EXHIBIT 10(j)
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement")
made as of October 30, 2001, by and between NetSilicon, Inc., a
Massachusetts corporation (the "Company"), and Cornelius Peterson,
VIII (the "Executive").
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WHEREAS, the Company has entered into an Agreement and Plan of Merger
by and among the Company, Digi International Inc., a Delaware corporation
("Digi"), and Dove Sub Inc., a wholly owned subsidiary of Digi ("Dove Sub"),
dated as of October 30, 2001 (the "Merger Agreement"), pursuant to which the
Company shall be merged with and into Dove Sub (the "Merger"); and
WHEREAS, the Executive has been providing services to the Company
pursuant to an Employment Agreement dated as of August 9, 2001, as amended by
the First Amended and Restated Employment Agreement dated as of October 30,
2001;
WHEREAS, it is a condition to Digi's and the Company's executing the
Merger Agreement that the Executive enter into this Agreement;
WHEREAS, the parties hereto desire to amend and restate the First
Amended and Restated Employment Agreement in its entirety as set forth herein,
subject to consummation of the Merger and effective upon the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, if the Merger is not consummated, this Agreement shall be null
and void.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements of the Company and Executive set forth below, the Company
and Executive, intending to be legally bound, agree as follows:
1) Term.
(a) The Company hereby agrees to continue to employ the Executive and the
Executive hereby agrees to continue employment with the Company, in
the positions set forth in Section 2 below, for the Term (as defined
below), subject to the terms and conditions of this Agreement.
(b) The term (the "Term") of this Agreement shall commence as of the
Effective Time (as defined in the Merger Agreement) and shall
continue until the date 18 months following the Effective Time unless
terminated earlier in accordance with Section 4.
2) Position, Duties and Responsibilities.
(a) During the Term, the Executive shall be employed by the Company and
shall serve the Company as Senior Vice President of Business
Development. The Executive shall have such duties and
responsibilities as are incident to, or reasonably requested in
connection with, such positions, as well as such other comparable
duties and responsibilities as may be agreed upon by him and the
Chief Executive Officer of Digi
and/or Digi's Board of Directors ("Digi's BOD"). The Executive shall
report to the Chief Executive Officer of Digi.
(b) During the Term, the Executive shall serve the Company faithfully,
diligently and to the best of the Executive's ability, and shall
devote substantially all of his business time and efforts to such
service. The Executive also shall not engage in any other business
activity without the written consent of the Chief Executive Officer
of Digi, except that the Executive may (i) carry on charitable,
civic, or other not-for-profit activities or (ii) manage his personal
investments, provided that none such activities conflict with the
Executive's duties under this Agreement and the Non-Disclosure,
Proprietary Rights and Non-Solicitation Agreement entered into
between the Executive and the Company dated May 2, 2000 (the
"Nondisclosure Agreement"). If the Executive shall be elected to
other offices of the Company, Digi or any of their affiliates, and if
the Executive shall in his sole discretion accept in writing the
election to such offices, he shall serve in such positions without
further compensation than provided for in this Agreement.
Notwithstanding the foregoing, the Executive agrees to serve as a
director of Digi without compensation (other than reimbursement for
expenses in connection with attendance at meetings in accordance with
Digi's policies) until such time as the Executive shall become an
Outside Director of Digi (as defined in Digi's 2000 Omnibus Stock
Plan), at which time he will be entitled to receive compensation from
Digi as an Outside Director generally applicable to other Outside
Directors. The Executive shall perform his services under this
Agreement primarily from his home office and at such locations as may
be required by the Company from time to time, but the Company will
not require the Executive to permanently relocate to an office more
than 50 miles from the Company's Waltham, Massachusetts, office. The
Company shall pay or reimburse the Executive for all reasonable
business expenses associated with maintaining his home office.
(c) The Executive agrees to comply with the policies and procedures of
the Company applicable to its U.S. employees generally from time to
time that are in force (which may be amended, revised or supplemented
at any time in the Company's and/or the Company's Board of Directors'
("Company's BOD") sole discretion), provided, however, that to the
extent there is a conflict between the terms of this Agreement and
the policies and procedures of the Company, the terms of this
Agreement shall govern unless otherwise specified herein.
3) Compensation and Benefits. During the term of this Agreement, the Company
shall pay the Executive as compensation for his performance of his duties
and obligations hereunder, the following:
(a) Base Salary. During the Term, the Company shall pay to the Executive
a base salary at the rate of U.S. $20,833.33 per month ("Base
Salary"), subject to annual increase at the discretion of the Digi's
BOD's Compensation Committee ("Digi Compensation Committee") in
accordance with Digi's executive compensation practices, and payable
in accordance with the regular payroll practices of the Company as
may be modified or established from time to time.
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(b) Incentive Compensation. During the Term, the Executive shall be
eligible to receive additional annual incentive compensation (the
"Incentive Bonus"). The amount of the Incentive Bonus, if any, shall
be $125,000 provided the Digi Compensation Committee has determined
that the Executive has attained certain goals established by the Digi
Compensation Committee. The Digi Compensation Committee may consider,
among other things, the Executive's actual attainment of specific
goals as established by the Digi Compensation Committee, and Digi's
and/or the Company's overall performance. The Digi Compensation
Committee will make all determinations regarding the Executive's
eligibility for the annual Incentive Bonus at its sole discretion.
Subject to the provisions of Section 4 herein, the Executive must be
employed by the Company in good standing (as determined by Digi's
BOD) to be eligible for any Incentive Bonus payments, which will be
subject to applicable taxes and payable in accordance with the
Company's normal bonus pay practices as may be established or
modified from time to time.
(c) Stock options.
(i) Digi shall upon consummation of the Merger and pursuant to the
Merger Agreement, assume all of the Executive's outstanding
stock options to purchase shares of the Company's stock, which
shares shall be exercisable for shares of Digi's common stock,
and Digi shall file a Registration Statement on Form S-8 to
register the Digi shares to be issued pursuant to such options.
(ii) Upon consummation of the Merger, Executive's unvested stock
options shall vest immediately and all of the Executive's stock
options shall remain in full force and effect and may be
exercised at any time up to their latest possible date of
expiration as set out in each stock option agreement entered
into between the Executive and the Company and applicable to
such options (such option agreements existing as of the date of
this Agreement and the latest possible date of expiration of the
option contained in each such option agreement as of the date of
this Agreement are identified in Exhibit A hereto)
notwithstanding any provision contained in any existing or
future stock option agreement entered into between the Executive
and the Company (as such agreements may be amended from time to
time) or in the Company's Amended and Restated 1998 Incentive
and Non-Qualified Stock Option Plan (as amended from time to
time) or the Company's 2001 Stock Option and Incentive Plan (as
amended from time to time) that provides for either a lesser
period of time within which to exercise such options or
forfeiture of any option granted thereunder. In the event that
any date of expiration contained in any existing or future stock
option agreement entered into between the Executive and the
Company shall be extended to a later date in time, then the
Executive's right to exercise options pursuant to such stock
option agreement shall be extended to that later date in time.
(iii) The Executive shall be eligible to receive additional stock
option awards as determined by Digi's Compensation Committee in
its sole discretion.
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(d) Benefits. Subject to any contribution therefor generally required of
senior executives of the Company, the Executive shall be eligible to
participate in all employee benefits plans, including the Company's
health and dental plans, as adopted by the Company's BOD and in
effect for senior Company executives. Such participation shall be
subject to (i) the terms of the applicable plan documents, (ii)
generally applicable Company policies, and (iii) the discretion of
the Company's BOD or any administrative or other committee provided
for in or contemplated by such plans.
(e) Expenses. The Company shall pay or reimburse the Executive for all
reasonable business expenses incurred or paid by the Executive in the
performance of his responsibilities hereunder in accordance with the
Company's prevailing policy and practice relating to reimbursements
as established, modified or amended from time to time. The Executive
must provide substantiation and documentation of these expenses to
the Company in order to receive reimbursement, as required pursuant
to Company policy.
(f) Vacation. The Executive shall be entitled to accrue up to four (4)
weeks of vacation per calendar year, to be taken and paid in
accordance with Company policy.
4) Termination of Employment.
(a) Termination by the Company for Cause. The Company may terminate the
Executive's employment and this Agreement for Cause (as defined in
Section 8(a)) upon written notice to the Executive and expiration of
any cure periods as set forth in Section 8(a). In the event of
termination for Cause, the Executive shall be entitled to no
payments, salary continuation or other benefits, except for:
(i) Base Salary earned and accrued but unpaid through the date of
Executive's termination of employment;
(ii) any Incentive Bonus payment, as determined by the Digi
Compensation Committee pursuant to Section 3(b) herein, for
the year previously ended prior to the Executive's
termination. In addition, in its sole discretion, the Digi
Compensation Committee may provide an additional incentive
bonus payment for the year in which the Executive's
termination of employment occurred;
(iii) payment for accrued but unused vacation time up to the
Executive's termination of employment;
(iv) statutory benefit continuation rights in accordance with the
Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), provided Executive makes the appropriate voluntary
contribution payments and subject to applicable law and the
requirements of the Company's health insurance plans then in
effect; and
(v) all expenses reimbursable to the Executive and unpaid as of
the date of Executive's termination of employment.
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(b) Termination Due to Death or Permanent Disability. In the event of the
termination of the Executive's employment and this Agreement due to
the Executive's death or Disability (as defined in Section 8(c)), the
Executive, or the Executive's legal representative, shall be entitled
to no payments, salary continuation or other benefits, except for:
(i) Base Salary to the extent earned and accrued but unpaid
through the date of Executive's termination of employment, as
well as a one-time lump-sum cash payment equivalent to the
Executive's monthly Base Salary multiplied by the number of
months remaining in the then-current Term of this Agreement,
to be paid within a reasonable time, not to exceed ninety (90)
days, after the Executive's death or Disability, subject to
any offset or reduction as set forth in Section 4(b)(iv);
(ii) any Incentive Bonus payment, as determined by the Digi
Compensation Committee pursuant to Section 3(b) herein, for
the year previously ended prior to the Executive's
termination. In addition, in its sole discretion, the Digi
Compensation Committee may provide an additional incentive
bonus payment for the year in which the Executive's
termination of employment occurred;
(iii) payment for accrued but unused vacation time up to the
Executive's termination of employment;
(iv) all benefits the Executive would otherwise receive upon a
Disability or upon death under any benefit plan covering the
Executive, provided, however, that all such benefits that the
Executive receives or would otherwise receive upon a
Disability shall be offset against any other payments under
Section 4(b)(i) of this Section 4(b), such that any amount
potentially owing to the Executive under Section 4(b)(i) is
reduced, but not less than zero, by the monetary value of the
benefits (referenced in this subsection) received by the
Executive;
(v) statutory benefit continuation rights in accordance with
COBRA, provided Executive makes the appropriate voluntary
contribution payments and subject to applicable law and the
requirements of the Company's health insurance plans then in
effect;
(vi) all expenses reimbursable to the Executive and unpaid as of
the date of Executive's termination of employment; and
(vii) the Executive's unvested stock options shall vest immediately
and all of the Executive's stock options shall remain in full
force and effect and may be exercised at any time up to their
latest possible date of expiration as set out in each stock
option agreement entered into between the Executive and the
Company and applicable to such options (such option agreements
existing as of the date of this Agreement and the latest
possible date of expiration of the option contained in each
such option agreement as of the date of this Agreement are
identified in Exhibit A hereto) notwithstanding any provision
contained in any
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existing or future stock option agreement entered into between
the Executive and the Company (as such agreements may be
amended from time to time) or in the Company's Amended and
Restated 1998 Incentive and Non-Qualified Stock Option Plan
(as amended from time to time) or the Company's 2001 Stock
Option and Incentive Plan (as amended from time to time) that
provides for either a lesser period of time within which to
exercise such options or forfeiture of any option granted
thereunder. In the event that any date of expiration contained
in any existing or future stock option agreement entered into
between the Executive and the Company shall be extended to a
later date in time, then the Executive's right to exercise
options pursuant to such stock option agreement shall be
extended to that later date in time.
During the Term, the Company shall maintain disability
insurance policies, for which the Executive is eligible,
comparable to the insurance policies for which the other
senior executives of the Company are eligible.
(c) Termination Without Cause or Expiration of Term. In the event that
the Executive's employment and this Agreement is terminated by the
Company without Cause or upon the expiration of the Term, this
Agreement shall expire and the Executive shall be entitled to no
payments, salary continuation or other benefits, except for:
(i) a one-time lump-sum cash payment equivalent to the Executive's
monthly Base Salary multiplied by the number of months
remaining in the initial 18 month Term of this Agreement, to
be paid within a reasonable time, not to exceed ninety (90)
days, if, and only if, this Agreement is terminated by the
Company without Cause or by the Executive for Good Reason in
the initial 18 month Term;
(ii) the Incentive Bonus payment as provided in Section 3(b),
prorated through the date of such termination by the Company
or expiration of the Term as provided in this Section 4(c),
regardless of whether or not the Executive has attained the
goals established by the Company's Compensation Committee;
(iii) payment for accrued but unused vacation time up to the
Executive's termination of employment;
(iv) all expenses reimbursable to the Executive and unpaid as of
the date of Executive's termination of employment;
(v) if the Executive elects after the termination of his
employment and in accordance with COBRA to continue health
coverage under the same plans available to active Company
employees, under the same rules, restrictions and regulations
applicable thereto, the Company shall make premium payments on
his behalf until the earlier of (x) eighteen (18) months from
the last day of the Executive's employment or (y) the date on
which the Executive becomes ineligible to receive COBRA
benefits ("COBRA Coverage"); provided that when the COBRA
Coverage concludes, the Company shall reimburse the Executive
for the cost of the Executive obtaining a medicare supplement
policy for both the Executive and his
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spouse, equivalent to the Blue Cross of New England's Medex
Gold policy, from the date on which the COBRA Coverage
concludes and terminating for each of the Executive and his
spouse when they respectively attain the age of 80 years. The
Executive shall be responsible for obtaining Medicare Part A,
Medicare Part B and the individual Medicare supplement policy
and shall be responsible for any premiums associated with
either Medicare part A or Part B for both himself and his
spouse. In addition, the Company shall reimburse the Executive
in an amount equal to the reasonable cost of the Executive
obtaining a dental insurance policy for himself and his spouse
until each of the Executive and his spouse respectively attain
the age of 80 years. The Executive shall be responsible for
obtaining the dental insurance policies. Any time after the
period ending five years from the date the COBRA Coverage
concludes, the Company may elect to pay a one-time lump-sum
payment for the insurance policies instead of continuing to
reimburse the Executive as provided above. The one-time
lump-sum payment will be in an amount equal to the then
current premium payments of the policies held by the Executive
and his spouse, indexed for inflation for the years remaining
until each of the Executive and his spouse attains the age of
80 years (using the average of the past three years' annual
Consumer Price Index for Boston Medical Care) and then
discounted to the present value using the then current prime
rate; and
(vi) the Executive's unvested stock options shall vest immediately
and all of the Executive's stock options shall remain in full
force and effect and may be exercised at any time up to their
latest possible date of expiration as set out in each stock
option agreement entered into between the Executive and the
Company and applicable to such options (such option agreements
existing as of the date of this Agreement and the latest
possible date of expiration of the option contained in each
such option agreement as of the date of this Agreement are
identified in Exhibit A hereto) notwithstanding any provision
contained in any existing or future stock option agreement
entered into between the Executive and the Company (as such
agreements may be amended from time to time) or in the
Company's Amended and Restated 1998 Incentive and
Non-Qualified Stock Option Plan (as amended from time to time)
or the Company's 2001 Stock Option and Incentive Plan (as
amended from time to time) that provides for either a lesser
period of time within which to exercise such options or
forfeiture of any option granted thereunder. In the event that
any date of expiration contained in any existing or future
stock option agreement entered into between the Executive and
the Company shall be extended to a later date in time, then
the Executive's right to exercise options pursuant to such
stock option agreement shall be extended to that later date in
time.
(d) Voluntary Termination. The Executive may voluntarily terminate his
employment only upon sixty (60) days' written notice to the Company's
BOD ("Voluntary Termination"). In the event of a Voluntary
Termination, the Company may accelerate Executive's departure date
(and terminate this Agreement) and will have no obligation to pay
Executive after his actual departure date. In the event of a
Voluntary Termination, the Executive shall be entitled to no
payments, salary continuation, or other benefits, except for (i)
those payments and benefits as set forth in Section 4(a) and (ii) any
of the
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Executive's stock options due to vest within sixty (60) days of the
Executive's written notice of Voluntary Termination to the Company's
BOD, which shall vest immediately.
(e) Termination by the Executive for Good Reason. In the event the
Executive decides to terminate this Agreement and his employment for
Good Reason (as defined in Section 8(e)), the Executive must give
notice of such Good Reason to the Company and the Company's BOD. If
the basis for such Good Reason is not cured (as determined by the
Company's BOD in good faith) within thirty (30) days after the
Company and the Company's BOD receive written notice specifying the
basis of such Good Reason, this Agreement, and the Executive's
employment, shall terminate. In the event of a termination by the
Executive for Good Reason, the Executive shall be entitled to the
payments and benefits as set forth in Section 4(c).
(f) Execution of Release of Claims. In order to receive any of the
payments and benefits outlined in Section 4(b), 4(c) or 4(e), as the
case may be, the Executive must execute a comprehensive release of
all claims in favor of the Company and its officers, directors,
employees, shareholders, agents and/or representatives.
(g) Cessation of Payments and Benefits. If the Company's BOD in good
faith determines that the Executive breached in any material respect
his obligations under this Agreement or the Nondisclosure Agreement,
the Company may immediately cease payment of all payments and/or
benefits described in this Agreement. This cessation of payments
and/or benefits shall be in addition to, and not as an alternative
to, any other remedies in law or in equity available to the Company,
including the right to seek specific performance or an injunction.
5) Change of Control. In the event of a Change of Control, the Executive's
unvested stock options shall vest immediately and all of the Executive's
stock options shall remain in full force and effect and may be exercised
at any time up to their latest possible date of expiration as set out in
each stock option agreement entered into between the Executive and the
Company and applicable to such options (such option agreements existing as
of the date of this Agreement and the latest possible date of expiration
of the option contained in each such option agreement as of the date of
this Agreement are identified in Exhibit A hereto) notwithstanding any
provision contained in any existing or future stock option agreement
entered into between the Executive and the Company (as such agreements may
be amended from time to time) or in the Company's Amended and Restated
1998 Incentive and Non-Qualified Stock Option Plan (as amended from time
to time) or the Company's 2001 Stock Option and Incentive Plan (as amended
from time to time) that provides for either a lesser period of time within
which to exercise such options or forfeiture of any option granted
thereunder. In the event that any date of expiration contained in any
existing or future stock option agreement entered into between the
Executive and the Company shall be extended to a later date in time, then
the Executive's right to exercise options pursuant to such stock option
agreement shall be extended to that later date in time.
6) Certain Additional Payments by the Company. If any payment or benefit to
which the Executive (or any person on account of the Executive) is
entitled, whether under this Agreement or otherwise (a "Payment")
constitutes a "parachute payment" within the
8
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and as a result thereof the Executive is subject to a tax
under Section 4999 of the Code, or any successor thereto (an "Excise
Tax"), the Company shall pay to the Executive an additional amount, which
is intended to make the Executive whole for payment of such Excise Tax
(the "Gross-Up Amount"). The Gross-Up Amount shall be equal to the amount
of the Excise Tax (including the aggregate amount of any interest,
penalties, fines or additions imposed in connection with the imposition of
such Excise Tax), plus all income, excise and other applicable taxes
imposed on the Executive under the laws of any Federal, state of local
government or taxing authority by reason of the payments required under
this Section 6.
(a) For purposes of determining the Gross-Up Amount, the Executive shall
be deemed to be taxed at the highest marginal rate under all
applicable local, state and federal income tax laws for the year in
which the Gross-Up Amount is paid. The Gross-Up Amount shall be paid
by the Company coincident with the Payment to which the Excise Tax
relates.
(b) All calculations under this Section 6, including whether and when a
Gross-Up Amount is required to be paid and the amount of such
Gross-Up Amount and the assumptions to be utilized in arriving at
such calculations, shall be made by a nationally recognized public
accounting firm as shall be jointly designated by the Executive and
the Company (the "Accounting Firm"). The Accounting Firm shall
provide detailed supporting calculations both to the Company and to
the Executive. All fees and expenses of the Accounting Firm shall be
borne by the Company. The determination of the Accounting Firm shall
be conclusive on the Company and the Executive unless the Internal
Revenue Service, a court of competent jurisdiction or such other duly
empowered governmental body or agency (a "Tax Authority") determines
that the Executive owes a greater or lesser amount of Excise Tax with
respect to any Payment than the amount determined by the Accounting
Firm.
(c) If a Tax Authority makes a claim against the Executive which, if
successful, would require the Company to pay a greater Gross-Up
Amount under this Section 6, the Executive agrees to contest the
claim on request of the Company with counsel jointly chosen by the
Executive and the Company, subject to the following conditions:
(i) The Executive shall notify the Company of any such claim
promptly after becoming aware thereof. In the event that the
Company desires the claim to be contested, it shall promptly
(but in no event more than thirty (30) days after the notice
from the Executive or such shorter time as the Tax Authority
may specify for responding to such claim) request the
Executive to contest the claim.
(ii) If the Company so request that the Executive contest the
claim, the Executive will, at the direction of the Company,
either pay the tax claimed and sue for a refund in the
appropriate court, or contest the claim in the United States
Tax Court or other appropriate court, provided, however, that
any request by the Company for the Executive to pay the tax
bill shall be accompanied by an advance from the Company to
the Executive of funds sufficient to make the requested
payment plus any amounts
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payable under this Section 6 determined as if such advance
were a Gross-Up Amount. The Executive agrees to cooperate in
good faith with the Company in contesting the claim and to
comply with any reasonable request from the Company concerning
the contest of the claim. The Company shall be liable for and
indemnify the Executive against any loss in connection with,
and all costs and expenses, including reasonable attorneys'
fees, which may be incurred as a result of contesting the
claim, and shall provide to the Executive cash advances for
all such costs and expenses reasonably expected to be incurred
by the Executive as a result of contesting the claim.
(d) Should a Tax Authority finally determine that an additional Excise
Tax is owed, then the Company shall pay an additional Gross-Up Amount
to the Executive including any assessment of interest, fines or
penalties in accordance with this Section 6. Should a Tax Authority
finally determine that the Executive is entitled to a refund, the
Executive shall promptly pay to the Company the amount of such
refund.
7) Consideration. In addition to the other benefits provided to the Executive
in this Agreement, the Company shall pay $10,000 to the Executive upon the
execution of this Agreement as consideration for his entering into this
Agreement.
8) Definitions.
For purposes of the Agreement, the following terms shall be defined as set
forth below:
(a) "Cause," which will be determined by the Digi Compensation Committee
in good faith and at its sole discretion, is defined as:
(i) the continued failure or refusal of the Executive
substantially to perform Executive's duties and obligations to
the Company (other than any such failure resulting from the
Executive's Disability) and which is not cured within fifteen
(15) days of notice thereof from the Company;
(ii) gross negligence in the performance of the Executive's duties,
willful misfeasance in connection with the Executive's work,
dishonesty, disloyalty, or a breach of fiduciary duty by the
Executive;
(iii) the commission by the Executive of an act of fraud,
embezzlement, misappropriation of any money or other assets or
property (whether tangible or intangible), or any other
illegal conduct in connection with the Executive's performance
of his duties;
(iv) the Executive's conviction of or pleading of nolo contendere
to a felony;
(v) disregard in any material respect of the rules or policies of
the Company, which, if curable, has not been cured within
fifteen (15) days after notice thereof from the Company;
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(vi) engagement by the Executive in misconduct which is injurious
in any material respect to the Company; or
(vii) the commission of an act which constitutes unfair competition
with the Company or which induces any customer of the Company
to breach a contract with the Company, or the Executive's
material breach of this Agreement, the Nondisclosure
Agreement, or any other written agreement with the Company.
(b) "Change of Control" means: (i) the merger or consolidation of Digi
with or into any other corporation or entity, or the merger or
consolidation of any other corporation or entity into or with Digi,
which results in Digi's or those persons who are shareholders of Digi
from and after the Effective Time holding less than 50% in voting
power of the outstanding capital stock of the surviving corporation;
(ii) any sale or transfer in a single transaction or series of
related transactions of all or substantially all of Digi's assets as
of the transaction date (or the date of the first transaction in a
series of related transactions); (iii) a third "person," including a
"group," becomes the "beneficial owner" (as these terms are defined
in Section 13(d) of the Securities Exchange Act of 1934, as amended)
of shares of Digi having more than 50% of the voting power of the
outstanding capital stock of Digi; or (iv) any transaction or series
of related transactions in which a third "person," including a
"group" (as these terms are defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended), appoints or elects a
majority of the Board of Directors of Digi.
(c) "Disability" means the Executive's inability, for a period of ninety
(90) consecutive days, to perform, with or without a reasonable
accommodation (that does not subject the Company to an undue
hardship), the essential functions of his position by reason of
mental or physical impairment.
(d) "Voluntary Termination" means a termination of employment during the
Term by the Executive on the Executive's own initiative other than a
termination for death or Disability under Section 4(b).
(e) "Good Reason" shall mean, without the Executive's approval,
(i) a material diminution, without Cause (as defined in Section
8(a)), in the material responsibilities of the Executive;
(ii) Executive's permanent relocation to an office more than 50
miles from the Company's Waltham, Massachusetts office;
(iii) failure by the Company to pay any material amount due under
this Agreement within fifteen (15) days after written notice
thereof from the Executive to the Company and the Company's
BOD; or
(iv) any reduction of the Executive's Base Salary or material
benefits provided to the Executive as a whole that comprises a
material reduction in his total annual compensation, unless
such reduction is applicable to other senior executives of the
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Company as part of a concessionary arrangement between those
executives and the Company and/or the Company's BOD.
9) Noncompetition and Nonsolicitation. As a condition of this Agreement, and
in consideration for the payments set forth herein, the Executive agrees
that, during the period of his employment by the Company, Digi and their
subsidiaries and for three (3) years after the termination of his
employment for any reason (except for termination without Cause or
termination for Good Reason), the Executive shall not:
(a) directly or indirectly, individually or on behalf of any other person
or entity, for any person or entity, engage in the marketing or sale
of Competitive Products or Services (defined below) to persons or
entities: (i) whom the Executive has called upon or contacted, or
from whom the Executive has solicited business, as an employee of the
Company; (ii) located in any sales territory that the Executive has
covered or supervised with the Company; or (iii) for whom the
Executive directly or indirectly prepared proposals or sales plans on
behalf of the Company;
(b) directly or indirectly work as an employee, independent contractor,
consultant, partner, or in any other capacity, with any entity
engaged in the business of manufacturing, marketing and/or selling
Competitive Products or Services if that entity is directly or
indirectly owned or controlled, in whole or in part, by any former
employee of the Company whose employment with the Company terminated
at any time during: (i) the six months preceding the Executive
separation of employment with the Company; or (ii) the twelve months
following the Executive separation of employment with the Company;
For purposes of this provision, Competitive Products or Services
means any product or service that is being designed, developed,
manufactured, marketed or sold by anyone other than the Company and
is of the same general type, performs similar functions or is used
for the same purposes as, and, in each case, is directly or
indirectly competitive with, a product or service of the Company
and/or its parent corporation
(c) directly or indirectly, individually or in collaboration with others
solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to
solicit, induce, recruit, encourage or take away employees of the
Company, either for the Executive or any other person or entity;
(d) divert or attempt to divert from the Company any business the Company
had enjoyed or solicited from its customers or potential customers
during the eighteen (18) months prior to the termination of
employment.
(e) If any of the provisions in this Section 9 are overbroad and legally
unenforceable as written, the parties agree that such provisions
shall be narrowed and construed in a manner to render them
enforceable to the maximum extent possible under applicable
12
law. If any of the provisions in this Section 9 are deemed legally
void, the remaining provisions will nevertheless continue in full
force and effect.
(f) The Executive hereby acknowledges that the provisions of this Section
9 are fair and reasonably necessary in order to protect the goodwill
and business interest of the Company, which business interest and
goodwill has been developed over many years at a substantial cost and
expense to the Company, and that the terms and conditions hereof are
not unreasonable as to time, limitation, or purpose. The Executive
also acknowledges that the provisions of this Section 9 will not
prevent him from engaging in a wide range of activities for the
purpose of earning a living.
(g) In the event that the Executive shall violate the provisions of this
Section 9, the Company shall have the legal right to seek an
injunction, or other equitable relief, compelling the Executive to
comply with the terms of this Section 9. In addition, the Company may
seek any and all other legal remedies or relief permitted by law,
including compensatory damages resulting from any breach.
10) Confidential Information.
(a) The Executive agrees at all times during the term of his employment
and thereafter, to hold in strictest confidence, and not to use or
disclose, except for the benefit of the Company, to any person, firm
or corporation without written authorization of the Chief Executive
Officer of the Company, any Confidential Information of the Company.
The Executive understands that "Confidential Information" means any
Company proprietary information, technical data, trade secrets or
know-how, including, but not limited to, research and research plans,
product plans, products, services, customer lists and customers
(including, but not limited to, customers of the Company on whom the
Executive called or with whom the Executive became acquainted during
the term of his employment), markets, software, means of accessing
the company's computer systems or networks, developments, inventions,
processes, formulas, technology, designs, drawings, engineering data,
hardware configuration information, marketing, financial or other
business information obtained by me either directly or indirectly in
writing, orally or by observation. The Executive further understands
that Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available
through no wrongful act of the Executive or of others who were under
confidentiality obligations as to the item or items involved or
improvements or new versions thereof.
(b) The Executive agrees that he will not, during his employment with the
Company, improperly use or disclose any proprietary information or
trade secrets of any former or concurrent employer or other person or
entity and that he will not bring onto the premises of the Company
any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by
such employer, person or entity.
13
(c) The Executive recognizes that the Company has received and in the
future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to
maintain the confidentiality of such information and to use it only
for certain limited purposes. The Executive agrees to hold all such
confidential or proprietary information in the strictest confidence
and not to disclose it to any person, firm or corporation or to use
it except as necessary in carrying out the Executive's work for the
Company consistent with the Company's agreement with such third
party.
11) Indemnification. The Executive shall be entitled to indemnification from
the Company to the fullest extent permitted by the Company's Articles of
Organization, By-laws, shareholder resolutions and/or applicable law.
12) Entire Agreement; Conflicts. This Agreement, the Nondisclosure Agreement,
any stock option agreement between the Executive and the Company, and all
promissory notes between the Executive and the Company, contain the entire
agreement between the Company and the Executive concerning the Executive's
employment by the Company and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether
written or oral, between them with respect to the subject matter herein,
provided, however, that to the extent there is a conflict between the
terms of this Agreement and the Nondisclosure Agreement or the terms of
any stock option agreement or stock option plan, the terms of this
Agreement shall govern. The Executive and the Company (except as may be
required in the course of the Company doing business) agree to keep the
terms of this Agreement strictly confidential. The Executive represents
that he is not bound by any agreement or any other existing or previous
business relationship that conflicts with, or may conflict with, the
performance of his obligations hereunder or prevent the full performance
of his duties and obligations hereunder.
13) Amendments or Waiver. This Agreement cannot be changed, modified or
amended without the consent in writing of both the Executive and the
Company's BOD, with the written consent of the Digi Compensation
Committee. No waiver by either the Company or the Executive at any time of
any breach by the other party of any condition or provision of this
Agreement shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or at any prior or subsequent time. Any waiver must
be in writing and signed by the Executive, an authorized officer of the
Company (other than the Executive), and the Company's BOD, with the
written consent of the Digi Compensation Committee.
14) Severability. In the event that any provision or portion of this
Agreement, the Nondisclosure Agreement or the other agreements executed in
connection with the transactions contemplated hereby for any reason shall
be determined to be invalid or unenforceable for any reason, in whole or
in part, such provisions will be reformed to the extent possible so as to
effectuate the intent of this Agreement. In addition, the remaining
provisions of this Agreement or such other agreements shall be unaffected
thereby and shall be construed, reformed and thus remain in full force and
effect to the fullest extent permitted by law.
15) Survival. The Executive agrees that Sections 4, 5, 6, 8, 9, 10, 11, 12,
13, 14, 15, 16, 17, 18 and 19, any agreements between the Executive and
the Company referenced herein, and
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such other provisions to the extent necessary to the intended preservation
of such rights and obligations, shall survive any termination of this
Agreement.
16) Governing Law and Jurisdiction; Arbitration. This Agreement shall be
governed by and construed and interpreted in accordance with the laws of
the Commonwealth of Massachusetts without reference to principles of
conflict of laws. Any dispute, controversy or claim arising out of or in
connection with this Agreement shall be exclusively subject to arbitration
before the American Arbitration Association ("AAA") in Boston,
Massachusetts, before a single arbitrator in accordance with the AAA's
then current Employment Arbitration Rules. Judgment upon any arbitration
award may be entered in any court of competent jurisdiction. All parties
shall cooperate in the process of arbitration for the purpose of
expediting discovery and completing the arbitration proceedings. Nothing
contained in this Section or elsewhere in this Agreement shall in any way
deprive either party of its right to obtain injunctive or other equitable
relief in a court of competent jurisdiction.
17) Notices; Miscellaneous.
(a) Any notice given to either party shall be in writing and shall be
deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the party concerned, as follows:
If to the Company, to:
**[_______]
**[_______]
**[_______]
Attention: Chief Executive Officer
with a copy to:
Faegre & Benson LLP
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: James E. Nicholson
If to the Executive, to:
c/o Taylor, Ganson & Perrin, LLP
160 Federal Street
Boston, MA 02110
Attention: Charles F. O'Connell
(b) The headings of the Sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
15
(c) This Agreement may be executed in two or more counterparts.
(d) The Company shall make such deductions and withhold such amounts from
the payments and benefits made or provided to the Executive
hereunder, as may be required from time to time by applicable law,
governmental regulation or order.
18) Assignment; Successors. The Company may assign this Agreement. This
Agreement is personal in its nature and therefore the Executive cannot
assign this Agreement without the consent of the Company's BOD. This
Agreement will inure to the benefit of the Company's or the Executive's
successors and assigns, and such successor or assign shall discharge and
perform all the promises, covenants, duties and obligations of the Company
hereunder, and all references herein to "Company" shall refer to such
successor.
19) Withholding.
(a) Any payments made to the Executive pursuant to this Agreement
(including without limitation the acceleration of options pursuant to
this Agreement) shall be subject to all applicable federal, state and
local taxes and/or withholding.
(b) If the Company in its discretion determines that it is obligated to
withhold any tax in connection with any payment under this Agreement,
or in connection with the acceleration of any option pursuant to this
Agreement, the Executive hereby agrees that the Company may withhold
from any amounts paid, or to be paid, under this Agreement, including
the Executive's wages or other remuneration, the appropriate amount
of such tax (as permitted under applicable law). The Executive
further agrees that, if the Company does not withhold an amount from
the Executive's wages or other remuneration (including any
remuneration paid pursuant to this Agreement) sufficient to satisfy
the withholding obligation of the Company, the Executive will make
reimbursement on demand, in cash, for the amount underwithheld.
* * * * *
[Signature page to follow.]
16
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Employment Agreement as of the date first above written as
an instrument under seal.
NETSILICON, INC.
By: /s/ Daniel J. Sullivan
-----------------------------------------
Its: Chief Financial Officer
----------------------------------------
EMPLOYEE
/s/ Cornelius Peterson
---------------------------------------------
Cornelius Peterson, VIII
The undersigned hereby consents to the terms of this Second Amended and Restated
Employment Agreement.
DIGI INTERNATIONAL INC.
By: /s/ Subramanian Krishnan
-------------------------------------------------
Its: Chief Financial Officer
------------------------------------------------
17
Exhibit A
To
Second Amended and Restated Employment Agreement
Between
NetSilicon, Inc. and Cornelius Peterson, VIII
Stock Option Agreements between NetSilicon, Inc. and Cornelius Peterson, VIII
Grant ID Agreement Date Expiration Date
- -------- -------------- ---------------
0078 September 15, 1999 September 15, 2009
0079 September 15, 1999 September 15, 2009
0320 May 11, 2000 May 11, 2010
0321 May 11, 2000 May 11, 2010
0524 December 11, 2000 December 11, 2010
0601 July 10, 2001 July 10, 2011
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