Your agreement
dated May 7, 2007 is hereby amended and restated in its
entirety to reflect your continued employment with Voyager Learning
Company (the “Company”). Capitalized terms used in this
letter and not otherwise defined herein are defined in
Exhibit A .
During your
employment with the Company, you will be paid a base salary
(“Base Salary”) of $20,656.73 bi-weekly ($537,075.00 if
annualized), payable in accordance with the regular payroll
practices of the Company. Your “Regular Salary”
includes your Base Salary plus another $20,800.00 annualized, for a
total Regular Salary of $557,875.00. You acknowledge and understand
that all calculations for annual bonus, merit pay, severance,
company paid disability, 401(k) match and any other benefit or
compensation plan or program sponsored or maintained by the Company
or its affiliates will utilize your Base Salary and not your
Regular Salary.
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(a)
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You
will be able to participate in the Company’s 2009 Financial
Bonus Plan, as such plan may be amended from time to time. Your
target bonus opportunity for 2009 is 70% of Base Salary. Your
minimum bonus for this year is 0% and maximum bonus is 200%, if
performance targets are exceeded in accordance with the terms of
the 2009 Financial Bonus Plan. In no event will you be entitled to
earn an annual bonus in excess of 200% of target. You will
separately be receiving a letter setting forth your performance
goals for 2009 under the 2009 Financial Bonus Plan. Should you
remain employed with the Company through December 31, 2009,
payment under the terms of this bonus plan will be made no later
than March 14, 2010.
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(b)
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In
the event that the Company terminates your employment without Cause
or you terminate employment for Good Reason, you will be entitled
to a pro-rata portion of your annual bonus for the year in which
your termination occurs, payable at the time that annual bonuses
are paid to other senior executives, but no later than
March 14 of the following year (determined by multiplying the
amount you would have received based upon actual performance had
your employment continued through the end of such year by a
fraction, the numerator of which is the number of days during the
year of termination that you are employed by the Company and the
denominator of which is 365). If a Change of Control of the Company
occurs in 2009 and you do not voluntarily terminate your employment
for at least six months after the Change of Control of the Company,
you will be paid 200% of your 2009 target bonus promptly following
such six-month anniversary of the Change of Control of the Company.
The amount of your 2009 performance bonus, if any, will be reduced
by the bonus described in the preceding sentence.
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(c)
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With respect to calendar years after
2009, if you remain employed by the Company, you will be eligible
to participate in the Company’s then current annual bonus
plan, in accordance with the terms of such plan.
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During your
employment with the Company, you will be entitled to participate in
the employee retirement and welfare benefit plans and programs set
forth in Exhibit C, in accordance with the terms and
conditions of such programs as in effect from time to
time.
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4.
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Severance and Change on Control
Protection
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(a)
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Subject to Section 6 below, you
will be entitled to the following benefits under this
Section 4 upon the earlier of (i) the sixth month
anniversary of a 409A Change of Control of the Company provided you
have not voluntarily terminated your employment or been terminated
by the Company for Cause before such sixth month anniversary or
(ii) the date the Company terminates your employment without
Cause or you resign for Good Reason at any time during a two year
period beginning on a Change of Control of the Company or an
Acquisition of at Least 30% of the Company’s Outstanding
Voting Stock and Board Change: a single lump sum payment in an
amount equal to the sum of (i) 150% of your then current Base
Salary and (ii) an amount equal to any accrued but unused
vacation days, with such payments commencing on the earliest
payroll date that does not result in adverse tax consequences to
you under Section 409A of the Code.
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(b)
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In
addition, if the Company terminates your employment without Cause
or you resign for Good Reason at any time during a two year period
beginning on a Change of Control of the Company or an Acquisition
of at Least 30% of the Company’s Outstanding Voting Stock and
Board Change, you are entitled, subject to your continued
co-payment of premiums, continued participation for eighteen months
in all medical, dental and vision plans which cover you (and
eligible dependents) upon the same terms and conditions (except for
the requirements of your continued employment) in effect for active
employees of the Company. If you obtain other employment that
offers substantially similar or improved benefits, as to any
particular medical, dental or vision plan, such continuation of
coverage by the Company for such similar or improved benefit under
such plan under this Section 4(b) will immediately cease. The
continuation of health benefits under this subparagraph shall
reduce and count against your rights under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended. To the extent that
such post-employment coverage cannot be provided under any such
plan, the Company, at its election, will either (i) arrange to
make available to you coverage through an insured arrangement that
provides benefits substantially similar and on the same terms and
conditions to those provided under such plan, or (ii) pay such
benefits as described in (i) above directly. The obligations
of the Company to provide any alternative coverage described in the
preceding sentence are expressly conditional on you taking all
reasonable actions and providing all reasonable information, as the
Company shall request, as is necessary for it to fulfill such
obligations.
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5.
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Regular Severance
Benefits
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(a)
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Subject to Section 6 below, you
shall be entitled to regular severance benefits under Section 5(c)
below if: (1) the Company terminates your employment without
Cause or you resign for Good Reason at any time before a Change of
Control of the Company or an Acquisition of at Least 30% of the
Company’s Outstanding Voting Stock and Board Change and
(2) you neither are entitled to nor received benefits under
Section 4. Under no circumstances shall you receive benefits
under both Section 4 and Section 5 of this
Agreement.
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(b)
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You
will be considered to be entitled to enhanced severance benefits
under Section 4 above if your employment is involuntarily
terminated by the Company without Cause, or you resign for Good
Reason prior to such date, and such termination of employment or
change in the terms of your employment occurs within the
60 day period prior to a definitive purchase or acquisition
agreement that results in a Change of Control of the
Company.
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(c)
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The
severance benefits payable under Section 5(a) shall be the same in
all respects as under Section 4(a) and 4(b) above, except that:
(i) 100% shall be used in lieu of 150% in Section 4(a),
and (ii) the period of continued participation in medical,
dental and vision plans described in Section 4(b) shall be twelve
months instead of eighteen months.
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6.
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Conditions to Receiving Severance
Benefits
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Benefits
payable under this Agreement shall be in lieu of any other
severance benefits that you may have otherwise been eligible to
receive from the Company or its affiliates under the Company
Separation Benefits Plan or otherwise. If you terminate employment
in a manner entitling you to benefits under either Section 4
or 5 above and your death occurs before full payment of such
benefits, any amount remaining to be paid shall be paid to your
surviving spouse, or, if none, to your estate. You must sign a
release agreement in substantially the same form as attached as
Exhibit B to this Agreement to receive the benefits. The
benefits under Section 4 or Section 5 of this Agreement
will commence as soon as reasonably practicable after the
termination of the revocation period provided in the release
agreement. You shall not be required to seek other employment to
mitigate damages, and any income earned by you from other
employment or self-employment shall not be offset against any
obligations of the Company to you under this Agreement.
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(a)
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Your rights to receive a tax
gross-up payment for golden parachute excise taxes under the
Multi-Year Stock Option Grant dated February 4, 2004 survives
whether or not such Multi-Year Stock Option Grant is terminated and
you are entitled to such tax-gross-up rights, including those set
forth in the Appendix to the Multi-Year Stock Option Grant. For
purposes of this Section, the following specialized terms will have
the following meanings:
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(1)
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“ Base Period Income
” “Base Period Income” is an amount equal to your
“annualized includable compensation” for the
“base period” as defined in Sections 280G(d)(1)
and (2) of the Code and the regulations thereunder. Generally,
your “annualized includable compensation” is the
average of your annual taxable income from the Company for the
“base period,” which is the five calendar years prior
to the year in which a “change of ownership or
control,” as defined in Section 280G(b)(2) of the Code,
occurs. These concepts are complicated and technical and all of the
rules set forth in the applicable regulations apply for purposes of
this Agreement.
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(2)
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“ 280G Cap ”
“280G Cap” means an amount equal to 3 times your
“Base Period Income,” less $1,000.00. This is the
maximum amount which you may receive without becoming subject to
the excise tax imposed by Section 4999 of the Code.
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(3)
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“ Total Payments
” The “Total Payments” include any
“payments in the nature of compensation” (as defined in
Section 280G of the Code and the regulations thereunder), made
under this Agreement or otherwise, to or for your benefit, the
receipt of which is contingent on a change of control and to which
Section 280G of the Code applies.
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(b)
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The
Company will, at its expense, retain a “Consultant”
(which shall be a law firm, a certified public accounting firm,
and/or a firm of recognized executive compensation consultants
selected by the Company and mutually agreeable to the Company and
you) to provide an opinion concerning whether your Total Payments
exceed the 280G Cap. The Company will select the Consultant. The
opinion required by this Section shall set forth the amount of your
Base Period Income, the present value of the Total Payments and the
amount and present value of any excess parachute
payments.
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8.
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Successors and
Assigns
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This Agreement
shall be binding upon any successor or assign of the Company,
including any entity that (whether directly or indirectly, by
purchase, merger, reorganization, consolidation, acquisition of
property or stock, liquidation or otherwise) is the survivor of the
Company or that acquires the Company and/or substantially all the
assets of the Company in accordance with the operation of law, and
such successor entity shall be deemed to be “the
Company” for purposes of this Agreement (except for purposes
of determining whether there has been a Change of Control of the
Company or an Acquisition of at Least 30% of the Company’s
Outstanding Voting Stock and Board Change). This Section will
continue to apply in the event of any subsequent merger or
consolidation or transfer of assets.
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9.
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Company Right to Recover Payments
Under This Agreement
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You hereby
agree that, if it is ever determined by the Company that any
action, or inaction by you constituted grounds for termination for
Cause, then the Company may recover all of any award or payment
made to you pursuant to this Agreement, and you agree to repay and
return any such award or payment to the Company. The Company may,
in its sole discretion, affect any such recovery by
(i) obtaining repayment directly from you; (ii) setting
off the amount owed to it against any amount or award that would
otherwise be payable by the Company to you, or (iii) any
combination of (i) and (ii) above.
This Agreement
does not change the at-will nature of your employment relationship
with the Company.
The Company may
withhold from any amounts payable under this Agreement such
federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
5
The payments
pursuant to this Agreement are intended to be exempt from or,
comply with, the requirements of Section 409A and this
Agreement is intended to be interpreted and operated accordingly to
the fullest extent possible; provided, however, that
notwithstanding anything to the contrary in this Agreement in no
event shall the Company be liable to you for or with respect to any
taxes, penalties or interest which may be imposed upon you pursuant
to Section 409A. Without limitation on the foregoing, the cash
in lieu of SERP described in Exhibit C is intended to be
exempt from the requirements of Section 409A as a short-term
deferral payment. In accordance with the preceding sentences, the
date on which a “separation from service” pursuant to
Section 409A (“Separation from Service”) occurs
shall be treated as the termination of employment date for purposes
of determining the timing of payments under this Agreement to the
extent necessary to have such payments under this Agreement be
exempt from the requirements of Section 409A or comply with the
requirements of Section 409A. To the extent that any payments
pursuant to this Agreement constitute “deferral of
compensation” subject to Section 409A (after taking into
account to the maximum extent possible any applicable exemptions)
(a “409A Payment”) treated as payable upon Separation
from Service, then, if you are a “Specified Employee”
pursuant to Section 409A on the date of your Separation from
Service, then to the extent required for you not to incur
additional taxes pursuant to Section 409A, no such 409A
Payment shall be made before the earlier of (i) 6 months
after your Separation from Service; or (ii) the date of your
death. Should the preceding sentence result in payments to you at a
later time than otherwise would have been made under this letter,
on the first day any such payments may be made without incurring
additional tax pursuant to Section 409A (“409A Payment
Date”), the Company shall make such payments provided that
any amounts that would have been paid earlier but for the
application of this Section 12 shall be paid in a lump sum on
the 409A Payment Date together with, subject to the following
sentence, accrued interest at the earnings rate (but not below 0)
of any rabbi trust containing your severance amounts (“Rabbi
Trust”). To the extent administratively feasible, you shall
be entitled to direct the investment of the portion of the assets
in the Rabbi Trust attributable to the amount you are entitled to
under this Agreement for which payment is delayed because of
Section 409A and to the extent you exercise this discretion,
instead of being entitled to the amount delayed because of
Section 409A with accrued interest at the earnings rate of the
Rabbi Trust you shall be entitled to the amount delayed because of
Section 409A adjusted by earnings and losses attributable to
your investment direction. For purposes of Section 409A, each
payment installment shall be treated as a separate payment. To the
extent required for payments under this Agreement to comply with or
be exempt from Code Section 409A (with the intention to comply
with Treasury Regulation §1.409A-3(d) with the treatment of
the 38th day after termination of employment as the designated
payment date), payments shall be made no sooner than the 8th day
after termination of employment nor later than the 38th day after
termination of employment based on when the release required by
Section 6 is executed and becomes non-revocable and if such
30-day period spans two calendar years, payment shall be made in
the later calendar year. The parties agree to cooperate to minimize
the impact of Section 409A without materially changing the
economic value of this Agreement to either party.
The Company
shall indemnify you to the same extent that its officers, directors
and employees are entitled to indemnification as of the date hereof
pursuant to the Company’s Articles of Incorporation and
Bylaws for any acts or omissions by reason of being a director,
officer or employee of the Company.
6
You agree to
reasonably cooperate with the Company and its af
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