**Exhibit10.11**

 
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**EMPLOYMENTAGREEMENT**

 

This Employment Agreement (the “Agreement”) is entered into as ofJanuary 1, 2003 (the “Effective Date”) between Click2learn, Inc., a Delawarecorporation with its principal offices located at 110-110th Avenue N.E.,Bellevue, Washington 98004-5840, (the “Company”) and Gary Millrood(“Employee”).

 

In consideration of the promises and the terms and conditions set forthin this Agreement, the parties agree as follows:

 

**1.****             Position**

 

During the term of this Agreement, Company will employ Employee andEmployee will serve as Senior Vice President, North American Sales.  Employee will be based out of his home inPortola Valley, California, until moving permanently to the Seattle-Bellevue,WA area in the summer of 2003.

 

**2.****             Duties**

 

Employee will have such duties as are commensurate with the position ofSenior Vice President, North American Sales at Click2learn, Inc.  Employee will comply with and be bound byCompany’s operating policies, procedures, and practices from time to time ineffect during Employee’s employment. Employee hereby represents and warrants that he is free to enter intoand fully perform this Agreement and the agreements referred to herein withoutbreach of any agreement or contract to which he is a party or by which he isbound.

 

**3.****             ExclusiveService**

 

Employee will devote his full professional time and efforts exclusivelyto this employment and apply all his skill and experience to the performance ofhis duties and advancing the Company’s interests in accordance with Employee’sexperience and skills.  In addition,Employee will not engage in any consulting activity or other potentiallyconflicting activity except with the prior written approval of Company, or atthe direction of Company, and Employee will otherwise do nothing incompatiblewith the performance of his duties hereunder.

 

**4.****             Termof Agreement**

 

This Agreement will commence on the Effective Date and will continueuntil the earlier of 12 months after the Effective Date or termination ofEmployees employment pursuant to Section 7 hereof.  This Agreement will automatically renew for additional periods of12 months each unless the parties mutually agree not to renew this Agreement.  Either party will provide the other partywith any requests for changes to this Agreement for any renewal term at least60 days prior to the renewal date unless otherwise agreed.

 

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**5.****             Compensationand Benefits**

 

(a)           BaseSalary.  The Company agrees to payEmployee an initial base salary of $175,000 per year, Employee’s salary will bepayable as earned in accordance with Company’s customary payroll practice,which currently is to pay salary on a bi-weekly basis.

 

(b)           AdditionalBenefits.  Employee will be eligibleto participate in Company’s employee benefit plans of general application,including without limitation the Company’s 401(k) Plan and those plans coveringlife, health, disability and dental insurance in accordance with the rulesestablished for individual participation in any such plan and applicablelaw.  Employee will receive such otherbenefits, including health club membership, vacation, holidays and sick leave,as the Company generally provides to its employees holding similar positions asthat of Employee.

 

(c)           CommissionPlan.  Employee will be eligible toreceive commissions on sales revenue from sales generated by the North AmericanSales organization in accordance with mutually agreed upon compensation plans.  Employee’s target commission at 100% oftarget revenue is $125,000 per year. Quotas, commission rates, payment terms and other details of thecommission plans will be set forth in a written plan signed by the Company’CEO, CFO and Employee.   Commissionsequal to the first 3 months of the Commission Plan at 100%, or roughlyequivalent to $10,416.66 per month, will be paid in equal installments at theend of each month during the first quarter of employment.

 

(d)           BusinessExpenses.  The Company willreimburse Employee for all reasonable and necessary expenses incurred byEmployee in connection with the Company’s business, provided that such expensesare deductible to the Company, are in accordance with the Company’s applicablepolicy and are property documented and accounted for in accordance with the requirementsof the Internal Revenue Service.

 

(e)           StockOptions.    Effective as of the dateof this Agreement Employee shall be granted, under the Company’s 1998 EquityIncentive  Plan (the “Plan”),  an option to purchase 100,000 shares ofCommon Stock at the fair market value as determined in accordance with thePlan.   Such options shall becomeexercisable (“vest”) over four years with 25% of such shares vesting at the endof one year and 1/36 of the remaining shares vesting on the same day of eachmonth for the remaining three years.

 

(f)            RelocationExpenses.   The Company willreimburse Employee for the reasonable and necessary expenses incurred byEmployee in moving himself and his family from the Portola Valley, Californiaarea to the Bellevue, Washington area. Such expenses include actual move costs.  Reimbursement is dependent upon Employee’s submission of receiptsfor applicable moving expenses and all expenses must be incurred within oneyear of the Effective Date.  Employeewill reimburse Company 100% of the relocation expenses paid in the event ofEmployee’s Voluntary Termination within one year from the Effective Date.  Employee agrees that Company may deduct anyrepayment due from Employee’s unpaid salary, commissions, outstanding expensereports and/or any other form of compensation or reimbursement due to you, tothe extent allowed by law, in addition to any other form of lawful recoveryremedy the Company may have.  

 

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**6.****             ProprietaryRights and Insider Trading**

 

Employee hereby agrees that concurrently with theexecution of this Agreement, Employee will execute Click2learn’s standard formof Employee Invention, Confidentiality, Non-raiding and NoncompetitionAgreement (the “Invention Agreement”). Employee agrees that, as an executive officer of the Company within themeaning of Section 16 of the Securities Act of 1933, as amended, he will complyin all respects with the Company’s Insider Trading Policies and Procedures forSection 16 Individuals and all applicable laws and regulations relating toownership of and trading in the Company’s securities and use and disclosure ofmaterial non-public information.

 

**7.****             Termination**

 

(a)           Eventsof Termination.    Employee’semployment with the Company shall terminate upon any one of the following:

 

(i)            thedetermination of the CEO made in good faith to terminate the Employee for“cause” as defined under Section 7(b) below (“Termination for Cause”); or

 

(ii)           theeffective date of a written notice sent to Employee stating that the Company isterminating his employment, without cause, which notice can be given by theCompany at any time after the Effective Date at the Company’s sole discretion,for any reason or for no reason (“Termination Without Cause”); or

 

(iii)          the effective date of a written notice sentto the Company from Employee stating that Employee is electing to terminate hisemployment with the Company (“Voluntary Termination”).

 

(b)           “Cause”Defined.For purposes of this Agreement,“cause” for Employee’s termination will exist at any time after the happeningof one or more of the following events:

 

(i)            afailure or refusal to comply in any material respect with the reasonablepolicies, standards or regulations of the Company;

 

(ii)           agood faith determination by the Company’s CEO that Employee’s performance is unsatisfactory after reasonablenotice of the ways in which performance is unsatisfactory and a reasonableopportunity to correct any such deficiencies;

 

(iii)          a failure or refusal in any material respectto perform his duties determined by the Company in accordance with thisAgreement or the customary duties of Employee’s employment (except for anyfailure due to ill health or disability);

 

(iv)          unprofessional,unethical or fraudulent conduct or conduct that materially discredits theCompany or is materially detrimental to the reputation, character or standingof the Company;

 

(v)           dishonestconduct or a deliberate attempt to do an injury to the Company;

 

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(vi)          Employee’smaterial breach of a term of this Agreement, the Company’s Insider TradingPolicy and Procedures or the Invention Agreement, including, withoutlimitation, Employee’s unauthorized disclosure or theft of the Company’sproprietary information;

 

(vii)         an unlawful or criminal act which wouldreflect badly on the Company in the Company’s reasonable judgment which shallinclude any violation of applicable laws and regulations relating to ownershipof and trading in the Company’s securities and use and disclosure of materialnon-public information; or

 

(viii)        Employee’s death.

 

(c)           Changeof Control Severance Plan.  Employeeshall be entitled to participate in the change of control severance planadopted by the Company’s Compensation Committee for executives generally;provided, however, that if this Agreement would provide Employee greaterbenefits than any such change of control severance plan in the event ofEmployee’s Termination Without Cause, then Employee shall be provided with the benefitsof this Agreement.

 

**8.****             Effectof Termination**

 

(a)           Terminationfor Cause or Voluntary Termination.  In the event of any termination of Employee’s employment pursuant toSections 7(a)(i) or 7(a)(iii), the Company shall pay Employee the compensationand benefits otherwise payable to Employee under Section 5 through the date oftermination (including commission payments earned through the date oftermination).  Employee’s rights underthe Company’s benefit plans of general application shall be determined underthe provisions of those plans.

 

(b)           TerminationWithout Cause.   In the event of anytermination of Employee’s employment pursuant to Section 7(a)(ii) or Section7(a)(iii) during the Term of this Agreement:

 

(i)            theCompany shall pay Employee the compensation and benefits otherwise payable toEmployee under Section 5 through the date of termination (including commissionpayments earned through the date of termination);

 

(ii)           provided that Employee has signed a mutuallyacceptable form of Separation Agreement and General Release, for a periodending 3 months following the date of termination, the Company shall continueto pay Employee his base salary under Section 5(a) above at Employee’s thencurrent salary, less applicable withholding taxes, payable on the Company’snormal payroll dates during that period; provided, however, that at any timeduring such period the Company may elect to pay such base salary, lessapplicable withholding taxes, or the then unpaid portion thereof, in a singlelump sum payment;

 

(iii)          Employee’s rights under the Company’s benefit plans ofgeneral application shall be determined under the provisions of those plans.

 

 

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**9.****             Miscellaneous**

 

(a)           Arbitration.  Employee and the Company shall submit tomandatory binding arbitration in Seattle, Washington  any controversy or claim arising out of, or relating to, thisAgreement or any breach hereof, provided, however, that Employee and the Companyretain their right to and shall not be prohibited, limited or in any other wayrestricted from, seeking or obtaining equitable relief from a court havingjurisdiction over the parties.  Sucharbitration shall be conducted in accordance with the commercial arbitrationrules of the American Arbitration Association in effect at that time, andjudgment upon the determination or award rendered by the arbitrator may beentered in any court having jurisdiction thereof.  The parties shall mutually agree on the arbitrator to decide anysuch controversy or claim and if the parties cannot agree on the selection ofan arbitrator then they shall each select an arbitrator and those twoarbitrators shall agree on a third arbitrator who will decide any suchcontroversy or claim.

 

(b)           Severability.  If any provision of this Agreement shall befound by any arbitrator or court of competent jurisdiction to be invalid orunenforceable, then the parties hereby waive such provision to the extent thatit is found to be invalid or unenforceable and to the extent that to do sowould not deprive one of the parties of the substantial benefit of itsbargain.  Such provision shall, to theextent allowable by law and the preceding sentence, be modified by sucharbitrator or court so that it becomes enforceable and, as modified, shall beenforced as any other provision hereof, all the other provisions continuing infull force and effect.

 

(c)           Remedies.  The Company and Employee acknowledge thatthe service to be provided by Employee is of special, unique, unusual,extraordinary and intellectual character, which gives it peculiar value theloss of which cannot be reasonably or adequately compensated in damages in anaction at law.  Accordingly, Employeehereby consents and agrees that for any breach or violation by Employee of any ofthe provisions of this Agreement including, without limitation, Section 3, arestraining order an/or injunction may be issued against Employee, in additionto any other rights and remedies the Company may have, at law or equity,including without limitation the recovery of money damages.

 

(d)           NoWaiver.  The failure by either partyat any time to require performance or compliance by the other of any of itsobligations or agreements shall in no way affect the right to require suchperformance or compliance at any time thereafter.  The waiver by either party of a breach of any provision hereofshall not be taken or held to be a waiver of any preceding or succeeding beachof such provision or as a waiver of the provision itself.  No waiver of any kind shall be effective orbinding, unless it is in writing and is signed by the party against whom suchwaiver is sought to be enforced.

 

(e)           Assignment.  This Agreement and all rights hereunder arepersonal to Employee and may not be transferred or assigned by Employee at anytime.  The Company may assign itsrights, together with its obligations hereunder, to any parent, subsidiary,affiliate or successor, or in connection with the sale, transfer, or otherdisposition of all or substantially all of its business and assets,provided, however, that any such assignee assumes the Company’s obligationshereunder.

 

(f)            Withholding.  All sums payable to Employee hereunder shallbe reduced by all federal, state, local and other withholding and similar taxesand payments required by applicable law.

 

(g)           EntireAgreement.  This Agreement, theoffer letter from the Company dated November 26, 2002 and the InventionAgreement constitute the entire and only agreement between the parties relatingto employment of Employee with the Company, and this Agreement and theInvention

 

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Agreement supersede and cancel any and all previous contracts,arrangements or understandings with respect thereto.

 

(h)           Amendment.     This Agreement may be amended, modified,superseded, canceled, renewed or extended only by an agreement in writingexecuted by both parties hereto.

 

(i)            Notices.       All notices and other communicationsrequired or permitted under this Agreement shall be in writing and hand delivered,sent by fax, sent by certified first class mail, postage prepaid, or sent bynationally recognized express courier service. Such notices and other communications shall be effective upon receipt ifhand delivered or sent by fax, five days after mailing if sent by U.S. mail,and one day after dispatch if sent by express courier, to the followingaddresses, or such other addresses as any party shall notify the other parties:

 
| If to the Company: |   | 110-110th Avenue N.E., Suite 700             |
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|               |   | Bellevue, WA 98004-5840                      |
| Fax:               |   | 425-637-1508                                 |
| Attention:         |   | President and CEO                            |
| If to Employee:    |   | At the address on the records of the Company |

 

(j)            BindingNature.  This Agreement shall bebinding upon, and inure to the benefit of, the successors and personalrepresentatives of the respective parties hereto.

 

(k)           GoverningLaw.  This Agreement and the rightsand obligations of the parties hereto shall be construed in accordance with thelaws of the state in which Employee is based, without giving effect to theprinciples of conflict of laws; provided, however, that if Employee isrelocated to another jurisdiction then the laws of such jurisdiction shallapply, and in the event of any claim made following termination, the laws ofthe jurisdiction where Employee was based on the date of termination shallapply.

 

IN WITNESS WHEREOF the Company and Employee haveexecuted this Agreement as of the date first above written.

 

 
| “COMPANY” | “EMPLOYEE”    |
|---------------------|-------------------------|
|                |                    |
| CLICK2LEARN, INC.   |                    |
|                |                    |
|                |                    |
| By:                 | /s/ Kevin M. Oakes      |   | /s/ Gary Millrood |   |
|                | Gary Millrood           |
| Name                | Kevin M. Oakes          |   |   |
|                |                    |
| Title:              | Chief Executive Officer |   |   |
|                     |                         |  |  |  |  |  |

 

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