Exhibit 99.1
Employment Agreement dated as of January 1, 2002, between WRC Media
Inc. and Ralph D. Caulo.
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
RALPH D. CAULO
, an individual resident of the State of Florida (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 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:
|
95%
|
$ 50,000
|
|
100%
|
$ 75,000
|
|
105%
|
$100,000
|
|
110%
|
$125,000
|
|
115%
|
$150,000
|
|
120%
|
$175,000
|
|
125%
|
$200,000
|
|
130%
|
$225,000
|
|
135%
|
$250,000
|
|
140%
|
$275,000
|
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), 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 of all (or such portion) of its shares of Common Stock
as described in a Drag-Along Notice, such Third Party Purchaser(s)
shall pay to Executive the consideration payable to Executive in
connection with such sale of all (or such portion) of his Shares to
such Third Party Purchaser(s), net of any option exercise price and
Executive's proportionate share of the legal, investment banking
and other expenses of the Sellers incurred in connection with such
sale, and the Executive's Shares (or such portion) shall be deemed
transferred to such Third Party Purchaser(s).
SECTION 10.
Registration Rights
. Beginning no earlier than 180 days after the consummation of a
public offering of Common Stock, the Company shall grant to the
management of the Company the right to require the Company to
register for re-sale under applicable federal securities laws
shares of Common Stock held by Executive (the “Registration
Right”);
provided that
(i) the Registration Right may be exercised only once by the
management of the Company, (ii) the Registration Right shall be
exercised on behalf of all members of management by the Chief
Executive Officer of the Company, and (iii) the Registration Right
may not be exercised at any time or during any period the Company
or lead underwriter to the Company determines in good faith that
such exercise would adversely affect a public offering of Common
Stock that the Company is in good faith considering. The terms and
conditions of the Registration Right (including, without
limitation, the number of shares of Common Stock that may be
registered) shall be customary for the private equity
industry.
SECTION 11.
Noncompete and Nonsolicitation.
During the Term, and for eighteen months thereafter, Executive
shall not directly or indirectly (other than as an employee of or
consultant to the Company or an affiliate of the
Company):
(a) engage in activities or businesses within the United States
which are substantially in competition with the Company
(“Competitive Activities"), including (i) selling goods or
serv
