Exhibit 10.19
SEVERANCE PROTECTION
AGREEMENT
THIS AGREEMENT made as of the 6th
day of June 2008, by and between NMS Communications
Corporation (the “Company”) and Joel Hughes (the
“Executive”).
WHEREAS, the Board of Directors of
the Company (the “Board”) recognizes that the
possibility of a Change in Control (as hereinafter defined) exists
and that the threat or the occurrence of a Change in Control may
result in significant distraction of the Company’s key
management personnel because of the uncertainties inherent in such
a situation;
WHEREAS, the Compensation Committee
of the Board has determined that it is essential and in the best
interest of the Company and its stockholders for the Company to
retain the services of the Executive in the event of a threat or
occurrence of a Change in Control and to ensure the
Executive’s continued dedication and efforts in such event
without undue concern for the Executive’s personal financial
and employment security; and
WHEREAS, in order to induce the
Executive to remain in the employ of the Company, particularly in
the event of a threat or the occurrence of a Change in Control, the
Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event the
Executive’s employment is terminated as a result of, or in
connection with, a Change in Control (as hereinafter
defined).
NOW, THEREFORE, in consideration of
the respective agreements of the parties contained herein, it is
agreed as follows:
1.
Term of Agreement
. This Agreement shall commence as
of the date first written above, and shall continue in effect until
December 31, 2008 (the “Term”); provided,
however, that on December 31, 2008, and on each
December 31 thereafter, the Term shall automatically be
extended for one (1) year unless either the Executive or the
Company shall have given written notice to the other at least sixty
(60) days prior thereto that the Term shall not be so extended;
provided, further, however, that following the occurrence of
a Change in Control, the Term shall not expire prior to the
expiration of eighteen (18) months after such
occurrence.
2.
Termination of
Employment . If, during
the Term, the Executive’s employment with the Company and
with any Affiliates shall be terminated within eighteen (18) months
following a Change in Control, the Executive shall be entitled to
the following compensation and benefits:
(a)
If the Executive’s employment
with the Company shall be terminated (1) by the Company for
Cause or Disability, (2) by reason of the Executive’s
death, or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive his Accrued Compensation. The
Executive’s entitlement to any other compensation or benefits
shall be determined in accordance with the Company’s employee
benefits plans and other applicable programs and practices then in
effect.
(b)
If the Executive’s employment
with the Company shall be terminated for any reason other than as
specified in Section 2(a), the Executive shall be entitled to
the following:
(1)
the Company shall pay the Executive
all Accrued Compensation;
(2)
the Company shall pay the Executive
as severance pay and in lieu of any further compensation for
periods subsequent to the Termination Date, an amount equal to the
sum of (i) the Executive’s Base Amount and (ii) the
Executive’s Bonus Amount.
(3)
for twelve (12) months after the
Termination Date, the Company shall at its expense continue on
behalf of the Executive and his dependents and beneficiaries the
life insurance, disability, medical, dental and hospitalization
coverages and benefits provided to the Executive immediately prior
to the Change in Control or, if greater, the coverages and benefits
provided at any time thereafter. The coverages and benefits
(including deductibles and costs) provided in this
Section 2(b)(3) during the Continuation Period shall be
no less favorable to the Executive and his dependents and
beneficiaries, than the most favorable of such coverages and
benefits referred to above. The Company’s obligation
hereunder with respect to the foregoing coverages and benefits
shall be reduced to the extent that the Executive obtains any such
coverages and benefits pursuant to a subsequent employer’s
benefit plans, in which case the Company may reduce any of the
coverages or benefits it is required to provide the Executive
hereunder so long as the aggregate coverages and benefits of the
combined benefit plans is no less favorable to the Executive than
the coverages and benefits required to be provided hereunder. This
Section 2(b)(3) shall not be interpreted so as to limit
any benefits to which the Executive, his dependents or
beneficiaries may be entitled under any of the Company’s
employee benefit plans, programs or practices following the
Executive’s termination of employment, including without
limitation, retiree medical and life insurance benefits;
(c)
If the Executive’s employment
is terminated by the Company without Cause prior to the date of a
Change in Control but the Executive reasonably demonstrates that
such termination (A) was at the request of a third party who
has indicated an intention or taken steps reasonably calculated to
effect a Change in Control (a “Third Party”) and who
effectuates a Change in Control or (B) otherwise arose in
connection with, or in anticipation of, a Change in Control which
has been threatened or proposed and which actually occurs, such
termination shall be deemed to have occurred after a Change in
Control, provided a Change in Control shall actually have
occurred.
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(d)
Additional Limitation
.
(1)
Anything in this Agreement to the
contrary notwithstanding, in the event that any compensation,
payment or distribution by the Company or an Affiliate to or for
the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (the “Severance Payments”),
would be subject to the excise tax imposed by Section 4999 of
the Code, the following provisions shall apply:
(A)
If the Severance Payments, reduced
by the sum of (1) the Excise Tax and (2) the total of the
Federal, state, and local income and employment taxes payable by
the Executive on the amount of the Severance Payments which are in
excess of the Threshold Amount, are greater than or equal to the
Threshold Amount, the Executive shall be entitled to the full
benefits payable under this Agreement.
(B)
If the Threshold Amount is less than
(x) the Severance Payments, but greater than (y) the
Severance Payments reduced by the sum of (1) the Excise Tax
and (2) the total of the Federal, state, and local income and
employment taxes on the amount of the Severance Payments which are
in excess of the Threshold Amount, then the benefits payable under
this Agreement shall be reduced (but not below zero) to the extent
necessary so that the maximum Severance Payments shall not exceed
the Threshold Amount. To the extent that there is more than one
method of reducing the payments to bring them within the Threshold
Amount, the Executive shall determine which method shall be
followed; provided that if the Executive fails to make such
determination within 45 days after the Company has sent the
Executive written notice of the need for such reduction, the
Company may determine the amount of such reduction in its sole
discretion.
(2)
For the purposes of this
Section 2(d), “Threshold Amount” shall mean three
times the Executive’s “base amount” within the
meaning of Section 280G(b)(3) of the Code and the
regulations promulgated thereunder less one dollar ($1.00); and
“Excise Tax” shall mean the excise tax imposed by
Section 4999 of the Code, and any interest or penalties
incurred by the Executive with respect to such excise
tax.
(3)
The determination as to which of the
alternative provisions of Section 2(d)(1) shall apply to the
Executive shall be made by a nationally recognized accounting firm
selected by the Company (the “Accounting Firm”), which
shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is
reasonably requested by the Company or the Executive. For purposes
of determining which of the alternative provisions of
Section 2(d)(1) shall apply, the Executive shall be
deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar
year in which the determination is to be made, and state and local
income taxes at the highest marginal rates of individual taxation
in the state and locality of the Executive’s residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and
local taxes. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive.
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(e)
The Executive shall not be required
to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise and no such
payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any
subsequent employment except as provided in
Section 2(b)(3).
(f)
The severance pay and benefits
provided for in this Section 2 shall be in lieu of any other
severance pay to which the Executive may be entitled under the
Company’s Severance Procedure or any other plan, agreement or
arrangement of the Company or any Affiliate.
(g)
The amounts provided for in Sections
2(a) and 2(b)(1) and (2) shall be paid in a single
lum sum cash payment within thirty (30) days after the Executive
Termination Date (or earlier, if required by applicable
law).
(h)
Anything in this Agreement to the
contrary notwithstanding, if at the time of the Executive’s
separation from service within the meaning of Section 409A of
the Internal Revenue Code of 1986, as amended (the
“Code”), the Executive is considered a “specified
employee” within the meaning of
Section 409A(a)(2)(B)(i) of the Code, and if any payment
or benefit that the Executive becomes entitled to under this
Agreement is considered deferred compensation subject to interest,
penalties and additional tax imposed pursuant to
Section 409A(a) of the Code as a result of the
application of Section 409A(a)(2)(B)(i) of the Code, then
no such payment shall be payable or benefit shall be provided prior
to the date that is the earlier of (A) six months and one day
after the Executive’s separation from service, or
(B) the Executive’s death, and the initial payment or
provision of benefit shall include a catch-up amount covering
amounts that would otherwise have been paid during the first
six-month period but for the application of this Section. The
parties intend that this Agreement will be administered in
accordance with Section 409A of the Code. The parties agree
that this Agreement may be amended, as reasonably requested by
either party, and as may be necessary to fully comply with
Section 409A of the Code and all related rules and
regulations in order to preserve the payments and benefits provided
hereunder without additional cost to either party.
3.
Notice of Termination
. Following a Change in Control, any
intended termination of the Executive’s employment by the
Company shall be communicated by a Notice of Termination from the
Company to the Executive, and any intended termination of the
Executive’s employment by the Executive for Good Reason shall
be communicated by a Notice of Termination from the Executive to
the Company.
4.
Fees and Expenses
. The Company shall pay all legal
fees and related expenses (including the costs of experts, evidence
and counsel) incurred by the Executive as they become due as a
result of (a) the termination of the Executive’s
employment by the Company or by the Executive for Good Reason
(including all such fees and expenses, if any, incurred in
contesting, defending or disputing the basis for any such
termination of employment), (b) the
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Executive’s hearing before the Board as
contemplated in Section 15.5 of this Agreement or (c) the
Executive seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement
maintained by the Company under which the Executive is or may be
entitled to receive benefits.
5.
Transfer of Employment
. Notwithstanding any other
provision herein to the contrary, the Company shall cease to have
any further obligation or liability to the Executive under this
Agreement if (a) the Executive’s employment with the
Company terminates as a result of the transfer of his employment to
any Affiliate, (b) this Agreement is assigned to such other
Affiliate, and (c) such other Affiliate expressly assumes and
agrees to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
assignment had taken place. Any Affiliate to which this Agreement
is so assign
