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                                                                    EXHIBIT 10.1
June 27, 2003


                                Via Hand Delivery

PERSONAL & CONFIDENTIAL

Mr. Michael H. Baum


Dear Mike:

         This will confirm our agreement concerning the termination of your
employment with Renaissance Learning, Inc. (the "Company").

         (1)      Benefits to You.

                  (A) The Company will continue to employ you until the earlier
         of (i) the date the Company provides you with written notice that there
         is Cause to end your employment with the Company; (ii) the effective
         date of any written resignation that you submit to the Company; or
         (iii) December 31, 2004 (the earlier of which shall be deemed the
         "Separation Date"). For purposes of this document "Cause" means (i) any
         act of dishonesty; or (ii) any violation by you of this Agreement.

                  Beginning July 1, 2003, the Company will pay you a monthly
         base salary of Ten Thousand Dollars ($10,000.00) through September 30,
         2003 and, thereafter, until the Separation Date, a monthly salary of
         Five Hundred Dollars ($500.00), payable in accordance with the
         Company's regular pay practices and subject to all requirements
         respecting deductions for income and employment taxes. You will
         continue to participate in the Company's group health insurance plan
         through the earlier of the date you become eligible for coverage under
         another group health plan or the Separation Date. Subject to the
         qualification mentioned below, the Company will pay the employee
         portion of the premium cost of that coverage through the earlier of the
         date you become eligible for coverage under another group health plan
         or the Separation Date. Except as provided in Subparagraph (1)(F),
         below, you will be responsible for all other medical and health
         insurance-related costs during the remaining term of your employment.
         The Company will reimburse you for business expenses incurred by you
         when acting on its behalf on or before the Separation Date in
         accordance with its policies. Except as provided herein, you will
         receive no other payments or benefits from the Company after June 30,
         2003. You will continue to be allowed the use of the computer and
         cellular telephone assigned you by the Company through the Separation
         Date, in any manner not injurious to the Company or the security of its
         computer network systems. You will retain all your vested rights as of
         the Separation Date in the Company's 401(k) plan, and your stock
         options will continue to vest until the Separation Date (although you
         will not be eligible for any additional option grants after June 30,
         2003), and will receive all payments and rights due you under the terms
         of those plans.

                  (B) Until the Separation Date, you will remain an employee of
         the Company in the capacity of a Special Consultant. As a Special
         Consultant you will perform such tasks as may be assigned from time to
         time; provided, however, that absent your consent, you will not be
         required to provide more than 60 hours of such services in any month up
         to September 30, 2003, and not more than 4 hours of such services in
         any month after September 30, 2003. You agree to remove your personal
         property from the office currently being utilized by you on Peach
         Street in Wisconsin Rapids by July 31, 2003, and return all keys and
         access cards used at that facility. Until the Separation Date, you can
         continue to use office space made available to you at the Company's
         Madison facility, and can continue to receive and send communications
         such as email, phone calls, mail, and faxes at and from that address.
         You and the company acknowledge that, as a Special Consultant, you
         shall not be on the Company's distribution list for, nor shall you
         otherwise routinely receive, material non-public financial information
         relating to the Company.

                  (C) On the first regular Company pay date at least three (3)
         business days following expiration of the Revocation Period, the
         Company will pay you a separation bonus of Two Hundred Fifty Thousand
         Dollars ($250,000.00). On the first regular Company pay date in 2004,
         the Company will pay you a similar bonus in the amount of Two Hundred
         Thousand Dollars ($200,000.00). These amounts will be subject to
         deductions for income and employment taxes as required by law, and
         deductions and matching payments pursuant to the terms of the Company's
         401(k) program if you are still employed by the Company at the time the
         bonuses are paid.


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                  (D) Beginning on the first day following the Separation Date,
         you will have the right to continue health insurance pursuant to the
         Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as
         amended and such conversion rights respecting the Company's group life
         insurance as are provided by law.

                  (E) Unless and until you are separated for Cause, the Company
         will provide you with a letter of reference which (i) states that you
         resigned your employment; (ii) confirms your dates of employment with
         the Company; (iii) confirms the titles and job responsibilities of all
         positions you held; and (iv) provides positive statements concerning
         your contributions to the Company. Furthermore, as an officer of the
         Company, Terry Paul will make himself reasonably available to
         prospective employers for the purpose of serving as a reference and to
         confirm the accuracy of the information contained in this letter and
         will not make any statements to any individual identifying him/herself
         as affiliated with a prospective employer which could reasonably be
         viewed as disparaging your personal or professional reputation.
         Notwithstanding the foregoing, nothing in this Subparagraph shall be
         required to impose a duty on Mr. Paul to respond other than truthfully
         to any question posed to him by any of your prospective employers.

                  (F) The Company will pay for costs incurred by you for your
         2003 Executive Physical that are not covered by the Company's group
         health insurance plan.

                  (G) Following the Revocation Period below, the Company will
         pay Career Momentum up to Six Thousand Dollars ($6,000.00) (Three
         Thousand Dollars ($3,000.00) per quarter) for assistance it provides
         you through the Separation Date.

                  (H) Following expiration of the Revocation Period described
         below, the Company will transfer to you its ownership interests in any
         non-group life insurance policies that it holds on your life.

                  (I) Provided that you sign the General Release in the form
         attached as Exhibit A in accordance with its terms, the Company will
         provide you with a severance payment in the gross, pre-tax amount of
         Fifty Thousand Dollars ($50,000.00). Please note that you cannot sign
         this General Release until after the Separation Date.

         Notwithstanding the foregoing, the health insurance benefits described
in Subparagraph 1 and the benefits described in Subparagraphs 1(B) and 1(G) will
immediately cease when you begin working for another employer. You agree to
notify the Company in writing the first business day you accept employment with
another employer should that occur before the Separation Date.

         (2) Your Undertakings. In exchange for the benefits provided to you
under Paragraph (1), above, you agree as follows:

                  (A) You agree, on behalf of yourself, your heirs, successors
         and assigns, to give up and release all claims which you have against
         the Released Parties which existed as of the time you sign this letter.
         "Released Parties" means the Company, its affiliates and subsidiaries,
         their successors and their respective past and present officers,
         directors, stockholders, agents and employees. This release applies,
         but is not limited to, any claims related in any way to your employment
         by the Company, whether they are presently known or unknown, or
         anticipated or unanticipated by you. Because you are age 40 or older,
         your acceptance of this proposal also will release any and all claims
         under the federal Age Discrimination in Employment Act. You should not
         construe this reference to age discrimination claims as in any way
         limiting the general and comprehensive nature of the release of claims
         provided under this Paragraph (2)(A). This release, however, does not
         apply to any rights under any workers' compensation law or any
         indemnification rights or claims you presently possess under the
         Company's corporate officer and director liability insurance contract,
         other contract or other officer and director indemnification rights by
         contract or under law. You agree to waive and give up any benefit
         conferred on you by any order or judgment issued in connection with any
         proceeding filed against any of the Released Parties regarding any
         claim released in this document. Nothing in this Paragraph shall be
         construed as an acknowledgment or admission by any of the Released
         Parties of any liability to you or of any wrongdoing under federal,
         state or local law or imply that you are a "prevailing party" under any
         law. The Company and the other Released Parties deny that you have any
         meritorious claims against any of them.

                  (B) On the earlier of (i) the first business day after you
         accept employment with another employer or (ii) within three (3)
         business days of the Separation Date, you agree to return to the
         Company all of its property and all of the property of its present and
         former officers, directors, stockholders, agents and employees which
         you possess or over which you have direct or indirect control,
         including, but not limited to, all monies, records and files, computer,
         credit cards, office keys, cellular telephones, Confidential
         Information (as that term is defined in the Restrictive Covenant
         Agreement) and electronically encoded information such as computer
         disks, etc. (and all



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         copies in any form of such records, files and Confidential
         Information), excepting that you will have the right but not the
         obligation to purchase the computer assigned to you by the Company at a
         market price to be mutually agreed upon, provided that all Confidential
         Information is deleted from your computer prior to any purchase.

                  (C) You agree that the financial terms of this letter and the
         discussions leading to its execution are confidential and you will not
         disclose the financial terms of this letter to anyone at any time,
         except to your spouse, if applicable, your attorneys, your tax and
         financial advisors and your personal bankers (who shall be informed of
         these requirements and agree to be bound by them for the benefit of the
         Company as a pre-condition of disclosure) or unless compelled to do so
         under subpoena or other judicial or regulatory process or agreed to by
         the Company. Notwithstanding the foregoing, you must disclose the
         provisions of Paragraphs (2)(D) and (E) and the June 30, 1998
         Restrictive Covenant Agreement between you and the Company
         ("Restrictive Covenant Agreement") to any entity or person who employs
         or contracts with you for your professional service at any time prior
         to October 1, 2005, and may disclose any information about the terms of
         this Agreement that the Company has disclosed in accordance with its
         filings under the securities laws.

                  (D) You agree that you will not at any time prior to October
         1, 2005, directly or indirectly assist any Competitor of the Company by
         providing services to it that are the same or are substantially similar
         to those that you provided to the Company within two (2) years prior to
         the date you sign this Agreement. This restriction shall apply only to
         activities by you in the Continental United States in which, you
         acknowledge, the Company presently does business. "Competitor" means
         any business that is engaged in the development and/or sale of computer
         software for use by educators in public or private schools to assess
         student performance, manage or monitor student practice skills,
         motivate learning and/or provide individualized exercises for
         assessment or practice of skills, and/or training related to such
         software; AND that sells such products and/or services in any state in
         which the Company sold in excess of One Hundred Thousand Dollars
         ($100,000.00) of products or services in the twelve (12) months
         preceding the time you begin to provide such services; AND where the
         Company's Confidential Information (as that term is defined in the
         Restrictive Covenant Agreement) or trade secrets would be useful to
         such business. This provision shall not restrict you with respect to
         services you may provide to a distinct business segment of a Competitor
         that does not compete with the Company.

                  (E) You agree that during the remaining term of your
         employment with the Company and for two (2) years following the
         Separation Date, you will not directly or indirectly induce or attempt
         to induce any person who is an employee of the Company to leave the
         employ of the Company or accept other employment with any other person
         or entity or to diminish the quantity or quality of services he/she
         provides to the Company; provided that the provisions of this paragraph
         will not be considered breached if such person or persons, independent
         of action on your part, apply and/or are accepted for employment with
         another person or entity with which you may be associated.

                  (F) You agree to make no remarks which could reasonably be
         viewed as denigrating the personal or professional reputation of the
         Company, its related businesses, or their officers, directors, or
         employees. This provision shall not restrict you in any way from making
         statements in any legal proceeding.

                  (G) You agree to take all reasonable actions to cooperate with
         the Company and its related entities in any litigation involving any of
         them, with the understanding that the Company will reimburse you for
         any expenses incurred by you in the course of such actions. Nothing in
         this provision should be interpreted to contemplate that you will offer
         anything other than truthful testimony in any such litigation.

                  (H) Although you have not committed any act that would make
         you ineligible for rehire, you agree not to seek employment with the
         Company at any time after the Separation Date.

         (3) Acceptance and Revocation Procedures. The Company wishes to ensure
that you voluntarily agree to the terms contained in this proposal and do so
only after you fully understand them. Accordingly, the following procedures
shall apply:

                  (A) You may agree to the terms of this document by signing and
         dating it and returning the signed and dated document, via mail, hand
         delivery, or overnight delivery, so that it is received by John
         Corrigall, Renaissance Learning, Inc., 2911 Peach Street, Wisconsin
         Rapids, Wisconsin 54494 on or before 5:00 p.m. Central Time of the
         twenty-fifth (25th) day after you receive this agreement.

                  (B) You have seven (7) days after signing this agreement
         within which to revoke your acceptance of it (the "Revocation Period").
         Such revocation will not be effective unless written notice of the
         revocation is, via mail, hand delivery, or overnight delivery, directed
         to and received by John Corrigall, Renaissance Learning,




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         Inc., 2911 Peach Street, Wisconsin Rapids, Wisconsin 54494 on or before
         5:00 p.m. Central Time of the seventh (7th) calendar day following the
         date you signed this document;

                  (C) This letter shall not become effective or enforceable
         until the Revocation Period has expired, at which time it will become a
         binding agreement between us. If you give timely notice of revocation,
         any of the offers contained in this letter shall be deemed withdrawn
         and all rights and claims of the parties, which would have existed, but
         for the execution of this letter, shall be restored.

                  (D) You represent and warrant to the Company that, in the
         event you choose to accept the terms of this proposal by signing this
         agreement, the date and time appearing above your name on the last page
         of this document shall be the actual date and time on which you have
         signed the agreement.

         (4) Miscellaneous. Should you accept the terms of the Company's
proposal, its terms will be governed by the following:

                  (A) This document constitutes the complete understanding
         between you and the Company concerning all matters affecting your
         employment with the Company and the termination thereof. If you accept
         this proposal, this document supersedes all prior agreements,
         understandings and practices concerning such matters, including, but
         not limited to, any Company personnel documents, handbooks, policies,
         incentive or bonus plans or programs, and any prior customs or
         practices of the Company; provided, however, that the Restrictive
         Covenant Agreement (except Paragraph 1) remains in effect and is
         incorporated by reference as a material provision of this document.

                  (B) You agree with the Company that irreparable injury may
         result to the Company, its business and/or financial prospects if you
         violate the covenants of Paragraphs (2)(C)-(F) of this document, and
         further understand and acknowledge that, your acceptance of the
         restrictions imposed by such covenants was a material factor in the
         Company's decision to confer upon you the benefits provided hereunder.
         You agree that in the event of your breach of any of these restrictive
         covenants, the Company shall be entitled, in addition to any other
         remedy, to an injunction enforcing such provisions.

                  (C) This document and its interpretation shall be governed and
         construed in accordance with the laws of the State of Wisconsin and
         shall be binding upon and insure to the benefit of the parties'
         successors; and

                  (D) In the event of any breach of any provision of this
         agreement, the breaching party shall, in addition to paying any damages
         caused by the breach, pay the reasonable attorneys' fees or costs
         incurred by the non-breaching party as a result of the breach.

                  (E) This Agreement is intended to inure to the benefit of the
         Company's successors and assigns.

                  (F) IF YOU ACCEPT THIS PROPOSAL, YOU WILL BE GIVING UP ANY
         LEGAL CLAIMS YOU HAVE AGAINST THE COMPANY AND OTHERS, INCLUDING, BUT
         NOT LIMITED TO, THOSE ARISING UNDER THE AGE DISCRIMINATION IN
         EMPLOYMENT ACT. THE COMPANY ENCOURAGES YOU TO CONSULT AN ATTORNEY PRIOR
         TO SIGNING THIS AGREEMENT.



                                Very truly yours,

                                RENAISSANCE LEARNING, INC.


                                By: /s/ Terrance D. Paul
                                    -----------------------------------------
                                    Terrance D. Paul, Chief Executive Officer



I agree with and accept the terms
contained in this proposal and agree
to be bound by them. Dated this
27th day of June, 2003.

Time:  1:57 PM  CDST

/s/ Michael H. Baum
-------------------
Michael H. Baum



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EXHIBIT A

                                 GENERAL RELEASE

         In exchange for a payment of severance pay in the pre-tax amount of
$50,000.00, I hereby agree, on behalf of myself, my heirs, successors and
assigns to release Renaissance Learning, Inc. ("the Company"), its affiliates
and subsidiaries and their respective past and present officers, directors,
stockholders, agents and employees (the "Released Parties") from any claims
arising on or before the time I sign this release. This includes, but is not
limited to, giving up any claims in any way related to my employment or the
ending of my employment relationship with the Company. This release of claims
includes any claims, whether they are presently known or unknown, or anticipated
or unanticipated by me. I understand that because I am age 40 or older, this
release of claims will include any which arise under the federal Age
Discrimination in Employment Act. I agree to waive and give up any benefit
conferred on me by any order or judgment issued in connection with any
proceeding filed against any of the Released Parties regarding any claim covered
by this release.

         I acknowledge that I can accept the terms of this agreement if I sign
and return it to the Company so that it is received by the later of (i) five (5)
days following my last day of employment with the Company; or (ii) twenty-one
(21) days from the date I receive this document. I understand that to be valid,
this agreement must be received by the Company in the manner described in
Paragraph (3)(A) of the Agreement to which this is an Exhibit, by the later of
the dates referred to above.

         I understand that I may revoke my acceptance of this document any time
within seven (7) days of signing it. I understand that notice of revocation of
my acceptance must be delivered in writing to the Company in the manner
described in Paragraph (3)(A) of the Agreement to which this is an Exhibit, with
the exception that the date shall be as described in this paragraph.

         I acknowledge that I have been advised to consult an attorney prior to
signing this document.


Michael H. Baum                  RENAISSANCE LEARNING, INC.


By: ________________________      By:  _________________________________________
                                       Terrance D. Paul, Chief Executive Officer

Dated:  ____________________      Dated:  ________________________