Exhibit 10.31
EMPLOYMENT AGREEMENT
This Agreement among Xxxxxxx Xxxxx (the "Executive") and SmartForce PLC, a
public company limited by shares formed under the laws of the Republic of
Ireland ("SmartForce PLC") and its wholly-owned subsidiary, SmartForce, a
Delaware corporation ("SmartForce"), is entered into as of June 10, 2002. The
effectiveness of this Agreement is subject to the occurrence of the Closing Date
as that term is defined in the Agreement and Plan of Merger by and among
SmartForce, SkillSoft Corporation and Slate Acquisition Corp. (the "Effective
Date"). If such Agreement and Plan of Merger is terminated prior to the Closing
Date, this Agreement shall be null and void. For purposes of this Agreement, the
term "Company" shall be used to refer to both SmartForce PLC and SmartForce.
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept employment with the Company on the terms and conditions set
forth below;
NOW, THEREFORE, in consideration of the foregoing recital and the
respective covenants and agreements of the parties contained in this document,
the Company and the Executive agree as follows:
1. Employment and Duties. The Executive shall be employed as President
and Chief Executive Officer of the Company effective as of the Effective Date
reporting to the Board of Directors of SmartForce PLC (the "Board"), and
assuming and discharging such responsibilities as are mutually agreed upon by
the Executive and the Board commensurate with such office and position. The
Executive shall perform faithfully the executive duties assigned to him to the
best of his ability.
2. Base Salary. In consideration of the Executive's services, the
Executive shall be paid a minimum base salary at the rate of $225,000 per year
during the period of employment (the "Base Salary"), to be paid in installments
in accordance with the Company's standard payroll practices. This Base Salary
shall be reviewed for increases at least annually by the Board on the same basis
as the Board shall review the compensation of other executive officers of the
Company.
3. Bonus. In addition to the Base Salary, the Executive shall be eligible
to receive an annual performance bonus in the amount determined by the Board
(the "Targeted Bonus") based on performance metrics established by the Board.
This Targeted Bonus shall be reviewed for increases at least annually by the
Board on the same basis as the Board shall review the compensation of other
executive officers of the Company.
4. 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. If the Executive's employment terminates for any reason, 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 accordance with the
Company's established employee plans and policies or other written agreements
with the Executive at the time of termination.
5. Benefits; Expenses. The Executive, together with his spouse and
dependent children, shall be permitted, to the extent eligible, to participate
at the Company's expense in any group medical, dental, life insurance and
disability insurance plans, or similar benefit plans of the Company that are
available to other executive officers in each case pursuant to the terms and
conditions of each such plan or program. The Executive shall also be entitled to
four (4) weeks' annual vacation. Without limiting the generality of the
foregoing, the Company shall reimburse the Executive for all reasonable business
and travel expenses actually incurred or paid by the Executive in the
performance of services on behalf of the Company, in accordance with the
Company's expense reimbursement policy as in effect from time to time.
6. Voluntary Termination and Termination for Cause. In the event that the
Executive terminates his employment with the Company voluntarily (other than for
Good Reason, as defined below) or the Company terminates the Executive's
employment for Cause, Sections 6(a), 6(b) and 6(c) below shall apply. For
purposes of this Agreement, termination for "Cause" shall mean (i) any act of
personal dishonesty taken by the Executive in connection with his
responsibilities as an employee which is intended to cause a material personal
financial benefit for the Executive and is intended to cause a material
financial detriment to the Company, (ii) the Executive's conviction of or plea
of nolo contendere to a felony, (iii) a willful act by the Executive which
constitutes misconduct and is injurious to the Company, and (iv) continued
willful violations by the Executive of the Executive's obligations to the
Company under this Agreement.
(a) Covenant Not to Solicit. Beginning with the effective date of the
Executive's voluntary termination (other than for Good Reason) or termination
for Cause and until the later of (i) one (1) year thereafter or (ii) the date
that is two (2) years after the Effective Date (the "Non-Compete Period"), the
Executive agrees that he will not:
(i) solicit, encourage, or take any other action which is
intended to induce any other employee of the Company to terminate his employment
with the Company, or
(ii) interfere in any manner with the contractual or employment
relationship between the Company and any such employee of the Company.
The foregoing shall not prohibit the Executive or any entity with which the
Executive may be affiliated from hiring a former employee of the Company,
provided that such hiring results from such employee's affirmative response to a
general recruitment effort carried out through a public solicitation or a
general solicitation.
(b) Covenant Not to Compete. During the Non-Compete Period, the
Executive agrees that he will not, directly or indirectly, own, manage, operate,
join, control, advise or participate in, as a shareholder (other than as a
shareholder with less than one percent (1%) of the outstanding stock of a
company), officer, manager, executive, partner, consultant or technical or
-2-
business advisor (or any foreign equivalents of the foregoing) any company that
derives more than ten percent (10%) of its revenues from a Restricted Business,
or any company or entity controlling, controlled by or under common control with
any company that derives more than ten percent (10%) of its revenues from a
Restricted Business (any such company, a "Restricted Company"). For the purposes
of this Agreement, the term "Restricted Business" shall mean the business of
developing or selling computer-based training for information technology
professionals, on-line business degrees, or any other interactive education
business in which the Company is then involved.
The foregoing will not in any way affect the Executive's right to take any
of the foregoing positions if he is involved only in parts of a company that do
not derive any revenues from the Restricted Business.
(i) In the event that the Executive intends to associate with
any Restricted Company during the Non-Compete Period, the Executive must provide
information in writing to the Board of Directors of the Company relating to the
business engaged in or proposed to be engaged in by such Restricted Company. All
such current associations of the Executive are set out in Exhibit A hereto.
In the event that the Board of Directors authorizes the Executive to engage
in such activity in writing, any activity by the Executive described in the
written information furnished to the Chairman of the Board and so authorized
shall be conclusively deemed not to be a violation of Section 6(a) and (b)
hereof.
(ii) The Executive acknowledges that, pursuant to an Agreement
and Plan of Merger among the Company, SkillSoft Corporation ("SkillSoft") and
Slate Acquisition Corp., he is transferring all shares of SkillSoft owned by him
and that the Company will be irreparably injured if the provisions of this
Section 6 are not specifically enforced. If the Executive commits or, in the
reasonable belief of the Company, threatens to commit a breach of any of the
provisions of this Section 6, the Company and each of its subsidiaries and
affiliates shall have the right and remedy, in addition to any other remedy that
may be available at law or in equity, to have the provisions of this Section 6
specifically enforced by any court having equity jurisdiction together with an
accounting for any benefit or gain by the Executive in connection with any such
breach, it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Company and its subsidiaries and
that money damages will not provide an adequate remedy therefor. Such injunction
shall be available without the posting of any bond or other security, and the
Executive hereby consents to the issuance of such injunction.
(c) The Executive shall not receive any compensation or benefits
under this Agreement on account of his voluntary termination or termination for
Cause. The Executive's rights under the Company's benefit plans upon such a
termination shall be determined under the provisions of those plans.
7. Termination without Cause and Involuntary Termination. If the
Executive's employment with the Company is involuntarily terminated by the
Company other than for Cause or by the Executive for Good Reason (an
"Involuntary Termination Event"), Sections 7(a) and 7(b) below
-3-
shall apply. For purposes of this Agreement, the term "Good Reason" shall mean
(i) without the Executive's express written consent, the assignment to the
Executive of any duties, or the removal from or reduction or limitation of the
Executive's duties or responsibilities, which in either case is a significant
change in the Executive's position, title, organization level, duties,
responsibilities, compensation and status with the Company; (ii) without the
Executive's express written consent, a substantial reduction of the facilities
and perquisites (including office space and location) available to the Executive
immediately prior to such reduction; (iii) without the Executive's express
written consent, a reduction by the Company in the base salary of the Executive
as in effect immediately prior to such reduction; (iv) without the Executive's
express written consent, a reduction by the Company in the kind or level of
employee benefits to which the Executive is entitled immediately prior to such
reduction with the result that the Executive's overall benefits package is
significantly reduced; (v) without the Executive's express written consent, the
relocation of the Executive to a facility or a location more than twenty (20)
miles from the Executive's then-present work location; (vi) any purported
termination of the Executive by the Company other than for Cause or by reason of
the Executive's death or Disability; (vii) the failure of the Company to obtain
the assumption of this Agreement by any successor as required by Section 12
below; (viii) without the Executive's express written consent, the granting of
options or other equity, or the modification of the terms of existing options or
other equity, to the Chairman or Chief Strategy Officer of the Company, where
the amount or terms of such grant or modification of options or other equity are
better than the amount or the terms concurrently granted to, or modified for the
benefit of, the Executive or (ix) any material breach by the Company of any term
of this Agreement.
(a) Severance. The Company shall, in addition to paying the Executive
all amounts accrued by the Executive on or prior to the date of the Involuntary
Termination Event, make a lump sum payment to him equal to his then base salary
plus the then maximum performance bonus for a period of the greater of (i) one
(1) year or (ii) from the date of the Involuntary Termination Event to the date
that is two (2) years after the Effective Date.
(b) Stock Options. Notwithstanding that above Sections 6(a) and 6(b)
will otherwise not apply to the Executive as a result of the Involuntary
Termination Event, the Executive may elect to be bound by above Sections 6(a)
and 6(b) in exchange for continued vesting of the stock options granted to him
by the Company for the period during which such Sections 6(a) and (b) apply
(i.e., through the later of (i) one year following the Involuntary Termination
Event or (ii) the date that is two (2) years after the Effective Date);
provided, however, that the Executive has to notify the Company of said election
within thirty (30) days of such termination. Otherwise, the Executive's stock
options will discontinue to vest immediately upon termination of employment.
8. Death. In the event of the Executive's death, except for obligations
accrued at such time, the Company shall have no obligation to pay or provide any
compensation or benefits under this Agreement. The Executive's rights under the
Company's benefit plans in the event of the Executive's death shall be
determined under the provisions of those plans.
9. Disability. The Company may terminate the Executive's employment for
Disability by giving the Executive thirty (30) days' advance notice in writing.
In the event that the Executive
-4-
resumes the performance of substantially all of his duties hereunder before the
termination of his employment under this Section 9 becomes effective, the notice
of termination shall automatically be deemed to have been revoked. Except for
such obligations that have accrued prior to the Executive's Disability, no
compensation or benefits will be paid or provided to the Executive under this
Agreement on account of termination for Disability. The Executive's rights under
the Company's benefit plans shall be determined under the provisions of those
plans. For all purposes under this Agreement, "Disability" shall mean that the
Executive, at the time notice is given, has been unable to substantially perform
his duties under this Agreement for a period of not less than six (6)
consecutive months as the result of his incapacity due to physical or mental
illness.
10. Tax Provisions. In the event that all or any part of the benefits
provided for in the Agreement, when aggregated with any other payments or
benefits received by the Executive, would (i) constitute "parachute payments"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) would be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then the amount of the Executive's
benefits to be paid or delivered hereunder shall be either
(a) the full amount of such benefits determined without regard to
this Section 10, or
(b) such lesser amount which would result in no portion of such
benefits being subject to the Excise Tax, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and the
Excise Tax, results in the receipt by the Executive on an after-tax basis, of
the greatest amount of benefits, notwithstanding that all or some portion of
such benefits may be taxable under Section 4999 of the Code. Unless the Company
and the Executive otherwise agree in writing, any determination required under
this paragraph shall be made in writing by the Company's independent public
accountants (the "Accountants") whose determination shall be conclusive and
binding upon the Executive and the Company for all purposes. For purposes of
making the calculations required by this paragraph, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Executive shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this paragraph. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this paragraph.
11. Proprietary Information Agreement. In connection with commencement of
the Executive's employment with the Company, the Executive will sign the
Company's standard executive proprietary information agreement, provided that
its provisions, if any, concerning non-solicitation and non-competition shall be
deleted in favor of the provisions herein.
12. Successors. The Company shall require any successor or assignee, in
connection with any sale, transfer or other disposition of all or substantially
all of the assets or business of SmartForce PLC, whether by purchase, merger,
consolidation or otherwise, expressly to assume and agree to perform the
Company's obligations under this Agreement in the same manner and to the
-5-
same extent that the Company would be required to perform if no such succession
or assignment had taken place. In such event, the term SmartForce PLC as used in
this Agreement, shall mean SmartForce PLC as defined above and any successor or
assignee to the business and assets which by reason hereof becomes bound by the
terms and provisions of this Agreement.
13. Confidentiality. Except as required by applicable laws, neither party
shall disclose the contents of this Agreement without first obtaining the prior
written consent of the other party, provided, however, that (i) the Executive
may disclose this Agreement to his attorney, financial planner and tax advisor
if such persons agree to keep the terms hereof confidential and (ii) the Company
may disclose this Agreement if its counsel advises that it is required to do so
under applicable law.
14. Arbitration. Any claim, dispute or controversy arising out of this
Agreement, the interpretation, validity or enforceability of this Agreement or
the alleged breach thereof shall be submitted by the parties to binding
arbitration before the American Arbitration Association in Nashua, New
Hampshire; provided, however, that this arbitration provision shall not preclude
either party from seeking injunctive relief from any court having jurisdiction
with respect to any disputes or claims relating to or arising out of this
Agreement or Executive's conduct as an officer, director or employee of the
Company. All costs and expenses of arbitration, excluding attorneys' fees, shall
be paid by the Company. The arbitrator shall have the power to award attorneys'
fees where provided by statute or rule. The arbitrator shall be neutral, and
shall issue all decisions in writing. Judgment may be entered on the award of
the arbitration in any court having jurisdiction.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Hampshire applicable to agreements
made and to be performed entirely within such state.
16. Integration. This Agreement, any written agreements or other documents
evidencing matters referred to herein and any written Company existing plans
that are referenced herein represent the entire agreement and understanding
between the parties as to the subject matter hereof and thereof and supersede
all prior or contemporaneous agreements as to the subject matter hereof and
thereof, whether written or oral. No waiver, alteration, or modification, if
any, of the provisions of this Agreement shall be binding unless in writing and
signed by duly authorized representatives of the parties hereto.
17. Notices. 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 when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Executive, mailed
notices shall be addressed to him at the home address that 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.
18. No Mitigation. In the event the Executive's employment with the
Company terminates, the Executive shall not be required to mitigate damages or
the amount of any payment
-6-
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided under this Agreement be reduced by any
compensation earned by the Executive as a result of employment by another
employer or by retirement benefits after such termination, or otherwise.
19. Waiver. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
20. Counterparts. This Agreement may be executed in counterparts, which
together will constitute one instrument.
[Remainder of page intentionally left blank]
-7-
EXECUTIVE SMARTFORCE PLC
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------ ---------------------------
Name: Xxxxxxx X Xxxxxx
Title: President & CEO
SMARTFORCE
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President & CEO
-8-