8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): January 18, 2005

PLATO Learning, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	0-20842	36-3660532
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
10801 Nesbitt Avenue South, Bloomington, Minnesota		55437
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 952-832-1000

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On January 18, 2005 our Board of Directors approved the following: (1) our fiscal year 2005 executive annual incentive plan, and (2) a revised compensation plan for our non-employee directors. Descriptions of these plans are attached hereto as Exhibits 10.42 and 10.43, respectively.

Item 9.01. Financial Statements and Exhibits.

Exhibit 10.42 Fiscal 2005 Executive Annual Incentive Plan
Exhibit 10.43 Directors Compensation Plan

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	PLATO Learning, Inc.
March 15, 2005	By:	Laurence L. Betterley
		Name: Laurence L. Betterley
		Title: Senior Vice President and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
10.42	Fiscal 2005 Executive Annual Incentive Plan
10.43	Directors Compensation Plan

EX-10.42

PLATO Learning, Inc.

Fiscal 2005 Executive Annual Incentive Plan

Objectives: The Fiscal 2005 Executive Annual Incentive Plan is a reward program that directly supports the achievement of financial goals and key strategic operational goals.

Eligibility: Employees in the named jobs are eligible to be considered for participation in the Plan: President & CEO; Chief Financial Officer; Chief Technology Officer; Sr. Vice President Operations; Vice President, Human Resources; Vice President, School Market and Evaluation; and Vice President, Instructional Design and Research. The Company reserves the right to determine whether an executive will actually participate in the Plan. Eligible employees will receive a notification letter indicating they are eligible to participate in the Plan.

Performance Measures: Payment will be based on the level of achievement of the financial goals and operational goals shown in this table.

	Weighting
Financial Goals
1. Pre-tax earnings – Target[x] 1		70	%
Sub total		70	%
Operational Goals2:
1. Restructure the business to reduce SG&A costs [x]3		10	%
2. Complete the 3 year growth plan [x]		5	%
3. Increase the growth rate of the elementary market [x]4		5	%
4. Improve cost/development scheduling and market acceptance of products and services[x]		5	%
5. Improve leadership effectiveness as measured by increased diversity representation, quality of new hires and retention of key talent		5	%
Sub total		30	%

¹The amount excludes restructuring and executive termination changes.
²Achievement of the operational goals can generally be substantiated. The level of achievement is somewhat subjective in the case of near achievement or over achievement of operational goals therefore it is to be determined by the Board in consultation with the CEO.
³Represents a [x] reduction from 2004 expenses [x] and excludes the impact of restructuring and executive termination changes, as well as the impact of revenue changes on commission and bad debt expense.
⁴Measured on the increase in elementary courseware orders (rather than revenue).

Target Incentive: Each executive’s payment will be based on their Annual Base Salary in effect (on October 31, 2005), their Target Incentive percent, and the level of achievement of the performance measures. Each executive’s Target Incentive is expressed as a percent of their Annual Base Salary and shown in this table.

Executive	Target Incentive
President & CEO		75	%
Chief Financial Officer		40	%
Chief Technology Officer		35	%
Sr. Vice President, Operations		35	%
Vice President, Human Resources		30	%
Vice President, School Market and Evaluation		25	%
Vice President, Instructional Design and Research		25	%

Actual Payment: The plan rewards executives for achievement of goals and also encourages performance that substantially exceeds goals. This chart shows how the actual payment will increase (as a percent of the Target Incentive) as performance is increased. A threshold or minimum level of performance has been established. Straight-line interpolation will be used to determine the payment for any level of achievement falling between the stated levels of performance. This is illustrated in the chart below.

Performance	Actual Payment
% Of Goal Achievement	% Of Target Incentive
70% 85% 100% 115% 130% 145% 160%	50% 75% 100% 125% 150% 175% 200%

General Provisions:
The obligations of the Company, as set forth in this document shall be subject to modification in such manner and to such extent as the CEO and the Board of Directors deems necessary by agreement, or as may be necessary to comply with any law, regulation or governmental order pertaining to compensation. The Compensation Committee will receive the recommendations of the CEO for the cash payment amount, and any actions related to termination of employment and/or change in control, and after due deliberation determine the payment amount.

This Plan shall be cancelled in the event of termination of employment with the company. To remain eligible for a cash payment amount from the Plan, a participant must be continuously employed by the Company from date of hire or November 1, 2004, which ever is later, through the date of the Plan payout (no later than December 31, 2005), except for the following circumstances:

Death or Disability. If a Participant dies or becomes disabled before October 31, 2005, his/her cash payment amount will be prorated for the number of days the Participant was an active PLATO employee. For the purposes of this Plan “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. In the case of death, the payment amount will be given to the Participant’s estate according to current law and established guidelines and practices.

Unpaid Leave of Absence. If a Participant is on an unpaid leave of absence anytime between November 1 2004 and October 31, 2005 his/her cash payment amount will be prorated on a daily basis to exclude the time he/she was on such leave.

Termination with Cause or without Good Reason. In the event a Participant’s employment with the Company is terminated with Cause or without Good Reason (as defined in Section 6 of their employment agreement) after November 1, 2004 and before October 31, 2005 his/her cash payment amount will be prorated for the number of days the Participant was an active PLATO employee.

Termination without Cause or with Good Reason. In the event a Participant’s employment with the Company is terminated without Cause or with Good Reason (as defined in Section 6 of their employment agreement) after November 1, 2004 and before October 31, 2005 his/her cash payment amount will be prorated for the number of days the Participant was an active PLATO employee.

Change in Control. If at any time during fiscal year 2005 there is a Change in Control event the incentive payment will be pro-rated through the end date of the Change in Control. The payment amount will be based on 100% of the Target Incentive.

PLATO LEARNING, INC.

BOARD OF DIRECTORS

DIRECTORS COMPENSATION PLAN

At the January 18, 2005 Board of Directors Meeting, the Board approved compensation for outside Directors as follows.

Stock Option Grant and Cash Payment — New Directors Initiation:

• 15,000 Stock Options Grant @ FMV as of close of business on the date of election to the Board of Directors to vest immediately.

• Prorated Cash payment ($20,000/12 X number of months remaining until the next Annual Meeting).

Restricted Stock Award, Stock Option Grant & Cash Payment — Continuing Directors Annual Retainer & Meeting Preparations:

• 1,000 shares Restricted Stock Award @ FMV as of close of business on the date of the Annual Meeting to vest immediately with restrictions to lapse the earlier of five years, retirement or resignation from the Board of Directors [relates to director year going forward].

• 10,000 Stock Options Grant @ FMV as of close of business on the date of the Annual Meeting to vest immediately [relates to director year going forward].

• $20,000 to be paid as soon as possible after the date of the Annual Meeting (except to Non-Employee Chairman of the Board, see below) [relates to director year going forward].

Cash and Stock Option Grant — for Non-Employee Chairman of the Board:

• 5,000 Stock Options Grant (in addition to the 10,000 grant as listed above) @ FMV as of close of business on the date of the Annual Meeting to vest immediately [relates to director year going forward].

• $30,000 to be paid as soon as possible after the date of the Annual Meeting (in place of the $20,000 as listed above) [relates to director year going forward].

Stock Option Grant — for Committee Chairs:

• 1,500 Stock Options Grant @ FMV as of close of business on the date of the Annual Meeting to vest immediately [relates to director year going forward].

Cash Payment — for Board and Committee Meeting Attendance:

• $1,500 fee for each Board Meeting attended [relates to director year going forward].

•	$1,250 fee to the Committee Chairs (except Audit Committee Chair meeting fee is $2,000), and $750 fee to Committee Members, for each Committee Meeting attended by each.
	Other —

• Chairman of the Board has the option to recommend an additional stock option grant based on the Company’s performance and achievement of goals.

• Chairman of the Board has the option to request a prorated refund of stock options granted or cash payments made to a Board Member who elects to resign at a time other than at the Annual Meeting.

• All travel and business expenses relating to meeting attendance or to conduct business on behalf of PLATO Learning are reimbursed.