<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 29, 1996
or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number: 0-25630
U.S. ROBOTICS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3994412
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8100 NORTH MCCORMICK BOULEVARD, SKOKIE, ILLINOIS 60076-2999
(Address of principal executive offices) (Zip Code)
(847) 982-5010
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK, $.01 PAR VALUE PER
SHARE, OUTSTANDING AS OF FEBRUARY 6, 1997 WAS 89,166,485.
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statement of Earnings . . . . . . . . . 3
Condensed Consolidated Balance Sheet . . . . . . . . . . . . . 4
Condensed Consolidated Statement of Stockholders' Equity . . . 5
Condensed Consolidated Statement of Cash Flows . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
U.S. ROBOTICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share and share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------
December 29, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Net sales $645,412 $364,812
Cost of goods sold 369,414 212,196
-------- --------
Gross profit 275,998 152,616
Operating expenses
Selling and marketing 100,750 47,790
General and administrative 30,018 17,625
Research and development 34,230 23,453
-------- --------
Total operating expenses 164,998 88,868
Operating profit 111,000 63,748
Interest income 192 3,271
Interest expense 1,779 1,220
Other income (expense) 331 (218)
-------- --------
Earnings before income taxes 109,744 65,581
Income tax expense 40,715 23,936
-------- --------
Net earnings $ 69,029 $ 41,645
======== ========
Net earnings per share $ 0.72 $ 0.45
======== ========
Number of shares used in per share
calculation 96,327 92,931
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
U.S. ROBOTICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
December 29, September 29,
1996 1996
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 18,726 $ 16,814
Accounts receivable, net 631,185 490,040
Inventories 152,164 185,855
Deferred income taxes 43,077 45,493
Prepaid expenses and other current assets 12,018 12,407
---------- ----------
Total current assets 857,170 750,609
PROPERTY, PLANT AND EQUIPMENT, NET 311,674 276,591
OTHER ASSETS 47,505 40,083
---------- ----------
$1,216,349 $1,067,283
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations $ 12,303 $ 12,174
Short-term obligations 50,000 32,500
Accounts payable 149,170 130,959
Accrued liabilities 143,336 138,747
Income taxes payable 32,664 19,324
---------- ----------
Total current liabilities 387,473 333,704
LONG-TERM OBLIGATIONS 54,922 54,044
DEFERRED INCOME TAXES 8,641 7,665
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value; 10,000,000 shares
authorized; issuable in series; none issued - -
Common stock - $.01 par value; 250,000,000 shares
authorized; 88,940,525 shares and 88,171,420 shares
outstanding at December 29, 1996 and September 29,
1996, respectively 889 882
Additional contributed capital 381,639 356,265
Retained earnings 381,521 312,492
---------- ----------
764,049 669,639
Cumulative translation adjustment and other 1,264 2,231
---------- ----------
Total stockholders' equity 765,313 671,870
---------- ----------
$1,216,349 $1,067,283
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
U.S. ROBOTICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Additional Translation Total
Common Contributed Retained Adjustment Stockholders'
Stock Capital Earnings and Other Equity
------ ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 29,
1996 $882 $356,265 $312,492 $ 2,231 $671,870
Net earnings for the
period - - 69,029 - 69,029
Issuances under stock
option and purchase
plans 7 10,294 - - 10,301
Tax benefits relating
to the exercise of
stock options - 15,080 - - 15,080
Foreign currency
translation
adjustments and
other - - - (967) (967)
---- -------- -------- ------- -------
BALANCE AT DECEMBER 29,
1996 $889 $381,639 $381,521 $ 1,264 $765,313
==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
U.S. ROBOTICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 69,029 $ 41,645
Changes in assets and liabilities (80,526) (44,061)
Other adjustments to reconcile net
earnings to net cash from operating
activities 27,890 1,371
-------- ---------
Net cash provided (used) by
operating activities 16,393 (1,045)
Cash flows from investing activities:
Capital expenditures, net (47,526) (28,885)
Purchases of marketable securities - (97,701)
Sales and maturities of marketable
securities - 62,528
Acquisitions of subsidiaries (6,687) -
Other, net (941) 58
-------- ---------
Net cash used by investing activities (55,154) (64,000)
Cash flows from financing activities:
Borrowings under short-term obligations 17,500 -
Issuance of common stock including tax
benefits relating to the exercise of
stock options 25,381 14,114
Other, net (196) (317)
-------- ---------
Net cash provided by financing
activities 42,685 13,797
Effect of exchange rate changes (2,012) (602)
-------- ---------
Net increase(decrease)in cash and cash
equivalents 1,912 (51,850)
Cash and cash equivalents at beginning
of period 16,814 136,803
-------- ---------
Cash and cash equivalents at end of period $ 18,726 $ 84,953
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
U.S. ROBOTICS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of U.S. Robotics Corporation and its subsidiaries
(the "Company"). Such statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
pursuant to the regulations of the Securities and Exchange Commission;
accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation (consisting of normal recurring accruals) have been included. The
results of operations for the quarter ended December 29, 1996 are not
necessarily indicative of the results for the fiscal year ending September 28,
1997. The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 29, 1996.
Certain fiscal year 1996 amounts have been reclassified to conform to the
fiscal year 1997 basis of presentation.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined by the first-in, first-out method. The elements of cost include
materials, direct labor, factory overhead and outside processing charges. The
components of inventories were as follows:
December 29, September 29,
1996 1996
------------ -------------
(In thousands)
Finished products $ 96,468 $116,802
Work-in-process 15,130 12,654
Raw materials 40,566 56,399
-------- --------
$152,164 $185,855
======== ========
NOTE C - LITIGATION
The Company is a party to lawsuits in the normal course of its business.
The Company and its counsel believe that the Company has meritorious defenses
in lawsuits in which the Company is a defendant. The Company does not believe
the outcome of these cases will have a material effect on its financial
position or results of operations.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
This information should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the fiscal year ended September 29,
1996.
RESULTS OF OPERATIONS
The following table sets forth, for the first quarter of fiscal year 1997
and the first quarter of fiscal year 1996, respectively, the percentage of net
sales and the percentage change represented by items reflected in the Company's
Condensed Consolidated Statement of Earnings.
<TABLE>
<CAPTION>
Percentage of Percentage
Net Sales Change
---------------- ----------
First Quarter 1996 to
1997 1996 1997
------- ------- ----------
<S> <C> <C> <C>
Net sales 100.0 100.0 76.9
Cost of goods sold 57.2 58.2 74.1
----- -----
Gross profit 42.8 41.8 80.8
Operating expenses
Selling and marketing 15.6 13.1 110.8
General and administrative 4.7 4.8 70.3
Research and development 5.3 6.4 46.0
----- -----
Total operating expenses 25.6 24.3 85.7
Operating profit 17.2 17.5 74.1
Interest income 0.0 0.9 (94.1)
Interest expense 0.3 0.3 45.8
Other income (expense) 0.1 (0.1) 251.8
----- -----
Earnings before income taxes 17.0 18.0 67.3
Income tax expense 6.3 6.6 70.1
----- -----
Net earnings 10.7 11.4 65.8
===== =====
</TABLE>
NET EARNINGS
Net earnings for the first quarter of 1997 were $69.0 million, an increase
of 65.8% from the $41.6 million recorded for the corresponding quarter of 1996.
Net earnings per share for the quarter were $.72, based on 96.3 million
weighted average shares outstanding, compared to $.45 on 92.9 million weighted
average shares outstanding for the first quarter of the prior year.
8
<PAGE> 9
Factors contributing to the significant improvements in net earnings and
net earnings per share are discussed below.
NET SALES
Net Sales for the first quarter of 1997 were $645.4 million, an increase
of 76.9% over the $364.8 million recorded for the corresponding quarter of
1996. The revenue growth was driven primarily by higher overall worldwide
market demand for information access devices and increased demand for all
product lines in all of the markets currently being served. Increased revenues
from the sale of PC-related products, which include desktop modems, PC card
modems and the Pilot connected organizer, were the primary reason for the
increase in total revenues from the first quarter of 1996.
Unit sales of the Company's PC-related products in the first quarter of
1997 were up 80% as compared to the corresponding quarter of 1996, while
overall average selling prices were essentially unchanged. During the first
quarter of 1997, revenues from the sale of modem products were attributable
primarily to 33.6 Kbps (Kilobits per second) and 28.8 Kbps products. During
the corresponding period of 1996, a significant portion of total revenues from
the sale of modem products was attributable to the sale of 14.4 Kbps products.
International sales for the first quarter of 1997 increased by 95.1% to
$193.5 million or 30% of consolidated net sales as compared to $99.2 million or
27.2% of consolidated net sales for the corresponding quarter of 1996. The
increase in international sales resulted from higher revenues in both the
systems and PC-related product categories. Also, international sales of
systems products as a percentage of total sales of systems products increased
significantly during the first quarter of 1997 from the comparable period in
1996. These increases were primarily the result of an expansion in the size of
the international sales force. The Company has significantly expanded its
presence in international markets in response to continued growth in market
demand for information access products, and has established a goal of
increasing the international portion of its business over time. Consistent with
that goal, the Company acquired distributors in Australia, Japan and Sweden
during the first quarter of 1997 in order to broaden its local sales presence
in these geographic areas.
International sales are denominated in U.S. dollars and several foreign
currencies. The Company has no significant foreign currency contracts or other
investments in derivative instruments.
GROSS PROFIT
Gross profit was $276.0 or 42.8% of net sales in the first quarter of
1997, compared to $152.6 million or 41.8% of net sales for the corresponding
quarter of 1996. The increase in gross profit dollar contribution reflected
significantly higher unit sales volumes. The increase in gross profit margin
was due primarily to reductions in the manufactured cost of the Company's
products, partially offset by changes in the mix of products sold in each of
the periods.
9
<PAGE> 10
OPERATING EXPENSES
Total operating expenses for the first quarter of 1997 were $165.0 million
or 25.6% of net sales, compared to $88.9 million or 24.3% of sales for the
corresponding quarter of 1996. The increase was related primarily to increased
selling and marketing costs.
Selling and marketing expenses were $100.8 million or 15.6% of net sales
for the first quarter of 1997, compared to $47.8 million or 13.1% of net sales
for the corresponding quarter of 1996. The dollar increase in these expenses
over the prior year reflected additional spending for personnel and programs
consistent with the Company's expanded level of business activity. The
increase in selling and marketing expense as a percentage of net sales in part
reflects continuing investments to build the Company's sales force with
particular emphasis on expanding sales of network systems products worldwide.
The worldwide sales force headcount increased by 64% over the same prior year
period. The increased spending level in the first quarter of 1997 also
reflected higher spending for programs and promotions needed to generate and
support continuing growth in net sales, as well as substantial marketing
expenditures made in connection with the introduction of the Company's new x2
(56Kbps) technology.
General and administrative expenses for the first quarter of 1997 were
$30.0 million or 4.7% of net sales, compared to $17.6 million or 4.8% of net
sales for the corresponding quarter of 1996. The dollar increases over the
prior year were attributable primarily to expenses associated with additional
administrative staff, systems and outside services necessary to support the
Company's expanded level of business activity. General and administrative
expenses decreased as a percentage of net sales due to the significant growth
in sales and the semi-fixed nature of some of these expenses.
Research and development expenses for the first quarter of 1997 were $34.2
million or 5.3% of net sales, compared to $23.5 million or 6.4% of net sales
for the corresponding quarter of 1996. The dollar increases resulted from
increases in the size of the Company's engineering staff and the related costs
to support its continued commitment to new product and technology development.
The Company believes that continued investment in research and development
activities is critical to future sales growth and technological
competitiveness.
INCOME TAX EXPENSE
The provisions for income taxes were $40.7 million in the first quarter of
1997 and $23.9 million for the corresponding quarter of 1996, resulting in
effective tax rates for those quarters of 37.1% and 36.5%, respectively.
OTHER
To date, inflation has not had a material impact on the Company's results
of operations.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
December 29, September 29,
1996 1996
------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 18.7 $ 16.8
Working capital $469.7 $416.9
Long-term obligations $ 54.9 $ 54.0
Availability under committed and uncommitted
lines of credit $340.0 $357.5
</TABLE>
The Company generated $96.9 million in cash flows from operating
activities, excluding changes in assets and liabilities, during the first
quarter of 1997 compared to $43.0 million for the corresponding quarter of
1996. The improvement was due primarily to the $280.6 million increase in net
sales and the resultant higher net earnings. The current ratio at December 29,
1996 was approximately 2.2-to-1, unchanged from the September 29, 1996 level.
Working capital was $469.7 million at December 29, 1996 compared to $416.9
at September 29, 1996. Accounts receivable, net of allowances, were $631.2
million at the end of the first quarter of 1997 as compared to $490.0 million
at the end of the fourth quarter of 1996. The increase was attributable in part
to the overall growth in net sales and, to some extent, a shift in the customer
base resulting in a slightly longer average collection period. The shift is
partially related to the increase in international shipments. Another
important factor contributing to the increase in accounts receivable was the
timing of shipments during the quarter; on a comparative basis, a greater
portion of the sales occurred during the last month of the quarter.
Receivables are being collected in the normal course of business based on
specified trade terms. Inventories were $152.2 million at the end of the first
quarter of 1997 as compared to $185.9 million at the end of the fourth quarter
of 1996. Inventory turns increased 28%, from 6.8 times during the fourth
quarter of 1996 to 8.7 times during the first quarter of 1997. Accounts
payable and accrued liabilities increased 8.5% during the first quarter of 1997
to $292.5 million reflecting the Company's expanded level of activity. Short
term borrowings totaled $50.0 million, up $17.5 million from the previous
quarter.
Cash used by investing activities was $55.2 million for the first quarter
of 1997 compared to $64.0 million during the comparable quarter of 1996. The
majority of the current year expenditures was related to the continued
development and outfitting of the Mt. Prospect, Illinois facility, as well as
for additional manufacturing equipment and office furniture and fixtures.
Expenditures also were made in connection with acquisitions of distributors in
Australia, Japan and Sweden designed to broaden the Company's local sales
presence in these geographic areas.
Cash provided by financing activities totaled $42.7 million during the
first quarter of 1997 compared to $13.8 for the comparable quarter of 1996. In
the 1997 period, proceeds from the exercise of stock options by employees and
issuances of common stock under the Company's employee stock
11
<PAGE> 12
purchase plan totaled $10.3 million. Also, the Company realized tax
benefits of $15.1 million in the same period in connection with the exercise of
stock options by employees. The Company had $50.0 million in short term
borrowings outstanding under its $90.0 million of uncommitted lines of credit at
the end of the first quarter of 1997. These borrowings were used to help finance
the investments in working capital, capital expenditures and acquisitions
mentioned previously. There were no borrowings outstanding under the $300
million revolving Multicurrency Credit Agreement at the end of the first quarter
of 1997.
The Company expects to continue to make significant investments in the
future to support its overall growth. Currently, it is anticipated that
ongoing operations will be financed primarily from internally generated funds.
However, as indicated in the Company's most recent Annual Report on Form 10-K,
there are several factors that could affect the Company's ability to generate
cash from operations in the future, including general economic conditions,
market competition and changes in working capital requirements. The Company
believes its anticipated cash flows from operations and access to debt and
equity markets will permit the financing of its business requirements in an
orderly manner for the foreseeable future.
FUTURE OPERATING RESULTS
The preceding paragraph and the following discussion include
forward-looking statements regarding the Company's future financial position
and results of operations. Actual financial position and results of operations
may differ materially from these statements.
Demand in the first quarter continued to be strong for the Company's
expanding portfolio of information access products, including Total Control
Enterprise Network Hubs, Sportster modems, Megahertz PC cards, OEM modem
products and Pilot connected organizers. The Company expects demand for all of
its product lines to continue to grow substantially during the remainder of the
1997 fiscal year as worldwide requirements for highly integrated,
cost-effective, end-to-end information access solutions increase. In addition,
the coming availability of the Company's x2 (56 Kbps) technology is expected to
have a widespread impact on Internet users by enabling them to have a more
satisfying on-line experience.
The Company does not expect revenue growth to occur ratably over the 1997
fiscal year; instead, the Company expects that the major impact of the x2 (56
Kbps) product introduction on revenues and earnings will occur during the
second half of the year. Revenue growth in the second quarter of 1997 will
depend to a large extent on the timing of the Company's Internet and on-line
service provider customers making x2 service available and the resultant
consumer and corporate demand for x2 enabled products.
Gross margin during the first quarter of 1997 increased 1.0% from the
comparable period in 1996; however, the Company expects gross margins for 1997
as a whole to remain consistent with the 1996 fiscal year. The Company expects
to reduce the costs of its products through design and engineering improvements
and increases in efficiency of the manufacturing process. The
12
<PAGE> 13
Company also expects to remain highly competitive in the pricing of all
of its products as it seeks to continue to expand market share.
The Company expects to grow international operations over the next several
years and estimates that approximately half of its total sales ultimately will
be derived from international operations. Total revenues attributable to sales
of systems products are expected to continue to increase over time, with
individual quarterly results fluctuating as a result of the ordering patterns
of the Company's major systems customers. The Company expects to continue
expanding its sales force, marketing efforts, and engineering and back office
support capabilities since these are instrumental to the Company's future
success. The Company intends to position itself to take advantage of
opportunities in the markets it serves by accelerating investments in new
technologies such as x2 (56 Kbps), wireless, switching and broadband access,
including xDSL and cable. The Company believes that continued investment in
research and development activities is critical to future sales growth and
technological competitiveness.
The Company's ability to achieve its revenue and profitability objectives
in fiscal 1997 will depend on many factors beyond the Company's control. These
include the timing and market acceptance of x2 and other new products and
features announced and introduced by the Company and its competitors, and the
extent to which the Company is successful in implementing its ongoing strategy
of continuously improving the performance/cost characteristics of its products
through improved designs and manufacturing efficiencies. Other factors include
rapid changes in technologies and standards relating to information access and
telecommunications.
The foregoing forward-looking statements involve a number of risks and
uncertainties. In addition to the factors discussed above, among the other
factors that could cause actual results to differ materially are those listed
in the Company's most recent Annual Report on Form 10-K and included from time
to time in other documents filed by the Company with the Securities and
Exchange Commission.
Because of the foregoing uncertainties affecting the Company's future
operating results, past performance should not be considered to be a reliable
indicator of future performance. The use of historical trends to anticipate
results or trends in future periods may be inappropriate. In addition, the
Company's participation in a highly dynamic industry often results in
significant volatility in the price of the Company's common stock.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit Description
-------------- --------------
10.1 Employment Agreement between U.S. Robotics Corporation's
subsidiary, U.S. Robotics Access Corp., and Casey
Cowell, dated January 1, 1997.
10.2 Employment Agreement between U.S. Robotics Access Corp.
and John McCartney, dated January 1, 1997.
10.3 Employment Agreement between U.S. Robotics Access Corp.
and Jonathan N. Zakin, dated January 1, 1997.
10.4 Form of Employment Agreement between U.S. Robotics
Access Corp. and each of Ross Manire and Michael Seedman.
10.5 Amendment #3 to Employee Stock Purchase Plan of U.S.
Robotics Corporation, dated November 14, 1996 and
effective as of January 1, 1997.
11 Computation of Net Earnings Per Share
27 Financial Data Schedule (filed only electronically with
the Securities and Exchange Commission)
(b) Since the end of its most recent fiscal year on September 29, 1996,
U.S. Robotics Corporation has filed the following reports on Form 8-K:
Date of Report Item Reported
-------------- -----------------------------------
November 4, 1996 U.S. Robotics Corporation announced its
results of operations for its fiscal year ended
September 29, 1996.
January 21, 1997 U.S. Robotics Corporation announced its
results of operations for its fiscal first quarter
ended December 29, 1996.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. ROBOTICS CORPORATION
(Registrant)
DATE: February 10, 1997 /s/ Mark Remissong
------------------------
Mark Remissong,
Vice President and Chief Financial Officer
(Principal Financial Officer)
DATE: February 10, 1997 /s/ Steven T. Campbell
------------------------
Steven T. Campbell,
Vice President and Controller
(Principal Accounting Officer)
15
<PAGE> 1
EXHIBIT 10.1
U.S. ROBOTICS ACCESS CORP.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made effective as of the 1st
day of January, 1997, by and between U.S. Robotics Access Corp., a Delaware
corporation (the "Company"), and CASEY COWELL ("Mr. Cowell").
RECITALS
WHEREAS, the Company is engaged in the business of designing,
manufacturing and selling data communications equipment, including modems, and
other high technology products; and
WHEREAS, Mr. Cowell has acknowledged knowledge, skill and experience; and
WHEREAS, the Company desires to obtain the benefit of Mr. Cowell's
knowledge, skill, and experience and, therefore, is willing to engage the
services of Mr. Cowell upon the terms set forth in this Agreement; and
WHEREAS, Mr. Cowell is willing to render services to the Company and its
affiliates on the terms set forth herein;
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Mr. Cowell agree as follows:
1. EMPLOYMENT.
(a) EMPLOYMENT. The Company hereby employs Mr. Cowell and Mr. Cowell
hereby accepts employment by the Company, subject to the terms set forth in
this Agreement.
(b) EMPLOYMENT TERM. The term of Mr. Cowell's employment under this
Agreement ("Employment Term") shall begin on January 1, 1997, and shall
continue for a period of three (3) consecutive calendar years, unless
terminated sooner in accordance with this Agreement. On each January 1 during
the Employment Term, the Employment Term shall be automatically extended by an
additional one-year period unless a notice of non-extension is given by one
party to the other at least sixty (60) days prior to January 1.
(c) TITLE AND DUTIES. Mr. Cowell's title shall be Chairman of the Board
and Chief Executive Officer of the Company's parent corporation, U.S. Robotics
Corporation (the "Parent Corporation"), and he shall possess such powers and
duties normally incident to such position, as provided in the By-laws and in
accordance with Delaware General Corporation Law. Mr. Cowell's title and
duties may be changed at the discretion of the Board of Directors of the Parent
Corporation. During the Employment Term, Mr. Cowell shall faithfully discharge
his duties and responsibilities in a diligent manner, devoting substantially
all of his working time to the affairs of the Parent Corporation and its
subsidiaries (collectively, "U.S. Robotics").
2. COMPENSATION AND RELATED MATTERS.
(a) SALARY. For services rendered by Mr. Cowell to U.S. Robotics and upon
the condition that Mr. Cowell fully and faithfully perform all of his duties
and obligations owed during the Employment Term under this Agreement, the
Company shall pay Mr. Cowell an annual base salary equal to $950,000, payable
in twenty-six equal bi-weekly installments per year less income tax
withholdings and other normal employee deductions. This base salary set forth
herein shall be reviewed annually by the Stock Option and Compensation
Committee (the
<PAGE> 2
"Stock Option and Compensation Committee") of the Board of Directors of the
Parent Corporation at the end of each fiscal year of the Company beginning with
the fiscal year ending on or about September 30, 1997 (hereafter "Fiscal
Year"), or at such other times as deemed appropriate by the Stock Option and
Compensation Committee, and may, at the sole discretion of the Stock Option and
Compensation Committee, be increased by an amount which it deems appropriate.
(b) BONUSES. Mr. Cowell shall be eligible to receive with respect to each
Fiscal Year during the Employment Term quarterly and annual bonuses under the
Parent Corporation's Senior Executive Performance Bonus Plan or a comparable
bonus program which would afford him the opportunity to earn a substantially
equivalent bonus, subject to the terms, conditions, and restrictions as set
forth in such bonus program. The minimum bonus target set for each Fiscal
Year shall not be less than an amount equal to the sum of the amounts of the
Threshold Bonus, the maximum Incremental Threshold Bonus and the Base Target
Bonus for him for the 1997 Fiscal Year as heretofore determined by the Stock
Option and Compensation Committee.
(c) STOCK OPTION PLAN. Mr. Cowell shall be entitled to receive such
options to purchase the common stock of the Parent Corporation as shall be
granted by the Stock Option and Compensation Committee pursuant to the Parent
Corporation's Executive Officers and Directors Stock Option Plan.
(d) FRINGE BENEFITS. During the Employment Term, Mr. Cowell shall be
eligible to receive reasonable amounts of paid, noncumulative vacation per
year, to be taken at a time or times reasonably agreeable to both Mr. Cowell
and the Company, and shall be eligible to participate in and receive coverage
and benefits under all group insurance, pension, profit sharing, bonus, stock
option, stock ownership and other employee benefit plans, programs and
arrangements of U.S. Robotics which are now or hereafter adopted by U.S.
Robotics for the benefit of its senior executive employees, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plans, programs and arrangements. U. S. Robotics shall not make any changes in
such plans, programs, and arrangements which would adversely affect Mr.
Cowell's (or, if Section 3 herein is applicable, his spouse's or dependents')
rights or benefits thereunder, unless such change occurs pursuant to a plan,
program or arrangement applicable to all senior executive employees of the
Parent Corporation and does not result in a proportionately greater reduction
in the rights of or benefits to Mr. Cowell as compared with any other senior
executive employee of the Parent Corporation. The Company shall also provide
Mr. Cowell with certain perquisites, payable at the Company's expense, which
are offered to other senior executive employees and which are reasonable,
necessary and in the best interests of U.S. Robotics.
(e) AUTOMOBILE ALLOWANCE. During the Employment Term, the Company shall
pay to Mr. Cowell a monthly automobile allowance in the amount of $1,250, which
amount may be paid in periodic installments, not less frequently than monthly.
Such allowance may be reviewed by the Stock Option and Compensation Committee
at the end of each Fiscal Year, or at such other times as deemed appropriate by
the Stock Option and Compensation Committee, and may, at the sole discretion of
the Stock Option and Compensation Committee, be increased by an amount which it
deems appropriate. If such allowance is increased by the Stock Option and
Compensation Committee, it shall not be decreased thereafter during the
Employment Term.
(f) BUSINESS EXPENSES. The Company shall reimburse Mr. Cowell for the
reasonable and necessary business expenses incurred by Mr. Cowell in connection
with the performance of his duties and obligations as set forth herein during
the Employment Term. Such expenses shall include, but are not limited to,
cellular telephone expenses and all expenses of travel and living expenses
while away from home on business or at the request and in the service of the
Company, provided that such expenses are properly incurred and accounted for in
accordance with the applicable policies and procedures established by the
Company. Reimbursement shall be made upon the presentation by Mr. Cowell to
the Company of reasonably detailed statements of such expenses.
(g) EFFECT OF SALARY AND OTHER BENEFITS. Salary payments pursuant to
Subsection (a) of this Section 2 shall not be deemed exclusive and shall not
prevent Mr. Cowell from participating in any other compensation or benefit
plan, program or arrangement of U.S. Robotics as provided in this Section 2.
Such salary payments (including any increased salary payments) shall not in any
way limit or reduce any other obligation of the Company pursuant to this
Agreement, and no other compensation, benefit or payment hereunder shall in any
way limit or
2
<PAGE> 3
reduce the obligation of the Company to pay Mr. Cowell's salary pursuant to
Subsection (a) of this Section 2. At the same time, nothing paid to Mr. Cowell
under any benefit plan, program, or arrangement under this Section 2, which is
presently in effect or made available in the future, shall be deemed to be in
lieu of the salary payable to Mr. Cowell pursuant to Subsection (a) of this
Section 2.
(h) PRORATION OF COMPENSATION. Any compensation payable to Mr. Cowell
under this Section 2, in respect of any Fiscal Year during which the Employment
Term terminates prior to the last day of such Fiscal Year shall, unless
otherwise provided in the applicable plan, program or arrangement, be prorated
in accordance with the number of days in such Fiscal Year during which he is so
employed.
3. BENEFITS FOLLOWING EMPLOYMENT TERM OR TERMINATION. For a period of
three (3) years following the Date of Termination of the Employment Term, other
than as provided in Subsection (a) (cause) of Section 5 herein, the Company
shall permit, at the Company's expense, Mr. Cowell, his spouse and dependents,
as applicable (the "Benefit Participants"), to participate in all group medical
and health insurance plans and employee benefit plans (including fringe
benefits), programs, and arrangements now or hereafter made available to the
senior executive employees of the Parent Corporation (the "Plans") (including
but not limited to such Plans in which Mr. Cowell was entitled to participate
immediately prior to the Date of Termination), in the same manner as provided
to its other senior executive employees; provided, however, that this Section 3
shall not apply in the event that (i) U.S. Robotics shall hereafter terminate
the applicable Plan, or (ii) the participation of the Benefit Participants in
such Plan is prohibited by law or, if applicable, would disqualify such Plan as
a tax qualified plan pursuant to the Internal Revenue Code of 1986, as amended,
or any successor thereto (the "Code"), or (iii) the participation of the
Benefit Participants violates the general terms and provisions of such
applicable Plan. In the event that any of the Benefit Participants'
participation in such Plans is prohibited by law or, if applicable, would
disqualify the Plan as a tax qualified plan, the Company shall permit the
Benefit Participants to acquire substantially comparable coverage or benefits,
at the Company's expense, from a source of Mr. Cowell's or his spouse's
choosing, notwithstanding the fact that such coverage or benefit will result in
a higher cost than if provided under a U.S. Robotics Plan. However, in no
event will the Benefit Participants receive from the Company the coverage and
benefits contemplated by this Section 3 if the Benefit Participants receive
such coverage and benefits from any other source.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) COMPENSATION UPON TERMINATION FOR CAUSE. If the Employment Term shall
be terminated "for cause," as provided in Subsection (a) of Section 5 herein,
the Company shall have no further liability under this Agreement except to pay
Mr. Cowell (i) the value of any accrued salary or other compensation due to Mr.
Cowell pursuant to Section 2 herein (including any earned but unpaid bonus
payment or prorata share of such earned bonus payment, but excluding deferred
bonus payments based upon annual Fiscal Year performance), upon the date of
delivery of Notice of Termination to Mr. Cowell, at the rate in effect at the
time such Notice of Termination is delivered, and (ii) any benefits payable
under all employee benefit plans, programs and arrangements of U.S. Robotics in
which Mr. Cowell is a participant on the date of delivery of Notice of
Termination.
(b) COMPENSATION UPON DEATH. If the Employment Term is terminated by Mr.
Cowell's death, the Company shall have no further liability under this
Agreement except to pay Mr. Cowell's spouse, or if he leaves no spouse, to his
estate or devisee, legatee or other designee, as applicable, (i) the value of
any accrued salary or other compensation due to Mr. Cowell pursuant to Section
2 herein (including any earned but unpaid bonus payment or prorata share of
such earned bonus payment, but excluding deferred bonus payments based upon
annual Fiscal Year performance), at the time of his death, (ii) an amount
equal to the next six (6) bi-weekly salary payments payable to Mr. Cowell under
Subsection (a) of Section 2 herein at the time of his death, payable on the
dates when such payments would otherwise have been made had Mr. Cowell's death
not occurred, (iii) any death benefit payable under all employee benefit plans,
programs and arrangements of U.S. Robotics in which Mr. Cowell is a participant
on the date of his death, and (iv) any Plan coverage or benefit continuation
for Mr. Cowell's spouse and dependents, as applicable, under Section 3 herein.
(c) COMPENSATION UPON DISABILITY. During any period that Mr. Cowell fails
to perform his duties hereunder as a result of incapacity due to an "impaired
condition," as such term is defined in Subsection (c) of
3
<PAGE> 4
Section 5 herein (the "disability period"), Mr. Cowell shall continue to
receive his full salary at the rate then in effect for the disability period
until the Employment Term is terminated pursuant to Subsection (c) of Section 5
herein; provided, however, that such salary payments so made to Mr. Cowell
pursuant hereto shall be reduced by the sum of the amounts, if any, payable to
Mr. Cowell prior to or during this period, as the result of such incapacity,
under any disability benefit plan or insurance program of U.S. Robotics in
which Mr. Cowell participates.
In the event of termination of the Employment Term pursuant to Subsection
(c) (disability) of Section 5 herein, the Company shall have no further
responsibilities under this Agreement except (i) to pay the value of any
accrued salary or other compensation due under Section 2 herein (including any
earned but unpaid bonus payment or prorata share of such earned bonus payment,
but excluding deferred bonus payments based upon annual Fiscal Year
performance), on the Date of Termination to Mr. Cowell (or in the event of Mr.
Cowell's subsequent death, to his estate or devisee, legatee or other designee,
as applicable), together with any benefits payable under all employee benefit
plans, programs or arrangements of U.S. Robotics in which Mr. Cowell is a
participant on the Date of Termination, (ii) to pay the value of any severance
compensation owed to Mr. Cowell (or in the event of Mr. Cowell's subsequent
death, to his estate or devisee, legatee or other designee, as applicable), as
set forth in Subsection (f)(i) of this Section 4 (which shall survive the
termination of the Employment Term) and (iii) to provide for any Plan coverage
or benefit continuation for Mr. Cowell, his spouse and dependents, as
applicable under Section 3 herein.
(d) COMPENSATION UPON TERMINATION BY MR. COWELL. If Mr. Cowell terminates
the Employment Term due to "impaired health" or for Good Reason, as such terms
are defined in Subsection (d) of Section 5 herein, the Company shall have no
further responsibility under this Agreement except (i) to pay the value of any
accrued salary or other compensation due under Section 2 herein (including any
earned but unpaid bonus payment or prorata share of such earned bonus payment,
but excluding deferred bonus payments based upon annual Fiscal Year
performance), on the Date of Termination to Mr. Cowell (or in the event of Mr.
Cowell's subsequent death, to his estate or devisee, legatee or other designee,
as appropriate), together with any benefits payable under all employee benefit
plans, programs or arrangements of U.S. Robotics in which Mr. Cowell is a
participant on the Date of Termination, (ii) to pay the value of any severance
compensation owed to Mr. Cowell (or in the event of Mr. Cowell's subsequent
death, to his estate or devisee, legatee or other designee, as appropriate), as
set forth in Subsection (f) of this Section 4 (which shall survive the
termination of the Employment Term) and (iii) to provide for any Plan coverage
or benefit continuation for Mr. Cowell, his spouse and dependents, as
applicable, under Section 3 herein.
(e) COMPENSATION UPON TERMINATION BY COMPANY. If the Company breaches
this Agreement by terminating the Employment Term, other than pursuant to
Subsections (a) (cause), (b) (death), or (c) (disability) of Section 5 herein,
including but not limited to termination without "cause" (as such term is
defined in Subsection (a) of Section 5 herein), the Company shall (i) pay the
value of any accrued salary or other compensation due under Section 2 herein
(including any earned but unpaid bonus payment or prorata share of such earned
bonus payment, but excluding deferred bonus payments based upon annual Fiscal
Year performance), on the Date of Termination to Mr. Cowell (or in the event of
Mr. Cowell's subsequent death, to his estate or devisee, legatee or other
designee, as appropriate), together with any benefits payable under all
employee benefit plans, programs or arrangements of U.S. Robotics in which Mr.
Cowell is a participant on the Date of Termination, (ii) pay the value of any
severance compensation owed to Mr. Cowell (or in the event of Mr. Cowell's
subsequent death, to his estate or devisee, legatee or other designee, as
appropriate), as set forth in Subsection (f) of this Section 4 (which shall
survive the termination of the Employment Term) and (iii) provide for any Plan
coverage or benefit continuation for Mr. Cowell, his spouse and dependents, as
applicable, under Section 3 herein.
(f) SEVERANCE COMPENSATION.
(i) TERMINATION DUE TO DISABILITY OR IMPAIRED HEALTH. Upon the
termination of the Employment Term under Subsection (c) (disability) of
Section 5 herein or upon the termination of the Employment Term by Mr.
Cowell due to "impaired health" (as such term is defined in Subsection
(d) of Section 5 herein), the Company shall pay to Mr. Cowell (or in the
event of Mr. Cowell's subsequent death, his estate or devisee, legatee or
other designee, as appropriate) all compensation and benefits specified
4
<PAGE> 5
under Section 2 herein, for a period of one (1) year from the Date of
Termination, payable in the same manner as if the Employment Term had not
been terminated.
(ii) TERMINATION BY COMPANY OR BY MR. COWELL FOR GOOD REASON. If
the Company breaches this Agreement by terminating the Employment Term,
other than pursuant to Subsections (a) (cause), (b) (death) or (c)
(disability) of Section 5 herein, including but not limited to
termination without "cause" (as such term is defined in Subsection (a) of
Section 5 herein), or if Mr. Cowell terminates the Employment Term for
Good Reason, as such term is defined in Subsection (d)(i) of Section 5
herein, then the Company shall pay as severance compensation to Mr.
Cowell an amount equal to (1) Mr. Cowell's annual base salary in effect
as of the Date of Termination, multiplied by three, plus (2) the sum of
the annual cash bonuses actually received by Mr. Cowell with respect to
the previous three Fiscal Years of U.S. Robotics, less the amount of cash
bonuses, if any, theretofore paid to him with respect to the Fiscal Year
in which such termination occurs. Such severance compensation shall be
payable in cash in a lump sum on or before the fifteenth (15th) day
following the Date of Termination; provided, however, that where Sections
280G and Section 4999 of the Internal Revenue Code of 1986, as amended,
or any successor thereto (the "Code") are applicable, then such severance
pay shall amount to one dollar less than the maximum amount that Mr.
Cowell may receive without having such payment be treated as an excess
parachute payment under Section 280G of the Code. Such severance
compensation shall not be subject to mitigation or offset due to other
earnings of Mr. Cowell.
5. TERMINATION.
(a) CAUSE. The Employment Term may be terminated at any time at the
option of the Company "for cause" (as such term is hereinafter defined),
effective upon the giving of written notice of termination to Mr. Cowell. As
used herein, the term "for cause" shall mean and be limited to: (i) any felony
conviction, (ii) willful misconduct or gross negligence in connection with the
performance of Mr. Cowell's duties, responsibilities, agreements and covenants
hereunder, which shall continue for a period of thirty (30) days after the
receipt of notice from the Company, (iii) refusal to comply with reasonable
rules, regulations, policies, directions and restrictions as may be established
from time to time by the Board, whereby such refusal continues for thirty (30)
days after the receipt of notice from the Company, or (iv) repeated abuse
(following at least one written warning from the Company) of alcohol or any
illegal use of narcotics or other controlled substances.
If Mr. Cowell is advised that he is being terminated for cause and, within
fifteen (15) days thereafter submits to the Board of Directors of the Parent
Corporation a written objection to such determination, this Subsection will not
be applicable unless the Board of Directors of the Parent Corporation, at or
before its next regularly scheduled meeting, determines by majority vote that
Mr. Cowell has been terminated for cause.
(b) DEATH. The Employment Term shall terminate automatically upon the
death of Mr. Cowell.
(c) DISABILITY. In the event Mr. Cowell becomes mentally or physically
"disabled" during the Employment Term, the Employment Term shall terminate on
the Date of Termination (as such term is defined in Subsection (f) of this
Section 5) once such disability is "established." As used in this Subsection,
the term "disabled" means suffering from any mental or physical condition,
other than that resulting from the use of alcohol or illegal use of narcotics
or other controlled substances, which renders Mr. Cowell unable to
substantially perform all of his material duties and services under this
Agreement in a satisfactory manner (an "impaired condition") for a period of
one hundred twenty (120) consecutive days or for more than one hundred eighty
(180) days in any twelve (12) month period. For purposes of this Subsection,
the date that Mr. Cowell's disability is "established" shall be, in the case of
an impaired condition which exists for a period of one hundred twenty (120)
consecutive days, the one hundred twenty-first (121) day on which such impaired
condition exists, and, in the case of an impaired condition existing for more
than one hundred eighty (180) days in any twelve (12) month period, the one
hundred eighty-first (181) day on which such impaired condition exists.
(d) TERMINATION BY MR. COWELL. Mr. Cowell may terminate the Employment
Term (1) for Good Reason, or (2) if his health should become impaired to an
extent that makes his continued performance of his duties
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<PAGE> 6
and obligations hereunder hazardous to his physical or mental health or his
life ("impaired health"), provided that Mr. Cowell shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request, Mr. Cowell shall submit to
an examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of Mr. Cowell's doctor, or (3) voluntarily, without
Good Reason and not due to "impaired health." In the event that Mr. Cowell
voluntarily terminates the Employment Term without Good Reason and not due to
"impaired health", such termination shall be treated as if it were a
termination "for cause" by the Company.
(i) GOOD REASON DEFINED. For purposes of this Agreement, "Good
Reason" shall mean:
a. a Change in Control of the Parent Corporation (as defined
in Subsection (d)(ii) below), with termination of the Employment
Term occurring within one year following such Change in Control;
b. a decrease in the total amount of Mr. Cowell's base salary
below its level in effect on the date hereof, as provided in
Subsection (a) of Section 2 herein;
c. a reduction in Mr. Cowell's title, duties, job
responsibilities or working conditions without Mr. Cowell's
consent, whereby the determination of whether a reduction in such
title, duties, job responsibilities or working conditions is in the
sole discretion of Mr. Cowell;
d. a failure by the Company to comply with any material
provision of this Agreement which has not been cured within ten
(10) days after notice of such noncompliance has been given by Mr.
Cowell to the Company; or
e. any purported termination of Mr. Cowell's employment which
is not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (e) of this Section 5 (and for purposes
of this Agreement no such purported termination shall be
effective).
For the purpose of this Subsection (d)(i), no action or inaction by
Mr. Cowell within ninety (90) days following the occurrence of the
foregoing events shall be deemed a consent by Mr. Cowell to such events,
absent written consent from Mr. Cowell to the Company.
(ii) CHANGE IN CONTROL DEFINED. A "Change in Control" shall be
deemed to have occurred:
a. upon any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") (other than U.S. Robotics, any trustee or other fiduciary
holding securities under any employee benefit plan of U.S.
Robotics, or any company owned, directly or indirectly, by the
stockholders of the Parent Corporation in substantially the same
proportions as their ownership of common stock of the Parent
Corporation), becoming the owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Parent Corporation representing twenty-five percent (25%) or more
of the combined voting power of the Parent Corporation's then
outstanding securities;
b. during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors, and any new director (other than a director designated
by a person who has entered into an agreement with the Parent
Corporation to effect a transaction described in paragraph (a), (c)
or (d) of this Subsection or a director whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or contests by or on behalf
of a person other than the Board of Directors of the Parent
Corporation) whose election by the Board of Directors or nomination
for election by the Parent Corporation's stockholders was approved
by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two-year
period
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<PAGE> 7
or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of
the Board of Directors;
c. upon the merger or consolidation of the Parent Corporation
with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Parent
Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities
of the Parent Corporation or such surviving entity (which entity
shall thereafter be the "Parent Corporation" as defined herein)
outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to
implement a recapitalization of the Parent Corporation (or similar
transaction) in which no person (other than those covered by the
exceptions in (a) above) acquires more than twenty-five percent
(25%) of the combined voting power of the Parent Corporation's then
outstanding securities shall not constitute a Change in Control of
the Parent Corporation; or
d. the stockholders of the Parent Corporation approve a plan
of complete liquidation of the Company or an agreement for the sale
or disposition by the Parent Corporation of all or substantially
all of the Parent Corporation's assets other than the sale of all
or substantially all of the assets of the Parent Corporation to a
person or persons who beneficially own, directly or indirectly, at
least fifty percent (50%) or more of the combined voting power of
the outstanding voting securities of the Parent Corporation at the
time of the sale.
(E) NOTICE OF TERMINATION. Any termination of the Employment Term by the
Company or by Mr. Cowell (other than termination pursuant to Subsection (b)
(death) of this Section 5) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employment Term under the Section and Subsection so
indicated.
(F) DATE OF TERMINATION. "Date of Termination" shall mean the following:
if the Employment Term is terminated by (i) Subsection (a) (cause) of this
Section 5, the date specified in the Notice of Termination, (ii) Subsection (b)
(death) of this Section 5, the date of Mr. Cowell's death, (iii) Subsection (c)
(disability) of this Section 5, thirty (30) days after Notice of Termination is
given (provided that Mr. Cowell shall not have returned to the satisfactory
performance of his duties on a full-time basis during such thirty (30) day
period), and (iv) if for any other reason, the date on which a Notice of
Termination is given; provided, however, that if, within (30) days after any
Notice of Termination is given, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual agreement of the parties, by a binding and final
arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected).
6. OTHER BUSINESS ACTIVITIES. During the Employment Term, Mr. Cowell
shall not, without the prior written authorization of the Board of Directors of
the Parent Corporation, directly or indirectly render services of a business,
professional or commercial nature (whether for compensation or otherwise) to
any person or entity competitive or adverse to U.S. Robotics' business welfare
or engage in any activity whether alone, as a partner, or as an officer,
director, employee, consultant, independent contractor, or stockholder in any
other corporation, person, or entity which is competitive with or adverse to
U.S. Robotics' business welfare. This Section 6 shall not, however, prevent
Mr. Cowell from investing in securities issued by any such competitive or
adverse corporation, provided the holdings thereof by Mr. Cowell do not
constitute more than five percent (5%) of any one class of such securities.
7. CONFIDENTIAL INFORMATION.
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<PAGE> 8
(a) DISCLOSURE AND USE. Mr. Cowell shall not disclose or use at any time,
either during or subsequent to the Employment Term, any trade secrets or other
confidential information, whether patentable or not, of U.S. Robotics,
including but not limited to, any technical or non-technical data, any
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, or any list of actual or potential customers or
suppliers, of which Mr. Cowell is or becomes informed or aware during the
Employment Term, whether or not developed by Mr. Cowell, except (i) as may be
reasonably required for Mr. Cowell to perform Mr. Cowell's employment duties
with U.S. Robotics, (ii) to the extent such information becomes generally
available to the public through no wrongful act of Mr. Cowell, (iii)
information which has been disclosed as a result of a subpoena or other legal
process, provided that Mr. Cowell has provided the Company with prompt written
notice of the receipt thereof, or (iv) unless Mr. Cowell shall first secure the
Company's prior written authorization. This covenant shall survive the
termination of Mr. Cowell's employment hereunder, and shall remain in effect
and be enforceable against Mr. Cowell for so long as any such U.S. Robotics
secret or confidential information retains economic value, whether actual or
potential, from not being generally known to other persons who can obtain
economic value from its disclosure or use. Mr. Cowell agrees to execute such
further agreements and/or confirmations of Mr. Cowell's obligations to U.S.
Robotics concerning non-disclosure of U.S. Robotics trade secrets and
confidential information as U.S. Robotics may reasonably require from
time-to-time.
(b) RETURN OF MATERIALS. Upon termination of the Employment Term, Mr.
Cowell (or in the event of termination due to Mr. Cowell's death, his estate or
devisee, legatee or other designee, as applicable) shall promptly deliver to
the Company all materials of a secret or confidential nature relating to U.S.
Robotics' business, which are in the possession or under the control of Mr.
Cowell.
8. INVENTIONS AND DISCOVERIES. Mr. Cowell hereby assigns to the Company
or its designee all of Mr. Cowell's rights, title and interest in and to all
inventions, discoveries, processes, designs, works of authorship and other
intellectual property and all improvements on existing inventions, discoveries,
processes, designs, works and other intellectual property made or discovered by
Mr. Cowell during the Employment Term. Promptly upon the development, making,
creation, or discovery of any invention, discovery, process, design, work,
intellectual property or improvement, Mr. Cowell shall disclose the same to the
Company and shall execute and deliver to the Company or its designee such
reasonable documents as the Company may request to confirm the assignment of
Mr. Cowell's rights therein, and if requested by the Company, shall assist the
Company or its designee in applying for and prosecuting any patents and any
trademark or copyright registration which may be available in respect thereof.
Any invention, discovery or other work for which none of U.S. Robotics'
equipment, supplies, facilities, or confidential information was used and which
was developed entirely on Mr. Cowell's own time, is exempted from this Section
8 so long as it (i) does not relate in any way to U.S. Robotics' business, or
actual or demonstrably anticipated research and development; and (ii) does not
result in any way from Mr. Cowell's work for U.S. Robotics.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render the same valid, or (ii) not applicable
to given circumstances, or (iii) excised from this Agreement, as the situation
may require, and this Agreement shall be construed and enforced as if such
provision had been included herein as so modified in scope or application, or
had not been included herein, as the case may be.
10. ARBITRATION OF DISPUTES. In the event of any controversy among the
parties hereto arising out of, or relating to, this Agreement which cannot be
settled amicably by the parties (other than a controversy contemplated by
Sections 6, 7, 8 and 11 herein), such controversy shall be submitted to binding
arbitration. Either the Company or Mr. Cowell may institute such arbitration
proceeding by giving written notice to the other party and by designating one
independent arbitrator. Unless such independent arbitrator alone is acceptable
to the other party, such other party shall designate within ten (10) days
following receipt of such notice, a second independent arbitrator, and such two
arbitrators shall thereafter select a third independent arbitrator. A hearing
shall be held by the arbitrator or arbitrators in the City of Chicago,
Illinois, and a decision of the matter so submitted shall be rendered promptly
in accordance with the rules of the American Arbitration Association. The
decision of the
8
<PAGE> 9
arbitrator or, if more than one, a majority of the arbitrators shall be final
and binding upon all parties hereto. Judgment upon the award rendered may be
entered in any court having jurisdiction thereof. The cost of the arbitration
shall be borne by the Company.
11. ENFORCEMENT. The Company will be entitled to institute proceedings
and avail itself of all remedies at law or in equity to recover damages
occasioned by a breach or threatened breach of any of the provisions of this
Agreement by Mr. Cowell and shall have the right to pursue one or more of such
proceedings and remedies simultaneously or from time to time. Mr. Cowell
hereby acknowledges that the Company would suffer irreparable injury if the
provisions of Sections 6, 7 and 8 herein, which shall survive the termination
of this Agreement, were breached and that the Company's remedies at law would
be inadequate in the event of such breach or threatened breach. Accordingly,
Mr. Cowell hereby agrees that any such breach or threatened breach may, in
addition to any and all other available remedies, be preliminarily and
permanently enjoined by any court of competent jurisdiction without any
requirement that the Company post a bond.
12. LEGAL FEES AND EXPENSES. In the event of litigation or arbitration
proceeding under this Agreement, both the Company and Mr. Cowell shall pay
their own attorneys' fees and other legal expenses; provided, however, that (i)
the Company shall pay Mr. Cowell's attorneys' fees and legal expenses in
connection with any proceeding which results in a court refusing to issue a
preliminary or permanent injunction against Mr. Cowell due to his alleged
breach or threatened breach of any provision of this Agreement, and (ii) the
Company shall pay the reasonable legal fees and expenses which Mr. Cowell may
incur in connection with the enforcement of this Agreement in connection with
the termination of the Employment Term under Subsections (c) (disability) and
(d) (termination by Mr. Cowell for Good Reason) of Section 5 herein or due to
the termination of the Employment Term by the Company for any reason other than
as provided in Section 5 herein, including but not limited to termination
without "cause" as such term is defined in Subsection (a) of Section 5 herein.
Such fees and expenses shall be paid in cash within forty-five (45) days
after the submission to the Company's Secretary, and inquiry into the
reasonableness of such fees and expenses shall not delay such payment.
13. GENERAL PROVISIONS.
(a) NOTICES. Any notice, request, demand or other communication required
or permitted to be given hereunder shall be in writing and personally delivered
or sent by registered or certified mail, return receipt requested, or by a
facsimile, telegram or telex followed by a confirmation letter sent by
registered or certified mail, return receipt requested, addressed as follows:
To the Company: U.S. Robotics Corporation
8100 McCormick Blvd.
Skokie, Illinois 60076
Attention: Vice President of Human Resources
cc: General Counsel
To Mr. Cowell: Mr. Casey Cowell
[Omitted]
Either the Company or Mr. Cowell may, at any time, by notice to the other,
designate another address for service of notice on such party. When the
letter, facsimile, telegram or telex is dispatched as provided for above, the
notice shall be deemed to be made when the addressee receives the letter,
facsimile, telegram or telex, or upon the third (3rd) business day after the
date it is sent, whichever is earlier.
(b) AMENDMENTS. Neither this Agreement nor any of the terms or conditions
hereof may be waived, amended or modified except by means of a written
instrument duly executed by the party to be charged therewith.
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<PAGE> 10
(c) CAPTIONS AND HEADINGS. The captions and Section headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
(d) GOVERNING LAW. This Agreement, and all matters or disputes relating
to the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(e) SUCCESSORS AND ASSIGNS. In light of the unique personal services to
be performed by Mr. Cowell hereunder, it is acknowledged and agreed that any
purported or attempted assignment or transfer by Mr. Cowell of this Agreement
or any of Mr. Cowell's duties, responsibilities, or obligations hereunder
shall be void. The Company shall not assign this Agreement to any third party
entity which is not affiliated with the Company, the Parent Corporation or any
of their direct or indirect subsidiaries. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
(g) ENTIRE AGREEMENT. Except as otherwise set forth or referred to in
this Agreement, this Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
(h) RELIANCE BY THIRD PARTIES. This Agreement is intended for the sole
and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit therefrom absent the express
written consent of the party to be charged with such reliance or benefit.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
U.S. ROBOTICS ACCESS CORP.
ATTEST:
/s/ GEORGE A. VINYARD By: /s/ JOHN MCCARTNEY
George A. Vinyard, Secretary John McCartney, Chief Operating Officer
/s/ CASEY COWELL
Casey Cowell
10
<PAGE> 1
EXHIBIT 10.2
U.S. ROBOTICS ACCESS CORP.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made effective as of the 1st
day of January, 1997, by and between U.S. Robotics Access Corp., a Delaware
corporation (the "Company"), and JOHN MCCARTNEY ("Mr. McCartney").
RECITALS
WHEREAS, the Company is engaged in the business of designing,
manufacturing and selling data communications equipment, including modems, and
other high technology products; and
WHEREAS, Mr. McCartney has acknowledged knowledge, skill and experience;
and
WHEREAS, the Company desires to obtain the benefit of Mr. McCartney's
knowledge, skill, and experience and, therefore, is willing to engage the
services of Mr. McCartney upon the terms set forth in this Agreement; and
WHEREAS, Mr. McCartney is willing to render services to the Company and
its affiliates on the terms set forth herein;
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Mr. McCartney agree as follows:
1. EMPLOYMENT.
(a) EMPLOYMENT. The Company hereby employs Mr. McCartney and Mr.
McCartney hereby accepts employment by the Company, subject to the terms set
forth in this Agreement.
(b) EMPLOYMENT TERM. The term of Mr. McCartney's employment under this
Agreement ("Employment Term") shall begin on January 1, 1997, and shall
continue for a period of three (3) consecutive calendar years, unless
terminated sooner in accordance with this Agreement. On each January 1 during
the Employment Term, the Employment Term shall be automatically extended by an
additional one-year period unless a notice of non-extension is given by one
party to the other at least sixty (60) days prior to January 1.
(c) TITLE AND DUTIES. Mr. McCartney's title shall be President and Chief
Operating Officer of the Company's parent corporation, U.S. Robotics
Corporation (the "Parent Corporation"), and he shall possess such powers and
duties normally incident to such position, as he currently exercises and
performs and as provided in the By-laws and in accordance with Delaware General
Corporation Law. Mr. McCartney's title and duties may be changed at the
discretion of the Board of Directors of the Parent Corporation. During the
Employment Term, Mr. McCartney shall faithfully discharge his duties and
responsibilities in a diligent manner, devoting substantially all of his
working time to the affairs of the Parent Corporation and its subsidiaries
(collectively, "U.S. Robotics").
2. COMPENSATION AND RELATED MATTERS.
(a) SALARY. For services rendered by Mr. McCartney to U.S. Robotics and
upon the condition that Mr. McCartney fully and faithfully perform all of his
duties and obligations owed during the Employment Term under this Agreement,
the Company shall pay Mr. McCartney an annual base salary equal to $500,000,
payable in
<PAGE> 2
twenty-six equal bi-weekly installments per year less income tax withholdings
and other normal employee deductions. This base salary set forth herein shall
be reviewed annually by the Stock Option and Compensation Committee (the "Stock
Option and Compensation Committee") of the Board of Directors of the Parent
Corporation at the end of each fiscal year of the Company beginning with the
fiscal year ending on or about September 30, 1997 (hereafter "Fiscal Year"), or
at such other times as deemed appropriate by the Stock Option and Compensation
Committee, and may, at the sole discretion of the Stock Option and Compensation
Committee, be increased by an amount which it deems appropriate.
(b) BONUSES. Mr. McCartney shall be eligible to receive with respect to
each Fiscal Year during the Employment Term quarterly and annual bonuses under
the Parent Corporation's Senior Executive Performance Bonus Program or a
comparable bonus program which would afford him the opportunity to earn a
substantially equivalent bonus, subject to the terms, conditions, and
restrictions as set forth in such bonus program. The minimum bonus target set
for each Fiscal Year shall not be less than an amount equal to the sum of the
amounts of the Threshold Bonus, the maximum Incremental Threshold Bonus and the
Base Target Bonus for him for the 1997 Fiscal Year as heretofore determined by
the Stock Option and Compensation Committee.
(c) STOCK OPTION PLAN. Mr. McCartney shall be entitled to receive such
options to purchase the common stock of the Parent Corporation as shall be
granted by the Stock Option and Compensation Committee pursuant to the Parent
Corporation's Executive Officers and Directors Stock Option Plan.
(d) FRINGE BENEFITS. During the Employment Term, Mr. McCartney shall be
eligible to receive reasonable amounts of paid, noncumulative vacation per
year, to be taken at a time or times reasonably agreeable to both Mr. McCartney
and the Company, and shall be eligible to participate in and receive coverage
and benefits under all group insurance, pension, profit sharing, bonus, stock
option, stock ownership and other employee benefit plans, programs and
arrangements of U.S. Robotics which are now or hereafter adopted by U.S.
Robotics for the benefit of its senior executive employees, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plans, programs and arrangements. U. S. Robotics shall not make any changes in
such plans, programs, and arrangements which would adversely affect Mr.
McCartney's (or, if Section 3 herein is applicable, his spouse's or
dependents') rights or benefits thereunder, unless such change occurs pursuant
to a plan, program or arrangement applicable to all senior executive employees
of the Parent Corporation and does not result in a proportionately greater
reduction in the rights of or benefits to Mr. McCartney as compared with any
other senior executive employee of the Parent Corporation. The Company shall
also provide Mr. McCartney with certain perquisites, payable at the Company's
expense, which are offered to other senior executive employees and which are
reasonable, necessary and in the best interests of U.S. Robotics.
(e) AUTOMOBILE ALLOWANCE. During the Employment Term, the Company shall
pay to Mr. McCartney a monthly automobile allowance in the amount of $1,100,
which amount may be paid in periodic installments, not less frequently than
monthly. Such allowance may be reviewed by the Stock Option and Compensation
Committee at the end of each Fiscal Year, or at such other times as deemed
appropriate by the Stock Option and Compensation Committee, and may, at the
sole discretion of the Stock Option and Compensation Committee, be increased by
an amount which it deems appropriate. If such allowance is increased by the
Stock Option and Compensation Committee, it shall not be decreased thereafter
during the Employment Term.
(f) BUSINESS EXPENSES. The Company shall reimburse Mr. McCartney for the
reasonable and necessary business expenses incurred by Mr. McCartney in
connection with the performance of his duties and obligations as set forth
herein during the Employment Term. Such expenses shall include, but are not
limited to, cellular telephone expenses and all expenses of travel and living
expenses while away from home on business or at the request and in the service
of the Company, provided that such expenses are properly incurred and accounted
for in accordance with the applicable policies and procedures established by
the Company. Reimbursement shall be made upon the presentation by Mr.
McCartney to the Company of reasonably detailed statements of such expenses.
(g) EFFECT OF SALARY AND OTHER BENEFITS. Salary payments pursuant to
Subsection (a) of this Section 2 shall not be deemed exclusive and shall not
prevent Mr. McCartney from participating in any other compensation or benefit
plan, program or arrangement of U.S. Robotics as provided in this Section 2.
Such salary payments
2
<PAGE> 3
(including any increased salary payments) shall not in any way limit or reduce
any other obligation of the Company pursuant to this Agreement, and no other
compensation, benefit or payment hereunder shall in any way limit or reduce the
obligation of the Company to pay Mr. McCartney's salary pursuant to Subsection
(a) of this Section 2. At the same time, nothing paid to Mr. McCartney under
any benefit plan, program, or arrangement under this Section 2, which is
presently in effect or made available in the future, shall be deemed to be in
lieu of the salary payable to Mr. McCartney pursuant to Subsection (a) of this
Section 2.
(h) PRORATION OF COMPENSATION. Any compensation payable to Mr. McCartney
under this Section 2, in respect of any Fiscal Year during which the Employment
Term terminates prior to the last day of such Fiscal Year shall, unless
otherwise provided in the applicable plan, program or arrangement, be prorated
in accordance with the number of days in such Fiscal Year during which he is so
employed.
3. BENEFITS FOLLOWING EMPLOYMENT TERM OR TERMINATION. For a period of
three (3) years following the Date of Termination of the Employment Term, other
than as provided in Subsection (a) (cause) of Section 5 herein, the Company
shall permit, at the Company's expense, Mr. McCartney, his spouse and
dependents, as applicable (the "Benefit Participants"), to participate in all
group medical and health insurance plans and employee benefit plans (including
fringe benefits), programs, and arrangements now or hereafter made available to
the senior executive employees of the Parent Corporation (the "Plans")
(including but not limited to such Plans in which Mr. McCartney was entitled to
participate immediately prior to the Date of Termination), in the same manner
as provided to its other senior executive employees; provided, however, that
this Section 3 shall not apply in the event that (i) U.S. Robotics shall
hereafter terminate the applicable Plan, or (ii) the participation of the
Benefit Participants in such Plan is prohibited by law or, if applicable, would
disqualify such Plan as a tax qualified plan pursuant to the Internal Revenue
Code of 1986, as amended, or any successor thereto (the "Code"), or (iii) the
participation of the Benefit Participants violates the general terms and
provisions of such applicable Plan. In the event that any of the Benefit
Participants' participation in such Plans is prohibited by law or, if
applicable, would disqualify the Plan as a tax qualified plan, the Company
shall permit the Benefit Participants to acquire substantially comparable
coverage or benefits, at the Company's expense, from a source of Mr.
McCartney's or his spouse's choosing, notwithstanding the fact that such
coverage or benefit will result in a higher cost than if provided under a U.S.
Robotics Plan. However, in no event will the Benefit Participants receive from
the Company the coverage and benefits contemplated by this Section 3 if the
Benefit Participants receive such coverage and benefits from any other source.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) COMPENSATION UPON TERMINATION FOR CAUSE. If the Employment Term shall
be terminated "for cause," as provided in Subsection (a) of Section 5 herein,
the Company shall have no further liability under this Agreement except to pay
Mr. McCartney (i) the value of any accrued salary or other compensation due to
Mr. McCartney pursuant to Section 2 herein (including any earned but unpaid
bonus payment or prorata share of such earned bonus payment, but excluding
deferred bonus payments based upon annual Fiscal Year performance), upon the
date of delivery of Notice of Termination to Mr. McCartney, at the rate in
effect at the time such Notice of Termination is delivered, and (ii) any
benefits payable under all employee benefit plans, programs and arrangements of
U.S. Robotics in which Mr. McCartney is a participant on the date of delivery
of Notice of Termination.
(b) COMPENSATION UPON DEATH. If the Employment Term is terminated by Mr.
McCartney's death, the Company shall have no further liability under this
Agreement except to pay Mr. McCartney's spouse, or if he leaves no spouse, to
his estate or devisee, legatee or other designee, as applicable, (i) the value
of any accrued salary or other compensation due to Mr. McCartney pursuant to
Section 2 herein (including any earned but unpaid bonus payment or prorata
share of such earned bonus payment, but excluding deferred bonus payments based
upon annual Fiscal Year performance), at the time of his death, (ii) an amount
equal to the next six (6) bi-weekly salary payments payable to Mr. McCartney
under Subsection (a) of Section 2 herein at the time of his death, payable on
the dates when such payments would otherwise have been made had Mr. McCartney's
death not occurred, (iii) any death benefit payable under all employee benefit
plans, programs and arrangements of U.S. Robotics in which Mr. McCartney is a
participant on the date of his death, and (iv) any Plan coverage or benefit
continuation for Mr. McCartney's spouse and dependents, as applicable, under
Section 3 herein.
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<PAGE> 4
(c) COMPENSATION UPON DISABILITY. During any period that Mr. McCartney
fails to perform his duties hereunder as a result of incapacity due to an
"impaired condition," as such term is defined in Subsection (c) of Section 5
herein (the "disability period"), Mr. McCartney shall continue to receive his
full salary at the rate then in effect for the disability period until the
Employment Term is terminated pursuant to Subsection (c) of Section 5 herein;
provided, however, that such salary payments so made to Mr. McCartney pursuant
hereto shall be reduced by the sum of the amounts, if any, payable to Mr.
McCartney prior to or during this period, as the result of such incapacity,
under any disability benefit plan or insurance program of U.S. Robotics in
which Mr. McCartney participates.
In the event of termination of the Employment Term pursuant to Subsection
(c) (disability) of Section 5 herein, the Company shall have no further
responsibilities under this Agreement except (i) to pay the value of any
accrued salary or other compensation due under Section 2 herein (including any
earned but unpaid bonus payment or prorata share of such earned bonus payment,
but excluding deferred bonus payments based upon annual Fiscal Year
performance), on the Date of Termination to Mr. McCartney (or in the event of
Mr. McCartney's subsequent death, to his estate or devisee, legatee or other
designee, as applicable), together with any benefits payable under all employee
benefit plans, programs or arrangements of U.S. Robotics in which Mr. McCartney
is a participant on the Date of Termination, (ii) to pay the value of any
severance compensation owed to Mr. McCartney (or in the event of Mr.
McCartney's subsequent death, to his estate or devisee, legatee or other
designee, as applicable), as set forth in Subsection (f)(i) of this Section 4
(which shall survive the termination of the Employment Term) and (iii) to
provide for any Plan coverage or benefit continuation for Mr. McCartney, his
spouse and dependents, as applicable under Section 3 herein.
(d) COMPENSATION UPON TERMINATION BY MR. MCCARTNEY. If Mr. McCartney
terminates the Employment Term due to "impaired health" or for Good Reason, as
such terms are defined in Subsection (d) of Section 5 herein, the Company shall
have no further responsibility under this Agreement except (i) to pay the value
of any accrued salary or other compensation due under Section 2 herein
(including any earned but unpaid bonus payment or prorata share of such earned
bonus payment, but excluding deferred bonus payments based upon annual Fiscal
Year performance), on the Date of Termination to Mr. McCartney (or in the event
of Mr. McCartney's subsequent death, to his estate or devisee, legatee or other
designee, as appropriate), together with any benefits payable under all
employee benefit plans, programs or arrangements of U.S. Robotics in which Mr.
McCartney is a participant on the Date of Termination, (ii) to pay the value of
any severance compensation owed to Mr. McCartney (or in the event of Mr.
McCartney's subsequent death, to his estate or devisee, legatee or other
designee, as appropriate), as set forth in Subsection (f) of this Section 4
(which shall survive the termination of the Employment Term) and (iii) to
provide for any Plan coverage or benefit continuation for Mr. McCartney, his
spouse and dependents, as applicable, under Section 3 herein.
(e) COMPENSATION UPON TERMINATION BY COMPANY. If the Company breaches
this Agreement by terminating the Employment Term, other than pursuant to
Subsections (a) (cause), (b) (death), or (c) (disability) of Section 5 herein,
including but not limited to termination without "cause" (as such term is
defined in Subsection (a) of Section 5 herein), the Company shall (i) pay the
value of any accrued salary or other compensation due under Section 2 herein
(including any earned but unpaid bonus payment or prorata share of such earned
bonus payment, but excluding deferred bonus payments based upon annual Fiscal
Year performance), on the Date of Termination to Mr. McCartney (or in the event
of Mr. McCartney's subsequent death, to his estate or devisee, legatee or other
designee, as appropriate), together with any benefits payable under all
employee benefit plans, programs or arrangements of U.S. Robotics in which Mr.
McCartney is a participant on the Date of Termination, (ii) pay the value of
any severance compensation owed to Mr. McCartney (or in the event of Mr.
McCartney's subsequent death, to his estate or devisee, legatee or other
designee, as appropriate), as set forth in Subsection (f) of this Section 4
(which shall survive the termination of the Employment Term) and (iii) provide
for any Plan coverage or benefit continuation for Mr. McCartney, his spouse and
dependents, as applicable, under Section 3 herein.
(f) SEVERANCE COMPENSATION.
4
<PAGE> 5
(i) TERMINATION DUE TO DISABILITY OR IMPAIRED HEALTH. Upon the
termination of the Employment Term under Subsection (c) (disability) of
Section 5 herein or upon the termination of the Employment Term by Mr.
McCartney due to "impaired health" (as such term is defined in Subsection
(d) of Section 5 herein), the Company shall pay to Mr. McCartney (or in
the event of Mr. McCartney's subsequent death, his estate or devisee,
legatee or other designee, as appropriate) all compensation and benefits
specified under Section 2 herein, for a period of one (1) year from the
Date of Termination, payable in the same manner as if the Employment Term
had not been terminated.
(ii) TERMINATION BY COMPANY OR BY MR. MCCARTNEY FOR GOOD REASON. If
the Company breaches this Agreement by terminating the Employment Term,
other than pursuant to Subsections (a) (cause), (b) (death) or (c)
(disability) of Section 5 herein, including but not limited to
termination without "cause" (as such term is defined in Subsection (a) of
Section 5 herein), or if Mr. McCartney terminates the Employment Term for
Good Reason, as such term is defined in Subsection (d)(i) of Section 5
herein, then the Company shall pay as severance compensation to Mr.
McCartney an amount equal to (1) Mr. McCartney's annual base salary in
effect as of the Date of Termination, multiplied by three, plus (2) the
sum of the annual cash bonuses actually received by Mr. McCartney with
respect to the previous three Fiscal Years of U.S. Robotics, less the
amount of cash bonuses, if any, theretofore paid to him with respect to
the Fiscal Year in which such termination occurs. Such severance
compensation shall be payable in cash in a lump sum on or before the
fifteenth (15th) day following the Date of Termination; provided,
however, that where Sections 280G and Section 4999 of the Internal
Revenue Code of 1986, as amended, or any successor thereto (the "Code")
are applicable, then such severance pay shall amount to one dollar less
than the maximum amount that Mr. McCartney may receive without having
such payment be treated as an excess parachute payment under Section 280G
of the Code. Such severance compensation shall not be subject to
mitigation or offset due to other earnings of Mr. McCartney.
5. TERMINATION.
(a) CAUSE. The Employment Term may be terminated at any time at the
option of the Company "for cause" (as such term is hereinafter defined),
effective upon the giving of written notice of termination to Mr. McCartney.
As used herein, the term "for cause" shall mean and be limited to: (i) any
felony conviction, (ii) willful misconduct or gross negligence in connection
with the performance of Mr. McCartney's duties, responsibilities, agreements
and covenants hereunder, which shall continue for a period of thirty (30) days
after the receipt of notice from the Company, (iii) refusal to comply with
reasonable rules, regulations, policies, directions and restrictions as may be
established from time to time by the Board, whereby such refusal continues for
thirty (30) days after the receipt of notice from the Company, or (iv)
repeated abuse (following at least one written warning from the Company) of
alcohol or any illegal use of narcotics or other controlled substances.
If Mr. McCartney is advised that he is being terminated for cause and,
within fifteen (15) days thereafter submits to the Board of Directors of the
Parent Corporation a written objection to such determination, this Subsection
will not be applicable unless the Board of Directors of the Parent Corporation,
at or before its next regularly scheduled meeting, determines by majority vote
that Mr. McCartney has been terminated for cause.
(b) DEATH. The Employment Term shall terminate automatically upon the
death of Mr. McCartney.
(c) DISABILITY. In the event Mr. McCartney becomes mentally or physically
"disabled" during the Employment Term, the Employment Term shall terminate on
the Date of Termination (as such term is defined in Subsection (f) of this
Section 5) once such disability is "established." As used in this Subsection,
the term "disabled" means suffering from any mental or physical condition,
other than that resulting from the use of alcohol or illegal use of narcotics
or other controlled substances, which renders Mr. McCartney unable to
substantially perform all of his material duties and services under this
Agreement in a satisfactory manner (an "impaired condition") for a period of
one hundred twenty (120) consecutive days or for more than one hundred eighty
(180) days in any twelve (12) month period. For purposes of this Subsection,
the date that Mr. McCartney's disability is "established" shall be, in the case
of an impaired condition which exists for a period of one hundred twenty (120)
5
<PAGE> 6
consecutive days, the one hundred twenty-first (121) day on which such impaired
condition exists, and, in the case of an impaired condition existing for more
than one hundred eighty (180) days in any twelve (12) month period, the one
hundred eighty-first (181) day on which such impaired condition exists.
(d) TERMINATION BY MR. MCCARTNEY. Mr. McCartney may terminate the
Employment Term (1) for Good Reason, or (2) if his health should become
impaired to an extent that makes his continued performance of his duties and
obligations hereunder hazardous to his physical or mental health or his life
("impaired health"), provided that Mr. McCartney shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request, Mr. McCartney shall submit
to an examination by a doctor selected by the Company and such doctor shall
have concurred in the conclusion of Mr. McCartney's doctor, or (3) voluntarily,
without Good Reason and not due to "impaired health." In the event that Mr.
McCartney voluntarily terminates the Employment Term without Good Reason and
not due to "impaired health", such termination shall be treated as if it were a
termination "for cause" by the Company.
(i) GOOD REASON DEFINED. For purposes of this Agreement, "Good
Reason" shall mean:
a. a Change in Control of the Parent Corporation (as defined
in Subsection (d)(ii) below), with termination of the Employment
Term occurring within one year following such Change in Control;
b. a decrease in the total amount of Mr. McCartney's base
salary below its level in effect on the date hereof, as provided in
Subsection (a) of Section 2 herein;
c. a reduction in Mr. McCartney's title, duties, job
responsibilities or working conditions without Mr. McCartney's
consent, whereby the determination of whether a reduction in such
title, duties, job responsibilities or working conditions is in the
sole discretion of Mr. McCartney;
d. a failure by the Company to comply with any material
provision of this Agreement which has not been cured within ten
(10) days after notice of such noncompliance has been given by Mr.
McCartney to the Company; or
e. any purported termination of Mr. McCartney's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (e) of this Section 5
(and for purposes of this Agreement no such purported termination
shall be effective).
For the purpose of this Subsection (d)(i), no action or inaction by
Mr. McCartney within ninety (90) days following the occurrence of the
foregoing events shall be deemed a consent by Mr. McCartney to such
events, absent written consent from Mr. McCartney to the Company.
(ii) CHANGE IN CONTROL DEFINED. A "Change in Control" shall be
deemed to have occurred:
a. upon any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") (other than U.S. Robotics, any trustee or other fiduciary
holding securities under any employee benefit plan of U.S.
Robotics, or any company owned, directly or indirectly, by the
stockholders of the Parent Corporation in substantially the same
proportions as their ownership of common stock of the Parent
Corporation), becoming the owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Parent Corporation representing twenty-five percent (25%) or more
of the combined voting power of the Parent Corporation's then
outstanding securities;
b. during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors, and any new director (other than a director designated
by a person who has entered into an agreement with the Parent
Corporation to effect a transaction
6
<PAGE> 7
described in paragraph (a), (c) or (d) of this Subsection or a
director whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or contests by or on behalf of a person other than the Board of
Directors of the Parent Corporation) whose election by the Board of
Directors or nomination for election by the Parent Corporation's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the two-year period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors;
c. upon the merger or consolidation of the Parent Corporation
with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Parent
Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities
of the Parent Corporation or such surviving entity (which entity
shall thereafter be the "Parent Corporation" as defined herein)
outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to
implement a recapitalization of the Parent Corporation (or similar
transaction) in which no person (other than those covered by the
exceptions in (a) above) acquires more than twenty-five percent
(25%) of the combined voting power of the Parent Corporation's then
outstanding securities shall not constitute a Change in Control of
the Parent Corporation; or
d. the stockholders of the Parent Corporation approve a plan
of complete liquidation of the Company or an agreement for the sale
or disposition by the Parent Corporation of all or substantially
all of the Parent Corporation's assets other than the sale of all
or substantially all of the assets of the Parent Corporation to a
person or persons who beneficially own, directly or indirectly, at
least fifty percent (50%) or more of the combined voting power of
the outstanding voting securities of the Parent Corporation at the
time of the sale.
(e) NOTICE OF TERMINATION. Any termination of the Employment Term by the
Company or by Mr. McCartney (other than termination pursuant to Subsection (b)
(death) of this Section 5) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employment Term under the Section and Subsection so
indicated.
(f) DATE OF TERMINATION. "Date of Termination" shall mean the following:
if the Employment Term is terminated by (i) Subsection (a) (cause) of this
Section 5, the date specified in the Notice of Termination, (ii) Subsection (b)
(death) of this Section 5, the date of Mr. McCartney's death, (iii) Subsection
(c) (disability) of this Section 5, thirty (30) days after Notice of
Termination is given (provided that Mr. McCartney shall not have returned to
the satisfactory performance of his duties on a full-time basis during such
thirty (30) day period), and (iv) if for any other reason, the date on which a
Notice of Termination is given; provided, however, that if, within (30) days
after any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual agreement of the parties, by a binding and
final arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected).
6. OTHER BUSINESS ACTIVITIES. During the Employment Term, Mr. McCartney
shall not, without the prior written authorization of the Board of Directors of
the Parent Corporation, directly or indirectly render services of a business,
professional or commercial nature (whether for compensation or otherwise) to
any person or entity competitive or adverse to U.S. Robotics' business welfare
or engage in any activity whether alone, as a partner, or
7
<PAGE> 8
as an officer, director, employee, consultant, independent contractor, or
stockholder in any other corporation, person, or entity which is competitive
with or adverse to U.S. Robotics' business welfare. This Section 6 shall not,
however, prevent Mr. McCartney from investing in securities issued by any such
competitive or adverse corporation, provided the holdings thereof by Mr.
McCartney do not constitute more than five percent (5%) of any one class of
such securities.
7. CONFIDENTIAL INFORMATION.
(a) DISCLOSURE AND USE. Mr. McCartney shall not disclose or use at any
time, either during or subsequent to the Employment Term, any trade secrets or
other confidential information, whether patentable or not, of U.S. Robotics,
including but not limited to, any technical or non-technical data, any
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, or any list of actual or potential customers or
suppliers, of which Mr. McCartney is or becomes informed or aware during the
Employment Term, whether or not developed by Mr. McCartney, except (i) as may
be reasonably required for Mr. McCartney to perform Mr. McCartney's employment
duties with U.S. Robotics, (ii) to the extent such information becomes
generally available to the public through no wrongful act of Mr. McCartney,
(iii) information which has been disclosed as a result of a subpoena or other
legal process, provided that Mr. McCartney has provided the Company with prompt
written notice of the receipt thereof, or (iv) unless Mr. McCartney shall first
secure the Company's prior written authorization. This covenant shall survive
the termination of Mr. McCartney's employment hereunder, and shall remain in
effect and be enforceable against Mr. McCartney for so long as any such U.S.
Robotics secret or confidential information retains economic value, whether
actual or potential, from not being generally known to other persons who can
obtain economic value from its disclosure or use. Mr. McCartney agrees to
execute such further agreements and/or confirmations of Mr. McCartney's
obligations to U.S. Robotics concerning non-disclosure of U.S. Robotics trade
secrets and confidential information as U.S. Robotics may reasonably require
from time-to-time.
(b) RETURN OF MATERIALS. Upon termination of the Employment Term, Mr.
McCartney (or in the event of termination due to Mr. McCartney's death, his
estate or devisee, legatee or other designee, as applicable) shall promptly
deliver to the Company all materials of a secret or confidential nature
relating to U.S. Robotics' business, which are in the possession or under the
control of Mr. McCartney.
8. INVENTIONS AND DISCOVERIES. Mr. McCartney hereby assigns to the
Company or its designee all of Mr. McCartney's rights, title and interest in
and to all inventions, discoveries, processes, designs, works of authorship and
other intellectual property and all improvements on existing inventions,
discoveries, processes, designs, works and other intellectual property made or
discovered by Mr. McCartney during the Employment Term. Promptly upon the
development, making, creation, or discovery of any invention, discovery,
process, design, work, intellectual property or improvement, Mr. McCartney
shall disclose the same to the Company and shall execute and deliver to the
Company or its designee such reasonable documents as the Company may request to
confirm the assignment of Mr. McCartney's rights therein, and if requested by
the Company, shall assist the Company or its designee in applying for and
prosecuting any patents and any trademark or copyright registration which may
be available in respect thereof. Any invention, discovery or other work for
which none of U.S. Robotics' equipment, supplies, facilities, or confidential
information was used and which was developed entirely on Mr. McCartney's own
time, is exempted from this Section 8 so long as it (i) does not relate in any
way to U.S. Robotics' business, or actual or demonstrably anticipated research
and development; and (ii) does not result in any way from Mr. McCartney's work
for U.S. Robotics.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render the same valid, or (ii) not applicable
to given circumstances, or (iii) excised from this Agreement, as the situation
may require, and this Agreement shall be construed and enforced as if such
provision had been included herein as so modified in scope or application, or
had not been included herein, as the case may be.
8
<PAGE> 9
10. ARBITRATION OF DISPUTES. In the event of any controversy among the
parties hereto arising out of, or relating to, this Agreement which cannot be
settled amicably by the parties (other than a controversy contemplated by
Sections 6, 7, 8 and 11 herein), such controversy shall be submitted to binding
arbitration. Either the Company or Mr. McCartney may institute such
arbitration proceeding by giving written notice to the other party and by
designating one independent arbitrator. Unless such independent arbitrator
alone is acceptable to the other party, such other party shall designate within
ten (10) days following receipt of such notice, a second independent
arbitrator, and such two arbitrators shall thereafter select a third
independent arbitrator. A hearing shall be held by the arbitrator or
arbitrators in the City of Chicago, Illinois, and a decision of the matter so
submitted shall be rendered promptly in accordance with the rules of the
American Arbitration Association. The decision of the arbitrator or, if more
than one, a majority of the arbitrators shall be final and binding upon all
parties hereto. Judgment upon the award rendered may be entered in any court
having jurisdiction thereof. The cost of the arbitration shall be borne by the
Company.
11. ENFORCEMENT. The Company will be entitled to institute proceedings
and avail itself of all remedies at law or in equity to recover damages
occasioned by a breach or threatened breach of any of the provisions of this
Agreement by Mr. McCartney and shall have the right to pursue one or more of
such proceedings and remedies simultaneously or from time to time. Mr.
McCartney hereby acknowledges that the Company would suffer irreparable injury
if the provisions of Sections 6, 7 and 8 herein, which shall survive the
termination of this Agreement, were breached and that the Company's remedies at
law would be inadequate in the event of such breach or threatened breach.
Accordingly, Mr. McCartney hereby agrees that any such breach or threatened
breach may, in addition to any and all other available remedies, be
preliminarily and permanently enjoined by any court of competent jurisdiction
without any requirement that the Company post a bond.
12. LEGAL FEES AND EXPENSES. In the event of litigation or arbitration
proceeding under this Agreement, both the Company and Mr. McCartney shall pay
their own attorneys' fees and other legal expenses; provided, however, that (i)
the Company shall pay Mr. McCartney's attorneys' fees and legal expenses in
connection with any proceeding which results in a court refusing to issue a
preliminary or permanent injunction against Mr. McCartney due to his alleged
breach or threatened breach of any provision of this Agreement, and (ii) the
Company shall pay the reasonable legal fees and expenses which Mr. McCartney
may incur in connection with the enforcement of this Agreement in connection
with the termination of the Employment Term under Subsections (c) (disability)
and (d) (termination by Mr. McCartney for Good Reason) of Section 5 herein or
due to the termination of the Employment Term by the Company for any reason
other than as provided in Section 5 herein, including but not limited to
termination without "cause" as such term is defined in Subsection (a) of
Section 5 herein.
Such fees and expenses shall be paid in cash within forty-five (45) days
after the submission to the Company's Secretary, and inquiry into the
reasonableness of such fees and expenses shall not delay such payment.
13. GENERAL PROVISIONS.
(a) NOTICES. Any notice, request, demand or other communication required
or permitted to be given hereunder shall be in writing and personally delivered
or sent by registered or certified mail, return receipt requested, or by a
facsimile, telegram or telex followed by a confirmation letter sent by
registered or certified mail, return receipt requested, addressed as follows:
To the Company: U.S. Robotics Corporation
8100 McCormick Blvd.
Skokie, Illinois 60076
Attention: Vice President of Human Resources
cc: General Counsel
To Mr. McCartney: Mr. John McCartney
[Omitted]
9
<PAGE> 10
Either the Company or Mr. McCartney may, at any time, by notice to the other,
designate another address for service of notice on such party. When the
letter, facsimile, telegram or telex is dispatched as provided for above, the
notice shall be deemed to be made when the addressee receives the letter,
facsimile, telegram or telex, or upon the third (3rd) business day after the
date it is sent, whichever is earlier.
(b) AMENDMENTS. Neither this Agreement nor any of the terms or conditions
hereof may be waived, amended or modified except by means of a written
instrument duly executed by the party to be charged therewith.
(c) CAPTIONS AND HEADINGS. The captions and Section headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
(d) GOVERNING LAW. This Agreement, and all matters or disputes relating
to the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(e) SUCCESSORS AND ASSIGNS. In light of the unique personal services to
be performed by Mr. McCartney hereunder, it is acknowledged and agreed that any
purported or attempted assignment or transfer by Mr. McCartney of this
Agreement or any of Mr. McCartney's duties, responsibilities, or obligations
hereunder shall be void. The Company shall not assign this Agreement to any
third party entity which is not affiliated with the Company, the Parent
Corporation or any of their direct or indirect subsidiaries. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and permitted assigns.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
(g) ENTIRE AGREEMENT. Except as otherwise set forth or referred to in
this Agreement, this Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
(h) RELIANCE BY THIRD PARTIES. This Agreement is intended for the sole
and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit therefrom absent the express
written consent of the party to be charged with such reliance or benefit.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
ATTEST: U.S. ROBOTICS ACCESS CORP.
/s/ GEORGE A. VINYARD By: /s/ CASEY COWELL
George A. Vinyard, Secretary Casey Cowell, Chief Executive Officer
/s/ JOHN MCCARTNEY
John McCartney
10
<PAGE> 1
EXHIBIT 10.3
U.S. ROBOTICS ACCESS CORP.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made effective as of the 1st
day of January, 1997, by and between U.S. Robotics Access Corp., a Delaware
corporation (the "Company"), and JONATHAN N. ZAKIN ("Mr. Zakin").
RECITALS
WHEREAS, the Company is engaged in the business of designing,
manufacturing and selling data communications equipment, including modems, and
other high technology products; and
WHEREAS, Mr. Zakin has acknowledged knowledge, skill and experience; and
WHEREAS, the Company desires to obtain the benefit of Mr. Zakin's
knowledge, skill, and experience and, therefore, is willing to engage the
services of Mr. Zakin upon the terms set forth in this Agreement; and
WHEREAS, Mr. Zakin is willing to render services to the Company and its
affiliates on the terms set forth herein;
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Mr. Zakin agree as follows:
1. EMPLOYMENT.
(a) EMPLOYMENT. The Company hereby employs Mr. Zakin and Mr. Zakin hereby
accepts employment by the Company, subject to the terms set forth in this
Agreement.
(b) EMPLOYMENT TERM. The term of Mr. Zakin's employment under this
Agreement ("Employment Term") shall begin on January 1, 1997, and shall
continue for a period of three (3) consecutive calendar years, unless
terminated sooner in accordance with this Agreement. On each January 1 during
the Employment Term, the Employment Term shall be automatically extended by an
additional one-year period unless a notice of non-extension is given by one
party to the other at least sixty (60) days prior to January 1.
(c) TITLE AND DUTIES. Mr. Zakin's title shall be Executive Vice
President, Business Development and Corporate Strategy, of the Company's parent
corporation, U.S. Robotics Corporation (the "Parent Corporation"), and he shall
possess such powers and duties normally incident to such position, as he
currently exercises and performs and as provided in the By-laws and in
accordance with Delaware General Corporation Law. Mr. Zakin's title and duties
may be changed at the discretion of the Board of Directors of the Parent
Corporation. During the Employment Term, Mr. Zakin shall faithfully discharge
his duties and responsibilities in a diligent manner, devoting substantially
all of his working time to the affairs of the Parent Corporation and its
subsidiaries (collectively, "U.S. Robotics").
2. COMPENSATION AND RELATED MATTERS.
(a) SALARY. For services rendered by Mr. Zakin to U.S. Robotics and upon
the condition that Mr. Zakin fully and faithfully perform all of his duties and
obligations owed during the Employment Term under this Agreement, the Company
shall pay Mr. Zakin an annual base salary equal to $400,000, payable in
twenty-six equal
<PAGE> 2
bi-weekly installments per year less income tax withholdings and other normal
employee deductions. This base salary set forth herein shall be reviewed
annually by the Stock Option and Compensation Committee (the "Stock Option and
Compensation Committee") of the Board of Directors of the Parent Corporation at
the end of each fiscal year of the Company beginning with the fiscal year
ending on or about September 30, 1997 (hereafter "Fiscal Year"), or at such
other times as deemed appropriate by the Stock Option and Compensation
Committee, and may, at the sole discretion of the Stock Option and Compensation
Committee, be increased by an amount which it deems appropriate.
(b) BONUSES. Mr. Zakin shall be eligible to receive with respect to each
Fiscal Year during the Employment Term quarterly and annual bonuses under the
Parent Corporation's Senior Executive Performance Bonus Plan or a comparable
bonus program which would afford him the opportunity to earn a substantially
equivalent bonus, subject to the terms, conditions, and restrictions as set
forth in such bonus program. The minimum bonus target set for each Fiscal
Year shall not be less than an amount equal to the sum of the amounts of the
Threshold Bonus, the maximum Incremental Threshold Bonus and the Base Target
Bonus for him for the 1997 Fiscal Year as heretofore determined by the Stock
Option and Compensation Committee.
(c) STOCK OPTION PLAN. Mr. Zakin shall be entitled to receive such
options to purchase the common stock of the Parent Corporation as shall be
granted by the Stock Option and Compensation Committee pursuant to the Parent
Corporation's Executive Officers and Directors Stock Option Plan.
(d) FRINGE BENEFITS. During the Employment Term, Mr. Zakin shall be
eligible to receive reasonable amounts of paid, noncumulative vacation per
year, to be taken at a time or times reasonably agreeable to both Mr. Zakin and
the Company, and shall be eligible to participate in and receive coverage and
benefits under all group insurance, pension, profit sharing, bonus, stock
option, stock ownership and other employee benefit plans, programs and
arrangements of U.S. Robotics which are now or hereafter adopted by U.S.
Robotics for the benefit of its senior executive employees, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plans, programs and arrangements. U. S. Robotics shall not make any changes in
such plans, programs, and arrangements which would adversely affect Mr. Zakin's
(or, if Section 3 herein is applicable, his spouse's or dependents') rights or
benefits thereunder, unless such change occurs pursuant to a plan, program or
arrangement applicable to all senior executive employees of the Parent
Corporation and does not result in a proportionately greater reduction in the
rights of or benefits to Mr. Zakin as compared with any other senior executive
employee of the Parent Corporation. The Company shall also provide Mr. Zakin
with certain perquisites, payable at the Company's expense, which are offered
to other senior executive employees and which are reasonable, necessary and in
the best interests of U.S. Robotics.
(e) AUTOMOBILE ALLOWANCE. During the Employment Term, the Company shall
pay to Mr. Zakin a monthly automobile allowance in the amount of $1,100, which
amount may be paid in periodic installments, not less frequently than monthly.
Such allowance may be reviewed by the Stock Option and Compensation Committee
at the end of each Fiscal Year, or at such other times as deemed appropriate by
the Stock Option and Compensation Committee, and may, at the sole discretion of
the Stock Option and Compensation Committee, be increased by an amount which it
deems appropriate. If such allowance is increased by the Stock Option and
Compensation Committee, it shall not be decreased thereafter during the
Employment Term.
(f) BUSINESS EXPENSES. The Company shall reimburse Mr. Zakin for the
reasonable and necessary business expenses incurred by Mr. Zakin in connection
with the performance of his duties and obligations as set forth herein during
the Employment Term. Such expenses shall include, but are not limited to,
cellular telephone expenses and all expenses of travel and living expenses
while away from home on business or at the request and in the service of the
Company, provided that such expenses are properly incurred and accounted for in
accordance with the applicable policies and procedures established by the
Company. Reimbursement shall be made upon the presentation by Mr. Zakin to the
Company of reasonably detailed statements of such expenses.
(g) EFFECT OF SALARY AND OTHER BENEFITS. Salary payments pursuant to
Subsection (a) of this Section 2 shall not be deemed exclusive and shall not
prevent Mr. Zakin from participating in any other compensation or benefit plan,
program or arrangement of U.S. Robotics as provided in this Section 2. Such
salary payments
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<PAGE> 3
(including any increased salary payments) shall not in any way limit or reduce
any other obligation of the Company pursuant to this Agreement, and no other
compensation, benefit or payment hereunder shall in any way limit or reduce the
obligation of the Company to pay Mr. Zakin's salary pursuant to Subsection (a)
of this Section 2. At the same time, nothing paid to Mr. Zakin under any
benefit plan, program, or arrangement under this Section 2, which is presently
in effect or made available in the future, shall be deemed to be in lieu of the
salary payable to Mr. Zakin pursuant to Subsection (a) of this Section 2.
(h) PRORATION OF COMPENSATION. Any compensation payable to Mr. Zakin
under this Section 2, in respect of any Fiscal Year during which the Employment
Term terminates prior to the last day of such Fiscal Year shall, unless
otherwise provided in the applicable plan, program or arrangement, be prorated
in accordance with the number of days in such Fiscal Year during which he is so
employed.
3. BENEFITS FOLLOWING EMPLOYMENT TERM OR TERMINATION. For a period of
three (3) years following the Date of Termination of the Employment Term, other
than as provided in Subsection (a) (cause) of Section 5 herein, the Company
shall permit, at the Company's expense, Mr. Zakin, his spouse and dependents,
as applicable (the "Benefit Participants"), to participate in all group medical
and health insurance plans and employee benefit plans (including fringe
benefits), programs, and arrangements now or hereafter made available to the
senior executive employees of the Parent Corporation (the "Plans") (including
but not limited to such Plans in which Mr. Zakin was entitled to participate
immediately prior to the Date of Termination), in the same manner as provided
to its other senior executive employees; provided, however, that this Section 3
shall not apply in the event that (i) U.S. Robotics shall hereafter terminate
the applicable Plan, or (ii) the participation of the Benefit Participants in
such Plan is prohibited by law or, if applicable, would disqualify such Plan as
a tax qualified plan pursuant to the Internal Revenue Code of 1986, as amended,
or any successor thereto (the "Code"), or (iii) the participation of the
Benefit Participants violates the general terms and provisions of such
applicable Plan. In the event that any of the Benefit Participants'
participation in such Plans is prohibited by law or, if applicable, would
disqualify the Plan as a tax qualified plan, the Company shall permit the
Benefit Participants to acquire substantially comparable coverage or benefits,
at the Company's expense, from a source of Mr. Zakin's or his spouse's
choosing, notwithstanding the fact that such coverage or benefit will result in
a higher cost than if provided under a U.S. Robotics Plan. However, in no
event will the Benefit Participants receive from the Company the coverage and
benefits contemplated by this Section 3 if the Benefit Participants receive
such coverage and benefits from any other source.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) COMPENSATION UPON TERMINATION FOR CAUSE. If the Employment Term shall
be terminated "for cause," as provided in Subsection (a) of Section 5 herein,
the Company shall have no further liability under this Agreement except to pay
Mr. Zakin (i) the value of any accrued salary or other compensation due to Mr.
Zakin pursuant to Section 2 herein (including any earned but unpaid bonus
payment or prorata share of such earned bonus payment, but excluding deferred
bonus payments based upon annual Fiscal Year performance), upon the date of
delivery of Notice of Termination to Mr. Zakin, at the rate in effect at the
time such Notice of Termination is delivered, and (ii) any benefits payable
under all employee benefit plans, programs and arrangements of U.S. Robotics in
which Mr. Zakin is a participant on the date of delivery of Notice of
Termination.
(b) COMPENSATION UPON DEATH. If the Employment Term is terminated by Mr.
Zakin's death, the Company shall have no further liability under this Agreement
except to pay Mr. Zakin's spouse, or if he leaves no spouse, to his estate or
devisee, legatee or other designee, as applicable, (i) the value of any accrued
salary or other compensation due to Mr. Zakin pursuant to Section 2 herein
(including any earned but unpaid bonus payment or prorata share of such earned
bonus payment, but excluding deferred bonus payments based upon annual Fiscal
Year performance), at the time of his death, (ii) an amount equal to the next
six (6) bi-weekly salary payments payable to Mr. Zakin under Subsection (a) of
Section 2 herein at the time of his death, payable on the dates when such
payments would otherwise have been made had Mr. Zakin's death not occurred,
(iii) any death benefit payable under all employee benefit plans, programs and
arrangements of U.S. Robotics in which Mr. Zakin is a participant on the date
of his death, and (iv) any Plan coverage or benefit continuation for Mr.
Zakin's spouse and dependents, as applicable, under Section 3 herein.
3
<PAGE> 4
(c) COMPENSATION UPON DISABILITY. During any period that Mr. Zakin fails
to perform his duties hereunder as a result of incapacity due to an "impaired
condition," as such term is defined in Subsection (c) of Section 5 herein (the
"disability period"), Mr. Zakin shall continue to receive his full salary at
the rate then in effect for the disability period until the Employment Term is
terminated pursuant to Subsection (c) of Section 5 herein; provided, however,
that such salary payments so made to Mr. Zakin pursuant hereto shall be reduced
by the sum of the amounts, if any, payable to Mr. Zakin prior to or during this
period, as the result of such incapacity, under any disability benefit plan or
insurance program of U.S. Robotics in which Mr. Zakin participates.
In the event of termination of the Employment Term pursuant to Subsection
(c) (disability) of Section 5 herein, the Company shall have no further
responsibilities under this Agreement except (i) to pay the value of any
accrued salary or other compensation due under Section 2 herein (including any
earned but unpaid bonus payment or prorata share of such earned bonus payment,
but excluding deferred bonus payments based upon annual Fiscal Year
performance), on the Date of Termination to Mr. Zakin (or in the event of Mr.
Zakin's subsequent death, to his estate or devisee, legatee or other designee,
as applicable), together with any benefits payable under all employee benefit
plans, programs or arrangements of U.S. Robotics in which Mr. Zakin is a
participant on the Date of Termination, (ii) to pay the value of any severance
compensation owed to Mr. Zakin (or in the event of Mr. Zakin's subsequent
death, to his estate or devisee, legatee or other designee, as applicable), as
set forth in Subsection (f)(i) of this Section 4 (which shall survive the
termination of the Employment Term) and (iii) to provide for any Plan coverage
or benefit continuation for Mr. Zakin, his spouse and dependents, as applicable
under Section 3 herein.
(d) COMPENSATION UPON TERMINATION BY MR. ZAKIN. If Mr. Zakin terminates
the Employment Term due to "impaired health" or for Good Reason, as such terms
are defined in Subsection (d) of Section 5 herein, the Company shall have no
further responsibility under this Agreement except (i) to pay the value of any
accrued salary or other compensation due under Section 2 herein (including any
earned but unpaid bonus payment or prorata share of such earned bonus payment,
but excluding deferred bonus payments based upon annual Fiscal Year
performance), on the Date of Termination to Mr. Zakin (or in the event of Mr.
Zakin's subsequent death, to his estate or devisee, legatee or other designee,
as appropriate), together with any benefits payable under all employee benefit
plans, programs or arrangements of U.S. Robotics in which Mr. Zakin is a
participant on the Date of Termination, (ii) to pay the value of any severance
compensation owed to Mr. Zakin (or in the event of Mr. Zakin's subsequent
death, to his estate or devisee, legatee or other designee, as appropriate), as
set forth in Subsection (f) of this Section 4 (which shall survive the
termination of the Employment Term) and (iii) to provide for any Plan coverage
or benefit continuation for Mr. Zakin, his spouse and dependents, as
applicable, under Section 3 herein.
(e) COMPENSATION UPON TERMINATION BY COMPANY. If the Company breaches
this Agreement by terminating the Employment Term, other than pursuant to
Subsections (a) (cause), (b) (death), or (c) (disability) of Section 5 herein,
including but not limited to termination without "cause" (as such term is
defined in Subsection (a) of Section 5 herein), the Company shall (i) pay the
value of any accrued salary or other compensation due under Section 2 herein
(including any earned but unpaid bonus payment or prorata share of such earned
bonus payment, but excluding deferred bonus payments based upon annual Fiscal
Year performance), on the Date of Termination to Mr. Zakin (or in the event of
Mr. Zakin's subsequent death, to his estate or devisee, legatee or other
designee, as appropriate), together with any benefits payable under all
employee benefit plans, programs or arrangements of U.S. Robotics in which Mr.
Zakin is a participant on the Date of Termination, (ii) pay the value of any
severance compensation owed to Mr. Zakin (or in the event of Mr. Zakin's
subsequent death, to his estate or devisee, legatee or other designee, as
appropriate), as set forth in Subsection (f) of this Section 4 (which shall
survive the termination of the Employment Term) and (iii) provide for any Plan
coverage or benefit continuation for Mr. Zakin, his spouse and dependents, as
applicable, under Section 3 herein.
(f) SEVERANCE COMPENSATION.
(i) TERMINATION DUE TO DISABILITY OR IMPAIRED HEALTH. Upon the
termination of the Employment Term under Subsection (c) (disability) of Section
5 herein or upon the termination of the Employment Term by Mr. Zakin due to
"impaired health" (as such term is defined in Subsection (d) of Section 5
herein), the Company shall pay to Mr. Zakin (or in the event of Mr. Zakin's
subsequent death, his estate or devisee, legatee or other designee, as
appropriate) all compensation and benefits specified under Section 2 herein,
for a period of one
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(1) year from the Date of Termination, payable in the same manner as if the
employment Term had not been terminated.
(ii) TERMINATION BY COMPANY OR BY MR. ZAKIN FOR GOOD REASON. If the
Company breaches this Agreement by terminating the Employment Term, other than
pursuant to Subsections (a) (cause), (b) (death) or (c) (disability) of Section
5 herein, including but not limited to termination without "cause" (as such
term is defined in Subsection (a) of Section 5 herein), or if Mr. Zakin
terminates the Employment Term for Good Reason, as such term is defined in
Subsection (d)(i) of Section 5 herein, then the Company shall pay as severance
compensation to Mr. Zakin an amount equal to (1) Mr. Zakin's annual base salary
in effect as of the Date of Termination, multiplied by three, plus (2) the sum
of the annual cash bonuses actually received by Mr. Zakin with respect to the
previous three Fiscal Years of U.S. Robotics, less the amount of cash bonuses,
if any, theretofore paid to him with respect to the Fiscal Year in which such
termination occurs. Such severance compensation shall be payable in cash in a
lump sum on or before the fifteenth (15th) day following the Date of
Termination; provided, however, that where Sections 280G and Section 4999 of
the Internal Revenue Code of 1986, as amended, or any successor thereto (the
"Code") are applicable, then such severance pay shall amount to one dollar less
than the maximum amount that Mr. Zakin may receive without having such payment
be treated as an excess parachute payment under Section 280G of the Code. Such
severance compensation shall not be subject to mitigation or offset due to
other earnings of Mr. Zakin.
5. TERMINATION.
(a) CAUSE. The Employment Term may be terminated at any time at the
option of the Company "for cause" (as such term is hereinafter defined),
effective upon the giving of written notice of termination to Mr. Zakin. As
used herein, the term "for cause" shall mean and be limited to: (i) any felony
conviction, (ii) willful misconduct or gross negligence in connection with the
performance of Mr. Zakin's duties, responsibilities, agreements and covenants
hereunder, which shall continue for a period of thirty (30) days after the
receipt of notice from the Company, (iii) refusal to comply with reasonable
rules, regulations, policies, directions and restrictions as may be established
from time to time by the Board, whereby such refusal continues for thirty (30)
days after the receipt of notice from the Company, or (iv) repeated abuse
(following at least one written warning from the Company) of alcohol or any
illegal use of narcotics or other controlled substances.
If Mr. Zakin is advised that he is being terminated for cause and, within
fifteen (15) days thereafter submits to the Board of Directors of the Parent
Corporation a written objection to such determination, this Subsection will not
be applicable unless the Board of Directors of the Parent Corporation, at or
before its next regularly scheduled meeting, determines by majority vote that
Mr. Zakin has been terminated for cause.
(b) DEATH. The Employment Term shall terminate automatically upon the
death of Mr. Zakin.
(c) DISABILITY. In the event Mr. Zakin becomes mentally or physically
"disabled" during the Employment Term, the Employment Term shall terminate on
the Date of Termination (as such term is defined in Subsection (f) of this
Section 5) once such disability is "established." As used in this Subsection,
the term "disabled" means suffering from any mental or physical condition,
other than that resulting from the use of alcohol or illegal use of narcotics
or other controlled substances, which renders Mr. Zakin unable to substantially
perform all of his material duties and services under this Agreement in a
satisfactory manner (an "impaired condition") for a period of one hundred
twenty (120) consecutive days or for more than one hundred eighty (180) days
in any twelve (12) month period. For purposes of this Subsection, the date
that Mr. Zakin's disability is "established" shall be, in the case of an
impaired condition which exists for a period of one hundred twenty (120)
consecutive days, the one hundred twenty-first (121) day on which such impaired
condition exists, and, in the case of an impaired condition existing for more
than one hundred eighty (180) days in any twelve (12) month period, the one
hundred eighty-first (181) day on which such impaired condition exists.
(d) TERMINATION BY MR. ZAKIN. Mr. Zakin may terminate the Employment
Term (1) for Good Reason, or (2) if his health should become impaired to an
extent that makes his continued performance of his duties and obligations
hereunder hazardous to his physical or mental health or his life ("impaired
health"), provided that
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<PAGE> 6
Mr. Zakin shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request, Mr. Zakin shall submit to an examination by a doctor selected by the
Company and such doctor shall have concurred in the conclusion of Mr. Zakin's
doctor, or (3) voluntarily, without Good Reason and not due to "impaired
health." In the event that Mr. Zakin voluntarily terminates the Employment
Term without Good Reason and not due to "impaired health", such termination
shall be treated as if it were a termination "for cause" by the Company.
(i) GOOD REASON DEFINED. For purposes of this Agreement, "Good Reason"
shall mean:
(a) a Change in Control of the Parent Corporation (as defined in
Subsection (d)(ii) below), with termination of the Employment Term
occurring within one year following such Change in Control;
(b) a decrease in the total amount of Mr. Zakin's base salary below
its level in effect on the date hereof, as provided in Subsection (a) of
Section 2 herein;
(c) a reduction in Mr. Zakin's title, duties, job responsibilities
or working conditions without Mr. Zakin's consent, whereby the
determination of whether a reduction in such title, duties, job
responsibilities or working conditions has occurred is in the sole
discretion of Mr. Zakin;
(d) a failure by the Company to comply with any material provision
of this Agreement which has not been cured within ten (10) days after
notice of such noncompliance has been given by Mr. Zakin to the Company;
or
(e) any purported termination of Mr. Zakin's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements
of Subsection (e) of this Section 5 (and for purposes of this Agreement
no such purported termination shall be effective).
For the purpose of this Subsection (d)(i), no action or inaction by Mr.
Zakin within ninety (90) days following the occurrence of the foregoing events
shall be deemed a consent by Mr. Zakin to such events, absent written consent
from Mr. Zakin to the Company.
(ii) CHANGE IN CONTROL DEFINED. A "Change in Control" shall be deemed to
have occurred:
(a) upon any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other
than U.S. Robotics, any trustee or other fiduciary holding securities
under any employee benefit plan of U.S. Robotics, or any company owned,
directly or indirectly, by the stockholders of the Parent Corporation in
substantially the same proportions as their ownership of common stock of
the Parent Corporation), becoming the owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Parent Corporation representing twenty-five percent (25%) or more of the
combined voting power of the Parent Corporation's then outstanding
securities;
(b) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors, and any
new director (other than a director designated by a person who has
entered into an agreement with the Parent Corporation to effect a
transaction described in paragraph (a), (c) or (d) of this Subsection or
a director whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or contests by or on
behalf of a person other than the Board of Directors of the Parent
Corporation) whose election by the Board of Directors or nomination for
election by the Parent Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either
were directors at the beginning of the two-year period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors;
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<PAGE> 7
(c) upon the merger or consolidation of the Parent Corporation with
any other corporation, other than a merger or consolidation which would
result in the voting securities of the Parent Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the
voting securities of the Parent Corporation or such surviving entity
(which entity shall thereafter be the "Parent Corporation" as defined
herein) outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to implement a
recapitalization of the Parent Corporation (or similar transaction) in
which no person (other than those covered by the exceptions in (a) above)
acquires more than twenty-five percent (25%) of the combined voting power
of the Parent Corporation's then outstanding securities shall not
constitute a Change in Control of the Parent Corporation; or
(d) the stockholders of the Parent Corporation approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Parent Corporation of all or substantially all of the
Parent Corporation's assets other than the sale of all or substantially
all of the assets of the Parent Corporation to a person or persons who
beneficially own, directly or indirectly, at least fifty percent (50%) or
more of the combined voting power of the outstanding voting securities of
the Parent Corporation at the time of the sale.
(e) NOTICE OF TERMINATION. Any termination of the Employment Term by the
Company or by Mr. Zakin (other than termination pursuant to Subsection (b)
(death) of this Section 5) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employment Term under the Section and Subsection so
indicated.
(f) DATE OF TERMINATION. "Date of Termination" shall mean the following:
if the Employment Term is terminated by (i) Subsection (a) (cause) of this
Section 5, the date specified in the Notice of Termination, (ii) Subsection (b)
(death) of this Section 5, the date of Mr. Zakin's death, (iii) Subsection (c)
(disability) of this Section 5, thirty (30) days after Notice of Termination is
given (provided that Mr. Zakin shall not have returned to the satisfactory
performance of his duties on a full-time basis during such thirty (30) day
period), and (iv) if for any other reason, the date on which a Notice of
Termination is given; provided, however, that if, within (30) days after any
Notice of Termination is given, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual agreement of the parties, by a binding and final
arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected).
6. OTHER BUSINESS ACTIVITIES. During the Employment Term, Mr. Zakin shall
not, without the prior written authorization of the Board of Directors of the
Parent Corporation, directly or indirectly render services of a business,
professional or commercial nature (whether for compensation or otherwise) to
any person or entity competitive or adverse to U.S. Robotics' business welfare
or engage in any activity whether alone, as a partner, or as an officer,
director, employee, consultant, independent contractor, or stockholder in any
other corporation, person, or entity which is competitive with or adverse to
U.S. Robotics' business welfare. This Section 6 shall not, however, prevent
Mr. Zakin from investing in securities issued by any such competitive or
adverse corporation, provided the holdings thereof by Mr. Zakin do not
constitute more than five percent (5%) of any one class of such securities.
7. CONFIDENTIAL INFORMATION.
(a) DISCLOSURE AND USE. Mr. Zakin shall not disclose or use at any time,
either during or subsequent to the Employment Term, any trade secrets or other
confidential information, whether patentable or not, of U.S.
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<PAGE> 8
Robotics, including but not limited to, any technical or non-technical data,
any formula, pattern, compilation, program, device, method, technique,
drawing, process, financial data, or any list of actual or potential customers
or suppliers, of which Mr. Zakin is or becomes informed or aware during the
Employment Term, whether or not developed by Mr. Zakin, except (i) as may be
reasonably required for Mr. Zakin to perform Mr. Zakin's employment duties with
U.S. Robotics, (ii) to the extent such information becomes generally available
to the public through no wrongful act of Mr. Zakin, (iii) information which has
been disclosed as a result of a subpoena or other legal process, provided that
Mr. Zakin has provided the Company with prompt written notice of the receipt
thereof, or (iv) unless Mr. Zakin shall first secure the Company's prior
written authorization. This covenant shall survive the termination of Mr.
Zakin's employment hereunder, and shall remain in effect and be enforceable
against Mr. Zakin for so long as any such U.S. Robotics secret or confidential
information retains economic value, whether actual or potential, from not being
generally known to other persons who can obtain economic value from its
disclosure or use. Mr. Zakin agrees to execute such further agreements and/or
confirmations of Mr. Zakin's obligations to U.S. Robotics concerning
non-disclosure of U.S. Robotics trade secrets and confidential information as
U.S. Robotics may reasonably require from time-to-time.
(b) RETURN OF MATERIALS. Upon termination of the Employment Term, Mr.
Zakin (or in the event of termination due to Mr. Zakin's death, his estate or
devisee, legatee or other designee, as applicable) shall promptly deliver to
the Company all materials of a secret or confidential nature relating to U.S.
Robotics' business, which are in the possession or under the control of Mr.
Zakin.
8. INVENTIONS AND DISCOVERIES. Mr. Zakin hereby assigns to the Company or
its designee all of Mr. Zakin's rights, title and interest in and to all
inventions, discoveries, processes, designs, works of authorship and other
intellectual property and all improvements on existing inventions, discoveries,
processes, designs, works and other intellectual property made or discovered by
Mr. Zakin during the Employment Term. Promptly upon the development, making,
creation, or discovery of any invention, discovery, process, design, work,
intellectual property or improvement, Mr. Zakin shall disclose the same to the
Company and shall execute and deliver to the Company or its designee such
reasonable documents as the Company may request to confirm the assignment of
Mr. Zakin's rights therein, and if requested by the Company, shall assist the
Company or its designee in applying for and prosecuting any patents and any
trademark or copyright registration which may be available in respect thereof.
Any invention, discovery or other work for which none of U.S. Robotics'
equipment, supplies, facilities, or confidential information was used and which
was developed entirely on Mr. Zakin's own time, is exempted from this Section 8
so long as it (i) does not relate in any way to U.S. Robotics' business, or
actual or demonstrably anticipated research and development; and (ii) does not
result in any way from Mr. Zakin's work for U.S. Robotics.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render the same valid, or (ii) not applicable
to given circumstances, or (iii) excised from this Agreement, as the situation
may require, and this Agreement shall be construed and enforced as if such
provision had been included herein as so modified in scope or application, or
had not been included herein, as the case may be.
10. ARBITRATION OF DISPUTES. In the event of any controversy among the
parties hereto arising out of, or relating to, this Agreement which cannot be
settled amicably by the parties (other than a controversy contemplated by
Sections 6, 7, 8 and 11 herein), such controversy shall be submitted to binding
arbitration. Either the Company or Mr. Zakin may institute such arbitration
proceeding by giving written notice to the other party and by designating one
independent arbitrator. Unless such independent arbitrator alone is acceptable
to the other party, such other party shall designate within ten (10) days
following receipt of such notice, a second independent arbitrator, and such two
arbitrators shall thereafter select a third independent arbitrator. A hearing
shall be held by the arbitrator or arbitrators in the City of Chicago,
Illinois, and a decision of the matter so submitted shall be rendered promptly
in accordance with the rules of the American Arbitration Association. The
decision of the arbitrator or, if more than one, a majority of the arbitrators
shall be final and binding upon all parties hereto. Judgment upon the award
rendered may be entered in any court having jurisdiction thereof. The cost of
the arbitration shall be borne by the Company.
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<PAGE> 9
11. ENFORCEMENT. The Company will be entitled to institute proceedings
and avail itself of all remedies at law or in equity to recover damages
occasioned by a breach or threatened breach of any of the provisions of this
Agreement by Mr. Zakin and shall have the right to pursue one or more of such
proceedings and remedies simultaneously or from time to time. Mr. Zakin hereby
acknowledges that the Company would suffer irreparable injury if the provisions
of Sections 6, 7 and 8 herein, which shall survive the termination of this
Agreement, were breached and that the Company's remedies at law would be
inadequate in the event of such breach or threatened breach. Accordingly, Mr.
Zakin hereby agrees that any such breach or threatened breach may, in addition
to any and all other available remedies, be preliminarily and permanently
enjoined by any court of competent jurisdiction without any requirement that
the Company post a bond.
12. LEGAL FEES AND EXPENSES. In the event of litigation or arbitration
proceeding under this Agreement, both the Company and Mr. Zakin shall pay their
own attorneys' fees and other legal expenses; provided, however, that (i) the
Company shall pay Mr. Zakin's attorneys' fees and legal expenses in connection
with any proceeding which results in a court refusing to issue a preliminary or
permanent injunction against Mr. Zakin due to his alleged breach or threatened
breach of any provision of this Agreement, and (ii) the Company shall pay the
reasonable legal fees and expenses which Mr. Zakin may incur in connection with
the enforcement of this Agreement in connection with the termination of the
Employment Term under Subsections (c) (disability) and (d) (termination by Mr.
Zakin for Good Reason) of Section 5 herein or due to the termination of the
Employment Term by the Company for any reason other than as provided in Section
5 herein, including but not limited to termination without "cause" as such term
is defined in Subsection (a) of Section 5 herein.
Such fees and expenses shall be paid in cash within forty-five (45) days
after the submission to the Company's Secretary, and inquiry into the
reasonableness of such fees and expenses shall not delay such payment.
13. GENERAL PROVISIONS.
(a) NOTICES. Any notice, request, demand or other communication required
or permitted to be given hereunder shall be in writing and personally delivered
or sent by registered or certified mail, return receipt requested, or by a
facsimile, telegram or telex followed by a confirmation letter sent by
registered or certified mail, return receipt requested, addressed as follows:
To the Company: U.S. Robotics Corporation
8100 McCormick Blvd.
Skokie, Illinois 60076
Attention: Vice President of Human Resources
cc: General Counsel
To Mr. Zakin: Mr. Jonathan N. Zakin
[Omitted]
Either the Company or Mr. Zakin may, at any time, by notice to the other,
designate another address for service of notice on such party. When the
letter, facsimile, telegram or telex is dispatched as provided for above, the
notice shall be deemed to be made when the addressee receives the letter,
facsimile, telegram or telex, or upon the third (3rd) business day after the
date it is sent, whichever is earlier.
(b) AMENDMENTS. Neither this Agreement nor any of the terms or conditions
hereof may be waived, amended or modified except by means of a written
instrument duly executed by the party to be charged therewith.
(c) CAPTIONS AND HEADINGS. The captions and Section headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
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<PAGE> 10
(d) GOVERNING LAW. This Agreement, and all matters or disputes relating
to the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(e) SUCCESSORS AND ASSIGNS. In light of the unique personal services to
be performed by Mr. Zakin hereunder, it is acknowledged and agreed that any
purported or attempted assignment or transfer by Mr. Zakin of this Agreement or
any of Mr. Zakin's duties, responsibilities, or obligations hereunder shall be
void. The Company shall not assign this Agreement to any third party entity
which is not affiliated with the Company, the Parent Corporation or any of
their direct or indirect subsidiaries. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
(g) ENTIRE AGREEMENT. Except as otherwise set forth or referred to in
this Agreement, this Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
(h) RELIANCE BY THIRD PARTIES. This Agreement is intended for the sole
and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit therefrom absent the express
written consent of the party to be charged with such reliance or benefit.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
U.S. ROBOTICS ACCESS CORP.
ATTEST:
/s/ GEORGE A. VINYARD By: /s/ CASEY COWELL
George A. Vinyard, Secretary Casey Cowell, Chief Executive Officer
/s/ JONATHAN N. ZAKIN
Jonathan N. Zakin
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<PAGE> 1
EXHIBIT 10.4
U.S. ROBOTICS ACCESS CORP.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made effective as of the 1st
day of January, 1997, by and between U.S. Robotics Access Corp., a Delaware
corporation (the "Company"), and [FULL NAME] ("Mr. [LAST NAME]").
RECITALS
WHEREAS, the Company is engaged in the business of designing,
manufacturing and selling data communications equipment, including modems, and
other high technology products; and
WHEREAS, Mr. [LAST NAME] has acknowledged knowledge, skill and experience;
and
WHEREAS, the Company desires to obtain the benefit of Mr. [LAST NAME]'s
knowledge, skill, and experience and, therefore, is willing to engage the
services of Mr. [LAST NAME] upon the terms set forth in this Agreement; and
WHEREAS, Mr. [LAST NAME] is willing to render services to the Company on
the terms set forth herein;
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Mr. [LAST NAME] agree as follows:
1. EMPLOYMENT.
(a) EMPLOYMENT. The Company hereby employs Mr. [LAST NAME] and Mr. [LAST
NAME] hereby accepts employment by the Company, subject to the terms set forth
in this Agreement.
(b) EMPLOYMENT TERM. The term of Mr. [LAST NAME]'s employment under this
Agreement ("Employment Term") shall begin on January 1, 1997, and shall
continue for a period of two (2) consecutive calendar years, unless terminated
sooner in accordance with this Agreement. The Employment Term shall be
automatically extended for successive one-year periods unless a notice of
non-extension is given by one party to the other at least one hundred twenty
(120) days prior to the expiration of the then current term.
(c) TITLE AND DUTIES. Mr. [LAST NAME]'s title shall be __________________
of the Company's parent corporation, U.S. Robotics Corporation (the "Parent
Corporation") and he shall possess such powers and duties as are normally
incident to such position, as he currently exercises and performs and as
provided in the By-laws, all in accordance with Delaware General Corporation
Law. Mr. [LAST NAME]'s title, powers and duties may be changed by the Chief
Operating Officer of the Parent Corporation, in his discretion, subject to the
approval of the Chief Executive Officer, or by the Chief Executive Officer, in
his discretion. During the Employment Term, Mr. [LAST NAME] shall faithfully
discharge his duties and responsibilities in a diligent manner, devoting
substantially all of his working time to the affairs of the Parent Corporation
and its subsidiaries (collectively, "U.S. Robotics").
<PAGE> 2
2. COMPENSATION AND RELATED MATTERS.
(a) SALARY. For services rendered by Mr. [LAST NAME] to U.S. Robotics and
upon the condition that Mr. [LAST NAME] fully and faithfully perform all of his
duties and obligations owed during the Employment Term under this Agreement,
the Company shall pay Mr. [LAST NAME] an annual base salary equal to
$____________, payable in twenty-six equal bi-weekly installments per year less
income tax withholdings and other normal employee deductions. The base salary
set forth herein shall be reviewed annually by the Stock Option and
Compensation Committee (the "Stock Option and Compensation Committee") of the
Board of Directors of the Parent Corporation at the end of each fiscal year of
the Company beginning with the fiscal year ending on or about September 30,
1997 (hereafter "Fiscal Year"), or at such other times as may be deemed
appropriate by the Stock Option and Compensation Committee, and may, at the
sole discretion of the Stock Option and Compensation Committee, be increased by
an amount which it deems appropriate.
(b) BONUSES. LANGUAGE FOR 1997 PARTICIPANTS IN SENIOR EXECUTIVE
PERFORMANCE BONUS PLAN. Mr. [LAST NAME] shall be eligible to receive with
respect to each Fiscal Year during the Employment Term an annual bonus under
the Parent Corporation's Senior Executive Performance Bonus Plan or a
comparable bonus program which would afford him the opportunity to earn a
substantially equivalent bonus, subject to the terms, conditions, and
restrictions as set forth in such bonus program. The minimum bonus target set
for each Fiscal Year shall not be less than an amount equal to the sum of the
amounts of the Threshold Bonus, the maximum Incremental Threshold Bonus and the
Base Target Bonus for persons in his Compensation Category for the 1997 Fiscal
Year as heretofore determined by the Stock Option and Compensation Committee.
(c) STOCK OPTION PLAN. Mr. [LAST NAME] shall receive such options to
purchase the common stock of the Parent Corporation, if any, as shall be
granted by the Stock Option and Compensation Committee, in its discretion,
pursuant to the Parent Corporation's Executive Officers and Directors Stock
Option Plan or any other stock option plan which may be applicable.
(d) FRINGE BENEFITS. During the Employment Term, Mr. [LAST NAME] shall be
eligible to receive reasonable amounts of paid, noncumulative vacation per
year, to be taken at a time or times reasonably agreeable to both Mr. [LAST
NAME] and the Company, and shall be eligible to participate in and receive
coverage and benefits under all group insurance, pension, profit sharing,
bonus, stock option, stock ownership and other employee benefit plans, programs
and arrangements of U.S. Robotics which are now or hereafter adopted by U.S.
Robotics for the benefit of its similarly situated executive employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans, programs and arrangements. U.S. Robotics shall
not make any changes in such plans, programs, and arrangements which would
adversely affect Mr. [LAST NAME]'s (or, if Section 3 herein is applicable, his
spouse's or dependents') rights or benefits thereunder, unless such change
occurs pursuant to a plan, program or arrangement applicable to all executive
employees of U.S. Robotics and does not result in a proportionately greater
reduction in the rights of or benefits to Mr. [LAST NAME] as compared with any
other similarly situated executive employee of U.S. Robotics. Mr. [LAST NAME]
will also be eligible to receive certain perquisites, payable at the Company's
expense, which are offered to other, similarly situated executive employees and
which are reasonable, necessary and in the best interests of U.S. Robotics.
(e) AUTOMOBILE ALLOWANCE. During the Employment Term, the Company shall
pay to Mr. [LAST NAME] an automobile allowance in the amount of $450 per month,
which amount may be paid in periodic installments, not less frequently than
monthly. Such allowance may be reviewed by the Chief Operating Officer at the
end of each Fiscal Year, or at such other times as deemed appropriate by the
Chief Operating Officer, and may, at the sole discretion of the Chief Operating
Officer, be increased by an amount which he deems appropriate. If such
allowance is increased as provided herein, it shall not be decreased thereafter
during the Employment Term.
(f) BUSINESS EXPENSES. The Company shall reimburse Mr. [LAST NAME] for
the reasonable and necessary business expenses incurred by Mr. [LAST NAME] in
connection with the performance of his duties and obligations as set forth
herein during the Employment Term. Such expenses shall include, but are not
limited to, cellular telephone expenses and all expenses of travel and living
expenses while away from home on business or at
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the request and in the service of the Company, provided that such expenses are
properly incurred and accounted for in accordance with the applicable policies
and procedures established by the Company. Reimbursement shall be made upon
the presentation by Mr. [LAST NAME] to the Company of reasonably detailed
statements of such expenses.
(g) EFFECT OF SALARY AND OTHER BENEFITS. Salary payments pursuant to
Subsection (a) of this Section 2 shall not be deemed exclusive and shall not
prevent Mr. [LAST NAME] from participating in any other compensation or benefit
plan, program or arrangement of U.S. Robotics as provided in this Section 2.
Such salary payments (including any increased salary payments) shall not in any
way limit or reduce any other obligation of the Company pursuant to this
Agreement, and no other compensation, benefit or payment hereunder shall in any
way limit or reduce the obligation of the Company to pay Mr. [LAST NAME]'s
salary pursuant to Subsection (a) of this Section 2. At the same time, nothing
paid to Mr. [LAST NAME] under any benefit plan, program, or arrangement under
this Section 2, which is presently in effect or made available in the future,
shall be deemed to be in lieu of the salary payable to Mr. [LAST NAME] pursuant
to Subsection (a) of this Section 2.
(h) PRORATION OF COMPENSATION. Any salary payable to Mr. [LAST NAME]
under this Section 2, in respect of any Fiscal Year during which the Employment
Term terminates prior to the last day of such Fiscal Year shall, unless
otherwise provided in the applicable plan, program or arrangement, be prorated
in accordance with the number of days in such Fiscal Year during which he is so
employed.
3. BENEFITS FOLLOWING EMPLOYMENT TERM OR TERMINATION. For a period of two
(2) years following the Date of Termination of the Employment Term, other than
as provided in Subsection (a) (cause) of Section 5 herein, the Company shall
permit, at the Company's expense, Mr. [LAST NAME], his spouse and dependents,
as applicable (the "Benefit Participants"), to participate in all group medical
and health insurance plans then made available to the executive employees of
the Company (the "Plans") (including but not limited to such Plans in which Mr.
[LAST NAME] was entitled to participate immediately prior to the Date of
Termination), in the same manner as provided to its other executive employees;
provided, however, that this Section 3 shall not apply in the event that (i)
U.S. Robotics shall hereafter terminate the applicable Plan, or (ii) the
participation of the Benefit Participants in such Plan is prohibited by law or,
if applicable, would disqualify such Plan as a tax qualified plan pursuant to
the Internal Revenue Code of 1986, as amended, or any successor thereto (the
"Code") or (iii) the participation of the Benefit Participants violates the
general terms and provisions of such applicable Plan. In the event that any of
the Benefit Participants' participation in such Plans is prohibited by law or,
if applicable, would disqualify the Plan as a tax qualified plan, the Company
shall permit the Benefit Participants to acquire substantially comparable
coverage at the Company's expense, from a source of Mr. [LAST NAME]'s or his
spouse's choosing, notwithstanding the fact that such coverage or benefit will
result in a higher cost than if provided under a U.S. Robotics Plan. However,
in no event will the Benefit Participants receive from the Company the coverage
contemplated by this Section 3 if the Benefit Participants receive such
coverage from any other source.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) COMPENSATION UPON TERMINATION FOR CAUSE. If the Employment Term shall
be terminated "for cause," as provided in Subsection (a) of Section 5 herein,
the Company shall have no further liability under this Agreement except to pay
Mr. [LAST NAME] (i) the value of any accrued salary or other compensation due
to Mr. [LAST NAME] pursuant to Section 2 herein (including any earned and
awarded but unpaid bonus payment, subject to set-off of amounts owed to the
Company, but excluding any deferred bonus payments based upon annual Fiscal
Year performance), upon the date of delivery of Notice of Termination to Mr.
[LAST NAME], at the rate in effect at the time such Notice of Termination is
delivered, and (ii) any benefits payable under all employee benefit plans,
programs and arrangements of U.S. Robotics in which Mr. [LAST NAME] is a
participant on the date of delivery of Notice of Termination.
(b) COMPENSATION UPON DEATH. If the Employment Term is terminated by Mr.
[LAST NAME]'s death, the Company shall have no further liability under this
Agreement except to pay Mr. [LAST NAME]'s spouse, or if he leaves no spouse, to
his estate or devisee, legatee or other designee, as applicable, (i) the value
of any accrued salary or other compensation due to Mr. [LAST NAME] pursuant to
Section 2 herein (including any earned
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<PAGE> 4
but unpaid bonus payment or prorata share of such earned bonus payment, but
excluding deferred bonus payments based upon annual Fiscal Year performance),
at the time of his death, (ii) an amount equal to the next six (6) bi-weekly
salary payments payable to Mr. [LAST NAME] under Subsection (a) of Section 2
herein at the time of his death, payable on the dates when such payments would
otherwise have been made had Mr. [LAST NAME]'s death not occurred, (iii) any
death benefit payable under all employee benefit plans, programs and
arrangements of the U.S. Robotics in which Mr. [LAST NAME] is a participant on
the date of his death, and (iv) any Plan coverage continuation for Mr. [LAST
NAME]'s spouse and dependents, as applicable, under Section 3 herein.
(c) COMPENSATION UPON DISABILITY. During any period that Mr. [LAST NAME]
fails to perform his duties hereunder as a result of incapacity due to an
"impaired condition," as such term is defined in Subsection (c) of Section 5
herein (the "disability period"), Mr. [LAST NAME] shall continue to receive his
full salary at the rate then in effect for the disability period until the
Employment Term is terminated pursuant to Subsection (c) of Section 5 herein;
provided, however, that such salary payments so made to Mr. [LAST NAME]
pursuant hereto shall be reduced by the sum of the amounts, if any, payable to
Mr. [LAST NAME] prior to or during this period, as the result of such
incapacity, under any disability benefit plan or insurance program of U.S.
Robotics in which Mr. [LAST NAME] participates.
In the event of termination of the Employment Term pursuant to Subsection
(c) (disability) of Section 5 herein, the Company shall have no further
responsibilities under this Agreement except (i) to pay the value of any
accrued salary or other compensation due under Section 2 herein (including any
earned but unpaid bonus payment or prorata share of such earned bonus payment,
but excluding deferred bonus payments based upon annual Fiscal Year
performance), on the Date of Termination to Mr. [LAST NAME] (or in the event of
Mr. [LAST NAME]'s subsequent death, to his estate or devisee, legatee or other
designee, as applicable), together with any benefits payable under all employee
benefit plans, programs or arrangements of U.S. Robotics in which Mr. [LAST
NAME] is a participant on the Date of Termination, (ii) to pay the value of any
severance compensation owed to Mr. [LAST NAME] (or in the event of Mr. [LAST
NAME]'s subsequent death, to his estate or devisee, legatee or other designee,
as applicable), as set forth in Subsection (f)(i) of this Section 4 (which
shall survive the termination of the Employment Term) and (iii) to provide for
any Plan coverage continuation for Mr. [LAST NAME], his spouse and dependents,
as applicable under Section 3 herein.
(d) COMPENSATION UPON TERMINATION BY MR. [LAST NAME]. If Mr. [LAST NAME]
terminates the Employment Term due to "impaired health" or for Good Reason, as
such terms are defined in Subsection (d) of Section 5 herein, the Company shall
have no further responsibility under this Agreement except (i) to pay the value
of any accrued salary or other compensation due under Section 2 herein
(including any earned but unpaid bonus payment or prorata share of such earned
bonus payment, but excluding deferred bonus payments based upon annual Fiscal
Year performance), on the Date of Termination to Mr. [LAST NAME] (or in the
event of Mr. [LAST NAME]'s subsequent death, to his estate or devisee, legatee
or other designee, as appropriate), together with any benefits payable under
all employee benefit plans, programs or arrangements of U.S. Robotics in which
Mr. [LAST NAME] is a participant on the Date of Termination, (ii) to pay the
value of any severance compensation owed to Mr. [LAST NAME] (or in the event of
Mr. [LAST NAME]'s subsequent death, to his estate or devisee, legatee or other
designee, as appropriate), as set forth in Subsection (f) of this Section 4
(which shall survive the termination of the Employment Term) and (iii) to
provide for any Plan coverage continuation for Mr. [LAST NAME], his spouse and
dependents, as applicable, under Section 3 herein.
(e) COMPENSATION UPON TERMINATION BY COMPANY. If the Company breaches
this Agreement by terminating the Employment Term, other than pursuant to
Subsections (a) (cause), (b) (death), or (c) (disability) of Section 5 herein,
including but not limited to termination without "cause" (as such term is
defined in Subsection (a) of Section 5 herein), the Company shall (i) pay the
value of any accrued salary or other compensation due under Section 2 herein
(including any earned but unpaid bonus payment or prorata share of such earned
bonus payment, but excluding deferred bonus payments based upon annual Fiscal
Year performance), on the Date of Termination to Mr. [LAST NAME] (or in the
event of Mr. [LAST NAME]'s subsequent death, to his estate or devisee, legatee
or other designee, as appropriate), together with any benefits payable under
all employee benefit plans, programs or arrangements of U.S. Robotics in which
Mr. [LAST NAME] is a participant on the Date of Termination, (ii) pay the value
of any severance compensation owed to Mr. [LAST NAME] (or in the event of Mr.
[LAST NAME]'s
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<PAGE> 5
subsequent death, to his estate or devisee, legatee or other designee, as
appropriate), as set forth in Subsection (f) of this Section 4 (which shall
survive the termination of the Employment Term) and (iii) provide for any Plan
coverage continuation for Mr. [LAST NAME], his spouse and dependents, as
applicable, under Section 3 herein.
(f) SEVERANCE COMPENSATION.
(i) TERMINATION DUE TO DISABILITY OR IMPAIRED HEALTH. Upon the
termination of the Employment Term under Subsection (c) (disability) of
Section 5 herein or upon the termination of the Employment Term by Mr.
[LAST NAME] due to "impaired health" (as such term is defined in
Subsection (d) of Section 5 herein), the Company shall pay to Mr. [LAST
NAME] (or in the event of Mr. [LAST NAME]'s subsequent death, his estate
or devisee, legatee or other designee, as appropriate) all compensation
and benefits specified under Section 2 herein, for a period of six (6)
months from the Date of Termination, payable in the same manner as if the
Employment Term had not been terminated.
(ii) TERMINATION BY COMPANY OR BY MR. [LAST NAME] FOR GOOD REASON.
If the Company breaches this Agreement by terminating the Employment
Term, other than pursuant to Subsections (a) (cause), (b) (death) or (c)
(disability) of Section 5 herein, including but not limited to
termination without "cause" (as such term is defined in Subsection (a) of
Section 5 herein), or if Mr. [LAST NAME] terminates the Employment Term
for Good Reason, as such term is defined in Subsection (d)(i) of Section
5 herein (other than due to a Change in Control, as hereinafter defined),
then the Company shall pay as severance compensation to Mr. [LAST NAME]
an amount equal Mr. [LAST NAME]'s annual base salary in effect as of the
Date of Termination, payable in cash in a lump sum on or before the
thirtieth (30th) day following the Date of Termination. Such severance
compensation shall not be subject to mitigation or offset due to other
earnings of Mr. [LAST NAME].
(iii) TERMINATION FOLLOWING A CHANGE IN CONTROL. If the Employment
Term is terminated by Mr. [LAST NAME] or by the Company within one
hundred eighty (180) days following a Change in Control, as such term is
defined in Subsection (d)(ii) of Section 5 herein, then the Company shall
pay as severance compensation to Mr. [LAST NAME] an amount equal to (1)
Mr. [LAST NAME]'s annual base salary in effect as of the Date of
Termination, plus (2) the average annual cash bonus received by Mr. [LAST
NAME] with respect to the previous three Fiscal Years of U.S. Robotics
(or, if Mr. [LAST NAME] has been employed by the Company for a period of
less than three Fiscal Years, the average annual cash bonus paid to him
during such shorter period). Such severance compensation shall be
payable in cash in a lump sum on or before the thirtieth (30th) day
following the Date of Termination. Such severance compensation shall not
be subject to mitigation or offset due to other earnings of Mr. [LAST
NAME].
5. TERMINATION.
(a) CAUSE. The Employment Term may be terminated at any time at the
option of the Company "for cause" (as such term is hereinafter defined),
effective upon the giving of written notice of termination to Mr. [LAST NAME].
As used herein, the term "for cause" shall mean and be limited to: (i) any
felony conviction, (ii) willful misconduct or gross negligence in connection
with the performance of Mr. [LAST NAME]'s duties, responsibilities, agreements
and covenants hereunder, which shall continue for a period of thirty (30) days
after the receipt of notice from the Company, (iii) refusal to comply with
reasonable rules, regulations, policies, directions and restrictions as may be
established from time to time by the Board of Directors of the Parent
Corporation, whereby such refusal continues for thirty (30) days after the
receipt of notice from the Company, or (iv) repeated abuse (following at least
one written warning from the Company) of alcohol or any illegal use of
narcotics or other controlled substances. If Mr. [LAST NAME] is advised that
he is being terminated for cause, he may submit to the Board of Directors of
the Parent Corporation a written objection to such determination.
(b) DEATH. The Employment Term shall terminate automatically upon the
death of Mr. [LAST NAME].
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<PAGE> 6
(c) DISABILITY. In the event Mr. [LAST NAME] becomes mentally or
physically "disabled" during the Employment Term, the Employment Term shall
terminate on the Date of Termination (as such term if defined in Subsection (f)
of this Section 5) once such disability is "established." As used in this
Subsection, the term "disabled" means suffering from any mental or physical
condition, other than that resulting from the use of alcohol or illegal use of
narcotics or other controlled substances, which renders Mr. [LAST NAME] unable
to substantially perform all of his material duties and services under this
Agreement in a satisfactory manner (an "impaired condition") for a period of
one hundred twenty (120) consecutive days or for more than one hundred eighty
(180) days in any twelve (12) month period. For purposes of this Subsection,
the date that Mr. [LAST NAME]'s disability is "established" shall be, in the
case of an impaired condition which exists for a period of one hundred twenty
(120) consecutive days, the one hundred twenty-first (121) day on which such
impaired condition exists, and, in the case of an impaired condition existing
for more than one hundred eighty (180) days in any twelve (12) month period,
the one hundred eighty-first (181) day on which such impaired condition exists.
(d) TERMINATION BY MR. [LAST NAME]. Mr. [LAST NAME] may terminate the
Employment Term (1) for Good Reason, or (2) if his health should become
impaired to an extent that makes his continued performance of his duties and
obligations hereunder hazardous to his physical or mental health or his life
("impaired health"), provided that Mr. [LAST NAME] shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request, Mr. [LAST NAME] shall submit
to an examination by a doctor selected by the Company and such doctor shall
have concurred in the conclusion of Mr. [LAST NAME]'s doctor, or (3)
voluntarily, without Good Reason and not due to "impaired health." In the
event that Mr. [LAST NAME] voluntarily terminates the Employment Term without
Good Reason and not due to "impaired health", such termination shall be treated
as if it were a termination "for cause" by the Company.
(i) GOOD REASON DEFINED. For purposes of this Agreement, "Good Reason"
shall mean:
a. a Change in Control of the Parent Corporation (as defined
in Subsection (d)(ii) below);
b. a failure by the Company to comply with any material
provision of this Agreement which has not been cured within thirty
(30) days after written notice of such noncompliance has been given
by Mr. [LAST NAME] to the Company; or
c. any purported termination of Mr. [LAST NAME]'s employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (e) of this Section 5
(and for purposes of this Agreement no such purported termination
shall be effective).
For the purpose of this Subsection (d)(i), no action or inaction by
Mr. [LAST NAME] within ninety (90) days following the occurrence of the
foregoing events shall be deemed a consent by Mr. [LAST NAME] to such
events, absent written consent from Mr. [LAST NAME] to the Company.
(ii) CHANGE IN CONTROL DEFINED. A "Change in Control" shall be deemed to
have occurred:
a. upon any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") (other than U.S. Robotics, any trustee or other fiduciary
holding securities under any employee benefit plan of U.S.
Robotics, or any company owned, directly or indirectly, by the
stockholders of the Parent Corporation in substantially the same
proportions as their ownership of common stock of the Parent
Corporation), becoming the owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Parent Corporation representing twenty-five percent (25%) or more
of the combined voting power of the Parent Corporation's then
outstanding securities;
b. if, during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of Directors, and any new director (other than a director
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<PAGE> 7
designated by a person who has entered into an agreement with the
Parent Corporation to effect a transaction described in paragraph
(a), (c) or (d) of this Subsection or a director whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or contests by or on
behalf of a person other than the Board of Directors of the Parent
Corporation) whose election by the Board of Directors or nomination
for election by the Parent Corporation's stockholders was approved
by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority
of the Board of Directors;
c. upon the merger or consolidation of the Parent Corporation
with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Parent
Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities
of the Parent Corporation or such surviving entity (which entity
shall thereafter be the "Parent Corporation" as defined herein)
outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to
implement a recapitalization of the Parent Corporation (or similar
transaction) in which no person (other than those covered by the
exceptions in (a) above) acquires more than twenty-five percent
(25%) of the combined voting power of the Parent Corporation's then
outstanding securities shall not constitute a Change in Control of
the Parent Corporation; or
d. if the stockholders of the Parent Corporation approve a
plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Parent Corporation of all or
substantially all of the Parent Corporation's assets other than the
sale of all or substantially all of the assets of the Parent
Corporation to a person or persons who beneficially own, directly
or indirectly, at least fifty percent (50%) or more of the combined
voting power of the outstanding voting securities of the Parent
Corporation at the time of the sale.
(e) NOTICE OF TERMINATION. Any termination of the Employment Term by the
Company or by Mr. [LAST NAME] (other than termination pursuant to Subsection
(b) (death) of this Section 5) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employment Term under the Section and Subsection so
indicated.
(f) DATE OF TERMINATION. "Date of Termination" shall mean the following,
respectively, if the Employment Term is terminated by: (i) Subsection (a)
(cause) of this Section 5, the date specified in the Notice of Termination,
(ii) Subsection (b) (death) of this Section 5, the date of Mr. [LAST NAME]'s
death, (iii) Subsection (c) (disability) of this Section 5, thirty (30) days
after Notice of Termination is given (provided that Mr. [LAST NAME] shall not
have returned to the satisfactory performance of his duties on a full-time
basis during such thirty (30) day period), and (iv) if for any other reason,
the date on which a Notice of Termination is given.
6. OTHER BUSINESS ACTIVITIES. During the Employment Term, Mr. [LAST NAME]
shall not, without the prior written authorization of the Board of Directors of
the Parent Corporation, directly or indirectly render services of a business,
professional or commercial nature (whether for compensation or otherwise) to
any person or entity competitive or adverse to U.S. Robotics' business welfare
or engage in any activity whether alone, as a partner, or as an officer,
director, employee, consultant, independent contractor, or stockholder in any
other corporation, person, or entity which is competitive with or adverse to
U.S. Robotics' business welfare. This Section 6 shall not, however, prevent
Mr. [LAST NAME] from investing in securities issued by any such competitive or
adverse corporation, provided the holdings thereof by Mr. [LAST NAME] do not
constitute more than five percent (5%) of any one class of such securities.
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<PAGE> 8
7. CONFIDENTIAL INFORMATION.
(a) DISCLOSURE AND USE. Mr. [LAST NAME] shall not disclose or use at any
time, either during or subsequent to the Employment Term, any trade secrets or
other confidential information, whether patentable or not, of U.S. Robotics,
including but not limited to, any technical or non-technical data, any
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, or any list of actual or potential customers or
suppliers, of which Mr. [LAST NAME] is or becomes informed or aware during the
Employment Term, whether or not developed by Mr. [LAST NAME], except (i) as may
be reasonably required for Mr. [LAST NAME] to perform Mr. [LAST NAME]'s
employment duties with the Company, (ii) to the extent such information becomes
generally available to the public through no wrongful act of Mr. [LAST NAME],
(iii) information which has been disclosed as a result of a subpoena or other
legal process, provided that Mr. [LAST NAME] has provided the Company with
prompt written notice of the receipt thereof, or (iv) unless Mr. [LAST NAME]
shall first secure the Company's prior written authorization. This covenant
shall survive the termination of Mr. [LAST NAME]'s employment hereunder, and
shall remain in effect and be enforceable against Mr. [LAST NAME] for so long
as any such U.S. Robotics secret or confidential information retains economic
value, whether actual or potential, from not being generally known to other
persons who can obtain economic value from its disclosure or use. Mr. [LAST
NAME] agrees to execute such further agreements and/or confirmations of Mr.
[LAST NAME]'s obligations to U.S. Robotics concerning non-disclosure of U.S.
Robotics trade secrets and confidential information as U.S. Robotics may
reasonably require from time-to-time.
(b) RETURN OF MATERIALS. Upon termination of the Employment Term, Mr.
[LAST NAME] (or in the event of termination due to Mr. [LAST NAME]'s death, his
estate or devisee, legatee or other designee, as applicable) shall promptly
deliver to the Company all materials of a secret or confidential nature
relating to U.S. Robotics' business, which are in the possession or under the
control of Mr. [LAST NAME].
8. INVENTIONS AND DISCOVERIES. Mr. [LAST NAME] hereby assigns to the
Company or its designee all of Mr. [LAST NAME]'s rights, title and interest in
and to all inventions, discoveries, processes, designs, works of authorship and
other intellectual property and all improvements on existing inventions,
discoveries, processes, designs, works and other intellectual property made or
discovered by Mr. [LAST NAME] during the Employment Term. Promptly upon the
development, making, creation, or discovery of any invention, discovery,
process, design, work, intellectual property or improvement, Mr. [LAST NAME]
shall disclose the same to the Company and shall execute and deliver to the
Company or its designee such reasonable documents as the Company may request to
confirm the assignment of Mr. [LAST NAME]'s rights therein, and if requested by
the Company, shall assist the Company or its designee in applying for and
prosecuting any patents and any trademark or copyright registration which may
be available in respect thereof. Any invention, discovery or other work for
which none of U.S. Robotics' equipment, supplies, facilities, or confidential
information was used and which was developed entirely on Mr. [LAST NAME]'s own
time, is exempted from this Section 8 so long as it (i) does not relate in any
way to U.S. Robotics' business, or actual or demonstrably anticipated research
and development; and (ii) does not result in any way from Mr. [LAST NAME]'s
work for the Company.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render the same valid, or (ii) not applicable
to given circumstances, or (iii) excised from this Agreement, as the situation
may require, and this Agreement shall be construed and enforced as if such
provision had been included herein as so modified in scope or application, or
had not been included herein, as the case may be.
10. ARBITRATION OF DISPUTES. In the event of any controversy among the
parties hereto arising out of, or relating to, this Agreement which cannot be
settled amicably by the parties (other than a controversy contemplated by
Sections 6, 7, 8 and 11 herein), such controversy shall be submitted to binding
arbitration. Either the Company or Mr. [LAST NAME] may institute such
arbitration proceeding by giving written notice to the other party and by
designating one independent arbitrator. Unless such independent arbitrator
alone is acceptable to the other party, such other party shall designate within
ten (10) days following receipt of such notice, a second
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<PAGE> 9
independent arbitrator, and such two arbitrators shall thereafter select a
third independent arbitrator. A hearing shall be held by the arbitrator or
arbitrators in the City of Chicago, Illinois, and a decision of the matter so
submitted shall be rendered promptly in accordance with the rules of the
American Arbitration Association. The decision of the arbitrator or, if more
than one, a majority of the arbitrators shall be final and binding upon all
parties hereto. Judgment upon the award rendered may be entered in any court
having jurisdiction thereof. The cost of the arbitration shall be borne by the
Company.
11. ENFORCEMENT. The Company will be entitled to institute proceedings
and avail itself of all remedies at law or in equity to recover damages
occasioned by a breach or threatened breach of any of the provisions of this
Agreement by Mr. [LAST NAME] and shall have the right to pursue one or more of
such proceedings and remedies simultaneously or from time to time. Mr. [LAST
NAME] hereby acknowledges that the Company would suffer irreparable injury if
the provisions of Sections 6, 7 and 8 herein, which shall survive the
termination of this Agreement, were breached and that the Company's remedies at
law would be inadequate in the event of such breach or threatened breach.
Accordingly, Mr. [LAST NAME] hereby agrees that any such breach or threatened
breach may, in addition to any and all other available remedies, be
preliminarily and permanently enjoined by any court of competent jurisdiction
without any requirement that the Company post a bond.
12. LEGAL FEES AND EXPENSES. In the event of litigation or arbitration
proceeding under this Agreement, both the Company and Mr. [LAST NAME] shall pay
their own attorneys' fees and other legal expenses; provided, however, that (i)
the Company shall pay Mr. [LAST NAME]'s attorneys' fees and legal expenses in
connection with any proceeding which results in a court refusing to issue a
preliminary or permanent injunction against Mr. [LAST NAME] due to his alleged
breach or threatened breach of any provision of this Agreement, and (ii) the
Company shall pay the reasonable legal fees and expenses which Mr. [LAST NAME]
may incur in connection with the enforcement of this Agreement in connection
with the termination of the Employment Term under Subsections (c) (disability)
and (d) (termination by Mr. [LAST NAME] for Good Reason) of Section 5 herein or
due to the termination of the Employment Term by the Company for any reason
other than as provided in Section 5 herein, including but not limited to
termination without "cause" as such term is defined in Subsection (a) of
Section 5 herein.
Such fees and expenses shall be paid in cash within forty-five (45) days
after the submission to the Company's Secretary, and inquiry into the
reasonableness of such fees and expenses shall not delay such payment.
13. GENERAL PROVISIONS.
(A) NOTICES. Any notice, request, demand or other communication required
or permitted to be given hereunder shall be in writing and personally delivered
or sent by registered or certified mail, return receipt requested, or by a
facsimile, telegram or telex followed by a confirmation letter sent by
registered or certified mail, return receipt requested, addressed as follows:
To the Company: U.S. Robotics Corporation
8100 McCormick Blvd.
Skokie, Illinois 60076
Attention: Vice President of Human Resources
cc: General Counsel
To Mr. [LAST NAME]: Mr. [FULL NAME]
_________________________
_________________________
Either the Company or Mr. [LAST NAME] may, at any time, by notice to the other,
designate another address for service of notice on such party. When the
letter, facsimile, telegram or telex is dispatched as provided for above, the
notice shall be deemed to be made when the addressee actually receives the
letter, facsimile, telegram or telex, or upon the third (3rd) business day
after the date it is sent, whichever is earlier.
9
<PAGE> 10
(b) AMENDMENTS. Neither this Agreement nor any of the terms or conditions
hereof may be waived, amended or modified except by means of a written
instrument duly executed by the party to be charged therewith.
(c) CAPTIONS AND HEADINGS. The captions and Section headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
(d) GOVERNING LAW. This Agreement, and all matters or disputes relating
to the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(e) SUCCESSORS AND ASSIGNS. In light of the unique personal services to
be performed by Mr. [LAST NAME] hereunder, it is acknowledged and agreed that
any purported or attempted assignment or transfer by Mr. [LAST NAME] of this
Agreement or any of Mr. [LAST NAME]'s duties, responsibilities, or obligations
hereunder shall be void. The Company shall not assign this Agreement to any
third party entity which is not affiliated with the Company, the Parent
Corporation or any of their direct or indirect subsidiaries. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and permitted assigns.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
(g) ENTIRE AGREEMENT. Except as otherwise set forth or referred to in
this Agreement, this Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
(h) RELIANCE BY THIRD PARTIES. This Agreement is intended for the sole
and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit therefrom absent the express
written consent of the party to be charged with such reliance or benefit.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
ATTEST: U.S. ROBOTICS ACCESS CORP.
_________________________________ By: _______________________________________
George A. Vinyard, Secretary John McCartney, Chief Operating Officer
________________________________________
[FULL NAME]
10
<PAGE> 1
EXHIBIT 10.5
THIRD AMENDMENT TO THE
U.S. ROBOTICS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The U.S. Robotics Corporation Employee Stock Purchase Plan (the "Plan") is
hereby amended, effective January 1, 1997, as follows:
1. Section 3(c) of the Plan shall be amended to read as follows:
"An employee shall not be eligible to participate in the Plan:
(i) Who has been employed less than three consecutive
months;
(ii) Whose customary employment is 20 hours or less per
week; or
(iii) Whose customary employment is for less or not
more than five months in any calendar year.
2. Any reference to "full" shares in the Plan shall be deemed to include
fractional shares as well.
IN WITNESS WHEREOF, U.S. Robotics Corporation has caused this Amendment to
be executed by its officer hereto duly authorized this 14th day of November,
1996.
U.S. ROBOTICS CORPORATION,
a Delaware corporation
By: /s/ Mark Remissong
Its: Vice President and Chief Financial Officer
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended
-----------------------------------------
December 29, 1996 December 31, 1995(A)
-------------------- --------------------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average common shares outstanding 88,535 84,646
Common equivalent shares 7,792 8,285
-------- --------
Shares used in per share calculations 96,327 92,931
======== ========
Net earnings $69,029 $41,645
======== ========
Net earnings per share $0.72 $0.45
======== ========
FULLY DILUTED EARNINGS PER SHARE
Weighted average common shares outstanding 88,535 84,646
Common equivalent shares 7,946 8,287
-------- --------
Shares used in per share calculations 96,481 92,933
======== ========
Net earnings $69,029 $41,645
======== ========
Net earnings per share $0.72 $0.45
======== ========
</TABLE>
(A) Adjusted to reflect the two-for-one stock split in the form of a 100%
stock dividend paid on May 10, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 29, 1996 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE QUARTER ENDED DECEMBER 29,
1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> DEC-29-1996
<CASH> 18,726
<SECURITIES> 0
<RECEIVABLES> 643,218
<ALLOWANCES> 12,033
<INVENTORY> 152,164
<CURRENT-ASSETS> 857,170
<PP&E> 383,659
<DEPRECIATION> 71,985
<TOTAL-ASSETS> 1,216,349
<CURRENT-LIABILITIES> 387,473
<BONDS> 54,922
0
0
<COMMON> 889
<OTHER-SE> 764,424
<TOTAL-LIABILITY-AND-EQUITY> 1,216,349
<SALES> 645,412
<TOTAL-REVENUES> 645,412
<CGS> 369,414
<TOTAL-COSTS> 369,414
<OTHER-EXPENSES> 164,998
<LOSS-PROVISION> 930
<INTEREST-EXPENSE> 1,779
<INCOME-PRETAX> 109,744
<INCOME-TAX> 40,715
<INCOME-CONTINUING> 69,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,029
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
