EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into on
June 7 , 2002, by and between Xxxx X. Xxxxx ("Employee") and Stonehouse
Technologies, Inc., a Texas corporation and wholly-owned subsidiary of nStor
Technologies, Inc. ("nStor") ("Stonehouse"). Employee and Stonehouse are
collectively referred to herein as the "parties". Capitalized terms used herein
and not otherwise defined herein shall have the meaning given such terms in that
certain Stock Purchase Agreement, dated June __, 2002, by and among nStor
Technologies, Inc, Pacific USA Holdings Corp., Pacific Technology Group, Inc.,
and Stonehouse (the "Stock Purchase Agreement").
1. Duties.
Stonehouse hereby employs Employee, and Employee hereby agrees to serve as
the President and Chief Executive Officer of Stonehouse during the Term (as
defined hereinafter) hereof. Employee shall have such duties and powers as
are normally accorded a President and Chief Executive Officer of a
corporation and shall loyally, conscientiously and in good faith perform
such duties as may be assigned to him from time to time by the Board of
Directors.
2. Term and Termination.
(a) Term of Agreement.
(i) Original Term. Unless earlier terminated as provided in this
Agreement, the term of Employee's employment shall commence on June ,
2002 (the "Effective Date") and shall continue until May 31, 2004;
provided, however, that in the event the Net Revenues of Stonehouse
for the Valuation Period as reflected on the Net Revenue Statement are
less than $1,000,000 (such an occurrence, a "Net Revenues Test
Failure"), Employee's employment shall, at the option of Stonehouse
and upon 30 days notice from Stonehouse to Employee, terminate upon
the date on which a final determination of the amount of Net Revenues
of Stonehouse for the Valuation Period is made in accordance with the
provisions of the Stock Purchase Agreement (the "Net Revenue
Determination Date") (the period from the Effective Date through the
earliest of (i) May 31, 2004, (ii) the Net Revenues Determination Date
and (iii) the date of any earlier termination in accordance with this
Agreement, being hereafter referred to as the "Original Term").
(ii) One Year Renewals. Unless (i) Stonehouse or Employee delivers
written notice of its or his intent not to extend the term of this
Agreement on or prior to the date that is three (3) months prior to
May 31, 2004 or the then applicable Annual Renewal Period (as defined
hereinafter), if any, or (ii) this Agreement is otherwise terminated
prior May 31, 2004 or the then applicable Annual Renewal Period as
provided in this Agreement, this Agreement shall be automatically
renewed for an unlimited number of additional one (1) year periods
(each an "Annual Renewal Period"). The Original Term and any Annual
Renewal Periods are hereinafter collectively referred to as the
"Term".
(b) Termination By Company for Cause. Notwithstanding anything in this
Agreement to the contrary, express or implied, this Agreement, and
Employee's employment, may be terminated immediately and without
notice by Stonehouse for "Fair and Honest Cause or Reason Regulated by
Good Faith" ("Cause"). For purposes of this Agreement, Cause shall
include, but is not limited to Employee's:
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(i) engaging or participating in any activity which is directly
competitive with or intentionally injurious to Stonehouse;
(ii) behavior that causes key employees to leave employment of
Stonehouse
(iii) commission of any fraud against Stonehouse or use or
appropriation for his personal use and benefit of any funds, assets or
properties of Stonehouse not authorized by Stonehouse to be so used or
appropriated;
(iv) knowing violation of law, conviction for commission of a felony
or conviction for a crime involving dishonesty or moral turpitude:
(v) failure to carry out business issues that are relevant to
Stonehouse's success; and
(vi) sexual, verbal or mental harassment of any employee.
Upon termination of this Agreement by Stonehouse pursuant to this
Section 2(b), Employee shall be entitled to receive on the date of
termination any unpaid Base Salary (as defined in Section 4) earned
through the date of termination. Upon termination of this Agreement
under this Section 2(b), employee shall not be entitled to any Bonus
amounts otherwise due under Section 4, and Stonehouse shall have no
further obligations to Employee under this Agreement.
(c) Termination By Stonehouse Without Cause. Notwithstanding anything
in this Agreement to the contrary, express or implied, this Agreement
and Employee's employment, may be terminated at the will of Stonehouse
without Cause upon delivery of written notice to Employee; provided,
however, that Employee shall nonetheless be entitled to receive (i)
his Base Salary for the balance of the Term, and (ii) any unpaid Bonus
(as hereinafter defined) amounts then earned by Employee through the
date of termination. All amounts payable to Employee under clause (i)
shall be paid to Employee in that number of equal monthly installments
as are remaining in the Term, and all amounts payable to Employee
under clause (ii) above shall be paid within thirty (30) days of
termination. If Stonehouse elects to terminate this Agreement pursuant
to this subparagraph 2(c), Stonehouse shall not have any further
obligations to Employee under this Agreement other than the payment of
the Base Salary and Bonus pursuant to this Section 2(c).
Notwithstanding the foregoing, in the event Employee is terminated by
Stonehouse under this Section 2(c) and Employee thereafter engages or
participates in any activity described in Section 2(b)(i), Stonehouse
shall not have any further obligations to pay Employee as set forth in
this Section 2(c).
(d) Voluntary Termination by Employee. Employee may voluntary
terminate his employment with Stonehouse by giving Stonehouse sixty
(60) days advance written notice. Upon any voluntary termination of
this employment with Stonehouse under this Section 2(d), Employee
shall be entitled to receive any unpaid Base Salary earned through the
date of termination. Upon any termination of Employee's employment
with Stonehouse pursuant to this Section 2(d), Employee shall not be
entitled to any Bonus amounts otherwise due under Section 4, and
Stonehouse shall not have any further obligations to Employee under
this Agreement.
(e) Automatic Termination. This Agreement and Employee's employment,
shall terminate immediately and without the necessity of any notice or
any other action by any party hereto upon the first to occur of the
following:
(i) The death of Employee;
(ii) The loss of Employee's legal capacity to contract;
(iii) The inability of Employee to perform his duties or
responsibilities hereunder, as a result of mental or physical
ailment or incapacity, for an aggregate of ninety (90) calendar
days during any calendar year (whether or not consecutive) unless
waived in writing by Stonehouse; or (iv) The expiration of the
Term of this Agreement, provided that timely notice has been
given as required by Section 2(a)(ii).
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Upon termination of this Agreement pursuant to clauses (i), (ii) or (iii) of
this Section 2(e), Employee or Employee's estate, as the case may be, shall be
entitled to an amount equal to (i) any unpaid Base Salary earned through the
date of termination and any unpaid Bonus earned through the date of termination,
plus (ii) Employee's Base Salary for a period of three (3) months or the
remaining period of the Term, whichever is less. The amounts payable pursuant to
this Section 2(e) shall be payable within thirty (30) days of the date of
termination. Upon payment of such amounts, Stonehouse shall not have any further
obligations to Employee or Employee's estate, as the case may be, under this
Agreement.
3. Exclusivity of Employment.
(a) Loyal and Conscientious Service. Subject to the Addendum to
Employment Agreement included as part of this Agreement, during the
Term of this Agreement, Employee shall devote his full time, interest,
abilities and energies to Stonehouse and use his best efforts, skills
and abilities to promote the general welfare and interest of
Stonehouse and to preserve, maintain and enhance its business and
business relationships with its customers and employees.
(b) Non-competition. During the Term of this Agreement and the
Restricted Period (defined below), Employee shall not, directly or
indirectly, render services of a business, professional or commercial
nature to any other person or entity that competes with the business
of Stonehouse or any of its affiliates (a "Stonehouse Entity"),
including nStor, whether alone, as an employee, as a partner, or as a
shareholder, officer or director of any corporation or other business
entity, or as a trustee, fiduciary or in any similar representative
capacity of any other entity. Notwithstanding the foregoing, the
expenditure of reasonable amounts of time for educational, charitable
or professional activities shall not be deemed a breach of this
Agreement if those activities do not materially interfere with the
services required under this Agreement. For purposes of this
Agreement, "Restricted Period" shall mean that period commencing on
the date of termination of this Agreement and ending on the date which
is two (2) years thereafter or, in the event this Agreement is
terminated by Stonehouse because of a Net Revenues Test Failure, the
date which results in a Restricted Period of equal duration to the
Original Term of this Agreement.
4. Compensation.
(a) Base Salary.
(i) Beginning on the date hereof, and continuing the entire Term
of this Agreement, Stonehouse shall pay Employee a fixed annual
salary in an amount equal to Two Hundred Thousand Dollars
($200,000.00) or such greater amount as may be determined by the
Board of Directors of Stonehouse from time to time (the "Base
Salary").
(ii) The Base Salary shall be paid in equal installments (subject
to proration for any period of employment of less than a year or
any applicable payroll period therein) on Stonehouse's regular
payroll dates. Employee authorizes Stonehouse to make such
deductions and withholdings from his Base Salary and any other
earnings of Employee from Stonehouse as are required by law,
which deductions shall include, without limitation, withholding
for federal and state income tax and Social Security and Medicare
withholding.
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(b) Bonus. Commencing in the fiscal year beginning July 1, 2002 and
for each fiscal year of Stonehouse thereafter during the Term of this
Agreement, Employee shall be eligible to receive a cash bonus (the
"Bonus"), in an amount equal to (i) 100% of the first $50,000 (or any
lesser amount) of Stonehouse's Net Revenues in excess of $1,000,000
and (ii) 13.33% of Stonehouse's Net Revenues in excess of $1,050,000.
(c) Additional Compensation and Benefits During the Term of this
Agreement.
(i) Employee shall be entitled to four weeks paid vacation in
each twelve-month period during the Term of this Agreement;
(ii) Stonehouse shall pay or reimburse Employee for all
reasonable and necessary travel and other business expenses
incurred or paid by Employee in connection with the performance
of his services under this Agreement upon approval of Stonehouse
and presentation of expense statements, vouchers, logs and such
other supporting information as Stonehouse may reasonably request
from time to time;
(iii) Stonehouse shall pay for Employee's portion of the standard
medical insurance plan, standard disability plan, standard dental
plan and standard life insurance plan provided for by Stonehouse.
Employee shall additionally be eligible to participate in any
standard Stonehouse retirement benefits including but not limited
to Stonehouse 401(k) retirement plans. Any additional premiums
for Employee's dependents shall be the responsibility of
Employee;
(iv) Employee shall be entitled to receive an automobile
allowance of $750.00 per month to be paid to Employee on the
first of every month during the Term of this Agreement .
(v) Employee shall be entitled to receive country club membership
benefits in the form of monthly dues compensations in the amount
of $500.00 per month to be paid on the first of every month
during the Term of this Agreement.
(d) nStor Stock Options. Employee will be granted an option to
purchase 250,000 shares of nStor common stock, par value $.05 per
share, pursuant to a stock option agreement (the "Stock Option
Agreement"), which will provide that one third of the options (83,333
shares) will be exercisable at $.50 per share and deemed vested on
July 1, 2003, and two thirds of the options (166,667 shares) will be
exercisable at $.75 per share, with 41,667 shares deemed vested each
six months on January 1, 2004, July 1, 2004, January 1, 2005 and July
1, 2005, respectively. All other terms of the option shall be as set
forth in the Stock Option Agreement and subject to the nStor
Technologies, Inc. 2001 Stock Option Plan.
5. Nondisclosure and Assignment of Proprietary and Confidential Information.
In consideration and recognition of the fact that Employee has had, and
during the course of his employment with Stonehouse may have, access to
Confidential Information (as hereinafter defined) of Stonehouse Entities or
other information and data or secrets of a proprietary nature of Stonehouse
Entities which such Stonehouse Entities desire to keep confidential, and
that a Stonehouse Entity has furnished, or during the course of Employee's
employment will furnish, such Confidential Information to Employee,
Employee agrees and acknowledges as follows:
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(a) Confidential Information. As used herein, the term "Confidential
Information" shall mean and include, without limitation, any and all
marketing and sales data, plans and strategies, financial projections,
customer lists, prospective customer lists, promotional ideas, data
concerning the services, designs, methods, inventions, improvements,
discoveries or designs, whether or not patentable, "know-how",
training and sales techniques, and any other information of a similar
nature of any Stonehouse Entity disclosed to Employee or otherwise
made known to him as a consequence of or through his performance of
this Agreement (including information originated by Employee);
provided, however, that the term Confidential Information shall not
include any information that (i) at the time of the disclosure or
thereafter is or becomes generally available to and known by the
public, other than as a result of a disclosure by Employee or any
agent or representative of Employee in violation of this Agreement; or
(ii) was available to Employee on a non-confidential basis from a
source other than a Stonehouse Entity, or any of their respective
officers, directors, employees, agents or other representatives which
source was not disclosing such information in violation of any
agreement not to so disclose.
(b) Exclusive Rights; Assignment to Stonehouse. The Stonehouse
Entities have exclusive rights to all Confidential Information, and
Employee hereby assigns to the Stonehouse Entities all rights he might
otherwise possess in any Confidential Information. Except as required
in the performance of his duties hereunder, Employee will not at any
time during or after his employment, directly or indirectly use,
communicate, disclose, disseminate, lecture upon, publish articles or
otherwise disclose or put in the public domain, any Confidential
Information . Employee agrees to deliver to Stonehouse any and all
copies of Confidential Information in the possession or control of
Employee upon the expiration or termination of this Agreement, or at
any other time upon request. This Section 5 shall survive the
termination of this Agreement and the termination of Employee's
employment with Stonehouse.
6. Solicitation of Employees, Customers and OthersIn consideration and
recognition of the fact that Employee's position with Stonehouse is an
executive position involving fiduciary responsibility to Stonehouse and
access to Confidential Information, Employee agrees that during the Term of
this Agreement and the Restricted Period he will not directly or indirectly
solicit, influence or attempt to influence any customer, potential customer,
supplier or any employee of any Stonehouse Entity to cease doing business
with or being employed by any Stonehouse Entity or to do business with a
competing company or seek employment with another company.
7. Remedies and Enforcement Upon Breach. Employee agrees and acknowledges that
any violation of Sections 3(b), 5 and 6 shall entitle Stonehouse to pursue
any appropriate remedies or relief provided by law or equity and to obtain a
temporary restraining order if warranted, injunctive relief if appropriate,
and/or specific performance of the above and foregoing agreements and
covenants. Employee has carefully read and considered the provisions of
Sections 3(b), 5 and 6 of this Agreement, and agrees that the restrictions
contained therein (including, but not limited to, the time period) are fair
and reasonable and that these provisions are reasonably required for
protection of the interests of the Stonehouse Entities. Employee further
agrees that a violation by Employee of any of the covenants contained in
Sections 3(b), 5 and 6 will cause damage to one or more StonehouseEntities
that will be significant, material and difficult or impossible to adequately
measure, and that in the event of such a breach, such Stonehouse Entity or
Entities will be entitled to seek and obtain injunctive relief. Employee
expressly acknowledges and agrees that the respective covenants and
agreements will be construed in such a manner as to be enforceable under
applicable laws if a more limited scope is determined by a court of
competent jurisdiction to be required.
8. Representation by Employee. Employee represents and warrants that he is
under no restriction or disability by reason of any prior contract or
otherwise which would prevent him from entering into and performing his
duties and obligations under this Agreement.
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9. Notices. All notices, requests, demands and other communications under this
Agreement must be in writing and shall be deemed to have been duly given on
the date of service if served personally on the party to whom notice is to
be given, or on the date indicated on the return receipt as the date of
receipt or refusal if mailed to the party to whom notice is to be given by
first class mail, registered or certified, postage prepaid, return receipt
requested, and properly addressed as follows:
to Stonehouse: nStor Technologies, Inc.
00000 Xxxx Xxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Fax: 000-000-0000
to the Employee: Xxxx X. Xxxxx
Any party may change its address for the purpose of this Section 9 by giving the
other party written notice of the new address in the manner set forth above.
10. Entire Agreement. This Agreement, including the Addendum to Employment
Agreement attached hereto, constitutes the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby, and supersedes all prior agreements, arrangements and understandings
relating to the subject matter hereof, written or otherwise.
11. Amendment. This Agreement may be amended, modified, superseded or
cancelled, and any of the terms, covenants or conditions hereof may be
amended, only by a written instrument executed by Employee and by an
authorized representative of Stonehouse, which expressly states the intent
of the parties to modify the terms of this Agreement.
12. Waiver. Any failure to exercise or delay in exercising any right, power or
privilege herein contained, or any failure or delay at any time to require
the other party's performance of any obligation under this Agreement, shall
not affect the right to subsequently exercise that right, power or
privilege, or to require performance of that obligation. A waiver of any of
the provisions of this Agreement shall not be deemed, nor shall constitute a
continuing waiver. A waiver shall not be binding unless executed in writing
by the party making the waiver.
13. Assignment; Binding Effect. This Agreement shall inure to the benefit of,
and be enforceable by, Stonehouse and its successors and assigns; however,
this Agreement is personal to Employee and may not be assigned. The parties
agree that nStor shall be deemed a third party beneficiary of this
Agreement.
14. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be valid and effective under applicable
law. If any provision of this Agreement shall be unlawful, void or for any
reason unenforceable, it shall be deemed separable from, and shall in no way
affect the validity or enforceability of, the remaining provisions of this
Agreement, and the rights and obligations of the parties shall be enforced
to the fullest extent possible.
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15. Attorney's Fees. In any judicial action or proceeding or any arbitration
proceeding between the parties to enforce any of the provisions of this
Agreement, to seek damages on account of the breach hereof, to seek
injunctive relief to prevent the breach hereof, to seek a judicial
determination of the rights or obligations of any party hereto or in any
judicial action or proceeding or any arbitration proceeding between the
parties in which this Agreement is raised as a defense, regardless of
whether the action or proceeding is prosecuted to judgement, and in addition
to any other remedy, the unsuccessful party shall pay the successful party
all reasonable costs and expenses, including reasonable attorney's fees,
incurred by the successful party.
16. Governing Law. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of Texas, excluding any choice of law
principles, which direct the application of the laws of another
jurisdiction.
17. Effect of Heading. The subject headings of this Agreement are included for
convenience only, and shall not affect the construction or interpretation
of any of its provisions.
18. Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
"Stonehouse" Stonehouse Technologies, Inc.,
a Texas Corporation
By: /s/ Xxxx Xxxxxx
Its: Vice President
"Employee" /s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx
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ADDENDUM TO EMPLOYMENT AGREEMENT
As an Addendum to the Agreement, Employee and nStor hereby agree that Employee
shall serve as a contract sales consultant for nStor at additional compensation
(the "Additional Compensation") of $50,000 per year, for a term of one year
commencing on the date hereof, which term may be cancelable by either party upon
thirty (30) days prior written notice effective not earlier than January 1,
2003. The Additional Compensation shall be payable in equal installments on the
Stonehouse Base Salary payment dates (subject to proration for a period of less
than one year or any applicable period therein).
nStor Technologies, Inc.,
a Delaware Corporation
By: /s/ Xxxx Xxxxxx
Its: Vice President
"Employee"
/s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx
