This EMPLOYMENT AGREEMENT ("Agreement") is
made and entered into as of the 14th day of July,
1999, by and between JLC LEARNING CORPORATION, an
Illinois corporation (the "Company"), and THERESE K.
CRANE, an individual resident of the State of Texas
(the "Executive").
WHEREAS the Company wishes to employ Executive, and Executive wishes
to accept such employment, on the following terms and conditions, effective as
of the Closing Date (as defined in the Stock Purchase Agreement dated as of June
7, 1999, among Software Systems Corp., Sylvan Learning Systems, Inc., Pyramid
Ventures, Inc., GE Capital Equity Investments, Inc., JLC Learning Corporation
and EAC I Inc. (the "Stock Purchase Agreement"));
WHEREAS immediately after the Closing (as defined in the Stock
Purchase Agreement), the Company will be merged with and into EAC I Inc., a
Delaware corporation, and the name of EAC I Inc. will be changed to "JLC
Learning Corporation";
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties hereby agree as
follows:
SECTION 1. EMPLOYMENT. The Company hereby employs Executive and
Executive accepts employment by the Company, on the terms and conditions
contained in this Agreement.
SECTION 2. TERM. The employment of Executive pursuant hereto shall
commence on the Closing Date and shall remain in effect unless terminated by
Executive upon 30 days prior written notice to the Company or by the Company
upon 30 days prior written notice to Executive. The period of time between the
Closing and the termination of this Agreement pursuant to its terms is herein
referred to as the "Term".
SECTION 3. DUTIES AND EXTENT OF SERVICE. Executive shall serve the
Company as President or in such other position as may be mutually agreed upon by
Executive and the Company and, as outlined in the letter dated June 10, 1999
from Charles L. Laurey to Executive, shall perform such services and duties for
the Company as are customarily performed by an executive in Executive's position
at a business such as the Company's business and as the Board of Directors of
the Company (the "Board of Directors") may assign or delegate to her from time
to time as provided in the By-laws of the Company. Executive shall devote her
full business knowledge, skill, time and effort exclusively to the performance
of her duties for the Company and the promotion of its interests. Executive's
duties hereunder shall be performed at such place or places as the interests,
needs, businesses or opportunities of the Company shall require. Notwithstanding
the foregoing, Executive shall not be required to change her residence from
Texas to any other location and shall continue to perform her responsibilities
as President of the Company, while residing in Texas and traveling to San Diego,
California, as necessary. Executive shall report to the Chief Executive Officer
of the Company.
SECTION 4. BASE SALARY. Executive shall be paid a base salary (the
"Base Salary") at a rate of $330,000 per annum (the "Initial Salary") subject to
annual review; PROVIDED, HOWEVER, that the Executive's Base Salary shall not be
reduced below the Initial Salary.
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SECTION 5. BONUS. Executive shall receive an annual bonus ("Bonus") of
up to 121% of Base Salary, based on the achievement of specific objectives to be
established by the Board of Directors on an annual basis in connection with the
development of the Company's annual operating budget for earnings before
interest, depreciation, taxes and amortization and after deductions for any
annual bonus payments payable by the Company. The Bonus in respect of 1999 will
be tied to the 1999 Business Plan as previously adopted by the Board of
Directors with a guaranteed bonus of $40,000 (the "Guaranteed Bonus"). For
achievement of 100%, 110%, 120% and 125% of budget, a Bonus of $200,000,
$268,000, $332,000 and $400,000, respectively, will be paid to Executive. For
subsequent years, it is expected that the Bonus will be tied to the Company's
annual operating budget.
SECTION 6. FRINGE BENEFITS. Executive shall be entitled to
participate, to the extent eligible, in such medical, dental, disability, life
insurance, deferred compensation and other benefit plans (such as pension and
profit sharing plans) as the Company shall maintain for the benefit of employees
generally, on the terms and subject to the conditions set forth in such plans.
Executive shall also be entitled to vacation time and sick leave in accordance
with the Company's policies in existence and as applied to Executive immediately
prior to the Closing.
SECTION 7. EXPENSES. The Company shall reimburse Executive promptly
for all reasonable expenses incurred by Executive in accordance with the
Company's budget and policy in connection with her duties and responsibilities
hereunder.
SECTION 8. EQUITY INVESTMENT. Executive, subject to the preparation of
a shareholder agreement reasonably acceptable to Executive, will be required to
purchase promptly after the Closing Date a minimum of _____ shares of Common
Stock, par value $0.01 per share ("EAC II Common Stock") of EAC II Inc. at a
price of $_____ per share in cash (the "Per Share Purchase Price") from EAC III
L.L.C.1 Employee will enter into such shareholder agreement which shall contain
customary terms and shall grant an irrevocable proxy to EAC III L.L.C. to vote
her shares of EAC II Common Stock. If Executive so elects (and to the extent
eligible), her purchase of Company Common Stock may be financed with a personal
loan guaranteed by the Company on commercially reasonable terms. The Company
shall make reasonable efforts to arrange and guarantee such loan.
SECTION 9. STOCK OPTIONS. In the event of an initial public offering
of the EAC I Common Stock, Executive shall participate in a stock option plan
commensurate with industry standards and the nature of EAC I Inc.'s ownership
and capital structure as of the closing of such offering.
SECTION 10. NONSOLICITATION. (a) During the period beginning on the
Closing Date and ending on the second anniversary of the date of termination of
Executive's employment with the Company (the "Nonsolicitation Period") and to
the fullest extent permitted under applicable law, Executive agrees that she
shall not, directly or indirectly: solicit, recruit or hire any employees of or
persons who have worked for the Company during the twelve-month period prior to
termination of Executive's employment, or solicit or encourage any such employee
of the Company to leave the employment of the Company.
(b) If a judicial determination is made that any of the provisions of
this Section 10 constitutes an unreasonable or otherwise unenforceable
restriction against Executive,
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1 This minimum investment would equate to $75,000.
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the provisions of such Section shall be rendered void only to the extent that
such judicial determination finds such provisions to be unreasonable or
otherwise unenforceable. Moreover, notwithstanding the fact that any provisions
of this Section 10 is determined not to be specifically enforceable, the Company
shall nevertheless be entitled to recover monetary damages as a result of
Executive's breach of such provision.
(c) Executive agrees that the provisions of this Section 10 are
reasonable and properly required for the adequate protection of the business and
the goodwill of the Company.
SECTION 11. NONDISCLOSURE. The parties hereto agree that during the
course of her employment by the Company, Executive will have access to, and will
gain knowledge with respect to, the Company's Confidential Information (as
defined below). The parties acknowledge that unauthorized disclosure or misuse
of such Confidential Information would cause irreparable damage to the Company.
Accordingly, Executive agrees to the nondisclosure covenants in this Section 11.
Executive represents that her experience and capabilities are such that the
provisions of Section 10 and this Section 11 will not prevent her from earning
her livelihood. Executive agrees that she shall not (except as may be required
by law), without the prior written consent of the Company during her employment
with the Company under this Agreement, and any extension or renewal hereof, and
thereafter for so long as it remains Confidential Information, use or disclose,
or knowingly permit any unauthorized person to use, disclose or gain access to,
any Confidential Information; PROVIDED that Executive may disclose Confidential
Information to a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by Executive of her duties under
this Agreement. Upon termination of this Agreement for any reason, Executive
shall return to the Company the original and all copies of all documents and
correspondence in her possession relating to the business of the Company or any
of its affiliates, including but not limited to all Confidential Information,
and shall not be entitled to any lien or right of retention in respect thereof.
For purposes of this Agreement, "Confidential Information" shall mean
all business information (whether or not in written form) which relates to the
Company, any of its affiliates or their respective businesses or products and
which is not known to the public generally, including but not limited to
technical information or reports; trade secrets; unwritten knowledge and
"know-how"; operating instructions; training manuals; customer lists; customer
buying records and habits; product sales records and documents, and product
development, marketing and sales strategies; market surveys; marketing plans;
profitability analyses; product cost; long-range plans; information relating to
pricing, competitive strategies and new product development; information
relating to any forms of compensation and other personnel-related information;
contracts; and supplier lists.
SECTION 12. SEVERANCE. If Executive's employment hereunder is
terminated (1) upon a breach by the Company of this Agreement; (2) by the
Company for any reason other than for "Good Cause" (as defined below), or (3) by
the Company as a result of the occurrence of the death or total disability of
Executive (total disability meaning the failure of Executive to perform her
normal required services hereunder for a period of three consecutive months
during the term hereof by reason of Executive's mental or physical disability,
as determined by an independent physician reasonably satisfactory to Executive
and the Company) the Company shall (i) pay to Executive as severance pay a lump
sum cash payment in the amount of her Base Salary for the period equal to the
greater of (x) 12 months or (y) 18 months minus the length of Executive's
employment with the Company following the date of this Agreement (the "Severance
Period"); and (ii) provide Executive with an executive outplacement program in
accordance with the policy of the Company at the time of such termination.
Payment of such
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severance pay will be made within thirty (30) days of such termination.
Executive shall have the option of receiving the severance pay specified in the
preceding sentence in the form of salary continuation payments for the Severance
Period. In the event that Executive elects to receive severance pay in the form
of salary continuation payments, Executive shall continue to receive medical,
dental, and vision coverage for the Severance Period subject to employee's
payment of the costs of such benefits to the extent such benefits are paid for
by active employees. For purposes of this Agreement, termination for a "Good
Cause" shall exist upon the occurrence of any of the following: (i) Executive is
convicted of, pleads guilty to, confesses to, or enters a plea of nolo
contendere to, any felony or any crime that involves moral turpitude or any act
of fraud, misappropriation or embezzlement;(ii) Executive has engaged in a
fraudulent act to the damage or prejudice of the Company or any affiliate of the
Company; (iii) any act or omission by Executive involving malfeasance or gross
negligence in the performance of Executive's duties to the Company; or (iv)
Executive otherwise fails to comply in any material respect with the terms of
this Agreement or deviates in any material respect from any reasonable written
policies or reasonable directives of the Board of Directors and, within 30 days
after written notice from the Company of such failure or deviation, Executive
has not corrected such failure.
SECTION 13. TERMINATION; SURVIVAL. This Agreement shall terminate upon
the earlier of (x) the termination of the Stock Purchase Agreement pursuant to
its terms; or (y) the termination of Executive's employment by the Company.
Notwithstanding the foregoing, Sections 10, 11 and 14 and, if Executive's
employment terminates in a manner giving rise to a payment under Section 12,
Section 12 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS. (a) This Agreement shall inure to the
benefit of and shall be binding upon Executive and her executor, administrator,
heirs, personal representative and permitted assigns, and the Company and its
successors and permitted assigns; PROVIDED, HOWEVER, that Executive shall not be
entitled to assign or delegate any of her rights or obligations hereunder
without the prior written consent of the Company.
(b) This Agreement shall be deemed to be made in, and in all respects
shall be interpreted, construed and governed by and in accordance with, the laws
of the State of California, without regard to the conflicts of law principles of
such State. No provision of this Agreement or any related document shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or drafted such provision.
(c) This Agreement constitutes the entire agreement between the
Company and Executive with respect to Executive's employment by the Company
after the Closing Date, and, effective as of the Closing Date, supersedes all
prior agreements, if any, whether written or oral, between them, relating to
Executive's employment by the Company. All prior agreements between the Company
and Executive with respect to Executive's employment by the Company shall
terminate and be without further force or effect as of the Closing. Except for
claims or rights under such agreements with respect to Fixed Sales Bonus as
described in the letter dated January 11, 1999, from Mr. David Veit to Executive
or the JLC Learning Corporation Stock Appreciation Rights Plan (each as defined
in the Stock Purchase Agreement), Executive hereby releases the Company from any
claims or rights under such agreements, without any liability or other adverse
consequence to the Company or Purchaser (as defined in the Stock Purchase
Agreement).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
JLC LEARNING CORPORATION,
by /s/ David M. Veit
-------------------------
Name: David M. Veit
Title: Chief Executive Officer
/s/ Therese K. Crane
--------------------------
Therese K. Crane
EAC III L.L.C. hereby agrees to the
provisions of Section 8
EAC III L.L.C.,
by RIPPLEWOOD PARTNERS, L.P.,
its Sole Member,
by RIPPLEWOOD HOLDINGS L.L.C.,
its General Partner,
By: /s/ Charles L. Laurey
-----------------------------
Title: Attorney-in-Fact
--------------------------