Exhibit 10.39
EMPLOYMENT SECURITY AGREEMENT
THIS EMPLOYMENT SECURITY AGREEMENT ("Agreement") is entered into this 24th
day of January, 2002 ("Effective Date"), between PLATO LEARNING, INC., a
Delaware Corporation (the "Company"), and ((FirstName)) ((LastName)) (the
"Executive"), the Company's ((Title)). This Agreement hereby rescinds the
previous Employment Security Agreement entered into by the above-mentioned two
parties on January 30, 2001.
WITNESSETH THAT:
WHEREAS, Executive currently serves as a key employee of the Company and
the Company has determined that it is in the best interests of the Company and
its stockholders to secure the services of the Executive and to ensure the
Executive's continued dedication and objectivity in the event of any negotiation
or other action that could lead to, or create the possibility of, a Change in
Control of the Company (as defined below), without concern as to whether the
Executive might be hindered or distracted by personal uncertainties or risks
created by such possible Change in Control; and
WHEREAS, the Company desires to encourage the Executive's full attention
and dedication to the Company, and this Agreement is intended for that purpose.
NOW, THEREFORE, it is hereby agreed by and between the parties, for good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. Retention Bonus. (a) As compensation for services rendered to the Company,
the Company shall pay to Executive (or Executive's beneficiary or estate),
a lump sum cash amount equal to Executive's Annual Compensation (as
defined below), which shall be known as "Retention Bonus". The Retention
Bonus shall be payable only after a Change in Control, and no later than
the earliest to occur of (i) the date that is thirty days after the date
of the Change in Control so long as the Executive is employed by the
Company (or the person who assumes this Agreement) on the date of the
Change in Control, and (ii) the date of the Change in Control, if the
Executive's employment is terminated prior to the Change in Control by the
Company without Good Cause (as defined below) or by the Executive for Good
Reason (as defined below) at a time when the Company is a party to a
letter of intent that contemplates effecting, or a binding written
agreement (subject to customary closing conditions) to effect, a
transaction contemplating a Change in Control.
2. Payments and Benefits Upon a Change in Control. If within twelve (12)
months after a Change in Control or during the Period Pending a Change
in Control (as defined below), (i) the Company shall terminate
Executive's employment with the Company without Good Cause or (ii)
Executive shall voluntarily terminate such employment with Good Reason,
the Company shall, within 30 days of Executive's Employment Termination
(as
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defined below), make the payments and provide the benefits described
below, in lieu of any other severance payments:
(a) Cash Payment. The Company shall continue Executive's current Annual
Compensation for a period of((Term))months through regular payroll
payments.
(b) Welfare Benefit Plans. With respect to each Welfare Benefit Plan (as
defined below), for the period beginning on Executive's Employment
Termination and ending on the earlier of (i)((Term)) months
following Executive's Employment Termination, or (ii) the date
Executive becomes covered by a welfare benefit plan or program
maintained by an entity other than the Company which provides
coverage or benefits at least equal, in all respects, to such
Welfare Benefit Plan, Executive shall continue to participate in
such Welfare Benefit Plan on the same basis and at the same cost to
Executive as was the case immediately prior to the Change in Control
(or, if more favorable to Executive, as was the case at any time
hereafter), or, if any benefit or coverage cannot be provided under
a Welfare Benefit Plan because of applicable law or contractual
provisions, Executive shall be provided with substantially similar
benefits and coverage for such period. Immediately following the
expiration of the continuation period required by the preceding
sentence, Executive shall be entitled to continued group health
benefit plan coverage (so-called "COBRA coverage") in accordance
with Section 4980B of the Internal Revenue Code of 1986, as amended
(the "Code"), it being intended that COBRA coverage shall be
consecutive to the benefits and coverage provided for in the
preceding sentence.
(c) Stock Incentive Plans. All stock options granted under any Company
or TRO Learning, Inc. (the Company's predecessor) stock incentive or
stock option plan (collectively referred to as the "SIPs"), will
immediately become fully vested and exercisable upon the Change in
Control. All restricted stock granted under the SIPs will
immediately be fully vested and distributed to Executive upon the
Change in Control.
(d) Salary to Date of Employment Termination. The Company shall pay to
Executive any unpaid salary or other compensation of any kind earned
with respect to any period prior to Executive's Employment
Termination and a lump sum cash payment for accumulated but unused
vacation earned through such Employment Termination.
3. Definitions. For purposes of this Agreement:
(a) "Good Cause" shall mean: (i) Executive's conviction of any criminal
violation involving dishonesty, fraud, or breach of trust; (ii)
Executive's willful engagement in any misconduct in the performance
of Executive's duty that materially injures the Company; or (iii)
Executive's willful and substantial nonperformance of assigned
duties, provided that such nonperformance has
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continued more than ten days after the Company has given written
notice of such nonperformance and of its intention to terminate
Executive's employment because of such nonperformance.
(b) "Good Reason" shall exist if, without Executive's express written
consent:
(i) The Company shall materially reduce the nature, scope, level
or extent of Executive's responsibilities from the nature,
scope, level or extent of such responsibilities prior to the
Change in Control, or shall fail to provide Executive with
adequate office facilities and support services to perform
such responsibilities;
(ii) The Company shall reduce Executive's salary below that in
effect as of the date of this Agreement (or as of the Change
in Control, if greater);
(iii) The Company shall require Executive to relocate Executive's
principal business office or his principal place of residence
outside the Minneapolis/St. Paul, Minnesota, Standard
Metropolitan Statistical Area (the "Geographical Employment
Area"), or assign to Executive duties that would reasonably
require such relocation; or
(iv) The Company shall fail to continue in effect any cash or
stock-based incentive or bonus plan, retirement plan, welfare
benefit plan, or other benefit plan, program or arrangement,
unless the aggregate value (as computed by an independent
employee benefits consultant selected by the Company) of all
such compensation, retirement and benefit plans, programs and
arrangements provided to Executive is not materially less than
their aggregate value as of the date of this Agreement (or as
of the Change in Control, if greater).
(c) "Change in Control" shall be deemed to occur on the earliest of:
(i) The acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of 50% or more of either (A) the then
outstanding share of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change
in Control: (C) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of a
conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities),
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(D) any acquisition by the Company, (E) any acquisition by an
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
Company or (F) any acquisition by any corporation pursuant to
a reorganization, merger or consolidation involving the
Company if, immediately after such reorganization, merger or
consolidation, each of the conditions described in clause (A),
(B) and (C) of paragraph (c) below shall be satisfied; and
provided further that, for purposes of Clause (D), if any
Person (other than the Company or any employee benefit plan
(or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company) shall become the
beneficial owner of 50% or more of the Outstanding Company
Common Stock or 50% or more of the Outstanding Company Voting
Securities by reason of an acquisition by the Company, and
such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional share of the
Outstanding Company Common Stock or any additional Outstanding
Company Voting Securities and such beneficial ownership is
publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of such Board; provided, however, that any
individual who becomes a director the Company subsequent to
the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by the vote of at
least a majority of the directors then comprising the
Incumbent Board shall be deemed to have been a member of the
Incumbent Board; and provided further, that no individual who
was initially elected as a director of the Company as a result
of an actual or threatened election contest, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any Person other
than the Board shall be deemed to have been a member of the
Incumbent Board;
(iii) approval of the stockholders of the Company or a
reorganization, merger or consolidation unless, in any such
case, immediately after such reorganization, merger or
consolidation, (A) more than 60% of the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of
the combined voting power of the then outstanding securities
of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals or
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation and in substantially the same
proportions relative to each other as their ownership,
immediately prior to such reorganization, merger or
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consolidation, of the Outstanding Company Stock and the
Outstanding Company Voting Securities, as the case may be, (B)
no Person (other than the Company, any employee benefit plan
(or related trust) sponsored or maintained by the Company or
the corporation resulting from such reorganization, merger or
consolidation (or any corporation controlled by the Company)
and any Person which beneficially owned, immediately prior to
such reorganization, merger or consolidation, directly or
indirectly, 50% or more of the Outstanding Company Common
Stock or the Outstanding Company Voting Securities, as the
case may be, beneficially owns, directly or indirectly, 50% or
more of the then outstanding shares of common stock of such
corporation or 50% or more of the combined voting power of the
then outstanding securities of such corporation entitled to
vote generally in the election of directors and (C) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time
of the execution of the initial agreement or action of the
Board of Directors providing for such reorganization, merger
or consolidation; or
(iv) approval by the stockholders of the Company of (A) a plan of
complete liquidation or dissolution of the Company or (B) the
sale or other disposition of all or substantially all of the
assets of the company other than to a corporation with respect
to which, immediately after such sale or other disposition,
(C) more than 60% of the then outstanding shares of common
stock thereof and more than 60% of the combined voting power
of the then outstanding securities thereof entitled to vote
generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to
such sale or other disposition and in substantially the same
proportions relative to each other as their ownership,
immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (D) no Person (other
than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or such corporation (or
any corporation controlled by the Company) and any Person
which beneficially owned, immediately prior to such sale or
other disposition, directly or indirectly, 50% or more of the
Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be, beneficially owns,
directly or indirectly, 50% or more of the then outstanding
shares of common stock thereof or 50% or more of the combined
voting power of the then outstanding securities thereof
entitled
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to vote generally in the election of directors and (E) at
least a majority of the members of the board of directors
thereof were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board
providing for such sale or other disposition.
(d) "Annual Compensation" shall mean Executive's base annual salary in
effect on the date of: (i) this Agreement; (ii) the Change in
Control; or (iii) Executive's Employment Termination, whichever is
greater.
(e) "Employment Termination" shall mean the effective date of: (i)
Executive's voluntary termination of employment with the Company
with Good Reason; or (ii) the termination of Executive's employment
by the Company without Good Cause.
(f) "Welfare Benefit Plan" shall mean each welfare benefit plan
maintained or contributed to by the Company, including, but not
limited to a plan that provides health (including medical and
dental), life, accident or disability benefits or insurance, or
similar coverage, in which Executive was participating at the time
of the Change in Control.
(g) "Period Pending a Change in Control" shall mean the period after the
approval by the Company's stockholders and prior to the effective
time of (i) a merger or consolidation of the Company with one or
more other corporations as a result of which the holders of the
outstanding voting stock of the Company immediately prior to such
merger or consolidation hold less than 60% of the voting stock of
the surviving or resulting corporation, or (ii) a transfer of
substantially all of the property of the Company other than to an
entity of which the Company owns at least 80% of the voting stock.
4. Mitigation and Set-Off. Executive shall not be required to mitigate
Executive's damages by seeking other employment or otherwise. The
Company's obligations under this Agreement shall not be reduced in any
way by reason of any compensation or benefits received (or foregone) by
Executive from sources other than the Company after Executive's
Employment Termination, or any amounts that might have been received by
Executive in other employment had Executive sought such other
employment. Executive's entitlement to benefits and coverage under
this Agreement shall continue after, and shall not be affected by,
Executive's obtaining other employment after his Employment
Termination, provided that any such benefit or coverage shall not be
furnished if Executive expressly waives the specific benefit or
coverage by giving written notice of waiver to the Company.
5. Litigation Expenses. The Company shall pay to Executive all
out-of-pocket expenses, including attorneys' fees, incurred by
Executive in the event Executive successfully enforces any provision of
this Agreement in any action, arbitration or lawsuit.
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6. Assignment Successors. This Agreement may not be assigned by the
Company without the written consent of Executive but the obligations of
the Company under this Agreement shall be the binding legal obligations
of any successor to the Company by merger, consolidation or otherwise,
and in the event of any business combination or transaction that
results in the transfer of substantially all of the assets or business
of the Company, the Company will cause the transferee to assume the
obligations of the Company under this Agreement. This Agreement may
not be assigned by Executive during Executive's life, and upon
Executive's death will inure to the benefit of Executive's heirs,
legatees and legal representatives of Executive's estate.
7. Interpretation. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Minnesota,
without regard to the conflict of law principles thereof. The invalidity
or unenforceability of any provision of this Agreement shall not affect
the validity or enforceability of any other provision of this Agreement.
The parties both agree to submit to jurisdiction and venue in the Courts
of Hennepin County, Minnesota.
8. Withholding. The Company may withhold from any payment that it is
required to make under this Agreement amounts sufficient to satisfy
applicable withholding requirements under any federal, state or local
law.
9. Amendment or Termination. This Agreement may be amended at any time by
written agreement between the Company and Executive. This Agreement
terminates on January 24, 2004, provided that, if a change in control
occurs prior to the effective date of such termination, the termination of
this Agreement shall not be effective and Executive shall be entitled to
the full benefits of this Agreement. Any such amendment or termination
shall be made pursuant to a resolution of the Board.
10. Financing. Cash and benefit payments under this Agreement shall constitute
general obligations of the Company. Executive shall have only an unsecured
right to payment thereof out of the general assets of the Company.
Notwithstanding the foregoing, the Company may, by agreement with one or
more trustees to be selected by the Company, create a trust on such terms
as the Company shall determine to make payments to Executive in accordance
with the terms of this Agreement.
11. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
12. Certain Reductions of Payments by the Company. If it is determined by
the independent auditor (the "Auditor") jointly selected by Executive
and the Company and paid by the Company that the payments under this
Agreement are or will become subject to any excise taxes, then it shall
determine if the payment of excise taxes in addition to any federal,
state, local or other income, excise or other taxes ("Other Taxes")
payable by
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Executive with respect to the payments under this Agreement will cause
Executive to pay an amount of excise and Other Taxes such that the net
payment Executive will receive after payment of all excise and Other Taxes
on payments under this Agreement is less than if the payment he would
receive was reduced to the maximum amount payable without imposition of
any excise taxes ("Economic Detriment"). If the Auditor determines that
the Executive will incur an Economic Detriment as a result of the receipt
of the full payment, the payment made to Executive under this Agreement
will be reduced to the maximum possible amount that can be paid to
Executive without him incurring any Economic Detriment. The Auditor shall
be a nationally recognized United States public accounting firm that has
not, during the two years preceding the date of its selection, acted in
any way on behalf of the Company or any of its subsidiaries.
IN WITNESS WHEREOF, the parties hereto, on the day and year first written
above, pursuant to a duly authorized resolution of the Board of Directors of the
Company, have executed this Agreement, which represents an amendment to and/or
pre-termination renewal of a predecessor Agreement dated January 30, 2001,
between the Executive and the Company.
PLATO LEARNING, INC.
By:
--------------------------------- ------------------------------------
John Murray ((FirstName))((LastName))
Its: PRESIDENT AND EXECUTIVE
CHIEF EXECUTIVE OFFICER
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EXECUTIVE
EMPLOYMENT SECURITY AGREEMENTS
TWO YEAR EMPLOYMENT SECURITY AGREEMENTS DATED JANUARY 24, 2002 (EXCEPT MELSEN'S
DATED FEBRUARY 4, 2002):
Annual Retention Severance
Name Compensation Bonus** Payments* Term
- ----------------------------------------------------------------------------------------------
Murray, John $ 270,000 $ 270,000 $ 540,000 24 months
Buske, John M $ 200,000 $ 200,000 $ 300,000 18 months
Foshay, Wellesley R $ 160,000 $ 160,000 $ 160,000 12 months
Hanna, Nancy L $ 140,000 $ 140,000 $ 140,000 12 months
Kilgarriff, Robert M $ 180,000 $ 180,000 $ 270,000 18 months
LePage, David H $ 160,000 $ 160,000 $ 160,000 12 months
Melsen, Gregory J $ 170,000 $ 170,000 $ 255,000 18 months
Preese, Frank $ 155,000 $ 155,000 $ 155,000 12 months
Reynolds, Michael J $ 135,000 $ 135,000 $ 135,000 12 months
Riesterer, James S $ 150,000 $ 150,000 $ 150,000 12 months
Super, John C $ 150,000 $ 150,000 $ 150,000 12 months
Schuster, Steven R $ 119,600 None $ 59,800 6 months
Murphy, Mary Jo $ 115,700 None $ 57,850 6 months
TOTALS: $2,105,300 $1,870,000 $2,532,650
========== ========== ==========
* If within twelve months after a Change in Control or during the Period Pending
a Change in Control (i) the Company terminates Executive's employment with the
Company without Good Cause or (ii) Executive shall voluntarily terminate
employment with Good Reason, the Company shall, within 30 days of Executive's
Employment Termination, make the payments and provide other benefits (outlined
in Agreement), in lieu of any other severance payments.
** Lump sum cash payment payable only after a Change in Control and no later
than the earliest to occur of (i) the date that is thirty days after the date of
the Change in Control so long as the Executive is employed by the Company on the
date of the Change, and (ii) the date of the Change in Control, if the
Executive's employment is terminated prior to the Change in Control by the
Company without Good Cause or by the Executive for Good Reason at a time when
the Company is a party to a letter of intent that contemplates effecting, or a
binding written agreement to effect, a transaction contemplating a Change in
Control.