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EXHIBIT 10.6
U.S. ROBOTICS ACCESS CORP.
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the "Amendment"), dated as
of the 26th day of February, 1997, by and among U.S. Robotics Corporation, a
Delaware corporation (the "Parent Corporation"), U.S. Robotics Access Corp., a
Delaware corporation (the "Company"), 3COM Corporation, a California
corporation ("3COM"), and Xxxx XxXxxxxxx ("Xx. XxXxxxxxx").
RECITALS
WHEREAS, the Company and Xx. XxXxxxxxx are parties to that certain
Employment Agreement, dated as of January 1, 1997 (as amended, the "Employment
Agreement");
WHEREAS, the Company is a wholly owned subsidiary of the Parent
Corporation;
WHEREAS, the Parent Corporation and 3COM are parties to that certain
Agreement and Plan of Merger, dated as of February 26, 1997 (the "Merger
Agreement"), pursuant to which TR Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of 3COM, shall merge with and into
the Parent Corporation (the "Merger"), with the Parent Corporation as the
surviving corporation, and, pursuant to the Merger, all issued and outstanding
common stock of the Parent Corporation shall be converted into shares of common
stock of 3COM;
WHEREAS, as a result of the Merger, the Parent Corporation shall become a
wholly owned subsidiary of 3COM, and the Company shall become an indirect
wholly owned subsidiary of 3COM;
WHEREAS, the Parent Corporation, the Company and 3COM desire that 3COM
shall assume all of the rights and obligations of the Company and the Parent
Corporation pursuant to the Employment Agreement following the effective time
of the Merger;
WHEREAS, the Parent Corporation, the Company and 3COM desire to obtain the
benefit of Xx. XxXxxxxxx'x knowledge, skill and experience for 3COM and its
affiliates following the Merger, and Xx. XxXxxxxxx is willing to render
services to 3COM and its affiliates following the Merger on the terms set forth
in the Employment Agreement as modified by this Amendment; and
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WHEREAS, the Parent Corporation, the Company, 3COM and Xx. XxXxxxxxx
desire to amend the Employment Agreement as provided herein;
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Parent Corporation, the Company, 3COM and Xx. XxXxxxxxx hereby agree as
follows:
1. Section 1(c) of the Employment Agreement is hereby amended as of the
effective time of the Merger to read in its entirety as set forth below:
"(c) TITLE AND DUTIES. Xx. XxXxxxxxx'x title shall be President, 3COM
Discreet Products, and he shall possess such powers and duties normally
incident to such position, as provided in the By-laws of 3COM and in accordance
with applicable law. Xx. XxXxxxxxx shall report to the Chief Executive Officer
of 3COM. Xx. XxXxxxxxx'x title and duties may be changed at the discretion of
the Board of Directors of 3COM. During the Employment Term, Xx. XxXxxxxxx
shall faithfully discharge his duties and responsibilities in a diligent
manner, devoting substantially all of his working time to the affairs of 3COM
and its affiliates, provided that Xx. XxXxxxxxx shall not be required to change
his principal place of residence from the Chicago, Illinois area without his
consent."
2. Section 2(a) of the Employment Agreement is hereby amended as of the
effective time of the Merger to read in its entirety as set forth below:
"(a) SALARY. For services rendered by Xx. XxXxxxxxx to 3COM and its
affiliates and upon the condition that Xx. XxXxxxxxx fully and faithfully
perform all of his duties and obligations owed during the Employment Term under
this Agreement, 3COM shall pay Xx. XxXxxxxxx a base salary during the
Employment Term at an annual rate not less than $500,000, payable in accordance
with the regular payroll practices and procedures of 3COM (but in no event
shall such salary be payable less frequently than on a monthly installment
basis). This base salary set forth herein shall be reviewed annually by the
Compensation Committee of the Board of Directors of 3COM, or any successor to
such committee (the "Compensation Committee"), at the end of each fiscal year
(a "Fiscal Year") of 3COM beginning with the end of the Fiscal Year in which
the Merger occurs, or at such other times as deemed appropriate by the
Compensation Committee, and may, at the sole discretion of the Compensation
Committee, be increased by an amount which it deems appropriate."
3. Section 2(b) of the Employment Agreement is hereby amended as of the
effective time of the Merger to read in its entirety as set forth below:
"(b) BONUSES. Following the effective time of the Merger, 3COM shall pay
Xx. XxXxxxxxx quarterly bonuses in the amounts and on the terms set forth on
the 3COM
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proposed Bonus Program attached hereto as Exhibit A (the "Bonus Program") for
3COM's full Fiscal Year ending in 1998. The quarterly pre-tax income
thresholds and quarterly pre-tax income targets with respect to the Bonus
Program shall be determined by the Compensation Committee, in its sole
discretion. Following 3COM's 1998 Fiscal Year, Xx. XxXxxxxxx'x bonuses shall
be determined by the Compensation Committee."
4. Section 2(c) of the Employment Agreement is hereby amended as of the
effective time of the Merger to read in its entirety as set forth below:
"(c) STOCK OPTIONS. Xx. XxXxxxxxx shall be entitled to receive such
options to purchase the common stock of 3COM ("3COM Common Stock") as shall be
granted by the Compensation Committee pursuant to the applicable stock option
plans of 3COM and its affiliates, provided that upon the first regular grant of
stock options by the Compensation Committee to senior executive officers of
3COM following the effective time of the Merger, Xx. XxXxxxxxx shall be
entitled to receive an option (a "3COM Option") to purchase at least that
number of shares of 3COM Common Stock which is equal to 100% of the number of
shares of 3COM Common Stock with respect to which a 3COM Option is granted by
the Compensation Committee to any person holding the position of President,
3COM Systems."
5. Section 2(d) of the Employment Agreement is hereby amended as of the
effective time of the Merger to read in its entirety as set forth below:
"(d) FRINGE BENEFITS. During the Employment Term, Xx. XxXxxxxxx shall be
eligible to receive reasonable amounts (at least six weeks per year) of paid,
noncumulative vacation or personal time, as the case may be, per year, to be
taken at a time or times reasonably agreeable to both Xx. XxXxxxxxx and 3COM,
and shall be eligible to participate in and receive coverage and benefits under
all group insurance, split dollar life insurance, pension, profit sharing,
bonus, stock option, stock ownership and other employee benefit plans, programs
and arrangements of 3COM and its affiliates which are now or hereafter adopted
by 3COM and its affiliates for the benefit of its senior executive employees,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans, programs and arrangements. 3COM shall also
provide Xx. XxXxxxxxx with certain perquisites, payable at the Company's
expense, which are offered to other senior executive employees and which are
reasonable, necessary and in the best interests of 3COM and its affiliates."
6. The following Section 2A is hereby added to and made a part of the
Employment Agreement, effective as of the effective time of the Merger:
"2A. REPRESENTATIONS, WARRANTIES, ACKNOWLEDGMENTS AND AGREEMENTS OF THE
PARENT CORPORATION, THE COMPANY AND 3COM. In order to induce Xx. XxXxxxxxx to
execute and deliver this Amendment, the parties hereby represent, warrant,
acknowledge and agree as follows:
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(a) EXERCISABILITY OF OPTIONS. The Parent Corporation and the Company
hereby represent and warrant, and 3COM hereby acknowledges and agrees, that the
Board of Directors of the Parent Corporation has made a determination that the
consummation of the Merger shall constitute a "Change in Control" within the
meaning of the third paragraph of Section 11 of each of the 1991 Stock Option
Plan of U.S. Robotics, Inc., as amended, the Key Employee Stock Option Plan of
U.S. Robotics Corporation, as amended, and the Executive Officers and Directors
Stock Option Plan of U.S. Robotics Corporation, as amended (collectively, the
"Plans"), such that all unexpired and unexercised options to purchase common
stock of the Parent Corporation granted to Xx. XxXxxxxxx under the Plans (which
options shall be converted by virtue of the Merger into options to purchase
3COM Common Stock) shall be immediately exercisable in full upon the
consummation of the Merger, except to the extent, if any, that Xx. XxXxxxxxx
waives or rejects such immediate exercisability in a written notice given to
the Parent Corporation prior to the effective time of the Merger.
(b) CHANGE IN CONTROL. The Parent Corporation and the Company hereby
represent and warrant, and 3COM hereby acknowledges and agrees, that the Board
of Directors of the Parent Corporation has made a determination that the
consummation of the Merger shall constitute a "Change in Control" of the Parent
Corporation within the meaning of Section 5(d)(ii) of the Employment Agreement.
In addition, without limiting the generality of the foregoing, with respect to
the Change in Control resulting from the consummation of the Merger, the
parties hereby agree that the period during which any termination of the
Employment Term shall constitute "Good Reason" within the meaning of Section
5(d)(i) of the Employment Agreement shall be two years (rather than one year)
following the effective time of the Merger. The parties acknowledge and agree
that Section 5(d)(i) and Section 5(d)(ii) shall also apply by their terms to
any further Change in Control occurring after the Merger, in which event all
references to the Parent Corporation shall be deemed to be references to 3COM
as provided in Section 9 of this Amendment, and, accordingly, that any
termination of the Employment Term occurring within one year following any such
further Change in Control of 3COM shall constitute "Good Reason" within the
meaning of Section 5(d)(i) of the Employment Agreement.
(c) GOOD REASON. The parties hereby acknowledge and agree that the
reference to "this Subsection (d)(i)" in the last sentence of Subsection
5(d)(i) of the Employment Agreement is intended and shall be deemed to refer
exclusively to Subsection 5(d)(i)(c) of the Employment Agreement.
(d) COMPENSATION COMMITTEE. Following the effective time of the Merger,
the Compensation Committee shall review and consider the adoption of an
incentive-based senior executive compensation plan to cover appropriate senior
executive personnel of 3COM and its affiliates, including Xx. XxXxxxxxx,
provided that the compensation payable to Xx. XxXxxxxxx under any such
incentive-based senior executive compensation plan shall not be less favorable
than the compensation payable to Xx. XxXxxxxxx under the Bonus Program set
forth as Exhibit A attached hereto with respect
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to the 1998 Fiscal Year of 3COM. Xx. XxXxxxxxx hereby acknowledges and agrees
that any salary and bonus amounts paid to Xx. XxXxxxxxx under the new
incentive-based senior executive compensation plan shall be credited against
the salary and bonus amounts required to be paid to Xx. XxXxxxxxx pursuant to
Section 2 of the Employment Agreement.
7. Section 4(f)(ii) of the Employment Agreement is hereby amended as of
the effective time of the merger to read in its entirety as set forth below:
"(ii) TERMINATION BY COMPANY OR BY XX. XXXXXXXXX FOR GOOD REASON. If 3COM
(or any of its affiliates) breaches this Agreement by terminating the
Employment Term, other than pursuant to Subsections (a) (cause), (b) (death) or
(c) (disability) of Section 5 herein, including but not limited to termination
without "cause" (as such term is defined in Subsection (a) of Section 5
herein), or if Xx. XxXxxxxxx terminates the Employment Term for Good Reason, as
such term is defined in Subsection (d)(i) of Section 5 herein, then 3COM shall
pay as severance compensation to Xx. XxXxxxxxx an amount equal to the sum of
(1) Xx. XxXxxxxxx'x annual base salary in effect as of the Date of Termination,
multiplied by three, plus (2) the greater of (A) the sum of all cash bonuses
actually received by Xx. XxXxxxxxx with respect to the three full Fiscal Years
of the Parent Corporation and the Company ended on September 29, 1996 and (B)
the sum of all cash bonuses actually received by Xx. XxXxxxxxx with respect to
the most recent three full Fiscal Years of either 3COM or the Parent
Corporation (disregarding the partial Fiscal Year of the Parent Corporation in
which the Merger occurs), in each case less the amount of cash bonuses, if
any, theretofore paid to him with respect to the Fiscal Year in which such
termination occurs. Such severance compensation shall be payable in cash in a
lump sum on or before the fifteenth (15th) day following the Date of
Termination; provided, however, that where Sections 280G and Section 4999 of
the Internal Revenue Code of 1986, as amended, or any successor thereto (the
"Code"), are applicable, then such severance pay shall amount to one dollar
less than the maximum amount that Xx. XxXxxxxxx may receive without having such
payment be treated as an excess parachute payment under Section 280G of the
Code. Such severance compensation shall not be subject to mitigation or offset
due to other earnings of Xx. XxXxxxxxx."
8. Section 13(a) of the Employment Agreement is hereby amended as of the
effective time of the Merger to provide that the address designated with
respect to each of the Company, the Parent Corporation and 3COM shall be as set
forth below:
"3COM Corporation
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: General Counsel"
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9. 3COM hereby acknowledges and agrees that, by this Amendment, it shall
become a party to and fully responsible under the Employment Agreement,
effective as of the effective time of the Merger. The parties acknowledge and
agree that no provisions of this Amendment shall become effective until the
effective time of the Merger and that, effective as of the effective time of
the Merger, except as otherwise expressly provided herein, (a) 3COM shall
automatically, without any further action on its part, assume all of the
rights and obligations of the Company and the Parent Corporation pursuant to
the Employment Agreement, as amended hereby, (b) all references in the
Employment Agreement to "the Company," "the Parent Corporation" and "U.S.
Robotics" shall be deemed to be references to "3COM," (c) all references in the
Employment Agreement to the "Board of Directors of the Parent Corporation"
shall be deemed to be references to the "Board of Directors of 3COM," (d) all
references in the Employment Agreement to the "Stock Option and Compensation
Committee" shall be deemed to be references to the "Compensation Committee" of
3COM, (e) all references in the Employment Agreement to "Fiscal Year" shall be
deemed to be references to the "Fiscal Year of 3COM."
10. This Amendment may be executed in one or more counterparts (including
by means of telecopied signature pages), all of which shall be considered one
and the same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
parties. This Amendment, and all matters or disputes relating to the validity,
construction, performance or enforcement hereof, shall be governed, construed
and controlled by and under the laws of the State of Illinois without regard to
principles of conflicts of law.
11. All provisions of the Employment Agreement shall at all times remain
in full force and effect, as amended hereby, and as so amended each of the
parties hereto hereby acknowledges and confirms all of its respective rights
and obligations thereunder.
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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the day and year first above written.
U.S. ROBOTICS CORPORATION
/ s / Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
U.S. ROBOTICS ACCESS CORP.
/ s / Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
3COM CORPORATION
/ s / Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
/ s / Xxxx XxXxxxxxx
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Xxxx XxXxxxxxx
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EXHIBIT A
BONUS PROGRAM
The Parent Corporation's current bonus will be closed out at the time of the
Merger. In the quarter of the Merger, the bonus will be paid as though analyst
estimates were achieved. The payment will be pro-rated for the performance
period in the quarter.
From the time of the Merger until 5/31/98, the bonus will be based on quarterly
pre-tax income targets without quarterly holdbacks. The first quarter will be
pro-rated based on the time of the Merger.
Quarter Pre-tax income Threshold
Q1 75%
Q2 80%
Q3 85%
Q4 85%
For purposes of determining the pre-tax income thresholds and targets, "pre-tax
income" means the net income of 3COM, determined before the payment of federal
and state income taxes, calculated in accordance with GAAP, excluding any
extraordinary and other non-recurring items.
Between the threshold and the target the bonus will be paid at the minimum
level indicated below.
For every percentage point the target earnings are exceeded the bonus will grow
1.6%.
No targets below current financial expectations.
EMPLOYMENT TERMS
Name Current Base Min Base ($000) Min Bonus/ Qtr Non-Comp.
($000) ($000)
Xx. XxXxxxxxx $500 $500 $225 2 yrs
Plan is renewable after one year for one additional year.
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