Change in Control Agreement - VTEL Corp. and Vinay Goel
September 9, 1998
Mr. Vinay Goel
Vice President & General Manager
Personal & Workgroup Systems
VTEL Corporation
108 Wild Basin Road
Austin, TX 78746
Dear Vinay,
VTEL Corporation (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, should the Company receive a proposal
from a third party, whether solicited by the Company or unsolicited, concerning
a possible business combination with, or the acquisition of a substantial share
of the equity or voting securities of, the Company, the Board of Directors of
the Company (the "Board") has determined that it is imperative that it and the
Company be able to rely upon your continued services without concern that you
might be distracted by the personal uncertainties and risks that such a
proposal might otherwise entail.
Accordingly, 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 yourself, to their assigned
duties without distraction in the face of potentially disturbing circumstances
that could arise out of a proposal for a change in control of the Company. The
Board has also determined that it is in the best interest of the Company and
its stockholders to ensure your continued availability to the Company and its
subsidiaries in the event of a "potential change in control" (as defined in
Section 2 hereof).
In order to induce you to remain in the employ of the Company and its
subsidiaries and in consideration of your agreement set forth in Section 2(ii)
hereof, the Company agrees that you shall receive the severance benefits set
forth in this letter agreement ("Agreement") in the event your employment with
the Company and its subsidiaries is terminated subsequent to a Change in
Control (as defined in Section 2 hereof) under the circumstances described
below.
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31, 2000; provided, however, that
commencing on January 1, 2001 and each January 1 thereafter, the term of this
agreement shall automatically be extended for one additional year unless, not
later than September 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; provided, further, that,
notwithstanding any such notice by the Company not to extend, if a Change in
Control shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of twenty-four
(24) months beyond the expiration of the term in effect immediately before such
Change in Control.
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September 9, 1998
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2. Change in Control. (i) No benefits shall be payable hereunder
unless there shall have been a Change in Control of the Company, as set forth
below. For purposes of this Agreement, a "Change in Control" of the Company
shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Company is then subject to such reporting requirement;
provided that, without limitation, such a Change in Control shall be deemed to
have occurred if (A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 40% or more of the combined voting power of the
Company's then outstanding securities; or (B) during any period of 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, whose election to the Board or nomination for
election to the Board 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 of the Board; (C) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than 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) more than 60% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, except that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires more than
40% of the combined voting power of the Company's then outstanding securities
shall not constitute a change in control of the Company; or (D) the
stockholders 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 of the Company's assets.
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if (A) the Company
enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control; (B) any person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (C) any person becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 25.0% or more of the combined voting power of the Company's then
outstanding securities; or (D) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a potential change in control of the
Company has occurred. You agree that, subject to the terms and conditions of
this Agreement, in the event of a potential change in control of the Company
occurring after the date hereof, you will not voluntarily terminate your
employment with the Company and its subsidiaries for a period of nine (9)
months from the occurrence of such potential change in control of the Company.
If more than one potential change in control occurs during the term of this
Agreement, the provision of the preceding sentence shall be applicable to each
potential change in control occurring prior to the occurrence of a Change in
Control.
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September 9, 1998
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3. Termination Following Change in Control. If any of the events
described in Section 2(i) hereof constituting a Change in Control shall have
occurred, you shall be entitled to the benefits provided in Section 4(iv)
hereof upon the subsequent termination of your employment with the Company and
its subsidiaries during the term of this Agreement unless such termination is
(A) because of your death or Retirement, (B) by the Company or any of its
subsidiaries for Disability or Cause or (C) by you other than for Good Reason.
(i) Disability; Retirement. For purposes of this Agreement,
"Disability" shall mean permanent and total disability as such term is defined
under Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"). Any question as to the existence of your Disability upon which you and
the Company cannot agree shall be determined by a qualified independent
physician selected by you (or, if you are unable to make such selection, such
selection shall be made by any adult member of your immediate family), and
approved by the Company. The determination of such physician made in writing to
the Company and to you shall be final and conclusive for all purposes of this
Agreement. For purposes of this Agreement, "Retirement" shall mean your
voluntary termination of employment with the Company in accordance with the
Company's retirement policy (excluding early retirement) generally applicable
to its salaried employees or in accordance with any retirement arrangement
established with your consent with respect to you.
(ii) Cause. For purposes of this Agreement, "Cause" shall
mean your willful breach of duty in the course of your employment, or your
habitual neglect of your employment duties or your continued incapacity to
perform them. For purposes of this Section 3(ii), no act, or failure to act, on
your part shall be deemed "willful" unless done, or omitted to be done by you
not in good faith and without reasonable belief that your action or omission
was in the best interest of the Company and its subsidiaries. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
this Section 3(ii) and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For the purpose of this Agreement, "Good Reason"
shall mean the occurrence, without your express written consent, of any of the
following circumstances unless, in the case of paragraphs (A), (E), (F), (G),
or (H) such circumstances are fully corrected prior to the Date of Termination
(as defined in Section 3(v)) specified in the Notice of Termination (as defined
in Section 3(iv)) given in respect thereof:
(A) a substantial diminution in the nature or status of your
responsibilities from those in effect immediately prior to the Change
in Control;
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September 9, 1998
Page 4
(B) a reduction by the Company or any of its subsidiaries in
your annual base salary as in effect on the date hereof or as the same
may be increased from time to time;
(C) a requirement from the Company or any of its subsidiaries
for you to be based anywhere outside a radius of 50 miles from the
executive office in which you are located prior to the Change in
Control except for required travel on the business of the Company and
its subsidiaries to an extent substantially consistent with your
present business travel obligations;
(D) the failure by the Company to pay to you any portion of
an installment of deferred compensation under any deferred
compensation program of the Company within seven (7) days of the date
such compensation is due;
(E) the failure by the Company or any of its subsidiaries to
continue in effect any compensation plan in which you participate
prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made
in such plan in connection with the Change in Control, or the failure
by the Company or any of its subsidiaries to continue your
participation therein on the same basis, both in terms of the amount
of benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change in Control;
(F) the failure by the Company or any of its subsidiaries to
continue to provide you with benefits at least as favorable to those
enjoyed by you under the employee benefit and welfare plans of the
Company and its subsidiaries, including, without limitation, the
pension, life insurance, medical, health and accident, disability,
deferred compensation and savings plans in which you were
participating at the time of the Change in Control, the taking of any
action by the Company or any of its subsidiaries which would directly
or indirectly materially reduce any of such benefits or deprive you of
any material fringe benefit enjoyed by you at the time of the Change
in Control, or the failure by the Company or any of its subsidiaries
to provide you with the number of paid vacation days to which you are
entitled at the time of the Change in Control;
(G) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(iv) below (and, if applicable, the
requirements of Section 3(ii) above); for purposes of this Agreement,
no such purported termination shall be effective.
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September 9, 1998
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Your continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason hereunder. A
Change in Control of the Company shall not, by itself, constitute Good Reason.
(iv) Notice of Termination. Any purported termination of your
employment by the Company and its subsidiaries or by you shall be communicated
by written Notice of Termination to the other party hereto in accordance with
Section 6 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 your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall
mean (A) if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not have returned
to the full-time performance of your duties during such thirty (30) day
period), and (B) if your employment is terminated pursuant to Section 3(ii) or
(iii) above or for any other reason (other than Disability), the date specified
in the Notice of Termination (which, in the case of a termination pursuant to
Section 3(ii) above shall not be less than thirty (30) days, and in the case of
a termination pursuant to Section 3(iii) above shall not be less than thirty
(30) nor more than sixty (60) days, respectively, from the date such Notice of
Termination is given); provided that, if within thirty (30) days after any
Notice of Termination is given the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the grounds for
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for appeal
therefrom having expired and no appeal having 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. Notwithstanding the
pendency of any such dispute, the Company and its subsidiaries will continue to
pay you your full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary) and continue you
as a participant in all compensation, benefit and insurance plans in which you
were participating when the notice giving rise to the dispute was given, until
the dispute is finally resolved in accordance with this Section 3(v). Amounts
paid under this Section 3(v) are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
4. Compensation Upon Termination or During Disability. Following a
Change in Control of the Company, as defined by Section 2(i), upon termination
of your employment or during a period of Disability you shall be entitled to
the following benefits, provided that such period of Disability or Date of
Termination occurs during the term of this Agreement;
(i) During any period that you fail to perform your full-time
duties with the Company and its subsidiaries as a result of your Disability,
you shall continue to receive an
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September 9, 1998
Page 6
amount equal to your base salary at the rate in effect at the commencement of
any such period through the Date of Termination for Disability, together with
all amounts payable to you under the disability plans and/or policies of the
Company and its subsidiaries. Thereafter, your benefits shall be determined in
accordance with the insurance programs of the Company and its subsidiaries then
in effect.
(ii) If your employment shall be terminated by the Company or
any of its subsidiaries for Cause or by you other than for Good Reason, the
Company (or one of its subsidiaries, if applicable) shall pay you your full
base salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given and shall pay any amounts to be paid to you
pursuant to any other compensation plans, programs or employment agreements
then in effect, and the Company shall have no further obligations to you under
this Agreement.
(iii) If your employment shall be terminated by reason of
your death or Retirement, your benefits shall be determined in accordance with
the retirement and the insurance programs of the Company and its subsidiaries
then in effect.
(iv) If your employment by the Company and its subsidiaries
shall be terminated by (a) the Company and its subsidiaries other than for
Cause, your death, Retirement, or Disability or (b) by you for Good Reason,
then you shall be entitled to the benefits provided below:
(A) The Company (or one of its subsidiaries, if applicable)
shall pay you your full base salary through the Date of Termination at
the rate in effect at the time the Notice of Termination is given, no
later than the fifth day following the Date of Termination, plus all
other amounts to which you are entitled under any compensation plan of
the Company applicable to you, at the time such payments are due;
(B) The Company shall pay as severance pay to you a severance
payment (the "Unadjusted Severance Payment") equal to 1.8 times your
"Base Amount" as such term is defined under section 280G(b) (3) of the
Code. Your Base Amount shall be determined in accordance with
temporary or final regulations promulgated under section 280G of the
Code in effect, if any. In the absence of such regulations, if you
were not employed by the Company (or any corporation affiliated with
the Company (an "Affiliate") within the meaning of section 1504 of the
Code or a predecessor of the Company) during the entire five calendar
years (the "Base Period") preceding the calendar year in which a
change in control of the Company occurred, your average annual
compensation for the purposes of such determination shall be the
lesser of (1) the average of your annual compensation for the complete
calendar years during the Base Period during which you were so
employed or (2) the average of your annual compensation for both
complete and partial calendar years during the Base Period during
which you were so employed, determined by annualizing any compensation
(other than nonrecurring items) includible in your gross income for
any partial calendar year or (3)
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September 9, 1998
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the annual average of your total compensation for the Base Period
during which you were so employed, determined by dividing such total
compensation by the number of whole and fractional years included in
the Base Period. Compensation payable to you by the Company or any
Affiliate or predecessor of the Company shall include every type and
form of compensation includible in your gross income in respect of
your employment by the Company or any Affiliate or predecessor of the
Company, including compensation income recognized as a result of your
exercise of stock options or sale of the stock so acquired, except to
the extent otherwise provided in temporary or final regulations
promulgated under section 280G of the Code. For purposes of this
Section 4(iv) a "change in control of the Company" shall have the
meaning set forth in section 280G of the Code and any temporary or
final regulations promulgated thereunder.
(C) The Company shall accelerate vesting of options, both
qualified and non-qualified, based on the number of years of
continuous employment at the time of termination. Vesting of
outstanding options will be accelerated 3 months for each year of
employment at the Company. Compensation income recognized by you as a
result of your exercise of such stock options or sale of the stock so
acquired shall be included in deriving the limitations set forth in
Section 4(iv)(D), if such benefits, in the opinion of tax counsel
referred to in Section 4(iv)(D), constitute "parachute payments"
within the meaning of section 280G of the Code.
(D) The Unadjusted Severance Payment shall not be reduced by
the amount of any other payment or the value of any benefit received
or to be received by you in connection with your termination of
employment or contingent upon a change in control of the Company
(whether payable pursuant to the terms of this Agreement or any other
agreement, plan or arrangement with the Company or an Affiliate,
predecessor or successor of the Company or any person whose actions
result in a change in control of the Company or an Affiliate of such
person) unless (1) in the opinion of tax counsel selected by the
Company's independent auditors and reasonably acceptable to you, such
other payment or benefit constitutes a "parachute payment" within the
meaning of section 280G(b) (2) of the Code, and (2) in the opinion of
such tax counsel, the Unadjusted Severance Payment plus all other
payments or benefits which constitute "parachute payments" within the
meaning of section 280G(b) (2) of the Code would result in a portion
of the Unadjusted Severance Payment being subject to the excise tax
under section 4999 of the Code. In such event, the amount of the
Unadjusted Severance Payment shall be reduced by the minimum amount
necessary such that no portion thereof will be subject to the excise
tax under section 4999 of the Code. The Unadjusted Severance Payment,
as reduced, if at all, pursuant to the provisions of this paragraph
shall be referred to as the Adjusted Severance Payment. In determining
whether the Unadjusted Severance Payment shall be reduced under this
paragraph, (i) there shall not be included in the computation any
payment if you shall have effectively waived your receipt or enjoyment
of such payment or benefit, and (ii) the value of any non-cash benefit
or any deferred cash payment shall be determined by the Company's
independent
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September 9, 1998
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auditors in accordance with the principles of sections 280G(d) (3)
and (4) of the Code.
(E) Except to the extent that the payment thereof would
subject any payment hereunder to the excise tax under section 4999 of
the Code:
(1) The Company shall also pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement); and
(2) For a twelve (12) month period after termination
of your employment, the Company shall arrange, at your expense, to
provide you with life, disability, accident and health insurance
benefits substantially similar to those which you are receiving or
entitled to receive immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this Section 4 (iv)
(D) (2) shall be reduced to the extent comparable benefits are
actually received by you during the twenty-four (24) month period
following your termination, and any such benefits actually received by
you shall be reported to the Company.
(F) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of you and the Company in applying the
terms of this Section 4 (iv), the aggregate "parachute payments" paid
to or for your benefit are in an amount that would result in any
portion of such "parachute payments" being subject to the excise tax
under section 4999 of the Code, then you shall have an obligation to
pay the Company upon demand an amount equal to the sum of (1) the
excess of the aggregate "parachute payments" paid to or for your
benefit over the aggregate "parachute payments" that would have been
paid to or for your benefit without any portion of such "parachute
payments" being subject to the excise tax under section 4999 of the
Code; and (2) interest on the amount set forth in clause (1) of this
sentence at the applicable Federal rate (as defined in section 1274(d)
of the Code) from the date of your receipt of such excess until the
date of such payment.
(G) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
in this Section 4 be reduced by any compensation earned by you as the
result of employment by another employer or by retirement benefits
after the Date of Termination, or otherwise except as specifically
provided in this Section 4.
(H) The Company shall pay you the Unadjusted Severance
Payment in a lump sum no later than the fifth day following the Date
of Termination; provided, however, that if the Company in good faith
believes that the Unadjusted Severance Payment shall be reduced under
the provisions of Section 4 (iv) (C) hereof, the Company shall pay to
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September 9, 1998
Page 9
you at such time a good faith estimate of the Adjusted Severance
Payment (the "Estimated Adjusted Severance Payment", the computation
of which shall be given to you in writing together with a written
explanation of the basis for making such adjustment) which amount
shall in no event be less than 50% of the Unadjusted Severance
Payment. The Company shall, within 60 days of the Date of Termination,
either pay to you the balance of the Unadjusted Severance Payment
together with interest thereon at the applicable Federal rate (as
defined in section 1274(d) of the Code) or deliver to you a copy of
the opinion of the tax counsel referred to in Section 4(iv)(C) hereof
establishing the amount of the Adjusted Severance Payment. If the
Adjusted Severance Payment exceeds the Estimated Adjusted Severance
Payment, the difference shall be paid to you at such time together
with interest thereon at the applicable Federal rate (as defined in
section 1274(d) of the Code).
5. Successors; Binding Agreement.
(i) 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. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in
the same amount and on the same terms as you would be entitled
hereunder if you had terminated your employment for Good Reason
following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore
defined and any such successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable to
you hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to your devisee, legatee or other designee or, if
there is no such designee, to your estate.
6. Notice. 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 or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer with a copy to the Chief Financial Officer, or to such other
address as either party may
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September 9, 1998
Page 10
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
7. 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 you 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 to
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 validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Delaware. 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.
The obligations of the Company under Section 4 shall survive the expiration of
the term of this Agreement.
8. Validity. The invalidity or unenforceability of 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.
9. 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.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration 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 you shall be entitled to seek specific
performance of your 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.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
Jerry S. Benson, Jr.
President and COO
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September 9, 1998
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VTEL Corporation
Agreed to this ____ day of ____________, 1998.
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Vinay Goel