1
EXHIBIT 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is entered
into as of this 1st day of September, 1998 (the "Effective Date") between ALPHA
MICROSYSTEMS, a California corporation (the "Company") and Xxxxxxx X. Xxxxxx
(the "Employee").
RECITALS
WHEREAS, on January 3, 1990, the Company and Employee executed a letter
agreement with respect to the Company's offer of employment to Employee
containing certain severance benefits to be provided to Employee under certain
circumstances (the "Offer Letter");
WHEREAS, the Company has on January 8, 1990 entered into the Employment
Agreement (as amended, the "Old Employment Agreement") which incorporated the
terms of the Offer Letter and provided certain severance benefits to Employee
under certain other circumstances; and
WHEREAS, the Company and the Employee desire to amend and restate the
Old Employment Agreement in order to modify certain of its terms and to provide
for certain additional terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
BASIC EMPLOYMENT
1.1 Employment. The Company agrees to employ Employee and Employee
hereby agrees to be employed by the Company to perform the duties described
below for the compensation specified in this Agreement, as it may be amended
from time to time, subject to and upon all the terms and conditions set forth
herein. During Employee's employment hereunder, Employee hereby agrees to use
his best efforts and to devote his full professional time, energy and ability in
order to assure the proper and efficient performance of his work for the
Company. At all times during Employee's employment hereunder, Employee shall not
render services of a business, professional or commercial nature to any other
person or firm, whether for compensation or otherwise, without the prior written
express authorization of the Board of Directors of the Company (the "Board"),
which authorization shall describe the nature
2
and duration of such services and shall name the person or firm to whom such
services may be rendered.
1.2 Term. Employee's employment hereunder shall commence as of the
Effective Date, and continue until the fourth anniversary of the Effective Date
(the "Employment Period").
1.3 Duties. The Employee shall devote his full time, energy and talents
to serving as the President and Chief Executive Officer of the Company, and
shall have such duties as are typically expected of such officers, subject to
the direction of the Board. The Employee will have such authority, power,
responsibilities and duties as are inherent to his positions and necessary to
carry out his responsibilities and the duties required of him hereunder.
1.4 Basic Compensation. The Company hereby agrees to pay Employee a
base salary (the "Base Salary") at the annual rate of Three Hundred Thousand
Dollars ($300,000.00), which rate may be amended from time to time in accordance
with the provisions of this paragraph, payable in equal payments with such
frequency as is the custom and practice of the Company, covering employment
during the immediately preceding period for all services rendered by Employee
during his Employment Period. On each anniversary of the Effective Date, the
Employee's Base Salary shall be adjusted by the Board or any duly constituted
committee thereof, to be an amount greater than the average salary but less than
the maximum salary for Chief Executive Officers of comparable companies as
determined by compensation surveys prepared by the Economic Research Institute
or other organization mutually acceptable to the Company and the Employee. The
Company shall deduct from any payment such social security insurance, federal,
state and other taxes, state disability insurance and other withholdings as may
be required by law.
1.5 Bonus Compensation. In addition to Base Salary, at the end of each
fiscal year, Employee may be considered for a bonus in the form of cash, stock
options, stock grants or other non-cash compensation ("Bonus Compensation") of
up to 40% of Base Salary to be based upon Employee's performance during such
fiscal year, or applicable portion thereof. The amount of said Bonus
Compensation, if any, shall be determined in the sole and absolute discretion of
the Board. The Company shall deduct from any payment of Bonus Compensation
social security insurance, federal, state and other taxes, state disability
insurance and other withholdings as may be required by law.
1.6 Vacation and Illness. Employee shall be entitled to paid vacation
and sick leave in accordance with the policies established from time to time by
the Company.
1.7 Benefits.
(a) Standard Company Benefits. During the Employment Period, Employee
will be eligible to participate in all retirement, stock option or other benefit
plans available to officers and employees of the Company. Employee shall also
receive employee group medical, dental
3
and life insurance benefits in accordance with the policies established from
time to time by the Company.
(b) Whole Life Insurance. The Company shall purchase One Million
dollars ($1,000,000) of life insurance for the Employee (the "Policy"). The
Policy will be funded annually by the Company for four (4) years at an annual
premium cost of $52,634. This level of funding will provide for the Employee a
paid up policy after four (4) years. If the Employee's Termination Date occurs
during the Employment Period and is a result of the Employee's death, the
Policy's $1,000,000 death benefit will be split evenly between the Company and
the Employee's estate, paying $500,000 to each. Upon completion of the
Employment Period, the Company agrees to transfer ownership of the policy to the
Employee and to expense him on an annual basis, as reflected on a Form 1099, for
the cash surrender value of the Policy over a ten (10) year period. The Employee
agrees to have the Company continue to have a Two Hundred Thousand dollar
($200,000) death benefit as long as the Policy is in effect.
1.8 Expenses. Employee shall be entitled to reimbursement for all
approved reasonable travel and other business expenses incurred by Employee in
connection with his services to the Company pursuant to the terms of this
Agreement. All business expenses for which Employee seeks reimbursement from the
Company shall be adequately documented by Employee in accordance with the
Company's procedures covering expense reimbursement and in compliance with the
regulations of the Internal Revenue Service.
ARTICLE II
PROPRIETARY INFORMATION
2.1 Non-Disclosure of Proprietary Information. Employee agrees that,
during and after his employment with the Company, Employee will regard and
preserve as confidential all trade secrets pertaining to the Company's business
that have been or may be obtained by Employee by reason of his employment, and
Employee will not directly or indirectly disclose to any third person or use for
the benefit of anyone other than the Company or use for his own benefit or
purposes, any inventions, designs, improvements, processes, techniques, methods,
ideas, discoveries, developments, formulae, compounds, specifications,
specialized knowledge, data, records, trade secrets, confidential information,
customer lists, customer data, sales data, sales programs, development programs,
acquisition programs, computer code or other secrets or proprietary information
of the Company which he has encountered or originated in the course of or
arising out of his employment with the Company. The parties hereto acknowledge
and agree that the subject matter of the provisions of this Section 2.1 is of a
unique and special nature such that such provisions may be specifically enforced
by a court of equity in addition to whatever other remedies the Company may have
at law.
-3-
4
2.2 Return of Documents and Materials. Employee agrees that any and all
documents and materials, including, without limitation, reports, drawings,
designs, tools, equipment, plans, proposals, marketing or sales plans,
specifications or materials made or prepared, in whole or in part, by Employee
or that may come into Employee's possession by reason of his employment are the
property of the Company and shall not be used by Employee in any way adverse or
competitive to the Company's interests. Employee acknowledges that Employee will
not deliver, reproduce or in any way allow such documents and materials to be
delivered or used by any third party without the specific written direction or
consent of the Company. The parties hereto acknowledge and agree that the
subject matter of the provisions of this Section 2.2 is of a unique and special
nature such that such provisions may be specifically enforced by a court of
equity in addition to whatever the remedies the Company may have at law.
2.3 Ownership of Inventions. Employee agrees that all inventions,
discoveries, improvements, and innovations, whether patentable or not
(hereinafter collectively referred to as "Inventions" or "Invention" as may be
appropriate), conceived or made by Employee, either solely or in concert with
others, during the period of employment with the Company (including, but not
limited to, any period prior to the date of this Agreement when Employee was
employed by the Company), whether or not made or conceived during working hours,
which (a) relate in any manner to the existing or contemplated business or
research activities of the Company, or (b) are suggested by or result from
Employee's work for the Company, or (c) result from the use of the Company's
time, materials or facilities, shall be the exclusive property of the Company.
2.4 Assignment of Rights. Employee further agrees:
(a) That Employee will promptly disclose in writing to the
Company all Inventions conceived or made by Employee, either solely or
in concert with others, during the period of employment by the Company;
and
(b) That Employee hereby assigns to the Company Employee's
entire right, title and interest in all Inventions which are the
property of the Company pursuant to Section 2.3 and will, on request,
execute specific assignments to any of such Inventions; and that
Employee will execute, acknowledge and deliver such documents and take
such further action considered necessary by the Company at any time on
its request during or subsequent to the period of employment with the
Company at the Company's expense, but without charge by Employee to the
Company, to obtain and defend letters patent and/or copyrights in any
and all countries and to vest title in such Inventions in the Company
or its assigns.
2.5 Statutory Right. Notwithstanding anything to the contrary herein
contained, in accordance with Section 2872 of the California Labor Code,
Employee hereby acknowledges that the provisions of this Agreement which relate
to the ownership of, and the assignment by Employee of Employee's right, title
and interest to, any Invention, will not be applicable to an
-4-
5
Invention which is proved to fully qualify under Section 2870 of the California
Labor Code, a copy of which Employee has read and is attached hereto as Exhibit
A
2.6 Noncompetition; Non-Solicitation. For the period beginning on the
Effective Date and ending one year after the Termination Date (regardless of the
reason for the termination of employment), (a) the Employee shall not directly
or indirectly be employed or retained by, or render any services for, or be
financially interested in any manner, in any person, firm or corporation engaged
in any business which is competitive in any way as of the Termination Date with
any business in which the Company or any of its affiliates is engaged (including
any program of development or research), (b) the Employee shall not divert or
attempt to divert any business from the Company or any affiliate, (c) the
Employee shall not disturb or attempt to disturb any business or employment
relationships of the Company or any affiliate and (d) Employee shall not make
any derogatory and/or untruthful statements about the Company or any of its
affiliates. Notwithstanding the foregoing provisions of this Section 2.6, the
Employee shall be permitted to (i) invest in mutual funds which are diversified,
open-end management companies (as those terms are defined in Section 5 of the
Investment Company Act of 1940) that are registered under such Act; (ii) invest
in the outstanding stock of any corporation listed on the New York Stock
Exchange or American Stock Exchange or included in the National Association of
Securities Dealers Automated Quotation System (but only to the extent that the
Employee's interest in the stock of any such corporation does not exceed 5% of
the voting power of the outstanding stock of such corporation); and (iii)
purchase and hold any other investment to the extent the Board consents in
writing to such investment; and any investment described in clauses (i), (ii) or
(iii) next above shall not be considered to violate the requirements of this
Section 2.6.
2.7 Specific Performance. The parties hereto agree that the Company
would be damaged irreparably in the event any of the foregoing provisions of
this Article II were not performed by the Employee in accordance with their
respective terms or were otherwise breached and that money damages would be an
inadequate remedy for any such nonperformance or breach. Therefore, the Company
or its successors or assigns shall be entitled, in addition to any other rights
and remedies existing in their favor, to an injunction or injunctions to prevent
any breach or threatened breach of any such provisions and to enforce such
provisions specifically (without posting a bond or other security).
ARTICLE III
TERMINATION
3.1 Rights and Payments Upon Termination. The Employee's right to
benefits and payments, if any, for periods after the date on which his
employment with the Company terminates for any reason (his "Termination Date")
shall be determined in accordance with this Section 3.1:
-5-
6
(a) Minimum Payment. The term "Minimum Payment" as used
herein shall mean:
(i) the Employee's earned but unpaid Base Salary for
the period ending on his Termination Date; and
(ii) the Employee's accrued but unpaid vacation pay
for the period ending with his Termination Date, as determined
in accordance with the Company's policy as in effect from time
to time.
Except as may be otherwise expressly provided to the contrary
in this Agreement, nothing in this Agreement shall be construed as
requiring the Employee to be treated as employed by the Company
following his Termination Date for purposes of any employee benefit
plan or arrangement in which he may participate at such time.
(b) Termination By Company for Cause. If the Employee's
Termination Date occurs during the Employment Period and is a result of
the Company's termination of the Employee's employment on account of
Cause (as defined below), then, except as agreed in writing between the
Employee and the Company, the Employee shall be entitled to receive the
Minimum Payment but shall have no other right to future payments or
benefits under this Agreement (and the Company shall have no obligation
to make any such future payments or provide any such future benefits)
for periods after the Employee's Termination Date. For purposes of this
Agreement, the term "Cause" shall mean (1) the continuous failure by
the Employee to substantially perform his duties under this Agreement
(following written notice by the Board and a reasonable opportunity to
cure not to exceed 30 days), (2) the willful engaging by the Employee
in conduct which is demonstrably and materially injurious to the
Company or its affiliates, (3) conduct by the Employee that involves
theft, fraud in connection with duties, dishonesty or moral turpitude;
or (4) the Employee's violation of any of the provisions of Article II
hereof.
(c) Termination for Death or Disability. If the Employee's
Termination Date occurs during the Employment Period on account of the
Employee's death or disability (as defined below), then the Employee
(or in the event of his death, his estate) shall be entitled to
continuing payments of his Base Salary then in effect for the period
commencing on his Termination Date and ending on the earliest of (i)
365 days following his Termination Date, (ii) the last day of the
Employment Period, or (iii) the date on which the Employee violates the
provisions of Article II of this Agreement. For purposes of this
Agreement, the term "disability" shall mean the inability of the
Employee to continue to perform his duties under this Agreement on a
full-time basis as a result of mental or physical illness, sickness or
injury for a period of 90 days within any 12-month period, as
determined in the sole and absolute discretion of the Board.
-6-
7
(d) Termination by the Company for Reasons Other Than Cause.
Subject only to such rights, benefits and payments provided hereunder,
the Company retains the right to terminate the Employee's employment at
will at any time with or without cause, immediately upon giving the
Employee written notice of the Company's intention to terminate his
employment. If the Employee's Termination Date occurs during the
Employment Period and is a result of the Employee's termination of
employment by the Company for any reason other than Cause (and is not
on account of the Employee's death, disability, or voluntary
resignation, the mutual agreement of the parties or any other reason),
then the Employee shall be entitled to receive an amount equal to (i)
his Base Salary for the Company's immediately preceding fiscal year
plus, (ii) the average of his bonus compensation over the Company's two
immediately preceding fiscal years, payable in a lump sum as soon as
practicable after the Termination Date. The assignment to the Employee
of any duties materially inconsistent with the Employee's position as
President and Chief Executive Officer, or the removal from the Employee
of the authority for any material responsibilities normally attendant
to the office of the President and Chief Executive Officer shall be
deemed to be termination by the Company for reasons other than for
Cause.
(e) Termination for Voluntary Resignation, Mutual Agreement or
Other Reasons. If the Employee's Termination Date occurs during the
Employment Period on account of his voluntary resignation, mutual
agreement of the parties, or any reason other than those specified in
subparagraphs (b), (c) or (d) above then, except as agreed in writing
between the Employee and the Company, the Employee shall have no right
to future payments or benefits under this Agreement other than the
Minimum Payment (and the Company shall have no obligation to make any
such future payments or provide any such future benefits) for periods
after the Employee's Termination Date.
(f) Termination Upon Change-In-Control.
(i) Definition of Change-In-Control. For the purposes
of this Article III, each of the following shall be deemed to
be a "Change-In-Control":
(A) merger of consolidation of the Company;
(B) sale of all or substantially all of the
assets of the Company; or
(C) sale of more than fifty percent (50%) of
the outstanding common stock of the Company by any
person or persons.
(ii) Termination. Employee shall be entitled to the
severance payments and other severance benefits set forth in
Sections 3.1(f)(iii) and (iv) hereof if Employee is terminated
under either of the following circumstances:
-7-
8
(A) if Employee delivers to the Company
written notice of resignation on or before the
effective date of a Change-In-Control (as defined in
Section 3.1(f)(i) hereinabove) that Employee
disapproves of the proposed Change-In-Control, which
resignation shall be effective upon the date of
Change-In-Control. Employee shall not be compelled to
set forth any reason or basis for Employee's
resignation under the circumstances of Section
3.1(f)(ii)(A). The Company shall be obligated to
personally deliver to Employee written notice of a
proposed Change-In-Control as soon as practicable
upon the Company's determination that a
Change-In-Control is likely to occur.
(B) if Employee does not resign upon a
Change-In-Control and if within 180 days following a
Change-In-Control, Employee is either involuntarily
terminated or Employee's responsibilities, duties, or
title as an employee of the Company are substantially
changed without Employee's consent, and as a result
thereof, Employee terminates his employment with the
Company. Notwithstanding the foregoing, Employee
shall not be entitled to any benefits (set forth in
Sections 3.1(f)(iii) and (iv)) if Employee's
termination is pursuant to Sections 3.1(b), (c) or
(d).
(iii) Calculation of Severance Payment. Upon
termination pursuant to Section 3.1(f), the employee shall be
entitled to receive an amount equal to (i) his Base Salary for
the Company's immediately preceding eighteen (18) months plus,
(ii) the average of his bonus compensation over the Company's
two immediately preceding fiscal years, payable in a lump sum
as soon as practicable after the Termination Date.
(iv) Stock Option, Stock and Profit Sharing Plans.
Reference is made to the stock option, profit sharing and
similar plans listed on Schedule 3.1(f)(iv) for which Employee
is or may become eligible. Schedule 3.1(f)(iv) lists the
benefits Employee is currently entitled to with respect to
each such plan and shall be updated from time to time to
incorporate any additional plans for which Employee becomes
eligible. Upon termination pursuant to Section 3.1(f), unless
prohibited by the terms of the applicable plan and applicable
law, all of Employee's stock options shall become fully vested
and shall be exercisable on a cashless exercise basis.
(g) If the Employee is terminated pursuant to Section 3.1(d),
the Employee shall continue to receive the group medical, dental and
life insurance benefits set forth in Section 1.7(a) for a twelve-month
period immediately following the Termination Date. If the Employee is
terminated pursuant to Section 3.1(f), the Employee shall continue to
-8-
9
receive the group medical, dental and life insurance benefits set forth
in Section 1.7(a) for an eighteen-month period immediately following
the Termination Date.
(h) Reduction for Withholding Taxes. With respect to any
payment made to the Employee under Article III, the Company shall
deduct from any such payment such social security insurance, state
disability insurance, and federal, state and other taxes and other
withholdings as may be required by law.
3.2 Outplacement Services. If Employee's termination pursuant to this
Article III is pursuant to Section 3.1(d) or 3.1(f)(ii) following the
Termination Date, the Company will pay for outplacement services for Employee
for up to twelve (12) months from the Termination Date and up to a maximum
aggregate amount of $35,000.
ARTICLE IV
MISCELLANEOUS
4.1 Miscellaneous. All notices provided for under this Agreement shall
be deemed to have been duly given if delivered by hand or, in the alternative,
if sent by registered or certified mail, with return receipt requested,
first-class postage prepaid, if to the Company, to Alpha Microsystems, 0000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx Xxx, XX 00000; Attention: Chairman; if to Employee,
to Xxxxxxx X. Xxxxxx, 0000 Xxxxxx Xxxxx Xxxxx, Xxxxxx Xxxxx, XX 00000, or to
such other address with respect to each party as such party shall notify the
other in writing. Delivery of any such communications so made by mail shall be
deemed to be complete on the date of delivery as shown by the addressee's
registry or certification receipt.
4.2 Assignability. The Company may assign its interest in this
Agreement in connection with a merger or sale of all or substantially all of the
assets of the Company and the provisions of this Agreement shall inure to the
benefit of the successors and assigns of the Company. Employee may not assign or
transfer this Agreement, it being deemed personal to Employee only; provided,
however, that upon Employee's death, Employee's heirs, executors and/or
administrators may seek collection of any sums that may have been due Employee
as of Employee's death (it being hereby acknowledged and agreed that no further
Severance Payments pursuant to Section 3.1(c) shall be due after Employee's
death). Subject to the above, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. The provisions of this Section 4.2
shall survive the termination of this Agreement.
4.3 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter herein and
supersedes all prior agreements, representations and understandings of the
parties. No modification or amendment to this Agreement shall be effective
unless in writing.
-9-
10
4.4 Captions. Any captions to or headings of the articles, sections,
subsections, paragraphs or subparagraphs of this Agreement are solely for the
convenience of the parties, are not a part of this Agreement and shall not be
used for the interpretation of determination of the validity of this Agreement
or any provisions hereof.
4.5 Severability. In the event that any one or more provisions,
clauses, paragraphs, subclauses or subparagraphs contained in this Agreement
shall for any reason be held to be invalid, illegal, void or unenforceable, the
same shall not affect any other provision, paragraph, clause, subparagraph or
subclause of this Agreement, but this Agreement shall be construed as if such
invalid, illegal, void or unenforceable provision, clause, paragraph,
subparagraph or subclause had never been contained herein.
4.6 Waiver. The waiver by the Company or the Employee of any breach of
any term or condition of this Agreement shall not be deemed to constitute the
waiver of any other breach of the same or any other term or condition hereof.
4.7 Costs of Disputes. Each party shall bear his/its own costs in
connection with any controversy or dispute arising out of or relating to this
Agreement (or the breach thereof).
4.8 Amendment. This Agreement may be amended or cancelled only by
mutual agreement of the parties in writing without the consent of any other
person. So long as the Employee lives, no person, other than the parties hereto,
shall have any rights under or interest in this Agreement or the subject matter
hereof.
4.9 Survival of Agreement. Except as otherwise expressly provided in
this Agreement, the rights and obligations of the parties to this Agreement
shall survive the termination of the Employee's employment with the Company.
4.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
4.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
4.12 Rights Upon a Spin-Off. In the event of a spin-off of a portion of
the Company's business into a new operating entity which is not wholly-owned by
the Company, Employee shall have the option to allocate his existing equity
interests in the Company (including all stock and stock options) between the
Company and the new entity on a basis consistent with that of ING Equity
Partners II, L.P. ("Equity Partners") pursuant to Section 5.2(f) of the Warrants
issued by the Company to Equity Partners as of the date hereof.
-10-
11
4.13 Arbitration. To the fullest extent allowed by law, any
controversy, claim or dispute between the Employee and the Company (and/or any
of its directors, officers, employees or agents) relating to or arising out of
the Employee's employment or the cessation of the Employee's employment will be
submitted to final and binding arbitration in Orange County, California, for
determination in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association as the exclusive
remedy for such controversy, claim or dispute. This means that both the Employee
and the Company give up all rights to a trial by jury. Possible disputes covered
by the above include (but are not limited to) wage, contract, tort,
discrimination, or other employment-related claims under laws known as Title VII
of the Civil Rights Act, the California Fair Employment and Housing Act, the
Americans With Disabilities Act, the Age Discrimination in Employment Act, and
any other statutes or laws relating to an employee's relationship with his
employer. However, claims for workers' compensation benefits and unemployment
insurance (or any other claims where mandatory arbitration is prohibited by law)
are not covered by this arbitration agreement, and such claims may be presented
by the Employee or the Company to the appropriate court or state agency as
provided by California law. Judgment on any award issued by the arbitrator may
be entered in any court having jurisdiction thereof.
-11-
12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date first above written.
"Company" ALPHA MICROSYSTEMS,
a California corporation
________________________________
By:_____________________________
Name:
Title:
"Employee" ______________________________
Xxxxxxx X. Xxxxxx
-12-
