EXHIBIT 10.21

January 3, 1997

Truman Cole
51 Hawthorn Drive
Atherton, CA 94027

Dear Truman:

This letter  represents the agreement  between you and Network  Peripherals Inc.
(the "Agreement") regarding your separation from the Company.

1.   Termination
a)   Your last day as an Officer and employee of Network  Peripherals Inc. (NPI)
     will be May 15, 1997 (your "Termination  Date).  Through that date you will
     continue to carry out all your existing  duties as Vice President and Chief
     Financial  Officer  in a  professional  manner,  consistent  with your past
     performance and the responsibilities of the position.

b)   Your current  salary and existing  employee  benefits will remain in effect
     through your Termination Date.

c)   The executive  bonus for 1996 will be  determined  in  accordance  with the
     agreed  upon terms of the  executive  bonus  program and paid to you at the
     same time as other bonuses are distributed to executive officers.  You will
     not be eligible for an executive bonus for 1997.

d)   The Salary  Continuation  Agreement  dated May 24, 1996 between you and NPI
     will end on your Termination Date.

e)   The Indemnity Agreement dated June 28, 1994 between you and NPI will remain
     in full force and effect  after the  Termination  Date and continue in full
     force and effect  throughout the consulting  period defined in paragraph 3,
     below.

2.   Early Termination

With a minimum of 30 days prior written notice,  NPI may change your Termination
Date described in paragraph 1.a.,  above, to any date prior to May 15, 1997, but
in no event later than May 15, 1997 unless agreed in writing by both parties.

3.   Consulting
a)   Effective  upon your  Termination  Date you will become a consultant to the
     Company reporting directly to me.
b)   The consulting period shall continue until the earlier of:
     -   November 15, 1997; or,
     -   That date on which you become a full-time  employee of another company.
         You agree to  promptly  notify  NPI on, or  before,  the date that this
         occurs.
     -   That date on which you consult, or  enter into an agreement to consult,
         for a competitor of NPI.  Consulting for  a competitor  shall result in
         immediate termination of  the benefits described  in  sections 3.c. and
         3.d. of this Agreement.



<PAGE>

AGREEMENT BETWEEN NPI & TRUMAN COLE
JANUARY 3,1997
PAGE 2 OF 3

c)   As a  consultant,  you  will  be  paid  $11,250  per  month,  in two  equal
     installments  on the 15th and last  day of each  month,  less any  required
     withholdings.

d)   You will  continue to receive  existing  health care  coverage  pursuant to
     COBRA and NPI will pay the costs of such  coverage  during this  consulting
     period.  Additionally,  NPI agrees to reimburse  you for any  out-of-pocket
     expenses  incurred  as a result  of your  consulting  activities  with such
     reimbursement  subject to NPI's  normal  travel and  expense  reimbursement
     policy.  If requested by you, NPI will provide  continued  use of voicemail
     and email during the consulting period.

e)   Your existing stock options will continue to vest throughout the consulting
     period,  and you  will  have 90 days  following  the end of the  consulting
     period in which to exercise any vested options.

f)   During  the  consulting  period  you agree to be  available  by phone or in
     person, as may be mutually agreed,  with respect to accounting,  financial,
     investor  relations and other related matters.  Additionally,  you agree to
     use reasonable efforts to make yourself  available,  by phone or in-person,
     to  support  NPI  in  its  litigation  with  Extreme  Networks,   including
     depositions  and  other  activities.  It is  understood  that  your  duties
     relative to these consulting  activities will not exceed a total of 24 days
     during the consulting period. If you agree to provide  consulting  services
     in excess of 24 days,  you will be compensated  for such  consulting at the
     rate of $2,800 per day.

4.   Release
In exchange  for the  benefits  described  above,  you and your  successors  and
assigns  release and  absolutely  discharge  the  Company and its  stockholders,
directors, employees, agents, attorneys legal successors and assigns of and from
any and all claims,  actions and causes of action, whether now known or unknown,
which you now have,  or at any other time had,  or of any  matter,  cause  fact,
thing  act or  omission  whatsoever  occurring  or  existing  at any time to and
including the date hereof, including, but not limited to, any claims of wrongful
termination,  breach of  contract  or national  origin,  race,  age sex or other
discrimination  under the Civil  Rights  Act of 1964 the Age  Discrimination  In
Employment Act of 1967, the Americans with Disabilities Act, the Fair Employment
and  Housing  Act or any other  applicable  law.  You hereby  waive any right or
benefit  which you have or may have under  section 1542 of the Civil Code of the
State of California,  to the full extent that you may lawfully waive such rights
and  benefits,  pertaining  to the  subject  matter of this  general  release of
claims. You acknowledge that you have read section 1542 of the Civil Code of the
State of California that is set forth below in its entirety:

          A general release does not extend to claims that the creditor does not
          know or  suspects  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.

5.   Proprietary Information Agreement
You  acknowledge  and agree that you shall  continue  to be bound by, and comply
with, the terms of any proprietary rights or confidentiality  agreements between
the Company and you.

<PAGE>

6.   Non-solicitation of employees
You agree that for a period of one year after your  Termination  Date, you shall
not, either directly or indirectly,  solicit the services, or attempt to solicit
the  services  of any  employee of NPI or its  affiliated  entities to any other
person or entity.

7.   Non-disclosure
Both NPI and you agree that neither party shall directly or indirectly  disclose
any of the terms of this Agreement to anyone (other than your  immediate  family
or counsel),  except as such  disclosure  may be required for  accounting or tax
reporting purposes or as may be required by law. Further, the timing and content
of any public announcements of your separation from the Company must be mutually
agreed between you and NPI.

8.   Recovery of legal costs
The  prevailing  party shall be entitled  to recover  from the losing  party its
attorneys'  fees and costs  incurred in any lawsuit or other  action  brought to
enforce any right arising out of this Agreement.

9.   Entire agreement
This letter constitutes the entire agreement between the parties with respect to
the subject matter hereof, and supersedes all prior negotiations and agreements,
whether  written or oral,  with the  exception  of the  agreements  described in
paragraphs 1.d., 1.e. and 5. This Agreement may not be altered or amended except
by a written document signed by the Company and you.

      Sincerely,


/s/ Pauline Lo Alker
--------------------------------
Pauline Lo Alker
President and Chief Executive Officer
--------------------------------------------------------------------------------
I  understand  that I should  consult  with an  attorney  prior to signing  this
Agreement and that I am giving up any legal claims I have against the Company by
signing  this  Agreement.  Further,  I  understand  that I may  have  21 days to
consider  this  Agreement,  that I may  revoke it at any time  during the 7 days
after I sign it and that it shall not become  effective  until that 7 day period
has passed. I further  acknowledge  that I am signing this Agreement  knowingly,
willingly and voluntarily in exchange for the benefits described in Paragraphs 1
through 3, above.



/s/  Truman Cole
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     Truman Cole                 Date