Document:

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                                                                    EXHIBIT 10.2

                                 FIRST AMENDMENT
                                       TO
                              EMPLOYMENT AGREEMENT

         WHEREAS, Reliant Resources, Inc., ("RRI") and Reliant Energy
Incorporated ("REI") have entered into an employment agreement, dated as July
29, 2002 (the "Agreement") with Mark M. Jacobs (the "Executive"); and

         WHEREAS, as a result of the spin-off of RRI by a successor to REI, REI
is no longer a party to the Agreement

         WHEREAS, the Executive and RRI desire to amend the Agreement;

         NOW, THEREFORE, the Agreement is hereby amended, effective as of the
date hereof:

1.       Section 2 of the Agreement is hereby redesignated as Section 2.A., and
         a new Section 2.B. is added to the Agreement, as follows:

                  B. New Severance Agreement. If Executive remains employed by
         RRI at the natural expiration of the Term on the close of business on
         July 31, 2005 and at such time neither Executive nor RRI shall have
         delivered a notice of termination of Executive's employment, the
         Severance Agreement between RRI and Executive, executed as of the date
         hereof (the "Severance Agreement"), shall become immediately effective
         without further action by the parties. Upon the effectiveness of the
         Severance Agreement, this Agreement shall be deemed to have expired in
         accordance with its terms and Executive shall have no rights hereunder
         due to any subsequent termination of employment with RRI. In the event
         that Executive is not employed by RRI at the natural expiration of the
         Term or a notice of termination of Executive's employment has been
         delivered by Executive or RRI prior to such time, the Severance
         Agreement shall not become effective and shall be null and void and of
         no force or effect and any applicable provisions of this Agreement
         shall govern the consequences of such termination of employment.

2.       The following additional clauses 4, 5 and 6 are added to Section 5.D.
         of the Agreement, as follows:

         4. subject to any election by Executive pursuant to Section 6.C.2., an
amount equal to the product of (a) the Base Salary and (b) the Executive's
target incentive award opportunity under the applicable annual short-term
incentive bonus plan in effect immediately prior to the termination of
Executive's employment (or, if higher, immediately prior to the first event or
circumstance constituting Good Reason) with the product of (a) and (b) prorated
based on the number of days Executive was employed during the bonus year in
which his employment terminated;

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         5. subject to any election by Executive pursuant to Section 6.C.2.,
reimbursement for fees incurred for outplacement services within twenty four
months of the date of Executive's termination of employment in connection with
Executive's efforts to obtain new employment, up to a maximum of $100,000 (such
outplacement benefits, together with the prorata bonus payment described in
clause 4 above, the "Elected Benefits");

         6. in the event it shall be determined that any payment or distribution
by RRI to or for the benefit of 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 5.D.6. (a "Payment")) would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") or any interest or penalties are incurred by 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 Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") from
RRI in an amount such that after payment (whether through withholding at the
source or otherwise) by 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),
employment taxes and Excise Tax imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. The provisions of Exhibit C shall govern determinations required
to be made under this Section 5.D.6.

3.       Section 6.C. is hereby amended by redesignating Section 6.C.2. as
         Section 6.C.3. and be adding a new Section 6.C.2., as follows:

                  2. Executive agrees that while employed by RRI during the Term
of this Agreement and for one year following a termination of employment during
the Term of this Agreement that does not occur (i) on or following a Change of
Control (as defined on Exhibit D) or (ii) on or following the execution of a
binding agreement to effectuate a Change of Control but prior to the
consummation of such Change of Control, Executive will not, without the prior
written consent of RRI, acting alone or in conjunction with others, either
directly or indirectly, engage in any business that is in competition with RRI
or accept employment with or render services to such a business as an officer,
agent, employee, independent contractor or consultant, or otherwise engage in
activities that are in competition with RRI. Notwithstanding the foregoing, in
the event that Executive irrevocably elects in writing, prior to the 15th day
following termination of his employment, not to receive the Elected Benefits,
Executive shall not be subject to the provisions of this Section 6.C.2.

4.       New Exhibits C and D are added to the Agreement in the form attached
         hereto.

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Executed this 30th day of April, 2003

                                              RELIANT RESOURCES, INC.

                                              By:    /s/ Joel V. Staff
                                                     ---------------------------
                                              Title: Chairman and Chief
                                                     Executive Officer

                                              /s/ Mark M. Jacobs
                                              ----------------------------------
                                              Mark M. Jacobs

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                                    EXHIBIT C

                  Subject to the provisions of this Exhibit C, all
determinations required to be made under this Exhibit C, 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 Deloitte & Touche (the "Accounting Firm") which shall provide detailed
supporting calculations both to RRI and Executive within 15 business days of the
receipt of notice from Executive that there has been a Payment, or such earlier
time as is requested by RRI. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control (as defined in Exhibit D), Executive may appoint another nationally
recognized 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 of the Accounting Firm shall be borne solely by RRI. Any
Gross-Up Payment, as determined pursuant to this Exhibit C, shall be paid by RRI
to Executive within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by Executive, it shall furnish Executive with a written opinion that failure to
report the Excise Tax on Executive's applicable federal income tax return would
not result in the imposition of negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon RRI and 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 RRI should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that RRI exhausts its remedies pursuant to the following
provisions of this Exhibit 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 RRI to or for the benefit of Executive.

Executive shall notify RRI in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by RRI of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than ten business days after Executive is informed in writing of such claim and
shall apprise RRI of the nature of such claim and the date on which such claim
is requested to be paid. 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 RRI (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If RRI notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:

                  (a) give RRI any information reasonably requested by RRI
         relating to such claim;

                  (b) take such action in connection with contesting such claim
         as RRI 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 RRI;

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                  (c) cooperate with RRI in good faith in order to effectively
         contest such claim; and

                  (d) permit RRI to participate in any proceedings relating to
         such claim;

provided, however, that RRI 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 Executive harmless, on an after-tax basis,
for any Excise Tax, employment 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 Exhibit C, RRI shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo 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 Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and 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 RRI shall determine; provided, however, that if RRI
directs Executive to pay such claim and sue for a refund, RRI shall advance the
amount of such payment to Executive, on an interest-free basis and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax, employment 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
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, RRI's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and 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.

If, after the receipt by Executive of an amount advanced by RRI pursuant to the
foregoing provisions of this Exhibit C, Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to RRI complying
with the requirements of this Exhibit C) promptly pay to RRI the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount advanced by
RRI pursuant to the foregoing provisions of this Exhibit C, a determination is
made that Executive shall not be entitled to any refund with respect to such
claim and RRI does not notify 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.

If RRI is obligated to provide the Executive with health benefit coverage
pursuant to Section 5.D.3., and the amount of such benefits or the value of such
benefit coverage (including without limitation any insurance premiums paid by
RRI to provide such

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benefits) is subject to any income, employment or similar tax imposed by
federal, state or local law, or any interest or penalties with respect to such
tax (such tax or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the "Income Tax") because such benefits
cannot be provided under a nondiscriminatory health plan described in Section
105 of the Code or for any other reason, RRI will pay to the Executive an
additional payment or payments (collectively, an "Income Tax Payment"). The
Income Tax Payment will be in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), the Executive retains an amount of the Income Tax Payment equal
to the Income Tax imposed with respect to such welfare benefits or such welfare
benefit coverage.

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                                    EXHIBIT D

                  A "CHANGE OF CONTROL" shall be deemed to have occurred upon
the occurrence of any of the following events:

                  (a) 30% OWNERSHIP CHANGE: Any Person, other than any pension
         plan regulated under the Employee Retirement Income Security Act of
         1974, as amended established by RRI or an Affiliate, makes an
         acquisition of Outstanding Voting Stock and is, immediately thereafter,
         the beneficial owner of 30% or more of the then Outstanding Voting
         Stock, unless such acquisition is made directly from RRI in a
         transaction approved by a majority of the Incumbent Directors; or any
         group is formed that is the beneficial owner of 30% or more of the
         Outstanding Voting Stock; or

                  (b) BOARD MAJORITY CHANGE: Individuals who are Incumbent
         Directors cease for any reason to constitute a majority of the members
         of the Board of Directors of RRI; or

                  (c) MAJOR MERGERS AND ACQUISITIONS: Consummation of a Business
         Combination unless, immediately following such Business Combination,
         (i) all or substantially all of the individuals and entities that were
         the beneficial owners of the Outstanding Voting Stock immediately prior
         to such Business Combination beneficially own, directly or indirectly,
         more than 70% of the then outstanding shares of voting stock of the
         parent corporation resulting from such Business Combination in
         substantially the same relative proportions as their ownership,
         immediately prior to such Business Combination, of the Outstanding
         Voting Stock, (ii) if the Business Combination involves the issuance or
         payment by RRI of consideration to another entity or its shareholders,
         the total fair market value of such consideration plus the principal
         amount of the consolidated long-term debt of the entity or business
         being acquired (in each case, determined as of the date of consummation
         of such Business Combination by a majority of the Incumbent Directors)
         does not exceed 50% of the sum of the fair market value of the
         Outstanding Voting Stock plus the principal amount of RRI's
         consolidated long-term debt (in each case, determined immediately prior
         to such consummation by a majority of the Incumbent Directors), (iii)
         no Person (other than any corporation resulting from such Business
         Combination) beneficially owns, directly or indirectly, 30% or more of
         the then outstanding shares of voting stock of the parent corporation
         resulting from such Business Combination and (iv) a majority of the
         members of the board of directors of the parent corporation resulting
         from such Business Combination were Incumbent Directors of RRI
         immediately prior to consummation of such Business Combination; or

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                  (d) MAJOR ASSET DISPOSITIONS: Consummation of a Major Asset
         Disposition unless, immediately following such Major Asset Disposition,
         (i) individuals and entities that were beneficial owners of the
         Outstanding Voting Stock immediately prior to such Major Asset
         Disposition beneficially own, directly or indirectly, more than 70% of
         the then outstanding shares of voting stock of RRI (if it continues to
         exist) and of the entity that acquires the largest portion of such
         assets (or the entity, if any, that owns a majority of the outstanding
         voting stock of such acquiring entity) and (ii) a majority of the
         members of the board of directors of RRI (if it continues to exist) and
         of the entity that acquires the largest portion of such assets (or the
         entity, if any, that owns a majority of the outstanding voting stock of
         such acquiring entity) were Incumbent Directors of RRI immediately
         prior to consummation of such Major Asset Disposition.

For purposes of the foregoing definition,

                  (1)      the term "Person" means an individual, entity or
         group;

                  (2) the term "group" is used as it is defined for purposes of
         Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange
         Act");

                  (3) the term "beneficial owner" is used as it is defined for
         purposes of Rule 13d-3 under the Exchange Act;

                  (4) the term "Outstanding Voting Stock" means outstanding
         voting securities of RRI entitled to vote generally in the election of
         directors; and any specified percentage or portion of the Outstanding
         Voting Stock (or of other voting stock) shall be determined based on
         the combined voting power of such securities;

                  (5) the term "Incumbent Director" means a director of RRI (x)
         who was a director of RRI on January 1, 2003 or (y) who becomes a
         director subsequent to such date and whose election, or nomination for
         election by RRI's shareholders, was approved by a vote of a majority of
         the Incumbent Directors at the time of such election or nomination,
         except that any such director shall not be deemed an Incumbent Director
         if his or her initial assumption of office occurs as a result of an
         actual or threatened election contest or other actual or threatened
         solicitation of proxies by or on behalf of a Person other than the
         Board of Directors of RRI;

                  (6) the term "election contest" is used as it is defined for
         purposes of Rule 14a-11 under the Exchange Act;

                  (7) the term "Business Combination" means (x) a merger or
         consolidation involving RRI or its stock or (y) an acquisition by RRI,

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         directly or through one or more subsidiaries, of another entity or its
         stock or assets;

                  (8) the term "parent corporation resulting from a Business
         Combination" means RRI if its stock is not acquired or converted in the
         Business Combination and otherwise means the entity which as a result
         of such Business Combination owns RRI or all or substantially all RRI's
         assets either directly or through one or more subsidiaries;

                  (9) the term "Major Asset Disposition" means the sale or other
         disposition in one transaction or a series of related transactions of
         70% or more of the assets of RRI and its subsidiaries on a consolidated
         basis; and any specified percentage or portion of the assets of RRI
         shall be based on fair market value, as determined by a majority of the
         Incumbent Directors; and

                  (10) the term "Affiliate" means any company controlled by,
         controlling or under common control with RRI within the meaning of
         Section 414 of the Code.

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                                                                    EXHIBIT 10.1
June 27, 2003

                                Via Hand Delivery

PERSONAL & CONFIDENTIAL

Mr. Michael H. Baum

Dear Mike:

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

         (1)      Benefits to You.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                Very truly yours,

                                RENAISSANCE LEARNING, INC.

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

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

Time:  1:57 PM  CDST

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

<PAGE>

EXHIBIT A

                                 GENERAL RELEASE

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

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

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

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

Michael H. Baum                  RENAISSANCE LEARNING, INC.

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

Dated:  ____________________      Dated:  ________________________

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