EXHIBIT
10.6
AMENDMENT NO. 1 TO RESTATED AND REVISED
EMPLOYMENT
AGREEMENT DATED AS OF JANUARY 1, 2002 BETWEEN
WRC MEDIA INC.
AND MARTIN E. KENNEY
1. Section 5 of
the above agreement is hereby amended by re-designating the
existing Section 5 as Paragraph 5(A), and by adding the following
Paragraph 5(B):
“B. In the event a sale of substantially all of the
assets of American Guidance Service, Inc., or of a controlling
interest in the capital stock of American Guidance Service, Inc.,
is consummated on or before December 31, 2005, then within 30 days
of the closing or other event by which delivery occurs, the Company
will pay to Executive a Value Enhancement Bonus determined
according to the following formula:
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Total Consideration Paid By All
Buyers
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Bonus To Be Paid
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<$250 million USD
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½ Executive’s Base Salary
as of the date of closing, in no event less than $287.5
thousand
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$250 million - $300 Million
USD
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Executive’s Base Salary as of
the date of closing, in no event less than $575 thousand
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>$300 million
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An amount equal to the sum of (i)
Executive’s Base Salary as of the date of closing, in no
event less than $575 thousand plus (ii) one percent of the
excess of consideration received over $300 million
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In the event that less than the
entirety of the assets of capital stock of AGS is sold, the total
consideration shall be, for purposes of this calculation, grossed
up to determine a pro forma enterprise value that includes
the value of stock or assets not sold, and the above formula will
be applied to that total enterprise value.
Total consideration shall include
all escrows and reserves that are subject to post-closing
adjustments.
Total consideration shall be
computed before allowance for taxes, currency exchange, and
transactional expenses.
In the event any portion of total
consideration is paid other than in cash, the fair market value of
the non-cash component shall be determined as (i) in the case of
publicly traded securities, the highest price of such securities
attained in the period commencing two weeks before the closing and
ending two weeks after the
closing, or (ii) in the case of
consideration other than cash or publicly-traded securities, that
value ascribed to the consideration in the books of the
seller.”
2. Section 15
is amended to delete its second sentence, and to substitute in its
place:
“Notwithstanding the
foregoing, Sections 5(B), 10, 11, 12, 14 and 16 and, if Executive's
employment terminates in a manner giving rise to a payment under
Section 13, Section 13 shall survive the termination of this
Agreement.”
3.
All other terms and conditions of
the above Agreement remain in full force and effect.
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WRC MEDIA INC.
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MARTIN E. KENNEY
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By:
/s/
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This Restated and Revised EMPLOYMENT
AGREEMENT (“Agreement") is made and entered into as of the
1st day of January, 2002, between WRC MEDIA INC .,
a Delaware corporation (the "Company"), and MARTIN E.
KENNEY , JR. , an individual resident of
the State of Pennsylvania (the "Executive").
WHEREAS. the Company wishes to
continue to employ Executive, and Executive wishes to accept such
employment, on the following terms and Conditions, effective as of
the date set forth above
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
January 1, 2002 and shall remain in effect until December 31, 2004,
and shall be renewed automatically thereafter for successive one
year terms, unless terminated by Executive upon 90 days prior
written notice to the Company or by the Company upon 90 days prior
written notice to Executive. The period of time between January 1,
2002 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 Chief
Executive Officer or in such other position as may be mutually
agreed upon by Executive and the Company and 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 him from time
to time as provided in the By-laws of the Company. Executive shall
devote his full business knowledge, skill, time and effort
exclusively to the performance of his 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. Executive
shall report to the Board of Directors of the Company.
SECTION 4. Base
Salary. Commencing January 1, 2002 Executive shall be paid
a base salary (the "Base Salary") at a rate of $575,000 per annum
(the "Base Salary"), in accordance with the Company’s payroll
practices. The Base Salary shall not be reviewed for increase until
December 31, 2003 and shall thereafter be annually
reviewed.
SECTION 5. Bonuses.
Executive shall receive an annual bonus ("Bonus"), 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 bonus payments
payable by the Company (“Bonus EBIDTA”). For
achievement of the following percentages of budgeted Bonus EBITDA
the corresponding Bonus will be paid to Executive:
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95%
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$175,000
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100%
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$225,000
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105%
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$262,500
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110%
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$300,000
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115%
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$337,500
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120%
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$375,000
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125%
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$437,500
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130%
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$500,000
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135%
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$575,000
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140%
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$650,000
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For each year of the Term, Bonus
EBIDTA will be computed according to the budget of the Company
adopted by the Board of Directors on or before March 31 or, in the
event no budget is so approved, the prior year budget;
provided that the March 31 approval date shall be equitably
extended if management of the Company has not delivered to the
Board of Directors on or before January 30 a good faith proposed
budget for the relevant fiscal year. Separate and apart from the
foregoing, Executive shall also receive annually a guaranteed bonus
of $200,000 (the "Guaranteed Bonus"). Payment dates shall be
determined by the Board of Directors but will in no event occur
later than 30 days after delivery to the Board of Directors of
audited financial statements for the relevant fiscal year of the
Company.
In the event the fiscal year of the
Company is changed to other than a calendar year basis, a prorated
Bonus opportunity will be made available to Executive, the terms
and conditions of which (including applicable Bonus EBITDA for the
stub period applicable to the pro rated Bonus) shall be determined
in good faith by the Board of Directors in a manner reasonably
consistent with the Bonus in effect for the fiscal year in which
such change is made.
In the event of a sale or
disposition of any business unit of the Company (including
subsidiaries and their subsidiaries, or discrete business
operations owned by them), budgeted Bonus EBITDA shall be adjusted
by reducing the Bonus EBITDA by an amount equal to the anticipated
EBITDA for the remainder of the then-current year attributable in
the budget for the then-current year to the operations of the
disposed-of unit.
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 accrue vacation in accordance with the Company’s
applicable policy.
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
his duties and responsibilities hereunder, including, without
limitation, expenses associated with any relocation.
SECTION 8. [Intentionally
Omitted]
SECTION 9. Stock
Options .
(a) Grant . In addition
to any other stock option grant made or to be made to Executive by
the Company, the Company shall grant Executive a nonqualified
option to purchase 120,000 shares of Common Stock at an exercise
price of $40.00 per share. Such option shall vest 33.3% on December
31, 2002, 33.3% on December 31, 2003 and the final 33.4% on
December 31, 2004; provided that such option shall vest
immediately upon a Change of Control (as defined below); and
provided further that such option shall terminate in its
entirety in the event that Executive's employment hereunder is
terminated by the Company for "Good Cause" (as defined in Section
13) and Executive shall have no rights with respect to any portion
thereof, whether or not vested. If Executive's employment hereunder
is terminated by the Company for any reason other than "Good Cause"
or by Executive for any reason then the foregoing vesting schedule
shall apply.
If a Change of Control (as defined
below) occurs, the option shall be deemed to have fully vested as
of the date of such Change of Control. "Change of Control" shall
mean the acquisition of direct or indirect Control (as defined
below) of the Company by any Person (other than EAC III L.L.C.
(“EAC III”), SGC Partners II LLC (“SGC”) or
any of their Affiliates (as defined below) or group other than any
group including EAC III or SGC or any of their Affiliates.
"Affiliate" means, with respect to any specified Person, any other
Person that directly or indirectly, through one or more
intermediaries, Controls, is Controlled by, or is under common
Control with, such specified Person. For purposes of this Section
9(a), "Control" (including, with correlative meanings, the terms"
Controlled by" and "under common Control with"), as used with
respect to any Person, means the direct or indirect possession of
the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise. “Person” means
any individual, corporation, partnership, trust, association,
limited liability company, joint venture, joint-stock company or
any other entity or organization, including a government or
governmental agency. A consummated private sale of 50% or more of
the common stock of the Company (including any rights to convert
securities to the common stock of the Company, whether or not such
right is exercised) in a single transaction or in a series of
related transactions, in each case, with any Person or their
Affiliates shall presumptively constitute a Change of
Control.
(b)
[Reserved]
(c)
Exercise of Stock Options. The Executive may exercise the
vested portion of options granted pursuant to Sections 9(a) by
notifying the Company of the number of shares of
Common Stock to be purchased under
such option and delivering with such notice an amount equal to the
aggregate exercise price for such number of shares in cash.
Notwithstanding the foregoing, Executive may notify the Company
that Executive desires to make a cashless exercise of such option
with respect to a specified number of shares of Common Stock, in
which case such option shall be deemed exercised with respect to
such specified number of shares but Executive shall only be
entitled to receive a number of shares of Common Stock equal to the
product of (A) such specified number multiplied by (B) the quotient
of (1) the aggregate Fair Market Value of such specified number of
shares of Common Stock (determined as of the date the Company
receives such notice in accordance with Section 14(b) minus the
aggregate exercise price for such specified number of shares
divided by (2) such aggregate Fair Market Value. Delivery of shares
with respect to any exercise shall take place within 10 days of
exercise.
(d)
Transfer, Adjustment of Stock Options . The options granted
hereby shall not be transferable or assignable by Executive,
otherwise than by will or the laws of descent and distribution, and
no such option shall be subject to execution, attachment or other
similar process. In no event shall any such option be exercisable
on or after the tenth anniversary of the date hereof. In the event
of changes in the outstanding Common Stock by reason of stock
dividends, stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations or other
changes in capitalization occurring after the date of this
Agreement, the number of shares and exercise price under such
option shall be equitably adjusted by the Board of Directors of the
Company. Any amount payable under such option shall be subject to
applicable withholding taxes.
(e)
Tag-Along Rights If EAC III, SGC and their Affiliates (the
"Sellers") desire to transfer in excess of 10% of their shares of
Common Stock to a prospective transferee (or transferees) other
than (A) in connection with a public offering of the Common Stock
(a "Permitted Transfer") or (B) to EAC III, SGC or their Affiliates
(a "Permitted Transferee"), and, after giving effect to such
transfer, the Sellers shall have transferred in excess of 75% of
their aggregate shares of Common Stock to a transferee (or
transferees) other than in connection with a Permitted Transfer or
to Permitted Transferees, the Sellers shall, as a condition to such
transfer, (i) provide a notice to Executive in writing (a
"Tag-Along Notice") of the material terms of the proposed transfer
at least 15 days prior to such transfer and (ii) permit Executive
(or cause Executive to be permitted) to sell (either to the
prospective transferee or to another financially reputable
transferee reasonably acceptable to Executive) the same portion of
his respective shares of Common Stock (including such shares
issuable pursuant to any option) (the “Shares”) as that
transferred by the Sellers in the aggregate to transferees other
than Permitted Transferees or in Permitted Transfers (after giving
effect to such proposed transfer) on the same terms and conditions,
subject to the same agreements and at the same price as the
proposed sale by the Sellers (less any option exercise price),
which sale shall take place on the date the Sellers' shares of
Common Stock (or such portion) are transferred to such transferee
(or transferees). Executive shall have five days from the date of
receipt of a Tag-Along Notice to exercise his right to sell
pursuant to clause (ii) above by delivering written notice to the
Sellers of his intent to exercise such right. Executive's right to
sell pursuant to clause (ii) above shall terminate if not exercised
within such five-day period. If Executive elects to exercise his
right to sell pursuant to clause (ii), Executive shall share, on a
pro rata basis, the legal, investment banking and other expenses of
the Sellers incurred in connection with such transfer.
(f)
Drag-Along Rights . If at any time the Sellers desire to
transfer all (or any portion in excess of 50%) of their shares of
Common Stock to any person or entity that is not considered a
Permitted Transferee under Section 9(e), above (a "Third Party
Purchaser"), the Sellers shall have the right to require that
Executive transfer the same portion of his respective Shares to
such Third Party Purchaser(s) on the same terms and conditions,
subject to the same agreements and at the same price as the sale by
the Sellers. The Sellers shall provide a notice to Executive in
writing (a "Drag-Along Notice") of such sale at least 10 days prior
to such transfer, and the Drag-Along Notice shall identify such
Third Party Purchaser(s), all material terms of the sale and the
date of closing. Upon the closing of any sale by the
Sellers
