Document:

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                                                                   EXHIBIT 10.18

                                                                         TIER II

                                  PC-TEL, INC.

                         MANAGEMENT RETENTION AGREEMENT

This Management Retention Agreement (the "Agreement") is made and entered into
by and between ______________________ (the "Executive") and PC-Tel, Inc. (the
"Company"), effective as of the latest date set forth by the signatures of the
parties hereto below (the "Effective Date").

                                R E C I T A L S
                                ---------------

     A.  It is expected that the Company from time to time may consider a Change
of Control (as defined below).  The Board of Directors of the Company (the
"Board") recognizes that such consideration can be a distraction to the
Executive and can cause the Executive to consider alternative employment
opportunities.  The Board has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have the continued
dedication and objectivity of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control of the Company.

     B.  The Board believes that it is in the best interests of the Company and
its stockholders to provide the Executive with an incentive to continue his
employment and to motivate the Executive to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.

     C.  The Board believes that it is imperative to provide the Executive with
severance benefits upon Executive's termination of employment following a Change
of Control which provides the Executive with enhanced financial security and
incentive and encouragement to remain with the Company notwithstanding the
possibility of a Change of Control.

     D.  Certain capitalized terms used in this Agreement are defined in Section
5 below.

     The parties hereto agree as follows:

         1.  Term of Agreement.  This Agreement shall terminate upon the date
             -----------------
that all obligations of the parties hereto with respect to this Agreement have
been satisfied.

         2.  At-Will Employment.  The Company and the Executive acknowledge that
             ------------------
the Executive's employment is and shall continue to be at-will, as defined under
applicable law, and may be terminated by either party at any time, with or
without cause or notice. If the Executive's employment terminates for any
reason, including (without limitation) any termination prior to a Change of
Control, the Executive shall not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this Agreement, or as may
otherwise be available in
<PAGE>

accordance with the Company's established Executive plans or pursuant to other
written agreements with the Company.

         3.  Change of Control Severance Benefits.
             ------------------------------------

             (a)  Involuntary Termination other than for Cause, Death or
                  ------------------------------------------------------
Disability or Voluntary Termination for Good Reason Following A Change of
-------------------------------------------------------------------------
Control. If, within twelve (12) months following a Change of Control,
-------
Executive's employment is terminated (i) involuntarily by the Company other than
for Cause, death or Disability or (ii) by the Executive pursuant to a Voluntary
Termination for Good Reason, then, subject to Executive entering into a standard
form of mutual release of claims with the Company, the Company shall provide
Executive with the following benefits upon such termination:

                     (i)    Severance Payment.  A lump-sum cash payment in an
                            -----------------
amount equal to one hundred fifty percent (150%) of the Executive's Annual
Compensation;

                     (ii)   Continued Executive Benefits.  Company-paid health,
                            ----------------------------
dental, vision, long-term disability and life insurance coverage at the same
level of coverage as was provided to such Executive immediately prior to the
Change of Control and at the same ratio of Company premium payment to Executive
premium payment as was in effect immediately prior to the Change of Control (the
"Company-Paid Coverage"). If such coverage included the Executive's dependents
immediately prior to the Change of Control, such dependents shall also be
covered at Company expense. Company-Paid Coverage shall continue until the
earlier of (A) one year from the date of termination, or (B) the date upon which
the Executive and his dependents become covered under another employer's group
health, dental, vision, long-term disability or life insurance plans that
provide Executive and his dependents with comparable benefits and levels of
coverage. For purposes of Title X of the Consolidated Budget Reconciliation Act
of 1985 ("COBRA"), the date of the "qualifying event" for Executive and his or
her dependents shall be the date upon which the Company-Paid Coverage commences,
and each month of Company-Paid Coverage provided hereunder shall offset a month
of continuation coverage otherwise due under COBRA.

                     (iii)  Pro-Rated Bonus Payment. A lump-sum cash payment
                            -----------------------
equal to one hundred percent (100%) of the higher of (A) Executive's Target
Bonus as in effect for the fiscal year in which the Change of Control occurs or
(B) Executive's Target Bonus as in effect for the fiscal year in which
Executive's termination occurs, pro-rated by multiplying such bonus amount in
clause (A) or (B), as applicable, by a fraction, the numerator of which shall be
the number of days prior to Executive's termination during such fiscal year, and
the denominator of which shall be three-hundred and sixty-five.

                     (iv)   Equity Compensation Accelerated Vesting. One Hundred
                            ---------------------------------------
percent (100%) of the unvested portion of any stock option, restricted stock or
other Company equity compensation held by the Executive shall be automatically
accelerated in full so as to become completely vested.

             (b)  Voluntary Resignation. If the Executive's employment
                  ---------------------
terminates by reason of the Executive's voluntary resignation (and is not a
Voluntary Termination for Good
<PAGE>

Reason), then the Executive shall not be entitled to receive severance or other
benefits except for those (if any) as may then be established under the
Company's then existing severance and benefits plans or pursuant to other
written agreements with the Company.

             (c)  Disability; Death. If the Executive's employment with the
                  -----------------
Company terminates as a result of the Executive's Disability, or if Executive's
employment is terminated due to the death of the Executive, then the Executive
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing severance
and benefits plans or pursuant to other written agreements with the Company.

             (d)  Termination for Cause. If the Executive is terminated for
                  ---------------------
Cause, then the Executive shall not be entitled to receive severance or other
benefits.

             (e)  Termination Apart from Change of Control. In the event the
                  ----------------------------------------
Executive's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12) month period
following a Change of Control, then the Executive shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's then existing severance and benefits plans or pursuant to other
written agreements with the Company.

         4.  Definition of Terms. The following terms referred to in this
             -------------------
Agreement shall have the following meanings:

             (a)  Annual Compensation. "Annual Compensation" shall mean an
                  -------------------
amount equal to the Executive's Company annual base salary.

             (b)  Target Bonus. "Target Bonus" shall mean Executive's annual
                  ------------
bonus, assuming 100% "on target" satisfaction of any objective or subjective
performance milestones.

             (c) Cause. "Cause" shall mean (i) an act of personal dishonesty
                 -----
taken by the Executive in connection with his responsibilities as an Executive
and intended to result in substantial personal enrichment of the Executive, (ii)
Executive being convicted of a felony, (iii) a willful act by the Executive
which constitutes gross misconduct and which is injurious to the Company, (iv)
following delivery to the Executive of a written demand for performance from the
Company which describes the basis for the Company's reasonable belief that the
Executive has not substantially performed his duties, continued violations by
the Executive of the Executive's obligations to the Company which are
demonstrably willful and deliberate on the Executive's part.

             (d)  Change of Control. "Change of Control" means the occurrence of
                  -----------------
any of the following events:

                  (i)  Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities who is not already such as of the Effective Date of this
Agreement; or
<PAGE>

                  (ii) The consummaion of the sale or disposition by the Company
of all or substantially all the Company's assets; or

                  (iii)  The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or its parent) at
least fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation; or

                  (iv) A change in the composition of the Board occurring within
a two-year period, as a result of which fewer than a majority of the directors
are Incumbent Directors. "Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date upon which this Agreement was
entered into, or (B) are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of those directors whose election
or nomination was not in connection with any transaction described in
subsections (i), (ii), or (iii) above, or in connection with an actual or
threatened proxy contest relating to the election of directors to the Company;
or

             (e)  Disability. "Disability" shall mean that the Executive has
                  ----------
been unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least 30 days' written notice by the Company of its intention to terminate the
Executive's employment. In the event that the Executive resumes the performance
of substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.

             (f)  Voluntary Termination for Good Reason. "Voluntary Termination
                  -------------------------------------
for Good Reason" shall mean the Executive voluntarily resigns after the
occurrence of any of the following (i) without the Executive's express written
consent, a material reduction of the Executive's duties, title, authority or
responsibilities, relative to the Executive's duties, title, authority or
responsibilities as in effect immediately prior to such reduction, or the
assignment to Executive of such reduced duties, title, authority or
responsibilities; provided, however, that a reduction in duties, title,
authority or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Senior Vice-President of
a business unit of the Company remains as such following a Change of Control)
shall not by itself constitute grounds for a "Voluntary Termination for Good
Reason;" (ii) without the Executive's express written consent, a material
reduction, without good business reasons, of the facilities and perquisites
(including office space and location) available to the Executive immediately
prior to such reduction; (iii) a reduction by the Company in the base salary of
the Executive as in effect immediately prior to such reduction; (iv) a material
reduction by the Company in the aggregate level of Executive benefits, including
bonuses, to which the Executive was entitled immediately prior to such reduction
with the result that
<PAGE>

the Executive's aggregate benefits package is materially reduced (other than a
reduction that generally applies to Company Executives); (v) the relocation of
the Executive to a facility or a location more than thirty-five (35) miles from
the Executive's then present location, without the Executive's express written
consent; (vi) the failure of the Company to obtain the assumption of this
agreement by any successors contemplated in Section 6(a) below; or (vii) any act
or set of facts or circumstances which would, under California case law or
statute constitute a constructive termination of the Executive.

         5.  Non-Solicitation. In consideration for the severance benefits
             ----------------
Executive is to receive herein, if any, Executive agrees that he or she will
not, at any time during the one year following his or her termination date,
directly or indirectly solicit any individuals to leave the Company's (or any of
its subsidiaries') employ for any reason or interfere in any other manner with
the employment relationships at the time existing between the Company (or any of
its subsidiaries) and its current or prospective Executives.

         6.  Successors.
             ----------

             (a)  Company's Successors. Any successor to the Company (whether
                  --------------------
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any such successor to the Company's business and/or
assets which executes and delivers the assumption agreement described in this
Section 6(a) or which becomes bound by the terms of this Agreement by operation
of law.

             (b)  Executive's Successors. The terms of this Agreement and all
                  ----------------------
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

         7.  Notice.
             ------

             (a)  General. Notices and all other communications contemplated by
                  -------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or one day following mailing via Federal Express or
similar overnight courier service. In the case of the Executive, mailed notices
shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.

             (b)  Notice of Termination. Any termination by the Company for
                  ---------------------
Cause or by the Executive pursuant to a Voluntary Termination for Good Reason
shall be communicated by a notice of termination to the other party hereto given
in accordance with Section 7(a) of this Agreement. Such notice shall indicate
the specific termination provision in this Agreement relied
<PAGE>

upon, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Executive to include in the notice
any fact or circumstance which contributes to a showing of Voluntary Termination
for Good Reason shall not waive any right of the Executive hereunder or preclude
the Executive from asserting such fact or circumstance in enforcing his rights
hereunder.

         8.  Miscellaneous Provisions.
             ------------------------

             (a)  No Duty to Mitigate. The Executive shall not be required to
                  -------------------
mitigate the value of any benefits contemplated by this Agreement, nor shall any
such benefits be reduced by any earnings or benefits that the Executive may
receive from any other source.

             (b)  Waiver. No provision of this Agreement shall be modified,
                  ------
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Executive and by two authorized officers of the
Company (other than the Executive). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.

             (c)  Whole Agreement. No agreements, representations or
                  ---------------
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
represents the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior arrangements and understandings
regarding same.

             (d)  Choice of Law. The validity, interpretation, construction and
                  -------------
performance of this Agreement shall be governed by the laws of the State of
California.

             (e)  Severability. The invalidity or unenforceability of any
                  ------------
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

             (f)  Counterparts. This Agreement may be executed in counterparts,
                  ------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
<PAGE>

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year set
forth below.

                                    PC-TEL, INC.

                                    By:______________________________

                                    Title:___________________________

                                    Date:___________________

                                    By:______________________________

                                    Title:___________________________

                                    Date:___________________

                                    EXECUTIVE

                                    _________________________________

                                    Date:___________________<PAGE>

                                                                   EXHIBIT 10.19

                                   EXECUTIVE
                                   ---------

                        SEVERANCE AGREEMENT AND RELEASE
                        -------------------------------

                                   RECITALS
                                   --------

     This Executive Severance Agreement and Release ("Agreement") is made by and
between  Peter C. Chen ("Employee") and PC Tel, Inc. ("Company"), collectively
referred to as the ("Parties"):

  A.  Employee was employed by the Company as Chief Executive Officer

  B.  The Company and Employee have entered into a Confidential and Proprietary
Information Agreement (the "Confidentiality Agreement");

  C.  Employee resigned his position effective February 16, 2001
("Resignation Date"), but will continue in his position as a Director on the
Board of Directors for PCTEL under the title "Honorary Chairman" until a
successor is fully elected.

  D.  The Parties, and each of them, wish to resolve any and all disputes,
claims, complaints, grievances, charges, actions, petitions and demands that the
Employee may have against the Company as defined herein, including, but not
limited to, any and all claims arising or in any way related to Employee's
employment with, or separation from, the Company;

     NOW THEREFORE, in consideration of the promises made herein, the Parties
hereby agree as follows:

                                   COVENANTS
                                   ---------

     1.  Consideration.
     -----------------
           (a)  Commencing with the Resignation Date, the Company agrees to pay
Employee a severance payment of one year's salary, which is Two Hundred and
Seventy Thousand ($270,000) Dollars, in exchange for the covenants and releases
herein.

           (b)  Payment.  The Company shall pay employee a severance payment of
                -------
$22,500 within 5 days of the Effective Date of this Agreement. Provided Employee
does not breach any term or provision of this Agreement at any time within the
11 months that follow the end of the first month after the Resignation Date, on
the tenth day of each month between March 10, 2001 and March 9, 2002, Employee
shall receive an additional severance payment of $22,500. Thus, if within one
year of the Resignation Date of this Agreement, Employee does not breach any
term or provision of this Agreement, Employee shall receive a total severance
payment of $270,000.
<PAGE>

           (c)  The Company will issue an Internal Revenue Service Form 1099 to
Employee for the purpose of reporting the payments described in section 1(b).

           (d)  Vesting of Stock.  As of Employee's Resignation Date (February
                ----------------
16, 2001), Employee is fully vested in 782,187 shares of the Company's common
stock and 161,146 unvested options shares are not yet exercisable . In further
consideration for the covenants and releases contained in this Agreement, and
contingent upon approval by the Company's Board of Directors, Company agrees
that Employee's status as a "Service Provider" as defined in the Company's Stock
Option Plan, shall continue uninterrupted for the next 12 months and Employee
shall continue to vest in all current unvested options he has pursuant to any
stock option agreement between Employee and Company for the next 12 months.
Employee shall continue to be subject to the terms and conditions of the
Company's Stock Option Plan and the applicable Stock Option Agreement between
Employee and the Company. By continuing your participation in the PCTEL's Common
Stock Option Plan it is further understood that you waive your participation in
the 1998 Director Option Plan.

           (e)  Benefits.  Health benefit coverage for the Employee shall cease
                --------
as of February 28, 2001. Employee shall have the right to convert his health
insurance benefits to individual coverage pursuant to COBRA, effective March 1,
2001. Should Employee elect COBRA coverage, the Company will pay the cost of
said COBRA coverage for a period up to 12 months, or until March 2002.

           (f)  Life Insurance: Company will continue to cover the supplemental
                --------------
life policy (Key Man Policy) for a period of 6 months from the Effective Date of
this Agreement.

     2.  Confidential Information.  Employee shall continue to maintain the
     ----------------------------
confidentiality of all confidential and proprietary information of the Company
and shall continue to comply with the terms and conditions of the
Confidentiality Agreement between Employee and the Company. Employee, shall
except for materials received in his capacity as an active member of the Board
of Directors, return all of the Company's property and confidential and
proprietary information in his possession to the Company on the Resignation Date
of this Agreement.

     3.  Payment of Salary.  Employee acknowledges and represents that the
     ---------------------
Company has paid all salary, wages, bonuses, accrued vacation, commissions and
any and all other benefits due to Employee once the above noted payments and
benefits are received.

     4.  Release of Claims. The Parties agree that the consideration set forth
     ---------------------
in this Agreement represents settlement in full of all outstanding obligations
owed by one Party to the other . The Parties, on their own behalves, and on
behalf of their respective heirs, family members, executors, officers,
directors, administrators, affiliates, divisions, subsidiaries, predecessor and
successor corporations, and assigns, hereby fully and forever releases the other
Party, and the other Party's heirs, family members, executors, officers,
directors, employees, investors, shareholders, administrators, affiliates,
divisions, subsidiaries, predecessor and successor corporations, and assigns,
from, and agree not to sue concerning, any claim, duty, obligation or cause of
action relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that
<PAGE>

they may possess arising from any omissions, acts or facts that have occurred up
until and including the Effective Date of this Agreement including, without
limitation:

           (a)  any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship;

           (b)  any and all claims relating to, or arising from, Employee's
right to purchase, or actual purchase of shares of stock of the Company,
including, without limitation, any claims for fraud, misrepresentation, breach
of fiduciary duty, breach of duty under applicable state corporate law, and
securities fraud under any state or federal law;

           (c)  any and all claims under the law of any jurisdiction including,
but not limited to, wrongful discharge of employment; constructive discharge
from employment; termination in violation of public policy; discrimination;
breach of contract, both express and implied; breach of a covenant of good faith
and fair dealing, both express and implied; promissory estoppel; negligent or
intentional infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; unfair business practices; defamation; libel;
slander; negligence; personal injury; assault; battery; invasion of privacy;
false imprisonment; and conversion;

           (d)  any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers Benefit Protection
Act; the California Fair Employment and Housing Act, and Labor Code section 201,
et seq. and section 970, et seq.;

           (e)  any and all claims for violation of the federal, or any state,
constitution;

           (f)  any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination;

           (g)  any claim for any loss, cost, damage, or expense arising out of
any dispute over the non-withholding or other tax treatment of any of the
proceeds received by Employee as a result of this Agreement; and

           (h)  any and all claims for attorneys' fees and costs.

     The Company and Employee agree that the release set forth in this section
shall be and remain in effect in all respects as a complete general release as
to the matters released. This release does not extend to any obligations
incurred under this Agreement, any stock option agreement entered into with
Employee, or to the Company's obligation under its Indemnification Agreement
with Employee, or to the Company's obligations to indemnify Employee pursuant to
the Company's Articles of Incorporation, By-Laws, or as otherwise provided by
law.

     5.  Acknowledgement of Waiver of Claims Under ADEA.  Employee acknowledges
     --------------------------------------------------
that he is waiving and releasing any rights he may have under the Age
Discrimination in Employment
<PAGE>

Act of 1967 ("ADEA") and that this waiver and release is knowing and voluntary.
Employee and the Company agree that this waiver and release does not apply to
any rights or claims that may arise under ADEA after the Effective Date of this
Agreement. Employee acknowledges that the consideration given for this waiver
and release agreement is in addition to anything of value to which Employee was
already entitled. Employee further acknowledges that he has been advised by this
writing that

           (a)  he should consult with an attorney prior to executing this
                                                   -----
Agreement;

           (b)  he has up to twenty-one (21) days within which to consider this
Agreement;

           (c)  he has been advised in writing by the Company of the class,
unit, or group of individuals covered by the severance program, and the job
titles and ages of all individuals who participated and did not participate in
the program;

           (d)  he has seven (7) days following his execution of this Agreement
to revoke the Agreement;

           (e)  this Agreement shall not be effective until the revocation
period has expired; and

           (f)  nothing in this Agreement prevents or precludes Employee from
challenging or seeking a determination in good faith of the validity of this
waiver under ADEA, nor does it impose any condition precedent, penalties or
costs for doing so, unless specifically authorized by federal law.

     6.  Civil Code Section 1542.  The Parties represent that they are not aware
     ---------------------------
of any claim by either of them other than the claims that are released by this
Agreement.  Employee and the Company acknowledge that they have been advised by
legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides 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.

     Employee and the Company, being aware of said code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.

     7.  No Pending or Future Lawsuits.  Employee and the Company represent that
     ---------------------------------
they have no lawsuits, claims, or actions pending in their names, or on behalf
of any other person or entity, against the other or any other person or entity
referred to herein.  Employee and the Company also represents that they do not
intend to bring any claims on their own behalf or on behalf of any other person
or entity against the other or any other person or entity referred to herein.
<PAGE>

     8.  Confidentiality.  The Parties acknowledge that Employee's agreement to
     -------------------
keep the terms and conditions of this Agreement confidential was a material
factor on which all Parties relied in entering into this Agreement. Employee
hereto agrees to use his best efforts to maintain in confidence the existence of
this Agreement, the contents and terms of this Agreement, the consideration for
this Agreement, and any allegations relating to the Company or his employment
with the Company except as otherwise provided for in this Agreement (hereinafter
collectively referred to as "Settlement Information"). Employee agrees to take
every reasonable precaution to prevent disclosure of any Settlement Information
to third parties, and agrees that there will be no publicity, directly or
indirectly, concerning any Settlement Information.  Employee agrees to take
every precaution to disclose Settlement Information only to those attorneys,
accountants, governmental entities, financial advisors and family members who
have a reasonable need to know of such Settlement Information.

     9.  No Cooperation.  Employee agrees he will not act in any manner that is
     ------------------
intended to damage the business of the Company.  Employee agrees that he will
not counsel or assist any attorneys or their clients in the presentation or
prosecution of any disputes, differences, grievances, claims, charges, or
complaints by any third party against the Company and/or any officer, director,
employee, agent, representative, shareholder or attorney of the Company, unless
under a subpoena or other court order to do so.  Employee further agrees both to
immediately notify the Company upon receipt of any court order, subpoena, or any
legal discovery device that seeks or might require the disclosure or production
of the existence or terms of this Agreement, and to furnish, within three (3)
business days of its receipt, a copy of such subpoena or legal discovery device
to the Company.

     10.  Non-Disparagement.  Employee and the Company agree to refrain from
     ----------------------
any defamation, libel or slander of the other or tortious interference with the
contracts and relationships of the other .

     11.  Non-Solicitation.  Employee agrees that for a period of twelve (12)
     ---------------------
months immediately following the Resignation Date of this Agreement, Employee
shall not either directly or indirectly solicit, induce, recruit or encourage
any of the Company's employees to leave their employment, or attempt to solicit,
induce, recruit, encourage, take away or hire employees of the Company, either
for him or any other person or entity.

     12.  No Admission of Liability.  The Parties understand and acknowledge
     ------------------------------
that this Agreement constitutes a compromise and settlement of disputed claims.
No action taken by the Parties hereto, or either of them, either previously or
in connection with this Agreement shall be deemed or construed to be:

           (a)  an admission of the truth or falsity of any claims heretofore
made or

           (b)  an acknowledgment or admission by either Party of any fault or
liability whatsoever to the other Party or to any third party.

     13.  Costs.  The Parties shall each bear their own costs, expert fees,
     ----------
attorneys' fees and other fees incurred in connection with this Agreement.
<PAGE>

     14.  Tax Consequences.  The Company makes no representations or warranties
     ---------------------
with respect to the tax consequences of the payment of any sums to Employee
under the terms of this Agreement.  Employee agrees and understands that he is
responsible for payment, if any, of local, state and/or federal taxes on the
sums paid hereunder by the Company and any penalties or assessments thereon.
Employee further agrees to indemnify and hold the Company harmless from any
claims, demands, deficiencies, penalties, assessments, executions, judgments, or
recoveries by any government agency against the Company for any amounts claimed
due on account of Employee's failure to pay federal or state taxes or damages
sustained by the Company by reason of any such claims, including reasonable
attorneys' fees.

     15.  Indemnification.  The Parties agree to indemnify and hold harmless the
     --------------------
other from and against any and all loss, costs, damages or expenses, including,
without limitation, attorneys' fees or expenses incurred by the non - breaching
Party arising out of the breach of this Agreement by the other, or from any
false representation made herein by the other, or from any action or proceeding
which may be commenced, prosecuted or threatened by the other or for the other's
benefit, upon the other's  initiative, or with the other's aid or approval,
contrary to the provisions of this Agreement.  The Parties further agrees that
in any such action or proceeding, this Agreement may be pled by the non-
breaching Party as a complete defense, or may be asserted by way of counterclaim
or cross-claim.

     16.  Arbitration.  The Parties agree that any and all disputes arising out
     ----------------
of the terms of this Agreement, their interpretation, and any of the matters
herein released, shall be subject to binding arbitration in Santa Clara County
before the American Arbitration Association under its Employment Dispute
Resolution Rules, or by a judge to be mutually agreed upon.  The Parties agree
that the prevailing party in any arbitration shall be entitled to injunctive
relief in any court of competent jurisdiction to enforce the arbitration award.
The Parties agree that the prevailing party in any arbitration shall be awarded
its reasonable attorneys' fees and costs.  The Parties hereby agree to waive
their right to have any dispute between them resolved in a court of law by a
judge or jury.

     17.  Authority.  The Company represents and warrants that the undersigned
     --------------
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Employee represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him/her to bind them to the
terms and conditions of this Agreement.  Each Party warrants and represents that
there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.

     18.  No Representations.  Each Party represents that it has had the
     -----------------------
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement.  Neither Party has
relied upon any representations or statements made by the other Party hereto
which are not specifically set forth in this Agreement.

     19.  Severability.  In the event that any provision hereof becomes or is
     -----------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full
<PAGE>

force and effect without said provision so long as the remaining provisions
remain intelligible and continue to reflect the original intent of the Parties.

     20.  Entire Agreement.  This Agreement, and the Confidentiality Agreement,
     ---------------------
constitute the entire agreement and understanding between the Parties concerning
the subject matter of this Agreement and all prior representations,
understandings, and agreements concerning the subject matter of this Agreement
have been superseded by the terms of this Agreement.

     21.  No Waiver.  The failure of any Party to insist upon the performance of
     --------------
any of the terms and conditions in this Agreement, or the failure to prosecute
any breach of any of the terms and conditions of this Agreement, shall not be
construed thereafter as a waiver of any such terms or conditions.  This entire
Agreement shall remain in full force and effect as if no such forbearance or
failure of performance had occurred.

     22.  No Oral Modification.  Any modification or amendment of this
     -------------------------
Agreement, or additional obligation assumed by either Party in connection with
this Agreement, shall be effective only if placed in writing and signed by both
Parties or by authorized representatives of each Party.  No provision of this
Agreement can be changed, altered, modified, or waived except by an executed
writing by the Parties.

     23.  Governing Law.  This Agreement shall be deemed to have been executed
     ------------------
and delivered within the State of California, and it shall be construed,
interpreted, governed, and enforced in accordance with the laws of the State of
California.

     24.  Attorneys' Fees.  In the event that either Party brings an action to
     --------------------
enforce or effect its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including the costs of mediation,
arbitration, litigation, court fees, plus reasonable attorneys' fees, incurred
in connection with such an action.

     25.  Effective Date.  This Agreement is effective eight (8) days after it
     -------------------
has been signed by both Parties, unless revoked by Employee within seven (7)
days of execution.

     26.  Counterparts.  This Agreement may be executed in counterparts, and
     -----------------
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.

     27.  Voluntary Execution of Agreement.  This Agreement is executed
     -------------------------------------
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims.  The Parties
acknowledge that:

           (a)  They have read this Agreement;

           (b)  They have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
<PAGE>

           (c)  They understand the terms and consequences of this Agreement and
of the releases it contains; and

           (d)  They are fully aware of the legal and binding effect of this
Agreement.

     IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set forth below.

Dated:    2/15/01               By     /s/ Thomas A. Capizzi
      ----------------          ---------------------------------
                                Thomas A. Capizzi
                                Vice President. Human Resources &
                                Chief Administrative Officer

                                Peter C. Chen, an individual

Dated:    2/15/01                       /s/ Peter C. Chen
      ----------------           --------------------------------
                                 Peter C. Chen

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