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Exhibit 10.1 

EMPLOYMENT
AGREEMENT 

     This
EMPLOYMENT  AGREEMENT  (this  “Agreement”)  is  made  by  and  between
Healthaxis,  Ltd.,  a  Texas  limited  partnership  (the  "Company")  and an
indirect  wholly  owned  subsidiary  of  HealthAxis  Inc., a  Pennsylvania  corporation
(the  "Parent"),  and Lawrence F. Thompson (the  "Executive"),  as of
the 13th day of May, 2005.
 

1.  Employment
Period. The Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing on June 1,
2005 (the “Effective Date”) and ending on the third anniversary of such
date, unless terminated sooner by either party as permitted herein (the
"Employment Period").
 

2.  Terms of
Employment.
 

	 	     (a)
Position and Duties. During the Employment Period, the Executive's position
(including status, offices, titles and reporting requirements), authority, duties
and responsibilities shall be at least commensurate in all material respects with
the following:
 

	 	(i)
Executive’s  title  shall be  Executive  Vice  President,  reporting to the Company’s
President  as  directed  from  time to time.  The  Executive  will hold the same  title
at  the Parent  company  level and any operating  subsidiaries as appropriate;
 

	 	(ii)
Executive  shall work closely with the  President  and  Chairman  to  develop  and
implement  a sales  and  marketing  strategy  for the  Company,  designed to position
the  Company  as a  leader  in  its  markets  and  generate  substantial  leads  for  new
business;
 

	 	(iii)
Executive  shall  build and  manage a  sales  and  marketing  organization  and  process
to  implement  the  Company’s  strategy;
 

	 	(iv)
Executive  may be  requested to assume  responsibility  for managing  the  Company’s
client  services  organization  once  a  successful  sales  and  marketing  organization
has been established;
 

	 	(v)
In addition  to  managing  the sales and  marketing  organization,  Executive  shall
seek to remain  personally  involved  in the  sales  process as  necessary to generate
and  close  new  business  transactions  for  the  Company;
 

	 	(vi)
Executive  will represent the Company,  as a public  spokesman,  in industry forums,
conferences, and industry gatherings;
 

EMPLOYMENT
AGREEMENT – Page 1
 

 

	 	(vii)
Executive  will  work  with  the  Chairman,  the  President  and other members  of
senior  management  of  the  Company  to  identify,  target  and  close  complementary
acquisitions; and
 

	 	(viii)
Executive  will carry out such other  duties  and  responsibilities  that  are  assigned
from  time  to  time  that  are  consistent with the foregoing.
 

	 	During
the  Employment  Period,  and  excluding  any  periods of vacation and  personal  leave
to which the  Executive  is  entitled,  the  Executive  agrees  to  devote  reasonable
attention  and time during normal  business  hours to the  business  and  affairs of the
Company  and, to the extent  necessary  to  discharge  the  responsibilities  assigned
to  the  Executive  hereunder,  to use the  Executive's  reasonable  best  efforts to
perform  faithfully and  efficiently  such  responsibilities.  During  the  Employment
Period it  shall not be a violation  of this  Agreement  for the  Executive  to  (A)
serve  on  corporate,  civic  or  charitable  boards  or  committees,  and  (B)  manage
personal  investments  or  other  business  in  which  Executive is involved or has an
ownership  interest,  so  long  as  such  activities  do not  significantly  interfere
with the  performance  of the  Executive's  responsibilities  as an  employee  of the
Company in  accordance  with  this  Agreement,  and  Executive  complies  with  the
Company’s  codes  of  ethics  in  relation to those outside interests.
 

	 	(b)
Location and Commuting Allowance. The Executive's services shall be performed
primarily at the Company’s corporate headquarters located in Irving, Texas.
The Executive’s duties will also involve significant travel on Company
business. Executive will commute to Irving, Texas on a weekly basis from his home in
California. Executive will be expected to spend at least 4 days a week in
Irving when not traveling on other Company business or on vacation or other Company
approved leave, and will be expected to work from his home on those remaining
business days when he is not traveling or in Irving. This commuting period is
expected to continue for no more than 27 months from the Effective Date, by
which time Executive will be expected to have relocated his residence to the

Dallas, Texas area. For a maximum of 27 months from the Effective Date, the
Company will reimburse Executive for (i) the cost of an apartment in the Dallas
area [up to a maximum of $1500/month (including all related expenses such as
furniture, utilities, phone, cable, water/sewer)], (ii) air fare and airport
transfers, and (iii) lease payments for a car (not to exceed $350 per month
plus reasonable insurance and maintenance costs) to be used in the Dallas area
during the commuting period. During the commuting period Executive will receive
tax gross up bonus payments on a quarterly quarterly basis to the extent these
commuting expense reimbursements are required to be reported as income by the
Executive using the same tax gross up process as is used for other executives who
have or may commute in a similar fashion. The Company will assume or buyout
these leases in the event Executive’s employment is terminated while such
leases are in effect; provided that Executive should make reasonable efforts to
limit the term of the apartment lease and the car lease to reasonable periods in
relation to the then remaining term of the commuting period so that the Company
has limited backend risk.
 

EMPLOYMENT
AGREEMENT – Page 2
 

 

	 	(c)
Compensation. During the Employment Period, the Executive shall receive the
following compensation:
 

	 	(i)
An initial  annual  base  salary of  $200,000  ("Annual  Base  Salary"),  which
shall  be  paid  semi-monthly  according  to  the  Company’s  standard  payroll
practice.  During  the  Employment  Period,  the Annual  Base  Salary will  generally  be
reviewed at  least  annually  by  the  Compensation  Committee  of the  Board of
Directors,  and  may be  increased  in the  Committee’s  sole  discretion.  Any
increase  in  Annual  Base  Salary  shall  not  serve to limit or reduce  any  other
obligation  to  the  Executive  under this  Agreement.  Annual  Base  Salary  shall  not
be  reduced  after  any  such  increase  and the term  Annual  Base  Salary  as  utilized
in this  Agreement  shall refer  to  Annual  Base  Salary  as  so  increased.  Executive’s
Annual  Base  Salary may not be  reduced below $200,000;
 

	 	(ii)
The  Executive  shall  receive  an  aggregate  signing bonus of $32,000  payable  in
quarterly  installments  of $8,000  each  on  June  10,  2005,  September  10,  2005,
January 10, 2006, and March 10, 2006;
 

	 	(iii)
The Executive shall  participate in  the  Company’s  Sales  Compensation  Plan as
established  by the  Compensation  Committee  of the  Board  of  Directors  from  time
to  time.  Simultaneously  herewith,  Executive  has  been  provided  with  a  copy  of
the  Company’s 2005 Sales  Compensation  Plan and  a copy of a 2005  Sales  Plan
Quota and Rate  Sheet  to be  executed  by the  Company  and  the  Executive  on or
before  the  Effective  Date.  During  the  first  12  months  of  Executive’s
employment,  there  are  no  guaranteed  minimum  commissions  payable to  the
Executive.  During  the  period  beginning  June 1, 2006 and  ending  May 31,  2007,  and
during the period  beginning June  1, 2007 and ending May 31,  2008,  Executive  is
guaranteed  a  minimum  aggregate  commission  under  the  applicable  Sales
Compensation  Plan(s)  of  $50,000  for each  such twelve-month  period.  Accordingly,
in  the event  the  Executive  does not  receive  at  least  $50,000  in  sales
commissions  during  either  such 12 month  period,  then  within  30  business  days
from  the end of  such  period,  the  Company  will  pay  Executive  the  difference
between  $50,000  and the  amount of actual  commissions  paid  during  such  period.  In
order  to  more  evenly  distribute  the  guaranteed  minimum  commissions,  Executive
will  receive  quarterly  draws during  these  twelve-month  periods  in  an  amount
equal  to  the  difference  between  $12,500.00  and  the  amount  of  actual
commissions  payable  to  Executive  for any  such  quarter  in  which  actual
commissions  payable  are less  than  $12,500.  These  quarterly  payments  shall  be
treated  as  draws  against  future  commissions,  and shall not be  required  if
Executive  has  already  received  at  least  $50,000  in actual  commissions  during
the  applicable twelve-month period;
 

	 	(iv)
Simultaneously  with the  execution  hereof,  Executive  will  receive  50,000  stock
options  issued  pursuant  to  the  Healthaxis  Inc.  2000  Stock  Option  Plan,  with  3
year  vesting  (same  as  other  executive  option  grants  to be made in May  2005),
and an  exercise  price equal to the  closing  price  of the  stock on the date of  the
grant.  Thereafter,  during  the  Employment  Period,  the Executive  shall be  entitled
to 
 

EMPLOYMENT
AGREEMENT – Page 3
 

 

	 	participate
in  all  equity  compensation  plans,  practices,  policies  and programs  applicable
generally to other  peer  executives  of  the  Company  and  its  affiliated  companies.
Executive  acknowledges  and agrees that  participation  in  such  plans  and  programs,
including  additional  equity  compensation  plan  awards,  if any,  will be at the
discretion  of the  Compensation  Committee of the Board  of  Directors,  and  Executive
further  acknowledges  that additional  equity awards  made from time to time  under
such plans or  programs  may differ  between  various  peer  executives;
 

	 	(v)
During the Employment  Period,  the  Executive  may,  but shall  not be  entitled  to,
participate  in  other  incentive  and  performance  based  programs  in which other
peer  executives  of  the  Company  and  its  affiliated  companies  may  participate.
Executive  acknowledges  and  agrees  that  participation  in such additional  programs,
if  any,  will be at the  discretion  of the  Compensation  Committee  of  the  Board  of
Directors,  and  Executive  further  acknowledges  that  other  peer  executives,
particularly  those  who do not  participate  in  the  Sales  Compensation  Plan,  may
participate  in plans and receive  incentive  and  performance  based  bonuses  and
other  incentive  and  performance  based  compensation  for  which  Executive  may not
participate,  or  on  a  basis  that  is  substantially  different  than the  basis on
which  the  Executive  is  allowed  to  participate in such plans;
 

	 	(vi)
During the Employment  Period,  the  Executive  shall be entitled to  participate  in
all  savings  and  retirement  plans,  practices,  policies  and  programs  applicable
generally  to  other  peer  executives  of  the  Company  and  its  affiliated companies;
 

	 	(vii)
During the Employment  Period,  the  Executive  and/or  the  Executive's  family,  as the
case may be,  shall be  eligible  for  participation  in  and  shall  receive  all
benefits  under  welfare  benefit  plans,  practices,  policies and  programs  provided
by  the  Company  and  its  affiliated  companies  (including,  without  limitation,
medical,  prescription,  dental, disability,  employee  life,  group  life,  accidental
death and travel  accident  insurance  plans  and  programs)  to  the  extent  applicable
generally  to other peer  executives  of the  Company and its affiliated companies;
 

	 	(viii)
During the Employment  Period,  the  Executive  shall  be  entitled  to  receive  four
weeks of  vacation  under the  standard  Executive  Vacation  Policy,  and seven days  of
personal  leave  under  the  Company’s  standard Paid Time Off policy; and
 

	 	(ix)
During the Employment  Period,  the  Executive  shall  be  entitled  to  receive  prompt
reimbursement  for  all  reasonable  business  expenses  incurred  by  the  Executive  in
accordance  with the standard  policies,  practices  and  procedures of the  Company.
 

3.  Termination
of Employment.
 

	 	(a)
Death or Disability. The Executive's employment shall terminate upon the
Executive's death during the Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 10(b) of this Agreement of its
intention to 
 

EMPLOYMENT
AGREEMENT – Page 4
 

 

	 	terminate
the  Executive's  employment.  In  such  event,  the  Executive's  employment  with  the
Company  shall  terminate  effective  on the  30th  day  after  receipt  of such  notice
by the Executive  (the  "Disability  Effective  Date"),  provided  that,
within 30 days  after  such  receipt,  the  Executive  shall not have  returned to
full-time  performance  of  the  Executive's  duties.  For purposes of this  Agreement,
"Disability"  shall  have  the  meaning  set  forth  in  the  long-term
disability  plan  providing  benefits to employees of  the  Company  and  its  affiliated
companies  at the  Disability  effective  date.  If  there  is  no  long  term
disability  plan in effect for employees at the  Disability  effective date,
"Disability"  shall mean  the  absence of the  Executive  from the  Executive's
duties  with the  Company  on a  full-time  basis for  180  consecutive  business  days
as  a  result  of  incapacity  due to mental or physical  illness  which  is  determined
to  be  total  and  permanent  by  a  physician  selected  by the  Company or its
insurers  and  acceptable to the  Executive or the  Executive's  legal representative.
 

	 	(b)
Cause. The Company may terminate the Executive's employment during the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean:
 

	 	(i)
the willful and  continued  failure of the  Executive  to  perform  substantially  the
Executive's  duties  with  the  Company  or  one  of  its  affiliates  to the extent,
degree and level  of  performance  as provided in Section 2(a)  (other  than  any  such
failure  resulting  from  incapacity  due to  physical or mental  illness),  after  a
written  demand  for  substantial  performance  is  delivered  to  the  Executive  by
the  Company  which  specifically  identifies  the  manner  in  which  the  Company
believes  that  the  Executive  has not  substantially  performed  the  Executive's
duties,  and such  failure  is  not  cured  within  30  days  (or  such  longer  period
as  may  be  stated  in  the  notice)  following  the date of the  notice;  or
 

	 	(ii)
the  willful  engaging  by  the  Executive  in  illegal  conduct  or  gross  misconduct
which  is  materially  and  demonstrably injurious to the Company.
 

	 	For
purposes of this  provision,  no act or  failure  to  act,  on  the  part  of  the
Executive,  shall  be  considered  "willful"  unless it is done,  or  omitted
to be done,  by the  Executive  in bad  faith or  without  reasonable  belief  that  the
Executive's  action  or  omission  was  in  the  best  interests  of  the  Company.  Any
act,  or  failure to act, based upon  authority  given  pursuant  to a  resolution  duly
adopted by  the  Board  of  Directors  or  upon  the  instructions  of  the  Chairman,
the  President  or  the  CEO of  the  Company  or  based  upon the  advice of  counsel
for the  Company  shall be  conclusively  presumed to  be  done,  or  omitted  to be
done,  by the  Executive  in  good  faith  and in the  best  interests  of  the  Company.
The  cessation  of  employment  of the  Executive  shall not  be deemed to be for Cause
unless  and until  there  shall  have  been  delivered  to  the  Executive  a  copy  of
a  resolution  duly  adopted  by  the  affirmative  vote  of  not  less  than
three-quarters  of  the  entire  membership  of the  Board  at a  meeting  of  the Board
called and held for such  purpose  (after  reasonable  notice  is  provided  to  the
Executive  and the  Executive  is given  an  opportunity,  together with counsel,  to  be
heard  before the Board),  finding  that,  in the  good  faith  opinion  of the  Board,
the  Executive  is  guilty  of  the  conduct  described  in  subparagraph  (i)  or  (ii)
above,  and  specifying  the  particulars  thereof in detail.
 

EMPLOYMENT
AGREEMENT – Page 5
 

 

	 	(c)
Good Reason. The Executive's employment may be terminated by the Executive for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
 

	 	(i)
the  assignment  of the  Executive  to a position  in  which the Executive's  authority,
duties or  responsibilities  are materially  diminished  from  the  authority,  duties
or  responsibilities  as  contemplated  by  Section  2(a)  of  this  Agreement,  or  any
other  action  by  the  Company  or  its  affiliated  companies  which  results  in  a
material  diminution  in  such  position,  authority,  duties  or  responsibilities,
excluding  for  this  purpose  an  isolated,  insubstantial  and  inadvertent  action
not  taken in bad  faith  and  which is  remedied  by the  Company  promptly  after
receipt of  notice thereof given by the Executive;
 

	 	(ii)
any  failure  by  the  Company  or  its  affiliated  companies  to  comply  with  any  of
the  provisions  of  Section  2(c)  of  this  Agreement,  other  than  an  isolated,
insubstantial  and  inadvertent  failure not  occurring  in  bad  faith  and  which  is
remedied  by  the  Company  promptly  after  receipt  of  notice  thereof  given  by  the
Executive;
 

	 	(iii)
the  Company's  requiring  the  Executive to be based  at any  office  or  location
other  than as  provided in Section 2(b) hereof;
 

	 	(iv)
any  purported  termination  by  the  Company  of the  Executive's  employment  otherwise
than  as  expressly  permitted  by  this  Agreement;  or
 

	 	(v)
any  failure  by  the  Company  to  comply  with  and  satisfy Section 9(c) of this
Agreement.
 

	 	For
purposes of this  Section  3(c),  any good faith  determination  of Good Reason  made by
the  Executive  shall be conclusive.
 

	 	(d)
Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 10(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights hereunder.
 

	 	(e)
Date of Termination. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified 
 

EMPLOYMENT
AGREEMENT – Page 6
 

 

	 	therein,
as  the case may be, (ii) if the  Executive's  employment  is  terminated  by the
Company  other than for Cause  or Disability,  the Date of Termination  shall be the
date on which the Company  notifies the  Executive of  such  termination,  and  (iii)  if
the  Executive's  employment  is  terminated  by  reason  of  death  or  Disability,  the
Date of  Termination  shall  be the  date of  death  of the  Executive  or the
Disability  effective date, as the case may be.
 

4.  Obligations
of the Company upon Termination.
 

	 	(a)
Good Reason, Other Than for Cause, Death or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or death or Disability, or the Executive shall terminate employment
for Good Reason:
 

	 	(i)
the  Company  shall  pay to the  Executive  in a lump  sum in cash  within  30 days
after the Date  of  Termination  the  aggregate  of  the  following amounts:
 

	 	A.
the sum of (1) the  Executive's  Annual  Base  Salary  through the Date of  Termination
to  the  extent not  theretofore  paid,  and  (2)  any  compensation  previously
deferred  by  the  Executive  (together  with  any  accrued  interest  or  earnings
thereon)  and any accrued  vacation  pay  payable  per  the  standard  vacation policy on
termination,  in  each  case  to  the  extent  not  theretofore  paid  (the  sum of the
amounts  described  in clauses (1),  and  (2)  shall  be  hereinafter  referred  to  as
the  "Accrued  Obligations");  and
 

	 	B.
an  amount  equal  to  the  Executive's  Annual  Base  Salary (the “Severance”).
 

	 	(ii)
all stock options,  restricted  stock or other equity  compensation  awarded  to the
Executive  by  either  the  Parent  or  a  successor  by  merger,  consolidation  or
otherwise,  including,  but not  limited  to, all awards  under  the  HealthAxis  Inc.
2000  Stock  Option  Plan  (as now or  hereafter  amended  and  restated),  shall  become
100%  vested  and,  the  stock  options  shall  be  exercisable  for  a  period  equal
to  thirty-six  (36)  months  after  the  Executive's Date of Termination;
 

	 	(iii)
all  commissions  under  the  Executive’s  Sales  Compensation  Plan shall  shall
continue  to be paid out per the plan  following  the Date of  Termination  for the
remaining  period  that  such  commissions  would have  otherwise  been paid following a
termination under the plan;
 

	 	(iv)
for twelve (12)  months  after the  Executive's  Date  of  Termination,  or such  longer
period as  may  be  provided  by  the  terms  of  the  appropriate  plan,  program,
practice  or  policy,  the  Company  shall  continue  benefits  to  the  Executive
and/or  the  Executive's  family at least  equal to those  which  would have been
provided  to them in  accordance  with  the  plans,  programs,  practices  and  policies
described  in  Section  2(c)(vii) of this  Agreement if the  Executive's  employment  had
not  been  terminated  or,  if  more  favorable  to the  Executive,  as in  effect
generally  at any  time  thereafter  with respect to other peer  executives  of  the
Company  and  its  affiliated  companies  and  their  families,  provided,  however,
that  if the  Executive  becomes  re-employed  with another  employer  and  is  eligible
to  receive  equivalent  medical  or  other  welfare  benefits  under  another  employer
provided  plan,  the  medical  and  other  welfare  benefits  described  herein  shall
be  secondary  to  those  provided  under  such  other  plan  during  such  applicable
period  of  eligibility;
 

EMPLOYMENT
AGREEMENT – Page 7
 

 

	 	(v)
the Company  shall,  at its sole expense as incurred,  provide  the  Executive  with
outplacement  services  for  a  period  of  twelve  (12)  months,  the  provider  of
which  shall  be  selected  by  the  Executive  in  his  sole  discretion;  and
 

	 	(vi)
to the extent not theretofore  paid or provided,  the  Company  shall  timely pay or
provide to the  Executive  any  other  amounts  or  benefits  required  to be paid or
provided  or  which  the  Executive is eligible to receive  under  any plan,  program,
policy or  practice  or  contract  or  agreement  of the  Company and  its  affiliated
companies,  including  the  obligation  to  assume  or  buyout  the  apartment  lease
and  the  car  lease  as  specified  in  Section  2(b)  of  this  Agreement  (such other
amounts and benefits  shall  be  hereinafter  referred  to as  the  "Other
Benefits").
 

	 	(b)
Death. If the Executive's employment is terminated by reason of the Executive's
death during the Employment Period, this Agreement shall terminate without
further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination.
 

	 	(c)
Disability. If the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this Agreement shall terminate
without further obligations to the Executive, other than for payment of
Accrued Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 4(c) shall include, and
the Executive shall be entitled after the Disability effective date to receive,
disability and other benefits at least equal to the most favorable of those
generally provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs, practices
and policies relating to disability, if any, as in effect generally with
respect to other peer executives and their families.
 

	 	(d)
Cause, Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Employment Period, this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay to
the Executive (x) the Accrued Obligations, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to the
extent theretofore unpaid. If the Executive voluntarily terminates employment
during the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination.
 

EMPLOYMENT
AGREEMENT – Page 8
 

 

5.
Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 10(f), shall anything herein
limit or otherwise affect such rights as the Executive may have under any contract
or agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this Agreement.
 

6.  Full
Settlement. The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be affected
by any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company or any of its affiliated companies may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and,
except to the extent provided in Section 4(a)(iv) hereof, such amounts shall not
be reduced whether or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company or any of its
affiliated companies, the Executive or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive about
the amount of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
 

7.  Certain
Additional Payments by the Company.
 

	 	(a)
Anything  in  this  Agreement  to  the  contrary  notwithstanding  and  except as set
forth  below,  in  the  event it shall be  determined  that any  payment  or
distribution  by  the  Company  to  or  for  the  benefit  of the  Executive  (whether
paid or payable  or  distributed  or  distributable  pursuant  to  the  terms  of  this
Agreement  or  otherwise,  but  determined  without  regard  to  any  additional
payments  required  under  this  Section  7)  (a  "Payment")  would  be
subject  to  the  excise  tax  imposed by Section  4999 of the Code or any  interest  or
penalties  are  incurred  by the  Executive  with  respect  to  such  excise  tax  (such
excise  tax,  together  with any such interest and  penalties,  are  hereinafter
collectively  referred to as the "Excise  Tax"),  then  the  Executive  shall
be  entitled  to  receive  an  additional  payment  (a  "Gross-Up  Payment")
in an amount  such that  after  payment by  the  Executive of all taxes  (including  any
interest  or  penalties  imposed  with  respect to such taxes),  including,  without
limitation,  any  income  taxes  (and  any  interest  and  penalties  imposed  with
respect  thereto)  and  Excise Tax  imposed  upon the  Gross-Up  Payment,  the  Executive
retains an amount  of the  Gross-Up  Payment  equal  to the  Excise  Tax  imposed upon
the Payments.
 

	 	(b)
Subject  to  the  provisions  of  Section  7(c),  all  determinations  required  to  be
made  under  this  Section  7,  including  whether  and when a  Gross-Up  Payment is
required  and the amount of such  Gross-Up  Payment  and  the  assumptions  to  be
utilized  in  arriving  at  such  determination,  shall  be made by  McGladrey  & Pullen
or such  other  certified  public
 

EMPLOYMENT
AGREEMENT – Page 9
 

 

	 	accounting
firm  as  may  be  designated  by  the  Executive  (the  "Accounting  Firm")
which  shall  provide  detailed  supporting  calculations  both  to  the  Company  and
the  Executive  within 15  business  days of the  receipt  of  notice  from the
Executive  that there has been a Payment,  or such  earlier time  as  is  requested  by
the  Company.  All  fees  and  expenses  of  the  Accounting  Firm  shall  be  borne
solely  by the  Company.  Any  Gross-Up  Payment,  as  determined  pursuant  to this
Section  7,  shall  be  paid by the  Company  to the  Executive  within  five  days  of
the  receipt  of  the  Accounting  Firm's  determination.  Any  determination  by the
Accounting  Firm  shall  be  binding  upon  the  Company  and the  Executive.  As a
result  of the  uncertainty  in the  application  of Section  4999 of the Code at the
time  of the initial  determination  by the Accounting Firm  hereunder,  it is  possible
that  Gross-Up  Payments  which will not have been made by the  Company  should  have
been  made  ("Underpayment"),  consistent  with  the  calculations  required to
be made hereunder.  In  the event  that the  Company  exhausts  its  remedies  pursuant
to  Section  7(c)  and  the  Executive  thereafter  is  required  to  make a  payment  of
any  Excise Tax, the Accounting  Firm shall  determine the  amount  of the  Underpayment
that has  occurred  and  any such  Underpayment  shall be promptly paid by the  Company
to or for the benefit of the Executive.
 

	 	(c)
The  Executive  shall  notify the  Company in writing  of any claim by the Internal
Revenue  Service  that,  if  successful,  would  require  the  payment  by the  Company
of the Gross-Up  Payment.  Such  notification  shall be given  as soon as  practicable
but no later  than ten (10)  business  days after the  Executive is  informed  in writing
of such claim and shall  apprise  the  Company  of the  nature  of such  claim  and the
date on which  such  claim is  requested  to be paid.  The  Executive  shall not pay such
claim prior to the  expiration  of the 30-day  period  following the date  on which it
gives  such  notice  to the  Company  (or  such  shorter  period  ending  on the  date
that any  payment  of  taxes  with  respect  to such  claim  is  due).  If  the  Company
notifies  the  Executive  in  writing  prior to the  expiration of such period that  it
desires  to  contest  such  claim,  the  Executive  shall:
 

	 	(i)
give  the  Company  any  information  reasonably  requested  by the  Company  relating to
such  claim,
 

	 	(ii)
take such action in connection  with  contesting such  claim  as  the  Company  shall
reasonably  request  in  writing  from  time  to  time,  including,  without  limitation,
accepting  legal  representation  with  respect to such  claim  by an  attorney
reasonably  selected  by the Company,
 

	 	(iii)
cooperate  with the  Company  in good  faith in order  effectively to contest such claim,
and
 

	 	(iv)
permit  the  Company  to  participate  in  any  proceedings relating to such claim;
 

	 	provided,
however,  that the Company  shall bear and  pay  directly  all  costs  and  expenses
(including  additional  interest  and  penalties)  incurred  in  connection  with such
contest  and  shall  indemnify  and  hold the  Executive  harmless,  on an  after-tax
basis,  for any Excise  Tax or income tax  (including  interest  and  penalties  with
respect  thereto)  imposed  as  a  result  of  such  representation  and  payment  of
costs and  expenses.  Without  limitation  of the  foregoing  provisions  of this Section
7(c),  the Company  shall control all  proceedings  taken in
 

EMPLOYMENT
AGREEMENT – Page 10
 

 

	 	connection
with  such  contest  and,  at  its  sole  option,  may  pursue  or  forego  any  and  all
administrative  appeals,  proceedings,  hearings  and  conferences  with the taxing
authority in respect of  such  claim  and  may,  at its  sole  option,  either  direct
the  Executive  to pay the tax claimed and sue  for  a  refund  or  contest  the  claim
in  any  permissible  manner,  and  the  Executive  agrees  to  prosecute  such  contest
to a  determination  before  any  administrative  tribunal,  in a court of initial
jurisdiction  and in one or  more  appellate  courts,  as the Company shall  determine;
provided,  however,  that if the  Company  directs  the  Executive  to pay  such claim
and sue for a refund,  the  Company  shall  advance  the  amount  of  such  payment  to
the  Executive,  on  an  interest-free  basis  and  shall  indemnify  and hold  the
Executive  harmless,  on an  after-tax  basis,  from any  Excise Tax or income tax
(including  interest  or  penalties  with  respect  thereto)  imposed  with  respect  to
such  advance or  with  respect to any imputed  income with  respect to  such  advance;
and  further  provided  that  any  extension of the statute of  limitations  relating to
payment  of  taxes  for  the  taxable  year  of  the  Executive  with  respect  to  which
such  contested  amount  is  claimed  to be due is  limited  solely to  such  contested
amount.  Furthermore,  the Company's  control  of the  contest  shall be  limited to
issues  with  respect  to which a Gross-Up  Payment  would be  payable  hereunder  and
the  Executive  shall  be  entitled  to settle or  contest,  as the case may be,  any
other  issue  raised  by  the  Internal  Revenue  Service or any other taxing authority.
 

	 	(d)
If,  after the receipt by the  Executive of an amount  advanced  by the Company  pursuant
to Section  7(c),  the  Executive  becomes  entitled  to  receive  any  refund  with
respect to such  claim,  the  Executive  shall  (subject to the Company's  complying
with the  requirements  of Section  7(c))  promptly  pay to the  Company  the  amount of
such  refund  (together  with  any  interest  paid or credited  thereon  after taxes
applicable  thereto).  If,  after the  receipt by the  Executive  of  an  amount
advanced  by  the  Company  pursuant to Section  7(c),  a  determination  is made  that
the  Executive  shall  not be  entitled  to any  refund  with  respect to such  claim and
the  Company  does not  notify  the  Executive  in  writing  of its  intent to  contest
such  denial  of refund  prior to  the  expiration of 30 days after such  determination,
then such  advance  shall be  forgiven  and shall not  be  required  to be  repaid  and
the  amount  of such  advance  shall  offset,  to the extent  thereof,  the  amount of
Gross-Up Payment required to be paid.
 

8.
Non-Compete, Confidential Information and Release.
 

	 	(a)
Covenant Not to Compete.
 

	 	(i)
Compliance  with the  provisions  of this  Section  8  are  an  express  condition  of
the  Executive's  right  to  receive  payments,  vesting,  and  benefits  hereunder.  The
Executive  acknowledges  and  recognizes the  confidential  information  and  records
provided by the  Company,  the  Parent,  and  its  subsidiaries,  affiliates,
successors,  and  assigns  (collectively,  the  "Employer"),  the  benefits
provided  hereunder,  and  the  professional  training  and  experience  he will  receive
from  and  the  contacts  he  will be  provided  by the  Employer,  as  well  as  the
highly  competitive  nature  of  the  Employer's  business,  and  in  consideration  of
all of  the  above,  agrees  that  during the period  beginning  on  the  effective  date
of  the  Executive's  termination of employment  with  the  Employer  (the  "Date of
Termination")  and ending  twelve  (12)  months  thereafter  (the "Covered
Time"),  the  Executive  will  not  compete  with  the  business  of  the  Employer.
For  purposes  hereof,  "competition"  shall  mean  any  engaging,  directly 
 

EMPLOYMENT
AGREEMENT – Page 11
 

 

	 	or
indirectly,  in  the  "Covered  Business"  (as  hereinafter  defined) in any
state of the  United  States of  America  or  any  nation  in  which  the  Employer  is
conducting  business  as  of  the  Date  of  Termination  (the  "Covered
Area").  For  purposes  of  this  Agreement,  "Covered  Business"  shall
mean  providing  any  services  similar  in scope or nature to the  services  provided
by  the  Executive  immediately  prior  to  his  Date  of  Termination.  For  purposes of
this  Section  8,  the  phrase  "engaging,  directly  or  indirectly"  shall
mean  engaging  directly  or  having  an  interest,  directly  or  indirectly,  as
owner,  partner,  shareholder,  agent,  representative,  employee,  officer,  director,
independent  contractor,  capital  investor,  lender,  renderer  of  consultation
services  or  advice  or  otherwise  (other  than  as  the  holder  of less  than 2% of
the  outstanding  stock  of  a  publicly-traded  corporation),  either  alone  or  in
association  with  others,  in the  operation  of any aspect of  any type of business or
enterprise  engaged  in  any  aspect  of  the  Covered  Business.  The  Company
acknowledges  and agrees  that  the  foregoing  shall  not be  construed  to  prohibit
Executive  from  performing  services  during  the  Covered  Time  as  an  independent
consultant  in  a  manner  substantially  the  same  as  Executive  engaged  in
immediately  prior  to  joining  the Company on June 1, 2005.
 

	 	(ii)
The  Executive  agrees  that  during the term of this  Agreement  (including  any
extensions  thereof)  and  for  the  twenty-four  (24)  months  thereafter,  he  shall
not  (i) directly  or  indirectly  solicit  or  attempt  to  solicit  any of the
employees,  agents,  consultants,  or representatives of  the Employer or  affiliates  of
the Employer  to  leave  any of  such  entities;  or  (ii)  directly  or  indirectly
solicit or attempt  to  solicit  any of the  employees,  agents,  consultants  or
representatives  of  the  Employer or  affiliates  of the  Employer to  become
employees,  agents,  representatives  or  consultants  of  any  other  person  or  entity.
 

	 	(iii)
The  Executive  understands  that the  provisions  of  Sections 8(a)(i)  and  (ii)
may  limit  his  ability to earn a  livelihood  in a business  similar  to the  business
of  the  Employer  but  nevertheless  agrees  and  hereby  acknowledges  that  the
restrictions  and  limitations  thereof  are  reasonable  in  scope,  area,  and
duration,  are reasonably  necessary  to  protect  the  goodwill  and  business
interests  of  the  Employer,  and  that the  consideration  provided under this
Agreement  is  sufficient  to  justify  the  restrictions  contained  in  such
provisions.  Accordingly,  in  consideration  thereof  and in  light  of  the
Executive's  education,  skills  and  abilities,  the  Executive  agrees  that he will
not  assert  that,  and  it  should  not  be  considered  that,  such  provisions  are
either  unreasonable  in scope,  area,  or duration,  or will  prevent him from  earning
a living,  or  otherwise  are  void,  voidable,  or  unenforceable  or  should  be voided
or held  unenforceable.
 

	 	(b)
Enforcement.
 

	 	(i)
The parties  hereto  agree and  acknowledge  that the  covenants and  agreements
contained  herein  are  reasonable  in  scope,  area,  and  duration  and  necessary  to
protect  the  reasonable  competitive  business  interests  of  the  Employer,
including,  without  limitation,  the  value  of the  proprietary  information and
goodwill of the Employer.
 

	 	(ii)
The  Executive  agrees  that  the  covenants  and  undertakings  contained  in  Section
8  of  this  Agreement  relate to matters which are  of  a  special,  unique  and 
 

EMPLOYMENT
AGREEMENT – Page 12
 

 

	 	extraordinary
character  and that the  Employer  cannot be  reasonably  or  adequately  compensated  in
damages  in an  action  at law in the  event  the  Executive  breaches  any  of  these
covenants or  undertakings.  Therefore,  the  Executive  agrees  that the  Employer
shall  be  entitled,  as  a  matter  of  course,  without  the  need  to  prove
irreparable  injury,  to  an  injunction,  restraining  order or  other  equitable
relief  from any  court  of  competent  jurisdiction,  restraining  any  violation  or
threatened  violation  of  any  of  such  terms  by  the  Executive  and  such  other
persons  as the  court  shall  order.  The  Executive  agrees  to pay  costs  and legal
fees  incurred  by  the Employer in obtaining such injunction.
 

	 	(iii)
Rights  and  remedies  provided  for in this  Section  8(b)  are  cumulative  and  shall
be  in  addition  to rights and  remedies  otherwise  available  to the  parties  under
any other  agreement or applicable law.
 

	 	(iv)
In the event  that any  provision  of this  Agreement  shall  to  any  extent  be  held
invalid,  unreasonable  or  unenforceable  in  any  circumstances,  the  parties  hereto
agree  that the  remainder  of this  Agreement  and  the  application  of such  provision
of this  Agreement  to other  circumstances  shall be  valid  and  enforceable  to  the
fullest  extent  permitted  by law. If any  provision  of this Agreement,  or any part
thereof,  is  held  to be  unenforceable  because  of  the  scope or  duration  of or the
area  covered  by  such  provision,  the  parties  hereto  agree  that the court or
arbitrator  making  such  determination  shall reduce the scope,  duration  and/or  area
of  such  provision  (and  shall  substitute  appropriate  provisions  for  any  such
unenforceable  provisions)  in  order  to  make  such  provision  enforceable  to  the
fullest  extent  permitted  by  law,  and/or  shall  delete  specific  words  and
phrases,  and  such  modified  provision  shall  then  be  enforceable  and  shall  be
enforced.  The  parties  hereto  recognize  that if,  in any  judicial  proceeding,  a
court shall  refuse  to  enforce  any of the  separate  covenants  contained  in  this
Agreement,  then  that  unenforceable  covenant  contained  in  this  Agreement  shall be
deemed  eliminated  from  these  provisions  to the  extent  necessary  to permit the
remaining  separate  covenants  to  be  enforced.  In  the  event  that  any  court  or
arbitrator  determines  that  the  time  period  or  the  area,  or  both,  are
unreasonable  and that any of the  covenants  is  to  that  extent  unenforceable,  the
parties  hereto  agree  that such  covenants  will  remain  in  full  force  and  effect,
first,  for the greatest  time  period,  and  second,  in the greatest  geographical
area  that would not render them unenforceable.
 

	 	(v)
In  the  event  of the  Executive's  breach  of  this  Section 8, in addition  to all
other  rights  the  Employer  may have  hereunder or in law  or in  equity,  all
payments  and  benefits  hereunder  shall  cease;  all  options,  stock, and other
securities  granted by the  Employer,  including stock obtained  through  prior  exercise
of  options,  shall  be  immediately  forfeited  (whether  or  not  vested),  and the
original  purchase  price,  if  any,  shall  be  returned  to  the  Executive;  and  all
profits  received  through  exercise  of  options  or  sale  of  stock,  and  all
previous  payments  and  benefits  made or provided  hereunder  shall  be  promptly
returned  and  repaid  to  the  Company.
 

	 	(c)
Confidential Information. The Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which 
 

EMPLOYMENT
AGREEMENT – Page 13
 

 

	 	shall
not  be  or  become  public  knowledge  (other  than  by  acts  by  the  Executive  or
representatives  of the  Executive  in  violation  of  this  Agreement).  After
termination  of  the  Executive's  employment  with  the  Company,  the  Executive  shall
not,  without  the  prior  written  consent  of  the  Company  or  as  may  otherwise  be
required  by law or  legal  process,  communicate  or  divulge any such  information,
knowledge  or data to  anyone  other than the Company  and those  designated  by it. In
no event  shall an  asserted  violation  of  the  provisions  of this  Section  8(c)
constitute a  basis  for  deferring  or  withholding  any  amounts  otherwise  payable
to  the  Executive  under  this  Agreement.
 

	 	(d)
Release. The Executive's execution of a complete and general release of any and
all of his potential claims (other than for vested benefits described in this
Agreement or any other vested benefits with the Company and/or its affiliates)
against the Company, any of its affiliated companies, and their respective
successors and any officers, employees, agents, directors, attorneys, insurers,
underwriters, and assigns of the Company, its affiliates and/or successors, is
an express condition of the Executive's right to receive Severance payments,
vesting, and benefits hereunder. The Executive shall be required to execute a
Waiver and Release Agreement which documents the release required under this
Section 8(d), the form of which shall be provided to the Executive by Company.
 

9.  Successors.
 

	 	(a)
This  Agreement  is  personal  to the  Executive  and  without  the prior  written
consent  of the  Company  shall not be assignable  by the  Executive  otherwise  than  by
will  or  the  laws  of  descent  and  distribution.  This  Agreement  shall  inure  to
the  benefit  of and  be  enforceable  by the  Executive's  legal representatives.
 

	 	(b)
This  Agreement  shall inure to the benefit of and be  binding  upon  the  Company  and
its  successors  and  assigns.
 

	 	(c)
The  Company  will  require  any  successor  (whether  direct  or  indirect,  by
purchase,  merger,  consolidation  or otherwise) to all or  substantially  all of the
business  and/or  assets  of the  Company  and/or  the Parent to assume  expressly  and
agree to  perform  this  Agreement  in the same  manner  and to  the same extent  that
the  Company  would be required  to  perform  it  if  no  such  succession  had  taken
place.  As used in this  Agreement,  "Company"  shall  mean the  Company  as
hereinbefore  defined  and any  successor  to  its  business  and/or  assets  as
aforesaid  which  assumes and agrees to perform  this  Agreement by operation of law, or
otherwise.
 

EMPLOYMENT
AGREEMENT – Page 14
 

 

10.
Miscellaneous.
 

	 	(a)
This  Agreement  shall be governed  by and  construed  in  accordance  with the laws of
the  State of Texas,  without  reference  to  principles  of  conflict  of  laws.  The
captions of this  Agreement  are not part  of the  provisions  hereof and shall have no
force or  effect.  This  Agreement  may  not  be  amended  or  modified  otherwise  than
by  a  written  agreement  executed  by the parties  hereto or their  respective
successors and legal representatives.
 

	 	(b)
All  notices  and  other  communications  hereunder  shall  be in  writing  and  shall
be  given  by hand  delivery  to the  other  party  or by  registered  or  certified
mail,  return receipt  requested,  postage  prepaid, addressed as follows:
 

	 	IF
TO THE EXECUTIVE:
 

	 	Lawrence
F. Thompson  
8282 N Fourth Street  
Fresno CA 93720
 

	 	IF
TO THE COMPANY:
 

	 	HEALTHAXIS,
LTD.  
7301 N. State Highway 161, Suite 300  
Irving, Texas  75039  
     Attention:  President
 

	 	WITH
COPY TO:
 

	 	HEALTHAXIS,
INC.  
7301 N. State Highway 161, Suite 300  
Irving, Texas  75039  
     Attention:  General
Counsel
 

	 	or
to such other  address as either  party shall have  furnished  to the  other  in  writing
in  accordance  herewith.  Notice  and  communications  shall  be  effective when
actually received by the addressee.
 

	 	(c)
The invalidity or  unenforceability  of any provision  of this  Agreement  shall not
affect the  validity or  enforceability  of  any  other  provision  of  this  Agreement.
 

	 	(d)

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.
 

	 	(e)
The  Executive's  or the Company's  failure to insist  upon strict  compliance  with any
provision  of this  Agreement  or the  failure  to  assert  any right the  Executive  or
the  Company  may  have  hereunder,  including,  without  limitation,  the  right  of
the  Executive  to  terminate  employment  for Good Reason  pursuant  to this  Agreement,
shall not be deemed to  be a waiver of such  provision  or right or any other  provision
or right of this Agreement.
 

EMPLOYMENT
AGREEMENT – Page 15
 

 

	 	(f)
The  Executive  and  the  Company  acknowledge  that,  except as may  otherwise be
provided  under any other  written  agreement  between  the  Executive  and  the
Company,  the  employment  of  the  Executive  by the  Company  is "at will".
From and after the  Effective  Date,  this  Agreement  shall  supersede  any  other
agreement  between  the parties  with  respect to the  subject matter hereof.
 

     IN
  WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant
  to the authorization from its Board of Managers, the Company has caused these
  presents to be executed in its name on its behalf, all as of the day and year
  first above written.

  

	 	EXECUTIVE:
      
	 	 
	 	 
	 	/s/
      Lawrence F. Thompson
	 	

	 	Lawrence
      F. Thompson
	 	 
	 	 
	 	HEALTHAXIS,
      LTD.
	 	 
	 	By its
      General Partner,
	 	HEALTHAXIS
      MANAGING PARTNER, LLC
	 	 
	 	 
	 	By:	/s/
      James W. McLane
	 	 	

	 	Its:	President

     The
  Board of Directors of HEALTHAXIS, INC. (the Parent) has authorized the undersigned
  officer to execute the foregoing Employment Agreement in order to indicate its
  approval of such Agreement.

  

	 	HEALTHAXIS,
      INC.
	 	 
	 	 
	 	By:	/s/
      James W. McLane
	 	 	

  

EMPLOYMENT
AGREEMENT – Page 16EX-10.48

EMPLOYMENT AGREEMENT

AGREEMENT, dated as of January 1, 2005 (“Effective Date”) by and between PLATO Learning, Inc.,
a Delaware corporation headquartered in Minneapolis (“Company”), and Frank Preese (“Executive”).

WITNESSETH THAT:

WHEREAS, the Company and Executive have entered into an Employment Agreement, effective as of
January 1, 2002, and an Employment Security Agreement, dated as of January 30, 2001
(collectively, “Prior Agreements”); and

WHEREAS, the Company and Executive desire to amend and restate the Prior Agreements in their
entirety;

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set
forth, it is hereby agreed by and between the parties that the Prior Agreements are amended and
restated in their entirety by this Agreement, to read as follows:

	 	1.	 	Employment. The Company hereby agrees to continue to employ Executive to perform the
duties set forth in Section 3 hereof, and Executive hereby accepts such continued employment,
on the terms and conditions of this Agreement.

	 	2.	 	Term. The term of this Agreement (“Term”) shall commence on the Effective Date and
shall end on December 31, 2005, subject to earlier termination pursuant to Section 6. On
January 1, 2006 and on each January 1 thereafter, unless earlier terminated pursuant to
Section 6, the Term will be automatically extended for an additional one (1) year, unless
either party gives written notice not to extend the Term hereof at least forty-five (45) days
prior to the date such extension would be effective. Notwithstanding anything contained
herein to the contrary, in the event of a Change in Control (as such term is defined in
Appendix A), the Term shall be automatically extended until the second anniversary of the
Change in Control.

	 	3.	 	Duties. Executive will serve as the Company’s Chief Technology Officer, with the
responsibilities and duties customarily associated with that position, and any other
consistent responsibilities and duties assigned or delegated to Executive by the Board of
Directors of the Company (“Board”) or the Company’s Chief Executive Officer.

	 	4.	 	Time Commitment. Executive will devote Executive’s time, attention and energies to
the performance of his duties and responsibilities under this Agreement. Executive may not be
associated with, consult, advise, work for, be employed by, contract with, or otherwise devote
any of Executive’s time to the pursuit of any other work or business activities that may
interfere with the performance of such duties and responsibilities. The foregoing shall not
preclude Executive from devoting reasonable time to the supervision of his personal
investments, civic, charitable, educational, religious and similar types of activities,
speaking engagements and membership on other boards of directors, provided such activities do
not interfere in any way with the business of the Company; and provided further that, the
Executive cannot serve on the board of directors of more than one publicly-traded company
without the written consent of the Board. The time involved in such activities shall not be
treated as vacation time. The Executive shall be entitled to keep any amounts paid to him in
connection with such activities (e.g., director fees and honoraria).

	 	5.	 	Compensation and Benefits. The Company will pay the following compensation to
Executive in full consideration for performance of his services hereunder, payable in regular
installments in accordance with the Company’s usual payroll policies and procedures.

	 	(a)	 	Salary. Executive will receive an annual salary of Two Hundred Ten
Thousand Dollars ($210,000). The Board will review Executive’s salary at least
annually. Executive’s salary will not be reduced, and after any increase the term
“salary” for purposes of this Agreement shall refer to Executive’s annual salary as
most recently increased.

	 	(b)	 	Bonus Compensation. Executive shall be eligible to receive annual cash
bonus compensation for each fiscal year of the Company during the Term based on bonus
amounts and performance criteria determined by the Board or the Compensation Committee
of the Board.

	 	(c)	 	Stock Options. Executive shall be eligible to be granted options to
purchase shares of Company common stock in accordance with the Company’s stock option
plan at the discretion of the Board.

	 	(d)	 	Benefits. Executive shall be eligible to participate in such group
life insurance, major medical, and other employee benefit plans and programs
(collectively “Benefit Plans”) as established by the Company, in accordance with the
applicable terms and conditions of such Benefit Plans (including the requirements of
the Benefit Plans for participation). The benefits under the Benefit Plans available
to Executive shall be no less favorable than those available to other senior executives
of the Company, excluding the Company’s Chief Executive Officer.

	 	(e)	 	Expenses. The Company will reimburse Executive for all reasonable and
necessary expenses incurred by Executive in connection with the performance of his
services hereunder upon submission by Executive of appropriate documentation in
accordance with the Company’s expense reimbursement policy.

6. Termination.

	 	(a)	 	Death or Disability. This Agreement and Executive’s employment shall
be terminated immediately upon Executive’s death. In the event of Executive’s
Disability, this Agreement and Executive’s employment shall be terminated thirty (30)
days after the Company gives written notice to Executive, unless Executive has
returned to the substantial performance of his duties on a full-time basis. For
purposes of this Agreement, “Disability” means that as a result of physical or mental
incapacity Executive 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.

Upon termination by reason of Death or Disability, Executive shall be entitled only
to accrued but unpaid salary through the date of termination, together with any
other benefit or payment provided under the Company’s plans, policies or programs in
accordance with their terms (collectively, “Accrued Obligations”).

	 	(b)	 	Cause or Without Good Reason. The Company may terminate this Agreement
and Executive’s employment for Cause (as defined in paragraph (d) of this Section) upon
ten (10) day’s prior written notice to Executive. Executive may terminate the
Agreement and his employment without Good Reason (as defined in paragraph (d) of this
Section) upon thirty (30) days’ prior written notice to the Company.

Upon termination for Cause or without Good Reason, Executive shall be entitled only
to the Accrued Obligations.

	 	(c)	 	Good Reason; Without Cause. Executive may terminate this Agreement and
his employment for Good Reason upon thirty (30) days’ prior written notice to the
Company. The Company may terminate this Agreement and Executive’s employment without
Cause upon thirty (30) days’ prior written notice to Executive.

Upon termination for Good Reason or without Cause, Executive shall be entitled to:

(i) the Accrued Obligations;

	 	(ii)	 	a lump sum severance payment equal to one (1) times of
Executive’s annual salary in effect on the termination date (without regard to
any reduction in salary referred to in clause (ii) of the definition of Good
Reason), which shall be paid to Executive within ten (10) business days
following such termination; and

	 	(iii)	 	continuation of health and other welfare benefits (including
life, accident and disability benefits) to Executive and his spouse and
dependents under the Benefit Plans in which they participated on the date of
Executive’s termination, for twelve (12) months following the date of
Executive’s termination on substantially the same terms and conditions
(including contributions by Executive) as in effect immediately prior to
Executive’s termination; provided, that the Company’s obligation to
provide such health or other welfare benefit shall cease with respect to such
benefit at the time Executive becomes eligible to participate in a group plan
of another employer providing comparable benefits in the aggregate.

To the extent that the health and other welfare benefits referred to in clause (iii)
above cannot be provided after termination of employment under applicable law or the
terms of the Benefit Plans then in effect (and cannot be provided through the
Company’s paying the applicable premium for Executive under COBRA), the Company
shall pay to Executive such amount as is necessary to provide Executive, on an
after-tax basis, with an amount equal to the cost of acquiring, for Executive and
his spouse and dependents, (on a non-group basis) those health and other welfare
benefits that would otherwise be lost to Executive and his spouse and dependents as
a result of Executive’s termination.

	 	(d)	 	Definitions. For the purposes of this Agreement, “Cause” shall mean
Executive’s:

	 	(i)	 	indictment or plea of guilty or nolo contendere
involving any felony or gross misdemeanor involving dishonesty, fraud, or
breach of trust under any law of the United States or any State thereof;

	 	(ii)	 	willful engagement in any conduct or gross negligence that in
either case materially injures the Company or any of its subsidiaries; or

	 	(iii)	 	willful and substantial nonperformance of assigned duties,
provided that such nonperformance has continued more than ten days after the
Company has given written notice of such nonperformance and of its intention to
terminate Executive’s employment because of such nonperformance.

For purpose of this Agreement “Good Reason” shall exist if the Company, without
Executive’s written consent:

	 	(i)	 	materially reduces the nature, scope, level or extent of
Executive’s responsibilities;

(ii) reduces Executive’s salary;

	 	(iii)	 	gives written notice to the Executive pursuant to Section 2
not to extend the Term of this Agreement; or

	 	(iv)	 	relocates Executive’s principal business office to a location
which is more than fifty (50) miles from both (A) Executive’s principal
business office immediately prior to such relocation and (B) Executive’s
principal place of residence at the time of such relocation.

	 	(e)	 	Conditions. Executive’s eligibility to receive the payment and
benefits under this Section is conditioned on (i) his compliance with the provisions of
Section 8 of this Agreement and (ii) his execution of a general release and waiver of
all claims against the Company and its directors, officers and subsidiaries, in a
reasonable and customary form prepared by the Company.

	 	(f)	 	Right of Recapture. In the event that (x) within one year after
termination of this Agreement and Executive’s employment for any reason the Company
determines that prior to such termination he engaged in any activity which would have
constituted a basis for termination by the Company for Cause while employed by the
Company or (y) Executive breaches the restrictive covenants of Section 8, then:

	 	(i)	 	the Company shall have no further obligations to pay the lump
sum severance payment or to continue providing Executive and his spouse and
dependents with health and other welfare benefits, as provided in paragraph (c)
above, if such termination was by the Company without Cause or by the Executive
for Good Reason;

	 	(ii)	 	upon written notice to Executive from the Company, Executive
shall pay to the Company within ten (10) business days any lump severance
payment received by Executive pursuant to paragraph (c) above, and

	 	(iii)	 	if Executive has exercised any stock options granted to him by
the Company, Executive shall pay to the Company within ten (10) business days
after written notice from the Company the difference between (A) the aggregate
fair market value on the date (or dates) of exercise of the shares subject to
stock options which were exercised by Executive on or after the date which is
one (1) year prior to Executive’s termination of employment and (B) the
aggregate exercise price of such stock options.

Notwithstanding anything contained herein, this paragraph shall not apply to any
breach of the provisions of Section 8(a) unless there has been substantial damage to
the Company. For purposes of this paragraph, “fair market value” on any date means
the per share closing price of the Company’s common stock on the Nasdaq Stock Market
on that date (or, if there was no reported closing price on that date, on the last
preceding date on which the closing price was reported) or, if the Company is not
then listed on the Nasdaq Stock Market, as determined by the Board in good faith.

7. Change in Control.

	 	(a)	 	Retention Bonus. In the event that Executive’s employment continues
for two (2) years after a Change in Control (as such term is defined in Appendix A),
Executive shall be entitled to a lump sum cash retention bonus equal to one (1) times
Executive’s annual salary then in effect. Such retention bonus shall be paid to
Executive within ten (10) business days following the second anniversary of the Change
in Control.

	 	(b)	 	Severance Payment and Benefits. In the event that Executive’s
employment is terminated less than two (2) years after a Change in Control by the
Company without Cause or by Executive for Good Reason, Executive shall be entitled to
the same rights, payments and benefits as provided in paragraph (c) of Section 6,
except that the amount of the lump sum severance payment shall be equal to one (1)
times Executive’s annual salary in effect on the termination date (without regard to
any reduction in salary referred to in clause (ii) of the definition of Good Reason).

For purposes of this Section, Good Reason shall also include the Company’s failure
without Executive’s written consent to continue in effect any incentive or bonus
plan, or Benefit Plan, unless Executive is permitted to participate in other plans
providing Executive with substantially equivalent compensation and benefits in the
aggregate (and, with respect to life insurance, major medical and other employee
welfare benefit plans, at a substantially equivalent cost).

	 	(c)	 	Reduction of Payment. If, as provided in Appendix B, Executive would
otherwise be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code, the amounts payable under this Agreement shall be reduced as provided in Appendix
B.

	 	(d)	 	Legal Fees. If any contest or dispute shall arise under this Agreement
involving termination of Executive’s employment with the Company after a Change in
Control or involving the failure or refusal of the Company to perform fully in
accordance with the terms of this Section, the Company shall reimburse Executive for
all reasonable legal fees and related expenses, if any, incurred by Executive in
connection with such contest or dispute if a court of competent jurisdiction or an
arbitration panel substantially upholds Executive’s position.

8. Restrictive Covenants.

	 	(a)	 	Confidentiality. Executive agrees not to directly or indirectly,
without the Company’s prior written consent:

	 	(i)	 	use or disclose, for the benefit of any person, firm or entity
other than the Company and its subsidiaries, the Confidential Business
Information of the Company or any of its subsidiaries;

	 	(ii)	 	distribute or disseminate in any way to any person, firm or
entity anyone other than the Company and its subsidiaries, any Confidential
Business Information in any form whatsoever;

	 	(iii)	 	copy any Confidential Business Information other than for use
by the Company or any of its subsidiaries;

	 	(iv)	 	remove any Confidential Business Information from the premises
of the Company;

(v) fail to safeguard all confidential documents; and

	 	(vi)	 	copy any confidential documents belonging to any of the
Company’s customers.

For purposes of this Agreement, “Confidential Business Information” means
information or material that is not generally available to or used by others or the
utility or value of which is not generally known or recognized as a standard
practice, whether or not the underlying details are in the public domain, including
but not limited to its computerized and manual systems, procedures, reports, client
lists, review criteria and methods, financial methods and practices, plans, pricing
and marketing techniques, business methods and procedures and other valuable and
proprietary information relating to the pricing, marketing, design, manufacture and
formulation of educational software, as well as information regarding the past,
present and prospective clients of the Company or any of its subsidiaries, and their
particular needs and requirements, and their own confidential information.

Upon termination of employment under this Agreement for any reason, Executive agrees
to return to the Company all policy and procedure manuals, records, notes, data,
memoranda, and reports of any nature (including computerized and electronically
stored information) which are in Executive’s possession and/or control which relate
to (i) the Confidential Business Information of the Company or any of its
subsidiaries, (ii) the business activities or facilities of the Company or its past,
present, or prospective clients.

	 	(b)	 	Non-Compete. During the period of Executive’s employment and for a
period of one (1) year following termination of this Agreement and Executive’s
employment for any reason (the “Restricted Period”), Executive will not directly or
indirectly, on his behalf, or as a partner, officer, director, trustee, member,
employee, or otherwise, within the United States or in any foreign market in which
Executive was engaged in activities on behalf of the Company or any of its
subsidiaries, own, engage in or participate in, in any way, any business that is
similar to or competitive with any actual or planned business activity engaged in or
planned by the Company or any of its subsidiaries at the time the employment under this
Agreement was terminated. However, this Agreement shall not prohibit ownership by
Executive of up to 2% of the shares of stock of any corporation the stock of which is
listed on a national securities exchange or is traded in the over-the-counter market.

	 	(c)	 	Non-Solicitation. During the Restricted Period, Executive will not
directly or indirectly, for the purpose of selling services and/or products provided
or planned by the Company or any of its subsidiaries at the time the employment under
this Agreement was terminated, call upon, solicit or divert any actual customer or
prospective customer of the Company or any of its subsidiaries, unless employed by the
Company to do so. An actual customer, for purposes of this Section, is any customer
to whom the Company or any of its subsidiaries has provided services and/or products
within one year prior to Executive’s termination of employment under this Agreement.
A prospective customer, for purposes of this Section, is any prospective customer to
whom the Company or any of its subsidiaries sought to provide services and/or products
within one year prior to the date of Executive’s termination of employment under this
Agreement when Executive had knowledge of or was involved in such solicitation.

Executive further agrees that during the Restricted Period Executive shall not
directly or indirectly induce any person to leave the employ of the Company or any
of its subsidiaries, or solicit any person who is currently or was an employee of
the Company or any of its subsidiaries at any time during the twelve months prior to
Executive’s termination of employment under this Agreement.

	 	(d)	 	Judicial Modification. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 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.

	 	9.	 	Remedies. In the event Executive breaches or threatens to breach and provision of
Section 8 of this Agreement, the Company shall, in addition to the provisions of Section 6(f)
be entitled to injunctive relief, enjoining or restraining such breach or threatened breach.
Executive acknowledges that the Company’s remedy at law is inadequate and that the Company and
its subsidiaries will suffer irreparable injury if such conduct is not prohibited.

Executive further agrees that the covenants contained in Section 8 shall be construed as
separate and independent of other provisions of this Agreement and the existence of any
claim by Executive against the Company or any of its subsidiaries, except for a claim that
Executive was terminated without Cause or terminated his employment for Good Reason, shall
not constitute a defense to the enforcement by the Company of either Section 8 or this
Section.

	 	10.	 	Property Rights. All discoveries, designs, improvements, ideas, inventions,
intellectual property, creations, and works of art, whether or not patentable or subject to
copyright, relating to the business of the Company or any of its subsidiaries, or its clients,
conceived, developed or made by Executive during employment under this Agreement, either
solely or jointly with others (hereafter “Developments”) shall automatically become the sole
property of the Company. Executive shall immediately disclose to the Company all such
Developments and shall, without additional compensation, execute all assignments, application
or any other documents deemed necessary by the Company to perfect the Company’s rights
therein. These obligations shall continue throughout the Restricted Period under this
Agreement with respect to Developments conceived, developed or made by Executive during the
period of employment under this Agreement.

The Company acknowledges and agrees that the provisions of this section shall not apply to
inventions or for which no equipment, supplies, facility or trade secret information of the
Company or its clients were used by Executive and which were developed entirely on
Executive’s own time unless (a) such inventions relate (i) to the business of the Company or
(ii) to the Company’s actual or demonstrably anticipated research or development or (b) such
inventions result from any work performed by Executive for the Company.

	 	11.	 	Assignments. Neither party shall have the right or power to assign any rights or
duties under this Agreement without the written consent of the other party, provided, however,
that the Company shall have the right to assign this Agreement without consent pursuant to any
corporate reorganization, merger, or other transaction involving a change of control of the
Company or any of its subsidiary companies. Any attempted assignment in breach of this
Section shall be void.

If Executive performs services and duties for any subsidiary or other affiliated entity of
the Company, then the provisions of Sections 8 and 10 shall apply to the confidential
information and business activities, property rights, clients, and employees of that
subsidiary or other entity.

	 	12.	 	Severability. Each section, paragraph, clause, sub-clause and provision
(collectively “Provisions”) of this Agreement shall be severable from each of the others, and
if for any reason the Section, clause, sub-clause or provision is invalid or unenforceable,
such invalidity or unenforceability shall not prejudice or in any way affect the validity or
enforceability of any other Provision hereof.

13. Miscellaneous.

	 	(a)	 	This Agreement contains the entire agreement of the parties with respect to the
employment of Executive and supersedes all prior agreements, provisions, covenants,
arrangements, communications, representations or warrantees whether written or oral, by
any officer, employee or representative of any party with respect to the subject matter
of this Agreement. The Prior Agreements are amended and restated in their entirety by
this Agreement

	 	(b)	 	Failure on the part of either party to insist upon strict compliance by the
other with respect to any of the terms, covenants and conditions hereof, shall not be
deemed a subsequent waiver of such term, covenant or condition.

	 	(c)	 	The provisions of any Section containing a continuing obligation after
termination shall survive such termination whether with or without Cause and even if
occasioned by the Company’s breach or wrongful termination.

	 	(d)	 	This Agreement may not be modified except in a written amendment signed by the
parties.

	 	(e)	 	Except for action by the Company to enforce the restrictive covenants of
Section 8, any dispute, controversy or difference that may arise between the parties
hereto out of or in relation to or in connection with this Agreement or for the breach
thereof which cannot be settled amicably by the parties within thirty (30) days shall
be finally and exclusively settled by arbitration in Minneapolis, Minnesota, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The arbitrator shall have discretion to award the
prevailing party reasonable attorney’s fees, subject to Section 7(d). In the event of
litigation under this Agreement, the court shall have discretion to award the
prevailing party reasonable attorney’s fees, subject to Section 7(d).

	 	(f)	 	The headings in this Agreement are inserted for convenience and identification
only and are not intended to describe, interpret, define or limit the scope, extent, or
intent of this Agreement or any provision hereof. Each party has cooperated in the
preparation of this Agreement. As a result, this Agreement shall not be construed
against any party on the basis that the party was the draftsperson.

	 	(g)	 	All forms of compensation referred to in this Agreement are subject to
reduction to reflect withholding for applicable income, payroll and other taxes.

	 	14.	 	Governing Law. It is the intention of the parties hereto that all questions with
respect to the construction, formation, and performance of this Agreement and the rights and
liabilities of the parties hereto shall be determined in accordance with the laws of the State
of Minnesota. The parties hereto submit to the jurisdiction and venue of the courts of
Hennepin County, Minnesota in respect to any dispute arising out of this agreement.

	 	15.	 	Insurance. For the period from the date hereof through at least the fifth
anniversary of Executive’s termination of employment from the Company, the Company agrees to
maintain Executive as an insured party on all directors’ and officers’ insurance maintained by
the Company for the benefit of its directors and officers on at least the same basis as all
other covered individuals.

	 	16.	 	Notices. Any notice required pursuant to this Agreement will be in writing and will
be deemed given upon the earlier of (i) delivery thereof, if by hand, (ii) five business days
after mailing if sent by mail (registered or certified mail, postage prepaid, return receipt
requested), (iii) the next business day after deposit if sent by a recognized overnight
delivery service, or (iv) upon transmission if sent by facsimile transmission or by electronic
mail, with return notification (provided that any notice sent by facsimile or electronic mail
shall also promptly be sent by one of the means described in clauses (i) through (iii) of this
Section. All notices will be addressed as follows or to such other address as a party may
identify in a written notice to the other party:

	 	 	 
	to the Company:

	 	PLATO Learning, Inc.

Attn: Chairman of the Board of Directors

10801 Nesbitt Avenue South

Bloomington, MN 55437-3109
	 
	 	 
	to Executive:

	 	Mr. Frank Preese

PLATO Learning, Inc.

10801 Nesbitt Avenue South

Bloomington, MN 55437-3109

Each party named above may change its address and that of its representative for notice by
the giving of notice thereof in the manner hereinabove provided.

	 	17.	 	Counterparts. This Agreement may be executed in one or more counterparts, all of
which together shall constitute but one Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement in the State of
Minnesota effective as of the day and year first above written.

PLATO Learning, Inc.

	 	 	 
	Frank Preese

	 	By:
	 
	 	 
	
 
	 	Its:
	
 
	 	 

1

APPENDIX A

“Change in Control” means the occurrence of any one of the following events:

(i) individuals who, on January 1, 2005, constitute the Board (the “Incumbent
Directors”) cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to January 1, 2005 whose election or
nomination for election was approved by a vote of at least a majority of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director; provided,
however, that no individual initially elected or nominated as a director of the
Company as a result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be deemed to be an Incumbent Director;

(ii) any “person” (as such term is defined in the Exchange Act and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then outstanding
securities eligible to vote for the election of the Board (the “Company Voting Securities”);
provided, however, that the event described in this paragraph (ii) shall not
be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by
the Company or any subsidiary, (B) by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying
Transaction, as defined in paragraph (iii), or (E) by any person of Voting Securities from
the Company, if a majority of the Incumbent Board approves in advance the acquisition of
beneficial ownership of 50% or more of Company Voting Securities by such person;

(iii) the consummation of a merger, consolidation, statutory share exchange or similar
form of corporate transaction involving the Company or any of its subsidiaries that requires
the approval of the Company’s stockholders, whether for such transaction or the issuance of
securities in the transaction (a “Business Combination”), unless immediately following such
Business Combination: (A) more than 60% of the total voting power of (x) the corporation
resulting from such Business Combination (the “Surviving Corporation”), or (y) if
applicable, the ultimate parent corporation that directly or indirectly has beneficial
ownership of 100% of the voting securities eligible to elect directors of the Surviving
Corporation (the “Parent Corporation”), is represented by Company Voting Securities that
were outstanding immediately prior to such Business Combination (or, if applicable, is
represented by shares into which such Company Voting Securities were converted pursuant to
such Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting Securities
among the holders thereof immediately prior to the Business Combination, (B) no person
(other than any employee benefit plan (or related trust) sponsored or maintained by the
Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner,
directly or indirectly, of 50% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority of the members of the
board of directors of the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business Combination were Incumbent
Directors at the time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which satisfies all of the
criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying
Transaction”);

(iv) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or the consummation of a sale of all or substantially all of the
Company’s assets; or

(v) the occurrence of any other event that the Board determines by a duly approved
resolution constitutes a Change in Control.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any
person acquires beneficial ownership of more than 50% of the Company Voting Securities as a result
of the acquisition of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities beneficially owned by such
person, a Change in Control of the Company shall then occur.

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APPENDIX B

Cut-back to Safe Harbor Cap on Payments

(a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be
determined that any payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of
Executive, whether pursuant to the terms of this Agreement or otherwise (the “Payments”), would be
subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the “Code”), then the amounts payable to Executive under this Agreement shall
be reduced (reducing first the payments under Section 7(a) and (b), unless an alternative method of
reduction is elected by Executive) to the maximum amounts will result in no portion of the Payments
being subject to such excise tax (the “Safe Harbor Cap”). For purposes of reducing the Payments to
the Safe Harbor Cap, only amounts payable to Executive under this Agreement (and no other Payments)
shall be reduced, unless consented to by Executive.

(b) All determinations required to be made under this Appendix B shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior to the Change in
Control (the “Accounting Firm”) which shall provide detailed supporting calculations both to the
Company and Executive within ten (10) business days of the receipt of notice from the Company or
Executive that there has been a Payment, or such earlier time as is requested by the Company.
Notwithstanding the foregoing, in the event (i) the Board shall determine prior to the Change in
Control that the Accounting Firm is precluded from performing such services under applicable
auditor independence rules or (ii) the Audit Committee of the Board determines that it does not
want the Accounting Firm to perform such services because of auditor independence concerns or (iii)
the Accounting Firm is serving as accountant or auditor for the person(s) effecting the Change in
Control, the Board shall appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses (including, but not limited to, the costs of
retaining experts) of the Accounting Firm shall be borne solely by the Company and the Company
shall enter into any agreement requested by the Accounting Firm in connection with the performance
of the services hereunder.

If the Accounting Firm determines that payments shall be reduced to the Safe Harbor Cap, it
shall furnish Executive with a written opinion to that effect, and to the effect that Executive is
not required to report any Excise Tax on Executive’s federal income tax return. If the Accounting
Firm determines that no Excise Tax would otherwise be payable by Executive, it shall furnish
Executive with a written opinion to such effect, and to the effect that Executive is not required
to report any Excise Tax on Executive’s federal income tax return. The determination by the
Accounting Firm shall be binding upon the Company and Executive (except as provided in paragraph
(c) below).

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(c) If it is established pursuant to a final determination of a court or the Internal Revenue

Service (the “IRS”) proceeding which has been finally and conclusively resolved, that Payments have

been made to, or provided for the benefit of, Executive by the Company, which are in excess of the

limitations provided in this Section 5 (hereinafter referred to as an “Excess Payment”), Executive

shall repay the Excess Payment to the Company on demand, together with interest on the Excess

Payment at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date of

Executive’s receipt of such Excess Payment until the date of such repayment. As a result of the

uncertainty in the application of Section 4999 of the Code at the time of the determination, it is

possible that Payments which will not have been made by the Company should have been made (an

“Underpayment”), consistent with the calculations required to be made under this Appendix B. In

the event that it is determined (i) by the Accounting Firm, the Company (which shall include the

position taken by the Company, or together with its consolidated group, on its federal income tax

return) or the IRS or (ii) pursuant to a determination by a court, that an Underpayment has

occurred, the Company shall pay an amount equal to such Underpayment to Executive within ten (10)

days of such determination together with interest on such amount at the applicable federal rate

from the date such amount would have been paid to Executive until the date of payment. Executive

shall cooperate; to the extent Executive’s expenses are reimbursed by the Company, with any

reasonable requests by the Company in connection with any contests or disputes with the Internal

Revenue Service in connection with the Excise Tax or the determination of the Excess Payment.

Notwithstanding the foregoing, in the event that amounts payable under this Agreement were reduced

pursuant to paragraph (a) of this Appendix B and the value is stock options is subsequently

redetermined by the Accounting Firm (as defined below) within the context of Treasury Regulation

§1.280G-1 Q/A 33 that reduces the value of the Payments attributable to such options, the Company

shall promptly pay to Executive any amounts payable under this Agreement that were not previously

paid solely as a result of paragraph (a) up to the Safe Harbor Cap.

4

AMENDMENT TO

EMPLOYMENT AGREEMENT

This AMENDMENT (“Amendment”) to the Employment Agreement (“Employment Agreement”), dated as of
January 1, 2005 by and between PLATO Learning, Inc., a Delaware corporation headquartered in
Minneapolis (“Company”), and Frank Preese (“Employee”), is effective May 5, 2005 (“Effective
Date”).

WHEREAS, The Company and Employee entered into an Employment Agreement dated as of January 1,
2005 (“Employment Agreement”);

WHEREAS, The Company has decided to restructure its organization in light of the changing
business climate and its alignment strategies;

WHEREAS, The Company’s restructuring includes hiring a Vice President – Chief Technology
Officer, which results in a change in Employee’s position and reporting relationship, constituting
“Good Reason” under Paragraph 6(d) of the Employment Agreement; and

WHEREAS, the Company and Employee desire to amend the Employment Agreement as set forth
herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set
forth, the parties agree as follows:

	 	1.	 	Trial Period. The Company and Employee will have a trial period through
December 31, 2005 during which the Company and Employee will work together to develop the
Employee’s new role with the Company and working relationship with the new Vice President –
Chief Technology Officer.

	 	2.	 	Notice and Termination Rights during Trial Period. At any time during this
trial period, the Employee may terminate his employment with the Company for Good Reason by
giving the Company 30 days’ notice under Section 6(c) of the Employment Agreement and
obtain the benefits set forth in Section 6(c) of the Employment Agreement. The Company will
retain its rights under the Employment Agreement to terminate the Employee’s employment
during this trial period in accordance with the Employment Agreement.

	 	3.	 	Termination Rights After Trial Period End. If the Employee does not notify the
Company by December 31, 2005 of the Employee’s decision to terminate his employment for
Good Reason, the Employee agrees that the Company’s hiring of the new Vice President –
Chief Technology Officer and any resulting change in the Employee’s title or the nature,
scope, level or extent of the Employee’s responsibilities with the Company will not
constitute Good Reason under the Employment Agreement, and the Employment Agreement will
continue in effect unless and until either the Company or the Employee elect to terminate
it for some other reason.

	 	4.	 	No Other Amendment. Except as stated in the Amendment, the terms and conditions
of the Employment Agreement remain in full force and effect in accordance with its original
terms.

	 	5.	 	Counterparts. This Amendment may be executed in one or more counterparts, each
of which will be deemed to be an original and all of which together will be deemed to be
one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Employment
Agreement in the State of Minnesota effective as of the day and year first above written.

PLATO Learning, Inc.

	 	 	 
	Frank Preese

	 	By:
	
 
	 	Its:
	
 
	 	 
	 
	 	 

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