Exhibit 10.2

 

SUMTOTAL SYSTEMS, INC.

 

KEVIN OAKES SEPARATION, RELEASE AND CONSULTING AGREEMENT

 

This Separation and Consulting Agreement is entered into by and between SumTotal
Systems, Inc. (the “Company”) and Kevin Oakes (“Oakes”) (Oakes and Company may
collectively be referred to as “Parties” or, individually, as “Party”). The
Agreement shall be effective on the eighth date after Oakes signs the Agreement,
assuming the Company has signed the Agreement by that date (the “Effective
Date”).

 

1. Interim Employment and Consulting Engagement. Oakes hereby submits his
resignation as President of the Company and as an employee of the Company,
effective May 31, 2006 (the “Resignation Date”). For the period from the
Effective Date through the Resignation Date, Oakes shall remain the President
and an employee of the Company with all of his current compensation and
benefits, including his restricted stock that will continue to vest in
accordance with the applicable vesting schedules in the restricted stock
agreement entered into with the Company on May 26, 2005 (the “Stock Agreement”),
and attached hereto as Exhibit A. In addition, Oakes shall be entitled to the
bonus payment for the first quarter of fiscal year 2006 under the Company’s 2006
Executive and Management Cash Incentive Plan (“Bonus Plan”), attached hereto as
Exhibit B, on the same terms and conditions as if he had not tendered his
resignation of employment. For the two year period following the Resignation
Date (i.e., June 1, 2006 through May 31, 2008), Oakes shall serve as a
consultant to the Company on the terms set forth in Section 4 of this Agreement
(the “Consulting Term”).

 

2. Board Membership. Oakes shall remain a member of the Board of Directors until
his term expires at the Company’s 2007 annual shareholder meeting.

 

3. Benefits Upon Separation From Employment. Upon the Resignation Date, the
Company shall pay Oakes (a) all base salary accrued through the Resignation
Date, (b) all pay for accrued but unused vacation, if any, and (c) all business
expenses required to reimbursed under the Company’s expense reimbursement
policy. For clarification purposes, Oakes shall not be entitled to any payment
pursuant to the Company’s 2006 Bonus Plan, for the second through the fourth
quarters, nor shall he be entitled to any payment of the MIT portion of the
Bonus Plan for any part of the 2006 year. All vesting on equity compensation
shall cease as of the Resignation Date. Any stock options that vested prior to
the Resignation Date may be exercised or sold pursuant to the applicable option
agreement and Company policy. Except as expressly provided in this Agreement,
Oakes is not entitled to any other payments or benefits, including salary,
severance, bonus, restricted stock vesting.

 

4. Retention Bonus. Oakes and the Company agree that Oakes is resigning his
employment with the Company for “Good Reason”, as defined in the retention bonus
agreement described below, and, therefore, Oakes has triggered the acceleration
of the retention bonus obligation as set forth in the retention bonus agreement
entered into between Oakes and the Company on October 21, 2005 (the “Retention
Bonus Agreement”), attached hereto as Exhibit C. Assuming Oakes has signed the
release as required in the Retention Bonus Agreement, by mutual agreement Oakes
shall receive his retention bonus of $480,000 on January 12, 2007 (“Retention

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Bonus”). Such Retention Bonus shall be subject to the Company’s standard tax and
payroll withholdings.

 

5. Duties and Scope of Consulting Agreement.

 

(a) Positions and Duties. Through the Consulting Term, Oakes will serve as a
consultant to the Company and shall perform such services in his areas of
expertise and as requested by the Company’s Board of Directors. Oakes will
render such business and professional services, in ways and at times as
reasonably requested by the Board of Directors.

 

(b) Obligations. During the Consulting Term, Oakes will devote his business
efforts and time to the Company, and, (a) for the first year of the Consulting
Term, be available to work sixty (60) hours per month, and, (b) for the second
year of the Consulting Term, be available to work forty (40) hours per month.
Oakes may serve on other board of directors and serve in any capacity with any
civic, educational, or charitable organization, provided such services do not
interfere with Oakes’s obligations to Company. Throughout Consulting Term, Oakes
and the Company agree that Oakes may also engage in other employment or
consulting activity without the prior approval of the Company; provided,
however, that if the Oakes is unable to perform the requested duties of the
Board of Directors, Oakes or the Company may terminate this Agreement as set
forth in Section 8 below. Oakes also agrees that he will notify the Company, in
writing, upon accepting any full or part-time employment or consulting activity.
Such notice shall include the identity of the organization, the nature of the
services Oakes is to provide, and whether Oakes will be receiving health care in
connection with providing such services.

 

6. Compensation for Consulting Services.

 

(a) Consulting Fees. Throughout the Consulting Term, the Company will pay Oakes
an annual retainer fee of $100,000 as compensation for his consulting services
(“Consulting Fees”). The annual Consulting Fees will be paid in two equal
installments, every six months, commencing on June 1, 2006. For clarification
purposes, Oakes shall receive a payment of $50,000 on each of the following
dates: June 1, 2006, December 1, 2006, June 1, 2007 and December 1, 2007. Oakes
shall file all reports and returns and pay all federal, state and local taxes
that are applicable to the Consulting Fees, including income, business
occupation taxes, and self-employment taxes. The Company shall not be
responsible for withholding or paying any taxes on any the Consulting Fees and
shall issue Oakes a Form 1099 for such Consulting Fees. Oakes hereby indemnifies
the Company for any taxes that Oakes fails to make in connection with his
receipt of the Consulting Fees.

 

(b) URL Assignment. The Company agrees to assign all of its rights to the
“Topshelf.com” URL to Oakes, which assignment shall be effective upon the
Resignation Date. Oakes agrees to work with Company counsel to ensure the
orderly effectuation of such assignment.

 

(c) COBRA Reimbursement. Oakes acknowledges that his group insurance coverage
will terminate on the Resignation Date. To the extent provided by the federal
COBRA law or, if applicable, state insurance laws, and by the Company’s current
group health insurance policies, Oakes will be eligible to continue his group
health insurance benefits through the maximum required period of eighteen
(18) months after his qualifying event, his Resignation Date. If Oakes or his

 

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family experiences another qualifying event while receiving COBRA continuation
coverage, Oakes may be able to receive up to 18 additional months of COBRA
continuation coverage, for a total maximum of 36 months. Upon termination of
COBRA coverage, Oakes may be able to convert to an individual policy through the
provider of the Company’s health insurance, if he so chooses. The Company shall
reimburse Oakes for COBRA premiums, for the maximum period allowed by COBRA
throughout the duration of Oakes’ Consulting Term, provided Oakes elects to
continue medical coverage through COBRA. The Company’s obligation to provide
Oakes COBRA reimbursement shall cease in the event Oakes becomes eligible for
other company-provided health coverage.

 

7. Expenses. The Company will reimburse Oakes for all reasonable travel,
entertainment, and other expenses incurred by Oakes in the furtherance of the
performance of Oakes’s duties hereunder, in accordance with the Company’s
expense reimbursement policy as in effect from time to time; provided, however,
that Oakes receives the prior consent of the CEO prior to incurring such
expenses.

 

8. Termination of Consulting Agreement.

 

(a) Termination Without Cause. If Oakes’s engagement is terminated by the
Company without Cause as defined in the Change of Control Agreement entered into
between Oakes and the Company on September 7, 2004 (the “Change of Control
Agreement”), attached hereto as Exhibit D, then Oakes will receive: (i) the
balance of the Consulting Fees for the period of time from the date of the early
termination of the Consulting Term through May 31, 2008, which amount shall be
paid in one lump sum within ten (10) business days following such termination,
and (ii) continued reimbursement of COBRA premiums, payable when such premiums
are due, for the shorter of: (i) the period of time from the date of the early
termination of the Consulting Term through May 31, 2008, or (b) the period of
time Oakes is eligible for COBRA.

 

(b) Termination for Cause or Voluntary Resignation. In the event the company
terminates Oakes’ consulting engagement for Cause or Oakes voluntarily resigns
his consulting engagement prior to the natural expiration of the Consulting
Term, Oakes shall not be entitled to any further payments of the Consulting Fees
or COBRA reimbursements, and Oakes shall reimburse the Company for the pro rata
portion of his Consulting Fees that he has not yet earned. For clarification
purposes, if Oakes resigns his employment on September 1, 2007, Oakes shall
reimburse the Company $25,000, and Oakes shall not be entitled to any further
payment of the Consulting Fee or reimbursement of COBRA.

 

(c) Sole Right to Payments. This section represents Oakes’s sole entitlement to
payments and benefits in connection with the early termination of his consulting
engagement, if any.

 

9. Releases.

 

(a) Release of Claims. In exchange for the payments and other consideration
under this Agreement to which Oakes is not otherwise entitled, Oakes hereby
releases, acquits and forever discharges the Company, its parents and
subsidiaries, and its and their respective officers, directors, agents,
servants, employees, attorneys, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees,

 

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damages, indemnities and obligations of every kind and nature, in law, equity,
or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising out of or in any way related to agreements, events, acts or
conduct at any time prior to and including the Effective Date, including but not
limited to: all such claims and demands directly or indirectly arising out of or
in any way connected with his employment with the Company or the termination of
that employment; claims or demands related to salary, bonuses, commissions,
stock, stock options, restricted stock, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
bonus payments, or any other form of compensation; claims pursuant to any
federal, state or local law, statute, or cause of action including, but not
limited to, the federal Civil Rights Act of 1964, as amended, including without
limitation claims for attorneys’ fees, the Equal Pay Act, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards
Act, the Washington Law Against Discrimination, the Washington Minimum Wage Act,
Chapters 49.48 and 49.52 of the Revised Code of Washington, any other federal,
state or local laws concerning employment, civil rights, tort law; contract law;
wrongful discharge; discrimination; harassment; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing. By
signing this Agreement, Oakes agrees that he will not pursue any claim against
the Company. If Oakes breaks this promise, Oakes agrees to pay the Company’s
costs and expenses (including reasonable attorneys’ fees) related to the defense
of any such claims. The Company and Oakes agree that the release set forth in
this section will be and remain in effect in all respects as a complete general
release as to the matters released. This release does not extend to any
obligations incurred under this Agreement.

 

(b) Acknowledgement of Waiver of Claims Under ADEA. Oakes acknowledges that you
are knowingly and voluntarily waiving and releasing any rights he may have under
the ADEA, as amended. He also acknowledges that the consideration given for the
waiver and release in this Agreement is in addition to anything of value to
which he was already entitled. He further acknowledges that he has been advised
by this writing, as required by the ADEA, that: (a) he has carefully read and
fully understands the provisions of this Agreement; (b) he is, through this
Agreement, releasing the Company from any and all claims he may have against it,
its parent, subsidiaries, predecessors, successors, affiliates and related
entities; (c) he has knowingly and voluntarily agreed to all of the terms set
forth in the agreement; (d) he knowingly and voluntarily intends to be legally
bound by the Agreement; (e) his waiver and release do not apply to any rights or
claims that may arise after the Effective Date of this Agreement; (f) he has
been advised hereby that he has the right to consult with an attorney prior to
executing this Agreement; (g) he has twenty-one (21) days to consider this
Agreement (although he may choose to voluntarily execute this Agreement
earlier); (h) he has seven (7) days following the execution of this Agreement to
revoke the Agreement; and (i) this Agreement shall not be effective until the
date upon which the revocation period has expired, which shall be the eighth day
after this Agreement is executed by him, provided that the Company has also
executed this Agreement by that date.

 

(c) Civil Code Section 1542. In connection with the foregoing general release,
the Oakes acknowledges that he has read and understand Section 1542 of the Civil
Code of the State of California, which provides in full as follows:

 

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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

Oakes hereby expressly waives and relinquishes all rights and benefits that he
has or may have under Section 1542 or any comparable code sections applicable in
other jurisdictions with respect to the release of unknown claims granted in
this agreement. Oakes acknowledges that he or his agents may hereafter discover
facts or claims in addition to or different from those he now knows or believes
to exist, but that he nevertheless intends to fully and finally settle all
claims released herein.

 

10. Return of Company Property. Within three (3) business days of the
termination of the Consulting Period, Oakes agrees to return to the Company all
Company documents (and all copies thereof) and other Company property which
Oakes has had in his possession at any time, including, but not limited to,
Company files, notes, drawings, records, business plans and forecasts, financial
information, specifications, computer-recorded information, tangible property
(including, but not limited to, computers), credit cards, entry cards,
identification badges and keys; and, any materials of any kind which contain or
embody any proprietary or confidential information of the Company (and all
reproductions thereof).

 

11. Indemnification. The Indemnification Agreement dated April 14, 2004 between
Oakes and the Company (the “Indemnification Agreement”), attached hereto as
Exhibit E, shall remain in full force and effect and shall not be amended or
modified by this Agreement. Oakes shall continue to be subject to the rights and
obligations under the Indemnification Agreement for the longer of (a) the
Consulting Term or (b) until the termination of his service as a Board member.

 

12. Confidential Information. Oakes and the Company agree that Oakes’ Employee
Invention, Confidentiality, Nonsolicitation, and Noncompetition Agreement
entered into with the Company on January 6, 2006, (the “Confidentiality
Agreement”) and attached hereto as Exhibit F, shall remain in full force and
effect throughout the duration of the Consulting Term, including, without
limitation, the non-competition and non-solicitation provisions of such
agreement, which provisions shall terminate one year following the expiration of
the Consulting Term.

 

13. Notices. All notices, requests, demands, and other communications called for
hereunder will be in writing and will be deemed given (a) on the date of
delivery if delivered personally, or (b) one day after being sent overnight by a
well established commercial overnight service, addressed to the parties or their
successors at the following addresses, or at such other addresses as the parties
may later designate in writing:

 

If to the Company:

 

Attn: General Counsel

SumTotal Systems, Inc.

1808 North Shoreline Boulevard

Mountain View, CA 94043

 

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If to Oakes:

 

Attn: Kevin Oakes

 

14. Severability. If any of the provisions of this Agreement are held void or
unenforceable, then such provision shall be modified by the court making such
determination to the extent necessary in order to render such provision valid
and enforceable; if such provision may not be so saved, it will be severed. The
remaining provisions shall nevertheless be effective, the intent being to
effectuate this Agreement to the fullest extent possible

 

15. Integration. This Agreement supersedes all other agreements, whether written
or oral, between the Company and Oakes except the Stock Agreement and any other
stock option agreements, the Indemnification Agreement, and the Confidentiality
Agreement. Oakes acknowledges that his Change of Control Agreement shall expire
on the Resignation Date.

 

16. Headings. All captions and Section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.

 

17. Governing Law. This Agreement will be governed by the laws of the State of
Washington.

 

18. Acknowledgment. Oakes acknowledges that he has had the opportunity to
discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.

 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by a duly authorized officer, as of the day and year written
below.

 

COMPANY:      SUMTOTAL SYSTEMS, INC.     

/s/ Jack Acosta

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   Date: 2/10/06 Name: Jack Acosta      Title: Chairman      KEVIN OAKES:     

/s/ Kevin Oakes

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   Date: 2/10/06 Signature     

 

[SIGNATURE PAGE TO K. OAKES SEPARATION, RELEASE AND CONSULTING AGREEMENT]

 

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