Employment Agreement - CBT Group PLC and Gregory M. Priest
EMPLOYMENT AGREEMENT
This Agreement among Gregory M. Priest (the "Executive") and CBT Group
PLC, a public company limited by shares formed under the laws of the Republic of
Ireland ("CBT Group") and its wholly-owned subsidiary, CBT Systems USA, Ltd., a
Delaware corporation ("CBT USA") is entered into as of January 2, 1996 (the
"Effective Date"). For purposes of this Agreement, the term "Company" shall be
used to refer to both CBT Group and CBT USA.
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 Vice
---------------------
President, Finance, Chief Financial Officer and General Counsel of the Company
effective as of January 2, 1996, reporting to the Chief Executive Officer of CBT
Group (the "CEO"), and assuming and discharging such responsibilities as are
mutually agreed upon by the Executive and the CEO commensurate with such office
and position. The Executive shall perform faithfully the executive duties
assigned to him to the best of his ability. After the Executive commences
employment with the Company but prior to June 1, 1996, the Executive shall be
nominated to serve as a director of the Company, and the Executive shall serve
in such capacity without additional compensation; provided, however, that the
Executive agrees, if so requested by the Board of Directors, to resign from the
Board of Directors of the Company in the event the Board of Directors of CBT
Group (the "Board") is restructured such that no members of management other
than the CEO are members of the Board.
2. Base Salary. In consideration of the Executive's services, the
-----------
Executive shall be paid a minimum base salary at the rate of $125,000 per year
during the period of employment, to be paid in installments in accordance with
the Company's standard payroll practices. This base compensation 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.
The base salary shall not be reduced.
3. Bonus.
-----
(a) Annual Bonus. In addition to base salary, the Executive shall
------------
participate in an annual bonus program beginning with the current fiscal year
under which the Executive shall be eligible to earn a minimum scheduled bonus of
$100,000 based upon satisfaction of certain CBT Group performance goals. The
minimum scheduled bonus shall be reviewed for increases at least annually by the
Board. The minimum annual bonus as may be increased from time to time as
provided herein shall not be reduced. To the extent a bonus accrues for a
fiscal year (as provided herein), it shall be paid to the Executive by January
31 of the year following the year to which the bonus relates. Bonus for a
fiscal year shall accrue as follows: each quarter, 1/16th of scheduled bonus
accrues if CBT Group's quarterly revenue plan (as approved by the Board, or if
no such approval is obtained, as approved by the CEO) is met and 1/16th of
scheduled bonus accrues if CBT Group's quarterly earnings per share plan (as
approved by the Board, or if no such approval is obtained, as approved by the
CEO) is met (not including extraordinary charges related to any acquisition).
At year-end, one-quarter of scheduled bonus
<PAGE>
accrues if CBT Group's annual revenue plan (as approved by the Board, or if no
such approval is obtained, as approved by the CEO) is met and one-quarter of
scheduled bonus accrues if CBT Group's annual earnings per share plan (as
approved by the Board, or if no such approval is obtained, as approved by the
CEO) is met (not including extraordinary charges related to any acquisition).
Notwithstanding the foregoing, the minimum bonus, net after-tax cash to the
Executive, amount payable to the Executive with respect to any fiscal year of
CBT Group during the period of employment shall be $30,000, provided the
Executive is employed by the Company as of September 30 of such fiscal year.
(b) Additional Bonus. The Executive shall also be entitled to receive
----------------
additional bonus amounts with respect to any fiscal year of CBT Group in which
CBT Group's high-end earnings per share plan (as approved by the Board, or if no
such approval is obtained, as approved by the CEO) is met (not including
extraordinary charges related to any acquisition). The amount of the additional
bonus opportunity shall be at least $25,000 per year, provided that it shall not
be less than any similar bonus paid to any other employee of CBT Group other
than the CEO.
(c) Termination of Employment. With respect to any fiscal year in
-------------------------
which the Executive is employed by the Company for only a part of such fiscal
year (other than as a result of a termination for Cause (as defined in paragraph
6(b) below)), the minimum amount of the scheduled bonus payable to the Executive
with respect to such fiscal year shall be (the greater of (i) the amount
determined by application of Section 3(a) above, or (ii) all quarterly bonuses
accrued while the Executive was employed by the Company. Subject to the
previous sentence, if the Executive's employment terminates (other than for
Cause) before September 30 of such fiscal year, only the quarterly bonus
accruals that accrued prior to termination of employment shall be payable with
respect to such fiscal year. If the Executive's employment terminates (other
than for Cause) on or after September 30 of such fiscal year, all of the
quarterly bonus accruals that accrued prior to termination of employment shall
be payable with respect to such fiscal year, and 100% of the scheduled annual
bonus with respect to the year in which employment is terminated shall also be
payable. Any bonus that becomes payable to the Executive pursuant to this
paragraph 3(c) shall be paid to the Executive within thirty (30) days of the
date of the Executive's termination of employment. In the event the Company
terminates the Executive's employment for Cause, no bonus shall be paid or
payable to the Executive for the fiscal year in which such termination occurs.
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 agreements with the Executive at the time of termination.
5. Benefits; Expenses. The Executive shall be permitted, to the extent
------------------
eligible, to participate in any group medical, dental, life insurance and
disability insurance plans, or similar benefit plans of the Company that are
available to other comparable executives. Participation in any such plan shall
be consistent with the Executive's rate of compensation to the extent that
compensation is a determinative factor with respect to coverage under any such
plan. The Executive shall also be entitled to four weeks' annual vacation.
Without limiting the generality of the foregoing, the Executive shall receive,
at the Company's expense and at no cost to the Executive (other than any
applicable taxes), life insurance with a death benefit in an amount that is not
less than four times the sum of Executive's base salary and scheduled bonus,
payable to
2
<PAGE>
the Executive's designated beneficiary. 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. Termination.
-----------
(a) Options/Severance. If, at any time prior to November 2, 1996, the
-----------------
Executive's employment with the Company is Involuntarily Terminated by the
Company other than for Cause (as those terms are defined in paragraphs 6(b) and
(c) below) or the Company breaches any of the material terms of this Agreement
(either of the foregoing, an "Event"), the Company shall retain the Executive as
a part-time employee or consultant, and the Executive shall continue to vest in
the options granted pursuant to the option agreement dated November 1, 1995 (the
"Option") until 25% of the Option shall have vested. In addition, and without
limiting the generality of the foregoing, if at any time after the Effective
Date an Event shall occur, the Executive shall be retained as a part-time
employee or consultant, and the Option shall continue to vest as set forth
herein. Such retention and continuation of Option vesting shall continue until
a sufficient number of Options (over and above Options actually vested prior to
the Event) have been vested such that the Target Realizable Value (as defined in
paragraph 6(h) below) has been attained. At such time as a sufficient number of
Options have vested to provide such Target Realizable Value to the Executive,
the part-time employment or consulting arrangement shall terminate, and
additional vesting of Options shall cease. In the event that, as of any monthly
Option vesting date following an Event, the Realizable Value (as defined in
paragraph 6(f) below) attributable to the portion of the Option that vested on
such date does not at least equal Target Monthly Compensation (as defined in
paragraph 6(g) below), the Company shall make a cash payment to the Executive in
an amount so as to cause the combination of the Realizable Value attributable to
such continued vesting and such cash payment to equal Target Monthly
Compensation. Any such cash payment shall count toward the Target Realizable
Value and the Company's obligation to continue vesting of Executive's Option
after any such cash payment shall be reduced by the amount of any such cash
payment. The Executive may take other employment during the period that Options
are continuing to vest and cash is being paid, and any such other employment
shall not reduce such continuation of Option vesting and cash payments as set
forth herein. In addition, if prior to repayment in full of any loans made by
the Company to the Executive, (i) the Executive dies, (ii) the Company
terminates the Executive's employment as a result of the Executive's Disability,
or (iii) an Event occurs, then all remaining amounts due under any such loans
shall be forgiven.
(b) Termination for Cause; Voluntary Resignation. In the event that
--------------------------------------------
(i) the Company terminates the Executive's employment for "Cause" (as defined
herein), or (ii) the Executive terminates his employment with the Company
voluntarily, then the Executive shall not receive any compensation or benefits
under this Agreement on account of such termination. The Executive's rights
under the Company's benefit plans upon such a termination shall be determined
under the provisions of those plans. For purposes of this Agreement,
termination for "Cause" shall mean (i) a final judicial determination that the
Executive has willfully and knowingly committed any act of personal dishonesty
in connection with his responsibilities as an employee and that such act is
intended to result in substantial personal enrichment of the Borrower at the
direct expense of either CBT Group or CBT USA, (ii) the Executive's conviction
of any crime based upon any willful act directly and substantially involving the
property or business of either CBT Group or CBT USA or (iii) a final judicial
determination that the Executive has willfully and knowingly committed an act of
gross and intentional misconduct
3
<PAGE>
and that such misconduct is demonstrably and significantly injurious to CBT
Group and CBT USA considered as a single enterprise. No act will be considered
"willful" for purposes of this paragraph unless it is committed in bad faith and
with actual knowledge that the act was not in the best interests of the Company.
For purposes of the foregoing, forgiveness of amounts due pursuant to paragraph
6(a) shall not constitute a waiver of the Company's right to seek a judicial
determination as contemplated in clauses (i) and (iii) above or to otherwise
enforce its rights in connection with a termination for Cause.
(c) Involuntary Termination. For purposes of this Agreement, the term
-----------------------
"Involuntary Termination" 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)
a reduction by the Company in the base salary of the Executive as in effect
immediately prior to such reduction; (iv) a material 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) the relocation of the Executive
to a facility or a location more than twenty (20) miles from the Executive's
then-present work location, without the Executive's express written consent;
(vi) any purported termination of the Executive by the Company other than for
Cause or by reason of the Executive's Disability; (vii) the failure of the
Company to obtain the assumption of this Agreement by any successor as required
by paragraph 9 below; or (viii) any material breach by the Company of any term
of this Agreement.
(d) Death. The Executive's employment shall terminate in the event of
-----
his death. Except as provided under paragraph 6(a) and except for such
obligations that have accrued prior to the Executive's death, the Company shall
have no obligation to pay or provide any compensation or benefits under this
Agreement on account of the Executive's death. 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.
(e) Disability. The Company may terminate the Executive's employment
----------
for Disability by giving the Executive thirty (30) days' advance notice in
writing. 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. In the event that the Executive resumes the performance of
substantially all of his duties hereunder before the termination of his
employment under this paragraph (d) becomes effective, the notice of termination
shall automatically be deemed to have been revoked. Except as provided under
paragraph 6(a) and 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.
(f) Realizable Value. The term "Realizable Value" means the
----------------
difference between the aggregate fair market value of the Executive's vested
Option shares and the aggregate exercise price thereof, but only with respect to
shares that are (or, upon exercise would be) freely tradable by the Executive.
4
<PAGE>
(g) Target Monthly Compensation. "Target Monthly Compensation" means,
---------------------------
with respect to an Event (as defined in paragraph 6(a)), the sum of (i) one
month of the Executive's base salary as in effect immediately preceding the
Event (without giving effect to any reduction in base salary prior to the
Event), plus (ii) 5.42% of scheduled bonus (annual and all four quarterly) for
the fiscal year in which the Event occurs.
(h) Target Realizable Value. The term "Target Realizable Value" means
-----------------------
a dollar denominated value used to determine the Executive's severance benefit
under paragraph 6(a) upon the occurrence of an Event (as defined in paragraph
6(a)). The Target Realizable Value is calculated differently depending on the
date of the Event and the Executive's base salary and scheduled annual bonus at
that time as follows: (i) in the case of an Event occurring before November 2,
1996, the Target Realizable Value shall be an amount equal to the Executive's
annual base salary in effect immediately preceding the Event (without giving
effect to any reduction in base salary prior to the Event) plus sixty-five
percent (65%) of the scheduled bonus (annual and all four quarterly) for the
fiscal year in which the Event occurs, calculated on the basis of a period of
time equal to one year less the number of months from January 2, 1996 to the
date of the Event, and (ii) in the case of an Event occurring on or after
November 2, 1996, the Target Realizable Value shall be an amount equal to three
months of base salary as in effect immediately preceding the Event (without
giving effect to any reduction in base salary prior to the Event) plus thirty-
two and one-half percent (32.5%) of the scheduled bonus (annual and all four
quarterly) for the fiscal year in which the Event occurs.
7. Covenant Not To Solicit.
-----------------------
Beginning with the Executive's termination of employment with the
Company as described in paragraph 7(b) and for a period of one (1) year
thereafter, the Executive agrees that he will not
(i) solicit, encourage, or take any other action which is intended to
induce any other executive 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 executive of the Company.
The foregoing shall not prohibit the Executive or any entity with
which the Executive may be affiliated from hiring a former executive of the
Company, provided that such hiring results exclusively from such executive's
affirmative response to a general recruitment effort carried out through a
public solicitation or a general solicitation.
8. 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.
9. 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 CBT Group, 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 same
extent that the Company would be required to perform if no such succession or
assignment had taken place. In such event, the term CBT Group as used in this
Agreement, shall mean CBT Group 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.
10. 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
5
<PAGE>
other party, provided, however, that the Executive may disclose this Agreement
to his attorney, financial planner and tax advisor if such persons agree to keep
the terms hereof confidential.
11. 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 by the American Arbitration Association in San Francisco County,
California; provided, however, that this arbitration provision shall not
preclude the Company from seeking a judicial determination of Cause as provided
in paragraph 6(b) or from seeking injunctive relief from any court having
jurisdiction with respect to any disputes or claims relating to or arising out
of the misuse or misappropriation of the Company's trade secrets or confidential
and proprietary information. All costs and expenses of arbitration or
litigation, including but not limited to attorneys fees and other costs
reasonably incurred by the Executive, shall be paid by the party who shall not
have prevailed in the arbitration all as conclusively determined by the
arbitrators. Judgment may be entered on the award of the arbitration in any
court having jurisdiction.
12. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California applicable to agreements
made and to be performed entirely within such state.
13. 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.
14. Voluntary Execution; Conflict Waiver. The Executive has been advised
------------------------------------
to obtain independent legal counsel regarding this Agreement. The Executive is
signing this Agreement knowingly and voluntarily. The Company and the Executive
acknowledge that Wilson, Sonsini, Goodrich & Rosati ("WSGR") has acted as
counsel to the Company in negotiating this Agreement and will continue to serve
as the Company's general counsel in the future, acknowledge that each has
received full disclosure of any potential conflict of interest which may result
from such representation, and knowingly and voluntarily waive any such conflict
of interest.
15. 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.
16. 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 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.
6
<PAGE>
17. 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
proceeding or succeeding breach of the same or any other provision of this
Agreement.
18. Counterparts. This Agreement may be executed in counterparts, which
------------
together will constitute one instrument.
EXECUTIVE CBT GROUP PLC
_________________________________ By:___________________________________
Gregory M. Priest
Title:________________________________
CBT SYSTEMS USA, LTD.
By:___________________________________
Title:________________________________
7
<PAGE>
Consent of Spouse: I hereby consent to this Agreement for purposes of any
-----------------
community property interest I may have in the foregoing arrangements. I have
had the opportunity to seek independent counsel with regard to this consent and
knowingly and voluntarily waive the right to such counsel.
______________________________________
Signature of Spouse
______________________________________
Printed Name of Spouse
______________________________________
Date Signed
8