Employment Agreement - Castelle and Donald L. Rich
EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into on the 12th day of November, 1998, by and between DONALD L. RICH ("Executive") and CASTELLE, a California corporation (the "Company"). WHEREAS, the Company desires to employ Executive to provide personal services to the Company, and wishes to provide Executive with certain compensation and benefits in return for his services; and WHEREAS, Executive wishes to be employed by the Company and provide personal services to the Company in return for certain compensation and benefits; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows: 1. EMPLOYMENT BY THE COMPANY. 1.1 The effective date of this Agreement shall be November 10, 1998. 1.2 Subject to terms set forth herein, the Company agrees to employ Executive in the position of Chief Executive Officer and Executive hereby accepts such employment effective as of November 10, 1998 (the "Employment Date"). During the term of his employment with the Company, Executive will devote his best efforts and substantially all of his business time and attention (except for vacation periods as set forth herein and reasonable periods of illness or other incapacities permitted by the Company's general employment policies or as otherwise set forth in this Agreement) to the business of the Company. 1.3 Executive shall serve in an executive capacity and shall perform such duties as are customarily associated the position of Chief Executive Officer and such other duties as are assigned to Executive by the Company's Board of Directors (the "Board"). Executive will report to the Board. Executive shall be appointed to the Board and the Company will use its best efforts to elect and re-elect Executive to the Board. 1.4 The employment relationship between the parties shall also be governed by the general employment policies and practices of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company's general employment policies or practices, this Agreement shall control. 2. COMPENSATION. 2.1 Salary. Executive shall receive for services to be rendered hereunder an annualized base salary of $200,000, payable on a biweekly basis. 1. <PAGE> 2.2 Bonus. Executive will be eligible to earn a bonus, in an amount up to $100,000 if performance criteria to be developed by the Compensation Committee of the Board (the "Corporation Committee") are met. These performance criteria will be established by the Compensation Committee prior to the end of the fourth quarter of the previous year. In the event Executive exceeds the performance criteria established by the Compensation Committee in a given year, Executive will be eligible to earn a bonus in excess of $100,000. 2.3 Standard Company Benefits. Executive shall be entitled to all rights and benefits for which he is eligible under the terms and conditions of the standard Company benefits and compensation practices which may be in effect from time to time and provided by the Company to its executive employees generally. 2.4 Compensatory Stock Awards. On November 12, 1998, the Board shall grant Executive an option to acquire three hundred thousand (300,000) shares of the common stock of the Company. Such options shall be granted under the Company's 1988 Incentive Stock Plan (the "Option Plan"). The exercise price per share of these options will be equal to one hundred percent (100%) of the fair market value of the Company's common stock, as determined under the Option Plan on the date of grant. Subject to Executive's continued employment by the Company, one-sixth (1/6) of the options shall vest on the date that is six (6) months after the date on which Executive commences employment and an additional one-thirty-sixth (1/36) of the options shall vest each calendar month for thirty (30) months thereafter for each subsequent month of service Executive completes with the Company. The vesting of such options may be accelerated upon a termination of Executive's employment with the Company pursuant to the provisions of the Executive Severance and Transition Benefits Agreement that Executive will enter into with the Company. 2.5 Executive Severance And Transition Benefits Agreement. Effective as of the Employment Date, Executive will be eligible to enter into an Executive Severance and Transition Benefits Agreement with the Company in the form attached hereto as Exhibit A (the "Severance Agreement"). The Severance Agreement will provide the sole benefits that Executive will receive upon Executive's termination of employment with the Company for any reason. 3. PROPRIETARY INFORMATION OBLIGATIONS. 3.1 Agreement. Executive agrees to execute and abide by the Proprietary Information and Inventions Agreement attached hereto as Exhibit B. 3.2 Remedies. Executive's duties under the Proprietary Information and Inventions Agreement shall survive termination of his employment with the Company. Executive acknowledges that a remedy at law for any breach or threatened breach by him of the provisions of the Proprietary Information and Inventions Agreement would be inadequate, and he therefore agrees that the Company shall be entitled to injunctive relief in case of any such breach or threatened breach. 2. <PAGE> 4. OUTSIDE ACTIVITIES. 4.1 Except with the prior written consent of the Board, Executive will not during the term of this Agreement undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor. Executive may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the performance of his duties hereunder. 4.2 During the term of his employment by the Company, except on behalf of the Company, Executive will not directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever which were known by him to compete directly with the Company, throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, he may own, as a passive investor, securities of any competitor corporation, so long as his direct holdings in any one such corporation shall not in the aggregate constitute more than 1% of the voting stock of such corporation. 5. TERMINATION OF EMPLOYMENT. Both the Company and Executive shall have the right to terminate Executive's employment with the Company at any time, with or without cause, and without prior notice. If Executive's employment with the Company is terminated, Executive will be eligible to receive severance benefits to the extent provided as set forth in the Severance Agreement. 6. NONINTERFERENCE. While employed by the Company, and for one (1) year immediately following the Termination Date, Executive agrees not to interfere with the business of the Company by soliciting, attempting to solicit, inducing, or otherwise causing any employee of the Company to terminate his or her employment in order to become an employee, consultant or independent contractor to or for any competitor of the Company. 7. GENERAL PROVISIONS. 7.1 Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by telex) or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at his address as listed on the Company payroll. 7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein. 3. <PAGE> 7.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement. 7.4 Complete Agreement. This Agreement and its Exhibit A and Exhibit B constitute the entire agreement between Executive and the Company and are the complete, final, and exclusive embodiment of their agreement with regard to this subject matter. They are entered into without reliance on any promise or representation other than those expressly contained herein or therein, and they cannot be modified or amended except in a writing signed by an officer of the Company. 7.5 Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement. 7.6 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof. 7.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably. 7.8 Attorneys' Fees. If either party hereto brings any action to enforce his or its rights hereunder, each party in any such action shall be responsible for its own attorneys' fees and costs incurred in connection with such action. 4. <PAGE> 7.9 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of California. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. CASTELLE By:/S/ Jerome Burke Jerome Burke President Date: 12th November, 1998 Accepted and agreed this 12th day of November, 1998 /s/ Donald L. Rich DONALD L. RICH 5.