Document:

June 20, 1997

 

 

February 13, 2006

 

Mr. Mark Thimmig

773 Kensington Way

Copley, OH  44321

Dear Mark,

On behalf of the Board of Directors of Varsity Group Inc. (the "Company"), I am pleased to offer you the position of President and Chief Executive Officer.  Speaking for myself, as well as the other members of the Company's Board, we are all extremely impressed with your credentials and we look forward to your future success in this position.

The terms of your new position with the Company are as set forth below:

1.Position.

	

 a.You will become President and Chief Executive Officer for the Company, working out of the Company's offices in Washington, DC.  

b.You agree to the best of your ability and experience that you will at all times loyally and conscientiously perform all of the duties and obligations required of and from you pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company.  During the term of your employment, you further agree that you will devote all of your business time and attention to the business of the Company.  

2. Start Date.  Subject to fulfillment of any conditions imposed by this letter agreement, you will commence this new position with the Company on or about February 15, 2006.

3.Proof of Right to Work.   For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States.  Such documentation must be provided to us within three (3) business days of your date of hire.

 

	Compensation. 

	Salary. You will be paid a monthly salary of $21,666.67, which is equivalent to $260,000 on an annualized basis.  Your salary will be payable in two equal payments per month pursuant to the Company's regular payroll policy.

	Bonus.  You shall be eligible for a discretionary bonus based upon certain sales goals and individual performance objectives established jointly and agreed upon by you and the Company's Board, in accordance with Company policy.  You must be actively employed with the Company at the time of bonus payment to be eligible for any bonus payment.   Your cash bonus opportunity shall be equal to 50% of your base salary and be paid at the end of the calendar year.  

	Stock Options.      In connection with the commencement of your employment, the Company the Board of Directors will grant you an option to purchase 100,000 shares of the Company's Common Stock ("Shares").  These option shares will vest over five years monthly.  Vesting will, of course, depend on your continued employment with the Company.   Options will accelerate over two years (40% after year one, the remaining in year two) for achieving targets established jointly and agreed upon by you and the Company's Board.   The option will be an incentive stock option to the maximum extent allowed by the tax code and will be subject to the terms of the Company's Second Amended and Restated 1998 Stock Option Plan and the Stock Option Agreement between you and the Company.  [See Appendix B: Incentive Stock Option Agreement]

	Stock Grant.  You shall be granted 300,000 shares of restricted stock over four years, with restrictions lapsing monthly. [See Appendix C: Restricted Stock Agreement]

	Severance.  Should you be terminated without Cause or resign for Good Reason, the Company shall pay you, upon your termination, your base salary through the date of termination at the rate in effect at the time of your termination and, in lieu of any further salary or bonus payments to you for periods subsequent to the date of termination, the Company shall pay, as severance pay to you, an amount equal to twelve (12) months of your base salary in effect as of the date of termination, payable monthly in twelve (12) equal installments after termination of employment

For purposes of this offer, termination "for Cause" shall arise where termination results from (A) conviction of, or the pleading of nolo contendere to, a felony; (B) The failure of you for any reason, within ten (10) days after receipt by you of written notice from the Company, to correct, cease or otherwise alter any failure to comply with any lawful instruction from the Board of Directors or its Chairman, or other action or omission to act which will materially or adversely affect its business or operations; (D) misconduct by you which is of such a serious and substantial nature that a reasonable likelihood exists that such misconduct will materially injure the reputation of the Company if you were to remain employed by the Company; and (E) proven gross negligence

For purposes of this offer, "Good Reason" shall mean (A) the termination of your employment with the Company other than for Cause, (B) your voluntary termination of employment with the Company within ninety (90) days following any of (i) a decrease in Executive's base salary below its level in effect on the date prior to such termination, (ii) a material reduction in Executive's job responsibilities without Executive's consent, or (C) a Change of Control of the Company followed, within two years after such Change of Control, by (i) the termination of Executive's employment with the Company other than for Cause, or (ii) the Executive's voluntary termination of employment with the Company within ninety (90) days following any of (x) a decrease in Executive's base salary below its level in effect on the date prior to such termination, or (y) a material reduction in Executive's job responsibilities without Executive's consent.

5.Benefits.

	Insurance Benefits.   You are eligible for Company sponsored medical, dental and vision insurance.

	Miscellaneous.   You are eligible to participate in the Company sponsored 401K Plan.

	Vehicle Expense.  You shall be eligible for a $700 per month car allowance. 

	Relocation Expenses.  You shall be eligible to be reimbursed for the following actual relocation expenses up to an aggregate amount of $100,000.  Should you be terminated for Cause or resign without Good Reason within twelve months of your start date, you will be responsible for reimbursing the Company for 100% of the relocation expenses reimbursed to you as part of this offer. 

	Business Equipment.  You will be provided with Company paid technology tools in support of your role and responsibilities which will include: Cell Phone, Blackberry, Computers, printers and software for Office and Homes with high speed connectivity. All connectivity and usage fees will be paid by the Company.   You may select reasonable equipment to be provided by the Company. Such equipment may also be exchanged for newer versions or models from time-to-time.

	Business Expenses.  You are entitled to full reimbursement for all business related expenses incurred by you including travel and entertainment with appropriate documentation provided to the Company to satisfy the substantiation requirements of Internal Revenue Code Section 274 and the regulations promulgated there under. You are entitled to utilize and be reimbursed for first class airline, hotel and restaurant arrangements at your discretion. If a company credit card is available, you will be offered a card for such expenses with an appropriate credit limit to meet such typical monthly expenditures. The Company credit card will only be used for Company related business expenses.

	Office Support.   You may hire a dedicated personal secretary/ assistant to manage all customary executive support functions. Such employment will be at the customary wage and benefit levels for such positions within the local DC market area.

	Professional Meeting and Continuing Education.    You may take time off from work to attend meetings of professional organizations or industry trade associations and to participate in training or continuing educational programs or courses. Any fees and expenses associated with such travel, attendance or participation will be paid by the Company.

6.Confidential Information and Invention Assignment Agreement.  Your acceptance of this offer and commencement of employment with the Company is contingent upon the execution, and delivery to an officer of the Company, of the Company's Confidential Information and Invention Assignment Agreement, a copy of which is enclosed for your review and execution (the "Confidentiality Agreement"), prior to or on your Start Date.

7. Confidentiality of Terms.   You agree to follow the Company's strict policy that employees must not disclose, either directly or indirectly, any information, including any of the terms of this agreement, regarding salary, bonuses, or stock option allocations to any person, including other employees of the Company; provided, however, that you may discuss such terms with members of your immediate family and any legal, tax or accounting specialists who provide you with individual legal, tax or accounting advice.

8. At-Will Employment.   Notwithstanding the Company's obligation described above, your employment with the Company will be on an "at will" basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason, subject to the Company's severance obligations set forth in Paragraph 4.e.

We are delighted to be able to extend you this offer and look forward to working with you.  To indicate your acceptance of the Company's offer, please sign and date this letter in the space provided below and return it to me, along with a signed and dated copy of the Confidentiality Agreement.  This letter, together with the Confidentiality Agreement, set forth the terms of your employment with the Company and supersedes any prior representations or agreements, whether written or oral.  This letter may not be modified or amended except by a written agreement, signed by the Company and by you.

 

VARSITY GROUP INC. INC.

By:

/s/ Eric J. Kuhn

Chairman of the Board

 

 

ACCEPTED AND AGREED:

/s/ Mark F. Thimmig

February 14, 2006Varsity Books Restricted Stock Agreement (ddr comments)

RESTRICTED STOCK AGREEMENT

THIS RESTRICTED STOCK AGREEMENT, dated as of February 17, 2006 (the "Award Date"), is made by and between VARSITY GROUP INC., a Delaware corporation (the "Corporation"), and Mark Thimmig, an employee of the Corporation (the "Employee"):

WHEREAS, the Corporation has established The Second Amended and Restated 1998 Stock Plan of Varsity Group Inc., as amended (the "Plan");

WHEREAS, the Corporation wishes to carry out the Plan (the terms of which are hereby incorporated by reference and made a part of this Agreement);

WHEREAS, the Plan provides for the issuance of shares of the Corporation's Common Stock (as defined hereunder), subject to certain restrictions thereon (hereinafter referred to as "Restricted Stock");

WHEREAS, the Corporation's Board of Directors (the "Board") has determined that it would be to the advantage and best interest of the Corporation and its stockholders to issue the shares of Restricted Stock provided for herein to the Employee in consideration of services to the Corporation and/or its subsidiaries, and the Board of Directors of the Corporation has approved the issuance of such shares of Restricted Stock to the Employee upon the terms and conditions set forth herein; and

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I.

DEFINITIONS

Whenever the following terms are used below in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan.  The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.

Section 1.1  Cause.

  "Cause" shall mean without limitation:  (i) conviction of, or the pleading of nolo contendere to, a felony, (ii) a material breach of Employee's duties, (iii) misconduct by Employee which is of such a serious and substantial nature that a reasonable likelihood exists that such misconduct will materially injure the reputation of the Corporation if Employee was to remain on the Corporation's Board of Directors, and (v) proven gross negligence.

Section 1.2Change of Control Event.

  "Change of Control Event" is defined in Section 3.5.

Section 1.3Exchange Act.

  "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

Section 1.4Restrictions.

  "Restrictions" shall mean the forfeiture and transferability restrictions imposed upon Restricted Stock under this Agreement.

Section 1.5Restricted Stock.

  "Restricted Stock" shall mean Common Stock of the Corporation issued under this Agreement and subject to the Restrictions imposed hereunder.

Section 1.6Rule 16b-3.

  "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time.

Section 1.7Secretary.

  "Secretary" shall mean the Secretary of the Corporation.

Section 1.8Securities Act.

  "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.9Termination or Resignation of Employee.

  "Termination or Resignation of Employee" shall mean the time when the relationship between the Employee and the Corporation, a Parent, or a Subsidiary is ended for any reason, including, but not by way of limitation, a resignation, discharge, death, disability or retirement.  The Board of Directors, in its absolute discretion, shall determine the effect of all other matters and questions relating to Termination or Resignation of Employee, including, but not by way of limitation, the question of whether a Termination or Resignation of Employee resulted from a discharge for Cause, and all questions of whether a leave of absence constitutes a Termination or Resignation of Employee.  

Section 1.10Vested Shares.

  "Vested Shares" is defined in Section 3.1.

ARTICLE II.

ISSUANCE OF RESTRICTED STOCK

Section 2.1Issuance of Restricted Stock

.  For good and valuable consideration which the Board of Directors has determined to be in excess of the par value of its Common Stock, on the date hereof the Corporation issues to the Employee 300,000 shares of its Common Stock ("Shares") upon the terms and conditions set forth in this Agreement.

Section 2.2Consideration to the Corporation

.  As consideration for the release of the restrictions on the Restricted Stock set forth herein, the Employee agrees to render faithful and efficient services to the Corporation, a Parent, or a Subsidiary with such duties and responsibilities as the Corporation shall from time to time prescribe for the remainder of Employee's employment.  

ARTICLE III.

RESTRICTIONS

Section 3.1Repurchase of Restricted Stock

.  The Corporation may repurchase the Restricted Stock from the Employee upon the terms and conditions hereinafter set forth within sixty (60) days after resignation by the Employee for any reason or sixty (60) days after termination or resignation of the Employee by the Corporation with or without Cause and with or without advance notice, unless such shares have vested, as provided below.  

In the event the Corporation exercises its right to repurchase, the Corporation shall promptly pay to the Employee an amount per share equal to the original purchase price paid per share (i.e., $0.001 per share) by the Employee for the Restricted Stock shares, as adjusted from time to time for stock splits, stock dividends, stock combinations and other recapitalizations.

In the event that Employee is unable to, or for any reason does not, promptly deliver the certificate or certificates evidencing the Restricted Stock shares repurchased by the Corporation (or any assignment form) to the Corporation in accordance with this Agreement, the Corporation may deposit the purchase price for such repurchased shares (in cash or by good check) with any bank doing business within a fifty (50) mile radius of the Corporation's principal office, to be held by such bank in escrow until withdrawn by the Employee.  Upon such deposit by the Corporation and upon delivery of written notice of such deposit to the Employee, such Restricted Stock shares shall at such time be deemed to have been repurchased by the Corporation, the Employee shall have no further rights thereto and the Corporation shall record such transfer in its stock transfer book.  Notwithstanding the foregoing provisions of this Section 3.1, the right to repurchase shall not apply to any "Vested Shares" held by the Employee.  

"Vested Shares" shall mean that number of shares of Restricted Stock that have vested in accordance with the terms set forth in the following sentence.   Shares of Restricted Stock will vest in equal monthly installments of 6,250 Shares on the 17th day of each month, beginning on March 17, 2006, with a final vesting date of March 17, 2010. 

Section 3.2Legend.

  Certificates representing shares of Restricted Stock issued pursuant to this Agreement shall, until all restrictions lapse and new certificates are issued pursuant to Section 3.4, bear the following legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN VARSITY GROUP INC. AND THE HOLDER OF THE SECURITIES.  PRIOR TO VESTING OF OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES.  COPIES OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT THE OFFICES OF THE CORPORATION AT 1850 M St., NW , SUITE 1150 WASHINGTON, D.C., 20036.

Section 3.3Lapse of Restrictions

.  Upon the vesting of the shares of Restricted Stock as provided in Section 3.1, the Corporation shall cause new certificates to be issued with respect to such Vested Shares and delivered to the Employee or his legal representative, free from the legend provided for in Section 3.3 and any of the other Restrictions.  Such Vested Shares shall then cease to be considered Restricted Stock subject to the terms and conditions of this Agreement.  Notwithstanding the foregoing, no such new certificate shall be delivered to the Employee or his legal representative unless and until the Employee or his legal representative shall have paid to the Corporation in cash or by check the full amount of all federal, state and local withholding or other employment taxes applicable to the taxable income of the Employee resulting from the lapse of the Restrictions.

Section 3.4Merger, Consolidation, Acquisition, Liquidation or Dissolution.

  Upon the merger or consolidation of the Corporation into another corporation, the exchange of all or substantially all of the assets of the Corporation for the securities of another corporation, the acquisition by another corporation or person (excluding any employee benefit plan of the Corporation or any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation) of all or substantially all of the Corporation's assets, the acquisition by another corporation or person of more than 50% of the Corporation's then outstanding voting stock, or the liquidation or dissolution of the Corporation (each a "Change of Control Event"), all shares of Restricted Stock shall automatically vest immediately prior to the effective date of such Change of Control Event and all Restrictions with respect to such shares of Restricted Stock shall immediately expire.

Section 3.5Restrictions On New Shares.

  In the event that the outstanding shares of the Corporation's Common Stock are changed into or exchanged for cash or a different number or kind of shares or other securities of the Corporation, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend, or combination of shares (excluding any employee benefit plan of the Corporation or any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation), such new, additional or different shares or securities which are held or received by the Employee in his capacity as a holder of Restricted Stock shall be considered to be Restricted Stock and shall be subject to all of the Restrictions, except as provided in Section 3.5 or unless the Board of Directors provides otherwise.

 

ARTICLE IV.

MISCELLANEOUS

Section 4.1Administration.  

The Board of Directors shall have the power to interpret the Plan, this Agreement and all other documents relating to Restricted Stock and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules.  All actions taken and all interpretations and determinations made by the Board of Directors in good faith shall be final and binding upon the Employee, the Corporation and all other interested persons.  No member of the Board of Directors shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Restricted Stock and all members of the Board of Directors shall be fully protected by the Corporation in respect to any such action, determination or interpretation.  

Section 4.2Restricted Stock Not Transferable.

  No Restricted Stock or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 4.2 shall not prevent transfers by will or by applicable laws of descent and distribution.

Section 4.3Conditions to Issuance of Stock Certificates.

  The Corporation shall not be required to issue or deliver any certificate or certificates for shares of stock pursuant to this Agreement prior to fulfillment of all of the following conditions:

	The admission of such shares to listing on all stock exchanges on which such class of stock is then listed;
	The completion of any registration or other qualification of such shares under any state or Federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Board of Directors shall, in its absolute discretion, deem necessary or advisable;
	The obtaining of any approval or other clearance from any state or Federal governmental agency which the Board of Directors shall, in its absolute discretion, determine to be necessary or advisable;
	The payment by the Employee of all amounts required to be withheld, under federal, state and local tax laws, with respect to the issuance of Restricted Stock and/or the lapse or removal of any of the Restrictions; and
	The lapse of such reasonable period of time as the Board of Directors may from time to time establish for reasons of administrative convenience.

Section 4.4Escrow.

  The Secretary or such other escrow holder as the Board of Directors may appoint shall retain physical custody of the certificates representing Restricted Stock, including shares of Restricted Stock issued pursuant to Section 3.6, until all of the Restrictions expire or shall have been removed; provided, however, that in no event shall the Employee retain physical custody of any certificates representing Restricted Stock issued to him.

Section 4.5 Notices.

  Any notice to be given under the terms of this Agreement to the Corporation shall be addressed to the Corporation in care of its Secretary, and any notice to be given to the Employee shall be addressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this Section 4.5, either party may hereafter designate a different address for notices to be given to it or him.  Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Corporation of his status and address by written notice under this Section 4.5.  Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

Section 4.6Rights as Stockholder.

  Except as otherwise provided herein, the Employee, upon the issuance of a new share certificate pursuant to Sections 3.3 and 4.3, shall have all the rights of a stockholder with respect to his Restricted Stock, including the right to vote all of the shares whether vested or unvested and the right to receive all dividends or other distributions paid or made with respect to all of the shares whether vested or unvested.  The Employee shall have all of the rights as a stockholder with respect to any shares of Restricted Stock which have not vested.  

Section 4.7Titles.

  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

Section 4.8Conformity to Securities Laws.

  This Agreement is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3.  Notwithstanding anything herein to the contrary, this Agreement shall be administered, and the Restricted Stock shall be issued, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, this Agreement and the Restricted Stock issued hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

Section 4.9Amendment.

  This Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Agreement.

Section 4.10Governing Law.

  The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

Section 4.11Tax Withholding.

  The Corporation shall have the authority and the right to deduct or withhold, or to require the Employee to remit to the Corporation, an amount sufficient to satisfy all applicable federal, state and local taxes (including the Employee's employment tax obligations) required by law to be withheld with respect to any taxable event arising in connection with the shares of Restricted Stock.  The Board may, in its sole discretion and in satisfaction of the foregoing requirement, allow the Employee to elect to have the Corporation withhold cash or shares of Stock otherwise issuable under this Agreement (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld, provided, that the number of shares of Stock which may be so withheld with respect to a taxable event arising in connection with the shares of Restricted Stock shall be limited to the number of shares which have a Fair Market Value on the date of withholding equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state and local income tax and payroll tax purposes that are applicable to such supplemental taxable income. 

Section 4.12Tax Consultation.

  The Employee understands that he may suffer adverse tax consequences in connection with the shares of Restricted Stock granted pursuant to this Agreement.  The Employee represents that he has consulted with any tax consultants that he deems advisable in connection with the shares of Restricted Stock and that he is not relying on the Corporation for tax advice.

Section 4.13Relationship to other Benefits.

  Neither the shares of Restricted Stock nor payment in respect thereof shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Corporation or any subsidiary of the Corporation.

 

IN WITNESS HEREOF, this Agreement has been executed and delivered by the parties hereto.

 
VARSITY GROUP INC.

By /s/ Eric J. Kuhn 

February 17, 2006

 

THE EMPLOYEE 

/s/ Mark F. Thimmig

February 17, 2006

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