Exhibit 4.1
XXXXXXX XXX
0 00 Xxxxxx
Xxxxxx XX0X 0XX
Telephone x00 (0)00 0000 0000
Facsimile x00 (0)00 0000 0000
xxx.xxxxxxx.xxx
January 28, 2005
CONFIDENTIAL
Xxxxx Xxxxxxxxxx
Re: Employment with Xxxxxxx Education and its Affiliates
Dear Xxxxx:
This letter ("Letter Agreement") outlines our arrangements regarding your
employment with Xxxxxxx Education Holdings Inc. (together with its successors
and assigns, the "Company"), Xxxxxxx plc, and their affiliates, as follows:
1. Disability Leave: Duties. As we are both in agreement that you are no
longer able to perform any of the material and substantial duties of your job,
you will step down as President and Chief Executive Officer of the Company
effective January 31, 2005 (the "Disability Date"). You will also resign from
all other officer and director positions you hold with the Company, Xxxxxxx plc,
and their affiliates as of the Disability Date. As of the Disability Date, you
will relinquish all of your day-to-day duties and responsibilities as President
and Chief Executive Officer of the Company. We very much appreciate your offer
to make yourself available for appropriate consulting projects during the 18
month period following the Disability Date on a pro xxxx basis. We will be
discussing possible projects with you, but we acknowledge and agree that none of
the benefits outlined in this Letter Agreement is conditioned upon your taking
on or completing any such projects.
2. Payments and Benefits. After the Disability Date, you will be entitled
to receive only the following payments and benefits (in each case subject to
applicable tax withholding):
a. Short Term Disability. With the assistance of the Company's Human
Resources Department, you will apply for benefits under the Company's Short-Term
Disability (STD) Plan. The STD Plan will provide you with 100% of your current
base salary ($890,000) from the Disability Date through the earlier of the date
of your death and the six month anniversary of the Disability Date (the "STD
Period").
b. Long Term Disability. Prior to the end of the STD Period, with the
assistance of and in consultation with the Company's Human Resources Department,
you will apply for benefits under the Company's Long-Term Disability (LTD) Plan.
Assuming you qualify and continue to qualify thereunder, UNUM, our insurance
carrier, will pay you (on a non-taxable basis, no less frequently than monthly,
and in approximately equal installments) $300,000 annually (60% of the first
$500,000 of your base salary), commencing on the six month anniversary of the
Disability Date and ending on the earlier of the date of your death and the date
you attain age 65 (the "LTD Period"), provided that for purposes of
REGISTERED OFFICE AT THE ABOVE ADDRESS, REGISTERED IN ENGLAND NUMBER 53723
xxxxxxx plc
paragraphs 2(c), 2(e), 2(f), 2(h) and 3, the LTD Period shall end upon your
knowingly rendering material services to a material competitor of the Company or
any of its affiliates ("Competitive Services").
c. Supplemental Long-Term Disability Benefits. During the LTD Period,
we will supplement your benefits under the LTD Plan and pay you (on a taxable
basis, no less frequently than monthly, and in approximately equal periodic
installments) $234,000 annually (60% of your base salary above $500,000, or 60%
of ($890,000 less $500,000)). In addition, to the extent that the $300,000 in
annualized non-taxable LTD payments discussed in paragraph 2(b) are not promptly
and fully paid to you throughout the LTD Period (e.g., because the LTD benefit
is reduced, eliminated, or delayed, or because you do not otherwise initially
qualify for the benefit), we will promptly make up any lost, reduced or delayed
payment to you, on a fully tax grossed-up basis (assuming taxation at the
highest applicable marginal rates), provided you have, in good faith, filed
applications, submitted to physical exams or interviews, and supplied other
information, in each case as may be required under the applicable LTD Plan or
UNUM policy; provided further that if all or any portion of any such make-up
payment is later paid by UNUM, you agree to promptly pay such amount, or assign
your right to such amount, to the Company. If during the LTD Period you receive
earnings for services rendered to any entity not affiliated with the Company or
Xxxxxxx plc, amounts otherwise payable to you under this paragraph 2(c) will be
reduced dollar-for-dollar by the amount of such earnings.
d. Benefits during the STD Period. During the STD Period, you will be
treated as an active employee for purposes of all of the equity, welfare,
pension, retirement and other benefit plans of the Company and its affiliates,
provided that following the Disability Date, you acknowledge that no new awards
will be made to you under any of the Xxxxxxx plc stock plans (other than any
awards made pursuant to the second sentence of paragraph 2(h)).
e. Benefits during the LTD Period.
(i) Medical, Dental and Vision Plans. Your coverage (and that of
your dependents) in the Xxxxxxx Inc. medical, hospitalization, dental and vision
plans and programs will continue during the LTD Period at the same level, and
with the same benefits, as are then provided to active employees of the Company
who participate in those plans and programs. You will be required to contribute
toward the costs of those plans and programs at the same level, and on the same
basis, as active employees.
(ii) Life Insurance. Your coverage under the Xxxxxxx Inc. basic
life insurance plan will continue during the LTD Period at the same level in
force prior to the Disability Date. The Company will pay the full cost of this
coverage. You also are entitled to continue to participate, during the LTD
Period, in the supplemental life insurance plan at the same level in force prior
to the Disability Date, provided that you continue to pay premiums at no greater
a rate than the rate that then applies to active employees whose coverage
continues. You may apply to the insurance company for a wavier of premium for
the supplemental life coverage once you have been receiving LTD benefits for 6
months.
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(iii) Vacation. At the expiration of the STD Period, you will
receive payment for any unused vacation days that are then accrued. You will
accrue vacation days during the STD Period, and will cease to accrue additional
vacation days upon the expiration of the STD Period.
(iv) Retirement Plans. At the expiration of the STD Period, you
(a) will cease to accrue additional benefits under, and (b) will be entitled to
apply for, and receive, benefits under the Xxxxxxx Inc. Pension Plan,
Supplemental Executive Retirement Plan, Xxxxxxx Inc. Retirement Plan (401k),
Pearson Excess Retirement Plan, and Pearson Inc. Share Bonus Plan in accordance
with the terms of those plans.
f. Individual Defined Contribution Arrangement. During both the STD
and LTD Periods, the Company will continue to credit your notional account under
your Individual Defined Contribution Arrangement (as described in our letter to
you dated June 13, 2003, with contributions at an annualized rate of $409,400
made in approximately equal periodic installments no less frequently than
monthly. All amounts credited to you under this arrangement (including, for
avoidance of doubt, notional interest) will be paid to you (or, in the event of
your death, to your nominated beneficiary) in a lump sum promptly following the
end of the LTD Period.
g. Annual Bonus. You will be paid your annual bonus in respect of
2004 in cash, such payment to be made at the time, and in the amount, that would
have applied if your active employment with the Company had continued
indefinitely, and determined without regard to any period of disability during
2004.
x. Xxxxxxx plc Stock Plans. The treatment of your outstanding awards
under the Xxxxxxx plc stock plans will governed by the terms of the applicable
plan documents and your individual award agreements, and, except with respect to
any plan intended to qualify under Section 401(a) or 423 of the Internal Revenue
Code, applied as if your active employment with the Company had continued
throughout the LTD Period. In the event that during the LTD Period, active
senior executives of the Company, Xxxxxxx plc, or any of their affiliates
receive special grants or awards in respect of grants or awards that correspond
to grants or awards that you received prior to the Disability Date, then you too
shall be entitled to receive corresponding special grants or awards, which
grants and awards shall be on terms and conditions (including relative amounts)
no less favorable than those received by continuing senior executives and shall
thereafter be treated as if your active employment with the Company had
continued throughout the LTD Period. The treatment of any awards or grants
described in the previous two sentences that are outstanding at the time of the
termination of the LTD Period will be governed by the terms of the applicable
plans and, to the extent that the Personnel Committee has discretion as to the
treatment of any such awards or grants, we will recommend to the Personnel
Committee that it exercise such discretion in the manner that is most favorable
to you or your beneficiaries, except where such termination is by reason of your
rendering Competitive Services.
3. Indemnification/D&O Insurance.
a. In the event that any Claim is made, is threatened to be made, or
is reasonably anticipated to be made, against you that arise out of or relates
to your
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employment by, or services for, the Company, Xxxxxxx plc, or any of their
affiliates, then you shall promptly be indemnified and held harmless to the
fullest extent permitted or authorized by the corporate governance documents of
the Company or Xxxxxxx plc, or if greater, by applicable law, against any and
all costs, expenses, liabilities and losses (including, without limitation,
attorneys' and other professional fees and charges reasonably incurred,
judgments, interest, expenses of investigation reasonably incurred, penalties,
fines, ERISA excise taxes or penalties, and amounts paid or to be paid pursuant
to settlements reasonably entered into) incurred or suffered by you in
connection therewith, and such indemnification shall continue through the STD
and LTD Periods, and thereafter, and shall inure to the benefit of your heirs,
executors and administrators. You shall be entitled to prompt advancement of any
and all costs and expenses (including, without limitation, attorneys' and other
professional fees and charges) incurred by you in connection with any such
Claim, or in connection with seeking to enforce your rights under this paragraph
3(a), any such advancement to be made within 15 days after you give written
notice, supported by reasonable documentation, requesting such advancement. Such
notice shall include and undertaking by you to repay the amount advanced if you
are ultimately determined not to be entitled to indemnification against such
costs and expenses. You shall be deemed to have met any standard of conduct
required for indemnification unless the contrary shall be established by the
Company or Xxxxxxx plc. Nothing in this Agreement, or the attached Release,
shall operate to limit or extinguish any right to indemnification, advancement
of expenses, or contribution that you would otherwise have (including, without
limitation, by agreement or under applicable law). For purposes of this
paragraph 3(a), "Claim" shall mean any claim, demand, investigation, dispute,
threat, discovery request, or request for testimony or information.
b. A directors' and officers' liability insurance policy (or
policies) shall be kept in place, until at least the sixth anniversary of the
Disability Date, providing coverage to you that is no less favorable to you in
any respect (including, without limitation, with respect to scope, exclusions,
amounts, and deductibles) than the coverage then being provided to any active
senior executive or director of the Company or any active director of Xxxxxxx
plc.
4. Cessation of all other Compensation and Benefits. You will not receive
compensation, payments or benefits of any kind from the Company, Xxxxxxx plc or
its affiliates in respect of any period that ends after the Disability Date
other than those set forth in paragraphs 2 and 3 above, and you expressly
acknowledge and agree that, except with respect to the payments and benefits
specifically set forth in this Letter Agreement, you are not entitled to any
compensation, payment or benefit from the Company, Xxxxxxx plc or its affiliates
whatsoever, including, without limitation, any right to payments or benefits
under your letter of employment dated October 9, 2000 and subsequent amendments
or supplements thereto (the "Employment Agreement").
5. Restrictive Covenants. The covenants and agreements made by you in
paragraphs 12, 13 and 14 of your Employment Agreement shall remain in full force
and effect in accordance with their terms, with the expiration of the STD Period
treated as your last day of employment for purposes of paragraph 12.
Notwithstanding the forgoing, you shall be entitled to retain, and not return to
the Company, your personal rolodex, personal
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correspondence files, documents relating to your personal entitlements and
obligations, and the like.
6. Release. In order to be entitled to the payments and benefits set forth
in paragraphs 2(c), 2(e)(i) and the second sentence of 2(h), and in
consideration therefor, you must (i) deliver a signed and dated copy of the
attached Release no later than February 21, 2005, and (ii) not subsequently
revoke your execution of such Release.
7. Assignability; Binding Nature.
a. This Letter Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors, heirs (in your case) and
assigns.
b. No rights or obligations of the Company or Xxxxxxx plc under this
Letter Agreement may be assigned or transferred by the Company or Xxxxxxx plc
(each a "Company Transferor") except that such rights and obligations may be
assigned or transferred pursuant to a merger, consolidation or other combination
in which the Company Transferor is not the continuing entity, or a sale or
liquidation of all or substantially all of the business and assets of the
Company Transferor, provided that the assignee or transferee is the successor to
all or substantially all of the business and assets of the Company Transferor
and such assignee or transferee expressly assumes the liabilities, obligations
and duties of the Company Transferor as set forth in this Agreement.
c. None of your rights or obligations under this Agreement may be
assigned or transferred by you other than your rights to compensation and
benefits, which may be transferred only by will or by operation of law.
Notwithstanding the previous sentence, you shall be entitled, to the extent
permitted under applicable plans, programs and arrangements of the Company,
Xxxxxxx plc, and their affiliates, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit hereunder following your
death by giving written notice thereof. In the event of your death or a judicial
determination of your incompetence, references in this Letter Agreement to you
shall be deemed, where appropriate, to refer to your beneficiary, estate or
other legal representatives.
8. Miscellaneous. This Letter Agreement may be executed in several
counterparts, each or which shall be deemed to be an original but all of which
together will constitute one and the same instrument. Signatures delivered by
facsimile shall be effective for all purposes. This Letter Agreement constitutes
the entire agreement, and supersedes all prior agreements, of the parties hereto
relating to the subject matter hereof, except to the extent otherwise set forth
herein, and there are no written or oral terms or representations made by any
party other than those contained herein and therein. This Letter Agreement
cannot be modified, altered or amended except by a writing signed by all the
parties. No waiver by either party of any provision or condition of this Letter
Agreement at any time shall be deemed a waiver of such provision or condition at
any prior or subsequent time or of any provision or condition at the same or any
prior or subsequent time. This Letter Agreement and attached Release shall be
governed by and construed in accordance with the domestic laws of the State of
New York, except to the extent preempted by federal law, without giving effect
to any choice of law or conflict of law provision or rule (whether of the
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State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. You are under no
obligation to seek other employment or otherwise mitigate our obligations under
this Letter Agreement. Other than as expressly set forth in this Letter
Agreement, there shall be no offset against amounts or benefits due to you under
this Letter Agreement (or otherwise) because of any benefit or remuneration you
receive after the Disability Date. In the event of any inconsistency between any
provision of this Letter Agreement and any provision of any plan, program,
policy, agreement, corporate governance document, or other arrangement of the
Company, Xxxxxxx plc, or any of their affiliates, the provisions of this Letter
Agreement shall control. The headings of the paragraphs and subparagraphs
contained in this Letter Agreement are for convenience only and shall not be
deemed to control or affect the meaning or construction of any provision of this
Letter Agreement.
9. Notices. Signed and dated copies of this Letter Agreement, the Release,
and any revocation of the Release should be sent by mail, courier, or facsimile
to:
Xxxxxxx Xxxxxxx
Senior Vice President, Human Resources
Xxxxxxx Education
Xxx Xxxx Xxxxxx
Xxxxx Xxxxxx Xxxxx, XX 00000
(000) 000-0000 (tel)
(000) 000-0000 (fax)
10. Public Announcement. You and we will agree on the form of all
statements to be made to employees, analysts, the media and the public generally
relating to the subject matter of this Letter Agreement.
11. Acknowledgement. By signing this Letter Agreement and attached Release,
you certify that you have read the terms of this Letter Agreement and Release,
and that your execution of this Letter Agreement and Release shall indicate that
this Letter Agreement and Release conforms to your understanding and is
acceptable to you as a final agreement. You further acknowledge and agree that
you have been advised of the opportunity to consult with counsel of your choice
and that you have been given a reasonable and sufficient period of time in which
to consider and return this Letter Agreement and attached Release.
Sincerely,
Xxxxxxx plc
By: /s/ Xxxxx Xxxx
------------------------------
Name: Xxxxx Xxxx
Title: Executive Director
Xxxxxxx Education Holdings Inc.
REGISTERED OFFICE AT THE ABOVE ADDRESS, REGISTERED IN ENGLAND NUMBER 53723
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By: /s/ Xxxxxxx Gligini
-----------------------------
Name: Xxxxxxx Gligini
Title: SVP, Human Resources, Xxxxxxx Education
REGISTERED OFFICE AT THE ABOVE ADDRESS, REGISTERED IN ENGLAND NUMBER 53723
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ACCEPTED AND AGREED
/s/ Xxxxx Xxxxxxxxxx
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Xxxxx Xxxxxxxxxx
Date: 28/01/05
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REGISTERED OFFICE AT THE ABOVE ADDRESS, REGISTERED IN ENGLAND NUMBER 53723
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RELEASE
I, Xxxxx Xxxxxxxxxx, the undersigned, irrevocably and unconditionally release,
remise, and forever discharge Xxxxxxx Education Holdings Inc. (the "Company")
and the Releasees (as defined below) from, any and all agreements, promises,
liabilities, claims and demands of any kind, in law or equity, whether known or
unknown, suspected or unsuspected, which I, my heirs, executors, administrators,
successors or assigns ever had, or now have against the Company or any Releasee
that arises out of or relates to my employment with, or services for, the
Company, Xxxxxxx plc, or any of their affiliates, or the termination thereof,
including (without limitation and to the extent set forth herein) any and all
contract claims, benefit claims, tort claims, fraud claims, claims for payments,
bonuses, severance, defamation, disparagement, or any other personal injury
claims, claims relating to retirement, pension or unemployment, arising out of
or relating to my status as a stockholder of Xxxxxxx plc, my employment,
compensation and benefits with the Company or the Releasees, and/or the
termination thereof, and any and all claims of unfair or unjust dismissal or
discrimination on any basis including but not limited to on the basis of age,
race, gender, disability, ethnic or national origin, sexual orientation, and
claims for costs, expenses and attorneys' fees with respect thereto existing, in
each case arising or occurring at any time up to and including the date I
execute this Release, provided, however, that nothing herein shall release,
waive, or otherwise affect any claim or right arising under, or preserved by,
the terms of the Letter Agreement between me and the Company, dated January 28,
2005 (the "Letter Agreement"), or preclude my participation as a class member in
any class action or derivative action against Xxxxxxx plc where I am not a named
defendant, provided that I agree that I shall in no way initiate or encourage
the initiation of the filing of any such action. This Release specifically
includes, without limitation and to the extent set forth above, any and all
claims under the Age Discrimination in Employment Act, 29 U.S.C. Section 621 et
seq., Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000(e), the
Americans with Disabilities Act, 42 U.S.C. 1201, et seq., the Employee
Retirement Income Security Act of 1974, any and all other federal, state and/or
local statutes, ordinances, regulations or common laws, and any and all claims
for benefits under any compensation, bonus or benefit plan, program or policy of
the Company or the Releasees. For purposes of this Letter Agreement, the term
"Releasee" includes Xxxxxxx plc, its direct and indirect subsidiaries, insurers,
affiliates, its and their past, present and future predecessors, successors and
assigns, and its and their current, former and future officers, directors,
employees, stockholders, representatives, agents, and attorneys, in their
official and/or individual capacities, jointly and individually.
I understand that I have a period of up to 21 days to review and consider this
Release. I further understand that once I have signed this Release, I may revoke
it at any time during the 7 days following its execution by delivering a written
notice of revocation as provided in paragraph 9 of the Letter Agreement.
I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE AND I UNDERSTAND AND ACCEPT ITS
TERMS
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Xxxxx Xxxxxxxxxx Date
