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EXHIBIT 10.22.1
KEY VICE PRESIDENT CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT dated as of November 30, 1998 is made by and between
PictureTel Corporation, a Delaware Corporation, (the "Company") and Xxxxxxx X.
Xxxx, Xx., 0 Xxxxx Xxxx Xxxx, Xxxxxxx, XX 00000 ("Executive").
WHEREAS the Company considers it essential to the best interests of the
Company, its shareholders, and its employees generally to xxxxxx the continuous
employment of key management personnel; and
WHEREAS the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among the
Company's management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders; and
WHEREAS the Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction in the face of potentially disrupting circumstances arising
from the possibility of a Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
Company and the Executive hereby agree as follows:
1.0 DEFINED TERMS. The definition of capitalized terms used in
this Agreement is provided in the last Section hereof.
2.0 TERM OF AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through November 30, 2000; provided,
however, that commencing on December 1, 1998 and each December 1st thereafter,
the term of this Agreement shall automatically be extended for one additional
year unless, not later than September 30th preceding that December 1st, the
Company or the Executive shall have given notice not to extend this Agreement or
a Change in Control shall have occurred prior to such September 30th; provided,
however, if a Change in Control shall have occurred during the term of this
Agreement, this Agreement shall continue in effect for a period of not less than
twenty-four (24) months beyond the date on which such Change in Control
occurred.
3.0 COMPANY'S COVENANTS SUMMARIZED. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4.0 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the "Severance Payments"
described in Section 6.1 hereof and the other payments and benefits described
herein in the event the Executive's employment with the Company is terminated
following a Change in Control and during the term of this Agreement. No amount
or benefit shall be payable under this Agreement unless there shall have been
(or, under the terms hereof, there shall be deemed to have been) a termination
of the Executive's employment with the Company following a Change in Control.
This Agreement shall not be construed as creating an express or implied contract
of employment prior to the date of a Change in Control and the Executive shall
not have any right to be retained in the employ of the Company.
4.0 THE EXECUTIVE'S COVENANTS. The Executive agrees that, subject
to the terms and conditions of this Agreement, in the event of a Potential
Change in Control during the term of this Agreement, the Executive will remain
in the employ of the Company until the earliest of (A) a date which is six (6)
months from the date of such Potential Change of Control, (B) the date of a
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Change in Control, (C) the date of termination by reason of death or Disability,
or (D) the termination by the Company of the Executive's employment for any
reason.
5.0 COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 Following a Change in Control during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control during the term of this Agreement, the
Company shall pay the Executive's full salary to the Executive through the Date
of Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company prior to the Date of
Termination.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control during the term of this Agreement, the
Company shall pay the Executive's normal post-termination compensation and
benefits to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements; provided however, that the Severance Payments
under Section 6.0 of this Agreement shall be the only severance paid following a
Change in Control during the term of this Agreement.
6.0 SEVERANCE PAYMENTS.
6.1 Subject to Section 6.2 hereof, the Company shall pay the
Executive the payments described in this Section 6.1 ("Severance Payments") upon
the termination of the Executive's employment following a Change in Control
during the term of this Agreement, in addition to the payments and benefits
described in Section 5.0 hereof, unless such termination is (A) by the Company
for Cause, or (B) by reason of Death or Disability. The Executive's employment
shall be deemed to have been terminated following a Change in Control by the
Company without Cause if the Executive's employment is terminated prior to a
Change in Control without Cause at the direction (or action which constitutes a
direction) of a Person who has entered into an agreement with the Company the
consummation of which will constitute a Change in Control.
(i) Subsequent to the Date of Termination, the Company
shall make cash severance payments to the Executive over a
twelve (12) month period in substantially equal bi-weekly
installments, in an amount equal to one (1) times the sum of
(a) the higher of the Executive's annual base salary in effect
immediately prior to the occurrence of the event or
circumstance upon which the Notice of Termination is based or
in effect immediately prior to the Change in Control, and (b)
the higher of the highest annual bonus paid to the Executive
in the three years preceding the year in which the Date of
Termination occurs or paid in the three years preceding the
year in which the Change in Control occurs.
(ii) For a twelve (12) month period after the Date of
Termination, the Company shall arrange to provide the
Executive with medical and dental insurance benefits
substantially similar to those which the Executive is
receiving on the same premium cost share basis immediately
prior to the Notice of Termination. Benefits otherwise
receivable by the Executive pursuant to this Section 6.1(ii)
shall be reduced to the extent comparable benefits are
actually received by or made available to the
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Executive without cost during the twelve (12) month period
following the Executive's termination of employment (and any
such benefits actually received by the Executive shall be
reported to the Company by the Executive). If the benefits
provided to the Executive under this Section 6.1(ii) shall
result in a decrease, pursuant to Section 6.2, in the Change
in Control Payments and these Section 6.1(ii) benefits are
thereafter reduced pursuant to the immediately preceding
sentence because of the receipt of comparable benefits, the
Company shall, at the time of such reduction, pay to the
Executive the lesser of (a) the amount of the decrease made in
the Severance Payments pursuant to Section 6.2, or (b) the
maximum amount which can be paid to the Executive without
being, or causing any other payment to be, nondeductible by
reason of section 28OG of the Code.
6.2 Notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by the Executive in
connection with a Change in Control or the termination of the Executive' s
employment (whether or not received pursuant to the terms of this Agreement)
(all such payments and benefits, including but not limited to the Severance
Payments, being hereinafter called the "Total Payments") would be subject in
whole or in part to the Excise Tax, then the Severance Payments shall be reduced
to the extent, but only to the extent, necessary so that no portion of the Total
Payments is subject to the Excise Tax; provided, that no such reduction shall be
effected unless the net amount of the Total Payments after such reduction in the
Severance Payments and after deduction of the net amount of federal, state and
local income taxes on such reduced Total Payments would be greater than the
excess of (a) the net amount of the Total Payments without such reduction in the
Severance Payments but after deduction of the net amount of federal, state and
local income taxes (other than the Excise Tax) on such unreduced Total Payments,
over (b) the Excise Tax to which the Total Payments are subject. The
determination as to whether a reduction in Severance Payments is to be made
under this Section 6.2 and, if so, the amount of any such reduction shall be
made by the Company's auditors or by such other firm of certified public
accountants, benefits consulting firm or legal counsel as the Board may
designate prior to the Change in Control.
The Company shall provide the executive with its calculations of the
amounts referred to in this Section 6.2 and such supporting materials as are
reasonably necessary for the Executive to evaluate the Company's calculations.
6.3 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of a termination which entitles
the Executive to the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in seeking in good faith
to obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
7.0 TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during
the term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party hereto in
accordance with Section 10.0 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
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7.2 DATE OF TERMINATION. "Date of Termination", with respect to
any purported termination of the Executive's employment after a Change in
Control during the term of this Agreement, shall mean:
(A) if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that
the Executive shall not have returned to the full-time performance of
the Executive's duties during such thirty (30) day period), and
(B) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the
case of a termination by the Company, shall not be less than thirty
(30) days (except in the case of a termination for Cause).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties by arbitrator's award, or, to the extent permitted by Section 14.0, by a
final judgment, order or decree of a court of competent jurisdiction on the
arbitrator's award (which is not appealable or with respect to which the time
for appeal therefrom has expired and no appeal has been perfected); provided
further that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the term of this Agreement and such
termination is disputed in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8.0 NO MITIGATION. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section
6.0 or Section 7.4. Further, the amount of any payment or benefit provided for
in Section 6.0 (other than Section 6.1(ii) or Section 7.4 shall not be reduced
by any compensation earned by the Executive as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by the Executive to the Company, or otherwise.
9.0 SUCCESSORS; BINDING AGREEMENT.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether direct
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 such succession
had taken place. In any event this agreement shall be binding upon the Company
and any successors or assignee.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs,
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distributees, devisees and legatees. If the Executive shall die while any amount
would still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
10.0 NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered in hand or when delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Company:
PictureTel Corporation
000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
To the Executive:
Xx. Xxxxxxx X. Xxxx, Xx.
0 Xxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
11.0 MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The laws of
the Commonwealth of Massachusetts shall govern the validity, interpretation,
construction and performance of this Agreement and the Agreement shall be an
instrument under seal. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed. The obligations of the Company
and the Executive under Sections 6.0, 7.0, 8.0 and 14.0 shall survive the
expiration of the term of this Agreement.
12.0 VALIDITY. The invalidity or unenforceability or any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. In
addition, if any provision of this Agreement is held invalid or unenforceable by
a court of competent jurisdiction, then such provision shall be deemed modified
to the extent necessary to enable such provision to be valid and enforceable.
13.0 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14.0 SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the
Executive for benefits under this Agreement shall be directed to the Board and
shall be in writing. Any denial by the
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Board of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Boston, Massachusetts in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement in
such arbitration or by a proceeding in the federal court in Boston or the
Massachusetts state court in Essex County.
15.0 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning defined in section
28OG(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean:
(i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to
Section 7.1) after a written demand for substantial
performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed
the Executive's duties, or
(ii) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company
or its subsidiaries, monetarily or otherwise.
For purposes of clauses (i) and (ii) of this definition, no act, or
failure to act, on the Executive's part shall be deemed "Willful"
unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company.
(E) A "Change in Control", shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
(i) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing twenty-five (25) percent or more of the combined
voting power of the Company's then outstanding securities; or
(ii) during any period of not more than two consecutive
years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with the Company to
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effect a transaction described in clause (i), (ii) or (iii) of
this Section 15(E)) whose election by the Board or nomination
for election by the Company's stockholders was approved by a
vote of at least two-thirds (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, cease for any reason to constitute a
majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (a) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) sixty (60) percent or more of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires twenty-five
(25) percent or more of the combined voting power of the
Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
the Company's assets.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Company" shall mean PictureTel Corporation and any successor
to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise (except in determining,
under Section 15(E) hereof, whether or not any Change in Control of the
Company has occurred in connection with such succession).
(H) "Date of Termination" shall have the meaning stated in Section
7.2 hereof.
(I) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the
Executive's duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice of
Termination for Disability, and, within thirty (30) days after such
Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(J) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(K) "Excise Tax" shall mean any excise tax imposed under section
4999 of the Code.
(L) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(M) "Notice of Termination" shall have the meaning stated in
Section 7.1 hereof.
(N) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include:
(i) the Company,
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(ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or
(iii) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
(O) "Potential Change in Control', shall be deemed to have
occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control;
(ii) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(P) "Severance Payments" shall mean those payments described in
Section 6.1 hereof.
(Q) "Total Payments" shall mean those payments described in
Section 6.2 hereof.
PictureTel Corporation
By
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Name: Xxxxx X. Xxxx
Title: Chairman, President and
Chief Executive Officer
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Xxxxxxx X. Xxxx, Xx.
