   with a copy to

General Counsel

US LEC Corp.

6801 Morrison Boulevard

Morrocroft III

Charlotte, NC 28211

Fax number: 794-319-3007

     If to MCI:

Peter H. Reynolds

Director, National Carrier Contracts and Initiatives

Verizon Business

22001 Loudoun County Parkway

Suite G2-3-6l4

Ashburn, VA 20147

Fax number (703) 886-0118

e-mail: Peter.H.Reynolds@verizonbusiness.com

with a copy to:

Brian H. Benjet

Verizon Business

1133 19th Street, NW

Washington, DC 20036

Fax Number (202) 736-6072

e-mail: brian.benjet@verizonbusiness.com

A Party may change the name and/or address to which notice is to be delivered by sending notice to
the applicable notice address.

16. Power, Authority and Legal Capacity to Bind.

     Each Party represents that it has the requisite power, authority and legal capacity to make,
execute, and deliver this Agreement and to fully perform its duties and obligations under this
Agreement, and that neither this Agreement nor the performance by such Party of any duty or
obligation under this Agreement will violate any other contract, agreement, covenant or

19

 

restriction by which such Party is bound. To the extent that this Agreement is in conflict
with any other contract, agreement, covenant or restriction by which such Party is bound, the
Parties hereby agree that such conflict is not material.

17. Governing Law.

     This Agreement will be governed by the laws of the state of North Carolina, without regard to
its choice of law provisions.

18. Waiver Amendment, Modification and Interpretation.

     No waiver, amendment or modification of any provision of this Agreement shall be effective
unless in writing and signed by the Parties. My waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given. No prior drafts of this
Agreement, or any negotiations regarding the terms contained in these drafts, or any related
agreements shall be admissible in any court to vary or interpret the terms of this Agreement, the
Parties hereto agreeing that this Agreement constitutes the final expression of the Parties’
agreement and supersedes all prior written and oral understandings regarding the terms of this
Agreement.

	 	 	 	 	 
	Executed on behalf of	 	US LEC CORP., US LEC OF ALABAMA INC., US LEC OF
FLORIDA INC., US LEC OF GEORGIA INC., US LEC OF
MARYLAND INC., US LEC OF NORTH CAROLINA INC.,
US LEC OF PENNSYLVANIA INC., US LEC OF SOUTH
CAROLINA INC., US LEC OF TENNESSEE INC., US LEC
OF VIRGINIA L.L.C., and US LEC COMMUNICATIONS
INC.
	 
	 	 	 	 
	 

	 	By:	 	/s/ Thomas R. Gooley
	 

	 	 	 	 
	 

	 	Print Name:	 	Thomas R. Gooley
	 

	 	 	 	 
	 

	 	Title:	 	Vice President
	 

	 	 	 	 
	 

	 	Date:	 	2/17/06
	 

	 	 	 	 

20

 

	 	 	 	 	 
	Executed on behalf of:	 	MCI, LLC, MCI NETWORK SERVICES, INC., AN MCI
COMMUNICATIONS SERVICES, INC.
	 
	 	 	 	 
	 

	 	By:	 	/s/ Randal S. Milch
	 

	 	 	 	 
	 

	 	Print Name:	 	Randal S. Milch
	 

	 	 	 	 
	 

	 	Title:	 	Senior Vice President — Legal
& External Affairs
	 

	 	 	 	 
	 

	 	Date:	 	7 February 2006
	 

	 	 	 	 

21

 

Schedule 1

MCI Accounts

As of 11/30/2005

[***]

[***]
These portions of this exhibit have been omitted and filed separately
with Commission pursuant to a request for confidential treatment.

22Employment Agreement with Stephen Elliston

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered as of May 15, 2006 between
ADVANCED VIRAL RESEARCH CORP., a Delaware corporation (“Employer”), and STEPHEN M. ELLISTON
(“Employee”).

R E C I T A L S

     A. Employee and Employer desire to enter into this Agreement to memorialize the employment
relationship between Employer and Employee.

     B. Subject to the terms and conditions of this Agreement, Employee is to be the President and
Chief Executive Officer of Employer.

     NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto mutually agree as follows:

1. RECITALS. The above stated Recitals are true and correct and are incorporated by reference into
this Agreement.

2. TERM. The term of this Agreement shall be one (1) year commencing as of May 15, 2006 (the
“Effective Date”) and ending on May 14, 2007 unless terminated earlier as provided herein (the
“Term”).

3. DUTIES.

     3.1. In General. Upon the terms and subject to the conditions of this Agreement,
Employer hereby employs Employee and Employee hereby accepts such employment with Employer for the
term of this Agreement as the President, Chief Executive Officer of Employer. Employee shall have
the powers and duties with respect to Employer’s business interests (the “Businesses”) as set forth
in the Bylaws of Employer for its Chief Executive Officer and President and such other executive
and managerial duties as normally associated with such positions, subject to the direction of the
Board of Directors in accordance with the reasonable policies adopted from time to time by the
Board of Directors and communicated by written notice to Employee (the “Duties”). During the term
of this Agreement and subject to Section 3.5 below, Employee shall devote substantially all of his
business time, attention, skill and efforts to the faithful performance of the Duties.

     3.2. Place of Performance. The Duties shall be performed in Yonkers, New York, except
for such travel in the ordinary course of Employer’s business as may from time to time be
reasonably required. Employee’s principal place of business shall be at the executive offices of
Employer in Yonkers, New York.

     3.3. Delegation. Notwithstanding anything to the contrary contained in this Section 3,
Employee shall have the right and authority to delegate responsibility to one or more personnel as
he

 

 

deems appropriate, and is hereby authorized to hire on behalf of Employer additional agents,
employees and other representatives which in his reasonable opinion are necessary to handle the
affairs of Employer, and to terminate the employment of any and all agents, employees and other
representatives of Employer, other than appointed officers of Employer, the termination of whom
shall be subject to the prior approval by Employer’s Board of Directors.

     3.4. Other Activities. Employee shall use his best efforts for the benefit of
Employer by whatever activities he reasonably deems appropriate to maintain and improve Employer’s
standing in the community generally and among other members of the industries in which Employer is
from time to time engaged, including such entertaining for business purposes as he reasonably
considers appropriate. Employee shall not, without the approval of the Board of Directors of
Employer, render services of a business nature to any other person or entity, if such activities
would interfere with the performance of Employee’s Duties as required under this Agreement or
otherwise prevent Employee from devoting substantially all of his business time, attention, skill
and efforts to the performance of Employee’s Duties as required under this Agreement. Subject to
the foregoing limitations, the following activities shall be deemed to be permissible: (i) owning
or managing real or personal property owned by Employee or his family members; (ii) owning any
business which does not compete, directly or indirectly, with Employer; and (iii) holding
directorships or similar positions in any organization which is not competing with Employer and
which is approved by the Board of Directors of Employer.

4. COMPENSATION AND OTHER BENEFITS.

     4.1. Compensation and Employee Benefit Plans. For all services rendered by Employee
in any capacity during his employment under this Agreement (including any renewals hereof),
Employer shall pay to Employee as compensation the sum of the amounts set forth in the following
subparagraphs (a) through (d).

          (a) Base Salary. Commencing upon the Effective Date, Employee shall be paid the sum
of Two Hundred Fifty Thousand Dollars ($250,000) on an annualized basis (the “Base Salary”), which
amount shall be paid in accordance with Employer’s customary payroll practices. On each
anniversary of the Effective Date, during the term of this Agreement and any extensions thereof,
Employer will review the Base Salary.

          (b) Bonus. Employee shall be entitled to receive a bonus payment as determined by
Employer’s Board of Directors in its sole and absolute discretion.

          (c) Benefit Plans. During the term of Employee’s employment with Employer, Employee
shall be entitled to participate in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other executives of Employer (“Investment Plans”) and
Employee and his family shall be eligible for participation in and shall receive all benefits
under, welfare benefit plans, practices, policies and programs applicable generally to other
executives of Employer, including but not limited to comprehensive medical and dental coverage,
disability and basic and supplemental life insurance (“Welfare Plans”).

          (d) Dues. Employer shall pay the dues of such professional associations and societies of
which Employee is a member in furtherance of his Duties.

     4.2. Business Expenses. Employee is authorized to incur reasonable expenses to
execute and/or promote the Businesses of Employer, including, but not limited to, expenses related
to

2

 

maintenance of professional licenses and expenses for reasonable entertainment, travel, and
similar items, in each case, in accordance with the policies, practices and procedures of Employer.
Employer will reimburse Employee for all reasonable travel or other expenses incurred while on
business. Employer agrees and acknowledges that reasonable travel expenses will include expenses
related to Employee’s travel between Yonkers, NY and Raleigh, North Carolina and moderately priced
accommodations near Employer’s headquarters.

     4.3. Vacation. Employee will be entitled to four (4) weeks paid vacation annually or
such other time as authorized by the Board of Directors during which time his compensation shall be
paid in full. Vacation Days unused in any calendar year may not be accumulated and carried forward
and used in future years.

5. TERMINATION OF EMPLOYMENT.

     5.1. Termination by Employee. Employee may terminate his employment with Employer at
any time upon notice to Employer for “Good Reason.” As used herein, “Good Reason” shall mean:

          (a) Employer’s material breach of this Agreement; provided, however, that in the event
Employee believes that this Agreement has been materially breached, he shall provide Employer with
written notice of such breach and provide Employer with a thirty (30) day period in which to cure
or remedy such breach;

          (b) Assignment to Employee of regular duties inconsistent with his position, or status with
Employer; or

          (c) The relocation of Employer’s principal executive offices to a location more than
seventy-five (75) miles outside of Yonkers, New York without Employee’s prior consent.

     5.2. Termination by Employer. Employee’s employment may be terminated by Employer at
any time upon notice to Employee for “Cause.” As used herein, the term “Cause” shall mean:

          (a) Employee’s material breach of any provision of this Agreement; provided, however, that in
the event Employer believes that this Agreement has been breached, it shall provide Employee with
written notice of such breach and provide Employee with a thirty (30) day period in which to cure
or remedy such breach. For the avoidance of doubt, it shall constitute a material breach of this
Agreement if Employee fails to perform his Duties hereunder by way of intentional neglect or
chronic absenteeism (excluding Disability);

          (b) The commission by Employee of a crime, or an act of fraud or dishonesty against Employer,
its subsidiaries or affiliates; or

          (c) The use by Employee of an illegal substance, including, but not limited to, marijuana,
cocaine, heroin, and all other illegal substances, and/or the dependence by Employee upon the use
of alcohol, which, in any case, in the opinion of both Employee’s family physician and a physician
chosen by Employer, materially impairs Employee’s ability to perform his Duties hereunder, which
dependence is not cured or rehabilitated, as determined by Employee’s physician, within three (3)
months of receipt of written notice from Employer to Employee.

     5.3. Death or Disability. This Agreement shall terminate upon the death or the
Disability of Employee. Employee or his heirs or estate (as the case may be) shall be entitled to
the compensation

3

 

provided for with respect to a termination by death or Disability in this Agreement. As used
in this Agreement, the term “Disability” means (A) Employee’s incapacity due to a permanent mental
or physical illness that prevents Employee from performing his duties hereunder for 26 consecutive
weeks or (B) a physical condition that renders the performance by Employee of his duties hereunder
a serious threat to the health and well being of Employee. Disability shall be determined by a
physician selected by Employee (or his legal representative) and reasonably acceptable to Employer.

     5.4. Payments Upon Termination.

          (a) Termination by Employer for Cause; Voluntary Unilateral Decision by Employee Without
Good Reason; Death or Disability. If Employee‘s employment is terminated (i) by Employer for
Cause; (ii) by Employee by a voluntary unilateral decision by Employee without Good Reason; or
(iii) as a result of Employee’s death or Disability, then Employee shall be entitled to: (1) the
base salary pursuant to Section 4.1(a) earned through the date of termination; (2) all applicable
reimbursements from Employer due under Section 4.2 hereof; and (3) accrued vacation under Section
4.3 hereof.

          (b) Other Termination. If Employee’s employment is terminated for any reason by
either party other than pursuant to Sections 5.1, 5.2 or 5.3 above, then Employee shall be entitled
to the following (collectively, the “Severance Benefits”): (1) that amount which is equivalent to
Employee’s base salary for the remainder of the Term, which amount shall be paid in accordance with
Employer’s customary payroll practices; and (2) all applicable reimbursements from Employer due
under Section 4.2 hereof. Payment of the Severance Benefits shall be conditioned upon the
execution by Employee of a valid release, to be prepared by Employer, in which Employee releases
Employer, to the maximum extent permitted by law, from any and all claims Employee may have against
Employer that relate to or arise out of Employee’s employment or termination of employment.

     5.5. Termination of Obligations. Upon the resignation of Employee or termination of
Employee’s employment in accordance with the provisions of this Section 5, all obligations of
Employee and Employer hereunder shall be terminated except as otherwise provided herein.

     5.6. Resignation. Any termination of employment under this Agreement, whether or not
voluntary, will automatically constitute a resignation of Employee as an officer of Employer and
all subsidiaries of Employer and if requested to do so by Employer’s Board of Directors, shall
resign as a member of the Board of Directors of Employer and all subsidiaries of Employer;
provided, however, that Employee shall execute such resignation documents as Employer may
reasonably request in order to evidence such resignation and this provision shall survive the
termination of this Agreement.

6. NON-COMPETITION.

     6.1.
Non-Competition. While in the employment of Employer and for the period of one (1) year
thereafter (the “Non-Competition Period”), unless otherwise agreed to in writing by Employer,
Employee will not, directly or indirectly, own, manage, operate, join, control, be employed by or
participate in the ownership, management, operation or control of, or be connected in any manner
with any business that is developing, manufacturing and/or distributing pharmaceutical products
which exhibit substantially similar biological mechanisms of action as Employer’s products in the
clinical indications pursued by Employer.

4

 

     6.2. Confidential Information. During and after the term of the Agreement, Employee
shall not directly or indirectly, divulge, furnish or make accessible to any party not authorized
by Employer to receive it, any of the proprietary or confidential information or knowledge of
Employer, including without limitation, any financial information, marketing plans, strategies,
trade secrets, data, know-how, processes, techniques and other proprietary information of Employer
or its subsidiaries (the “Confidential Information”), other than in the course of performing his
duties hereunder and with the consent of Employer, which consent shall not unreasonably be
withheld, and in accordance with Employer’s policies and regulations, as established from time to
time, for the protection of the Employer’s Confidential Information. The term “Confidential
Information” does not include, and there shall be no obligation hereunder with respect to
information (including office practices and procedures) that is obvious, or that may readily be
determined by any person reasonably knowledgeable in the industry in which Employer operates by
diligent review and examination of public sources, or that becomes generally available to the
public other than as a result of a disclosure by Employee or any agent or other representative
thereof. Employee shall not have any obligation hereunder to keep confidential any Confidential
Information to the extent disclosure of any thereof is required by law, or determined in good faith
by Employee to be necessary or appropriate to comply with any legal or regulatory order, regulation
or requirement; provided, however, that in the event disclosure is required by law,
Employee shall provide Employer with reasonable notice of such requirement so that Employer may
seek an appropriate protective order and Employee shall reasonably cooperate with Employer’s
efforts to seek such a protective order. Upon termination of employment on the expiration of the
Agreement, all tangible evidence of such confidential or proprietary information in the possession
of Employee shall be returned to Employer, and Employee shall not make or retain any copies or
excerpts thereof, except that Employee may retain copies of all materials that may be of a personal
nature to Employee. Employee further agrees not to use any Confidential Information for the
benefit of any person or entity other than Employer or its subsidiaries.

     6.3. Non-Solicitation. During the term of the Agreement and for a period of two (2)
years thereafter (the “Non-Solicitation Period”), Employee shall not influence or attempt to
influence customers of Employer or any of its present or future subsidiaries either directly or
indirectly, to divert their business from Employer to any individual, partnership, firm,
corporation, or other entity that is in competition with the business of Employer or any subsidiary
of Employer at any time during the Non-Solicitation Period. During the Non-Solicitation Period,
Employee shall not directly or indirectly solicit any of Employer’s employees or independent
contractors to work for (as an employee or independent contractor) any business, individual,
partnership, firm, corporation, or other entity in competition with the business of Employer or any
subsidiary of Employer at any time during the Non-Solicitation Period.

     6.4. Patents/Assignment and Transfer of Inventions. Employee shall disclose, assign
and transfer to the Company any and all ideas, concepts, discoveries, inventions, developments,
improvements, trade secrets, technical data, know-how or other materials conceived, devised,
invented, developed or reduced to practice or tangible medium by Employee or any of his affiliates,
or under his direction, during the term of this Agreement (hereinafter “Inventions”). If any
patents shall be developed by Employee or any patents shall result from the knowledge of Employee
during the term of this Agreement,, Employee shall assign such patents to the Employer. Employee
also agrees to execute such documents and perform such activities as the Employer may reasonably
request to obtain such patents and to assist the Employer, as reasonably requested by the
Employer’s Board of Directors in defending its patents.

     6.5.
Remedies. In the event of an actual or threatened breach by the Employee of this Section
6, including any subparagraph hereof, Employer shall be entitled to an injunction restraining
Employee

5

 

from its prohibited conduct. If the court should hold that the duration and/or scope
(geographic or otherwise) of the covenants contained herein are unreasonable, then, to the extent
permitted by law, the court may prescribe a duration and/or scope (geographic or otherwise), that
is reasonable and the parties agree to accept such determination, subject to their rights of
appeal. Nothing contained herein shall be construed as prohibiting Employer or any third party
from pursuing any of the remedies available to it for such breach or threatened breach, including
recovery of damages from Employee. In any action or proceeding to enforce the provisions of this
Section 6, the prevailing party (other than Employee in the event Employee prevails as a result of
a determination that the duration and/or scope (geographic or otherwise) of the covenants contained
herein are unreasonable) shall be reimbursed by the other party for all costs incurred in such
action or proceeding, including, without limitation, all court costs and filing fees and all
reasonable attorneys’ fees, incurred either at the trial level or at the appellate level. If
Employee shall be in violation of any of the restrictive covenants contained in this Agreement,
then the time limitation otherwise applicable to such restrictive covenant shall be extended for a
period of time equal to the period of time during which such breach or breaches occur. If Employer
seeks injunctive relief from such breach in any court, then the covenant shall be extended for a
period of time equal to the pendency of such proceedings, including all appeals. The existence of
any claim or cause of action by Employee against Employer, whether predicated upon this Agreement
or otherwise, shall not constitute a defense to the enforcement by Employer of the foregoing
restrictive covenant, but shall be litigated separately.

     6.6. Acknowledgments by Employee. Employee understands that the restrictions set
forth in this Section 6 may limit his ability to earn a livelihood in a business similar to the
business of Employer or any subsidiary thereof, but he nevertheless believes that he has received
and will receive sufficient consideration and other benefits as an employee of Employer and as
otherwise provided hereunder to justify clearly such restrictions which, in any event (given his
education, skills and ability), Employee does not believe would prevent his from earning a living.
Employee acknowledges that the geographic boundaries, scope of prohibited activities, and duration
of this Section 6 are reasonable in nature and are no broader than are necessary to maintain the
confidentiality and the goodwill of Employer’s proprietary information, plans and services and to
protect the other legitimate business interests of Employer.

7. NOTICES. Any notice, request, demand, offer, payment or communication required or permitted to
be given by any provision of this Agreement shall be deemed to have been delivered and given for
all purposes if written and if (a) delivered personally or by courier or delivery service, at the
time of such delivery; or (b) directed by registered or certified United States mail, postage and
charges prepaid, addressed to the intended recipient, at the address specified below, at such time
that the intended recipient or its agent signs or executes the receipt:

	 	 	 
	If to Employer:

	 	Advanced Viral Research Corp.
	 

	 	200 Corporate Boulevard South
	 

	 	Yonkers, New York 10701
	 

	 	Attn: Chairman of the Board
	 

	 	Tel: 914-376-7383
	 
	 	 
	If to Employee:

	 	Stephen M. Elliston
	 

	 	5808 Rocky Point Court
	 

	 	Raleigh, NC 27613
	 

	 	Tel: 919-845-9695

6

 

Any party may change the address to which notices are to be mailed by giving written notice as
provided herein to the other party. Commencing immediately after the receipt of such notice, such
newly designated address shall be such person’s address for purposes of all notices or other
communications required or permitted to be given pursuant to this Agreement.

8. MISCELLANEOUS.

     8.1. Governing Law. This Agreement shall be construed pursuant to the laws of the
State of New York, and all of its provisions shall be administered according to and its validity
shall be determined under the laws of the State of New York without regard to any conflict or
choice of law issues.

     8.2.
Gender and Number. Whenever appropriate, references in this Agreement in any
gender shall be construed to include all other genders, references in the singular shall be
construed to include the plural, and references in the plural shall be construed to include the
singular, unless the context clearly indicates to the contrary.

     8.3. Certain Words. The words “hereof,” “herein,” “hereunder,” and other similar
compounds of the word “here” shall mean and refer to the entire Agreement and not to any particular
section, provision or paragraph unless so required by the context.

     8.4. Captions. Paragraph titles or captions contained in this Agreement are inserted only as
a matter of convenience and/or reference, and they shall in no way be construed as limiting,
extending, defining or describing either the scope or intent of this Agreement or of any provision
hereof.

     8.5. Counterparts. This Agreement may be executed in one or more counterparts, and any such
counterpart shall, for all purposes, be deemed an original, but all such counterparts together
shall constitute but one and the same instrument.

     8.6. Severability. The invalidity or unenforceability of any provision hereunder (or any
portion of such a provision) shall not affect the validity or enforceability of the remaining
provisions (or remaining portions of such provisions) of this Agreement. 8.7.

     8.8. Entire Agreement. This Agreement (and all other documents executed
simultaneously herewith or pursuant hereto) constitutes the entire agreement among the parties
pertaining to the subject matter hereof, and supersedes and revokes any and all prior or existing
agreements, written or oral, relating to the subject matter hereof, and this Agreement shall be
solely determinative of the subject matter hereof.

     8.9. Restrictive Covenant. In the event the non-competition, non-solicitation clause
or any other restrictive covenant of this Agreement shall be deemed unenforceable, invalid or
overbroad in whole or in part for any reason, then any arbitration panel or court of competent
jurisdiction is hereby authorized, requested and instructed to reform such provision(s) to provide
for the maximum competitive restraints upon Employee’s activities (in time and geographic area),
which may then be legal and valid.

     8.10. Waiver. Either Employer or Employee may, at any time or times, waive (in whole or in
part) any rights or privileges to which he or it may be entitled hereunder. However, no waiver by
any party of any condition or of the breach of any term, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a
further continuing waiver of any other condition or of any breach of any other terms, covenants,
representations or

7

 

warranties contained in this Agreement, and no waiver shall be effective unless it is in
writing and signed by the waiving party.

     8.11. Attorneys’ Fees. In the event that either party shall be required to retain the
services of an attorney to enforce any of his or its rights hereunder, the prevailing party in any
arbitration or court action shall be entitled to receive from the other party all costs and
expenses including (but not limited to) court costs and attorneys’ fees (whether in the arbitration
or in a court of original jurisdiction or one or more courts of appellate jurisdiction) incurred by
him or it in connection therewith. The parties hereby expressly confer on the arbitrator the right
to award costs and attorneys’ fees in the arbitration.

     8.12. Dispute Resolution. Except for any dispute or controversy in which Employer is
seeking injunctive relief pursuant to Section 6, Employee and Employer shall settle by arbitration
any dispute or controversy arising in connection with this Agreement, whether or not such dispute
involves a plan subject to the Employee Retirement Income Security Act of 1974, as amended. Such
arbitration shall be conducted in accordance with the rules of the American Arbitration Association
before a panel of three arbitrators sitting in New York City, New York or such other location as
shall be mutually agreed by the parties. The award of the arbitrators shall be final and
nonappealable, and judgment may be entered on the award of the arbitrators in any court having
proper jurisdiction. THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD PUNITIVE DAMAGES UNDER ANY
CIRCUMSTANCES (WHETHER IT BE EXEMPLARY DAMAGES, TREBLE DAMAGES, OR ANY OTHER PENALTY OR PUNITIVE
TYPE OF DAMAGES) REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER APPLICABLE LAW, EMPLOYEE
AND EMPLOYER HEREBY EACH WAIVING THEIR RIGHT, IF ANY, TO RECOVER PUNITIVE DAMAGES IN CONNECTION
WITH ANY SUCH CLAIMS, DISPUTES OR DISAGREEMENTS REGARDLESS OF WHETHER SUCH CLAIM, DISPUTE OR
DISAGREEMENT ARISES UNDER THE LAW OF CONTRACTS, TORTS, (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE
OF EVERY KIND AND STRICT LIABILITY WITHOUT FAULT), OR PROPERTY, OR AT COMMON LAW OR IN EQUITY OR
OTHERWISE. EMPLOYEE ACKNOWLEDGES THAT BY SIGNING THIS AGREEMENT) EMPLOYEE IS WAIVING ANY RIGHT
THAT EMPLOYEE MAY HAVE TO A JURY TRIAL OR, OTHER THAN AS PROVIDED BY SECTION 16, A TRIAL BEFORE A
JUDGE IN CONNECTION WITH, OR RELATING TO, A CLAIM.

     8.13. Venue. Without limiting Paragraph E above, any litigation arising hereunder shall be
instituted only in New York City, New York, the place where this Agreement was executed, and all
parties hereto agree that venue shall be proper in said county for all such legal or equitable
proceedings.

     8.14. Assignment. The rights and obligations of the parties under this Agreement shall inure
to the benefit of and shall be binding upon their successors, assigns, and/or other legal
representatives. Additionally, covenants in this Agreement which are for the benefit of Employer
also shall run in favor of Employer’s subsidiaries. This Agreement shall not be assignable by
Employer or Employee. The services of Employee are personal and his obligations may not be
delegated by his except as otherwise provided herein.

     8.15. Amendment. This Agreement may not be amended, modified, superseded, canceled, or
terminated, and any of the matters, covenants, representations, warranties or conditions hereof may
not be waived, except by a written instrument executed by Employer and Employee or, in the case of
a waiver, by the party to be charged with such waiver.

8

 

     8.16. No Third Party Beneficiary. Nothing expressed or implied in this Agreement is
intended or shall be construed to confer upon or give any person, other than Employer and Employee
and their respective successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.

     8.17. Indemnification. To the fullest extent permitted by law and Employer’s
certificate of incorporation and by-laws, Employer shall promptly indemnify Employee for all
amounts (including, without limitation, judgments, fines, settlement payments, losses, damages,
costs and expenses (including reasonable attorneys’ fees)) incurred or paid by the Employee in
connection with any action, proceeding, suit or investigation arising out of or relating to the
performance by Employee of services for (or acting as a fiduciary of any Employee benefit plans,
programs or arrangements of) Employer or any of its subsidiaries or affiliates, including as a
director, officer or employee of Employer or any such subsidiary or affiliate. Employer also
agrees to maintain a directors’ and officers’ liability insurance policy covering Employee to the
extent Employer provides such coverage for its other executive officers.

     8.18. Tax Withholding. All payments to the Employee under this Agreement will be
subject to the withholding of all applicable employment and income taxes.

[Signatures on next page]

9

 

     IN WITNESS WHEREOF, Employer and Employee have caused this Agreement to be executed on the day
and year first above written.

	 	 	 	 	 
	 	ADVANCED VIRAL RESEARCH CORP.

 	 
	 	By:  	/s/ Eli Wilner
 	 
	 	 	Name:  	Eli Wilner 	 
	 	 	Title:  	Chairman of the Board 	 
	 
	 	 	 
	 	                                            /s/ Stephen M. Elliston
 	 
	 	Stephen M. Elliston 	 
	 	 	 
	 

10

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