Document:

exhibit_1.htm

  

  

  

 

Exhibit 10.1

 

 

PLATO Learning, Inc

 

FY10 Leadership Incentive Plan

 

PURPOSE OF PLAN AND EFFECTIVE DATE: This PLATO Learning FY10 Leadership Incentive Plan (“Plan”) is established to (a) incent senior leadership of the Company to achieve key business priorities and objectives, (b) hold
senior leadership accountable for performance against targets, (c) encourage stock ownership across the senior leadership team and align their interest with those of shareholders, (d) focus on long-term success, and (e) provide a competitive compensation structure designed to attract and retain senior leadership talent at the Company.  The Plan is effective for the fiscal year beginning November 1, 2009 (“Effective Date”).

 

PLAN STRUCTURE: The Plan is structured to provide eligible leadership employees (“Participants”) an opportunity to earn a cash incentive and an equity incentive aligned to each Participant’s position with the
Company.

Cash Incentive: The cash incentive consists of a target cash payout expressed as a percentage of the Participant’s base salary and is conditioned on the achievement of pre-determined performance measures as specified in the Plan (“Cash
Incentive”).  The performance measures have minimum threshold performance levels.  Assuming at least one of these minimum thresholds is met, the actual cash incentive earned can range from 12.5% of the target incentive to a maximum of 150% of the target incentive (subject to the “Payout Modifier” provisions discussed below). The entire cash incentive earned under this Plan, if any, will be paid in a single lump-sum amount in December 2010.

Equity Incentive: The equity incentive consists of (i) a grant of time-vested, stock-settled Stock Appreciation Rights (“SARs”), (ii) a grant of the right to earn time-vested Performance Shares conditioned
on achievement of certain pre-determined performance measures “Performance Shares Incentive”, and (iii) a grant of Restricted Stock to be made at the discretion of the Compensation Committee of the Board of Directors (“Restricted Stock Grant”).

SARs: SARs are granted on the date the Plan is approved by the Compensation Committee (“Grant Date” or “Approval Date”).  The SARs are granted with a grant price equal to $5.00 per share, or
a premium of approximately 25% above the fair market value of the Company’s common stock on the Grant Date. All SAR’s have a three year vesting period beginning one year after the Grant Date. To be eligible to receive the SARs, Participants must be employed by the Company on the Grant Date.

Performance Shares: The right to earn the Performance Shares Incentive is granted to the Participants on the Approval Date with the actual issuance of shares occurring after the end of the fiscal year when the performance criteria are evaluated and the actual number of shares is
determined (“Issue Date”).  To be eligible to receive the Performance Shares Incentive, Participants must be employed by the Company on the Issue Date. The performance measures have minimum threshold performance levels.  Assuming these thresholds are met, the actual number of Performance Share earned can range from 12.5% of the target shares to a maximum of 125% of the target shares (subject to the “Payout Modifier”
provisions discussed below).  The Performance Shares vest one-third on the Issue Date with the remaining two-thirds vesting in equal amounts on approximately the first and second anniversary dates thereafter.

Discretionary Restricted Stock: The Restricted Stock Grant, if any, will be granted in December 2010 after the Committee has evaluated performance of the CEO and CFO during fiscal year 2010.  In determining the number of shares, if any, of the Restricted Stock Grant to
be awarded to the CEO and CFO, the Compensation Committee will consider a number of factors including individual and Company performance relative to key operational and strategic goals, quantitative and qualitative assessment of Company and individual performance relevant to growing shareholder value over the long-term, and the levels of past equity awards.  To be eligible to receive the Restricted Stock Grant, the Participant must be employed by the Company on the date of grant. The Restricted Stock
Grant, if any, will vest one-third on the date of grant with the remaining two-thirds vesting in equal amounts on approximately the first and second anniversary dates thereafter.

All SARs, Performance Shares and Restricted Stock, including vesting provisions, are subject to the terms of this Plan and their respective stock award agreements and will be granted pursuant to the provisions of the PLATO Learning 2006 Stock Incentive Plan.

ELIGIBILITY AND INCENTIVE TARGETS: Listed in the table below are the Participants eligible to participate in the Plan and their respective target incentive opportunities as of October 31, 2010.

	
Position
	
Target Cash Incentive

 (% of Base Salary
	
Equity Incentive - % of Base Salary
	
Equity Incentive - # of Shares

	
Stock Appreciation Rights
	
Performance Share
	
Discretionary Restricted Stock
	
# of Stock Appreciation Rights
	
Target Performance Shares
	
Discretionary Restricted Stock

	
Chief Executive Officer
	
60%
	
22.5%
	
45.0%
	
22.5%
	
49,000
	
44,000
	
22,000

	
Chief Financial Officer
	
40%
	
15%
	
30%
	
15%
	
22,000
	
20,000
	
10,000

Notes to Incentive Target Table:

	
(1)  
	
The SARs are granted with a strike price of $5.00 per share, a premium of approximately 25% to the estimated market price of the Company’s common stock on the Approval Date;

	
(2)  
	
The number of SARs is determined by multiplying these individuals’ base salaries times their base salary percentage for SARs as indicated in the table and dividing by a Black-Scholes value of the premium-priced SAR of $1.81, rounded up to the nearest one-thousand shares. The Black-Scholes value approximates the per share fair value of the SAR on
the Approval Date as determined in accordance with Company’s application of Statement of Financial Accounting Standards No. 123(R) (“FAS 123(R)”).

	
(3)  
	
The number of target Performance Shares and maximum Restricted Stock shares is determined by multiplying these individuals base salaries times their base salary percentages for Performance Shares and Restricted Stock as indicated in the table and dividing by $4.00, the approximate market price of the Company’s common stock on the Approval Date.  Shares
are rounded up to the nearest thousand.

CASH AND PERFORMANCE SHARE INCENTIVE MEASURES: The actual amount of the Cash Incentive and Performance Shares Incentive earned is based upon the achievement of the following four key performance measures, weighted equally across all measures:

	
1.  
	
PLE Revenue. PLE Revenue is defined as GAAP subscription revenue earned in FY10 on all PLE products.

	
2.  
	
PLE Annual Order Value. PLE Annual Order Value is defined as the order value associated with the first 12 months of all PLE subscription contracts signed in FY10.

	
3.  
	
PLE Renewal Rate. The PLE Renewal Rate is equal to 1 minus Expired Customer Total Order Value divided by the Total Renewal Opportunities, where:

	
a.  
	
Expired Customer Total Order Value is equal to the sum of the total order value of subscriptions due for renewal in the year that were not renewed by PLE customers who, upon non-renewal, had no remaining subscriptions on PLE (i.e. expired PLE customers), and

	
b.  
	
Total Renewal Opportunities is equal to the sum of the total order value of all PLE subscriptions due for renewal in the fiscal year.

	
4.  
	
Adjusted EBITDA. Adjusted EBTIDA is defined as GAAP Earnings Before Interest, Taxes, Depreciation and Amortization, less GAAP capitalized software development costs, and adjusted for any non-recurring or one-time charges or benefits as approved by the Committee.

The minimum, target and maximum levels of each of these performance measures and the corresponding percentage of the target Cash Incentive and Performance Share Incentive are as follows (dollars in millions):

	  	
PLE Subscription Revenue
	
PLE Annual Order Value
	
PLE Renewal Rate
	
Adjusted EBITDA
	
Percent of Target Cash Incentive Earned*
	
Percent of Target Performance Shares Earned*

	  	
25% Weighting
	
25% Weighting
	
25% Weighting
	
25% Weighting
	  	  
	
Threshold
	
$XX.X
	
$XX.X
	
XX%
	
$XX.X
	
50%
	
50%

	
Target
	
$XX.X
	
$XX.X
	
XX%
	
$XX.X
	
100%
	
100%

	
Maximum
	
$XX.X
	
$XX.X
	
XX%
	
$XX.X
	
150%
	
125%

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

OTHER TERMS AND CONDITIONS:

Payout Modifier: The computed cash and Performance Share incentive as determined above 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 the Performance Share Incentive may be different and may be applied to specified Participants or all Participants.

Rights Upon 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 stock appreciation rights, performance shares and restricted stock
awards under the Plan are governed by each Participants equity grant agreements issued in association with the Plan.

Rights with respect to the Cash Incentive are as follows:

(Note: Cause, Good Reason and Change in Control have the meanings ascribed to them in each Participant’s respective Stock Appreciation Rights agreement under this Plan.

 

	
·  
	
Voluntary Termination Without Good Reason or Involuntary Termination with Cause. In the event a Participant voluntarily terminates his or her employment with the Company without Good Reason, or is involuntarily terminated by the Company with Cause, prior to the date the Cash Incentive is
paid, the Participant will not be eligible for any Cash Incentive payout under this Plan.

 

	
·  
	
Involuntary Termination without Cause of Voluntary Termination for Good Reason.  In the event a Participant’s employment with the Company is terminated involuntarily without Cause or voluntarily for Good Reason prior to the date the cash incentive is paid, his/her Cash Incentive
amount will be prorated for the number of days in the fiscal year that the Participant was an active PLATO employee.

 

	
·  
	
Change in Control.  In the event of a Change in Control, (a) the Participant’s Cash Incentive payment will be pro-rated through the effective date of the Change in Control based on the achievement of the performance measures relative to the targets established in the Company’s
operating plan through the date of the Change in Control, and (b) an amount equal to $200,000 and $100,000 for the CEO and CFO, respectively, shall be added to their pro-rated Cash Incentive. Such payments must be paid within 15 days of the Change in Control and in no event later than 2-1/2 months following the end of the calendar year or the Company’s tax year in which the Change in Control occurred.

 

	
·  
	
Death or Disability. If a Participant dies or becomes disabled prior to the date the Cash Incentive is paid, his/her Cash Incentive payment amount will be prorated to include only the time period for which the Participant was an active PLATO employee. 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.

 

Paid or Unpaid Leave of Absence.  If a Participant is on a paid or unpaid leave of absence for more than 120 days between November 1, 2009 and October 31, 2010 his/her Cash Incentive and Performance Share incentive may 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 the eligibility for pro-rated participation in the Plan of those individuals who are hired or promoted within the first six months of the fiscal year.

Plan Administration. The plan will be administered by the Compensation Committee of the Board of Directors of the Company, which reserves the right to, at any time, amend, interpret, or terminate the Plan, in whole or in part. The obligations of the Company with respect to
the Plan shall be subject to modification in such manner and to such extent as the Compensation Committee deems necessary by agreement, or as may be necessary to comply with any law, regulation or governmental order pertaining to compensation.exhibit_2.htm

  

  

  

Exhibit 10.2

PLATO LEARNING, INC.

2006 STOCK INCENTIVE PLAN

FY10 LEADERSHIP INCENTIVE PLAN

STOCK APPRECIATION RIGHTS AGREEMENT

PLATO Learning, Inc., a Delaware corporation (the “Company”), hereby grants to [ (Name) ]  (the
“Participant”) on this  [ (Date) ]  (the “Grant Date”) an Award of [ (Number) ]  stock
appreciation rights (“SARs”) pursuant to the provisions of the PLATO Learning, Inc. 2006 Stock Incentive Plan (the “Plan”). Each SAR represents a contingent right to receive shares of the Company’s common stock, $.01 par value (“Shares”), in the future based upon the appreciation
in value of the Share underlying each SAR above  [ (Price) ]  (the “Grant Price”), subject to the terms and conditions set forth in this Agreement (this “Agreement”).
Any term capitalized herein, but not defined, will have the meaning set forth in the Plan.

1. SAR Award Subject to Acceptance of Agreement.

The Award of any SAR pursuant to this Agreement become null and void unless the Participant shall accept this Agreement by executing it in the space provided below and return it to the Company within 45 days following the Grant Date.

2. Terms of SAR Award.

2.1 Maximum Term of SARs. In no event may a SAR be exercised, in whole or in part, after 5:00 p.m., Minneapolis time, on the date that is eight (8) years after the Grant Date (the “Expiration Date”).

2.2 Vesting of SARs. Except as otherwise provided herein and in Section 2.4, the SARs will vest and become exercisable as to one-third of the Shares to which the SARs relate on [_____________], 20[__]; (2) one-third of the Shares to which the SARs relate on [_____________],
20[__]; and (3) one-third of the Shares to which the SARS relate on [_____________], 20[__]. Each of the vesting dates is contingent upon the Participant having provided continuous Service to the Company or an Affiliate from the Grant Date through each such vesting date. Any SARs that are not vested upon the termination of the Participant’s Service shall be forfeited.

2.3 Method of Exercise and Distribution of SARs. The SARs may be exercised by written notice to the Company indicating the number of Shares to which the SARs relate being exercised. When a SAR is vested and exercisable, it may be exercised in whole or in part at any time
as to any or all full Shares under the SAR. Any amount due to the Participant upon exercise of a SAR will be paid in Shares with a Fair Market Value equal to the amount, if any, by which the Fair Market Value of a Share on the date of exercise exceeds the Grant Price of the SAR, rounded down to the nearest whole Share. The Participant will not receive a distribution if the Fair Market Value on the date of exercise does not exceed the Grant Price.

2.4 Termination of SAR. Each vested SAR shall terminate and shall cease to be exercisable as follows:

(a) For purposes of this Agreement, the terms “Good Reason” and “Cause” shall have the meanings given to them in the Participant’s Employment Agreement with the Company as in effect from time to time; provided that, if no such Employment Agreement is in effect, such terms shall have the following meanings:

(i)      “Cause” shall mean Participant’s:

(1)         conviction or indictment for, or plea of guilty or nolo contendere to, any felony or gross misdemeanor;

(2)         conviction or indictment for, or plea of guilty or nolo contendere to, any crime involving dishonesty, fraud, or breach of trust under any law of the United States or any State thereof;

(3)         engagement in any conduct or gross negligence that in either case materially injures the Company, any of its subsidiaries, its customers or vendors; or

(4)         non-performance of assigned duties, insubordination, disrespectful treatment by Participant of Company employees or a violation of a material provision of a Company policy or code of conduct.

(ii)      “Good Reason” shall exist if the Company, without Participant’s written consent:

(1)         materially reduces the nature, scope or extent of Participant’s responsibilities; or

(2)         reduces Participant’s annual salary.

(b) Upon voluntary termination with Good Reason or involuntary termination without Cause, of such Participant’s Service with the Company, any SAR held by such Participant will vest and be exercisable until and including the Expiration Date upon (i) Participant’s execution of a general release and waiver of all claims against
the Company and its directors, officers and subsidiaries, in the form prepared by the Company (the “Release”) and (ii) the expiration of any rescission period provided by applicable law without the Participant taking any action to rescind the Release.

(c) Upon voluntary termination without Good Reason of such Participant’s service with the Company, any SAR held by such Participant may thereafter be exercised to the extent it was exercisable at the time of such termination, but may not be exercised after one year after such termination, or the Expiration Date, whichever period
is the shorter.

(d) In the event Participant’s Service with the Company is terminated for Cause, all unexercised SARs granted to such Participant shall immediately terminate. In the event that Participant shall forfeit rights to receive all or a portion of the Shares to which the SARs relate, Participant shall, within 10 days of the date of
the Company’s written request, return this Agreement to the Company for cancellation.

(e) If a Participant’s Service with the Company and any Affiliate terminates by reason of a change in control (as defined in the Plan), death or Disability, any SAR held by such Participant will vest immediately and be exercisable until and including the Expiration Date.  In the case of termination of Participant’s
Service by reason of Death, such SAR shall be exercisable by the legal representative of the estate or by the legatee of the Participant under the will of the Participant.

(f) If a Participant’s Service with the Company and any Affiliate terminates by reason of Retirement, any SAR held by such Participant may thereafter be exercised, to the extent it was exercisable at the time of termination due to Retirement, but may not be exercised after -thirty-six months from the date of such termination
of Service or the expiration of the stated term of the SAR, whichever period is the shorter.

2.5 Withholding Taxes. The Company will have the right to deduct or withhold, or require the Participant to remit to the Company, the minimum amount necessary to satisfy federal, state and local taxes, domestic or foreign, as required by law or regulation to be withheld with
respect to any taxable event arising under this Plan, including by withholding Shares otherwise distributable to the Participant pursuant to this Agreement.

3. Judicial Modification. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the parties agree that (i) the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, (ii) the parties shall request that the court exercise that power, and (iii) this Agreement shall be enforceable as so modified after the expiration of the time
within which the judgment or decision may be appealed.

4. Transferability of SARs. The SARs awarded under this Agreement are transferable only by will or the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)). Each SAR will be exercisable during the Participant’s
lifetime only by the Participant or by his or her guardian or legal representative. The Committee may, in its discretion, require a guardian or legal representative to supply it with evidence the Committee deems necessary to establish the authority of the guardian or legal representative to exercise a SAR on behalf of the Participant.

5. Securities Law Requirements.

(a) The SARs awarded under this Agreement are not exercisable in whole or in part, if exercise may, in the opinion of counsel for the Company, violate the 1933 Act (or other federal or state statutes having similar requirements), as it may be in effect at that time, or cause the Company to violate the terms of Section 4.1 of
the Plan.

(b) The SARs are subject to the further requirement that, if at any time the Committee determines in its discretion that the registration, listing or qualification of the Shares subject to the SARs under any federal securities law, securities exchange requirements or under any other applicable law, or the consent or approval of any
governmental regulatory body, is necessary as a condition of, or in connection with, the granting of a SAR, the SAR may not be exercised in whole or in part, unless the necessary registration, listing, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.

(c) With respect to individuals subject to Section 16 of the Exchange Act, transactions under this Agreement are intended to comply with all applicable conditions of Rule 16b-3, or its successors under the Exchange Act. To the extent any provision of the Agreement or action by the Committee fails to so comply, the Committee
may determine, to the extent permitted by law, that the provision or action will be null and void.

6. No Obligation to Exercise SAR. The grant of a SAR imposes no obligation upon the Participant (or upon a transferee of a Participant) to exercise the SAR.

7. No Limitation on Rights of the Company. The grant of a SAR will not in any way affect the right or power of the Company to make adjustments, reclassification or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer
all or any part of its business or assets.

8. Plan and SARs Not a Contract of Employment. Neither the Plan nor this Agreement is a contract of employment, and no terms of employment of the Participant will be affected in any way by the Plan, this Agreement or related instruments except as specifically provided
therein. Neither the establishment of the Plan nor this Agreement will be construed as conferring any legal rights upon the Participant for a continuation of employment, nor will it interfere with the right of the Company or any Affiliate to discharge the Participant and to treat him or her without regard to the effect that treatment might have upon him or her as a Participant.

9. Participant to Have No Rights as a Stockholder. The Participant will have no rights as a stockholder with respect to any Shares subject to the SAR.

10. No Deferral Rights. Notwithstanding anything in Article 13 of the Plan to the contrary, there shall be no deferral of payment, delivery or receipt of any amounts hereunder.

11. Notice. Any notice or other communication required or permitted hereunder must be in writing and must be delivered personally, or sent by certified, registered or express mail, postage prepaid. Any such notice will be deemed given when so delivered personally or,
if mailed, three days after the date of deposit in the United States mail, in the case of the Company to 10801 Nesbitt Avenue South, Bloomington, Minnesota, 55437, Attention: Corporate Secretary and, in the case of the Participant, to the last known address of the Participant in the Company’s records.

12. Governing Law. This Agreement and the SARs will be construed and enforced in accordance with, and governed by, the laws of the State of Delaware, determined without regard to its conflict of law rules.

13. Plan Document Controls. The rights granted under this Agreement are in all respects subject to the provisions of the Plan to the same extent and with the same effect as if they were set forth fully herein. If the terms of this Agreement conflict with the terms of
the Plan document, the Plan document will control.

PLATO LEARNING, INC.

By:                                                      

[Company Executive]

[Title]

Accepted this      day of _____________, 200__

[Name]

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