EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into as
of May 1, 2002, by and between Enterasys Networks, Inc., a Delaware corporation
(the "Company"), and Xxxx Xxxxx (the "Executive").
1. Term of Employment; Executive Representation.
(a) Employment Term. Executive shall be employed by the
Company in the capacity described in Section 2 of this Agreement for a term
commencing on May 1, 2002 (the "Effective Date") and ending December 31, 2002.
(b) Executive Representation. Executive hereby represents
to the Company that the execution and delivery of this Agreement by Executive
and the performance by Executive of his duties hereunder shall not constitute a
breach of, or otherwise contravene, the terms of any statute, law, regulation,
or of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound. Executive further agrees and represents that he
will duly, punctually and faithfully perform and observe any and all rules and
regulations that the Company may now or shall hereafter establish governing the
conduct of its business and/or the performance of Executive's duties hereunder.
2. Position.
(a) While employed hereunder, Executive shall serve as
the Company's President and shall report directly to the Company's Interim Chief
Executive Officer (the "CEO"). In such position, Executive shall have such
authority as is customarily associated with the position of President at other
publicly held companies similar to the Company and shall have such duties,
consistent with his position, as may be assigned from time to time by the CEO.
(b) While employed hereunder, Executive will devote
Executive's full business time and best efforts to the performance of
Executive's duties hereunder and will not engage, either directly or indirectly,
in any other business, profession or occupation for compensation or otherwise
that would conflict with the rendering of such services, without the prior
written consent of the Company. Executive may be an outside board member for
other companies that do not compete with the Company, its subsidiaries and/or
affiliates, provided that such services do not interfere with Executive's
responsibilities to the Company, with the prior written approval of the Company,
which shall be in the Company's sole discretion, provided that approval shall
not be unreasonably withheld.
3. Base Salary. While employed hereunder, the Company shall pay
Executive a base salary (the "Base Salary") at the monthly rate of $80,000,
payable in regular installments in accordance with the Company's usual payment
practices. Executive shall be entitled to such increases in Executive's Base
Salary, if any, as may be determined from time to time by the Board. In the
event that Executive remains employed by Company beyond the first
anniversary of the Effective Date, Executive's basic compensation structure will
be adjusted to be competitive with overall compensation packages for the office
of President at comparable publicly traded companies, which may include a change
in Executive's annualized base salary and which likely would include an annual
cash incentive bonus and/or a sales commission plan.
4. Equity Arrangements. Within thirty (30) days following the
Effective Date, Executive shall be granted a stock option (the "Option") to
purchase 400,000 shares of the Company's Common Stock ("Common Stock"). Except
as otherwise provided herein, the Option shall in all respects be subject to
terms and conditions substantially similar to the Company's 1998 Equity
Incentive Plan. The per share exercise price of the Option shall be equal to the
fair market value of a share of Common Stock on the grant date of the Option. At
such time as the Company is eligible to utilize Form S-8, it will use its best
efforts to file and cause to become effect a registration statement on Form S-8
to register shares issuable upon exercise of the Options.
The Option shall vest and become exercisable in twelve (12) equal monthly
installments, beginning upon the last day of May, 2002 and in equal monthly
installments over the succeeding ten (10) months of continued service with the
Company. The vesting and exercisability of the Option shall be accelerated in
the following circumstances:
(a) If for any of the Company's last three fiscal
quarters of the Company's 2002 fiscal year the Company achieves its Revenue
target for such quarter as set forth in the Enterasys Performance Incentive
Plan, the Option shall vest as to 80,000 shares as of the last day of such
quarter and any portion of the option so vested shall become exercisable upon
the determination by the Board of Directors of the Company (in their sole
discretion) that the Company has achieved the applicable Revenue target. For the
avoidance of doubt, the maximum possible cumulative acceleration pursuant to the
immediately preceding sentence is 240,000 shares. For purposes of this
Paragraph, "Revenue" shall have the meaning set forth in the Enterasys
Performance Incentive Plan, a copy of which is attached hereto as Exhibit A, and
"Revenue Target" shall mean the revenue target for the period in question as set
forth in the Fiscal Year 2002 Addendum dated June, 2002 to the Enterasys
Performance Incentive Plan, a copy of which is attached hereto as Exhibit B.
(b) The Option shall become vested as to 64,000 shares if
the Company achieves break-even or positive Cash Flow from Operations in any of
the last three quarters of its 2002 fiscal year and any portion of the option so
vested shall become exercisable upon the determination by the Board of Directors
of the Company (in their sole discretion) that the Company has achieved such
Cash Flow from Operations target. For purposes of the foregoing sentence, "Cash
Flow from Operations" shall have the meaning set forth in the Enterasys
Performance Incentive Plan attached hereto as Exhibit A.
(c) The Option shall become vested as to 56,000 shares if
the Company achieves break-even or positive Operating Income in any of the last
three quarters of the Company's 2002 fiscal year and any portion of the option
so vested shall become exercisable upon the determination by the Board of
Directors of the Company, or by the Audit Committee thereof, (in their sole
discretion) that the Company has achieved such Operating Income target.
For purposes of the foregoing sentence, "Operating Income" shall have the
meaning set forth in the Enterasys Performance Incentive Plan attached hereto as
Exhibit A.
(d) The shares, if any, as to which the Option vests on
an accelerated basis pursuant to subsections (a), (b) or (c) above shall be
those as to which the Option otherwise would have vested last in time based upon
continued service to the Company.
(e) Notwithstanding the foregoing, the Option shall
immediately vest and become exercisable in the event of a Change in Control (as
defined below). No more than a total of 400,000 shares may become vested under
the Option.
The scheduled term of the Option shall be ten (10) years, subject to
earlier termination in the event that Executive terminates continued service to
the Company. In the event that Executive is no longer serving as an employee and
is not a consultant to the Company or a member of the Board of Directors of the
Company (the "Board") prior to the tenth (10th) anniversary of the grant date of
the Option, the Option shall terminate on the last to occur of the following
dates: (i) the first anniversary of Executive's termination of service as an
employee, consultant and member of the Board, or (ii) December 31, 2004.
Notwithstanding the terms of the previous sentence, in no event shall the Option
be exercisable subsequent to the tenth (10th) anniversary of the grant date of
the Option.
As used in this Section 4, the term "Change in Control" shall mean the
occurrence of any of the following events:
(a) the sale or disposition, in one or a series of
related transactions, of all or substantially all, of the assets of the Company
to any "person" or "group" (as such terms are defined in Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended, or any successor
thereto) (the "Act") other than the Permitted Holders (as defined below);
(b) any person or group, other than the Permitted
Holders, is or becomes the Beneficial Owner (as such term is defined in Rule
13d-3 under the Act or any successor rule thereto, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the total
voting power of the voting stock of the Company (or any entity which controls
the Company), including by way of merger, consolidation, tender or exchange
offer or otherwise; or
(c) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board (together
with any new directors whose election by such Board or whose nomination for
election by the shareholders of the Company was approved by a vote of a majority
of the directors of the Company, then still in office, who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board, then in office.
As used in this Section 4, the term "Permitted Holders" shall mean, as
of the date of determination, (i) an employee benefit plan (or trust forming a
part thereof) maintained by the
Company, its parent, subsidiary or affiliates, or (ii) Silver Lake Partners its
parent, subsidiary and/or affiliates.
5. Employee Benefits. During the Employment Term, Executive shall
be entitled to participate in the Company's employee benefit plans, including
non-qualified programs, as in effect from time to time (collectively "Employee
Benefits"), commensurate with his position and compensation level, in accordance
with the requirements and terms of such Employee Benefits plans, programs and
arrangements; provided, however, that Executive shall at all times be entitled
to Employee Benefits on a basis that is no less favorable in the aggregate than
is provided to any other senior executive of the Company. Beginning on the
Effective Date and continuing for the period of Executive's employment by the
Company, Executive shall accrue paid vacation time and personal days in
accordance with Company policies applicable to it senior executives. In
addition, Executive shall be entitled to the perquisites and other fringe
benefits made available to senior executives of the Company.
6. Business Expenses. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement,
including, without limitation, expenses for travel and similar items related to
such duties and responsibilities. The Company will reimburse Executive for all
such expenses upon presentation by Executive from time to time of appropriately
itemized (consistent with the Company's policy) accounts of such expenditures.
7. Relocation Benefits. Executive shall be entitled to
participate in the Company's relocation program on a basis, which is no less
favorable in the aggregate than is provided to any other senior executive of the
Company. Alternatively, for a period not to exceed one year, the Company will
provide temporary housing, mutually acceptable to the Executive and the Company.
8. Termination. The Employment Term and Executive's employment
hereunder may be terminated by either party at any time and for any reason or no
reason. Notwithstanding any other provision of this Agreement, the provisions of
this Section 8 shall exclusively govern Executive's rights upon termination of
employment with the Company and its affiliates.
(a) By the Company For Cause.
(i) For purposes of this Agreement, "Cause"
shall be defined as (i) the Executive's continued failure substantially to
perform the material duties of his office (other than as a result of total or
partial incapacity due to physical or mental illness) if such failure continues
following Executive's receipt of written notice from the Company and a period of
thirty (30) days to cure such failure, (ii) the embezzlement or theft by the
Executive of the property of the Company, its subsidiaries or affiliates, (iii)
the commission of any act or any omission on the Executive's part resulting in
the conviction of Executive or a plea of nolo contendre with respect to a
felony, a crime involving moral turpitude, or a crime that materially adversely
affects the performance or the reputation of the Company, its subsidiaries or
affiliates, (iv) Executive's willful malfeasance or willful misconduct in
connection with Executive's duties to the Company, its subsidiaries or
affiliates or any other act or omission which is materially
injurious to the financial condition or business reputation of the Company, its
subsidiaries or affiliates, or (v) a material breach by Executive of the terms
of this Agreement, or any non-compete, non-disclosure, or non-solicitation
provisions to which Executive is subject.
(ii) If Executive's employment is terminated by
the Company for Cause, Executive shall be entitled to receive, reduced by any
amounts owed to the Company by Executive, the amounts described in the following
clauses (A) through (C) set forth below:
(A) the Base Salary through the date of
termination;
(B) reimbursement for any unreimbursed
business expenses properly incurred by Executive in accordance with Company
policy prior to the date of Executive's termination; and
(C) such employee benefits, if any, as
to which Executive may be entitled under the Employee Benefits plans (the
amounts described in clauses (A) through (C) hereof, reduced by any amounts
owed to the Company by Executive, being referred to as the "Accrued
Rights").
Following such termination of Executive's employment by the Company for
Cause, except as set forth in this Section 8(a), Executive shall have no further
rights to any compensation or any other benefits under this Agreement.
(b) By the Company Without Cause Prior to December 31,
2002.
(i) The Executive's employment hereunder may be
terminated by the Company without Cause.
(ii) If Executive's employment is terminated by
the Company without Cause (other than by reason of total or partial incapacity
due to physical or mental illness) prior to January 1, 2003, then contingent
upon Executive's full compliance with the provisions set forth in Section 9 of
this Agreement and contingent upon Executive's execution of an effective release
of all claims against the Company in a form reasonably satisfactory to the
Company, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) continued payment of the Base
Salary through December 31, 2002;
Executive shall not be required to mitigate the amount of any payments
or benefits provided for pursuant to this Section 8(b) by seeking other
employment. Following such termination of Executive's employment by the Company
without Cause prior to January 1, 2003, except as set forth in this Section
8(b), Executive shall have no further rights to any compensation or any other
benefits under this Agreement. The benefits described in this Section 8(b) shall
not survive beyond December 31, 2002. In the event that Executive remains
employed by the Company subsequent to December 31, 2002, Executive will not be
entitled to the benefits
described in this Section 8(b) unless such benefits are the subject of a
separate agreement between the parties.
(c) Notice of Termination. Any purported termination of
employment by the Company (other than due to Executive's death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 12(g) hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
9. Nondisclosure of Confidential Information; Non-Competition.
(a) At any time during or after Executive's employment
with the Company, Executive shall not, without the prior written consent of the
Company, use, divulge, disclose or make accessible to any other person, firm,
partnership, corporation or other entity any Confidential Information (as
hereinafter defined) pertaining to the business of the Company or any of its
subsidiaries or affiliates, except (i) while employed by the Company, in the
business of and for the benefit of the Company, or (ii) when required to do so
by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Company, or by any administrative
body or legislative body (including a committee thereof) with jurisdiction to
order Executive to divulge, disclose or make accessible such information. For
purposes of this Section 9(a), "Confidential Information" shall mean information
(whether or not in written form) which relates to Silver Lake Partners, the
Company or any of their respective subsidiaries or affiliates, or any of their
respective businesses or products (including, without limitation, their
financial data, strategic business plans, and other proprietary information) or
to this Agreement, and which is not known to the public generally (excluding
public knowledge which occurs as a result of Executive's breach of this covenant
or the wrongful acts of others who were under confidentiality obligations as to
the item or items involved), except in the conduct of the business of the
Company, as in existence as of the date of Executive's termination of
employment.
(b) As President of the Company, Executive will acquire
knowledge of Confidential Information and trade secrets. Executive acknowledges
that the Confidential Information and trade secrets that the Company has
provided and will provide to Executive could play a significant role were
Executive to directly or indirectly be engaged in any business in competition
with the Company or its subsidiaries. For so long as the Executive is employed
by the Company and continuing for eighteen (18) months thereafter, (A) Executive
shall not, directly or indirectly, as a sole proprietor, member of a
partnership, stockholder or investor (other than a stockholder or investor
owning not more than a 5% interest), officer or director of a corporation, or as
an employee, associate, consultant or agent of any person, partnership,
corporation or other business organization or entity other than the Company or
any of its subsidiaries, render any service to or in any way be affiliated with
a competitor (or any person or entity that is reasonably anticipated (to the
general knowledge of the Executive or the public) to become a competitor) of the
Company or any of its subsidiaries or affiliates in the business in which the
Company or any of its subsidiaries or affiliates is engaged and (B) Executive
shall not, on Executive's own behalf or on behalf of any person, firm or
company, directly or indirectly,
solicit or offer employment to any person who has been employed by the Company
or its subsidiaries at any time during the 12 months immediately preceding such
solicitation. Notwithstanding anything contained in this Section 9(b) to the
contrary, the period of applicability of this Section 9(b) shall be extended an
additional day for each day on which the Executive is in breach of this Section
9(b).
(c) The results and proceeds of Executive's services
hereunder, including, without limitation, any works of authorship resulting from
Executive's services during Executive's employment with the Company, its
subsidiaries and/or its affiliates and any works in progress, will be
works-for-hire and the Company will be deemed the sole owner throughout the
universe of any and all rights of whatsoever nature therein, whether or not now
or hereafter known, existing, contemplated, recognized or developed, with the
right to use the same in perpetuity in any manner the Company determines in its
sole discretion without any further payment to Executive whatsoever. If, for any
reason, any of such results and proceeds will not legally be a work-for-hire
and/or there are any rights which do not accrue to the Company under the
preceding sentence, then Executive hereby irrevocably assigns and agrees to
assign any and all of Executive's right, title and interest thereto, including,
without limitation, any and all copyrights, patents, trade secrets, trademarks
and/or other rights of whatsoever nature therein, whether or not now or
hereafter known, existing, contemplated, recognized or developed, to the
Company, and the Company will have the right to use the same in perpetuity
throughout the universe in any manner the Company determines without any further
payment to Executive whatsoever. Executive will, from time to time as may be
requested by the Company, (i) during the term of Executive's employment without
further consideration, and (ii) thereafter at Executive's then current hourly
rate, do any and all things which the Company may deem useful or desirable to
establish or document the Company's exclusive ownership of any and all rights in
any such results and proceeds, including, without limitation, the execution of
appropriate copyright and/or patent applications or assignments. To the extent
Executive has any rights in the results and proceeds of Executive's services
that cannot be assigned in the manner described above, Executive unconditionally
and irrevocably waives the enforcement of such rights. This subsection is
subject to and will not be deemed to limit, restrict, or constitute any waiver
by the Company of any rights of ownership to which the Company may be entitled
by operation of law by virtue of the Company being Executive's employer.
10. Specific Performance. Executive and the Company agree that the
covenants set forth in this Agreement are reasonable covenants under the
circumstances, and further agree that if in the opinion of any court of
competent jurisdiction such restraints are not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of such covenant as to the court shall appear not
reasonable and to enforce the remainder of the covenant as so amended. Executive
agrees that any breach of the covenants contained in Section 9 would irreparably
injure the Company. Accordingly, Executive agrees the Company's remedies at law
for a breach or threatened breach of any of the provisions of Section 9 would be
inadequate and, in recognition of this fact, Executive agrees that, in the event
of such a breach or threatened breach, the Company may, without posting any
bond, in addition to pursuing any other remedies it may have in law or in
equity, cease making any payments otherwise required by this Agreement and
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any
other equitable remedy which may then be available against Executive from any
court having jurisdiction over the matter, restraining any further violation of
the covenants set forth in Section 9 by Executive.
11. Payment of Legal Fees. The Company agrees to pay Executive's
reasonable legal fees associated with entering into this Agreement upon
receiving an invoice for such legal services.
12. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New Hampshire, without
regard to conflicts of laws principles thereof.
(b) Entire Agreement/Amendments. This Agreement and the
other documents referenced in this Agreement contain the entire understanding of
the parties with respect to the employment of Executive by the Company. There
are no restrictions, agreements, promises, warranties, covenants or undertakings
between the parties with respect to the subject matter herein other than those
expressly set forth herein. This Agreement may not be altered, modified, or
amended except by written instrument signed by the parties hereto. This
Agreement supersedes all prior agreements and understandings (including verbal
agreements) between Executive and the Company regarding the terms and conditions
of Executive's employment with the Company, its subsidiaries and/or its
affiliates (collectively, the "Prior Agreements").
(c) No Waiver. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
(d) Severability. The parties intend that the covenants
and agreements contained in the provisions of this Agreement shall be deemed to
be a series of separate covenants and agreements. If, in any judicial
proceeding, a court shall refuse to enforce all of the separate covenants deemed
included in the provisions of this Agreement, then such unenforceable covenants
shall be deemed eliminated from the provisions of this Agreement for the purpose
of such proceeding to the extent necessary to permit the remaining separate
covenants to be enforced in such proceeding. If any one or more of the covenants
contained in this Agreement is for any reason held to be excessively broad as to
duration, geographical scope, activity or subject, it will be construed by
limiting and reducing it, so as to be enforceable to the extent compatible with
the applicable law as it then appears.
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement may be assigned by the Company to a company that is a
successor in interest to substantially all of the business operations of the
Company. Such assignment shall become effective when the Company notifies the
Executive of such assignment or at such later date as may be specified in such
notice. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such successor company,
provided that any assignee expressly assumes the obligations, rights and
privileges of this Agreement.
(f) Successors; Binding Agreement. This Agreement shall
inure to the benefit of and be binding upon personal or legal representatives,
executors, administrators, successors, heirs, distributes, devises and legatees.
(g) Notice. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given if (1) personally delivered, (2)
transmitted by facsimile (with written confirmation), (3) delivered by an
express courier (with written confirmation), or (4) mailed by United States
registered mail (in which case notice shall be deemed given on the third day
after such mailing), return receipt requested, postage prepaid, to the parties
at the addresses set forth below, or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
If to the Company:
Enterasys Networks, Inc.
00 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Chief Legal Officer
If to Executive:
To the most recent address of Executive
set forth in the personnel records of the Company.
(h) Withholding. The Company may withhold from any
amounts payable under this Agreement such Federal, state and local taxes or
other amounts as may be required to be withheld pursuant to any applicable law,
regulation or other authority to which the Company is subject.
(i) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
[Signatures on next page]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ENTERASYS NETWORKS, INC.
By: /s/ Xxxxxx X. Xxxxxx XX
-------------------------
Name: Xxxxxx X. Xxxxxx XX
Title: EVP
EXECUTIVE:
/s/ Xxxx Xxxxx
----------------------------
Xxxx Xxxxx
____________________________
____________________________
Address
