SALARY CONTINUATION AGREEMENT
This Salary Continuation Agreement (the "Agreement") is made and
entered into as of May 24, 1996 (the "Effective Date"), by and between Network
Peripherals Inc., a Delaware corporation (the "Company") and Truman Cole
("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
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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
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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
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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
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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 18 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
18 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
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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.
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8. 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 Clara 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.
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(b) 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.
1371 McCarthy Boulevard
Milpitas, CA 95035
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: By: /s/ Truman Cole
---------------------- ---------------------------------
Signature
Title: VP Finance & CFO
------------------------------
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Date: /s/ Truman Cole
----------------------- -----------------------------------
Employee's Signature
Address for Notice: Truman Cole
- ---------------------------- Name
- ----------------------------
Address of Designated ------------------------------------
Beneficiary: Designated Beneficiary
- -----------------------------
- -----------------------------
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