EXHIBIT 10.45
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement"), is made and entered into
this 9th day of September, 2003, by and between John T. Kernan (hereinafter
referred to as the "Consultant"), an individual residing at 560 San Gorgonio
Street, San Diego, California 92106, and PLATO Learning, Inc., a Delaware
corporation (hereinafter referred to as "Company").
WITNESSETH
WHEREAS, pursuant to that certain Agreement and Plan of Merger
(as may be amended, restated, supplemented or otherwise modified from time to
time, the "Merger Agreement"), dated as of September 9, 2003, among the Company,
LSPN Merger Corp., a Delaware corporation and wholly-owned subsidiary of the
Company ("Merger Sub"), and Lightspan, Inc., a Delaware corporation
("Lightspan"), pursuant to which the parties thereto have agreed to merge (the
"Merger") Merger Sub with and into Lightspan, with Lightspan as the surviving
entity. Unless otherwise defined herein, each capitalized term used herein shall
have the meaning assigned thereto in the Merger Agreement;
WHEREAS, Lightspan and the Consultant had previously entered
into an Employment Agreement dated as of March 1, 2001 (the "Prior Agreement");
WHEREAS, the Prior Agreement shall terminate upon consummation
of the Merger;
WHEREAS, the execution and delivery of this Agreement by the
Consultant and the Company are conditions precedent to the obligations of the
parties to the Merger Agreement;
WHEREAS, the election of the Consultant to the Board of
Directors of the Company is a condition precedent to the obligations of the
parties to the Merger Agreement;
WHEREAS, the Company desires to retain the services of the
Consultant following the Merger and the Consultant desires to provide consulting
services to the Company following the Merger on the terms provided herein;
WHEREAS, the Company is acquiring Lightspan pursuant to the
Merger in accordance with the terms and conditions of the Merger Agreement;
WHEREAS, by virtue of the Consultant's being a shareholder of
and currently employed by Lightspan, the Consultant continuing to provide
consulting services to the Company, and the Consultant's position after the
merger as a director of the Company, the Consultant is familiar with
confidential and proprietary information and will obtain and become familiar
with certain additional confidential and proprietary information relating to the
Company and its subsidiaries (including Lightspan) and its business and assets;
WHEREAS, because the Consultant will sell all his shares of
Lightspan in the Merger to the Company, the Company desires by this Agreement to
protect the goodwill and all proprietary rights and information of the Company
and its subsidiaries (including Lightspan).
NOW THEREFORE, in consideration of the mutual promises and
covenants herein set forth, and for other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.00 - CONSULTING SERVICES
1.01 CONSULTING ARRANGEMENT. The Company shall hereby retain the
consulting services of the Consultant to advise the Chief Executive Officer of
the Company upon the terms and conditions hereinafter set forth and the
Consultant accepts such engagement to provide consulting services and agrees to
abide by the terms and conditions hereof.
1.02 SERVICES.
A. SERVICES RENDERED TO THE COMPANY. The Consultant shall
render such services as may reasonably be requested from time to time by the
Chief Executive Officer of the Company for the period and upon the terms and
conditions set forth in this Agreement. The Consultant's services shall consist
of (i) assisting the Company in the transition of the business of Lightspan to a
new management structure following the Merger, (ii) assisting with investor and
customer meetings and (iii) assisting with the ongoing relationships with the
Lightspan's major business partners. Such consulting services will be provided
upon reasonable advance notice from the Company's Chief Executive Officer, at
such times and locations as the Company's Chief Executive Officer shall
reasonably request.
B. PERFORMANCE OF SERVICES. The Consultant shall serve the
Company and Lightspan faithfully and to the best of his ability during the Term
(as hereafter defined). The Consultant hereby confirms that he is under no
contractual commitments inconsistent with the obligations set forth in this
Agreement and that, during the Term, he will not render or perform services, or
enter into any contract to do so, for any other Person (as hereafter defined)
which are inconsistent with the provisions of this Agreement. For purposes
hereof, the term "Person" shall mean an individual, partnership, limited
partnership, corporation, limited liability company, association, joint stock
company, trust, joint venture or unincorporated organization or the United
States of America or any other nation, any state or other political subdivision
thereof, or any entity exercising legislative, judicial, regulatory or
administrative functions of government.
ARTICLE 2.00 - TERM
2.01 The Company hereby retains the Consultant's services hereunder for
an initial term commencing on the date of the consummation of the Merger and
ending on the second anniversary of the date of the consummation of the Merger,
unless this Agreement is otherwise terminated earlier in accordance with the
terms hereof and upon such earlier termination, the Consultant is no longer
entitled to his Consulting Fee or any other compensation or benefits, in which
case the term shall end on the date of such termination of this Agreement (the
"Initial Term"). The Initial Term may be extended upon mutual agreement in
writing of the parties
-2-
hereto (the "Additional Term;" together with the Initial Term, the "Term"), in
each case subject to earlier termination of this Agreement as hereafter
specified.
2.02 This Agreement shall not be effective until the Effective Time (as
defined in the Merger Agreement). In the event the Merger Agreement is
terminated for any reason prior to the Effective Time, this Agreement shall be
null and void without limitation with no continuing obligations from either
party to the other.
ARTICLE 3.00 - COMPENSATION
3.01 CONSULTING FEE. During the Term of this Agreement, and subject to
the provisions contained herein, Company shall pay the Consultant for all
consulting services to be rendered by the Consultant pursuant to this Agreement
an annual consulting fee in the amount of $416,348.00 (the "Consulting Fee").
The Consulting Fee shall be payable in equal installments every two (2) weeks or
at such other intervals that the Consultant and the Company shall mutually
agree. The Consulting Fee for any partial month during the term hereof shall be
paid on a pro rata basis based upon the actual number of days elapsed during
such partial month.
3.02 BENEFITS. If, effective from the date the Consultant would
otherwise lose his medical and dental coverage from Lightspan as a result of his
termination of employment with Troy on the date of consummation of the Merger,
the Consultant chooses continuation coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA Continuation Coverage") the
Company will subsidize the Consultant's COBRA Continuation Coverage to the
extent necessary to ensure that, during the Term, the Consultant will be
responsible for paying no more to maintain that medical or dental COBRA
Continuation Coverage than he would have had to pay as an active employee of
Lightspan immediately prior to the Merger for the type of medical or dental
coverage he is receiving as COBRA Continuation Coverage. If, immediately
following termination of his COBRA Continuation Coverage, the Consultant begins
to receive medical or dental continuation coverage under a state continuation
coverage law ("State Continuation Coverage") then the Company will subsidize
that State Continuation coverage in the same manner as it subsidized the
Consultant's COBRA Continuation Coverage. If the maximum periods of both of the
Consultant's COBRA Continuation Coverage and State Continuation Coverage end
during the Term, then, for the remainder of the Term, Company will reimburse the
Consultant for premiums for medical and/or dental coverage (whichever he was
receiving under this Section 3.02) that is no less comprehensive overall than
the coverage the Consultant was receiving immediately before the continuation
coverage period ended. The Consultant will be responsible for paying a portion
of the premium(s) for coverage provided under the previous sentence equal to the
dollar amount he would have had to pay as an active employee of Lightspan
immediately prior to the Merger. Notwithstanding any other provision of this
Section 3.02, if the Consultant's medical or dental COBRA Continuation Coverage
or State Continuation coverage ends before the maximum period provided by law
because the Consultant (i) becomes covered by another group health plan or (ii)
fails to pay his portion of the premium for continuation coverage, the Company
will have no further obligation to provide coverage to Consultant of the sort
(medical or dental) that ended before the end of the maximum continuation
coverage period.
-3-
3.03 EXPENSE REIMBURSEMENT. During the Term, in accordance with the
Company's policies established from time to time, the Company will pay or
reimburse the Consultant for all reasonable and necessary out-of-pocket expenses
incurred by him in the performance of his consulting services under this
Agreement, subject to the presentment of appropriate vouchers and expense
reports provided that any expense over $1,000 is approved in advance by the
Chief Executive Officer of the Company.
3.04 MERGER. If the Merger Agreement is terminated for any reason prior
to the Effective Time, the Consultant shall not be entitled to any Consulting
Fees or benefits hereunder, without limitation.
3.05 DIRECTOR COMPENSATION. In addition to the foregoing, for so long
as the Consultant serves on the Company's Board of Directors, Company shall
provide the Consultant with such compensation, reimbursements and/or option
grants as may be made available to other non-employee directors of the Company
from time to time.
ARTICLE 4.00 - COMPENSATION UPON THE TERMINATION OF THE CONSULTANT'S SERVICES
4.01 If prior to the end of the Term the Consultant's services
hereunder are terminated:
A. by the Company for any reason other than pursuant to
Section 6.01, or by the Consultant for Good Reason (as hereafter defined), the
Consultant shall continue to be paid the Consulting Fee and shall continue to
receive any other compensation or benefits described in Section 3 to the same
extent the Consultant would have been entitled thereto for the remainder of the
Term, subject to the terms herein, had this Agreement not been terminated; or
B. by the Consultant for any reason other than for Good Reason
or by the Company pursuant to Section 6.01, the Consultant shall not be entitled
to his Consulting Fee for the remainder of the Term, or any other compensation
or benefits, subject to the terms herein.
4.02 A termination shall be deemed to be for "Good Reason" if (i) it
follows a material breach of this Agreement by the Company which is not curable,
or if curable, is not cured within 20 days of written notice by the Consultant
(provided, that any such notice also must include a statement that failure to
cure any such breach may result in a termination by the Consultant of his
services for Good Reason) or (ii) the Board of Directors of the Company
otherwise determines that such termination is for "Good Reason" under the
circumstances then prevailing.
ARTICLE 5.00 - COVENANTS
5.01 COVENANT NOT TO COMPETE.
A. The Consultant acknowledges that the Company and its
subsidiaries are engaged in highly competitive businesses and have a
compelling business interest in preventing unauthorized use or
disclosure of Confidential Information, that the Company and its
subsidiaries have highly valuable and long-term customer relationships
which they have a legitimate interest in protecting, and that the
Consultant has had and may continue to have access to those customers
and has had and will have access to
-4-
Confidential Information. Accordingly, the Consultant agrees that,
during the Non-Compete Period (as defined below), he shall not engage
or participate in any business which involves the development or sale
of educational software products which are the same in scope, sequence
or title to the products of the Company and its subsidiaries (including
Lightspan), including, where such business is conducted in a geographic
area in which the Company's and its subsidiaries' business is
conducted; provided, however, that ownership by the Consultant, as a
passive investment, of less than five percent (5%) of the outstanding
shares of capital stock of any corporation listed on a national
securities exchange or publicly traded in the over-the-counter market
shall not constitute a breach of this Section 5.01.
B. "Non-Compete Period" means the period commencing with the
Effective Time and ending at the later of (a) the last day of the Term
and (b) the end of the Consultant's tenure on the Company's Board of
Directors.
C. The Consultant further agrees that during the Non-Compete
Period, he will not, directly or indirectly, knowingly assist or
encourage any other Person in carrying out, directly or indirectly, any
activity that would be prohibited by the above provisions of this
Section 5.01 if such activity were carried out by the Consultant,
either directly or indirectly, and in particular the Consultant agrees
that he will not, directly or indirectly, knowingly induce or assist
any employee or former employee of the Company or any of its
subsidiaries (including Lightspan) to carry out, directly or
indirectly, any such activity.
5.02 COVENANT FOR PROTECTION OF PROPRIETARY INFORMATION.
A. The Consultant recognizes and acknowledges that: (a) in the
course of the Consultant's employment by Lightspan he has obtained
Confidential Information (as hereafter defined) and that in the course
of his providing consulting services hereunder he will acquire
additional Confidential Information; (b) the Confidential Information
is the property of the Company and its subsidiaries; (c) the
unauthorized use, misappropriation or disclosure of the Confidential
Information could cause irreparable injury to the Company; and (d) it
is essential to the protection of the Company's goodwill and to the
maintenance of the Company's competitive position that the Confidential
Information be kept secret and that the Consultant not disclose the
Confidential Information to others or use the Confidential Information
to the Consultant's own advantage or the advantage of others or in any
way to disadvantage the Company. "Confidential Information" means
information, whether or not reduced to writing, and whether in paper,
electronic, digital, analog or other format, relating to the past,
present or planned business of the Company and its subsidiaries
(including Lightspan), which has not been made generally known to the
public or the industry by the Company or its subsidiaries (including
Lightspan), including, without limitation, trade secrets, know-how,
inventions, new product and product development information, research
results, marketing and sales programs, customer and supplier
information, financial data, employee records, cost information,
pricing information, sales and marketing strategies, business systems,
computer systems, software, software systems and techniques, the
identity of customers, all information
-5-
received under an obligation of confidentiality to customers, and all
information generated for customers.
B. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Consultant
agrees to hold and safeguard the Confidential Information in trust for
the Company, its successors and assigns and agrees that he shall not,
without the prior written consent of the Company's Board of Directors,
use for the Consultant's own benefit or purposes or misappropriate or
disclose or make available to any Person for use outside the Company's
organization at any time, either while providing consulting service to
the Company or subsequent to the termination of his consulting service
with the Company, for any reason, including, without limitation,
termination by the Company for cause or without cause, any of the
Confidential Information or any copy, notes or item embodying
Confidential Information, whether or not developed by the Consultant,
except (a) as required in the performance of the Consultant's
consulting services and as authorized by the Company and (b) to the
extent that such information (i) is or becomes generally available to
the public or the industry other than as a result of a disclosure by
the Consultant in violation of this Agreement, or (ii) is required to
be disclosed pursuant to a court order or other legal process (provided
the Consultant gives the Company notice of such obligation promptly
after the Consultant receives notice of such obligation and prior to
any disclosure pursuant to such obligation, to the extent practicable,
affords the Company the opportunity and cooperates with the Company in
any efforts by the Company to limit the scope of such obligation and/or
to obtain confidential treatment of any material disclosed pursuant to
such obligation). The Consultant agrees that his obligations with
respect to Confidential Information shall continue even after the end
of the Term with the Company.
C. ACKNOWLEDGMENT. The Consultant acknowledges and agrees that
the restrictions set forth in this Article 5 are reasonable in scope
and essential to the preservation of the Company's business and
proprietary interests and that enforcement of these restrictions will
not cause the Consultant any hardship, and because of the Consultant's
background and experience, will not in any manner preclude the
Consultant, in the event of a termination of this Agreement, from
becoming gainfully employed in such a manner and to such an extent as
will provide a standard of living for himself and the members of his
family of at least the sort and fashion to which he and they have
become accustomed.
D. SEPARATE AGREEMENT. The covenants of the Consultant
contained in this Article 5 shall each be construed independently of
any other provision in this Agreement, and the existence of any claim
or cause of action of the Consultant against Company whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of such covenants. These covenants may be
enforced by specific performance or any available legal or equitable
remedy, including, but not limited to, temporary restraining orders or
preliminary and permanent injunctions, and the Company and its
affiliated corporations shall be entitled to recover from the
Consultant all court costs and reasonable attorney's fees incurred in
enforcing these covenants. The remedies hereunder shall not be
exclusive of each other, but shall be cumulative.
-6-
5.03 AGREEMENT NOT TO SOLICIT BUSINESS RELATIONS. The Consultant agrees
that, during the Term and Non-Compete Period, he will not, directly or
indirectly, on his own behalf or in the service or on behalf of others, solicit,
divert or appropriate, or attempt to solicit, divert or appropriate any
supplier, licensor, licensee or other business relation of the Company or any of
its subsidiaries (including Lightspan), including, without limitation, other
Persons with whom the Company or any of its subsidiaries (including Lightspan)
has contractual or other arrangements to provide services for the Company or any
of its subsidiaries (including Lightspan), for the purpose of inducing such
party to cease or to not begin doing business with the Company or any of its
subsidiaries (including Lightspan) or to do business competitive with that
conducted by the Company or any of its subsidiaries (including Lightspan) with
any other Person.
5.04 AGREEMENT NOT TO SOLICIT EMPLOYEES. The Consultant agrees that,
during the Non-Compete Period, he will not, either directly or indirectly, on
his own or in the service or on behalf of others solicit, divert or hire, or
attempt to solicit, divert or hire any Person employed by the Company or any of
its subsidiaries (including Lightspan).
ARTICLE 6.00 - TERMINATION
6.01 GROUNDS FOR TERMINATION. This Agreement shall terminate prior to
the expiration of the Term set forth in Article 2 in the event that at any time
during the Term:
A. the Consultant shall die, or
B. the Board of Directors of the Company shall determine, in
good faith, that Cause exists. "Cause" shall mean any of the following:
(A) embezzlement, fraud, misappropriation or dishonesty by the
Consultant against or with respect to the Company or any of its
subsidiaries (including Lightspan) that materially impairs the goodwill
or business of that Company or any of its subsidiaries (including
Lightspan), or that causes material damage to the property, goodwill or
business of the Company or any of its subsidiaries (including
Lightspan); (B) the Consultant's engaging in willful misconduct in the
performance of the Consultant's consulting services; or (C) the breach
by the Consultant of any provision of this Agreement, which breach or
failure is not cured by the Consultant after reasonable prior written
notice (provided, that any such notice also must include a statement
that failure to cure any such breach or failure may result in the
termination by the Company of this Agreement for Cause) or is not
capable of being cured; or
C. the Company and the Consultant mutually agree.
Notwithstanding any termination of this Agreement pursuant to this Article 6,
each party shall remain bound following any such termination by the provisions
of this Agreement which specifically relate to periods, activities or
obligations upon or subsequent to the termination of the services of the
Consultant. In addition, no termination of this Agreement pursuant to this
Article 6 shall be deemed to release either party from any liability for any
breach by such party of the terms and conditions of this Agreement.
-7-
ARTICLE 7.00 - INDEPENDENT CONTRACTOR
7.01 INDEPENDENT CONTRACTOR. The Consultant shall, for purposes of this
Agreement, be an independent contractor of Company and not an employee thereof
and, notwithstanding any determination by the Internal Revenue Service that the
Consultant is an employee, the Consultant shall be responsible to pay all taxes
as if he were an independent contractor (or to reimburse Company if Company is
required to pay such amounts on behalf of the Consultant).
ARTICLE 8.00 - GENERAL MATTERS
8.01 CONFLICT. The Consultant represents and warrants to Company that
he has not executed any written agreement with any other Person that would
prohibit the Consultant from entering into this Agreement. Further, the
Consultant represents and warrants to Company that the execution of this
Agreement by the Consultant and his services rendered to Company pursuant to
this Agreement will not conflict with any obligations or duties which the
Consultant may have to prior employers or pursuant to any other agreement.
8.02 NON-DISCLOSURE OF AGREEMENT. The Consultant and the Company agree
that, during the term of this Agreement and after the termination of this
Agreement, neither shall disclose the terms and provisions of this Agreement to
any Person other than their professional advisors, and in the case of the
Company, other than to its affiliates, except in connection with a dispute
hereunder, or as required in connection with a proceeding before a court,
arbitrator, administrative agency or other governmental or judicial entity or as
otherwise required by law.
8.03 ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Company may, without the consent of the Consultant, assign its rights
and delegate its obligations under this Agreement to any Person (a) with or into
which the Company merges or consolidates, (b) to which the Company sells or
transfers all or substantially all of its assets or (c) of which fifty percent
(50%) or more of the equity investment and the voting control is owned, directly
or indirectly, by, or is under common ownership with, the Company.
8.04 INJUNCTIVE RELIEF. Each party agrees that it would be difficult to
compensate the other party fully for damages for any violation of the provisions
of this Agreement, including without limitation, the provisions of Articles 3
and 5. Accordingly, each party specifically agrees that the other party shall be
entitled to temporary and permanent injunctive relief to enforce the provisions
of this Agreement, without the posting of any bond. This provision with respect
to injunctive relief shall not, however, diminish the right of either party to
claim and recover damages in addition to injunctive relief.
8.05 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND EFFECT OF THIS
AGREEMENT SHALL BE GOVERNED EXCLUSIVELY BY THE LAWS OF THE STATE OF CALIFORNIA,
EXCLUDING THE "CONFLICT OF LAWS" RULES THEREOF.
8.06 PRIOR AGREEMENTS. This Agreement, at the Effective Time, shall
contain the entire agreement of the parties relating to the subject matter
hereof and shall at such time
-8-
supersede all prior agreements, including the Prior Agreement, and
understandings with respect to such subject matter, and the parties hereto have
made no agreement, representations or warranties relating to the subject matter
of this Agreement which are not set forth herein.
8.07 AMENDMENTS. No amendment or modification of this Agreement shall
be deemed effective unless made in writing signed by the parties hereto.
8.08 NO WAIVER. No term or condition of this Agreement shall be deemed
to have been waived nor shall there be any estoppel to enforce any provisions of
this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, shall operate only
as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
8.09 SEVERABILITY. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect. In furtherance and not in limitation of the
foregoing, should the duration or geographical extent of, or business activities
covered by any provision of this Agreement be in excess of those that are valid
and enforceable under applicable law, then the provision shall be construed to
cover only that duration, or extent or activities, which may validly and
enforceably be covered. The parties acknowledge the uncertainty of the law in
this respect and expressly stipulate that this Agreement shall be given the
construction that renders its provisions valid and enforceable to the maximum
extent (not exceeding its express terms) possible under applicable law.
8.10 NOTICE.
A. All notices or other communications required or permitted
by this Agreement shall be in writing and shall be deemed to have been duly
received (i) if given by telecopier, when they have been transmitted and the
appropriate telephonic confirmation have been received if transmitted on a
business day and during normal business hours of the recipient, and otherwise on
the next business day following transmission, and (ii) if given by certified or
registered mail, return receipt requested, postage prepaid, upon actual delivery
or refusal of delivery as evidenced by the return receipt, and (iii) if given by
courier or other means, when received or personally delivered (or when delivery
is refused, if applicable), and, in any such case, addressed as follows:
(1) if to the Consultant to,
John T. Kernan
560 San Gorgonio Street
San Diego, California 92106
-9-
(2) if to the Company,
PLATO Learning, Inc.
10801 Nesbit Avenue South
Bloomington, Minnesota 55437
Attention: Chief Executive Officer
B. Either party may from time to time change its address for
the purpose of notices to that party by a similar notice specifying a new
address, but no such change shall be deemed to have been given until it is
actually received by the party sought to be charged with its contents.
8.11 THE CONSULTANT ACKNOWLEDGMENT. The Consultant hereby acknowledges
that (a) the Company has advised him to consult with an attorney prior to the
execution of this Agreement, (b) he has read this Agreement, (c) he fully
understands the terms of this Agreement, (d) he has executed this Agreement
voluntarily and without coercion, whether express or implied and (e) this
Agreement shall not be effective until the Effective Time of the Merger.
[signature page follows]
-10-
The parties hereby execute this Consulting Agreement on the day and year first
written above.
PLATO LEARNING, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
CONSULTANT:
--------------------------------
John T. Kernan