Exhibit 10.42
EMPLOYMENT AND NON-COMPETITION
AGREEMENT
This
EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement") is made
by and among Adaptec, Inc. (the "Company"), a Delaware
corporation and Eric Kelly ("Employee"). This Agreement is entered
into in connection with the acquisition of Snap Appliance by the
Company (the "Acquisition") pursuant to that certain Agreement and
Plan of Merger among the Company, Snap Appliance, Snap Appliance
Acquisition Corp., and James Caccavo as Representative, dated as of
July 13, 2004, (the "Merger Agreement") and employment
pursuant to this Agreement is contingent upon the occurrence of the
Acquisition and shall not become effective until the date of the
closing of such Acquisition (the "Employment Effective
Date").
RECITALS
WHEREAS,
Employee is one of a select group of key and senior management
employees of Snap Appliance and is an owner of outstanding capital
stock, and/or options to purchase outstanding capital stock, of
Snap Appliance. The parties hereto recognize that Employee has
unique knowledge and experience regarding Snap Appliance's
business, and the Company desires to be assured that confidential
information pertaining to Snap Appliance's business and the
goodwill of Snap Appliance will be preserved and protected and will
inure to the benefit of the Company.
WHEREAS,
Employee acknowledges that the promises and restrictive covenants
that Employee is providing in this Agreement are reasonable and
necessary to the protection of the Company's and Snap Appliance's
business and the Company's legitimate interests in acquiring Snap
Appliance pursuant to the Merger Agreement. Employee acknowledges
that he is receiving substantial capital stock equity, cash
payments, and other benefits for the consummation of the Merger,
which benefits constitute adequate consideration for the covenants
in this Agreement.
WHEREAS,
Employee understands and acknowledges that as an inducement for,
and a material condition to, the Acquisition, Employee is entering
into this Agreement and agrees and approves to the terms and
conditions set forth herein.
NOW,
THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, the Company and
Employee hereby agree as follows:
1. Employment and Term.
Commencing with the Employment Effective
Date, the Company agrees to employ the Employee in the position of
Vice President, General Manager . Employee's employment
shall be at-will. Employee shall report to Robert N.
Stephens . The transfer of Employee's employment, or secondment
of Employee's services, at any time to any parent or subsidiary of,
or successor corporation to, the Company (including, for example,
Snap Appliance) shall be expressly permitted pursuant to this
Agreement and in the event of such a transfer, the terms of this
Agreement shall continue to apply and the parties shall execute any
necessary documents to effect the continued application of the
terms of this Agreement.
2. Obligations to the Company.
During the employment period, the Employee
shall devote on a full-time basis Employee's business efforts and
time to the Company and will diligently follow and implement the
management policies and decisions of the Company as communicated to
Employee consistent with Employee's position and responsibilities
and Employee will diligently carry out such responsibilities.
During the employment period, without the prior written approval of
the Company, the Employee shall not render services in any capacity
to any other person or entity and shall not act as a sole
proprietor or partner of any other person or entity or as an equity
holder owning more than three percent (3%) of the equity of any
other business enterprise. The Employee shall comply with the
Company's written policies and rules, as they may be in effect from
time to time during the employment period.
3. No Conflicting Obligations.
The Employee represents and warrants to the
Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his
obligations under this Agreement. The Employee represents and
warrants that he will not use or disclose, in connection with his
employment by the Company any trade secrets or other proprietary
information or intellectual property in which the Employee or any
other person has any right, title or interest and that, to
Employee's knowledge, his employment by the Company as contemplated
by this Agreement will not infringe or violate the rights of any
other person. The Employee represents and warrants to the Company
that he has returned all property and confidential information
belonging to any prior employer.
4. Base Salary and Bonus.
Employee's base salary during the
employment period will be no less than $260,000 Dollars per
year, payable on the Company's regular payroll dates, less required
withholdings. Beginning on October 1, 2004, the employee will
be eligible to participate in Adaptec's Incentive Plan (AIP). This
discretionary plan targets 50% percentage of the employee's
base salary. The Board of Directors identifies the measurement
criteria, which currently consists of company revenue achievement
and operating profit before tax goals. The AIP is generally paid on
a semi-annual base. In addition to the base pay, employee shall
receive a guaranteed bonus payment of $40,000 payable in calendar
2005 and 2006. Payments shall correspond with the AIP payments:
$27,000 in April 2005, $20,000 in October 2005, $20,000
in April 2006, and $20,000 in October 2006. Beginning on
October 1, 2004, the employee will also be eligible to
participate in the quarterly Variable Incentive Plan (VIP) targeted
at 4% of the employee's quarterly base salary. The VIP is based on
successful achievement of individual objectives mutually set
between the employee and the manager.
5. Employee
Benefits.
(a)
Employee
will be entitled to insurance, vacation and other benefits
commensurate with Employee's position in accordance with the
Company's standard policies for similarly situated employees as in
effect from time to time. Further, Employee will be entitled to
enroll in the Company's other employee benefit plans for which the
employee are otherwise eligible, including its employee stock
purchase plan, medical plan, dental plan, life insurance plan and
disability plan, to the extent permitted by the terms of such
plans. The Company shall recognize Employee's prior service with
Snap Appliance in connection with its PTO policy, excluding
sabbatical and company service awards, for purposes of eligibility,
vesting and levels of benefits. Sabbatical eligibility is based on
the Adaptec's hire date.
(b)
In addition,
while Employee is employed, Employee will be paid an additional
$650 per month to cover automobile expenses and related automobile
insurance coverage.
(c)
In addition,
while Employee is employed, Employee shall be entitled, at
Company's expense, to have an annual executive health
exam.
6. Stock
Options.
(a)
Information
on Snap Appliance Stock Options. Any stock options granted Employee
by Snap Appliance prior to the Employment Effective Date shall be
treated as provided in the Merger Agreement. The Merger Agreement
generally provides for the assumption of stock options granted by
Snap Appliance with most terms of the applicable Snap Appliance
stock option agreement (including vesting provisions) remaining in
effect, but with the number of shares and exercise price
appropriately adjusted to reflect that the stock option will cover
shares of the Company rather than Snap Appliance. The aggregate
exercise price will remain the same. The Company will provide
Employee with separate notification of the adjustments made to any
Snap Appliance stock option of Employee. The vesting on the Snap
Appliance stock options are: 15% of the original grant of 4,040,000
Snap common stock options vested on September 12, 2002, 21.25%
of the original grant of 4,040,000 Snap common stock options vested
on September 12, 2003 and 1.77% of the original grant of
4,040,000 Snap common stock options shall vest on each subsequent
month from and after September 12, 2003. The Company
will
provide Employee with separate
notification of the adjustments made to any Snap Appliance stock
option of Employee.
In consideration of the benefits
provided Employee under this Agreement, and as required by the
Merger Agreement to effect the Acquisition, by signing below,
Employee waives any right to acceleration of the vesting and
exercisability of the shares subject to Employee's Snap stock
option(s) to which Employee was otherwise entitled under the terms
and conditions of the Snap 2002 Stock Option and Restricted Stock
Purchase Plan (for example, Section 9(b) thereunder) and/or
any existing agreements you may have with Snap, that could result
from this merger, or a later merger, consolidation, or similar
event, or any other subsequent event (including termination of your
employment). Employee is not waiving any vesting acceleration or
other rights set forth in this Agreement regarding such stock
option(s).
(b)
New Option. In accordance with the
Company's Stock Option Plan, Adaptec will recommend to the Board of
Directors that employee be granted an option to purchase
75,000 shares of Adaptec stock that will vest 6.25% per
quarter, and will be fully vested at the end of four years. These
options will be priced based upon the employee's start date. The
option price will be the previous trading day's closing price with
vesting commencing on the hire date.
7. Management Incentive Plan.
Employee shall be designated a participant
in the Management Incentive Plan (the " MIP ") instituted by
the Company pursuant to the Merger Agreement. As such you will
receive a MIP Bonus as described in Appendix I (incorporated herein
by reference). Employee understands and agrees that Employee's
interest in the MIP Bonus shall be reduced to the extent required
to satisfy claims or other obligations as provided in the Merger
Agreement.
8. Confidentiality.
Simultaneously with the execution of this
Agreement, Employee is executing and delivering and hereby adopts
and agrees to be bound by the Company's standard Employee
Proprietary Information Agreement (the " Employee Proprietary
Information Agreement ").
9. Termination of
Employment.
(a)
Termination
by the Company. The Company may terminate Employee's employment at
any time and for any reason (or no reason), and with or without
Cause, by giving Employee notice in writing.
For
purposes of this Agreement, " Cause " shall mean:
(i)
Employee's
willful misconduct, or willful failure to perform, his material
duties, including Employee's willful failure to follow the
reasonable and lawful directions of the person to whom Employee
reports which are consistent with Employee's position and duties,
provided that (A) Employee is given written notice from the
Company setting forth with reasonable specificity such misconduct
or failure and giving Employee notice that failure to cure such
misconduct or failure will result in termination of Employee for
Cause, and (B) Employee fails to correct the behavior
described in the notice within thirty (30) business days
following receipt of such notice.
(ii)
Employee's
conviction of a felony offense, plea of "guilty" or "no contest" to
a felony offense or a material act of dishonesty, fraud,
embezzlement, or misappropriation against the Company or its
affiliates; or
(iii)
Employee's
material breach of this Agreement or the Employee Proprietary
Information Agreement, or any material provision of any other
material written agreement between the Company and Employee, or
Employee's material breach or violation of any lawful material
written employment policy of the Company, including those
prohibiting harassment of another employee, which in any case would
be materially detrimental to the results of operations of the
Employer on a consolidated basis, provided that (A) Employee
is given written notice from Company setting forth with reasonable
specificity such breach and giving Employee notice that failure to
cure such breach will result in termination of Employee for Cause
and (B) Employee fails to correct the behavior described in
the notice within thirty (30) business days following receipt
of such notice.
(b)
Termination
by Employee. Employee may terminate his employment at any time for
any reason, Good Reason or no reason by giving the Company written
notice.
For
purposes of this Agreement, " Good Reason " shall exist if
Employee terminates his employment within sixty (60) days of
the occurrence, after the Closing Date, of any of the following
events:
(i)
a material
adverse change in Employee's position, as of the time immediately
following the Employment Effective Date;
(ii)
the
Company's relocation of Employee to an office or location that is
more than 25 miles from the office at which Employee was originally
hired to work for the Company; or
(iii)
a reduction
of more than 10% of Employee's base salary and the target VIP and
AIP percentages provided in this Agreement (other than when made as
part of a reduction in salary across all levels of management in
the Company that are then at least at Employee's level in the
Company). Actual VIP payment may range from 0% to 5% of base salary
as measured by achievement of individual quarterly objectives.
Actual AIP payments may range from 0% to 100% of base salary as
measured by company operating profit before taxes and revenue
goals.
(c)
Employee's
Death or Disability. Employee's employment shall terminate upon his
death or Disability. For purposes of this Agreement, "
Disability " shall mean that Employee, at the time notice is
given by the Company, has failed to perform his duties under this
Agreement after reasonable accommodation by the Company for a
period of not less than ninety (90) consecutive days as a
result of his incapacity due to physical or mental disability,
injury or illness.
(d)
Rights Upon
Termination of Employment. Upon termination of Employee's
employment for any reason described in Section 9 hereof,
Employee shall be entitled to receive all accrued and unpaid salary
and vacation, if any, through the date of such
termination.
(e)
Termination
of Agreement. This Agreement shall
