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Exhibit 10.1
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EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT made effective as of this 9 day of April, 1997 by and
between THE LEARNING COMPANY, INC., a Delaware corporation (the "Corporation"),
and Xxxxxxx X. Xxxxx (the "Executive").
WHEREAS the Corporation desires to employ the Executive in the position of
Chairman and Chief Executive Officer or a position with similar
responsibilities, and the Executive wishes to be so employed by the Corporation.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
EMPLOYMENT
1.1 EMPLOYMENT AND POSITION. Effective as of the date hereof and for the Term
(as defined in Section 3.1 herein), the Corporation hereby employs the Executive
in the capacity of Chairman and Chief Executive Officer, and the Executive
hereby accepts such employment, all on and pursuant to the terms and conditions
set out herein.
1.2 DUTIES AND RESPONSIBILITIES. The Executive shall have such powers and
duties as are customarily associated with the office of Chief Executive Officer
and as may from time to time be prescribed by the Board of Directors of the
Corporation (the "Board").
1.3 FULL TIME AND ATTENTION. The Executive shall well and faithfully serve
the Corporation and its subsidiaries and shall devote his full working time and
attention to the business and affairs of the Corporation and its subsidiaries
and the performance of his duties and responsibilities hereunder; PROVIDED,
HOWEVER, that the Executive may participate in other business ventures and
activities from time to time which do not interfere with his duties and
responsibilities hereunder.
1.4 PROHIBITED INTERESTS. Neither the Executive nor any member of his
immediate family shall purchase or hold an interest in any company doing
business with the Corporation (other than as a customer of the Corporation) or
competing with the Corporation other than a two percent or lesser interest in
publicly traded stock or such other interests to which the Corporation has given
its prior written consent.
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ARTICLE II
REMUNERATION AND BENEFITS
2.1 ANNUAL BASE SALARY. Effective as of the date hereof and for each year of
employment during the Term (an "Employment Year"), the Corporation shall pay to
the Executive an annual base salary (the "Annual Base Salary") of not less than
$400,000. The Annual Base Salary shall be payable twice monthly in equal
installments or in such other regular installments as the Corporation may pay
its employees from time to time. The Annual Base Salary may be increased from
time to time and shall not be decreased at any time during the Term.
2.2 BENEFITS. The Corporation shall provide to the Executive benefits
consistent with benefits provided under the existing benefit plans, practices,
programs and policies of the Corporation in effect for executive officers from
time to time during the Term. In addition, the Corporation shall pay to the
Executive a monthly automobile allowance of $750.00.
2.3 VACATION. The Executive shall be entitled to paid vacation in accordance
with the Corporation's vacation policy, as the same may be in effect from time
to time; PROVIDED, HOWEVER, that the Executive shall be entitled to at least
four weeks of paid vacation per year.
2.4 BONUS. In addition to the Annual Base Salary, the Executive shall be
eligible to receive a targeted annual cash bonus of $300,000 (the "Bonus"),
payable in quarterly installments, based upon performance objectives approved by
the Corporation's Compensation Committee (the "Compensation Committee") for each
Employment Year. To the extent that the Bonus is based on annual performance
objectives not readily quantified at the end of each quarter, in the discretion
of the Compensation Committee the Corporation may pay the Bonus to the Executive
in estimated quarterly installments. If, at the end of the Employment Year, the
estimated payments exceed the amount of Bonus actually earned, the Executive
shall reimburse such excess to the Corporation. The Bonus may be increased from
time to time and shall not be decreased at any time during the Term.
2.5 EXPENSES. During the Term the Corporation will reimburse the Executive
for all normal and customary expenses incurred by the Executive in carrying out
his duties under this Agreement, provided that the Executive complies with the
policies, practices and procedures of the Corporation for submission of expense
reports, receipts or other similar documentation of such expenses.
ARTICLE III
TERM AND TERMINATION
3.1 TERM. Unless otherwise terminated in accordance with the provisions
hereof, this Agreement shall have a term of three years from the effective date
hereof, as the same is first set forth above (the "Term"). On the expiration of
the Term and on each anniversary
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of the expiration of the Term this Agreement shall automatically renew for an
additional one year period (each of which renewal periods shall form part of the
Term) unless the Corporation notifies the Executive in writing four months in
advance of the expiration of the Term, or any subsequent anniversary thereof,
that the Corporation does not wish to further extend this Agreement.
3.2 TERMINATION FOR JUST CAUSE.
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(a) The Corporation may terminate the employment of the Executive
hereunder at any time for Just Cause, such termination to be communicated by the
Corporation to the Executive by written notice. For the purposes hereof, "Just
Cause" means a determination by the Board, in the exercise of its reasonable
judgment and after permitting the Executive a reasonable opportunity to be
heard, that any of the following has occurred:
(i) the willful and continued failure by the Executive to
perform his duties and responsibilities with the Corporation under this
Agreement (other than any such failure resulting from incapacity due to
physical or mental illness or disability) which is not cured within 30
days of receiving written notice from the Corporation specifying in
reasonable detail the duties and responsibilities which the Corporation
believes are not being adequately performed;
(ii) the willful engaging by the Executive in any act which is
demonstrably and materially injurious to the Corporation unless such act
is cured (if susceptible to being cured) within 30 days of receiving
written notice of such act;
(iii) the conviction of the Executive of a criminal offense
involving fraud, dishonesty or other moral turpitude;
(iv) any material breach by the Executive of the terms of this
Agreement or any other written agreement between the Executive and the
Corporation relating to proprietary information, confidentiality,
non-competition or non-solicitation which is not cured within 30 days of
receiving written notice from the Corporation specifying in reasonable
detail such breach; or
(v) the engaging by the Executive in any intentional act of
dishonesty resulting or intended to result, directly or indirectly, in
personal gain to the Executive at the Corporation's expense.
(b) Upon the termination of the Executive's employment for Just Cause,
the Executive shall not be entitled to any severance, termination or other
compensation payment other than unpaid Annual Base Salary earned by the
Executive up to the date of termination and any unpaid Bonus earned with respect
to any year prior to the termination,
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together with any amount to which the Executive may be entitled under the
provisions of applicable employment legislation in force at the date of
termination of the Executive's employment (less any deductions required by law).
3.3 TERMINATION WITHOUT JUST CAUSE OR FOR GOOD REASON.
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(a) The Corporation may terminate the employment of the Executive
hereunder at any time without Just Cause, such termination to be communicated by
the Corporation to the Executive by at least 30 days prior written notice. In
addition, the Executive may terminate his employment for Good Reason, such
termination to be communicated by the Executive to the Corporation by at least
30 days prior written notice. For purposes of this Agreement, "Good Reason"
shall mean (i) a substantial diminution in or adverse alteration to the
Executive's position, duties, responsibilities or authority with the
Corporation, (ii) any purported termination of the Executive's employment which
is not effected in accordance with this Agreement (which purported termination
shall not be effective), (iii) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 4.10 hereof, (iv) any material breach by
the Corporation of this Agreement which is not cured within 30 days of receiving
written notice from the Executive specifying in reasonable detail such breach or
(v) the receipt by the Executive of written notice under Section 3.1 hereof that
the Corporation does not wish to further extend this Agreement. The Executive's
right to terminate his employment for Good Reason shall not be affected by his
incapacity due to physical or mental illness or disability. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.
(b) Upon the termination of the Executive's employment without Just
Cause or for Good Reason, the Corporation shall have the following obligations:
(i) if not theretofore paid, the Corporation shall pay to or to
the order of the Executive within 10 days after the date of termination
of the Executive's employment hereunder any unpaid Annual Base Salary
earned by the Executive up to the date of termination (less any
deductions required by law);
(ii) the Corporation shall pay to or to the order of the
Executive, in equal bi-monthly installments in accordance with its normal
payroll practices over a three-year period (the "Continuation Period"),
as compensation for the Executive's loss of employment, an amount equal
to three times the Annual Base Salary plus three times the amount of all
bonuses pursuant to Section 2.4 hereof paid to or accrued by the
Executive with respect to the twelve month period immediately preceding
such termination (less any deductions required by law);
(iii) during the Continuation Period all of the Executive's then
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outstanding options for the purchase of capital stock of the Corporation
shall continue to vest and remain exerciseable in accordance with the
terms of the applicable stock option agreements as if the employment of
the Executive were not terminated. The last day of the Continuation
Period shall be deemed to be the date of termination of the Executive's
employment with respect to any such options, and the Executive shall be
entitled to exercise such options after the Continuation Period for the
applicable period after termination of employment as may be specified in
the applicable stock option agreement;
(iv) the Corporation shall provide the Executive with life,
disability, accident and health insurance benefits and a monthly
automobile allowance identical or substantially similar to those which
the Executive is receiving immediately prior to the written notice of
termination referenced in section 3.3(a) hereof (without giving effect to
any reduction in such benefits which constitutes Good Reason) during the
Continuation Period.
(c) The terms and provisions of section 3.3(b)(iii) herein shall be
deemed to form a part of any and all agreements between the Corporation and the
Executive embodying the terms and provisions of options for the purchase of
capital stock of the Corporation granted to the Executive.
(d) (i) Subject to Section 3.3(d)(iv) below, in the event that
any of the payments provided for herein, together with any other payments
or benefits received or to be received by the Executive in connection
with the termination of employment of the Executive or otherwise (the
"Severance Payments"), will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Corporation shall immediately pay to or to the order of
the Executive an additional amount (the "Gross-up Payment") such that the
net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments and any federal, state and local income tax and
Excise Tax on the payment provided for by this section 3.3(d), shall be
equal to the Severance Payments, placing the Executive in the same
after-tax financial position in which he would have been if he had not
incurred any tax liability under Section 4999 of the Code. For purposes
of determining the amount of the Gross-up Payment, the Executive shall be
deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's
residence on the date of termination, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes.
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(ii) In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time of
termination of the Executive's employment, the Executive shall repay to
the Corporation at the time that the amount of such reduction in Excise
Tax is finally determined the portion of the Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-up Payment being repaid by the Executive, if such
repayment results in a reduction in Excise Tax or in federal, state and
local income tax deductions) plus interest on the amount of such
repayment at the rate provided in Section 1274(d) of the Code.
(iii) In the event that the Excise Tax is determined to exceed
the amount taken into account hereunder at the time of the termination of
the Executive's employment (including by reason of any payment the
existence or amount of which cannot be determined at the time the
Gross-up Payment is made), the Corporation shall make an additional
Gross-up Payment in respect to such excess (plus any interest payable
with respect to such excess) at the time that the amount of such excess
if finally determined.
(iv) This Section 3.3(d) will only apply to Severance Payments
if the event that causes the Severance Payments to be subject to the
Excise Tax occurs during the Term. For purposes of clarity, if, on the
date of termination, the Severance Payments would not be subject to
Excise Tax, the Corporation will have no obligation to make any Gross up
Payment if an event occurring after the date of termination subjects any
Severance Payment to Excise Tax.
(e) As promptly as reasonably practicable the Corporation shall enter
into a security arrangement reasonably acceptable to the Executive to secure the
performance by the Corporation of its obligations pursuant to Section 3.3(b)
hereof.
3.4 TERMINATION UPON DEATH OR DISABILITY OR BY EXECUTIVE FOR OTHER THAN GOOD
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REASON.
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(a) The Corporation may terminate the employment of the Executive
hereunder at any time forthwith upon the death or permanent disability of the
Executive, such termination to be communicated by written notice given by the
Corporation to the Executive or, in the event of the death of the Executive, to
his personal representative or his estate. The Executive shall be considered to
have become permanently disabled if in any period of 12 consecutive months
during the Term, because of ill health, physical or mental disability, or for
other causes beyond the control of the Executive, the Executive has been or is
reasonably likely to be continuously unable or unwilling or has failed to
perform his duties and responsibilities hereunder for 180 consecutive days, or
if, during any period of 12 consecutive months during the Term, the Executive
has been unable or unwilling or
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has failed to perform his duties and responsibilities hereunder for a total of
240 days, consecutive or not.
(b) The Executive may, upon three months' prior written notice to the
Corporation, voluntarily terminate his employment hereunder for other than Good
Reason.
(c) On termination of the Executive's employment as a result of the
Executive's death or as a result of the Executive having become permanently
disabled, or upon the termination by the Executive of his employment for other
than Good Reason, the Corporation shall pay to the Executive or his personal
representative on behalf of the estate of the Executive, within 10 days after
date of termination of the Executive's employment, any unpaid Annual Base Salary
earned by the Executive up to the date of termination and any unpaid Bonus
earned with respect to any year prior to the termination, together with any
amount to which the Executive may be entitled under the provisions of applicable
employment legislation in force at the date of termination of the Executive's
employment (less any deductions required by law).
(d) The several payments and other obligations of the Corporation
described in this Section 3.4 are the only severance, compensation or
termination payments or benefits that the Executive will receive in the event of
any termination of employment set forth in this Section 3.4.
3.5 RETURN OF PROPERTY. Upon the termination of the employment of the
Executive hereunder, regardless of the reason therefor, the Executive will
immediately deliver or cause to be delivered to the Corporation all books,
documents, effects, money, securities, equipment or other property (including
manuals, computer disks and software products) belonging to the Corporation, or
for which the Corporation is liable to others, which are in the possession,
charge or custody of the Executive. The Executive agrees not to make for
personal or business use or for the use of any other party any reproductions or
copies of any such books, documents, effects or other property belonging to the
Corporation or for which the Corporation is liable to others. Notwithstanding
the foregoing, the Executive shall be entitled to retain, as his own personal
property, all personal computer equipment and cellular telephone (including both
hardware and, if and only to the extent permitted by applicable licenses, all
software written onto non-removable media therein) used by the Executive as of
the date of his termination hereunder.
ARTICLE IV
GENERAL
4.1 CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation and its subsidiaries
and their respective businesses which shall have been obtained by the Executive
during the Executive's employment by the Corporation and which shall not be or
become public knowledge (other than by acts of the Executive or
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representatives of the Executive in violation of this Agreement). If the
employment of the Executive hereunder is terminated for any reason, the
Executive shall not, without the prior written consent of the Corporation or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to any person other than the Corporation and
those persons designated by it.
4.2 NON-COMPETITION. During the Term and the Continuation Period, the
Executive shall not compete with any business then conducted by the Company or
any of its subsidiaries without the prior written consent of the Board. For
purposes of this Agreement, the term "compete" shall mean directly or indirectly
engaging or participating, or conducting as an owner, officer, director,
manager, employee or consultant of, or having a financial interest in, or aiding
or assisting anyone else in the conduct of, any business of the same type and
character as any business of the Corporation or any subsidiary thereof, as
conducted during the time the Executive rendered services hereunder, within any
geographical area in which the Corporation or its subsidiaries transacts its
business at the time of the termination of the Executive's employment hereunder;
PROVIDED, HOWEVER, that the Executive's ownership of not more than one percent
(2%) of the securities of any corporation or other entity which are traded on
any national securities exchange or market shall not constitute a violation of
this Section 4.2.
4.3 NON-INTERFERENCE WITH PERSONNEL RELATIONS. During the Term and the
Continuation Period the Executive will not, directly or indirectly, solicit,
entice or persuade any employee of the Corporation or any of its subsidiaries to
leave the services of the Corporation for any reason.
4.4 EQUITABLE RELIEF. The Executive acknowledges that a breach of the
restrictions contained in Sections 4.1 through 4.3 hereof will cause irreparable
damage to the Corporation, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, the Executive and the Corporation agree that if the Executive
breaches or attempts to breach any of the restrictions contained in Sections 4.1
through 4.3 hereof, then the Corporation shall be entitled to temporary or
permanent injunctive relief with respect to any such breach or attempted breach
(in addition to any other remedies, at law or in equity, as may be available to
the Corporation), without posting bond or other security.
4.5 LEGAL FEES. Except as set forth in Section 4.15 hereof, the Corporation
shall pay the Executive all reasonable, documented legal and professional fees
and expenses incurred by the Executive in seeking to obtain or enforce any
rights provided for under this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder upon receipt by the
Corporation of notification setting forth in reasonable detail the rights to
which the Executive believes he is entitled and the provision of the Agreement
under which he believes such rights are afforded.
4.6 FULL SATISFACTION. The terms set out in this Agreement, provided that
such terms
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are satisfied by the Corporation, are in lieu of (and not in addition to) and in
full satisfaction of any and all other claims or entitlement which the Executive
has or may have against the Corporation relating to the Executive's employment
by the Corporation as a result of the termination of his employment by the
Corporation in the circumstances contemplated in this Agreement and the
compliance by the Corporation with these terms will effect a full and complete
release of the Corporation from any and all claims which the Executive may then
have for whatever reason or cause in connection with the Executive's employment
by the Corporation and the termination of it, other than those obligations
specifically set out in the Agreement. In agreeing to the terms set out in this
Agreement the Executive specifically agrees to execute a formal release document
to that effect and will deliver upon request appropriate resignations from all
offices and positions with the Corporations and any associated resignations from
all offices and positions with the Corporation and any associated or affiliated
companies if, as, and when requested by the Board of Directors upon the
termination of employment within the circumstances contemplated by this
Agreement.
4.7 MITIGATION. The Executive shall have no duty to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Agreement be
reduced by any compensation earned by the Executive as the result of employment
by another employer after the date of termination of the Executive's employment
with the Corporation, or otherwise.
4.8 NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be properly given if delivered
personally or mailed by prepaid registered mail addressed as follows:
(a) in the case of the Corporation, to:
The Learning Company, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
(b) in the case of the Executive, to:
Xxxxxxx X. Xxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
or to such other address as the parties may from time to time specify by notice
given in accordance herewith. Any notice so given shall be conclusively deemed
to have been given or made on the day of delivery, if delivered, or, if mailed
by registered mail, upon the date shown on the postal return receipt as the date
upon which the envelope containing such notice was actually received by the
addressee.
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4.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the employment relationship contemplated hereby and
cancels and supersedes all prior understandings and agreements between the
parties with respect thereto, and no agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
4.10 SUCCESSORS AND ASSIGNS. Neither the Executive nor the Corporation may
assign its rights hereunder to another person without the consent of the other;
provided, however, that the Corporation may assign its rights hereunder to a
successor corporation which acquires (whether directly or indirectly, by
purchase, arrangement, merger, consolidation, dissolution or otherwise) all or
substantially all of the business or assets of the Corporation and expressly
assumes and agrees to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place and provided that such successor shall reasonably be
able to perform all of its obligations under this Agreement. As used in this
Agreement, the term "Corporation" shall mean the Corporation (as herein defined)
and any successor to its business or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law or otherwise.
4.11 ENUREMENT. This Agreement shall enure to the benefit of and be binding
upon the Executive and his personal representatives and upon the Corporation and
its successors and permitted assigns.
4.12 FURTHER ASSURANCES. Each of the Corporation and the Executive agrees to
execute all such documents and to do all such acts and things as the other party
may reasonably request and as may be lawful and within its power to do or to
cause to be done in order to carry out or implement in full the provisions and
intent of this Agreement.
4.13 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and the federal
laws of the United States of America applicable therein. Each of the parties
assents to the jurisdiction of the courts of the Commonwealth of Massachusetts
to hear any action, suit or proceeding arising in connection with this
Agreement.
4.14 WAIVER OF RIGHTS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing by the party against whom the same is sought to be enforced and no
failure by any party to enforce any of its rights hereunder shall, except as
aforesaid, be deemed to be a waiver of such right. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any provision of this Agreement to be performed by such other party shall
be deemed to be a waiver of a similar or dissimilar provision hereof at the same
or at any prior or subsequent time.
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4.15 MANDATORY ARBITRATION. Except as expressly stated below, any dispute,
controversy or claim arising out of or relating to the Executive's employment by
the Corporation or its termination, including but not limited to claims of
unlawful discrimination or harassment (collectively, the "Arbitrable Claims"),
will be settled by binding arbitration in Boston or Cambridge, Massachusetts in
accordance with the then current rules of the American Arbitration Association
(the "AAA"), before an experienced employment arbitrator licensed to practice
law in the Commonwealth of Massachusetts and selected in accordance with the
Model Employment Arbitration Procedures of the AAA. The Corporation and the
Executive each knowingly waive the right to a jury trial in a court of law with
respect to the Arbitrable Claims. For purposes of any arbitration under this
Section 4.15, the Corporation and the Executive hereby incorporate by reference,
and adopt all of the discovery rights and procedures referenced in, the
Massachusetts Code of Civil Procedure, and agree that each of the Corporation
and the Executive shall pay the fees of its, his own attorneys, the expenses of
its, his own witnesses and any other expenses connected with presenting its, his
own claims. The fees of the arbitrator will be paid half by the Executive and
half by the Corporation, provided that the Corporation will pay 100% of any
portion of the arbitrator's fee that exceeds $1000. The Arbitrator shall have
the power to summarily adjudicate claims and/or enter summary judgment in
appropriate cases. Notwithstanding any of the foregoing, any claim or
counterclaim brought for infringement or misappropriation of any patent,
copyright, trade secret, trademark or other proprietary right shall not be
subject to arbitration, and neither the Executive nor the Corporation waive any
right to submit any such claim, or any factual or legal issues relating to such
a claim, to a court of competent jurisdiction.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
date and year first above written.
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
THE LEARNING COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx
Chairman of the Compensation
Committee of the Board
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