Employment Agreement dated as of January 1, 2002, between WRC Media Inc. and Ralph D. Caulo

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 Vice Chairman 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 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 $390,000 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:

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. 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 pro-rated 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 requested by the Company.

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 40,000 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