SALARY CONTINUATION AGREEMENT
This Salary Continuation Agreement (the "Agreement") is made and
entered into as of April 21, 1997 (the "Effective Date"), by and between Network
Peripherals Inc., a Delaware corporation (the "Company") and Xxxxxx X. Xxxxx
("Employee").
Recitals
The Company recognizes that the possibility of a change of control or
other event may occur which may change the nature and structure of the Company
and that uncertainty regarding the consequences of such events may adversely
affect the Company's ability to retain its key employees. The Company also
recognizes that the Employee possesses an intimate and essential knowledge of
the Company upon which the Company may need to draw for objective advice and
continued services in connection with any acquisition of the Company or other
change of control that is potentially advantageous to the Company's
stockholders. The Company believes that the existence of this Agreement will
serve as an incentive to Employee to remain in the employ of the Company and
will enhance its ability to call on and rely upon the Employee in connection
with a change of control.
The Company and the Employee desire to enter into this Agreement in
order to provide additional compensation and benefits to the Employee in
recognition of past services and to encourage Employee to continue to devote his
full attention and dedication to the Company and to continue his employment with
the Company.
1. Definitions. As used in this Agreement, unless the context requires
a different meaning, the following terms shall have the meanings set forth
herein:
(a) "Cause" means:
(i) theft, a material act of dishonesty, fraud, the
falsification of any employment or Company records or the commission of any
criminal act which impairs Employee's ability to perform his duties under this
Agreement;
(ii) improper disclosure of the Company's
confidential, business or proprietary information by the Employee;
(iii) any action by Employee which the Company's
Board of Directors (the "Board") reasonably believes has had or will have a
material detrimental effect on the Company's reputation or business; or
(iv) persistent failure of the Employee to perform
the lawful duties and responsibilities assigned by the Company which is not
cured within a reasonable time following the Employee's receipt of written
notice of such failure from the Company.
(b) "Change of Control Event" means an Ownership Change in
which the stockholders of the Company before such Ownership Change do not
retain, directly or indirectly, at a least a majority of the beneficial interest
in the voting stock of the Company after such transaction or in which the
Company is not the surviving corporation. For purposes of this Agreement, an
"Ownership Change" shall be deemed to have occurred in the event any of the
following occurs with respect to the Company:
(i) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the stock of the
Company;
(ii) a merger or consolidation in which the Company
is a party and in which the stockholders of the Company before such Ownership
Change do not retain, directly or indirectly, at a least a majority of the
beneficial interest in the voting stock of the Company after such transaction or
in which the Company is not the surviving corporation;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(c) "Constructive Termination" means one or more of the
following that occurs within two years after the occurrence of any Change of
Control Event:
(i) without the Employee's express written consent,
the assignment to the Employee of any duties, or any limitation of the
Employee's responsibilities, substantially inconsistent with the Employee's
positions, duties, responsibilities and status with the Company immediately
prior to the date of the Change of Control Event;
(ii) without the Employee's express written consent,
the removal of the Employee from the Employee's position with the Company as
held by the Employee immediately prior to the Change of Control Event (including
a termination of employment as a result of the death or Permanent Disability of
the Employee), except in connection with the termination of the employment of
the Employee by the Company for Cause;
(iii) without the Employee's express written consent,
the relocation of the principal place of the Employee's employment to a location
that is more than fifty miles from the Employee's principal place of employment
immediately prior to the date of the Change of Control Event, or the imposition
of travel requirements on the Employee substantially inconsistent with such
travel requirements existing immediately prior to the date of the Change of
Control Event;
(iv) any failure by the Company to pay, or any
reduction by the Company of (a) the Employee's base salary in effect immediately
prior to the date of the Change of Control Event (unless reductions comparable
in amount and duration are concurrently made for all other employees of the
Company with responsibilities, organizational level and title comparable to the
Employee), or (b) the Employee's bonus compensation in effect immediately prior
to the date of the Change of Control Event (subject to applicable performance
requirements with respect to the actual amount of bonus compensation earned by
the Employee and all other participants in the bonus program);
(v) any failure by the Company to (a) continue to
provide the Employee with the opportunity to participate, on terms no less
favorable than those in effect for the benefit of any executive, management or
administrative group which customarily includes a person holding the employment
position or a comparable position with the Company then held by the Employee,
any benefit or compensation plans and programs, including, but not limited to,
the Company's life, disability, health, dental, medical, savings, profit
sharing, stock purchase and retirement plans in which the Employee was
participating immediately prior to the date of the Change of Control Event, or
their equivalent (provided, that any changes or terminations of such
existing benefit or compensation plans or programs shall not be a Constructive
Termination if the changed plan or program or a replacement plan or program
provides equivalent or more favorable benefits or compensation to the Employee),
or (b) provide the Employee with all other fringe benefits (or their equivalent)
from time to time in effect for the benefit of any executive, management or
administrative group which customarily includes a person holding the employment
position or a comparable position with the Company then held by the Employee; or
(vi) any failure or refusal of a successor company to
assume the Company's obligations under this Agreement as required by Section 13.
(d) "Effective Date" means the day and year first set forth
above.
(e) "Permanent Disability" means that:
(i) the Employee has been incapacitated by bodily
injury or disease so as to be prevented thereby from engaging in the performance
of the Employee's duties following reasonable accommodations on behalf of the
Company;
(ii) such total incapacity shall have continued for a
period of six consecutive months; and
(iii) such incapacity will, in the opinion of a
qualified physician, be permanent and continuous during the remainder of the
Employee's life.
(f) "Termination Upon Change of Control" means any one of the
following:
(i) any termination of the employment of the Employee
by the Company without Cause within one year after the occurrence of any Change
of Control Event;
(ii) any termination of the employment of the
Employee by the Company without Cause during the period commencing thirty days
prior to the date of the Company's first public announcement that the Company
has entered into a definitive agreement to effect an Ownership Change (even
though still subject to approval by the Company's stockholders and other
conditions and contingencies) and ending on the date of the Change of Control
Event; or
(iii) any resignation by the Employee immediately
following any Constructive Termination (with the termination of employment
following death or Permanent Disability being deemed a resignation) that occurs
within one year after the occurrence of any Change of Control Event.
"Termination Upon Change of Control" shall not include any termination
of the employment of the Employee (a) by the Company for Cause; or (b) as a
result of the voluntary termination of employment by the Employee that is not
deemed a Constructive Termination under Subsection 1(c) above.
2. Position and Duties. Until a Change of Control Event, Employee shall
continue to be an at-will employee of the Company employed in his current
position at his then current salary rate, subject to revision from time to time
by the Board of Directors or a committee thereof. Employee shall also be
entitled to continue to participate in and to receive benefits on the same basis
as other executive or senior staff members under any of the Company's employee
benefit plans as in effect from time to time. In addition, Employee shall be
entitled to the benefits afforded to other employees similarly situated under
the Company's vacation, holiday and business expense reimbursement policies, as
amended from time to time. Employee agrees to devote his full business time,
energy and skill to his duties at the Company. These duties shall include, but
not be limited to, any duties consistent with his position which may be assigned
to Employee from time to time.
3. Benefits Upon Voluntary Termination, Permanent Disability or Death.
In the event that Employee voluntarily terminates his employment relationship
with the Company at any time and such termination is not deemed a Constructive
Termination as described in Subsection 1(c) above, or in the event that
Employee's employment terminates as a result of his death or Permanent
Disability prior to a Change of Control Event, Employee shall be entitled to no
compensation or benefits from the Company other than those earned under Section
2 above through the date of his termination of employment.
4. Termination Upon Change of Control.
(a) In the event of the Employee's Termination Upon Change of
Control, Employee shall be entitled to the following separation benefits:
(i) those benefits earned under Section 2 (other than
any unpaid incentive bonus) through the date of Employee's termination;
(ii) Employee's employment as an officer of the
Company shall terminate immediately; however, the Company shall continue
Employee's employment as a non-officer employee of the Company for one year (the
"Severance Period"). During such period, Employee shall be entitled to the
greater of (i) Employee's then current salary at the time of the Change of
Control Event, or (ii) Employee's salary and bonus over the preceding twelve
months, in either case less applicable withholding, payable in accordance with
the Company's normal payroll practices;
(iii) within ten days of submission of proper expense
reports by the Employee, the Company shall reimburse the Employee for all
expenses reasonably and necessarily incurred by the Employee in connection with
the business of the Company prior to his termination of employment;
(iv) continued provision of the Company's standard
employee medical insurance coverages through the end of the Severance Period;
thereafter, Employee shall be entitled to elect continued medical insurance
coverage in accordance with the applicable provisions of federal law (COBRA).
Notwithstanding the above, in the event Employee becomes covered under another
employer's group health plan during the period provided for herein, the Company
shall cease provision of continued group health insurance for Employee; and
(v) notwithstanding any provisions to the contrary
contained in any stock option agreement between the Company and the Employee,
upon a Termination Upon Change of Control all stock options granted by the
Company to the Employee prior to the Change of Control Event, which are not
accelerated pursuant to the provisions of Section 5, shall continue to vest
during the term of the Severance Period, to the extent such stock options remain
outstanding and unexercised at the time of such Termination Upon Change of
Control. This Subsection 4(a)(v) shall apply to all such stock option
agreements, whether heretofore or hereafter entered into between the Company and
the Employee.
(b) In the event that Employee accepts employment with, or
provides any services to (whether as a partner, consultant, joint venturer or
otherwise), any person or entity which offers products or services that are
competitive with any products or services offered by the Company or with any
products or services that Employee is aware the Company intends to offer,
Employee shall be deemed to have resigned from his employment with the Company
effective immediately upon such acceptance of employment or provision of
services. Upon such resignation, Employee shall not be entitled to any further
payments or benefits as provided under this Section 4.
(c) In the event that Employee accepts employment with, or
provides any services to (whether as a partner, consultant, joint venturer or
otherwise), any person or entity while Employee continues to receive any
separation benefits pursuant to this Section 4, Employee shall immediately
notify the Company of such acceptance and provide to the Company information
with respect to such person or entity as the Company may reasonably request in
order to determine if that person's or entity's products or services are
competitive with the Company's.
5. Acceleration of Exerciseability of Stock Options.
(a) In the event of a Change of Control Event where the
consideration paid to stockholders of the Company consists, at least in part, of
other than equity securities of the acquiring entity (except for cash payment
for fractional shares), then all stock options granted to the Employee prior to
the Change of Control Event (whether heretofore or hereafter granted) which
would otherwise become exercisable within 12 months of the Change of Control
Event (assuming Employee's continued employment) shall vest and become
exercisable in full 30 days before the consummation of the transaction
constituting such Change of Control Event.
(b) In the event of a Termination Upon Change of Control, all
stock options granted to the Employee prior to the Change of Control Event
(whether heretofore or hereafter granted) which would otherwise become
exercisable within 12 months of the Change of Control Event (assuming Employee's
continued employment) shall vest and become exercisable and shall remain
exercisable for a period of at least one year, subject to any longer periods for
exercise of such options set forth in the particular option agreements.
6. Limitation of Payments and Benefits.
(a) To the extent that any of the payments and benefits
provided for in this Agreement or otherwise payable to the Employee constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
Code (the "Code") and, but for this Section 6, would be subject to the excise
tax imposed by Section 4999 of the Code, the aggregate amount of such payments
and benefits shall be reduced such that none of the payments and benefits are
subject to excise tax pursuant to Section 4999 of the Code.
(b) Within sixty days after the later of termination of
employment or the related Change of Control Event, the Company shall notify the
Employee in writing if it believes that any reduction in the payments and
benefits that would otherwise be paid or provided to the Employee under the
terms of this Agreement is required to comply with the provisions of Subsection
6(a). If the Company determines that any such reduction is required, it will
provide the Employee with copies of the information used and calculations made
by the Company to determine the amount of such reduction. The Company shall
determine, in a fair and equitable manner after consultation with the Employee,
which payments and benefits are to be reduced so as to result in the maximum
benefit for the Employee.
(c) Within thirty days after the Employee's receipt of the
Company's notice pursuant to Subsection 6(b), the Employee shall notify the
Company in writing if the Employee disagrees with the amount of reduction
determined by the Company, or the selection of the payments and the benefits to
be reduced. As part of such notice, the Employee shall also advise the Company
of the amount of reduction, if any, that the Employee has, in good faith,
determined to be necessary to comply with the provisions of Subsection 6(b)
and/or the payments and benefits to be reduced. Failure by the Employee to
provide this notice within the time allowed will be treated by the Company as
acceptance by the Employee of the amount of reduction determined by the Company
and/or the payments and benefits to be reduced. If any differences regarding the
amount of the reduction and/or the payments and benefits to be reduced have not
been resolved by mutual agreement within sixty days after the Employee's receipt
of the Company's notice pursuant to Subsection 6(b), the amount of reduction
and/or the payments and benefits to be reduced determined by the Employee will
be conclusive and binding on both parties unless, prior to the expiration of
such sixty day period, the Company notifies the Employee in writing of the
Company's intention to have the matter submitted to arbitration for resolution
and proceeds to do so promptly. If the Company gives no notice to the Employee
of a required reduction as provided in Subsection 6(b), the Employee may
unilaterally determine the amount of reduction required, if any, and/or the
payments and benefits to be reduced, and, upon written notice to the Company,
the amount and/or the payments and benefits to be reduced will be conclusive and
binding on both parties.
(d) If, as a result of the reductions required by Subsection
6(a), the amounts previously paid to the Employee exceed the amount to which the
Employee is entitled, the Employee will promptly return the excess amount to the
Company.
7. Exclusive Remedy. Under any claim for breach of this Agreement or
wrongful termination, the payments and benefits provided for in Section 4 shall
constitute the Employee's sole and exclusive remedy for any alleged injury or
other damages arising out of the cessation of the employment relationship
between the Employee and the Company in the event of Employee's termination.
Except as expressly set forth herein, the Employee shall be entitled to no other
compensation, benefits, or other payments from the Company as a result of any
termination of employment with respect to which the payments and/or benefits
described in Section 4 have been provided to the Employee.
Proprietary and Confidential Information. The Employee agrees
to continue to abide by the terms and conditions of the Company's
confidentiality and/or proprietary rights agreement between the Employee and the
Company.
9. Conflict of Interest. Employee agrees that for a period of one year
after termination of his employment with the Company, he will not, directly or
indirectly, solicit the services of or in any other manner persuade employees or
customers of the Company to discontinue that person's or entity's relationship
with or to the Company as an employee or customer, as the case may be.
10. Arbitration. Any claim, dispute or controversy arising out of this
Agreement, the interpretation, validity or enforceability of this Agreement or
the alleged breach thereof shall be submitted by the parties to binding
arbitration by the American Arbitration Association in Santa Xxxxx County,
California; provided, however, that this arbitration provision shall not
preclude the Company from seeking injunctive relief from any court having
jurisdiction with respect to any disputes or claims relating to or arising out
of the misuse or misappropriation of the Company's trade secrets or confidential
and proprietary information. All costs and expenses of arbitration or
litigation, including but not limited to attorneys fees and other costs
reasonably incurred by the prevailing party, as determined by such arbitration
or litigation, shall be paid by the other party. Judgment may be entered on the
award of the arbitration in any court having jurisdiction.
11. Interpretation. Employee and the Company agree that this Agreement
shall be interpreted in accordance with and governed by the laws of the State of
California.
12. Conflict in Benefits. This Agreement shall supersede all prior
arrangements, whether written or oral, and understandings regarding the subject
matter of this Agreement; provided, however, that this Agreement is not intended
to and shall not affect, limit or terminate (i) any plans, programs, or
arrangements of the Company that are either in writing or regularly made
available to a significant number of employees of the Company, (ii) any
agreement or arrangement with the Employee that has been reduced to writing and
which does not relate to the subject matter hereof, or (iii) any agreements or
arrangements hereafter entered into by the parties in writing, except as
otherwise expressly provided herein.
13. Successors and Assigns.
(a) Successors of the Company. The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, expressly, absolutely and unconditionally to 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 or assignment
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession transaction shall be a breach of this
Agreement and shall entitle the Employee to terminate his employment with the
Company within three months thereafter and to receive the benefits provided
under Section 4 of this Agreement in the event of Termination Upon Change of
Control. As used in this Agreement, "Company" shall mean the Company as defined
above and any successor or assign to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in this Section 13 or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.
Heirs of Employee. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees. If the Employee should die after the conditions to payment
of benefits set forth herein have been met and any amounts are still payable to
him hereunder, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Employee's beneficiary,
successor, devisee, legatee or other designee or, if there be no such designee,
to the Employee's estate. Until a contrary designation is made to the Company,
the Employee hereby designates as his beneficiary under this Agreement the
person whose name appears below his signature on this Agreement.
14. Notices. For purposes 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, as follows:
if to the Company: Network Peripherals Inc.
0000 XxXxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attn: President
and if to the Employee at the address specified at the end of this Agreement.
Notice may also be given at such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
15. No Representations. Employee acknowledges that he is not relying
and has not relied on any promise, representation or statement made by or on
behalf of the Company which is not set forth in this Agreement.
16. Validity. If any one or more of the provisions (or any part
thereof) of this Agreement shall be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions (or any part thereof) shall not in any way be affected or impaired
thereby.
17. Modification. This Agreement may only be modified or amended by a
supplemental written agreement signed by Employee and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year written below.
Network Peripherals Inc.
Date: April 21, 1997 By: /s/ Xxxxxxx Xx Xxxxxx
Signature
Title: President, CEO
Date: April 21, 1997
Employee's Signature
/s/ Xxxxxx X. Xxxxx
Name
Xxxxxx X. Xxxxx
Address of Designated
Beneficiary: Designated Beneficiary
0000 Xxx Xxxxx Xxxxx X. Xxxxx
Xxxxxxxxxx, XX 00000
