Exhibit 10.31.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is made as of June 2, 2003 by and
between Exult, Inc. (the “Company”), and John A. Adams (“Executive”).

 

The Company desires to employ Executive, and Executive desires to be employed by
the Company, on the terms set forth herein. Therefore, the Company and Executive
hereby agree as follows:

 

1. Duties and Responsibilities.

 

(a) Title and Reporting. Executive shall serve as the Company’s Corporate
Executive Vice President and Chief Financial Officer and shall report to and
perform the duties and responsibilities assigned to Executive by the Company’s
Chief Executive Officer (the “CEO”), which duties and responsibilities shall be
consistent with Executive’s position and titles.

 

(b) Duties. Executive’s duties as Corporate Executive Vice President and Chief
Financial Officer will include serving on the Company’s executive management
committee and management of and responsibility for the Company’s finances,
accounting and reporting, treasury, taxes, investor relations, and real estate
facilities, and review, structuring and execution of the financial aspects of
the Company’s mergers & acquisitions activity. The CEO, or such other person as
may be designated by the CEO, may also assign other duties and responsibilities
to Executive that are reasonably related to the foregoing.

 

(c) Location. Executive shall be based at the Company’s office located at the
Corporate Headquarters at Irvine, California, but Executive shall be required to
travel to other geographic locations as is reasonable and appropriate in
connection with the performance of his executive duties.

 

2. Cash Compensation.

 

(a) Base Salary. Executive’s initial base salary shall be $425,000 per year
payable in accordance with the Company’s standard payroll policies. Executive’s
base salary shall be subject to annual review by the Company, and may be
increased or decreased in the Company’s discretion, provided that the Company
will not decrease Executive’s base salary more than once in any 365-day period.
Decrease of Executive’s base salary as provided in the preceding sentence will
not constitute a breach by the Company of this Agreement, but may trigger
certain rights of Executive pursuant to a separate written severance arrangement
with the Company.

 

(b) Incentive Compensation. Executive will be eligible to participate in
incentive compensation programs established by the Company from time to time for
its executive officers. The terms of any such incentive compensation program and
Executive’s participation therein will be subject to the discretion of the
Company’s Board of Directors. Any bonus is intended to reward contribution to
the Company’s performance over an entire fiscal year, and (unless other
commitments are made in writing to Executive) consequently will be paid only if
Executive is employed and in good standing at the time of incentive compensation

--------------------------------------------------------------------------------

payments, which generally occurs within 45 days after the close of the Company’s
fiscal year. Incentive compensation determinations will be made in the Company’s
sole discretion. Executive’s basic annual incentive compensation target is 50%
of base salary, but no particular level of incentive compensation is guaranteed.
It is understood that no cash incentive payment is anticipated to be paid to
executive officers of the Company, including Executive, for 2003.

 

(c) Withholding. The Company may deduct and withhold any and all applicable
federal, state and local income and employment withholding taxes and any other
amounts required to be deducted or withheld by the Company under applicable
statutes, regulations, ordinances or orders from the compensation payable to
Executive in connection with Executive’s employment.

 

3. Equity Compensation.

 

(a) Stock Options. Upon commencement of Executive’s employment, Exult will issue
to Executive (i) options to purchase 750,000 shares of Exult common stock (the
“Original Options”), and (ii) options to purchase an additional 70,883 shares of
Exult common stock (the “Additional Options”). Executive will be eligible to
participate in future stock option grant programs, but no further stock option
grants are guaranteed.

 

(b) Basic Option Terms. The Original Options and the Additional Options will
have an exercise price equal to the fair market value of Exult’s common stock on
the date of grant, as determined according to Exult’s 2000 Equity Incentive
Plan. The Original Options will vest and become exercisable, subject to
continued employment, with respect to 25% of the underlying shares on the first
anniversary of the date of grant and with respect to the remaining 75% of the
underlying shares in 36 equal monthly installments thereafter. The Additional
Options will vest in the same manner as the Original Options, except that
vesting will accelerate, and the Additional Options will become exercisable (i)
with respect to 40% of the unvested underlying shares as of December 31, 2003 if
the Company’s 2003 revenue is equal to or in excess of the revenue reflected in
the Company’s 2003 Budget as originally approved by the Company’s board of
directors; and (ii) with respect to 60% of the unvested underlying shares as of
December 31, 2003 if the Company’s 2003 net income is equal to or in excess of
the net income reflected in the Company’s 2003 Budget as originally approved by
the Company’s board of directors. In case of partial acceleration, the remaining
unaccelerated shares will be subject to vesting in equal installments over 36
months as described above. For purposes of these acceleration provisions, the
2003 Budget as originally approved by the Company’s board of directors for the
2003 year will only be modified to take into account any direct and incremental
expenses incurred as a result of an acquisition of a business that occurs during
the 2003 year and results of operations of the acquired business; that modified
Budget will govern for purposes of any acceleration determination. All stock
options granted to Executive are subject to Exult’s applicable stock option plan
and any terms or conditions imposed by Exult in connection with the options.

 

(c) Restricted Stock. Upon commencement of Executive’s employment, Exult will
issue to Executive 150,000 shares of the Exult common stock, subject to
restrictions on transfer pending vesting. Terms and conditions of the restricted
stock are set forth in a separate Restricted Stock Agreement of even date
herewith. Executive will be eligible to

 

2

--------------------------------------------------------------------------------

participate in future restricted stock grant programs, but no further restricted
stock grants are guaranteed.

 

(d) No Representations. All stock options and restricted stock granted to
Executive are governed by Exult’s Equity Incentive Plan (or its successor or
replacement plan) and any terms or conditions imposed by Exult in connection
with the options or restricted stock, as applicable, and Executive’s acceptance
of stock options or restricted stock, as applicable, constitutes Executive’s
agreement that such stock options and restricted stock, and Executive’s rights
and obligations thereunder, will be governed thereby. No representations or
promises are made to Executive regarding the value of Exult stock or options, or
Exult’s business prospects. A notice of option grant, a restricted stock
agreement, a copy of the option plan, and a prospectus will be made available to
Executive in connection with grants of stock options and restricted stock.
Additional information about investment in Exult stock, including financial
information and related risks, is contained in Exult’s Securities and Exchange
Commission reports on Form 10-Q and Form 10-K. The equity plan and prospectus
and Exult’s recent SEC reports are available from Exult’s HR department for
Executive’s review at any time before Executive’s acceptance of employment or at
any time during Executive’s employment. Executive understands that Exult does
not provide tax advice and acknowledges Exult’s recommendation that Executive
consult with a tax specialist regarding Executive’s employment compensation.
Sale or other transfer of Exult stock may be limited by and subject to Exult
policies as well as applicable securities laws.

 

4. Expense Reimbursement; Indemnification.

 

(a) Business Expenses. In addition to the compensation specified in Section 2,
Executive shall be entitled, in accordance with the Company’s reimbursement
policies in effect from time to time, to receive reimbursement from the Company
for reasonable business expenses incurred by Executive in the performance of
Executive’s duties hereunder, provided Executive furnishes the Company with
vouchers, receipts and other details of such expenses in the form required by
the Company sufficient to substantiate a deduction for such business expenses
under all applicable rules and regulations of federal and state taxing
authorities.

 

(b) Relocation Expenses. The Company will reimburse Executive’s documented
out-of-pocket expenses incurred in moving his family and household goods from
New Jersey to Orange County, California. In addition, the Company will pay to
Executive, in addition to his salary and other compensation to which he is
entitled, a monthly living allowance, pro-rated for partial months, until the
earlier of the first anniversary of the date of this Agreement or the date of
sale of Executive’s house in New Jersey. The target amount of the living
allowance will be $5,000 per month, subject to adjustment to reflect the cost to
executive of suitable executive level rental housing for himself and his family.
Adjustment will be determined by agreement of executive and the CEO after
executive has had an opportunity to locate rental housing, and will be
retroactive to the date hereof. In addition, the Company will reimburse to
executive the cost to executive of any real estate agent’s sales commission paid
by executive in connection with the sale of his house in New Jersey within 365
days of the date hereof. These amounts will include a tax “gross-up” to the
extent necessary to neutralize the effects of income tax on reimbursement of
relocation expenses. Executive will use reasonable good faith efforts to sell
his house in New Jersey as soon as practicable without incurring a loss

 

3

--------------------------------------------------------------------------------

on his investment in the house, taking into account sales commissions and other
costs of sale borne by Executive.

 

(c) Director’s and Officer’s Coverage; Indemnification. Simultaneously with the
execution of this Agreement, the Executive shall enter into a separate
indemnification agreement with the Company (the “Indemnification Agreement”),
and at all times during the Executive’s employment, the Company shall include
Executive as an insured under director’s and officer’s liability insurance
policies as may from time to time be maintained by the Company, to the same
extent that other executive officers are included as insureds thereunder.

 

5. Fringe Benefits.

 

(a) Benefit Programs. Executive shall, throughout the period of Executive’s
employment with the Company (the “Employment Period”), be eligible to
participate in all executive life and disability insurance programs, group term
life insurance plans, group health plans, accidental death and dismemberment
plans and disability programs and other executive perquisites that are made
available to the Company’s executive officers and for which Executive qualifies.

 

(b) Vacation. Executive shall earn vacation time during the Employment Period at
the rate of four (4) weeks per year. Vacation shall accrue and be taken pursuant
to the Company’s vacation benefit policy set forth in the Company’s Employee
Handbook. Executive also shall be eligible to participate in any “floating
holiday” or “personal day off” programs offered by the Company. It is understood
that Executive will be on vacation for approximately 3.5 weeks in 2003 due to
previous arrangements, and to accommodate this Executive may during the first
year of employment take up to five weeks of paid vacation before it is accrued,
provided that any such pre-accrual vacation will constitute an obligation of
Executive that will offset vacation as it accrues.

 

(c) Death Benefit. If Executive dies during the Employment Period other than as
a result of suicide, Executive’s legal representatives shall be entitled to
receive an amount equal to one year of Executive’s annual salary (but in no case
in excess of $425,000), payable in equal installments in accordance with
Company’s standard payroll schedule (subject to all applicable withholdings
required by law), but reduced (not below 0) by the aggregate amount of the
proceeds of any death benefits paid to Executive’s survivors under policies of
life insurance for which the Company paid all premiums as part of the Company’s
death benefit arrangements.

 

(d) Disability Benefit. If during the Employment Period Executive suffers
Permanent Disability as defined at the time of Permanent Disability in the
Company’s 2000 Equity Incentive Plan, or a successor plan thereto other than as
a result of attempted suicide, the Company may, without any liability under this
agreement and by written notice to Executive, at any time thereafter suspend or
terminate the Employment Period without any severance obligation, except that
Executive shall be entitled to continue to receive payments of his salary, as in
effect at the time of the incapacitation or disability leading to Permanent
Disability, in accordance with the Company’s regular payroll schedule for a
period 180 days after such suspension or termination, provided that such
obligation will be reduced (but not below 0) by the sum of (A) salary paid in
excess of accrued vacation during periods that Executive did not work due to the
incapacitation or disability leading to Permanent Disability, plus (B) the
aggregate

 

4

--------------------------------------------------------------------------------

amount of any monthly disability benefits paid to Executive under policies of
disability insurance for which the Company paid all the premiums as part of the
Company disability benefit arrangements.

 

6. Employment Attributes.

 

(a) At-Will. Executive’s employment with the Company is at-will and not for a
specific term and may be terminated by either the Company or Executive at any
time, for any reason without cause or advance notice.

 

(b) Changes. The Company may change Executive’s responsibilities, duties, title,
and reporting relationships at any time for any reason. Such changes will not
constitute a breach by the Company of this Agreement, but may trigger certain
rights of Executive pursuant to a separate written severance arrangement with
the Company.

 

(c) No Severance. Upon termination of Executive’s employment for any reason, the
Company will have no severance obligation under this Agreement other than for
payment of accrued but unpaid salary, vacation and expenses. Executive may,
however, be entitled to severance benefits in accordance with a separate written
severance arrangement with the Company.

 

7. Conditions to Employment. Notwithstanding execution and delivery of this
Agreement or any other document related to Executive’s employment or
compensation, Executive’s employment with the Company and rights under this
Agreement or such other documents are contingent upon satisfaction of the
following conditions:

 

(a) Proprietary Information and Inventions. Executive must execute and deliver
the Company’s standard Confidential Information and Inventions Agreement.
Executive’s obligations pursuant to the Confidential Information and Inventions
Agreement will survive termination of Executive’s employment with the Company.

 

(b) Eligibility. Executive must provide to the Company the documents listed on
the standard Employment Eligibility (I-9) Form, and demonstrate to the Company’s
satisfaction Executive’s legal right to work.

 

(c) Prior Employment Cessation. Executive must have lawfully and effectively
ceased employment with AT&T or its affiliates, and any employment or consulting
relationship with any other third party.

 

8. Representations.

 

In order to induce the Company to hire him as set forth in this Agreement,
Executive represents, warrants and undertakes to the Company as follows:

 

(a) Executive has been fully advised to the extent Executive desires by counsel
independent of the Company of his obligations under and the terms of all
agreements and other obligations applicable to his relationship with all prior
employers or parties engaging Executive’s services and their successors
(collectively, the “Prior Employers”). Executive does

 

5

--------------------------------------------------------------------------------

and will rely upon his own judgment and the advice he receives from counsel
independent of the Company in any action he takes (or decides not to take) in
relation to his employment with Exult and with respect to his obligations to
Prior Employers, but Executive will keep the Company fully informed of the
nature and extent of his obligations to all Prior Employers at any time and any
steps Executive proposes to take to effect his disengagement from all Prior
Employers.

 

(b) Executive has been fully advised by counsel independent of the Company of
his obligations under and the terms of this Agreement and the other documents
referenced in Section 10(c).

 

(c) Executive is under no contractual restriction or other restrictions or
obligations that are inconsistent with the execution of this Agreement or the
performance of Executive’s duties and covenants hereunder, and will not breach
any obligations to any Prior Employer.

 

(d) Executive is under no physical or mental impairment that would interfere
with Executive’s ability to perform his duties hereunder.

 

(e) Executive has full right and power to enter into this Agreement and perform
his duties and covenants hereunder without any consent from any third party.

 

(f) Executive’s performance of his duties and covenants hereunder will not
infringe the rights, including intellectual property rights, of any third party.

 

(g) All information provided by Executive to the Company is true, correct and
complete.

 

9. Certain Covenants.

 

(a) Focus on Company. During the Employment Period, Executive shall devote his
full business time and energy solely and exclusively to the performance of his
duties to the Company, and shall render his services under this Agreement fully,
faithfully, diligently, and to the best of his ability. During the Employment
Period, Executive shall not directly or indirectly provide services of any kind
or character to or through any person, firm or other entity except the Company,
unless otherwise authorized in writing by the CEO. However, Executive shall have
the right to perform such incidental services as are necessary in connection
with (a) Executive’s personal passive investments, but only if Executive is not
obligated or required to (and shall not in fact) devote any managerial efforts
which interfere with Executive’s services to the Company, or (b) Executive’s
charitable or community activities, or participation in trade or professional
organizations, but only if such incidental services do not interfere with
Executive’s services to the Company.

 

(b) Prior Employers. Executive will not, in connection with his employment with
the Company, breach any obligation to any Prior Employer or other third party,
including without limitation by improperly using or disclosing any confidential
information, proprietary information or trade secrets belonging to any Prior
Employer, or bringing onto the premises of the Company or in any other way using
or referring to any unpublished document or any property belonging to any Prior
Employer unless consented to in writing by such Prior

 

6

--------------------------------------------------------------------------------

Employer, and will return all property and confidential information belonging to
any Prior Employer. This is in addition to all obligations of Executive under
the Confidential Information and Inventions Agreement.

 

(c) Non-Solicitation. During the Employment Period and for one (1) year
following termination of Executive’s employment, Executive shall not encourage
or solicit any of the Company’s employees to leave the Company’s employ for any
reason or interfere in any other manner with employment relationships at the
time existing between the Company and its employees; or solicit any client of
the Company, induce any of the Company’s clients to terminate its existing
business relationship with the Company or interfere in any other manner with any
existing business relationship between the Company and any client or other third
party. Executive acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss that may be incurred by reason of
his breach of the foregoing restrictive covenants. Accordingly, in the event of
any such breach, the Company shall, in addition to any remedies available to the
Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding Executive from continuing such breach.

 

10. General

 

(a) Successors and Assigns. This Agreement is personal in its nature and may not
be assigned by either party, whether by operation of law or otherwise, without
the prior written consent of the other party, except that any right, title or
interest of the Company arising out of this Agreement may be assigned to any
corporation or entity controlling, controlled by, or under common control with
the Company, or to any successor of the Company or any entity acquiring all or
substantially all of the assets of the Company; provided, however, that no such
assignment shall relieve the Company of its obligations hereunder without the
express written consent of the Executive.

 

(b) Notices. Any notices, demands or other communications required or desired to
be given by any party shall be in writing and shall be validly given to another
party if served either personally or if deposited in the United States mail,
certified or registered, postage prepaid, return receipt requested. If such
notice, demand or other communication shall be served personally, service shall
be conclusively deemed made at the time of such personal service. If such
notice, demand or other communication is given by mail, such notice shall be
conclusively deemed given forty-eight (48) hours after the deposit thereof in
the United States mail addressed to the party to whom such notice, demand or
other communication is to be given as hereinafter set forth:

 

   

To the Company:

   Exult, Inc.          121 Innovation Drive, Suite 200          Irvine,
California 92612          Attention: Chief Executive Officer    

With a copy to:

   General Counsel    

To Executive:

   At his address of record as maintained in the Company’s employment files

 

7

--------------------------------------------------------------------------------

Any party may change its address for the purpose of receiving notices, demands
and other communications by providing written notice to the other party in the
manner described in this paragraph.

 

(c) Entire Agreement. Except as this Agreement may expressly provide otherwise,
this Agreement, any separate document pursuant to which the Company undertakes
severance obligations to Executive, the Company’s Confidential Information and
Inventions Agreement, the Indemnification Agreement, and the separate
documentation related to Executive’s stock options and restricted stock together
constitute the entire agreement and understanding of the Company and Executive
with respect to the terms and conditions of Executive’s employment with the
Company and the provision by the Company of any consideration or benefits, and
supersede all prior and contemporaneous written or verbal agreements and
understandings between Executive and the Company relating to such subject
matter. This Agreement may only be amended by written instrument signed by
Executive and an authorized officer of the Company. Any and all prior
agreements, understandings or representations relating to the Executive’s
employment with the Company are terminated and cancelled in their entirety and
are of no further force or effect.

 

(d) Governing Law; Severability. This Agreement will be construed and
interpreted under the laws of the State of California applicable to agreements
executed and to be wholly performed within the State of California. If any
provision of this Agreement as applied to any party or to any circumstance is
adjudged by a court of competent jurisdiction to be void or unenforceable for
any reason, the invalidity of that provision shall in no way affect (to the
maximum extent permissible by law) the application of such provision under
circumstances different from those adjudicated by the court, the application of
any other provision of this Agreement, or the enforceability or invalidity of
this Agreement as a whole. If any provision of this Agreement becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction by reason of the
scope, extent or duration of its coverage, then such provision shall be deemed
amended to the extent necessary to conform to applicable law so as to be valid
and enforceable or, if such provision cannot be so amended without materially
altering the intention of the parties, then such provision will be stricken and
the remainder of this Agreement shall continue in full force and effect.

 

(e) Remedies. All rights and remedies provided pursuant to this Agreement or by
law shall be cumulative, and no such right or remedy shall be exclusive of any
other. A party may pursue any one or more rights or remedies hereunder or may
seek damages or specific performance in the event of another party’s breach
hereunder or may pursue any other remedy by law or equity, whether or not stated
in this Agreement.

 

(f) Arbitration. Any and all disputes and claims between Executive and the
Company that arise out of Executive’s employment with the Company or termination
thereof shall be resolved through final and binding arbitration. This shall
include, without limitation, disputes relating to this Agreement or any of the
other documents referred to in Section 10(c), claims for wrongful termination or
breach of contract or breach of the covenant of good faith and fair dealing,
public policy violation, harassment, discrimination, or other claims under any
federal, state or local law or regulation now in existence or hereinafter
enacted and as amended from time to time. The only claims not covered by this
Agreement are claims for benefits under the workers’ compensation or
unemployment insurance laws, which will be resolved pursuant to

 

8

--------------------------------------------------------------------------------

those laws, and any claims that are deemed by a court of competent jurisdiction
not to be subject to mandatory arbitration under applicable law. Any demand for
arbitration must be made within 365 days of the date on which the dispute first
arose (unless a longer period of time is required by law), or it will be deemed
waived by both parties. Binding arbitration will be conducted in Orange County,
California in accordance with the rules and regulations of the American
Arbitration Association. Executive understands and agrees that the arbitration
shall be instead of any civil litigation and that this means that Executive is
waiving his right to a jury trial as to such claims. The parties further
understand and agree that the arbitrator’s decision shall be final and binding
to the fullest extent permitted by law and enforceable by any court having
jurisdiction. The Company shall pay the arbitrator’s compensation and any fees
for the arbitration, unless the arbitrator directs otherwise in the award, or
unless the law where the arbitration occurs provides otherwise. The prevailing
party in any arbitration conducted pursuant to this Section 10(f), and any
appeal therefrom or related thereto, or any litigation between Executive and the
Company related to Executive’s employment or termination thereof that occurs
notwithstanding this arbitration provision (all of the foregoing being referred
to as “Proceedings”), shall be entitled to recover from the non-prevailing party
all reasonable attorneys’ costs and fees incurred by the prevailing party in the
Proceedings. The identity of the prevailing party in any Proceeding will be
determined by the arbitrator or other trier of fact or tribunal in the
Proceeding as the party most nearly achieving the result sought, although the
arbitrator or other trier of fact or tribunal may decide in any Proceeding that
there is no prevailing party if, on the basis of all of the facts and
circumstances, the interests of justice so require. In addition, the Company
shall propose a reasonable set of rules to guide any Proceedings. Such rules
shall be designed to lead to a prompt and just result without undue delay or
expense, but will not be unduly prejudicial to either party. If Executive agrees
to such proposed rules and guidelines, the Company will pay on Executive’s
behalf or advance to Executive all of Executive’s reasonable attorneys’ fees and
costs incurred in the Proceedings. Executive’s acceptance of such payments or
advances will constitute Executive’s agreement to reimburse the Company therefor
if the Company is found by the arbitrator or other trier of fact or tribunal to
be the prevailing party in the Proceeding.

 

(g) Waivers; Amendments. The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any later
breach of that provision. This Agreement may be modified only by written
agreement signed by Executive and the Company.

 

(h) Counterparts. This Agreement may be executed in more than one counterpart,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument. Facsimile or photographic copies of
originally signed copies of this Agreement will be deemed to be originals.

 

9

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company and Executive have entered into this Agreement
as of the date first above written.

 

Exult, Inc.

By:

 

 

--------------------------------------------------------------------------------

   

James C. Madden, V

   

President & CEO

         

 

--------------------------------------------------------------------------------

   

John A. Adams

 

10