SETTLEMENT AGREEMENT
Exhibit
10.1
This Settlement Agreement (this “Agreement”), dated as of May 5, 2006 (the “Effective Date”),
is entered into among Inter-Tel, Incorporated (“Inter-Tel” or the “Company”), Xxxxxx X. Xxxxxxx
(“Xx. Xxxxxxx”) and Summit Growth Management LLC, a wholly owned affiliate of Xx. Xxxxxxx
(“Summit”). Each of the Company, Xx. Xxxxxxx and Summit are referred to individually as a “Party”
and collectively as the “Parties”.
WHEREAS, on March 6, 2006, Xx. Xxxxxxx filed a Schedule 13D with the Securities and Exchange
Commission (the “SEC”), which has been amended twice, most recently on April 21, 2006 (collectively
the “Schedule 13D”). In the Schedule 13D, Xx. Xxxxxxx states that he is the beneficial owner of
5,179,498 shares of Company common stock, or approximately 19.6% of the outstanding shares and that
he has been discussing a possible arrangement with Vector Capital Corporation (“Vector”) to purse
an acquisition of the Company.
WHEREAS, on April 7, 2006, in accordance with the Company’s recently adopted advance notice
bylaw provisions, Xx. Xxxxxxx notified the Company of his intent to nominate three persons for
election to the Company’s board of directors (the “Board”) at the Annual Meeting (as defined below)
and to make six proposals for approval at the Annual Meeting (the “Mihaylo Resolutions”).
WHEREAS, on April 10, 2006, Xx. Xxxxxxx made a filing with the SEC under Schedule 14A which
(a) contained, among other things, the text of a press release issued by Xx. Xxxxxxx announcing
that he had requested that the Board meet with him to discuss a possible all-cash acquisition of
the Company led by Xx. Xxxxxxx and the text of April 3, 2006 and April 10, 2006 letters from Xx.
Xxxxxxx to the Board regarding such a possible acquisition and (b) disclosed that he had delivered
to the Board the advance notices of director nominations and shareholder business.
WHEREAS, on April 10, 2006, the Company filed a preliminary proxy statement under Schedule 14A
for the annual meeting of stockholders to be held on May 31, 2006 (including any adjournment or
postponement thereof, the “Annual Meeting”), as amended on April 28, 2006, in which the Company
proposed the election of eight nominees as directors, submitted two proposals for shareholder
approval (the “Company Proposals”), and requested that the shareholders ratify the selection of
accountants.
WHEREAS, on April 21, 2006, Xx. Xxxxxxx and Summit filed preliminary proxy materials under
Schedule 14A for the Annual Meeting in which they proposed the election of three nominees for
directors, submitted the Mihaylo Resolutions, and recommended that shareholders vote for the
election of the three nominees, for the Mihaylo Resolutions and the ratification of auditors and
against the two proposals submitted by the Company.
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WHEREAS, the advisors of the Company and Xx. Xxxxxxx have met to discuss a potential
resolution of the proxy solicitation.
WHEREAS, in order to facilitate such discussions and to resolve the proxy solicitation, the
parties have agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to
be legally bound hereby, agree as follows:
1. With respect to the election of directors:
(a) The Board agrees to nominate and recommend the election of Xx. Xxxxxxx, Xxxx X. Xxxx and
Xxxxxxx X. Xxxxx (the “Mihaylo Nominees”) as part of the Company’s slate of eleven (11) directors
to be elected at the Annual Meeting. The Board’s proxies and Xx. Xxxxxxx will vote equally all of
the shares they are entitled to vote at the Annual Meeting for Company’s eight nominees and the
Mihaylo Nominees (or their replacements chosen pursuant to Section 1(b) below). Xx. Xxxxxxx agrees
that he will not give notice of his intention to cumulate his votes at the Annual Meeting.
(b) The Board agrees that if a Mihaylo Nominee shall be unable or unwilling to serve as a
nominee or a director for any reason prior to his election as a director in accordance with this
Agreement, then Xx. Xxxxxxx shall be entitled to designate another person reasonably acceptable to
the Corporate Governance and Nominating Committee and a majority of the members of the entire
Board, and any such person shall become a “Mihaylo Nominee” for all purposes under this Agreement,
and the Board shall nominate for election or appoint to the Board such person, as the case shall
be.
(c) The Board will use its reasonable best efforts to cause the Annual Meeting to be held on
May 31, 2006.
(d) The Board agrees to elect the Mihaylo Nominees to the Board effective the day after the
Effective Date to serve until the Annual Meeting and until their successors are duly elected and
qualified or until their earlier resignation, death, or removal. For purposes of disclosure only,
the Board hereby notifies Xx. Xxxxxxx and Summit that, until Xx. Xxxxxxx files a Schedule 13D
disclosing that he no longer has an intent to increase his shareholdings or otherwise acquire the
Company, the Board presently intends to exclude, and it is agreed by Xx. Xxxxxxx and Summit that,
subject to such agreement not causing the Mihaylo Nominees to breach their fiduciary duties as
directors of the Company, the Board may exclude, the Mihaylo Nominees from any discussions
concerning, and from receipt of any materials regarding, the Company’s value and the strategic plan
upon which such value would in part be based, the Company’s relationship with Xx. Xxxxxxx, and the
consideration of any proposal to acquire the Company from Xx. Xxxxxxx or any other person.
2. With respect to the other business to be considered at the Annual Meeting:
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(a) The Company will not make, or otherwise consider for business, any proposals at the Annual
Meeting other than the election of directors, the Company Proposals, and the ratification of
auditors. The Company agrees that it will not make any references to Xx. Xxxxxxx or Summit in any
of the Company’s soliciting materials in connection with the Annual Meeting without Xx. Xxxxxxx’x
prior consent, which consent shall not be unreasonably withheld or delayed.
(b) Xx. Xxxxxxx hereby withdraws and rescinds his request that the Company shareholders
consider and vote upon the Mihaylo Resolutions at the Annual Meeting. Xx. Xxxxxxx will terminate
his proxy solicitation, and make all appropriate filings with the SEC with respect thereto. Xx.
Xxxxxxx agrees to vote all shares he is entitled to vote in favor of the Company Proposals and the
ratification of auditors.
(c) Upon the execution of this Agreement, the Parties will issue the press release attached
hereto as Exhibit A. The Parties agree that this press release will be the only press
release on the subject matter of this Agreement and the Parties agree not to grant or participate
in media interviews regarding the subject matter of this Agreement, other than to recite that the
Settlement Agreement has been filed with the SEC.
3. Prior to December 31, 2006, Xx. Xxxxxxx and Summit agree that, other than by evaluating and
making a Mihaylo Proposal (as defined below), they will not acquire, offer or propose to acquire,
or agree to acquire (except by way of stock dividends, stock splits, reverse stock splits or other
distributions or offerings made available to holders of any common stock generally), directly or
indirectly, whether by purchase, tender or exchange offer, through the acquisition of control of
another person, by joining a partnership, limited partnership, syndicate or other “group” (within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) or otherwise,
any common stock of the Company, provided, however, that activities other than
share acquisitions in connection with evaluating and making a Mihaylo Proposal, including, without
limitation, discussions and/or arrangements with equity and debt financing sources (other than the
acquisition of beneficial ownership of shares owned as of such date as a result of formation of a
“group”) in connection therewith, are not subject to this paragraph. Notwithstanding the forgoing,
the Company acknowledges that, Xx. Xxxxxxx and Summit may form a partnership, limited partnership,
“group”, or other arrangement with Vector in connection with a Mihaylo Proposal. Prior to the
earlier of (a) December 31, 2006, (b) the entry by the Company into a definitive agreement with
respect to a Third Party Proposal (as defined below), (c) the public announcement of an
extraordinary corporate transaction (for example, a material acquisition, a reorganization, an
extraordinary dividend, or a sale of significant number of shares), and (d) the submission of a
Mihaylo Request (as defined below), Xx. Xxxxxxx and Summit agree (i) not to publicly make any
adverse statement regarding the Company, its directors, management, or employee personnel, its
business, or the Annual Meeting, (ii) not to visit any Company facility (other than in connection
with Board, committee or shareholder meetings scheduled to be held at a Company facility), and
(iii) to notify the Company at least five (5) business days in advance of submitting a Mihaylo
Proposal of his non-binding intent to do so and to attempt to coordinate with the Company public
disclosure
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thereof and the Company agrees not to publicly make any adverse statement regarding Xx.
Xxxxxxx and Summit. For these purposes, the statements of Company’s board of directors and
executive officers will be deemed to be statements of the Company whereas the statements of other
persons will not be considered statements of the Company.
4. Concurrently with the execution of this Agreement, the Company and Xx. Xxxxxxx are entering
into the confidentiality agreement in the form attached hereto as Exhibit B. Upon
reasonable notice given to Xxxx Xxxxxxx, Xxxx Xxxxx, or Xxxxxx Xxxxx, the Company agrees to provide
promptly Xx. Xxxxxxx and his advisors and financing sources access to the reasonable due diligence
information requested in good faith, in order to facilitate the making of an all cash acquisition
proposal for all outstanding Company shares by Xx. Xxxxxxx (other than shares beneficially owned by
him) accompanied by commitment letters (subject only to customary conditions) of financial
institutions of national reputation (including Vector and RBC) demonstrating a reasonable certainty
of his ability to finance the transaction in its entirety (“Mihaylo Proposal”) prior to June 15,
2006, provided, that the term “Mihaylo Proposal” shall include acquisition proposals, and
any amendments or revisions thereto, made by Xx. Xxxxxxx, whether prior to or after June 15, 2006
so long as they continue to meet the criteria for a Mihaylo Proposal as set forth in this sentence
before this proviso.
5. If the Board determines that the initially-submitted Mihaylo Proposal is not in the best
interests of the Company’s shareholders (or fails to make such determination within ten (10)
business days of submission of the Mihaylo Proposal), then, upon the request of Xx. Xxxxxxx (a) in
the event the Board fails to make such determination within such ten (10) business day period, made
within twenty (20) business days after submission of the Mihaylo Proposal) or (b) in the event the
Board determines that the Mihaylo Proposal is not in the best interests of the Company’s
shareholders, made within ten (10) business days after receipt by Xx. Xxxxxxx of written notice of
such determination or public announcement thereof (the “Mihaylo Request”), the Company will
promptly call a special meeting of shareholders (the “Special Meeting”) to vote on the proposals
set forth in the Mihaylo Request, including, without limitation, any proposal urging the Board to
arrange for the prompt sale of the Company to the highest bidder (the “Sell the Company Request”).
The Company will set the record date for the Special Meeting for a date within ten (10) days of
receipt of the Mihaylo Request and the date of the Special Meeting shall be on a date chosen by the
Company within sixty (60) days after receipt of the Mihaylo Request. The Company will not contest
the calling of the Special Meeting as to the Sell the Company Request but, notwithstanding any
other provision of this Section 5, may contest the calling of the meeting for other purposes and
the submission of proposals other than the Sell the Company Request at the Special Meeting, and the
Company may oppose the Sell the Company Request and any other proposals that are included in the
Mihaylo Request. Notwithstanding the foregoing, if, prior to the date of the Special Meeting, the
Company enters into a definitive agreement to be acquired by a third party (a “Third Party
Proposal”), then Xx. Xxxxxxx will agree to withdraw the Mihaylo Request.
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6. Nothing in this Agreement shall prevent the Company from having discussions, or entering
into a definitive agreement, with respect to a Third Party Proposal.
7. Prior to the earlier of (a) the execution of a definitive acquisition agreement with
respect to the Mihaylo Proposal, (b) the execution of a definitive agreement with respect to a
Third Party Proposal that provides for per share consideration higher than the consideration
provided in the final Mihaylo Proposal presented to the Company, (c) the Special Meeting, (d)
August 31, 2006, (e) June 15, 2006, if the Mihaylo Proposal has not been made, or (f) the
expiration of the period in which Xx. Xxxxxxx is entitled to submit a Mihaylo Request, if Xx.
Xxxxxxx does not submit a Mihaylo Request within such period, except as required by applicable law,
the Company will not adopt a bylaw or amend its articles or certificate of incorporation to prevent
Xx. Xxxxxxx from calling a Special Meeting so long as he and Summit have not sold any of their
Company shares of stock such that they then no longer own at least ten percent (10%) of the
Company’s outstanding stock.
8. If, prior to August 31, 2006, the Board enters into a definitive acquisition
agreement with respect to a Third Party Proposal that provides for per share cash consideration
higher than the cash consideration provided in the final Mihaylo Proposal presented to the Company
and Xx. Xxxxxxx has determined not to make a competing proposal, then Xx. Xxxxxxx agrees to vote
(or, if requested, to execute proxies), or execute a written consent or consents if shareholders of
the Company are requested to vote their shares through the execution of an action by written
consent in lieu of any such annual or special meeting of shareholders of the Company, in either
case with respect to all of the shares of common stock of the Company beneficially owned by him on
the record date of any such vote or written consent, in favor of approval of such Third Party
Proposal, provided that (a) the Board shall have recommended that shareholders approve such
proposal and not changed such recommendation (or been precluded by the terms of such proposal from
changing such recommendation) or (b) no third party shall have publicly announced an acquisition
proposal that would provide for per share consideration higher than the consideration provided in
the Third Party Proposal.
9. Xx. Xxxxxxx and Summit each represent and warrant to the Company as follows:
(a) Each has the power and authority to execute, deliver and carry out the terms and
provisions of this Agreement.
(b) This Agreement has been duly and validly authorized, executed, and delivered by each,
constitutes a valid and binding obligation and agreement of each, and is enforceable against each
in accordance with its terms.
10. The Company represents and warrants to each of Xx. Xxxxxxx and Summit as follows:
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(a) The Company has the corporate power and authority to execute, deliver and carry out the
terms and provisions of this Agreement.
(b) This Agreement has been duly and validly authorized, executed and delivered by the
Company, constitutes a valid and binding obligation and agreement of the Company, and is
enforceable against the Company in accordance with its terms.
11. The Parties acknowledge that remedies at law may be inadequate to protect a Party against
any actual or threatened breach of this Agreement and, without prejudice to the rights and remedies
otherwise available to the non-breaching Party, each Party agrees to the granting of injunctive
relief in favor of the non-breaching Party without proof of irreparable harm or damages.
12. The validity and interpretation of this Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California applicable to agreements made and
to be fully performed therein (excluding the conflicts of laws rules). The state and federal
courts located within the State of California have exclusive jurisdiction over any dispute arising
out of or relating to this Agreement and the Parties hereby submit and consent to the exercise of
personal jurisdiction over each of them by these courts. .
13. The benefits of this Agreement shall inure to the respective successors and assigns of the
Parties, and the obligations and liabilities assumed in this Agreement by the Parties shall be
binding upon their respective successors and assigns; provided, however, that neither Xx. Xxxxxxx
nor Summit may assign his or its rights and obligations under this Agreement to any person other
than an affiliate without the prior written consent of the Company.
14. If it is found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that any term or provision hereof is invalid or unenforceable, (i) the remaining
terms and provisions hereof shall be unimpaired and shall remain in full force and effect and (ii)
the invalid or unenforceable provision or term shall be replaced by a term or provision that is
valid and enforceable and that comes closest to expressing the intention of such invalid or
unenforceable term or provision.
15. This Agreement, including the Exhibits hereto, embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements, arrangements and
understandings relating to the matters provided for herein. No alteration, waiver, amendment,
change or supplement hereto shall be binding or effective unless the same is set forth in writing,
signed by a duly authorized representative of each Party, and may be modified or waived only by a
separate letter executed by the parties expressly so modifying or waiving such Agreement.
16. For the convenience of the Parties, any number of counterparts of this Agreement may be
executed by the parties hereto. Each such counterpart shall be,
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and shall be deemed to be, an original instrument, but all such counterparts taken together
shall constitute one and the same Agreement.
17. Each Party shall bear its own expenses in connection with this Agreement.
18. Any waiver by any party of a breach of any provision of this Agreement shall not operate
as or be construed to be a waiver of any other breach of such provision or of any breach of any
other provision of this Agreement. The failure of any Party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver or deprive that
Party of the right thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
19. All notices, demands and other communications to be given or delivered under or by reason
of the provisions of this Agreement shall be in writing and shall be deemed to have been given (a)
one (1) business day after being sent by a nationally recognized overnight carrier to the addresses
set forth below (or to such other mailing addresses as a Party may designate by notice to the other
Parties in accordance with this section) or (b) when actually delivered if sent by any other method
that results in delivery (with written confirmation of receipt):
If to the Company:
0000 Xxxxx 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxx, CEO
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxx, CEO
with a copy to (which shall not constitute notice):
Pillsbury Xxxxxxxx Xxxx Xxxxxxx LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
and
If to Xx. Xxxxxxx or Summit:
X.X. Xxx 00000
Xxxx, Xxxxxx 00000
Xxxx, Xxxxxx 00000
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. XxXxxxxx, Esq.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. XxXxxxxx, Esq.
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or to such other address as the person to whom notice is given may have previously furnished to the
others in writing in the manner set forth above.
20. Any headings contained in this Agreement are for reference purposes only and shall not
effect in any way the meaning or interpretation of this Agreement.
21. In the event a Party shall bring any action to enforce or protect any of its rights under
this Agreement, the prevailing Party shall be entitled to recover, in addition to its damages, its
reasonable attorneys’ fees and costs.
22. Upon and subject to the terms of this Agreement, each of the Parties hereto agrees to use
its or his commercially reasonable efforts to cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other party in doing, all things necessary, proper
or advisable to consummate or make effective, in the most expeditious manner practicable, the
matters contemplated by this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, each of the undersigned parties has executed or caused this Agreement to
be executed on the date first above written.
| INTER-TEL, INCORPORATED | ||||||
| By: | /s/ Xxxxxx Xxxxx | |||||
| Name: Xxxxxx Xxxxx | ||||||
| Title: Chief Executive Officer | ||||||
| /s/ Xxxxxx X. Xxxxxxx | ||||||
| XXXXXX X. XXXXXXX | ||||||
| SUMMIT GROWTH |
||||||
| MANAGEMENT LLC | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| Name: Xxxxxx X. Xxxxxxx | ||||||
| Title: Managing Member | ||||||
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