AGREEMENT REGARDING
CHANGE IN CONTROL
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This Agreement entered into as of the 1st day of November, 1995, by and
between Ameritech Corporation, a Delaware corporation (the "Company"), and Xxxxx
X. Xxxxx (the "Executive"),
WITNESSETH THAT:
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WHEREAS, the Company wishes to induce the Executive to remain in its
employ, to provide fair and equitable treatment and a competitive compensation
package to the Executive, and to assure continued attention of the Executive to
his duties without any distraction arising out of uncertain personal
circumstances in a change in control environment; and
WHEREAS, the Company recognizes that in the event of a change in control of
the Company it is likely that the Executive's authorities, duties and
responsibilities would be substantially altered; and
WHEREAS, the Company and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the
date hereof and shall continue through December 31, 1996; provided, however,
that on such date and on each December 31 thereafter, the Term of this Agreement
shall automatically be extended for one additional year (but not beyond the
Executive's attainment of age 65) unless, not later than the preceding November
1 the Company shall have given notice that it does not wish to extend the Term;
and provided, further, that if a Change in Control (as defined in paragraph 2
below) shall have occurred during the original or any extended Term of this
Agreement, the Term of this Agreement shall continue for a period of twenty-four
months beyond the month in which such Change in Control occurs, but not beyond
the Executive's attainment of age 65.
2. Change in Control. For purposes of this Agreement, the term "Change in
Control" means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or
(ii) the Executive or any person acting in concert with the Executive
is or becomes a beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of stock of
the Company representing 20% or more of the total voting power of the
Company's then outstanding stock; provided, however, that this
subparagraph (a) shall not apply to any tender offer made pursuant to
an agreement with the Company approved by the Company's Board of
Directors and entered into before the offeror has become a beneficial
owner of stock of the Company representing 5% or more of the combined
voting power of the Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the Company
representing 20% or more of the total voting
power of the Company's then outstanding stock; provided, however, that
this subparagraph (b) shall not apply to any tender offer made
pursuant to an agreement with the Company approved by the Company's
Board of Directors and entered into before the offeror has become a
beneficial owner of stock of the Company representing 5% or more of
the combined voting power of the Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning of such period constitute the Board of Directors
and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by
a vote of at least two-third (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved;
or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) a merger or consolidation which would result in the Company's
voting stock outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting stock of the surviving entity) more than 70% of the
combined voting power of the Company's or such surviving entity's
outstanding voting stock immediately after such merger or
consolidation; or
(ii) a merger or consolidation which would result in the directors of
the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or consolidation.
For purposes of subparagraph (d) above, the phrase "surviving entity" shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase "directors of the Company who were directors
immediately prior thereto" shall not include (A) any director of the Company who
was designated by a person who has entered into an agreement with the Company to
effect a transaction described in subparagraph (a) or subparagraph (d) above, or
(B) any director who was not a director at the beginning of the 24-consecutive-
month period preceding the date of such merger or consolidation, unless his
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors who were directors before the beginning of such period.
3. Compensation After a Change in Control. During any period in which
the Executive is employed by the Company after a Change in Control, there shall
be no reduction in the base salary, long and short term incentives and bonuses,
employee benefits (including medical insurance, disability income protection,
and life insurance and death benefits), fringe benefits and perquisites to which
the Executive was entitled prior to the Change in Control.
4. Severance Payments. Subject to the provisions of paragraphs 5 and 6
below, in the event that (i) the Executive's employment with the Company is
involuntarily terminated by the Company for any reason other than death,
Disability (as defined below) or Just Cause (as defined below) during the
twenty-four month period following a Change in Control or (ii) the Executive's
employment with the Company is terminated by the Executive for any reason during
the thirty-day period beginning on the first anniversary of a Change in Control,
the Executive shall continue to receive all medical insurance, disability income
protection, life insurance coverage and death benefits, fringe benefits and
perquisites to which the Executive was entitled prior to the Change in Control
for a period of not less than the 24 consecutive months immediately following
the date of his termination of employment, and shall be entitled to a lump sum
payment in cash no later than ten business days and no earlier than two business
days after the date of termination equal to the sum of:
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(a) an amount equal to 2.99 (or, if less, the number of years remaining
until the Executive's attainment of age 65) times the Executive's
annual salary rate in effect immediately prior to the Change in
Control;
(b) an amount equal to 2.99 (or, if less, the number of years remaining
until the Executive's attainment of age 65) times the Executive's
short term incentive award and other bonuses payable for the calendar
year preceding the Change in Control; and
(c) the actuarial equivalent of the additional pension benefits which the
Executive would have accrued under the terms of the Ameritech
Management Pension Plan, the Ameritech Senior Management Retirement
and Survivor Protection Plan and each other tax-qualified or
nonqualified defined benefit pension plan maintained by the Company
(determined without regard to any termination or any amendment
adversely affecting the Executive which is adopted on or after a
Change in Control or in contemplation of a Change in Control) if, on
the date of Termination, the Executive had been credited with two
additional years of service and two additional years of compensation
at his annual base salary rate and target short term incentive award
in effect on the date of the Change in Control for benefit accrual
purposes and were two years older than his actual age on such date;
provided, however, that the additional service, compensation and age
credits under this paragraph (c) shall be proportionately reduced if
the Executive is at least age 63 on the date of termination and
eliminated if the Executive is age 65 or older on such date. For
purposes of this subparagraph (c), actuarial equivalence shall be
determined in accordance with the terms of the Ameritech Senior
Management Retirement and Survivor Protection Plan for purposes of
lump sum payments under that plan, but without regard to any amendment
of that plan adopted on or after a Change in Control or in
contemplation of a Change in Control which would reduce the amount of
such lump sum payment.
For purposes of this Agreement, the Executive's employment with the Company
shall be deemed to have been involuntarily terminated by the Company if the
Executive's duties and responsibilities are significantly diminished by the
Company without the Executive's consent. For purposes of this Agreement, the
term "Disability" means an incapacity, due to physical injury or illness or
mental illness, causing a Participant to be unable to perform his duties for the
Company on a full-time basis for a period of at least six consecutive months and
the term "Just Cause" means willful misconduct, dishonesty, conviction of a
felony or excessive absenteeism not related to illness or disability.
5. Tax Limitations. If any payments under this Agreement, after taking
in account all other payments to which the Executive is entitled from the
Company, or any affiliate thereof, are more likely than not to result in a loss
of a deduction to the Company by reason of section 280G of the Internal Revenue
Code of 1986 or any successor provision to that section, such payments shall be
reduced by the least amount required to avoid such loss of deduction. If the
Executive and the Company shall disagree as to whether a payment under this
Agreement is more likely than not to result in the loss of a deduction, the
matter shall be resolved by an opinion of tax counsel chosen by the Company's
independent auditors. The Company shall pay the fees and expenses of such
counsel, and shall make available such information as may be reasonably
requested by such counsel to prepare the opinion. If, by reason of the
limitations of this paragraph 5, the maximum amount payable to the Executive
under paragraph 4 above cannot be determined prior to the due date for such
payment, the Company shall pay on the due date the minimum amount which it in
good faith determines to be payable and shall pay the remaining amount, with
interest calculated at the rate prescribed by section 1274(b)(2)(B) of the
Internal Revenue Code of 1986, as soon as such remaining amount is determined in
accordance with this paragraph 5.
6. Source of Payments and Withholding. Any amount payable under the
terms of this Agreement shall be paid from the general assets of the Company or
from one or more trusts, the assets of which are subject to the claims of the
Company's general creditors. All payments to the Executive under this Agreement
will be subject to all applicable withholding of state and federal taxes.
7. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Chicago, in accordance with the laws of the
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State of Illinois, by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and third of whom shall be appointed by the first
two arbitrators. If the first two arbitrators cannot agree on the appointment of
a third arbitrator, then the third arbitrator shall be appointed by the Chief
Judge of the United States Court of Appeals for the Seventh Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 11. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable for the Executive
to retain legal counsel or incur other costs and expenses in connection with
enforcement of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company, as the case may be) his
reasonable attorneys' fees and costs and expenses in connection with enforcement
of his rights (including the enforcement of any arbitration award in court).
Payments shall be made to the Executive at the time such fees, costs and
expenses are incurred. If, however, the arbitrators shall determine that, under
the circumstances, payment by the Company of all or a part of any such fees and
costs and expenses would be unjust, the Executive shall repay such amounts to
the Company in accordance with the order of the arbitrators.
8. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Company, or any
amounts which might have been earned by the Executive in other employment had he
sought such other employment.
9. Severance Pay Plan. During the Term of this Agreement, the Executive
shall not participate in or have any rights under either the Ameritech Senior
Management Severance Pay Plan or the Ameritech Management Employees Severance
Pay Plan.
10. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph shall limit the Executive's rights or powers
to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have.
11. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
12. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
13. Successors to the Company. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company. The
Company will require any successor (whether director or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no succession had taken place.
14. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
15. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name and on its behalf, and its corporate seal to
be hereunto affixed and attested by its Secretary, all as of the date and year
first above written.
/s/ Xxxxx X. Xxxxx
Executive
Ameritech Corporation
By /s/ Xxxxx X. Xxxxx
Its Secretary
ATTEST:
Xxxxxxx X. Xxxxxxxx
Assistant Secretary
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