NETRIX CORPORATION
EXECUTIVE RETENTION AGREEMENT
THIS EXECUTIVE RETENTION AGREEMENT by and between Netrix Corporation, a
Delaware corporation (the "COMPANY"), and Lynn Chapman (the "EXECUTIVE") is made
as of February 1, 1999 (the "EFFECTIVE DATE").
WHEREAS, the Board of Directors of the Company (the "BOARD") has
determined that appropriate steps should be taken to reinforce and encourage the
continued employment and dedication of the Company's key personnel;
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below.
1. KEY DEFINITIONS.
As used herein, the following terms shall have the following respective
meanings:
1.1 "CAUSE" means:
(a) the Executive's willful and continued failure to
substantially perform [his/her] reasonable assigned duties [AS AN OFFICER OF THE
COMPANY] (other than any such failure resulting from incapacity due to physical
or mental illness), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
of Directors of the Company which specifically identifies the manner in which
the Board of Directors believes the Executive has not substantially performed
the Executive's duties; or
(b) the Executive's willful engagement in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.1, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
1.2 "DISABILITY" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
1.3 "TERM" means the period commencing as of the Effective Date and
continuing in effect through December 31, 2000; PROVIDED, however, that
commencing on January 1, 2001 and each January 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
1.4 "Good Reason" shall mean the occurrence of any of the following
circumstances without the Executive's written consent, unless such circumstances
are fully corrected prior to the Date of Termination (as defined in Article
4.1(a)(i) of this Agreement):
(A) any reduction in the Executive's annual compensation
(including salary and bonuses and commissions based on agreed upon targets then
in effect) as in effect on the date hereof or as the same may be increased
during the term; or
(B) any requirement by the Company or of any person in control
of the Company that the location at which the Executive performs his or her
principal duties for the Company be outside a radius of 50 miles from the
location at which such duties were performed immediately prior to the Effective
Date of this Agreement.
2. TERM OF AGREEMENT. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term or (b) the
fulfillment by the Company of all of its obligations under Sections 4 and 5.2 if
the Executive's employment with the Company terminates during the Term.
3. EMPLOYMENT STATUS.
3.1 NOT AN EMPLOYMENT CONTRACT. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time.
4. BENEFITS TO EXECUTIVE.
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4.1 COMPENSATION. If the Executive's employment with the Company
terminates during the Term, the Executive shall be entitled to the following
benefits:
(a) TERMINATION WITHOUT CAUSE; RESIGNATION WITH GOOD REASON.
If the Executive's employment with the Company is terminated by the Company
(other than for Cause, Disability or Death) or if the Executive terminates
employment for Good Reason during the Term, then the Executive shall be entitled
to the following benefits:
(i) the Company shall pay to the Executive in equal
semi-monthly installments in cash beginning within 30 days after the effective
date of an employment termination (the "DATE OF TERMINATION") the aggregate of
the following amounts:
(1) the sum of (A) the Executive's base
salary through the Date of Termination, (B) the product of (x) the annual bonus
paid or payable (including any bonus or portion thereof which has been earned
but deferred) for the most recently completed fiscal year or the annual bonus
amount contained in an offer of employment if the Executive was not employed by
the Company in the most recently completed fiscal year and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (C) the amount of
any compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not previously paid (the sum of the amounts described in clauses (A),
(B), and (C) shall be hereinafter referred to as the "ACCRUED OBLIGATIONS"); and
(2) an amount equal to the greater of (a) the
Executive's annual base salary during the twelve month period prior to the Date
of Termination, or (b) the product of twelve (12) times the Executive's monthly
salary in effect immediately before the Date of Termination.
(ii) for 12 months after the Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue to provide benefits to
the Executive and the Executive's family at least equal to those which would
have been provided to them if the Executive's employment had not been
terminated, in accordance with the applicable benefit plan or program
(including, without limitation, any insurance, medical, health and accident or
disability plan and any vacation program or policy) (a "BENEFIT PLAN") in effect
on the Date of Termination, or, if more favorable to the Executive and [his/her]
family, in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies; PROVIDED, however, that
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if the Executive becomes reemployed with another employer and is eligible to
receive a particular type of benefits (e.g., health insurance benefits) from
such employer on terms at least as favorable to the Executive and [his/her]
family as those being provided by the Company, then the Company shall no longer
be required to provide those particular benefits to the Executive and [his/her]
family;
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(iii) to the extent not previously paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive following the Executive's termination of employment under any plan,
program, policy, practice, contract or agreement of the Company and its
affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "OTHER BENEFITS"); and
(iv) for purposes of (i) determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits to which the Executive is entitled and (ii) determining vesting OR
EXERCISING under stock options or awards granted to the Executive prior to the
Date of Termination under the Company's employee stock option plans, the
Executive shall be considered to have remained employed by the Company until 12
months after the Date of Termination.
(b) RESIGNATION WITHOUT GOOD REASON; TERMINATION FOR DEATH OR
DISABILITY. If the Executive voluntarily terminates WITHOUT GOOD REASON
[his/her] employment with the Company during the Term or if the Executive's
employment with the Company is terminated by reason of the Executive's death or
Disability during the Term, then the Company shall (i) pay the Executive (or
[his/her] estate, if applicable), in a lump sum in cash within 30 days after the
Date of Termination, the Accrued Obligations and (ii) timely pay or provide to
the Executive the Other Benefits.
(c) TERMINATION FOR CAUSE. If the Company terminates the
Executive's employment with the Company for Cause during the Term, then the
Company shall (i) pay the Executive, in a lump sum in cash within [30 days]
after the Date of Termination, the sum of (A) the Executive's annual base salary
through the Date of Termination and (B) the amount of any compensation
previously deferred by the Executive, in each case to the extent not previously
paid, and (ii) timely pay or provide to the Executive the Other Benefits.
4.2 MITIGATION. The Executive shall not be required to mitigate the
amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.1(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
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5. DISPUTES.
5.1 SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board of Directors of the Company and shall be in writing. Any denial by the
Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Washington, D.C., 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.
5.2 EXPENSES. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
6. SUCCESSORS; NON-COMPETE.
6.1 SUCCESSOR TO COMPANY. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement 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 an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute a termination without cause in accordance with Section 4.1(a) if the
Executive elects to terminate employment, 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 defined above and any successor to its
business or assets as aforesaid which assumes and agrees to perform this
Agreement, by operation of law or otherwise.
6.2 SUCCESSOR TO EXECUTIVE. This Agreement shall inure to the
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benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or [his/her] family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
6.3 NON-COMPETE.
(a) During the Term the Executive will not directly or
indirectly:
(i) as an individual proprietor, partner
stockholder, officer, employee, director, joint venturer, investor, lender, or
in any other capacity whatsoever (other than as the holder of not more than one
percent (1%) of the total outstanding stock of a publicly held company), engage
in the business of developing, producing, marketing or selling products of the
kind or type developed or being developed, produced, marketed or sold by the
Company while the Executive was employed by the Company; or
(ii) recruit, solicit or induce, or attempt to
induce, any employee or employees of the Company to terminate their employment
with, or otherwise cease their relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to
divert or to take away, the business or patronage of any of the clients,
customers or accounts, or prospective clients, customers or accounts, of the
Company which were contacted, solicited or served by the Executive while
employed by the Company.
(b) If any restrictions set forth in this Section 6.3 is found
by any court of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6.3 are
necessary for the protection of the business and goodwill of the Company and are
considered by the Executive to be reasonable for such purpose. The Executive
agrees that any breach of this Section 6.3 will cause the Company substantial
and irrevocable damage and therefore, in the event of any such breach, in
addition to such other remedies which may be available, the Company shall have
the right to seek specific performance and injunctive relief.
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7. NOTICE. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
13595 Dulles Technology Drive, Herndon, Virginia 20171, and to the Executive at
43454 Thistlewood Court, Ashburn, Virginia 22011 (or to such other address as
either the Company or the Executive may have furnished to the other in writing
in accordance herewith). Any such notice, instruction or communication shall be
deemed to have been delivered five business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, or one business
day after it is sent via a reputable nationwide overnight courier service.
Either party may give any notice, instruction or other communication hereunder
using any other means, but no such notice, instruction or other communication
shall be deemed to have been duly delivered unless and until it actually is
received by the party for whom it is intended.
8. MISCELLANEOUS.
8.1 EMPLOYMENT BY SUBSIDIARY. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 SEVERABILITY. 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.
8.3 INJUNCTIVE RELIEF. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the internal laws of
the Commonwealth of Virginia, without regard to conflicts of law principles.
8.5 WAIVERS. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.6 COUNTERPARTS. This Agreement may be executed in counterparts,
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each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.7 TAX WITHHOLDING. Any payments provided for hereunder shall
be paid net of any applicable tax withholding required under federal, state
or local law.
8.8 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
8.9 AMENDMENTS. This Agreement may be amended or modified only
by a written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
NETRIX CORPORATION
By:-----------------------------------------
Title:--------------------------------------
--------------------------------------------
[SIGNATURE]
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