Sample Business Contracts


Executive Severance and Transition Benefits Agreement - Castelle and Donald L. Rich


                            EXECUTIVE SEVERANCE AND
                          TRANSITION BENEFITS AGREEMENT


         THIS  EXECUTIVE   SEVERANCE  AND  TRANSITION  BENEFITS  AGREEMENT  (the
"Agreement")  is entered into  effective  as of the 10th day of  November,  1998
between DONALD L. RICH,  ("Executive")  and CASTELLE,  a California  corporation
(the  "Company").  This  Agreement  is  intended to provide  Executive  with the
compensation  and  benefits  described  herein upon the  occurrence  of specific
events.  Certain capitalized terms used in this Agreement are defined in Article
5.

         The Company and Executive hereby agree as follows:

                                   ARTICLE 1

                            EMPLOYMENT BY THE COMPANY

1.1 The Company and Executive  wish to set forth the  compensation  and benefits
which  Executive  shall be  entitled  to  receive  (i) in the event  Executive's
employment with the Company  terminates,  or (ii) in the event there is a Change
in Control of the Company, under the circumstances described herein.

1.2 The duties and  obligations of the Company to Executive under this Agreement
shall  be in  consideration  for  Executive's  past  services  to  the  Company,
Executive's  continued employment with the Company, and Executive's execution of
the general waiver and release described in Section 3.2.

1.3 This Agreement shall remain in full force and effect so long as Executive is
employed by the Company; provided,  however, that Executive's rights to payments
and benefits under Article 2 shall  continue  until the Company's  obligation to
provide such payments and benefits is satisfied.

1.4 This Agreement shall supersede any other agreements  relating to Executive's
termination of employment with the Company.

                                   ARTICLE 2

              SEVERANCE, CHANGE IN CONTROL AND TRANSITION BENEFITS

2.1  Severance  Benefits.  If  Executive's   employment  terminates  due  to  an
Involuntary Termination Without Cause or a Voluntary Termination for Good Reason
after the date of execution of this Agreement,  and without regard to any Change
in Control of the  Company,  the  termination  of  employment  will be a Covered
Termination.  Executive  shall  receive Base Pay and bonus that have accrued but
are unpaid as of the date of such Covered  Termination,  and, within thirty (30)
days following such Covered Termination, Executive shall also receive a lump sum
payment equal to one hundred percent (100%) of Executive's  Base Pay, all of the
foregoing  subject to  applicable  tax  withholding.  In  addition,  following a
Covered  Termination,  Executive  and  Executive's  covered  dependents  will be
eligible to continue  their health care  benefit  coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at the same cost to Executive as in effect
immediately  prior  to the  Covered  Termination  for  the one  (l)-year  period
following the Covered Termination.
                                  
                                       1.
<PAGE>

2.2      Transition Bonus.

(a) In the event  there is a Change in  Control  of the  Company  and  Executive
continues to render  services to the Company for ninety (90) days  following the
closing of the transaction resulting in such Change in Control, then, if:

(i)  Executive's  employment has been  terminated and such  termination is not a
Covered Termination,  Executive shall be entitled to a lump-sum payment equal to
fifty percent (50%) of Executive's Base Pay, subject to applicable  withholding;
or

(ii)  Executive's  employment  has been  terminated  and such  termination  is a
Covered Termination,  Executive shall be entitled to a lump-sum payment equal to
the Severance  Benefits set forth in Section 2.1 of this  Agreement,  subject to
applicable withholding.

(b) If Executive does not terminate  employment with the successor company on or
before the ninetieth  (90th) day after the closing of the transaction  resulting
in a Change in Control and continues to render  services to the Company from and
after the ninetieth  (90th) day following such closing,  then Executive shall be
entitled to a lump-sum  payment equal to fifty percent (50%) of Executive's Base
Pay, subject to applicable  withholding,  and without regard to any payment that
might be received by Executive with respect to a Covered Termination.

2.3      Acceleration of Vesting of Outstanding Options.

(a) If  Executive's  employment  terminates on a date that is less than eighteen
(18) months after the date Executive  commences  employment with the Company and
such  termination  is a Covered  Termination,  the  vesting  of any  options  to
purchase common stock of the Company then held by Executive shall accelerate and
such options  shall become  immediately  vested as to fifty percent (50%) of the
total number of shares of common stock subject to such options.

(b) If Executive's  employment terminates on a date that is eighteen (18) months
or more after the date Executive commences  employment with the Company and such
termination  is a Covered  Termination,  the  vesting of any options to purchase
common  stock of the Company then held by Executive  shall  accelerate  and such
options shall become  immediately vested as to one hundred percent (100%) of the
total number of shares of common stock subject to such options.

(c) Notwithstanding (a) and (b) above, if Executive's  employment  terminates in
connection with a Change in Control that is a transaction  that is accounted for
as a pooling of interests for financial accounting purposes,  then no portion of
any option to purchase  common stock of the Company  granted to Executive  after
November  10,  1998 shall  accelerate  unless the  Company  receives  reasonable
assurances  from its  independent  public  accountants  (and from the  acquiring
party's  independent public  accountants) that in their good faith judgment such
acceleration  will not affect the pooling of interests  accounting  treatment of
such Change in Control transaction.

                                      2.
<PAGE>

2.4  Mitigation.  Executive  shall not be required  to  mitigate  damages or the
amount of any payment  provided under this Agreement by seeking other employment
or  otherwise,  nor shall the  amount of any  payment  provided  for under  this
Agreement  be reduced by any  compensation  earned by  Executive  as a result of
employment  by  another  employer  or by any  retirement  benefits  received  by
Executive after the date of the Covered Termination, or otherwise.

2.5 Possible  Outcomes.  The chart  attached  hereto as Exhibit B is intended to
summarize  the  possible  cash  benefits  payable  under  this  Article 2 in the
circumstances  indicated  and  is  incorporated  into  this  Agreement  for  the
convenience of the parties.

                                   ARTICLE 3

                     LIMITATIONS AND CONDITIONS ON BENEFITS

3.1 Withholding of Taxes. The Company shall withhold appropriate federal, state,
local (and foreign, if applicable) income and employment taxes from any payments
hereunder.

3.2  Employee  Agreement  and  Release  Prior to Receipt of  Benefits.  Upon the
occurrence  of a Covered  Termination,  and prior to the receipt of any benefits
under this Agreement on account of the  occurrence of such Covered  Termination,
Executive  shall execute the Employee  Agreement and Release (the  "Release") in
the form attached hereto as Exhibit A. Such Release shall specifically relate to
all of Executive's  rights and claims in existence at the time of such execution
and shall confirm  Executive's  obligations under the Company's standard form of
proprietary   information  agreement.   It  is  understood  that  Executive  has
twenty-one (21) days to consider whether to execute such Release,  and Executive
may revoke such Release within seven (7) business days after  execution.  In the
event  Executive does not execute such Release  within the  twenty-one  (2l)-day
period,  or if Executive  revokes such Release within the  subsequent  seven (7)
business day period,  no benefits shall be payable under this Agreement and this
Agreement shall be null and void.

                                   ARTICLE 4

                            OTHER RIGHTS AND BENEFITS

4.1 Nonexclusivity.  Except as otherwise  expressly provided herein,  nothing in
the  Agreement  shall  prevent  or  limit   Executive's   continuing  or  future
participation  in any  benefit,  bonus,  incentive  or  other  plans,  programs,
policies  or  practices  provided by the  Company  and for which  Executive  may
otherwise  qualify,  nor shall  anything  herein limit or otherwise  affect such
rights as Executive may have under other agreements with the Company.  Except as
otherwise expressly provided herein,  amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan,  policy,  practice or
program of the  Company at or  subsequent  to the date of a Covered  Termination
shall be payable in accordance with such plan, policy, practice or program.

                                       3.
<PAGE>

4.2  Parachute  Payments.  If the  severance  and  other  benefits  provided  to
Executive under this Agreement (i) constitute  "parachute  payments"  within the
meaning of Section  280G of the Internal  Revenue Code of 1986,  as amended (the
"Code") and (ii) but for this Section 4.2,  such  severance  and other  benefits
would be subject to the excise  tax  imposed by Section  4999 of the Code,  then
Executive's benefits under this Agreement shall be payable either:

(a) in full; or

(b) as to such lesser amount which would result in no portion of such  severance
and other benefits being subject to excise tax under Section 499 of the Code,

whichever of the foregoing amounts,  taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by Executive,  on an after-tax  basis,  of the greatest amount of
severance  benefits  under this  Agreement.  Unless the  Company  and  Executive
otherwise agree in writing,  any  determination  required under this Section 4.2
shall be made in  writing by  independent  public  accountants  agreed to by the
Company  and  Executive  (the  "Accountants"),   whose  determination  shall  be
conclusive  and binding upon  Executive  and the Company for all  purposes.  For
purposes  of  making  the  calculations   required  by  this  Section  4.2,  the
Accountants  may make  reasonable,  good faith  interpretations  concerning  the
application  of Sections  280G and 4999 of the Code.  The Company and  Executive
shall  furnish  to  the  Accountants  such  information  and  documents  as  the
Accountants may reasonably  request in order to make a determination  under this
Section 4.2. The Company  shall bear all costs the  Accountants  may  reasonably
incur in connection with any calculations contemplated by this Section 4.2.

                                   ARTICLE 5

                                   DEFINITIONS

         For  purposes  of the  Agreement,  the  following  terms are defined as
follows:

5.1 "Base Pay" means  Executive's  annual base pay at the rate in effect  during
the  last  regularly   scheduled  payroll  period   immediately   preceding  any
termination of Executive's employment or, if higher, Executive's annual base pay
in effect as of the date of this  Agreement if subsequent to that time Executive
has agreed to a reduction in base pay in connection with a general  reduction in
the base pay of other similarly situated employees of the Company.

5.2 "Change in Control" means (1) a  dissolution,  liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the  Company is not the  surviving  corporation;  (3) a reverse  merger in
which the Company is the surviving  corporation  but the shares of the Company's
common  stock  outstanding  immediately  preceding  the merger are  converted by
virtue of the merger  into other  property,  whether in the form of  securities,
cash or otherwise;  or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any comparable successor provisions  (excluding
any employee  benefit  plan,  or related  trust,  sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning  of Rule  13d-3  promulgated  under  the  Exchange  Act,  or  comparable
successor rule) of securities of the Company representing at least fifty percent
(50%)  of the  combined  voting  power  entitled  to  vote  in the  election  of
directors.

                                       4.
<PAGE>

5.3 "Covered  Termination" means an Involuntary  Termination  Without Cause or a
Voluntary Termination for Good Reason.

5.4  "Involuntary  Termination  Without  Cause" means  Executive's  dismissal or
discharge  for  reasons  other than  fraud,  misappropriation,  embezzlement  or
intentional misconduct on the part of Executive which resulted in material loss,
damage or injury to the Company. The termination of Executive's  employment will
not  be  deemed  to  be an  "Involuntary  Termination  Without  Cause"  if  such
termination occurs as a result of Executive's death or disability.  For purposes
of the foregoing,  "disability"  means a disability,  as that term is defined in
the long term disability  plan maintained by the Company that covers  Executive,
that continues for ninety (90) days.

5.5 "Voluntary Termination For Good Reason" means that the Executive voluntarily
terminates  employment  within  ninety (90) days after any of the  following are
undertaken without Executive's express written consent:

(a) the assignment to Executive of any duties or  responsibilities  which result
in a material  diminution or adverse change of Executive's  position,  status or
circumstances of employment;

(b) a reduction by the Company in Executive's Base Pay;

(c) any  failure  by the  Company to  continue  in effect  any  benefit  plan or
arrangement,  including  incentive  plans or plans to receive  securities of the
Company,  in  which  Executive  is  participating  (hereinafter  referred  to as
"Benefit  Plans"),  or the  taking of any  action  by the  Company  which  would
adversely affect  Executive's  participation in or reduce  Executive's  benefits
under any Benefit Plans or deprive  Executive of any fringe benefit then enjoyed
by  Executive,  provided,  however,  that  Executive  may not terminate for Good
Reason if the Company offers a range of benefit plans and programs which,  taken
as a whole,  are  comparable to the Benefit Plans as determined in good faith by
the Company;

(d) a relocation of Executive or the Company's  principal  business offices to a
location  more  than  twenty  (20)  miles  from the  current  location  at which
Executive  performs  duties,  except for  required  travel by  Executive  on the
Company's  business  to an  extent  substantially  consistent  with  Executive's
business travel obligations;

(e) any breach by the Company of any provision of this  Agreement or Executive's
Employment Agreement dated November 10, 1998; or

(f) any failure by the Company to obtain the assumption of this Agreement by any
successor or assign of the Company.

                                       5.
<PAGE>

                                   ARTICLE 6

                               GENERAL PROVISIONS

6.1  Employment  Status.  This  Agreement  does not  constitute  a  contract  of
employment  or impose on Executive any  obligation to remain as an employee,  or
impose on the Company any  obligation  (i) to retain  Executive  as an employee,
(ii) to change  the status of  Executive  as an  at-will  employee,  or (iii) to
change the Company's policies regarding termination of employment.

6.2 Notices.  Any notices provided hereunder must be in writing and such notices
or any other written communication shall be deemed effective upon the earlier of
personal  delivery  (including  personal delivery by facsimile) or the third day
after mailing by first class mail, to the Company at its primary office location
and to  Executive  at  Executive's  address as listed in the  Company's  payroll
records.  Any payments made by the Company to Executive  under the terms of this
Agreement shall be delivered to Executive  either in person or at the address as
listed in the Company's payroll records.

6.3 Severability.  Whenever  possible,  each provision of this Agreement will be
interpreted  in such manner as to be effective and valid under  applicable  law,
but if any  provision  of  this  Agreement  is held to be  invalid,  illegal  or
unenforceable   in  any  respect  under  any  applicable  law  or  rule  in  any
jurisdiction,  such invalidity,  illegality or unenforceability  will not affect
any  other  provision  or any other  jurisdiction,  but this  Agreement  will be
reformed,  construed  and  enforced  in such  jurisdiction  as if such  invalid,
illegal or unenforceable provisions had never been contained herein.

6.4 Waiver.  If either party should waive any breach of any  provisions  of this
Agreement,  he or it shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.

6.5  Arbitration.  Unless  otherwise  prohibited by law or specified  below, all
disputes,  claims  and  causes of  action,  in law or  equity,  arising  from or
relating  to  this  Agreement  or  its  enforcement,   performance,  breach,  or
interpretation  shall be resolved  solely and  exclusively  by final and binding
arbitration held in San Francisco,  California  through  Judicial  Arbitration &
Mediation  Services/Endispute  ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party from
obtaining  injunctive  relief in court to prevent  irreparable  harm pending the
conclusion of any such arbitration.  Each party in any such arbitration shall be
responsible  for its own  attorneys'  fees,  costs and necessary  disbursements;
provided,  however,  that in the event one party  refuses to  arbitrate  and the
other  party seeks to compel  arbitration  by court  order,  if such other party
prevails,  it shall be entitled to recover reasonable attorneys' fees, costs and
necessary  disbursements.  Pursuant to California  Civil Code Section 1717, each
party  warrants  that it was  represented  by  counsel  in the  negotiation  and
execution of this Agreement, including the attorneys' fees provision herein.

6.6 Complete Agreement. This Agreement,  including Exhibit A, Exhibit B, and any
other written agreements  referred to in this Agreement,  constitutes the entire
agreement between  Executive and the Company and it is the complete,  final, and
exclusive  embodiment of their agreement with regard to this subject matter.  It
is entered into  without  reliance on any promise or  representation  other than
those expressly contained herein.


                                       6.
<PAGE>
6.7  Amendment or  Termination  of Agreement.  This  Agreement may be changed or
terminated  only upon the mutual  written  consent of the Company and Executive.
The written  consent of the Company to a change or termination of this Agreement
must be signed by an  executive  officer of the  Company  after  such  change or
termination  has been  approved by the  Compensation  Committee of the Company's
Board of Directors.

6.8 Counterparts.  This Agreement may be executed in separate counterparts,  any
one of which need not  contain  signatures  of more than one  party,  but all of
which taken together will constitute one and the same Agreement.

6.9 Headings.  The headings of the Articles and Sections hereof are inserted for
convenience  only and shall not be deemed to  constitute  a part  hereof  nor to
affect the meaning hereof.

6.10 Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive and the Company, and their respective
successors, assigns, heirs, executors and administrators,  except that Executive
may not  assign  any duties  hereunder  and may not assign any rights  hereunder
without the written consent of the Company,  which consent shall not be withheld
unreasonably.

6.11 Attorneys' Fees. Except as otherwise  provided in Section 6.5, if Executive
brings  any  action  to  enforce  his  rights  hereunder,   Executive  shall  be
responsible  for his own attorneys'  fees and costs incurred in connection  with
such action, regardless of the outcome of such action.

6.12 Choice Of Law. All  questions  concerning  the  construction.  validity and
interpretation  of this  Agreement  will be  governed by the law of the State of
California, without regard to such state's conflict of laws rules.

6.13  Non-Publication.  The parties mutually agree not to disclose  publicly the
terms of this  Agreement  except to the extent  that  disclosure  is mandated by
applicable law or to respective personal advisors.

6.14  Construction Of Agreement.  In the event of a conflict between the text of
the Agreement and any summary,  description or other  information  regarding the
Agreement, the text of the Agreement shall control.

                                       7.
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year written above.


CASTELLE                                                     DONALD  L. RICH
By:   /s/Jerome Burke                                    /s/ DONALD  L. RICH

Name: Jerome Burke

Title: Executive Vice President




Exhibit A: Employee Agreement and Release
Exhibit B: Chart of Possible Outcomes


                                       8.
<PAGE>


                                    EXHIBIT A

                         EMPLOYEE AGREEMENT AND RELEASE


         I  understand  and  agree  completely  to the  terms  set  forth in the
foregoing agreement.

         I  hereby  confirm  my  obligations  under  the  Company's  proprietary
information agreement.

         I  acknowledge  that I have  read and  understand  Section  1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the  creditor  does not know or suspect to exist in his favor at
the time of executing  the release,  which if known by him must have  materially
affected  his  settlement  with  the  debtor."  I  hereby  expressly  waive  and
relinquish  all  rights  and  benefits  under  that  section  and any law of any
jurisdiction  of similar  effect with  respect to my release of any claims I may
have against the Company.

         Except as  otherwise  set forth in this  Agreement,  I hereby  release,
acquit and forever  discharge  the Company,  its parents and  subsidiaries,  and
their  officers,   directors,   agents,   servants,   employees,   shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands,   causes  of  action,  costs,   expenses,   attorneys'  fees,  damages,
indemnities  and  obligations  of every  kind and  nature,  in law,  equity,  or
otherwise,  known  and  unknown,   suspected  and  unsuspected,   disclosed  and
undisclosed (other than any claim for  indemnification I may have as a result of
any third party  action  against me based on my  employment  with the  Company),
arising out of or in any way related to agreements,  events,  acts or conduct at
any time prior to and including the Effective Date of this Agreement,  including
but not limited to: all such claims and demands  directly or indirectly  arising
out of or in any way  connected  with my  employment  with  the  Company  or the
termination  of  that  employment,  including  but not  limited  to,  claims  of
intentional  and negligent  infliction of emotional  distress,  any and all tort
claims  for  personal  injury,  claims or demands  related  to salary,  bonuses,
commissions,  stock,  stock  options,  or any other  ownership  interests in the
Company, vacation pay, fringe benefits,  expense reimbursements,  severance pay,
or any other form of  compensation;  claims  pursuant to any  federal,  state or
local law or cause of action  including,  but not limited to, the federal  Civil
Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act
of 1967, as amended  ("ADEA");  the federal  Americans with  Disabilities Act of
1990; the  California  Fair  Employment  and Housing Act, as amended;  tort law;
contract law; wrongful discharge;  discrimination;  fraud; defamation; emotional
distress;  and breach of the implied  covenant  of good faith and fair  dealing;
provided,  however, that nothing in this paragraph shall be construed in any way
to release the  Company  from its  obligation  to  indemnify  me pursuant to the
Company's indemnification  obligation pursuant to agreement or applicable law or
to reduce or eliminate any coverage I may have under the Company's  director and
officer liability policy, if any.

                                       1.
<PAGE>

         I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under  ADEA.  I also  acknowledge  that the  consideration
given  for the  waiver  and  release  in the  preceding  paragraph  hereof is in
addition  to  anything  of value  to which I was  already  entitled.  I  further
acknowledge  that I have been advised by this writing,  as required by the ADEA,
that:  (A) my waiver and  release do not apply to any rights or claims  that may
arise  after  the  Effective  Date of this  Agreement;  (B) I have the  right to
consult  with  an  attorney  prior  to  executing  this  Agreement;  (C) I  have
twenty-one  (21) days to  consider  this  Agreement  (although  I may  choose to
voluntarily execute this Agreement earlier); (D) I have seven (7) days following
the execution of this Agreement by the parties to revoke the Agreement;  and (E)
this Agreement  shall not be effective  until the date upon which the revocation
period has  expired,  which  shall be the eighth  day after  this  Agreement  is
executed by me,  provided that the Company has also  executed this  Agreement by
that date (the "Effective Date").

CASTELLE                                                     DONALD  L. RICH



By:    ___________________________                 __________________________

Name:  ___________________________                 Date:_____________________

Title: ___________________________         

                                       2.
<PAGE>


                                    EXHIBIT B

                          POSSIBLE CASH PAYMENTS UNDER
              EXECUTIVE SEVERANCE AND TRANSITION BENEFITS AGREEMENT





---------------------------------------- -------------------------------------- --------------------------------------
                                                                                
                                         Termination that Does Not Qualify as      Termination that Qualifies as a
                                                 a Covered Termination                   Covered Termination
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Prior to Change in Control               Cash:  -0-                             Cash:  12 months base pay
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
0 - 89 days after Change in Control      Cash:  -0-                             Cash:  12 months base pay
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
90 days after Change in Control          Cash:  6 months base pay               Cash:  12 months base pay
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
90+ days after Change in Control         Cash:  6 months base pay               Cash:  18 months base pay
---------------------------------------- -------------------------------------- --------------------------------------


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