Exhibit 10.2
Executive Annual Incentive Plan
Fiscal Year 2009
Plan Name: PLATO Learning FY 2009 Executive Annual Incentive Plan (“the Plan”).
Plan Effective Date: The plan will be effective for the fiscal year beginning
November 1, 2008.
Plan Structure: Eligible Participants will be provided an opportunity to earn a
total incentive, expressed as a percent of salary. Part of the total opportunity
will be payable in cash (the “Cash Incentive”) and Performance Shares (the
“Performance Share Incentive”) based on the achievement of predetermined
financial goals as specified in this plan, and the remainder is payable in the
form of a time-vested stock option grant. The Plan also provides for a payout
modifier at the discretion of the Compensation Committee.
Eligibility and Incentive Targets: Listed in the table below are the executives
eligible to participate in the Plan (each a “Participant”) and their respective
target incentive opportunities expressed as a percentage of the Participant’s
annual base salary as of October 31, 2009.

                                      Target Cash   Target Stock   Target      
  Incentive (% of   Incentive (% of   Performance   Stock Executive Job Title  
Base Salary)   Base Salary)   Shares (1)   Options(2)
President & CEO
    60 %     90 %     102,000       255,000  
Chief Financial Officer
    40 %     60 %     45,700       114,200  
Chief Technology Officer
    40 %     60 %     44,000       109,900  
Vice President, Customer Experience
    30 %     40 %     23,300       58,100  
Vice President, Human Resources
    30 %     40 %     22,700       56,700  
 
                               
Total
                    237,700       593,900  
 
                               

Total Target Stock Incentive is split between performance shares and stock
options, and calculated as follows:

      (1)   target performance shares are equal to the dollar value of the
Target Stock Incentive times 50% divided by $1.72 (average market price last
10 days of FY08) and (2) stock options are equal to performance shares times a
conversion ratio of 2.5 stock options per 1 performance share and rounded to the
nearest 00

Performance Measures: The actual amount of Cash and Performance Share Incentive
awards will be determined based upon company achievement of the following four
performance measures:

  •   Free Cash Flow     •   Revenue     •   Operating Income (or Loss)     •  
PLE Customer Renewal Rate

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Total Incentive Components:

             
1.
  Cash Incentive Goal:   •   50% Free Cash Flow (FCF)  
 
      •   50% Revenue Achievement

The pre-adjustment value of the Cash Incentive will be determined from two
equally weighted performance measures described as follows:

  A.   Free Cash Flow (50%): One half of the computed Cash Incentive is based on
the percentage of achievement of the pre-established quarterly and annual FCF
goals, weighted across the quarterly and annual periods as shown in the first
table below. The minimum, target and maximum levels of these measures and the
corresponding percentage of Target Cash Incentive is as follows:

(Dollars in Thousands)

                                          Percent of One Half of Target Qtr 1  
Qtr 2   Qtr3   Qtr 4   Fiscal Year   Cash Incentive Weight
25%   Weight
25%   Weight
15%   Weight
15%   Weight
20%     $X   $X   $X   $X   $X    25% $X   $X   $X   $X   $X   100% $X   $X   $X
  $X   $X   200%

  B.   Revenue Achievement (50%): The other half of the computed Cash Incentive
will be based on the achievement of revenue as indicated in the following table:

      Achievement of 2009   Percent of One Half of Revenue   Target Cash
Incentive $X    25% $X   100% $X   200%

The entire bonus earned under this Plan, if any, will be paid in a single
payment in December 2009.
Straight-line interpolation will be applied to award payouts between achievement
thresholds.

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2.
  Stock Incentive Goal:   •   50% Operating Income (or Loss)  
 
      •   50% PLE Customer Renewal Rate

The pre-adjustment value of the Performance Share Incentive will be computed
from two equally-weighted performance measures, described as follows:
A. Operating Income (Loss)(50%): One half of the computed Performance Share
incentive will be based on the achievement of fiscal year 2009 Operating Income
(Loss) weighted across the quarterly and annual periods as shown in the first
table below. The minimum, target and maximum levels of these measures and the
corresponding percentage of the target Performance Share Incentive will be as
follows:
(Dollars in Thousands)

                                          Percent of One Half of Target Qtr 1  
Qtr 2   Qtr3   Qtr 4   Fiscal Year   Stock Incentive Weight
20%   Weight
20%   Weight
20%   Weight
20%   Weight
20%     $X   $X   $X   $X   $X    25% $X   $X   $X   $X   $X   100% $X   $X   $X
  $X   $X   200%

B. PLE Customer Renewal Rate (50%): The other half of the computed Performance
Share Incentive will be based on the PLE Customer Renewal Rate in fiscal year
2009.

      Achievement of 2009   Percent of One Half of Renewal Rate   Target Cash
Incentive X%    25% X%   100% X%   200%

Straight-line interpolation will be applied to award payouts between achievement
thresholds.

3.   Payout Modifier:          Discretionary

The computed Cash and Performance Share Incentive payment may be further
increased or decreased up to 20% of the Participant’s target based on the
Compensation Committee’s assessment of performance relative to the achievement
of strategic goals but not to exceed the maximum payable under this plan. The
modifiers for the Cash Incentive and Performance Share Incentives may be
different.

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APPENDIX
Terms and Conditions
Payment & Eligibility:
The Performance Share Incentive will be awarded in performance shares and, if
earned, will be granted on December 17, 2009 and vest one-third on December 17,
2009, one-third on December 17, 2010 and one-third on December 17, 2011. To be
eligible to receive the Performance Share grant, Participants must be employed
by the Company on the date of grant.
The stock options are granted based on the Participant’s employment with the
Company and will be granted December 11, 2008. To be eligible to receive the
stock option grant, Participants must be employed by the Company on the date of
grant. The options are time based and will vest one-third in December 2009,
one-third in December 2010 and one-third in December 2011.
All performance share and stock option grants, including vesting provisions, are
subject to the terms of the applicable stock grant agreements.
Definitions:
Free Cash Flow: “Free Cash Flow” is defined as The Company’s cash flow from
operations less internal product development less capital expenditures all as
reflected in the Company’s Consolidated Statement of Cash Flows prepared in
accordance with GAAP.
Operating Income (Loss): “Operating Income (Loss)” is defined as Operating
Income (Loss) per the Company’s Consolidated Statement of Operations prepared in
accordance with GAAP adjusted for restructuring and impairment charges, if any,
net of any current year benefit/expense associated with such charges.
PLE Customer Renewal Rate: ”PLE Customer Renewal Rate” is defined as the sum of
the trailing 12 month dollar value renewal opportunities divided by the total
trailing 12 month dollar value renewal orders.
Cause, Good Reason and Change in Control: These terms have the meaning ascribed
to them in the stock option agreements associated with the stock options granted
under this Plan.
General Provisions:

The obligations of the Company, as set forth in this document shall be subject
to modification in such manner and to such extent as the CEO and the
Compensation Committee of the Board of Directors deems necessary by agreement,
or as may be necessary to comply with any law, regulation or governmental order
pertaining to compensation   Termination: A Participant shall be removed from
the Plan in the event of termination of employment with the company. Upon
termination, the Participant’s rights with respect to performance share and
stock option awards under the Plan are governed by the applicable performance
share and stock option grant agreement. Rights with respect to the Cash
Incentive are as follows:

•   Death or Disability. If a Participant dies or becomes disabled before
October 31, 2009, his/her Cash Incentive payment amount will be prorated to
include only the quarterly achievements for the time period for which the
Participant was an active PLATO employee.

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    For the purposes of this Plan “Disability” means that as a result of
physical or mental incapacity the Participant is unable for a period of 120
consecutive days during any consecutive 180-day period to perform his duties
hereunder on a full-time basis. In the case of death, the payment amount will be
given to the Participant’s estate according to current law and established
guidelines and practices.   •   Voluntary or Involuntary Termination without
Cause. In the event a Participant’s employment with the Company is terminated
Voluntarily or Involuntarily without Cause after November 1, 2008 and before the
Plan end date (October 31, 2009) his/her Cash Incentive payment amount will be
prorated to include only the quarterly achievements for the time period for
which the Participant was an active PLATO employee.   •   Involuntary
Termination with Cause. In the event a Participant’s employment with the Company
is terminated for cause after November 1, 2008 and before the Plan end date
(October 31, 2009) the Participant will not be eligible for any cash payment
under the terms of this plan.   •   Change in Control. In the event of a Change
in Control and the new company does not continue the Plan, the Cash Incentive
payment will be pro-rated through the effective date of the Change in Control
and must be paid no later than 2-1/2 months following the end of the calendar
year or the Company’s tax year.

Paid or Unpaid Leave of Absence. If a Participant is on a paid or unpaid leave
of absence anytime between November 1, 2008 and October 31, 2009 his/her Cash
Incentive payment and Performance Share Incentive will be prorated to exclude
the time he/she was on such leave.
Participation for New Hire or Promotion. The Compensation Committee of the Board
of Directors may decide, in its sole discretion, those individuals who are hired
or promoted within the first six months of a performance period who will be
eligible for a prorated award within the confines of the Plan.
Plan Administration. The plan will be administered by PLATO Learning, which
reserves the right to, at any time, amend, interpret, or terminate the Plan, in
whole or in part.

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