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Exhibit 10.63
Change of Control Severance Agreement INTER-TEL, INCORPORATED TIER 1
KEY EMPLOYEE
CHANGE OF CONTROL SEVERANCE AGREEMENT This Key Employee Change of Control Severance Agreement (the Agreement) is
made and entered into by and between       (the Executive) and
Inter-Tel, Incorporated, an Arizona Corporation (the Company), effective as
of March        , 2004 (the Effective Date). RECITALS 1. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other control change
transaction. The Board of Directors of the Company (the Board) recognizes
that such consideration can be a distraction to Executive and can cause
Executive to consider alternative employment opportunities. The Board has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication and objectivity
of Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control of the Company. 2. The Board believes that it is in the best interests of the Company and its
stockholders to provide Executive with an incentive to continue his or her
employment and to motivate Executive to maximize the value of the Company upon
a Change of Control for the benefit of its stockholders. 3. The Board believes that it is appropriate to provide Executive with certain
severance benefits upon Executives termination of employment following a
Change of Control. These benefits will provide Executive with enhanced
financial security and incentive and encouragement to remain with the Company
notwithstanding the possibility of a Change of Control. 4. Certain capitalized terms used in the Agreement are defined in Section 6
below. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows: 1. Term of Agreement. This Agreement shall terminate upon the date that all of
the obligations of the parties hereto with respect to this Agreement have been
satisfied. 2. At-Will Employment. The Company and Executive acknowledge that Executives
employment is and shall continue to be at-will, as defined under applicable
law, except as may otherwise be specifically provided under the terms of any
written formal employment agreement between the Company and Executive (an
Employment Agreement). If Executives employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control,
Executive shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement or under his or her
Employment Agreement (if applicable) or under existing Company
benefit plans and programs. 3. Acknowledgment Regarding Acceleration upon Change of Control. The Company
and Executive hereby acknowledge that pursuant to the terms of the Companys
1997 Long Term Incentive Plan and the related option agreement to which the
Company and Executive are parties, upon a Change of Control, 100% of
Executives then outstanding options to purchase shares of the Companys Common
Stock (the Options) shall immediately vest and become exercisable (that is,
in addition to the shares subject to the Options which have vested and become
exercisable as of the date of such Change of Control), but in no event shall
the number of shares subject to such Options which so vest exceed the total
number of shares subject to such Options. Additionally, 100% of the shares of
the Companys Common Stock then held by Executive subject to a Company
repurchase right (the Restricted Stock) shall immediately vest and have such
Company right of repurchase with respect to such shares of 1




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Restricted Stock lapse (that is, in addition to the shares of Restricted Stock
which have vested as of the date of such Change of Control), but in no event
shall the number of shares which so vest exceed the number of shares of
Restricted Stock outstanding immediately prior to the Change of Control. 4. Severance Benefits. (a) Involuntary Termination Following a Change of Control. If either (A)
within ninety (90) days prior to a Change of Control or (B) within twenty-four
(24) months following a Change of Control (i) Executive terminates his or her
employment with the Company (or any parent or subsidiary of the Company) for
Good Reason or (ii) the Company (or any parent or subsidiary of the Company)
terminates Executives employment for other than Cause, and Executive signs and
does not revoke a standard release of claims with the Company in a form
acceptable to the Company (such acceptance not to be unreasonably withheld),
then Executive shall receive the following severance from the Company: (i) Severance Payment. Executive shall be entitled to receive a lump-sum
severance payment equal to (A) twenty-four (24) months of Executives annual
base salary (as in effect immediately prior to (1) the Change of Control, or
(2) Executives termination, whichever is greater) and (B) 100% of Executives
earned but unpaid bonus as of the date of such termination. (ii) Continued Employee Benefits. Executive shall receive Company-paid
coverage for a period of twelve (12) months for Executive and Executives
eligible dependents under the Companys Benefit Plans. (b) Timing of Severance Payments. The severance payment to which
Executive is entitled shall be paid by the Company to Executive in cash and in
full, not later than ten (10) calendar days after the date of the termination
of Executives employment as provided in Section 4(a). If
Executive should be entitled to a severance payment and should die
before all amounts have been paid, such unpaid amounts shall be paid in a
lump-sum payment to Executives designated beneficiary, if living, or otherwise
to the personal representative of Executives estate. (c) Voluntary Resignation; Termination for Cause. If Executives
employment with the Company terminates (i) voluntarily by Executive or (ii) for
Cause by the Company, then Executive shall not be entitled to receive severance
or other benefits except for those (if any) provided for in an Employment
Agreement or as may then be established under the Companys then existing
severance and benefits plans and practices or pursuant to other written
agreements with the Company. (d) Disability; Death. If the Company terminates Executives employment
as a result of Executives Disability, or Executives employment terminates due
to his or her death, then Executive shall not be entitled to receive severance
or other benefits except for those (if any) provided for in an Employment
Agreement or as may then be established under the Companys then existing
written severance and benefits plans and practices or pursuant to other written
agreements with the Company. (e) Termination Apart from Change of Control. In the event Executives
employment is terminated for any reason, either prior to the occurrence of a
Change of Control or after the twenty-four (24) month period following a Change
of Control, then Executive shall be entitled to receive severance and any other
benefits only as provided for in an Employment Agreement, if any, or as may
then be established under the Companys existing written severance and benefits
plans and practices, if any, or pursuant to any other written agreements with
the Company. (f) Exclusive Remedy. In the event of a termination of Executives employment
either (A) within ninety (90) days prior to a Change of Control or (B) within
twenty-four (24) months following a Change of Control, the provisions of this
Section 4 are intended to be and are exclusive and in lieu of any other rights
or remedies to 2




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which Executive or the Company may otherwise be entitled (including any
provisions in an Employment Agreement), whether at law, tort or contract, in
equity, or under this Agreement. Executive shall be entitled to no benefits,
compensation or other payments or rights upon termination of employment
following a Change in Control other than those benefits expressly set forth in
this Section 4 or as otherwise set forth in existing Company
benefit plans and programs. 5. Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to Executive (i) constitute
parachute payments within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the Code) and (ii) but for this Section 5, would be
subject to the excise tax imposed by Section 4999 of the Code, then Executives
severance benefits under Section 4(a)(i) shall be either: (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of
such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999,
results in the receipt by Executive on an after-tax basis, of the greatest
amount of severance benefits, notwithstanding that all or some portion of such
severance benefits may be taxable under Section 4999 of the Code. Unless the
Company and Executive otherwise agree in writing, any determination required
under this Section 5 shall be made in writing by the Companys independent
public accountants immediately prior to Change of Control (the Accountants),
whose determination shall be conclusive and binding upon Executive and the
Company for all purposes. For purposes of making the calculations required by
this Section 5, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5. 6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings: (a) Benefit Plans. Benefit Plans means plans, policies or arrangements
that the Company sponsors (or participates in) and that immediately prior to
Executives termination of employment provide Executive and/or Executives
eligible dependents with medical, dental, vision and/or financial counseling
benefits. Benefit Plans do not include any other type of benefit (including,
but not by way of limitation, disability, life insurance or retirement
benefits). A requirement that the Company provide Executive and Executives
eligible dependents with coverage under the Benefit Plans will not be satisfied
unless the coverage is no less favorable than that provided to Executive and
Executives eligible dependents immediately prior to Executives termination of
employment. Notwithstanding any contrary provision of this Section 6, but
subject to the immediately preceding sentence, the Company may, at its option,
satisfy any requirement that the Company provide coverage under any Benefit
Plan by instead providing coverage under a separate plan or plans providing
coverage that is no less favorable or by paying Executive a lump-sum payment
sufficient to provide Executive and Executives eligible dependents with
equivalent coverage under a third party plan that is reasonably available to
Executive and Executives eligible dependents. (b) Cause. Cause means (i) an act of dishonesty made by Executive in
connection with such Executives responsibilities as an employee, (ii)
Executives conviction of, or plea of nolo contendreto, a felony which the
Board reasonably believes had or will have a material detrimental effect on the
Companys reputation or business, (iii) a willful act by Executive which
constitutes gross misconduct and which is injurious to the Company, (iv)
circumstances where Executive intentionally imparts material confidential
information relating to the Company or its business to competitors or to other
third parties other than in the course of carrying out Executives duties, or
(v) Executives continued substantial violations of such Executives duties as
an employee after Executive has received a written demand for performance from
the Company which specifically sets forth the factual basis for the Companys
belief that Executive has not substantially performed such Executives duties
and after such Executive has been given at least sixty (60) days to cure such
performance issues. 3




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(c) Change of Control. Change of Control means the occurrence of any of
the following: (i) Any action or event occurring within a two-year period, as a result of
which fewer than a majority of the outside directors of the Company are
Incumbent Directors. Incumbent Directors shall mean directors who either (A)
are outside directors of the Company as of the date hereof, or (B) are elected,
or nominated for election, as an outside director to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company); or (ii) The consummation of 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) at least sixty percent (60%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or (iii) The consummation of the sale, lease or other disposition by the
Company of seventy-five percent (75%) or more of the Companys assets. (d) Disability. Disability shall mean that Executive has been unable to
perform his Company duties as the result of his incapacity due to physical or
mental illness, and such inability, at least twenty-six (26) weeks after its
commencement, is determined to be total and permanent by a physician selected
by the Company or its insurers and acceptable to Executive or Executives legal
representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least thirty (30) days written notice by the Company of its intention to
terminate Executives employment. In the event that Executive resumes the
performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked. (e) Good Reason. Good Reason means without Executives express written
consent (i) a significant reduction of Executives duties, position or
responsibilities, or the removal of such Executive from such position and
responsibilities, unless Executive is provided with a comparable position
(i.e., a position of equal or greater organizational level, duties, authority,
compensation and status); (ii) a
reduction by the Company in the compensation of Executive as in effect
immediately prior to such reduction; (iii) a material reduction by the Company
in the kind or level of benefits or perquisites to which Executive was entitled
immediately prior to such reduction with the result that such Executive s
overall benefits package is significantly reduced; (iv) the relocation of
Executive to a facility or a location more than fifty (50) miles from Executive
s then present location. 7. Successors. (a) The Companys Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Companys business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company shall include any successor to the Companys business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law. (b) The Executives Successors. The terms of this Agreement and all
rights of Executive hereunder shall inure to the benefit of, and be enforceable
by, Executives personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. 8. Notice. 4




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(a) General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of Executive, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its Chief Executive Office. (b) Notice of Termination. Any termination by the Company for Cause or by
Executive for Good Reason or as a result of a voluntary resignation shall be
communicated by a notice of termination to the other party hereto given in
accordance with Section 8(a) of this Agreement. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than thirty (30) days after the giving of such
notice). The failure by Executive to include in the notice any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of Executive hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his or her rights hereunder. 9. Miscellaneous Provisions. (a) No Duty to Mitigate. Executive shall not be required to mitigate the
amount of any payment contemplated by this Agreement, nor shall any such
payment be reduced by any earnings that Executive may receive from any other
source. (b) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by Executive and by an authorized officer of the Company (other than
Executive). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same
condition or provision at another time. (c) Headings. All captions and section headings used in this Agreement
are for convenient reference only and do not form a part of this Agreement. (d) Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto and supersedes in their entirety all prior representations,
understandings, undertakings or agreements (whether oral or written and whether
expressed or implied) of the parties with respect to the subject matter hereof,
including (without limitation) an Employment Agreement). No future agreements
between the Company and Executive may supersede this Agreement, unless they are
in writing and specifically mention this Section 9(d). (e) Choice of Law. The laws of the State of Arizona (without reference to
its choice of laws provisions) shall govern the validity, interpretation,
construction and performance of this Agreement. (f) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect. (g) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes. (h) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute
one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year set
forth below. COMPANY
    
    INTER-TEL, INCORPORATED
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By:Title:EXECUTIVE
    
    By:Title:
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