SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
School Specialty, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which
transaction applies:
3) Per unit price or other underlying value
of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
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3) Filing Party:
4) Date Filed:
<PAGE>
Preliminary Copies
SCHOOL SPECIALTY, INC.
1000 N. Bluemound Drive
Appleton, Wisconsin 54914
_____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 29, 2000
TO THE STOCKHOLDERS OF SCHOOL SPECIALTY, INC.:
The 2000 Annual Meeting of Stockholders of School Specialty,
Inc. will be held at the Park Plaza Paper Valley Hotel, 333 West
College Avenue, Appleton, Wisconsin, on Tuesday, August 29, 2000 at
10:00 a.m. Central Time for the following purposes:
(1) To elect two directors to serve until the 2003 Annual Meeting
of Stockholders as Class II directors;
(2) To vote upon a proposal to reincorporate School Specialty in
Wisconsin under a Merger Agreement which will merge the current
Delaware corporation into a newly formed Wisconsin corporation and
wholly owned subsidiary of School Specialty;
(3) To vote upon a proposal to amend and restate School
Specialty's 1998 Stock Incentive Plan;
(4) To ratify the appointment of PricewaterhouseCoopers LLP
as School Specialty's independent auditors for fiscal
2001; and
(5) To transact such other business as may properly come
before the Annual Meeting (and any adjournment thereof),
all in accordance with the accompanying Proxy Statement.
Stockholders of record at the close of business on July 10,
2000 are entitled to receive notice of and to vote at the Annual
Meeting.
All stockholders are cordially invited to attend the Annual
Meeting in person. However, whether or not you expect to attend
the Annual Meeting in person, you are urged to complete, date and
sign the enclosed proxy card and return it as soon as possible in
the enclosed envelope which has been provided for your convenience.
The prompt return of proxy cards will ensure a quorum. If you send
in your proxy card and then decide to attend the Annual Meeting to
vote your shares in person, you may still do so. Your proxy is
revocable in accordance with the procedures set forth in the Proxy
Statement.
By Order of the Board of Directors
Joseph F. Franzoi IV, Secretary
July 24, 2000
<PAGE>
Preliminary Copies
SCHOOL SPECIALTY, INC.
1000 N. Bluemound Drive
Appleton, Wisconsin 54914
July 24, 2000
Proxy Statement
Unless the context requires otherwise, all references to
"School Specialty," "we" or "our" refers to School Specialty,
Inc. and its subsidiaries. Our fiscal year ends on the last
Saturday in April in each year. In this proxy statement, we
refer to fiscal years by reference to the calendar year in which
they end (e.g., the fiscal year ended April 29, 2000 is referred
to as "fiscal 2000").
This Proxy Statement is furnished by the Board of Directors
of School Specialty for the solicitation of proxies from the
holders of our common stock, $0.001 par value (the "Common
Stock"), in connection with the Annual Meeting of Stockholders to
be held at the Park Plaza Paper Valley Hotel, 333 West College
Avenue, Appleton, Wisconsin, on Tuesday, August 29, 2000 at 10:00
a.m. Central Time, and at any adjournment thereof (the "Annual
Meeting"). It is expected that the Notice of Annual Meeting of
Stockholders, this Proxy Statement and the enclosed proxy card,
together with our Annual Report to Stockholders for fiscal 2000,
will be mailed to stockholders starting on or about July 24,
2000.
Stockholders can ensure that their shares are voted at the
Annual Meeting by signing and returning the enclosed proxy card
in the envelope provided. The submission of a signed proxy will
not affect a stockholder's right to attend the Annual Meeting and
vote in person. Stockholders who execute proxies retain the
right to revoke them at any time before they are voted by filing
with School Specialty's Secretary a written revocation or a proxy
bearing a later date. The presence at the Annual Meeting of a
stockholder who has signed a proxy does not itself revoke that
proxy unless the stockholder attending the Annual Meeting files a
written notice of revocation of the proxy with School Specialty's
Secretary at any time prior to the voting of the proxy.
Proxies will be voted as specified by the stockholders.
Where specific choices are not indicated, proxies will be voted
as follows:
* FOR the election of each of the individuals nominated to
serve as Class II directors,
* FOR approval of the proposal to change School Specialty's
state of incorporation from Delaware to Wisconsin through the
merger,
* FOR approval of the proposal to amend and restate School
Specialty's 1998 Stock Incentive Plan,
* FOR ratification of the appointment of the independent
auditors.
The Board of Directors knows of no other matters to be
presented for stockholder action at the Annual Meeting. If any
other matters properly come before the Annual Meeting, the
persons named as proxies will vote on the same in their
discretion.
The expense of printing and mailing proxy materials,
including expenses involved in forwarding materials to beneficial
owners of Common Stock held in the name of another person, will
be paid by School Specialty. No solicitation, other than by
mail, is currently planned, except that officers or employees of
School Specialty may solicit the return of proxies from certain
stockholders by telephone.
Only stockholders of record at the close of business on July
10, 2000 (the "Record Date") are entitled to receive notice of
and to vote the shares of Common Stock registered in their name at the
<PAGE>
Annual Meeting. As of the Record Date, we had outstanding
[17,464,505] shares of Common Stock. Each share of Common Stock
entitles its holder to cast one vote on each matter to be voted
upon at the Annual Meeting.
Under Delaware law and School Specialty's Amended and
Restated By-Laws, the presence of a quorum is required to conduct
business at the Annual Meeting. A quorum is defined as the
presence, either in person or by proxy, of a majority of the
total outstanding shares of Common Stock entitled to vote at the
Annual Meeting. The shares represented at the Annual Meeting by
proxies that are marked, with respect to the election of
directors, "withhold authority" or, with respect to any other
proposals, "abstain," will be counted as shares present for the
purpose of determining whether a quorum is present. Broker non-
votes will also be counted as shares present for purposes of
determining a quorum.
With respect to the vote required to approve the various
proposals at the Annual Meeting, the following rules apply:
* The affirmative vote of a plurality of the shares of Common
Stock present, either in person or by proxy, at the Annual
Meeting and entitled to vote is required for the election of the
directors. For this purpose, "plurality" means that the
individuals receiving the largest number of votes are elected as
directors, up to the maximum number of directors to be chosen at
the election. In the election of directors, votes may be cast in
favor or withheld. Votes that are withheld and broker non-votes
will have no effect on the outcome of the election of directors.
* The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual
Meeting is required to approve the proposal to change School
Specialty's state of incorporation from Delaware to Wisconsin.
Any shares not voted at the Annual Meeting, whether due to
abstentions or broker non-votes, will have the same effect as a
vote against the proposal.
* The affirmative vote of the holders of a majority of the
shares of Common Stock present, either in person or by proxy, at
the Annual Meeting and entitled to vote is required to approve
the proposal to amend and restate School Specialty's 1998 Stock
Incentive Plan and to ratify the appointment of the independent
auditors. Abstentions will have the same effect as a vote
against these proposals, while broker non-votes will have no
effect on the approval of these proposals.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of
July 10, 2000 regarding the beneficial ownership of shares of
Common Stock by (i) each of our directors, (ii) our Chief
Executive Officer and the four most highly compensated executive
officers other than our Chief Executive Officer (the "Named
Officers"), (iii) all of our directors and executive officers as
a group and (iv) each person believed by us to be a beneficial
owner of more than 5% of the Common Stock. Except as otherwise
indicated, the business address of each of the following is 1000
N. Bluemound Drive, Appleton, Wisconsin 54914.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Outstanding Shares (4)*
Daniel P. Spalding (1) 453,357 [ ]%
Peter S. Savitz (1) 11,250 [ ]
Ronald E. Suchodolski (1) 50,551 [ ]
David J. Vander Zanden (1) 286,019 [ ]
Richard H. Nagel (1) 50,577 [ ]
Jonathan J. Ledecky (1) 914,079 [ ]
Leo C. McKenna (1) 14,739 [ ]
Rochelle Lamm Wallach (1) 10,450 [ ]
Jerome M. Pool 4,000 [ ]
All executive officers and
directors as a group
(17 persons) (1) 2,335,798 [ ]
Janus Capital Corporation (2)
Janus Venture Fund
Thomas H. Bailey
100 Fillmore Street
Denver, Colorado 80206-4923 1,486,515 [ ]
Dresdner RCM Global
Investors LLC (3)
Dresdner RCM Global
Investors US Holdings LLC
Dresdner Bank AG
Four Embarcadero Center
San Francisco, California 94111 1,333,000 [ ]
_________________
* Less than 1% of the outstanding Common Stock.
(1)Share amounts include options granted under our 1998 Stock
Incentive Plan which are currently exercisable, or
exercisable within 60 days after the Record Date, in the
amount of 306,139 for Mr. Spalding, 11,250 for Mr. Savitz,
50,537 for Mr. Suchodolski, 236,019 for Mr. Vander Zanden,
50,537 for Mr. Nagel, 914,079 for Mr. Ledecky, 8,500 for
Mr. McKenna, 8,500 for Ms. Lamm Wallach, 3,000 for Mr. Pool
and 1,816,090 for all executive officers and directors as a
group.
(2)Janus Capital Corporation, Janus Venture Fund and Thomas H.
Bailey have jointly filed a Schedule 13G with the SEC reporting
that they had, as of December 31, 1999, sole voting and sole
dispositive power over 1,486,515 shares of Common Stock
(including 958,820 shares beneficially owned by Janus Venture
Fund).
(3)Dresdner RCM Global Investors LLC ("Dresdner RCM"),
Dredsner RCM Global Investors US Holdings LLC ("Dresdner RCM
Global") and Dresdner Bank AG ("Dresdner Bank") have jointly
filed a Schedule 13G with the Securities and Exchange Commission
(the "SEC") reporting that they had, as of December 31, 1999,
sole voting power over 1,068,700 shares of Common Stock and sole
dispositive power over 1,014,800 shares of Common Stock.
Dresdner Bank's principal business office is located at Jurgen-
Ponto-Platz 1, 60301 Frankfurt, Germany. The principal business
address of both Dresdner RCM and Dresdner RCM Global is as
indicated in the table.
(4)Based on [17,464,505] shares of Common Stock outstanding as
of the Record Date.
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
School Specialty's directors are divided into three classes,
designated as Class I, Class II and Class III, with staggered
terms of three years each. The term of office of directors in
Class II expires at the Annual Meeting. The Board of Directors
proposes that the nominees described below, who are currently
serving as Class II directors, be elected as Class II directors
for a new term of three years ending at the 2003 Annual Meeting
and until their successors are duly elected and qualified.
The nominees have indicated a willingness to serve as
directors, but if either of them should decline or be unable to
act as a director, the persons named in the proxy will vote for
the election of another person or persons as the Board of
Directors recommends.
NOMINEES FOR DIRECTOR - CLASS II
Name and Age of
Director
David J. Vander Zanden Mr. Vander Zanden became the President and
Age 45 Chief Operating Officer of School Specialty in
March 1998. From 1992 to March 1998, he served
as President of Ariens Company, a manufacturer
of outdoor lawn and garden equipment. Mr.
Vander Zanden has served as a director of
School Specialty since completion of the spin-
off from U.S. Office Products in June 1998.
Rochelle Lamm Wallach Ms. Wallach has served as a director of School
Age 52 Specialty since the completion of the spin-off
from U.S. Office Products in June 1998. Ms.
Wallach is Chairman and Chief Executive Officer
of Precision Marketing Partners, LLC and The
Academy of Financial Services Studies, LLC.
Ms. Wallach was associated with Strong Advisory
Services, a division of Strong Capital
Management, Inc., as its President from 1995 to
February 1998. Prior to that time, she was
President and the Chief Operating Officer of
AAL Capital Management, a mutual fund manager.
CONTINUING DIRECTORS - CLASS I
(term expiring 2002)
Jonathan J. Ladecky Mr. Ledecky has served as a director of School
Age 42 Specialty since June 1998 and as an employee of
School Specialty from June 1998 to June 2000.
He founded Building One Services Corporation
(formerly Consolidation Capital Corporation) in
February 1997 and served as its Chairman until
March 2000. Mr. Ledecky founded U.S. Office
Products in October 1994, served as its
Chairman of the Board until June 1998 and
served as its Chief Executive Officer until
November 1997. Mr. Ledecky also serves as a
director of Aztec Technology Partners, Inc.,
UniCapital Corporation and MicroStrategy
Corporation. Mr. Ledecky served from 1989 to
1991 as the President of The Legacy Fund, Inc.,
and from 1991 to September 1994 as President
and Chief Executive Officer of Legacy Dealer
Capital Fund, Inc., a wholly-owned subsidiary
of Steelcase Inc. Prior to his tenure at The
Legacy Fund, Inc., Mr. Ledecky was a partner at
Adler and Company and a Senior Vice President
at Allied Capital Corporation, an investment
management company.
<PAGE>
Name and Age of
Director
Jerome M. Pool Mr. Pool was appointed to the Board of
Age 64 Directors of School Specialty in June 1999.
Mr. Pool is a self-employed business
advisor/consultant to several private companies
in Poland, Hungary and Bulgaria. He retired
from Jantzen, Inc., a manufacturer of apparel,
in 1992 having served as Chairman, President
and Chief Executive Officer since 1983. Prior
to 1983, Mr. Pool served in various sales and
management positions with Jantzen.
CONTINUING DIRECTORS - CLASS III
(term expiring 2001)
Daniel P. Spalding Mr. Spalding became Chairman of the Board and
Age 45 Chief Executive Officer of School Specialty in
February 1998. From 1996 to February 1998, Mr.
Spalding served as President of the Educational
Supplies and Products Division of U.S. Office
Products. From 1988 to 1996, he served as
President, Chief Executive Officer and a
director of School Specialty, Inc., a Wisconsin
corporation ("Old School"), acquired by U.S.
Office Products in July 1996. Prior to 1988,
Mr. Spalding was an officer of JanSport, a
manufacturer of sports apparel and backpacking
equipment. Mr. Spalding was a co-founder of
JanSport and served as President and Chief
Executive Officer from 1977 to 1984. Mr.
Spalding has been a director of the National
School Supply and Equipment Association since
1992 and completed his term as the
association's Chairman in November 1997.
Leo C. McKenna Mr. McKenna has served as a director of School
Age 66 Specialty since completion of the spin-off from
U.S. Office Products in June 1998. Mr. McKenna
is a self-employed financial consultant working
with personal asset management, corporate
planning, acquisitions, merger studies and
negotiations. Mr. McKenna is currently on the
Executive Committee of the Boston and New York
Life Insurance Company, a subsidiary of Boston
Mutual Life Insurance Company. He is the
founder and a director of Ledyard National
Bank, where he also serves on the Investment
Advisory Board and the Trust Committee. He is
a director and member of the John Brown Cook
Foundation and an overseer and Chairman of the
Finance Committee for the Catholic Student
Center at Dartmouth College.
The Board of Directors has standing Compensation, Executive
Performance Compensation and Audit Committees. The Board of
Directors does not have a Nominating Committee. The Board of
Directors held six meetings in fiscal 2000. Each director
attended at least 75% of the meetings of the Board of Directors
and meetings of committees on which each served, if any, in
fiscal 2000.
The Compensation Committee is responsible for reviewing and,
if appropriate, approving the compensation of our Chief Executive
Officer and our President and the recommendations of our Chief
Executive Officer and our President concerning the compensation
of our other executive officers. The Compensation Committee is
also responsible for administering our 1998 Stock Incentive Plan
and the 2000 Stock Incentive Plan of our JuneBox.com subsidiary.
The members of the Compensation Committee are Mr. Pool
(Chairman), Mr. McKenna and Ms. Wallach, none of whom is an
employee of School Specialty. Mr. Pool became a member and
Chairman of the Compensation Committee upon his
<PAGE>
appointment as a director on June 1, 1999. The Compensation Committee
held two meetings in fiscal 2000.
The Board of Directors appointed the Executive Performance
Compensation Committee as a sub-committee of the Compensation
Committee on June 19, 2000 to approve certain matters related to
performance-based compensation when required by Section 162(m) of
the Internal Revenue Code of 1986, as amended. The members of
the Executive Performance Compensation Committee are Mr. Pool and
Ms. Wallach.
The Audit Committee is responsible for reviewing our annual
audit and meeting with our independent accountants to review our
internal controls and financial management practices. The
members of the Audit Committee are Mr. McKenna (Chairman), Ms.
Wallach and Mr. Pool. Mr. Pool became a member of the Audit
Committee upon his appointment as a director on June 1, 1999.
The Audit Committee held four meetings in fiscal 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 1999, we purchased our main office and
warehouse facility, a 120,000 square foot building located in
Appleton, Wisconsin, from Bluemound Corporation. The purchase
price for the facility was $2.6 million, which represented the
fair market value of the property as determined by an independent
appraisal. Previously, we leased this facility from Bluemound
Corporation. The lease provided for annual payments of $196,000
through December 31, 2001. John S. Spalding, a former member of
the Board of Directors of Old School and the father of Daniel P.
Spalding, holds a one-third stake in Bluemound. Donald Killoren,
father of Michael J. Killoren and uncle of Daniel P. Spalding,
executive officers of School Specialty, also holds a one-third
stake in Bluemound.
On June 30, 1998, School Specialty entered into a lease with
Roger D. Pannier and Pamela S. Pannier for the lease of a 95,000
square foot facility located in Freemont, Nebraska. Roger D.
Pannier is an executive officer of School Specialty and was
Executive Vice President for Hammond and Stephens through June
20, 2000. This lease expires June 30, 2003 and provides for
annual payments of $179,780. This amount is subject to an annual
adjustment by the Consumer Price Index.
On July 1, 1990, Larry Joseph and Peter Savitz Partners, as
lessor, entered into a lease with Select Service & Supply, Inc.
for the leasing of certain improved real property located at One
Sportime Way in Norcross, Georgia. Through a Sublease and a
series of amendments thereto, on February 1, 1999 Sportime, LLC
became the Sub-Lessee of the leased premises. The Sublease
arrangement expires in January 2002 and currently requires an
annual rental amount of $331,116. This amount is subject to
annual adjustment by the Consumer Price Index. Peter Savitz has
an interest in Larry Joseph and Peter Savitz Partners and is also
an executive officer of School Specialty.
PENDING LEGAL PROCEEDINGS
No director or executive officer of School Specialty is an
adverse party or has an interest adverse to School Specialty or
its subsidiaries in any material pending legal proceeding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and officers, among others, to file
reports with the Securities and Exchange Commission disclosing
their ownership, and changes in their ownership, of stock in
School Specialty. Copies of these reports must also be furnished
to School Specialty. Based solely on a review of these copies,
we believe that during fiscal 2000, all filing requirements were
complied with, except that Donald Ray Pate, Jr. filed one report
on Form 4 late.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Information. The following table sets
forth the compensation paid by us for services rendered during
fiscal 2000, fiscal 1999 and fiscal 1998 to the Named Officers.
Summary Compensation Table
<TABLE>
Long Term
Compensation
Awards
Securities
Name and Principal Annual Compensation Underlying All Other
Position Year Salary($) Bonus($)(1) Options (#) Compensation($)
<S> <C> <C> <C> <C> <C>
Daniel P. Spalding 2000 233,654 - 130,000 2,400 (7)
Chairman of the Board 1999 225,000 - (6) 332,520 1,072 (7)
and CEO 1998 212,104 34,200 - -
Peter S. Savitz (2) 2000 205,036 107,197 10,000 67,491 (8)
Executive Vice 1999 47,500 - 45,000 17,867 (9)
President, Sportime 1998 - - - -
Ronald E. Suchodolski (3) 2000 159,679 103,509 10,000 2,400 (7)
Executive Vice 1999 146,017 144,853 59,570 -
President, Childcraft 1998 128,757 62,134 - -
David J. Vander Zanden (4) 2000 233,654 - 130,000 1,038 (7)
President and Chief 1999 225,000 - (6) 228,519 1,466 (7)
Operating Officer 1998 25,962 - - -
Richard H. Nagel (5) 2000 129,768 77,411 10,000 2,399 (7)
Executive Vice 1999 127,166 101,232 59,570 1,108 (7)
President, Sax Arts and 1998 106,346 - - -
Crafts
_______________
(1) Consists of amounts awarded under School Specialty's
Executive Incentive Plan.
(2) Mr. Savitz was first employed by School Specialty in
February 1999.
(3) Mr. Suchodolski was first employed by School Specialty in
May 1997.
(4) Mr. Vander Zanden was first employed by School Specialty in
March 1998.
(5) Mr. Nagel was first employed by School Specialty in June 1997.
(6) On June 1, 1999, Messrs. Spalding and Vander Zanden were
granted options under our 1998 Stock Incentive Plan to purchase
30,000 shares of Common Stock at the market price on the date of
grant of $15.00 per share. These options were granted in fiscal
2000 and are reflected in the table as such. Because the option
grants reflected, in part, fiscal 1999 performance, Messrs.
Spalding and Vander Zanden did not receive a cash bonus for
fiscal 1999.
(7) Consists of contributions by School Specialty under our
401(k) plan.
(8) Consists of $62,500 in non-competition payments, $2,367 in
contributions by School Specialty under our 401(k) plan and an
automobile allowance of $2,624.
(9) Consists of $15,625 in non-competition payments and an
automobile allowance of $2,242.
<PAGE>
Option Grants. The following table provides information on
options to acquire School Specialty Common Stock granted to the
Named Officers during fiscal 2000 under the School Specialty 1998
Stock Incentive Plan.
Option/SAR Grants in Last Fiscal Year
</TABLE>
<TABLE>
Individual Grants (1)
Number of % of Total Potential Realizable Value at
Securities Options/SARs Assumed Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for
Options/SARs Employees in Price Expiration Option Term (2)
Name Granted (#) Fiscal Year ($/sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Daniel P. Spalding 30,000 3.9% $15.00 6/1/09 $ 283,003 $ 717,184
100,000 13.1% 17.69 3/27/10 1,112,357 2,818,932
Peter S. Savitz 10,000 1.3% 17.69 3/27/10 111,236 281,893
Ronald E. Suchodolski 10,000 1.3% 17.69 3/27/10 111,236 281,893
David J. Vander Zanden 30,000 3.9% 15.00 6/1/09 283,003 717,184
100,000 13.1% 17.69 3/27/10 1,112,357 2,818,932
Richard H. Nagel 10,000 1.3% 17.69 3/27/10 111,236 281,893
____________
</TABLE>
(1) The options reflected in the table were granted under our
1998 Stock Incentive Plan and include incentive stock options
granted under Section 422 of the Internal Revenue Code and
nonstatutory stock options. The exercise price of each option
granted was equal to 100% of the fair market value of the
Common Stock on the date of grant. The options granted vest
in increments of one-fourth of the total grant on the first,
second, third and fourth anniversaries of the grant or
earlier upon certain specified change of control events.
(2) The dollar amounts under these columns are the results of
calculations at assumed annual rates of stock appreciation of
5% and 10%. These assumed rates of growth were selected by
the SEC for illustration purposes only. They are not
intended to forecast possible future appreciation, if any, of
stock prices. No gain to the optionees is possible without
an increase in stock prices, which will benefit all
stockholders.
<PAGE>
Option Exercises. The following table sets forth certain
information regarding options to acquire School Specialty Common
Stock held at the end of fiscal 2000 by the Named Officers.
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year End Option/SAR Values
<TABLE>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options/SARs
Acquired on Value Options/SARs at FY-End (#) at FY-End ($) (1)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Daniel P. Spalding - - 298,639 163,881 $842,413 $264,489
Peter S. Savitz - - 11,250 43,750 - 9,375
Ronald E. Suchodolski - - 50,537 19,033 142,822 9,375
David J. Vander Zanden - - 228,519 130,000 714,122 202,500
Richard H. Nagel - - 50,537 19,033 142,822 9,375
____________
</TABLE>
(1)For valuation purposes, an April 28, 2000 market price of
$18.625 was used.
DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS
Outside directors are granted options under our 1998 Stock
Incentive Plan to purchase 15,000 shares of Common Stock upon
their initial election as members of the Board of Directors and
5,000 shares of Common Stock for each additional year of service.
These options are granted at an exercise price equal to the fair
market value on the date of grant and have three year vesting
schedules. Outside directors are also paid an annual retainer of
$20,000 plus $1,000 for each additional special meeting and
committee meeting attended and are reimbursed for all out-of-
pocket expenses related to their service as directors.
We entered into an employment agreement with Mr. Ledecky
effective as of June 10, 1998 that implemented certain portions
of an agreement that Mr. Ledecky had previously entered into with
U.S. Office Products (the "Ledecky Services Agreement") and that
continued until June 30, 2000. Under the employment agreement,
Mr. Ledecky reported to the Board of Directors and senior
management of School Specialty. In such capacity, Mr. Ledecky
provided high-level acquisition negotiation services and
strategic business advice. As an employee, Mr. Ledecky was
subject to our generally applicable personnel policies and was
eligible for such benefit plans in accordance with their terms.
Under the Ledecky Services Agreement, we were required to pay Mr.
Ledecky an annual salary of $48,000 through June 30, 2000. As of
July 1, 2000, Mr. Ledecky became a non-employee outside director.
Because of this change of status, the Board of Directors, upon a
recommendation of the Compensation Committee, authorized a grant
of options for 15,000 shares to Mr. Ledecky.
The Ledecky Services Agreement provides for non-competition
and non-solicitation restrictions that continue until June 30,
2001. These provisions generally restrict Mr. Ledecky from,
among other things, investing in or working for or on behalf of
any business selling any products or services (determined as of
January 1998) in direct competition with U.S. Office Products,
School Specialty or the three other spin-off companies within 100
miles of any location where U.S. Office Products or a spin-off
company, as applicable, regularly maintains an office with
employees. Mr. Ledecky may serve in a policy making role (but
not engage in direct personal competition) with respect to
certain specified businesses generally not related to School
Specialty's primary business and businesses providing internet
<PAGE>
services. The Ledecky Services Agreement prohibits Mr. Ledecky
from trying to hire away our managerial employees or from calling
upon our customers to solicit or sell products or services in
direct competition with us. Mr. Ledecky also may not hire away
for Building One Services Corporation any person then or in the
preceding one year employed by us.
EMPLOYMENT CONTRACTS AND RELATED MATTERS
We have entered into employment agreements with Daniel P.
Spalding, David J. Vander Zanden, Peter S. Savitz and Richard H.
Nagel, each of whom is a Named Officer.
We entered into an employment agreement with Daniel P.
Spalding, Chairman and Chief Executive Officer of School
Specialty, on September 3, 1999. The agreement has an initial
term of three years, and, at expiration, automatically renews for
additional three year terms unless either party gives notice of
non-renewal. The agreement provides for an annual base salary of
at least $225,000 and participation in a performance-based
incentive compensation plan. The agreement contains
confidentiality and non-compete provisions for two years
following a termination of employment. The agreement provides
Mr. Spalding with the right to terminate his employment upon a
change of control of School Specialty. If Mr. Spalding's
employment is terminated due to his death, upon a change of
control, or due to disability, School Specialty is required to
pay Mr. Spalding his base salary through the balance of the then
effective term of the agreement. In the case of disability,
these amounts are reduced by insurance benefits provided by
School Specialty.
We entered into an employment agreement with David J. Vander
Zanden, President and Chief Operating Officer of School
Specialty, on July 15, 1998. The agreement has an initial term
of two years, and, at expiration, automatically renews for
additional two year terms unless either party gives notice of non-
renewal. The agreement provides for an annual base salary of at
least $225,000 and participation in a performance-based incentive
compensation plan. The agreement contains confidentiality and
non-compete provisions for the period during which he receives
severance pay under the terms of the agreement. The agreement
provides Mr. Vander Zanden the right to terminate his employment
upon a change of control of School Specialty. In the event Mr.
Vander Zanden's employment is terminated due to his death,
disability, his breach of or failure to perform under the
agreement, or upon a change of control, School Specialty is
required to pay to him his base salary for the balance of the
then effective term of the agreement. In the case of disability,
these amounts are reduced by insurance benefits provided by
School Specialty.
We entered into an employment agreement with Peter S.
Savitz, Executive Vice President of Sportime, effective February
1, 1999. The agreement will continue until January 31, 2003.
The agreement provides for an annual base salary of at least
$190,000 and participation in a performance-based incentive
compensation plan. The agreement contains confidentiality and
non-compete provisions for two years following termination. In
the event Mr. Savitz's employment is terminated for any reason
other than death, disability, or cause, he is entitled to his
then current base salary for the balance of the term of the
agreement. Mr. Savitz is entitled to receive a monthly payment
of $4,167 during that portion of the term of his agreement during
which he is not receiving other compensation under the agreement.
Richard H. Nagel, Executive Vice President of Sax Arts and
Crafts, entered into a four-year employment contract with Sax
Arts and Crafts on June 27, 1997. The agreement provides for an
annual base salary of at least $125,000 and participation in a
performance-based incentive compensation plan. If Mr. Nagel is
terminated without cause, he is entitled to receive his base
salary for one year or until the end of the contractual term,
whichever period is lesser. Mr. Nagel also entered into a
covenant not to compete agreement with Sax Arts and Crafts on
June 27, 1997 for which he will receive consideration of $31,250
within ten days of the date of the termination of his employment
with Sax Arts and Crafts (other
<PAGE>
than termination because of death). Pursuant to this agreement,
following the termination of his employment for any reason, Mr. Nagel
has agreed not to compete with Sax Arts and Crafts for one year.
COMPENSATION COMMITTEE REPORT
The Compensation Committee consists of Mr. Pool (Chairman),
Mr. McKenna and Ms. Rochelle Lamm Wallach. The Compensation
Committee is responsible for reviewing and, if appropriate,
approving the compensation of Mr. Spalding, our Chief Executive
Officer, and Mr. Vander Zanden, our President, and the
recommendations of Messrs. Spalding and Vander Zanden concerning
the compensation levels of our other executive officers. The
Compensation Committee also administers our 1998 Stock Incentive
Plan and the 2000 Stock Incentive Plan of our JuneBox.com
subsidiary, with responsibility for determining the awards to be
made under such plans. The Compensation Committee reviews
compensation programs for executive officers in June of each
year.
Overview. The compensation structure for our executive
officers consists in general of three principal components: base
salary, annual cash bonus and periodic grants of stock options.
Base salary determinations are an important ingredient in
attracting and retaining quality personnel in a competitive
market. Base salaries are set at levels based generally on
subjective factors, including the individual's level of
responsibility, experience and past performance record. In
addition, a significant portion of compensation is directly
related to and contingent upon our profitability based on
objective performance criteria. Accordingly, our executives
participate in cash bonus arrangements based on formulas and
other criteria tied to the individual's profit center and/or
School Specialty as a whole. Finally, to ensure that executive
officers hold equity positions in School Specialty, which we
think is important, stock options are granted to executives to
enable them to hold equity interests at more meaningful levels
than they could through alternative methods.
Base Salary. The base salaries of several of our executives
for fiscal 2000, including the base salary of Mr. Spalding prior
to September 1999, were established and carried forward in
connection with our spin-off from U.S. Office Products in June
1998. Accordingly, the Compensation Committee did not have any
input on these salaries. However, the base salaries of Mr.
Spalding (since September 1999), Mr. Vander Zanden and several
other executive officers were set by employment agreements entered
into after the spin-off. Accordingly, the Compensation Committee
reviewed and approved the base salaries of Messrs. Spalding (since
September 1999) and Vander Zanden and approved the recommendations
of Messrs. Spalding and Vander Zanden concerning the base salaries
of certain other executive officers, as set forth in their
employment agreements. Going forward, executive salaries for
officers other than the Chief Executive Officer and the President
will be recommended to the Compensation Committee by Messrs.
Spalding and Vander Zanden and reviewed and, if appropriate,
approved by the Compensation Committee. The salaries of Messrs.
Spalding and Vander Zanden will be governed by their employment
agreements, with modifications reviewed and approved by the
Compensation Committee.
Cash Bonus. At the time of the spin-off, a performance-
based executive incentive compensation plan was established by
the Board of Directors, but was not specifically reviewed or
approved by the Compensation Committee. For corporate
executives, this plan permits such persons to receive up to 100%
of their base compensation in cash bonus and is tied to the
operating profits of School Specialty as a whole. For divisional
executives, the plan permits up to the same level of cash bonus
compensation, but is tied primarily to the operating profits of
the division in which each such person operates and partially to
School Specialty as a whole. While the Compensation Committee
did not have any input on the plan when it was initially
established, the Committee believes that the plan provides
important incentives to executives thereby benefiting not only
the executive but School Specialty as well. The Compensation
Committee continued the plan in fiscal 2000 with minor
modifications and intends to continue the plan in fiscal 2001.
No cash bonuses were paid under the plan to corporate executive
officers in fiscal 2000. However, cash bonuses were paid to
certain divisional executive officers.
<PAGE>
Equity Based Compensation. Our 1998 Stock Incentive Plan
was established at the time of the spin-off. Under the plan, the
Compensation Committee determines the awards to be made to
executive officers and others. With respect to our Chief
Executive Officer and our President, the Compensation Committee
bases its determination upon long-term incentive goals as well as
existing overall compensation. With respect to other executives,
the Compensation Committee bases its determinations on
recommendations made by management.
CEO Compensation. Mr. Spalding's base salary is set pursuant
to his employment agreement. This agreement was reviewed and
approved by the Compensation Committee in September 1999. Before
September 1999, Mr. Spalding's base salary was set by a prior
employment agreement which had been in place before our spin-off
from U.S. Office Products in June 1998 and which, therefore, was
not reviewed or approved by the Compensation Committee. Mr.
Spalding's current employment agreement contains a bonus provision
which was not implemented in fiscal 2000. During fiscal 2000, the
Compensation Committee determined to issue to Mr. Spalding two
stock option grants under the 1998 Stock Incentive Plan. One such
grant was made in June 1999, in part, for fiscal 1999 performance
and the other was made in March 2000. The Committee believes Mr.
Spalding's compensation is appropriate given School Specialty's
size and financial performance.
Section 162(m) of the Internal Revenue Code of 1986, as
amended, generally disallows a tax deduction to public
corporations for compensation over $1.0 million for any fiscal
year paid to the corporation's chief executive officer and four
other most highly compensated executive officers as of the end of
any fiscal year. However, Section 162(m) also provides that
qualifying performance-based compensation will not be subject to
the deduction limit if certain requirements are met. In making
compensation decisions, it is the Compensation Committee's
current intention to recommend plans and awards which will meet
the requirements for deductibility for tax purposes under Section
162(m) and has recently established the Executive Performance
Compensation Committee, consisting of Mr. Pool and Ms. Wallach,
to assist in that regard. Because of uncertainties as to the
application and interpretation of Section 162(m), no assurance
can be given that the compensation paid to our most highly
compensated officers will be deductible for federal income tax
purposes, notwithstanding School Specialty's efforts to satisfy
such section. In addition, School Specialty may pay compensation
that does not satisfy these requirements for deduction if it is
deemed advisable for business reasons.
The Compensation Committee: The Executive Performance Compensation
Committee:
Jerome M. Pool (Chairman)
Leo C. McKenna Jerome M. Pool
Rochelle Lamm Wallach Rochelle Lamm Wallach
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
With the exception of Leo C. McKenna, no member of the
Compensation Committee has ever been an officer of our company or
any of our subsidiaries and none of our executive officers has
served on the compensation committee or the board of directors of
any company of which any of our directors is an executive
officer. Mr. McKenna is a former officer and director of Old
School.
PERFORMANCE GRAPH
The following graph compares the total stockholder return on
our Common Stock since our initial public offering on June 9,
1998 with that of the Russell 2000 Stock Market Index and a peer
group index constructed by us. The issuers included in the peer
group index are: Advantage Learning Systems, Inc. (ALSI),
American Educational Products, Inc. (AMEP), Nobel Learning
Communities, Inc. (NLCI), National Computer Systems, Inc. (NLCS)
and Scholastic Corporation (SCHL). The total return
<PAGE>
calculations set forth below assume $100 invested on June 9, 1998, with
reinvestment of any dividends into additional shares of the same
class of securities at the frequency with which dividends were
paid on such securities through April 29, 2000. The stock price
performance shown in the graph below should not be considered
indicative of potential future stock price performance.
[Insert Graph]
June 9, 1998 April 24, 1999 April 29, 2000
School Specialty, Inc. $100.00 $125.81 $120.16
Russell 2000 Index $100.00 $ 94.52 $110.84
Peer Group $100.00 $133.29 $152.52
PROPOSAL TWO: PROPOSED REINCORPORATION IN WISCONSIN
General
The Board of Directors has approved a plan to reincorporate
School Specialty in Wisconsin, subject to stockholder approval.
The material terms of the proposed reincorporation can be
summarized as follows:
* The reincorporation involves changing School Specialty's
state of incorporation from Delaware to Wisconsin through a
merger of School Specialty into a newly-formed Wisconsin
subsidiary pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), a copy of which is attached hereto as
Appendix A.
* Following the reincorporation, the surviving Wisconsin
corporation will continue to be named "School Specialty, Inc."
* The reincorporation will not involve any change in the
business, management, benefit plans, assets, liabilities or net
worth of School Specialty.
* The corporate headquarters of School Specialty will remain
in Wisconsin.
* Stockholders of School Specialty will automatically become
shareholders of the Wisconsin corporation on a share-for-share
basis, and the Wisconsin corporation's shares will continue to be
listed on the Nasdaq National Market under the same symbol
(SCHS).
* Stockholders will not have to exchange their stock
certificates. The current certificates will represent stock in
the Wisconsin corporation following the merger.
Under the Delaware General Corporation Law ("DGCL"), the
affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting is
required to approve the Merger Agreement and the resulting
reincorporation. The Board of Directors recommends a vote FOR
approval of the Merger Agreement and the reincorporation.
Proxies solicited by the Board of Directors will, unless
otherwise directed, be voted in favor of the Merger Agreement and
the reincorporation.
<PAGE>
Principal Reasons for Changing the State of Incorporation
The primary reason for the proposed change in the state of
incorporation is to achieve cost savings. Under the DGCL,
corporations are required to pay an annual franchise tax to the
State of Delaware, which is $150,000 annually for School
Specialty. Wisconsin corporations pay a one-time filing fee of
$10,000 and a nominal fee of $25 annually.
An additional reason for the proposed change in the state of
incorporation is to conform School Specialty's legal residence to
its principal place of business. School Specialty believes that
having its legal residence in Wisconsin would enable it to have a
more significant voice in the legislative process with respect to
the corporate laws directly affecting it. This opportunity can
be an important one, as corporations are substantially affected
by changes in the legal and financial environment in which they
operate, and by the variety of legislative and other governmental
actions that may be taken in response to such changes.
Finally, the Board of Directors believes that, because the
Wisconsin Business Corporation Law ("WBCL") offers corporate law
advantages comparable to those that the DGCL offers, the extra
tax burden that results from maintaining a Delaware domicile is
unwarranted.
Terms and Effect of the Merger and Reincorporation
In February 2000, the Board of Directors approved the Merger
Agreement and the resulting reincorporation. If approved by
stockholders, the reincorporation will be accomplished by merging
School Specialty into its recently incorporated Wisconsin
subsidiary, New School, Inc. ("New School"), with New School as
the surviving corporation. The surviving Wisconsin corporation
will continue to be named "School Specialty, Inc."
The reincorporation will not result in any change in the
business, management, benefit plans, assets, liabilities or net
worth of School Specialty, and School Specialty's current
corporate headquarters will remain in Wisconsin. All of the
assets, liabilities, subsidiaries (other than New School) and
other properties of School Specialty, will, pursuant to the
Merger Agreement, become the assets, liabilities, subsidiaries
and other properties of New School to the full extent provided by
law. The directors and officers of School Specialty will hold
the same positions with New School. New School's authorized
capital stock will be identical to School Specialty with 151
million authorized shares consisting of 150 million authorized
Common Shares and one million authorized Preferred Shares.
At the effective time of the reincorporation, which is
expected to occur starting after the Annual Meeting, each
outstanding share of Common Stock of School Specialty will be
converted automatically into one share of New School stock. As a
result, stockholders will continue to own the same pro rata
interest in New School after the merger as they did in School
Specialty before the merger. Stockholders of School Specialty do
not need to exchange their existing share certificates for share
certificates of New School Stock and outstanding certificates of
School Specialty should not be destroyed or sent to School
Specialty. Outstanding stock options will be automatically
converted into identical options of New School. School
Specialty's Stock will continue to be listed on the Nasdaq
National Market under the same symbol (SCHS).
It is expected that, following stockholder approval, the
reincorporation will be consummated as soon as practicable by the
filing of a Certificate of Merger with the Delaware Secretary of
State and filing of Articles of Merger with the Wisconsin
Department of Financial Institutions. No other federal or state
regulatory approval is required in order to consummate the
reincorporation.
<PAGE>
The Board of Directors of School Specialty may amend, modify
and supplement the Merger Agreement before or after stockholder
approval; provided, however, that no such amendment, modification
or supplement may be made or become effective after stockholder
approval which, in the judgment of the Board of Directors, would
have a materially adverse effect upon the rights of School
Specialty's stockholders in any manner not permitted under
applicable law. The Merger Agreement may be terminated and the
reincorporation may be abandoned, notwithstanding stockholder
approval, by the Board of Directors of School Specialty at any
time before consummation of the reincorporation in the unlikely
event that the Board should determine that in its judgment, the
reincorporation is no longer in the best interests of School
Specialty and its stockholders.
Comparison of Material Differences Between the DGCL and the WBCL
If the reincorporation is approved, a shareholder's rights
will be governed by the WBCL and School Specialty's Wisconsin
Articles of Incorporation and By-Laws ("Wisconsin Articles" and
"Wisconsin By-Laws"). Currently, stockholder rights are governed
by School Specialty's Delaware Restated Certificate of
Incorporation and Amended and Restated By-Laws ("Delaware
Articles" and "Delaware By-Laws"). The Wisconsin Articles are
attached as Appendix B to this Proxy Statement. Copies of School
Specialty's Delaware Articles and By-Laws and Wisconsin By-Laws
may be obtained at no cost by writing to Ms. Karen A. Riching,
Assistant Secretary, School Specialty, Inc., 1000 N. Bluemound
Drive, Appleton, Wisconsin 54914, or by calling (920) 734-2756.
The WBCL and DGCL differ in some ways. Although it is
impractical to note all of the differences between the DGCL and
WBCL, summarized below are certain material differences between
the DGCL as it currently applies to School Specialty and the WBCL
as it will apply to School Specialty after the reincorporation.
Potential Statutory Shareholder Liability for Debts to
Employees. The WBCL provides that shareholders of Wisconsin
corporations are personally liable, up to the par value of the
shares ($0.001 per share in the case of the New School stock),
for all debts owed by the corporation to employees for services
performed, but not exceeding six months' service in any one case.
While the WBCL specifies that such liability is limited to the
par value of the shares, "par value" has been interpreted by a
Wisconsin trial court to mean the consideration paid to the
corporation for its shares. This decision was affirmed by a
split decision of the Wisconsin Supreme Court. Although there is
no similar provision under Delaware law, Wisconsin courts have
applied this rule to foreign corporations with a principal place
of business in Wisconsin. As a result, this provision may
already be applicable to School Specialty.
Corporate Franchise Tax. Under Delaware law, corporations
are assessed an annual franchise tax, which for School Specialty
in 1999 amounted to the maximum of $150,000. Wisconsin has no
comparable annual tax for domestic corporations. Since School
Specialty is headquartered in Wisconsin and has substantial
operations in Wisconsin, changing the state of incorporation is
expected to have no effect on its income and other corporate
taxes, other than relieving School Specialty of any liability for
Delaware franchise taxes.
Special Meetings of Shareholders. Under Delaware law,
special meetings of stockholders may be called by the board of
directors or by such persons as may be authorized by the
certificate of incorporation or by-laws. The Delaware Articles
provide that special meetings of stockholders may be called by
the Chairman of the Board, the Chief Executive Officer, the Board
of Directors or the holders of at least 33 1/3% of Common Stock.
Under Wisconsin law, special meetings of shareholders may be
called by the Board of Directors or by any person authorized by
the articles of incorporation or by-laws to call a special
meeting, and must be called upon written demand of at least 10%
of the total outstanding
<PAGE>
voting shares. The Wisconsin Articles and By-Laws are the same as
the Delaware Articles, except that the Wisconsin 10% threshold is used.
Inspection of Corporate Records. The DGCL permits any
record stockholder to inspect corporate records for a proper
purpose and to inspect a stockholder list at least 10 days before
a stockholders' meeting. Under the WBCL, in order to inspect and
copy corporate records, including the shareholder list, a
shareholder must make a demand five days in advance, have a
proper purpose, have owned shares for at least six months or own
at least 5% of the Corporation's outstanding stock. Under the
WBCL, any shareholder may inspect the shareholder list from two
business days after notice of the meeting is given until
conclusion of the meeting.
Dividends. Under the DGCL, a corporation may pay dividends
out of its surplus or, if none, any net profits for the current
and preceding fiscal year provided that no payment may reduce
capital below the amount of capital represented by any shares
with a preference upon the distribution of assets. Under the
WBCL, a corporation may pay dividends if its board of directors
determines that the corporation will be able to pay its debts in
the ordinary course of business as they became due and that the
total assets of the corporation after the dividend would not be
less than the sum of the corporation's liabilities, plus the
amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the
distribution. Historically School Specialty has retained
earnings to finance the growth and expansion of the business and,
accordingly, does not expect to pay cash dividends for the
foreseeable future.
Dissenters' Rights. Under the DGCL, stockholders are
entitled to dissent from certain corporate transactions requiring
a stockholder vote by demanding payment in cash for the fair
value of their shares. The transactions which trigger
dissenters' rights are mergers and consolidations, unless the
shares are listed on a national securities exchange or designated
as a national market security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or held
of record by more than 2000 holders. However, dissenters' rights
will still apply if the holders of shares are required to accept
anything other than shares of stock of the surviving public or
private corporation, shares of stock of another public or widely
held corporation, cash in lieu of fractional shares or any
combination of these types of consideration.
Under the WBCL, dissenters' rights apply to mergers, share
exchanges or sales of all or substantially all of the assets of a
Wisconsin corporation. Except for business combinations with a
10% or greater shareholder, or unless the articles of
incorporation provide otherwise, dissenters' rights are not
available to holders if on the record date for a proposed
transaction the shares are registered on a national securities
exchange or quoted on the National Association of Securities
Dealers, Inc. automated quotations system. Since School
Specialty's Common Stock will continue to be listed on the Nasdaq
National Market, shareholders of New School are not expected to
be entitled to dissenters' rights for any future merger, share
exchange or sale of all or substantially all of the assets of New
School which might occur following the reincorporation.
Director and Officer Discretion. Under the WBCL, in
discharging fiduciary duties to the corporation, a director or
officer may, in addition to considering the effects of any action
on shareholders, consider the effects of the action on employees,
suppliers, customers, the communities in which the corporation
operates and any other factors that the director or officer
considers pertinent. The DGCL does not contain a comparable
provision and under Delaware law, the consideration that may be
given to non-stockholder constituencies is less clear.
<PAGE>
Bankruptcy Provision. Under the DGCL, a corporation's
certificate of incorporation may contain a provision relating to
a compromise or arrangement between the corporation and its
stockholders or creditors. If included in the certificate of
incorporation, the provision states that any stockholder or
creditor of a corporation, or its receiver, may apply to the
Delaware Court of Chancery for an order directing a meeting of
creditors of the corporation to consider any proposed compromise
between such creditors and the corporation. At such a meeting,
if a majority of creditors representing three-fourths in value of
the creditors agrees to any compromise or arrangement and to any
reorganization of the corporation, such compromise or arrangement
and reorganization will be binding on all creditors and/or
stockholders, as well as the corporation. The DGCL further
provides that if this provision is contained in the certificate
of incorporation, all persons who become stockholders or
creditors of the corporation are deemed to have become
stockholders or creditors subject to the provision, which shall
be binding on them. The Delaware Articles contain this
provision. No similar provision is found under the WBCL. As a
result, the Wisconsin Articles do not contain this provision.
Indemnification. Under the DGCL, indemnification of
directors and officers is permitted. School Specialty's Articles
and By-Laws, however, mandate indemnification of directors and
officers to the fullest extent permitted under the DGCL and allow
for indemnification of employees and agents in certain
circumstances. Unless the Board of Directors determines
otherwise in a specific case, expenses incurred by a director or
officer in defending an action must be paid by School Specialty
in advance of the final disposition of the action upon receipt of
an undertaking by such person to repay such amount if it is
ultimately determined that he or she is not entitled to be
indemnified. Under the Delaware Articles, the indemnification
provisions cannot be amended without an affirmative vote of 66
2/3 of the outstanding shares of School Specialty's Common Stock.
Under the WBCL, indemnification is mandatory unless limited
by the articles of incorporation. New School's By-Laws provide
for indemnification of directors, officers, designated employees
and designated agents to the fullest extent permitted under the
WBCL. New School's By-Laws provide that upon the written request
of a director, officer, designated employee or designated agent
who is a party to an action, the corporation must pay or
reimburse such person's expenses as incurred if such person
provides a written affirmation of his or her good faith belief
that he or she is entitled to indemnification and a written
undertaking to repay all amounts advanced if it is ultimately
determined that indemnification is prohibited.
By-Laws. Under the DGCL, the corporation's by-laws may be
amended by the stockholders and, if authorized in the certificate
of incorporation, by the board of directors. School Specialty's
Articles and By-Laws authorize the Board of Directors to amend By-
Laws by a majority vote. In addition, the Delaware Articles and
By-Laws provide that the By-Laws may be altered, amended and
repealed by the holders of at least 66 2/3% of the voting stock
of the corporation. Under the WBCL, the board of directors may
amend by-laws, unless the articles of incorporation or the WBCL
reserve the power to the shareholders or the shareholders, in
adopting, amending or repealing a particular by-law, expressly
provide that the board of directors may not amend, repeal or
readopt that by-law. The WBCL also provides that a corporation's
shareholders may also amend or repeal the corporation's by-laws.
New School's Articles and By-Laws substantially mirror School
Specialty's Articles and By-Laws (including the 66 2/3
shareholder vote requirement for amendments), except to the
extent necessary to comply with the WBCL.
Under both the DGCL and the WBCL, a corporation has the
authority to adopt emergency by-laws which become operative only
in an emergency. The emergency by-laws may contain any
provisions necessary for the operation of the corporation during
the emergency, including provisions that permit the convening of
emergency meetings of the board of directors, the establishment
of a quorum of directors in
<PAGE>
attendance at such an emergency meeting and the designation of
additional or substitute directors. While School Specialty's Articles
and By-Laws do not contain emergency by-law provisions, New School's
By-Laws do.
Anti-Takeover Statutes. Section 203 of the DGCL (the
"Delaware Business Combination Statute") prevents a corporation
from entering into certain business combinations (including sale
of assets, mergers and related party transactions) with an
"interested stockholder" (generally a person holding 15% or more
of the corporation's voting stock) for three years following the
date such person became an interested stockholder. A corporation
may opt out of the Delaware Business Combination Statute in the
Certificate of Incorporation and it will not apply to
transactions if:
* Before a person became an interested stockholder, the board
of directors approved the transaction which caused the person to
become an interested stockholder or approved the business
combination,
* Upon consummation of the transaction which resulted in the
interested stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced
(excluding stock held by directors who are also officers of the
corporation and certain employee stock ownership plans), or
* Following the transaction in which such person became an
interested stockholder, the business combination is approved by
the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of
two-thirds of the outstanding voting stock of the corporation not
owned by the interested stockholder.
The Delaware Business Combination Statute currently applies to
School Specialty.
Sections 180.1141 to 180.1144 of the WBCL (the "Wisconsin
Business Combination Statute") prohibit a Wisconsin corporation
from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder,
unless the board of directors approved the business combination
or the transaction in which the person became an interested
stockholder in advance. Under certain circumstances, a Wisconsin
corporation may engage in a business combination with an
interested stockholder more than three years after the stock
acquisition date. For purposes of the Wisconsin Business
Combination Statutes, a "business combination" includes a merger
or share exchange, or a sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets equal to at least 5% of
the market value of the stock or assets of the corporation or 10%
of its earning power, or the issuance of stock or rights to
purchase stock with a market value equal to at least 5% of the
outstanding stock, the adoption of a plan of liquidation or
dissolution, and certain other transactions involving an
interested stockholder. An "interested stockholder" is a person
who beneficially owns 10% of the voting power of the outstanding
voting stock of the corporation or who is an affiliate or
associate of the corporation and beneficially owned 10% of the
voting power of the then outstanding voting stock within the last
three years. Unlike the Delaware Business Combination Statute,
the Wisconsin Business Combination Statute's prohibition on
business combinations applies for three years after the
acquisition of at least 10% of the outstanding shares regardless
of the percentage of shares owned by the interested shareholder
and cannot be avoided by subsequent action of the board of
directors or shareholders. In addition, the Wisconsin Business
Combination Statute is triggered by a lower threshold of
outstanding shares (10% rather than 15%).
Sections 180.1130 to 180.1133 of the WBCL (the "Wisconsin
Fair Price Statute") require that business combinations involving
a "significant shareholder" and a Wisconsin corporation be
approved by a supermajority vote of shareholders, in addition to
any approval otherwise required, unless certain fair
<PAGE>
price standards have been met. For purposes of the Wisconsin Fair
Price Statute, a "significant shareholder" is a person who
beneficially owns, directly or indirectly, 10% or more of the
voting stock of the corporation, or an affiliate of the
corporation which beneficially owned, directly or indirectly, 10%
or more of the voting stock of the corporation within the last
two years. The Wisconsin Fair Price Statute may discourage any
attempt by a shareholder to squeeze out other shareholders
without offering an appropriate premium purchase price. Delaware
does not have a similar statute.
Subject to certain exceptions, Section 180.1150 of the WBCL
(the "Wisconsin Control Share Statute") limits the voting power
of shares of a Wisconsin corporation held by any person or
persons acting as a group, including shares issuable upon the
exercise of options, in excess of 20% of the voting power in the
election of directors, to 10% of the full voting power of those
excess shares. This may deter any shareholder from acquiring in
excess of 10% of our outstanding voting stock. Delaware does not
have a similar statute.
Section 180.1134 of the WBCL (the "Wisconsin Defensive
Action Restrictions") provides that, in addition to the vote
otherwise required by law or the articles of incorporation, a
Wisconsin corporation must receive approval of the holders of a
majority of the shares entitled to vote before the corporation
can take certain action while a takeover offer is being made or
after a takeover offer has been publicly announced and before it
is concluded. Under the Wisconsin Defensive Action Restrictions,
shareholder approval is required for the corporation to acquire
more than 5% of the outstanding voting shares at a price above
the market price from any individual who or organization which
owns more than 3% of the outstanding voting shares and has held
those shares for less than two years, unless a similar offer is
made to acquire all voting shares. This restriction may deter a
shareholder from acquiring shares of New School's common stock if
the shareholder's goal is to have New School repurchase the
shareholder's shares at a premium over the market price.
Shareholder approval is also required under the Wisconsin
Defensive Action Restrictions for the corporation to sell or
option assets of the corporation which amount to at least 10% of
the market value of the corporation, unless the corporation has
at least three independent directors and a majority of the
independent directors vote not to be governed by this
restriction. School Specialty currently has three independent
directors, as will New School after the reincorporation. So long
as New School maintains at least three independent directors,
this restriction will not apply to New School after the
reincorporation. Delaware does not have a similar statute.
Accounting Treatment of the Merger and Reincorporation
Under generally accepted accounting principles, the merger
and the reincorporation will not result in any gain or loss to
School Specialty or New School. The assets, liabilities and
stockholders' equity of School Specialty will become the assets,
liabilities and shareholders' equity of New School, without any
changes in amounts or classifications.
Federal Income Tax Consequences of the Merger and Reincorporation
This is a summary of certain federal income tax
considerations relevant to holders of School Specialty Common
Stock. This summary is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service rulings and judicial decisions now in effect, all
of which are subject to change. This summary assumes the Common
Stock is held as a capital asset within the meaning of Section
1221 of the Code. It does not purport to deal with all aspects
of federal income taxation that may be relevant to a holder.
Also, it is not intended to be wholly applicable to all
categories of holders, such as foreign corporations and
individuals who are citizens or residents of the United States,
some of which may be subject to special rules or tax regimes.
This summary also does not
<PAGE>
discuss the tax consequences arising under the laws of any state,
local or foreign jurisdiction. Each stockholder is advised to
consult his or her personal attorney or tax advisor as to the federal,
state or local tax consequences of the proposed reincorporation and
the reporting thereof in view of the stockholder's individual circumstances.
The merger and reincorporation will constitute a
reorganization within the meaning of Section 368(a) of the Code.
Accordingly, for federal income tax purposes, no gain or loss
will be recognized by a holder of School Specialty Common Stock
upon the automatic conversion of School Specialty Common Stock
into New School Stock in the merger. Each holder whose shares
are converted from School Specialty Common Stock into New School
Stock will have the same basis in his or her New School Stock as
he or she had in his or her School Specialty Common Stock, and
his or her holding period of New School Stock will include the
period during which he or she held the corresponding shares of
the School Specialty Common Stock. No gain or loss will be
recognized by School Specialty or New School as a result of the
reincorporation.
PROPOSAL THREE: PROPOSAL TO AMEND AND RESTATE
1998 STOCK INCENTIVE PLAN
General
The Board of Directors adopted School Specialty's 1998 Stock
Incentive Plan (the "Plan") on June 5, 1998. The Plan provides
that the maximum number of shares issuable under the Plan will
not exceed 20% of the outstanding shares of School Specialty
Common Stock. However, to comply with the Internal Revenue Code
of 1986 (the "Code"), the Plan provides that the number of shares
which may cumulatively be available for issuance upon the
exercise of incentive stock options, or ISOs, within the meaning
of Section 422 of the Code, may not exceed 600,000 shares.
Because the use of ISOs is an important factor in attracting and
retaining qualified employees, the Board of Directors amended and
restated the Plan (the "Restated Plan"), subject to stockholder
approval, to increase the ISO issuance limit by 2,887,600 shares,
to 3,487,600. The Board of Directors also made certain
ministerial changes in connection with this amendment. The
increase in the ISO issuance limit will not increase the total
number of shares available for issuance under the Plan.
Stockholders are requested to approve the Restated Plan in
the form attached to this proxy as Appendix C. The Restated Plan
is being submitted to stockholders for approval in order to meet
the requirements of Section 162(m) of the Code, which governs the
deductibility of compensation paid to certain executive officers
and Section 422 of the Code, which requires shareholder approval
of a plan pursuant to which ISOs are to be granted. If the
stockholders fail to approve this Proposal, we will not increase
the number of ISOs and grants to 162(m) officers will not be
excepted from the 162(m) deductibility limitations.
The affirmative vote of a majority of the shares of Common
Stock present, either in person or by proxy and entitled to vote,
is required to approve the proposal to amend and restate School
Specialty's 1998 Stock Incentive Plan. The Board of Directors
recommends a vote FOR approval of the Restated Plan. Proxies
solicited by the Board of Directors will, unless otherwise
directed, be voted in favor of the proposal to amend and restate
the Plan.
Purpose
The purpose of the Restated Plan is to promote our long-term
growth and profitability. The Restated Plan does this by
providing key personnel with incentives to improve stockholder
value and contribute to our growth and financial success, and by
enabling us to recruit, reward and retain employees, consultants,
officers and non-employee directors.
<PAGE>
Eligibility
All employees, consultants, advisors and independent
contractors of School Specialty and its subsidiaries, as well as
non-employee directors and officers of School Specialty, are
eligible to receive awards under the Restated Plan. As of April
29, 2000, School Specialty and its subsidiaries had approximately
2,200 employees, one non-employee officer and three non-employee
directors. As of July 1, 2000, Mr. Ledecky became a non-employee
director. The Plan also permits grants to consultants, advisors
and independent contractors. Currently, one consultant is a
participant in the Plan.
Administration
The Restated Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"). The
Committee, in its sole discretion, determines which individuals
may participate in the Restated Plan and the prices (which may
not be less than the fair market value on the date of award),
vesting schedules, expiration dates and other material conditions
under which the awards may be granted. In addition, when
required under the Code, the Executive Performance Compensation
Committee will also approve awards under the Restated Plan.
Awards
The Restated Plan authorizes the Committee to make awards of
stock options ("Options") or direct grants of restricted stock
("Stock Grants" and, together with the Options, "Awards") to
eligible individuals. The terms and conditions of Awards granted
under the Restated Plan are set out from time to time in an
agreement between School Specialty and the individuals receiving
such Awards. School Specialty may grant nonqualified stock
options ("NQSOs") to any eligible person; however, only employees
of School Specialty and its subsidiaries may receive ISOs within
the meaning of Section 422 of the Code. Options will vest and
become exercisable within such period or periods (not to exceed
10 years) as determined by the Committee and set forth in the
participant's Option agreement. Awards may be exercised by
delivery of notice of exercise to School Specialty accompanied by
full payment of the exercise price.
Awards Granted
The Awards that will be granted in the future under the
Restated Plan are not currently determinable. During fiscal
2000, under the Plan, School Specialty granted the following:
* options to purchase 457,000 shares at exercise prices
ranging from $12.81 to $17.69 per share to all current executive
officers, as a group;
* options to purchase 25,000 shares at exercise price of
$15.00 per share to current directors who are not officers; and
* options to purchase 320,500 shares at exercise prices
ranging from $12.00 to $18.00 per share to all other persons
eligible to participate in the Plan, as a group.
For information regarding stock option grants to the Named
Officers, see "Executive Compensation - Option/SAR Grants in Last
Fiscal Year."
Adjustments
The Restated Plan and any outstanding Awards shall be
subject to adjustment, as determined by the Committee, in the
event of certain changes due to recapitalization,
reclassification, stock splits or other increase or decrease. In
the event of such changes, the Committee may make a proportionate
adjustment in the number of shares of Common Stock underlying
each Award.
<PAGE>
In the event of a sale, reorganization, consolidation or
merger of School Specialty or other Substantial Corporate Change
(as defined in the Restated Plan), the Restated Plan and any
Unexercised Awards will terminate unless written provision is
made for the assumption or continuation of outstanding Awards.
All Awards shall become immediately exercisable with respect to
100 percent of the Shares subject to such Award, unless the
Committee determines otherwise.
Amendment and Termination
The Board may from time to time, to the extent permitted by
applicable law, amend, suspend or terminate the Restated Plan
without the consent of participants. However, the Board may not
make an amendment that has material adverse affect on outstanding
Awards without the consent of the affected participants. In
addition, the Board may not amend the Restated Plan so as to
deprive any participant of a previously granted Award.
Shares Subject to the Restated Plan
The aggregate number of shares of Common Stock that may be
issued under the Awards (whether ISOs, NQSOs or Stock Grants) may
not exceed 20% of School Specialty's shares of Common Stock
outstanding. As noted above, the Restated Plan increased the
maximum number of shares that may be subject to ISOs from 600,000
to 3,487,600. The maximum number of shares that may be issued
with respect to awards granted under the Restated Plan to any one
person in a calendar year may not exceed 1.2 million shares. On
the Record Date, the closing price of School Specialty's Common
Stock was $____ per share.
Federal Income Tax Consequences
Our counsel has advised us that the federal income tax
consequences of NQSOs, ISOs and restricted stock granted under
the Restated Plan are generally as follows:
NQSOs. The grant of a NQSO will have no federal income tax
consequences to School Specialty or to a participant. A
participant will recognize taxable ordinary income at the time of
exercise of the option in an amount equal to the excess of the
fair market value of the stock acquired at the time of exercise
over the option price, and School Specialty will ordinarily be
entitled to a deduction for such amount.
The holder of stock acquired upon exercise of a NQSO will,
upon a subsequent disposition of such stock, generally recognize
a short-term or long term capital gain or loss, depending upon
the holding period of the stock, equal to the difference between
the amount realized on the sale and the basis in such stock (the
sum of the option price and the amount taxed as ordinary income
at the time of exercise).
ISOs. Neither the grant nor exercise of an ISO will
generally have any federal income tax consequences for a
participant. The amount by which the fair market value of the
stock acquired upon the exercise of any ISO exceeds the option
price as of the date of exercise, however, is an item of "tax
preference" for purposes of computing the alternative minimum tax
on individuals. If a participant has held the stock acquired on
the exercise of an ISO for at least two years from the date of
the grant of the option and at least one year from the date of
exercise, the participant will recognize taxable long-term
capital gain or loss upon a subsequent disposition of the stock.
In such circumstances, no deduction would be allowed to School
Specialty for federal income tax purposes in connection with the
grant or exercise of the option or the transfer of stock acquired
upon such exercise.
If, however, the participant disposes of his or her stock
within the holding periods described above, (i) the participant
will recognize ordinary income in an amount equal to the
difference between the fair market value of such stock on the
date of exercise and the option price, provided that, if the
<PAGE>
disposition is a sale or exchange with respect to which a loss
(if sustained) would be recognized by the participant and the
amount realized from such sale or exchange is less than the fair
market value on the exercise date, then the ordinary income will
be limited to the excess of the amount realized upon the sale or
exchange of the stock over the option price; (ii) School
Specialty will be entitled to a deduction for such year in the
amount of the ordinary income so recognized; and (iii) the
participant will recognize capital gain or loss, as the case may
be, in an amount equal to the difference between the amount
realized upon such sale or exchange of the stock and the sum of
the option price plus the amount of ordinary income, if any,
recognized upon such disposition.
Restricted Stock. The grant of restricted stock is not a
taxable event to a participant, absent an election under Section
83(b) of the Code. If no election is made, the participant will
recognize income, taxable for income tax purposes at ordinary
rates, upon the lapse of the restrictions governing the stock.
The amount of the income will equal the fair market value of the
stock when the restrictions lapse. If the participant makes a
Section 83(b) election within 30 days of the date of grant, he or
she will be deemed to have received ordinary income at the time
of the grant of the restricted stock equal to their fair market
value at the date of grant less any amount paid by the
participant for the stock, determined without regard to the
restrictions imposed thereon. If the restricted stock is
subsequently forfeited after a Section 83(b) election and before
the restrictions lapse, the participant is not entitled to claim
the loss for income tax purposes.
School Specialty or a subsidiary will be entitled to a
deduction for income tax purposes when the participant recognizes
ordinary income, either as a result of a Section 83(b) election
or because of the lapse of the restrictions. The amount of the
deduction will equal the amount of ordinary income recognized by
the participant.
PROPOSAL FOUR: RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee and subject to
ratification by the stockholders at the Annual Meeting, the Board
of Directors has appointed PricewaterhouseCoopers LLP, an
independent public accounting firm, to audit the consolidated
financial statements of School Specialty for the fiscal year
ending April 28, 2001. PricewaterhouseCoopers LLP has audited
the financial statements of School Specialty since the fiscal
year ended April 26, 1997. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting
to make any statement they may desire and to respond to questions
from stockholders.
If the stockholders do not ratify the appointment of
PricewaterhouseCoopers LLP, the selection of our independent
auditors will be reconsidered by the Board of Directors.
PROPOSAL FIVE: OTHER MATTERS
Although management is not aware of any other matters that
may come before the Annual Meeting, if any such matters should be
presented, the persons named in the enclosed proxy card intend to
vote in accordance with their best judgment.
<PAGE>
SUBMISSION OF STOCKHOLDER PROPOSALS
Assuming the reincorporation is effected, nominations, other
than by or at the direction of the Board of Directors, of
candidates for election as directors at the 2001 Annual Meeting
of Stockholders and any other stockholder proposed business to be
brought before the 2001 Annual Meeting of Stockholders must be
submitted to us no later than June 30, 2001. Stockholder
proposed nominations and other stockholder proposed business must
be made in accordance with our By-Laws which, upon completion of
the reincorporation, will provide, among other things, that
stockholder proposed nominations must be accompanied by certain
information concerning the nominee and the stockholder submitting
the nomination, and that stockholder proposed business must be
accompanied by certain information concerning the proposal and
the stockholder submitting the proposal. To be considered for
inclusion in the proxy statement solicited by the Board of
Directors, stockholder proposals for consideration at the 2001
Annual Meeting of Stockholders of School Specialty must be
received by us at our principal executive offices, 1000 N.
Bluemound Drive, Appleton, Wisconsin, 54914 on or before March
26, 2001. Proposals should be directed to Ms. Karen A. Riching,
Assistant Secretary. To avoid disputes as to the date of
receipt, it is suggested that any stockholder proposal be
submitted by certified mail, return receipt requested.
Stockholders may obtain a copy of our Annual Report to
Stockholders for fiscal 2000, which includes our Annual Report on
Form 10-K, at no cost by writing to Ms. Karen A. Riching,
Assistant Secretary, School Specialty, Inc., 1000 N. Bluemound
Drive, Appleton, Wisconsin, 54914.
By Order of the Board of Directors,
Joseph F. Franzoi IV, Secretary
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June ___, 2000,
by and between School Specialty, Inc., a Delaware corporation
("SSI"), and New School, Inc., a Wisconsin corporation and a
wholly-owned subsidiary of SSI (the "Surviving Corporation").
SSI and the Surviving Corporation are sometimes hereinafter
referred to as the "Constituent Corporations."
WHEREAS, SSI, as of the date hereof, has authority to
issue 151,000,000 shares of capital stock, of which
150,000,000 are designated as Common Stock, $.001 par value
(the "SSI Common Stock"), and 1,000,000 shares are designated
as Preferred Stock, $.001 par value (the "SSI Preferred") and,
as of the date hereof, ___________ shares of SSI Common Stock
are issued and outstanding, and no shares of SSI Preferred are
issued and outstanding; and
WHEREAS, the Surviving Corporation, on or before the
Effective Time of the Merger (as defined below), will have
authority to issue 151,000,000 shares of capital stock, of
which 150,000,000 will be designated as Common Stock, $.001
par value (the "Surviving Corporation Common Stock"), and
1,000,000 shares will be designated as Preferred Stock, $.001
par value (the "Surviving Corporation Preferred"); and
WHEREAS, as of the date hereof, 100 shares of Surviving
Corporation Common Stock are issued and outstanding, all of
which are held by SSI, and no shares of Surviving Corporation
Preferred are issued and outstanding; and
WHEREAS, SSI and the Surviving Corporation desire that SSI
merge with and into the Surviving Corporation and that the
Surviving Corporation shall continue as the surviving
corporation in such merger, upon the terms and subject to the
conditions set forth herein and in accordance with the laws of
the State of Wisconsin and the laws of the State of Delaware;
and
WHEREAS, the respective Boards of Directors of SSI and the
Surviving Corporation have approved this Agreement and
directed that it be submitted to a vote of their shareholders.
NOW, THEREFORE, in consideration of the mutual agreements
and covenants set forth herein, the parties hereto agree to
merge as follows:
ARTICLE 1
MERGER
1.1. Merger. Subject to the terms and conditions of this
Agreement, SSI shall be merged with and into the Surviving
Corporation (the "Merger") in accordance with the Wisconsin
Business Corporation Law ("WBCL") and the Delaware General
Corporation Law (the "DGCL"), the separate existence of SSI shall
cease, and the Surviving Corporation shall be the surviving
corporation and continue its corporate existence under the laws
of the State of Wisconsin.
1.2. Effect of the Merger. At the Effective Time of the
Merger (as hereinafter defined), the Surviving Corporation shall
possess all the rights, privileges, powers and franchises, of a
public as well as of a private nature, and shall be subject to
all the restrictions, disabilities and duties, of each of SSI and
the Surviving Corporation; all property, real, personal and
mixed, and all debts due on any account,
<PAGE>
including subscriptions for shares, and all other choses in action,
and every other interest of or belonging to or due to each of SSI
and the Surviving Corporation shall vest in the Surviving Corporation
without any further act or deed; the title to any real estate or
any interest therein vested by deed or otherwise in SSI shall not
revert nor in anyway become impaired by reason of the Merger; the
Surviving Corporation shall be responsible and liable for all the
debts, liabilities and duties of each of SSI and the Surviving
Corporation; a claim of or against or a pending proceeding by or
against SSI or the Surviving Corporation may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may
be substituted in the place of SSI; and neither the rights of
creditors nor any liens upon the property of SSI or the Surviving
Corporation shall be impaired by the Merger.
1.3. Effective Time of the Merger. The Merger shall become
effective as of the date and time (the "Effective Time of the
Merger") the following actions are completed: (a) appropriate
duly executed articles of merger are filed in accordance with
Section 180.1105 of the WBCL; and (b) an appropriate duly
executed certificate of merger is filed in accordance with
Section 252 of the DGCL.
ARTICLE 2
NAME, ARTICLES OF INCORPORATION, BY-LAWS,
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
2.1. Name of Surviving Corporation. At the Effective Time
of the Merger, Article I of the Surviving Corporation's Articles
of Incorporation shall be amended to read as follows:
The name of the Corporation is School Specialty, Inc.
2.2. Articles of Incorporation. The Articles of
Incorporation of the Surviving Corporation, as amended pursuant
to Section 2.1 hereof, shall be the Articles of Incorporation of
the Surviving Corporation from and after the Effective Time of
the Merger by virtue of the Merger and without any further action
by the Constituent Corporations, until amended thereafter as
provided therein or by law.
2.3. By-Laws. The By-Laws of the Surviving Corporation
shall be the By-Laws of the Surviving Corporation from and after
the Effective Time of the Merger by virtue of the Merger and
without any further action by the Constituent Corporations, until
amended thereafter as provided therein, in the Surviving
Corporation's Articles of Incorporation or By-Laws.
2.4. Directors and Officers. The directors and officers of
SSI immediately prior to the Effective Time of the Merger shall
be the directors and officers, respectively, of the Surviving
Corporation from and after the Effective Time of the Merger and
shall hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation until the
expiration of the terms to which they were elected to serve as
directors and officers of SSI and until their successors are duly
elected and qualified. With respect to the directors of the
Surviving Corporation, they shall be assigned to the same Class
(either Class I, II or III) in which they were assigned while
serving as directors of SSI.
ARTICLE 3
CONVERSION OF SECURITIES
3.1. Conversion. At the Effective Time of the Merger, each
of the following transactions shall be deemed to occur
simultaneously and this Section 3.1 shall constitute the manner
and basis of converting
<PAGE>
the capital stock of the Constituent Corporations into capital stock
of the Surviving Corporation and of consummating the other transactions
referred to in this Section 3.1:
(a) Each share of SSI Common Stock issued and
outstanding immediately prior to the Effective Time of the
Merger shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and
become one validly issued, fully paid and nonassessable share
of Surviving Corporation Common Stock (except to the extent
provided in Section 180.0622(2)(b) of the WBCL).
(b) Each stock option to purchase shares of SSI Common
Stock granted by SSI under any of the stock option plans of
SSI and outstanding immediately prior to the Effective Time of
the Merger shall, by virtue of the terms of the stock option
plans, the actions of the Boards of Directors of the
Constituent Corporations and the Merger and without any action
on the part of the holder thereof, be converted into and
become a stock option to purchase, upon the same terms and
conditions, the number of shares of Surviving Corporation
Common Stock which is equal to the number of shares of SSI
Common Stock which the optionee would have received had he or
she exercised his or her option in full immediately prior to
the Effective Time of the Merger (whether or not such option
was then exercisable). The exercise price per share of the
Surviving Corporation Common Stock under each of such options
shall be equal to the exercise price per share of SSI Common
Stock thereunder immediately prior to the Effective Time of
the Merger. A number of shares of Surviving Corporation Common
Stock shall be reserved for issuance upon the exercise of
options equal to the number of shares of SSI Common Stock so
reserved immediately prior to the Effective Time of the
Merger.
(c) Each share of Surviving Corporation Common Stock
issued and outstanding immediately prior to the Effective Time
of the Merger (each of which is presently held by SSI),
without any action on the part of the holder thereof shall be
canceled and cease to exist, and no shares of the Surviving
Corporation or other securities of the Surviving Corporation
shall be issued or other consideration paid in respect
thereof.
3.2. Conversion of Certificates.
(a) Each stock certificate which, immediately prior to
the Effective Time of the Merger, represented issued and
outstanding shares of SSI Common Stock shall not represent
shares of SSI Common Stock (which shares shall cease to exist)
after the Effective Time of the Merger but instead shall be
and become at the Effective Time of the Merger a certificate
representing an identical number of shares of Surviving
Corporation Common Stock, automatically by virtue of the
Merger and without any action on the part of the holder
thereof. Upon the surrender or transfer following the
Effective Time of the Merger of a stock certificate that
represented SSI Common Stock immediately prior to the
Effective Time of the Merger, but subject to Section 3.2(b)
hereof, a stock certificate representing the same number of
shares of Surviving Corporation Common Stock shall be reissued
to the holder or transferee, as the case may be, thereof,
provided that no holder of a stock certificate that
represented SSI Common Stock immediately prior to the
Effective Time of the Merger shall be required to surrender
such stock certificate in connection with the Merger and such
stock certificate shall represent the same number of shares of
Surviving Corporation Common Stock until so surrendered.
(b) If, after the Effective Time of the Merger, any
certificate for shares of Surviving Corporation Common Stock
is to be issued in a name other than that in which the
certificate which immediately prior to the Effective Time of
the Merger represented shares of SSI Common Stock surrendered
in exchange therefor is registered, it shall be a condition of
such exchange that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer
and the
<PAGE>
person requesting such exchange shall pay any transfer
and other taxes required by reason of the issuance of
certificates for such shares of the Surviving Corporation
capital stock in a name other than that of the registered
holder of the certificate surrendered, or shall establish to
the satisfaction of the Surviving Corporation or its agent
that such tax has been paid or is not applicable.
Notwithstanding the foregoing, no party hereto shall be liable
to a holder of shares of SSI capital stock for any shares of
Surviving Corporation capital stock or dividends or
distributions thereon delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
ARTICLE 4
EMPLOYEE BENEFIT AND COMPENSATION PLANS
At the Effective Time of the Merger, any employee benefit
plan or incentive compensation plan, including any stock option
plan, to which SSI is then a party shall be assumed by, and
continue to be the plan of, the Surviving Corporation. To the
extent any employee benefit plan or incentive compensation plan
of SSI provides for the issuance or purchase of, or otherwise
relates to, SSI capital stock, from and after the Effective Time
of the Merger, such plan shall be deemed to provide for the
issuance or purchase of, or otherwise to relate to, the Surviving
Corporation capital stock.
ARTICLE 5
CONDITIONS
Consummation of the Merger is subject to the satisfaction at
or prior to the Effective Time of the Merger of the following
conditions:
5.1. SSI Stockholder Approval. This Agreement and the
Merger shall have been adopted and approved by the stockholders
of SSI in accordance with the Articles of Incorporation of SSI
and the applicable provisions of the DGCL.
5.2. Surviving Corporation Shareholder Approval. This
Agreement and the Merger shall have been adopted and approved by
SSI as the holder of all the outstanding shares of Surviving
Corporation capital stock prior to the Effective Time of the
Merger.
5.3. Consents, etc. Any and all consents, permits,
authorizations, approvals and orders deemed in the sole
discretion of SSI to be material to the consummation of the
Merger shall have been obtained.
ARTICLE 6
AGREEMENTS
6.1. No Preferred Stock. Prior to the Effective Time of
the Merger, the Surviving Corporation shall not issue Surviving
Corporation Preferred.
6.2. Taking of Necessary Action; Further Action. Subject
to Section 7.1, each of SSI and the Surviving Corporation will
take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time of the
Merger, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to
all assets, property, rights, privileges, powers and franchises
of the Constituent Corporations, the officers and directors of the
<PAGE>
Constituent Corporations are fully authorized in the name of
their corporation or otherwise to take, and will take, all such
lawful and necessary action.
6.3. Other Agreements. The Surviving Corporation, from and
after the Effective Time of the Merger, agrees that it may be
served with process in the State of Delaware in any proceeding
for the enforcement of any obligation of either Constituent
Corporation and in any proceeding for the enforcement of any
obligation of the Surviving Corporation arising from the Merger.
The Surviving Corporation irrevocably appoints the Secretary of
State of the State of Delaware as its agent to accept service of
process in any such proceeding. A copy of any such service of
process may be sent by the Secretary of State of the State of
Delaware to the chief executive officer of the Surviving
Corporation at the following address: 1000 N. Bluemound Drive,
Appleton, Wisconsin 54914 (or such other address as specified by
the Surviving Corporation in a notice to the Secretary of State
of the State of Delaware).
ARTICLE 7
GENERAL
7.1. Termination and Abandonment. This Agreement may be
terminated and the Merger and other transactions herein provided
for abandoned at any time prior to the Effective Time of the
Merger, whether before or after adoption and approval of this
Agreement by the stockholders of SSI, by action of the Board of
Directors of SSI, if the Board of Directors of SSI determines
that the consummation of the transactions provided for herein
would not, for any reason, be in the best interests of SSI and
its stockholders. In the event of termination of this Agreement,
this Agreement shall become void and of no effect and there shall
be no liability on the part of either SSI or the Surviving
Corporation or their respective Boards of Directors or
shareholders, except that SSI shall pay all expenses incurred in
connection with the Merger or in respect of this Agreement or
relating thereto.
7.2. Amendment. This Agreement may be amended at any time
prior to the Effective Time of the Merger with the mutual consent
of the Boards of Directors of SSI and the Surviving Corporation;
provided, however, that after it has been adopted by the
stockholders of SSI, this Agreement may not be amended in any
manner which, in the judgment of the Board of Directors of SSI,
would have a material adverse effect on the rights of such
stockholders or in any manner not permitted under applicable law;
provided further, however, that any amendment of this Agreement
after its adoption by the sole shareholder of the Surviving
Corporation shall require the prior approval of such shareholder.
7.3. Headings. The headings set forth herein are inserted
for convenience or reference only and are not intended to be part
of, or to affect the meaning or interpretation of, this
Agreement.
7.4. Counterparts. This Agreement may be executed in two
counterparts, each of which shall constitute an original, and all
of which, when taken together, shall constitute one and the same
instrument.
7.5. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Wisconsin without giving effect to the principles of conflicts of
law thereof, except to the extent the laws of the State of
Delaware are applicable to SSI in respect of the Merger, in which
case the laws of the State of Delaware shall apply without giving
effect to the principles of conflicts of law thereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed on its behalf and attested by its
officers hereunto duly authorized, all as of the day and year
first above written.
SCHOOL SPECIALTY, INC.
A Delaware Corporation
By: ______________________________________
Daniel P. Spalding,
Chairman of the Board and
ChiefExecutive Officer
Attest: __________________________________
Joseph F. Franzoi, IV, Secretary
NEW SCHOOL, INC.
A Wisconsin Corporation
By: ___________________________________________
Daniel P. Spalding,
Chairman of the Board and
Chief Executive Officer
Attest: ___________________________________
Joseph F. Franzoi, IV, Secretary
<PAGE>
Appendix B
ARTICLES OF INCORPORATION
OF
NEW SCHOOL, INC.
These Articles of Incorporation are executed by the
undersigned for the purpose of forming a Wisconsin corporation
under Chapter 180 of the Wisconsin Statutes.
ARTICLE I
NAME
The name of the Corporation is New School, Inc.
ARTICLE II
PERIOD OF EXISTENCE
The period of existence of the Corporation shall be
perpetual.
ARTICLE III
PURPOSES
The Corporation is authorized to engage in any lawful
activity for which corporations may be organized under Chapter
180 of the Wisconsin Statutes and any successor provisions.
ARTICLE IV
CAPITAL STOCK
The aggregate number of shares which the Corporation shall
have the authority to issue, the designation of each class of
shares, the authorized number of shares of each class and the par
value thereof per share shall be as follows:
Designation Par Value Authorized
of Class Per Share Number of Shares
Common Stock $.001 150,000,000
Preferred Stock $.001 1,000,000
<PAGE>
The preferences, limitations and relative rights of shares
of each class and series thereof, if any, and the authority of
the Board of Directors of the Corporation to create and designate
series of Preferred Stock and to determine the preferences,
limitations and relative rights as between series shall be as
follows:
A. Common Stock.
1. Voting. Except as otherwise provided by law and except as
may be determined by the Board of Directors of the Corporation
with respect to shares of Preferred Stock as provided in Section
B, below, only the holders of shares of Common Stock shall be
entitled to vote for the election of directors of the Corporation
and for all other corporate purposes. Except as otherwise
provided by law, upon any such vote, each holder of Common Stock
shall be entitled to one vote for each share of Common Stock held
of record by such shareholder.
2. Dividends. Subject to the provisions of paragraph (2) of
Section B, below, the holders of Common Stock shall be entitled
to receive such dividends as may be declared thereon from time to
time by the Board of Directors of the Corporation, in its
discretion, out of any funds of the Corporation at the time
legally available for payment of dividends.
3. Liquidation. In the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, after
there have been paid to or set aside for the holders of shares of
Preferred Stock the full preferential amounts, if any, to which
they are entitled as provided in paragraph (3) of Section B,
below, the holders of outstanding shares of Common Stock shall be
entitled to share ratably, according to the number of shares held
by each, in the remaining assets of the Corporation available for
distribution.
B. Preferred Stock.
1. Series and Variations Between Series. The Board of
Directors of the Corporation is authorized, to the full extent
permitted under the Wisconsin Business Corporation Law and the
provisions of this Section B, to adopt resolutions which provide
for the issuance of the Preferred Stock in one or more series,
each of such series to be distinctively designated, and to have
such voting rights, redemption or conversion rights, dividend or
distribution rights, preferences with respect to dividends or
distributions, or other preferences, limitations or relative
rights as shall be provided by the Board of Directors of the
Corporation consistent with the provisions of the Wisconsin
Business Corporation Law and this Article IV. The Board of
Directors of the Corporation, unless otherwise provided when the
series is established, may increase or decrease the number of
shares of any series, provided that the number of shares of any
series shall not be reduced below the number of shares then
outstanding.
2. Dividends. Before any dividends (other than a dividend
payable solely in Common Stock) shall be paid or set apart for
payment upon shares of Common Stock, the holders of each series
of Preferred Stock shall be entitled to receive dividends at the
rate (which may be fixed or variable) and at such times as
specified in the particular series, if any. The holders of
shares of Preferred Stock shall have no rights to participate
with the holders of shares of Common Stock in any dividends in
excess of the preferential dividends, if any, fixed for such
Preferred Stock.
3. Liquidation. In the event of liquidation, dissolution or
winding up (whether voluntary or involuntary) of the Corporation,
the holders of shares of Preferred Stock shall be entitled to be
paid the full amount payable on such shares upon the liquidation,
dissolution or winding up of the Corporation fixed by the Board
of Directors with respect to such shares, if any, before any
amount shall be paid to the holders of the Common Stock.
ARTICLE V
PREEMPTIVE RIGHTS
No holder of any shares of the Corporation shall have any
preemptive or subscription rights nor be entitled, as of right,
to purchase or subscribe for any part of the unissued shares of
the Corporation or of any additional shares issued by reason of
any increase of authorized shares of the Corporation or other
securities whether or not convertible into shares of the
Corporation.
<PAGE>
ARTICLE VI
SHARE DIVIDENDS
A dividend payable in shares of any class or series of stock
of the Corporation may be paid in shares of any other class or
series.
ARTICLE VII
BOARD OF DIRECTORS
A. Number. The number of directors of the Corporation shall
not be less than one (1), the exact number of directors to be
determined from time to time by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors
then in office.
B. Classification of the Board. The directors shall be
divided into three classes, designated Class I, Class II and
Class III, and the term of office of directors of each class
shall be three (3) years. Directors shall be assigned to each
class in accordance with a resolution or resolutions adopted by
the Board of Directors. Each class shall consist, as nearly as
possible, of one-third (1/3) of the total number of directors
constituting the entire Board of Directors. If the number of
directors is changed by resolution of the Board of Directors
pursuant to this Article VII, any increase or decrease shall be
apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, but in no
case shall a decrease in the number of directors shorten the term
of any incumbent director.
C. Tenure and Vacancies. A director shall hold office until
the annual meeting for the year in which his or her term expires
and until his or her successor shall be duly elected and
qualified or until his or her earlier death, resignation or
removal. Any newly created directorship resulting from an
increase in the number of directors and any other vacancy on the
Board of Directors, however caused, shall be filled by the vote
of a majority of the directors then in office, although less than
a quorum, or by the sole remaining director; provided that any
vacancy resulting from removal from office by a vote of the
shareholders may be filled by a vote of the shareholders at the
same meeting at which such removal occurs. Any director so
elected to fill any vacancy on the Board of Directors shall hold
office for the remaining term of directors of the class to which
he or she has been elected and until his or her successor shall
be duly elected and qualified or until his or her earlier death,
resignation or removal.
D. Removal of Directors. No director of the Corporation may
be removed from office by a vote of the shareholders at any time,
except for Cause. As used in this Article VII, the term "Cause"
shall mean solely malfeasance arising from the performance of a
director's duties which has a material adverse effect on the
business of the Corporation.
E. Rights of Preferred Shareholders. Notwithstanding the
foregoing, whenever the holders of one or more series of
Preferred Stock shall have the right, voting separately, as a
class or series, to elect directors, the election, term of
office, filling of vacancies, removal and other features of such
directorships shall be governed by the terms of the resolution or
resolutions adopted by the Board of Directors pursuant to Article
IV of these Articles of Incorporation, and each director so
elected shall not be subject to the provisions of this Article
VII unless otherwise provided therein.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Notwithstanding any other provision of these Articles of
Incorporation or the Corporation's By-Laws, the Corporation's
By-Laws may be amended, altered or repealed, and new By-Laws may
be enacted, only by the affirmative vote of the holders of not
less than sixty-six and two-thirds percent (66 2/3%) of the total
outstanding shares of capital stock of the Corporation entitled
to vote at a meeting of shareholders duly called for such
purpose, or by a vote of not less than a majority of the entire
Board of Directors then in office.
<PAGE>
ARTICLE IX
SPECIAL MEETINGS OF SHAREHOLDERS
Special meetings of shareholders may be called, for any
purpose or purposes, by (a) the Chairman of the Board of
Directors, (b) the Chief Executive Officer, (c) the President,
(d) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the
Board of Directors for adoption) or (e) the holders of at least
ten percent (10%) of the total outstanding shares of capital
stock of the Corporation entitled to vote on any issue proposed
to be considered at the special meeting, on such date and at such
time as the Board of Directors shall fix.
ARTICLE X
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is
44 East Mifflin Street, Madison, Wisconsin 53703. The name of
its registered agent at such address is CT Corporation System.
ARTICLE XI
INCORPORATOR
The name and address of the incorporator of the Corporation
is Scott A. Moehrke, 780 North Water Street, Milwaukee, Wisconsin
53202.
Executed this ___ day of ____________, 2000.
________________________________
Scott A. Moehrke
This instrument was drafted by:
Scott A. Moehrke
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
<PAGE>
Appendix C
AMENDED AND RESTATED
SCHOOL SPECIALTY, INC.
1998 STOCK INCENTIVE PLAN
PURPOSE SCHOOL SPECIALTY, INC., a Delaware corporation
(the "Company"), wishes to recruit, reward, and
retain employees, consultants, independent
contractors, advisors, officers and outside
directors. To further these objectives, the
Company hereby sets forth the School Specialty,
Inc. 1998 Stock Incentive Plan (the "Plan") to
provide options ("Options") or direct grants
("Stock Grants" and, together with the Options,
"Awards") to employees, consultants, independent
contractors, advisors, officers and outside
directors with respect to shares of the Company's
common stock (the "Common Stock"). The Plan was
originally effective as of the effective date (the
"Effective Date") of the Company's registration
under Section 12 of the Securities Exchange Act of
1934 (the "Exchange Act") with respect to its
initial public offering ("IPO"), and this
amendment and restatement is effective as of June
20, 2000.
PARTICIPANTS The following persons are eligible to receive
Options and Stock Grants under the Plan: (1)
current and prospective Employees (as defined
below) of the Company and any Eligible Subsidiary
(as defined in the Eligible Subsidiary section
below), (2) consultants, advisors and independent
contractors of the Company and any Eligible
Subsidiary and (3) officers and directors of the
Company and any Eligible Subsidiary who are not
Employees ("Eligible Officers and Eligible
Directors"). Eligible persons become "Optionees"
when the Administrator grants them an option under
this Plan or "Recipients" when they receive a
direct grant of Common Stock. (Optionees and
Recipients are referred to collectively as
"Participants." The term Participant also
includes, where appropriate, a person authorized
to exercise an Award in place of the original
Optionee.)
Employee means any person employed as a common law
employee of the Company or an Eligible Subsidiary.
ADMINISTRATOR The Administrator will be the Compensation
Committee of the Board of Directors of the Company
(the "Compensation Committee"), unless the Board
specifies another committee. The Board may also
act under the Plan as though it were the
Compensation Committee.
The Administrator is responsible for the general
operation and administration of the Plan and for
carrying out its provisions and has full
discretion in interpreting and administering the
provisions of the Plan. Subject to the express
provisions of the Plan, the Administrator may
exercise such powers and authority of the Board as
the Administrator may find necessary or
appropriate to carry out its functions. The
Administrator may delegate its functions (other
than those described in the Granting of Awards
section) to Employees of the Company.
The Administrator's powers will include, but not
be limited to, the power to amend, waive, or
extend any provision or limitation of any Award.
The Administrator may act through meetings of a
majority of its members or by unanimous consent.
GRANTING OF Subject to the terms of the Plan, the Administrator will,
AWARDS in its sole discretion, determine:
<PAGE>
the Participants who receive Awards,
the terms of such Awards,
the schedule for exercisability or
nonforfeitability (including any requirements
that the Participant or the Company satisfy
performance criteria),
the time and conditions for expiration of the
Award, and
the form of payment due upon exercise, if
any.
The Administrator's determinations under the Plan
need not be uniform and need not consider whether
possible Participants are similarly situated.
Options granted to Employees may be nonqualified
stock options ("NQSOs") or "incentive stock
options" ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), or the
corresponding provision of any subsequently
enacted tax statute. Options granted to
consultants, independent contractors, advisors,
Eligible Officers and Eligible Directors,
including Formula Options (as defined below), must
be NQSOs. The Administrator will not grant ISOs
unless the stockholders either have already
approved the granting of ISOs or give such
approval within 12 months after the grant.
The Administrator may impose such conditions on or
charge such price for the Stock Grants as it deems
appropriate.
SUBSTITUTIONS The Administrator may also grant Awards in
substitution for options or other equity interests
held by individuals who become Employees of the
Company or of an Eligible Subsidiary as a result
of the Company's acquiring or merging with the
individual's employer or acquiring its assets. In
addition, the Administrator may provide for the
Plan's assumption of Awards granted outside the
Plan (including those granted by an Eligible
Subsidiary) to persons who would have been
eligible under the terms of the Plan to receive an
Award, including both persons who provided
services to any acquired company or business and
persons who provided services to the Company or
any Eligible Subsidiary. If appropriate to
conform the Awards to the interests for which they
are substitutes, the Administrator may grant
substitute Awards under terms and conditions
(including Exercise Price) that vary from those
the Plan otherwise requires. Awards in
substitution for U.S. Office Products' options in
connection with the distribution by U.S. Office
Products of the Company's Common Stock will retain
their pre-distribution exercise schedule and terms
(including Change of Control provisions) and
expiration date.
JUNEBOX Awards in substitution for options issued by JuneBox.com,
OPTIONS Inc. ("JuneBox") will, unless the Administrator determines
otherwise, retain their pre-distribution exercise schedule
and expiration dates, but any Change of Control
provisions will thereafter refer to the Company
under the rules set forth in this Plan for any
such awards that have not become fully exercisable
on or before their assumption under this Plan,
unless the Administrator provides otherwise. In
replacing JuneBox options, the Administrator may
adjust the Exercise Price and number of shares
covered by JuneBox options in its discretion to
reflect the relative value of JuneBox as an
Eligible Subsidiary of the Company. It may
determine the relative value in any manner it
considers appropriate.
<PAGE>
DIRECTOR Each Eligible Director will receive a formula stock option
FORMULA (" Formula Option") with respect to 15,000 shares of Common
OPTIONS Stock upon the first to occur of their initial appointment
or election to the Board (with the grant made as of the date
of such appointment or election). Thereafter,
each Eligible Director serving on the Board will
receive a Formula Option annually with respect to
5,000 shares of Common Stock on a date determined
by the Administrator. The Exercise Price for
Formula Options will be the Fair Market Value on
the Date of Grant.
EXERCISE Unless the Administrator specifies otherwise, each Formula
SCHEDULE Option will become exercisable as to 20% of the covered
shares on the first anniversary of its Date of Grant (as
defined in the Date of Grant section below), an
additional 30% on the second anniversary, and the
remaining 50% on or after the third anniversary.
A Formula Option will become exercisable in its
entirety upon the Eligible Director's death,
Disability, or attainment of age 70. Options will
be forfeited to the extent they are not then
exercisable if an Eligible Director resigns or
fails to be reelected as a director. Exercisable
options will expire as provided under Award
Expiration.
DATE OF GRANT The Date of Grant will be the date as of which
this Plan or the Administrator grants an Award to
a Participant, as specified in the Plan or in the
Administrator's minutes or other written evidence
of action.
EXERCISE PRICE The Exercise Price is the value of the
consideration that a Participant must provide in
exchange for one share of Common Stock. The
Administrator will determine the Exercise Price
under each Award and may set the Exercise Price
without regard to the Exercise Price of any other
Awards granted at the same or any other time. The
Company may use the consideration it receives from
the Participant for general corporate purposes.
The Exercise Price per share for NQSOs may not be
less than 100% of the Fair Market Value (as
defined below) of a share on the Date of Grant.
If an Option is intended to be an ISO, the
Exercise Price per share may not be less than 100%
of the Fair Market Value (on the Date of Grant) of
a share of Common Stock covered by the Option;
provided, however, that if the Administrator
decides to grant an ISO to someone covered by
Sections 422(b)(6) and 424(d) (as a
more-than-10%-stockholder), the Exercise Price of
the Option must be at least 110% of the Fair
Market Value (on the Date of Grant).
The Administrator may satisfy any state law
requirements regarding adequate consideration for
Stock Grants by (i) issuing Common Stock held as
treasury stock or (ii) charging the Recipients at
least the par value for the shares covered by the
Stock Grant. The Administrator may designate that
a Recipient may satisfy (ii) above either by
direct payments or by the Administrator's
withholding from other payments due to the
Recipient.
FAIR MARKET Fair Market Value of a share of Common Stock for purposes of the
VALUE Plan will be determined as follows:
If the Common Stock trades on a national
securities exchange, the closing sale price
on the Date of Grant;
If the Common Stock does not trade on any
such exchange, the closing sale price as
reported by the National Association of
Securities Dealers, Inc. Automated Quotation
System ("Nasdaq") for such date;
If no such closing sale price information is
available, the average of the closing bid and
asked prices that Nasdaq reports for such
date;
<PAGE>
If there are no such closing bid and asked
prices, the average of the closing bid and
asked prices as reported by any other
commercial service for such date; or
If the Company has no publicly-traded stock,
the Administrator will determine the Fair
Market Value for purposes of the Plan using
any measure of value it determines in good
faith to be appropriate.
For any date that is not a trading day, the Fair
Market Value of a share of Common Stock for such
date shall be determined by using the closing sale
price or the average of the closing bid and asked
prices, as appropriate, for the immediately
preceding trading day. The Administrator can
substitute a particular time of day or other
measure of "closing sale price" if appropriate
because of changes in exchange or market
procedures.
The Fair Market Value will be deemed equal to the
IPO price for any Options granted as of the date
on which the IPO's underwriters price the IPO or
granted on the following day before trading opens
in the Common Stock.
The Administrator has sole discretion to determine
the Fair Market Value for purposes of this Plan,
and all Awards are conditioned on the recipient's
agreement that the Administrator's determination
is conclusive and binding even though others might
make a different and also reasonable
determination.
EXERCISABILITY The Administrator will determine the times and
conditions for exercise of or purchase under each
Award but may not extend the period for exercise
beyond the tenth anniversary of its Date of Grant
(or five years for ISOs granted to 10% owners
covered by Code Sections 422(b)(6) and 424(d)).
Awards will become exercisable at such times and
in such manner as the Administrator determines and
the Award Agreement, if any, indicates; provided,
however, that the Administrator may, on such terms
and conditions as it determines appropriate,
accelerate the time at which the Participant may
exercise any portion of an Award or at which
restrictions on Stock Grants lapse. For Stock
Grants, "exercise" refers to acceptance of the
Award or lapse of restrictions, as appropriate in
context.
If the Administrator does not specify otherwise,
Options will become exercisable and restrictions
on Stock Grants will lapse as to one-fourth of the
covered shares on each of the first four
anniversaries of the Date of Grant, so long as the
recipient remains employed or continues his
relationship as a service provider to the Company
or any Eligible Subsidiary, and will expire as of
the tenth anniversary of the Date of Grant (unless
they expire earlier under the Plan or the Award
Agreement). The Administrator has the sole
discretion to determine that a change in service-
providing relationship eliminates any further
service credit on the exercise schedule.
No portion of an Award that is unexercisable at a
recipient's termination of service-providing
relationship (for any reason) will thereafter
become exercisable (and the recipient will
immediately forfeit any unexercisable portions at
his termination of service-providing
relationship), unless the Award Agreement or the
Plan provides otherwise, either initially or by
amendment.
Termination of service-providing relationship will
not occur for recipients who are Employees,
officers, or directors of JuneBox until the
earlier of (i) the date they leave all service-
providing relationships with both JuneBox and the
Company or (ii) the first day of the 13th month
beginning after the date JuneBox ceases to be an
Eligible Subsidiary, unless the Administrator
agrees to other treatment.
<PAGE>
CHANGE OF Upon a Change of Control (as defined below), all Options held
CONTROL by current Employees, consultants, advisors, independent
contractors, Eligible Officers and Eligible
Directors will become fully exercisable and all
restrictions on Stock Grants will lapse. A Change
of Control for this purpose means the occurrence
of any one or more of the following events:
a person, entity, or group (other than the
Company, any Company subsidiary, any Company
benefit plan, or any underwriter temporarily
holding securities for an offering of such
securities) acquires ownership of more than
50% of the undiluted total voting power of
the Company's then-outstanding securities
eligible to vote to elect members of the
Board ("Company Voting Securities");
completion of a merger or consolidation of
the Company with or into any other
entity-unless the holders of the Company
Voting Securities outstanding immediately
before such completion, together with any
trustee or other fiduciary holding securities
under a Company benefit plan, hold securities
that represent immediately after such merger
or consolidation at least 50% of the combined
voting power of the then outstanding voting
securities of either the Company or the other
surviving entity or its parent; or
the stockholders of the Company approve (i) a
plan of complete liquidation or dissolution
of the Company or (ii) an agreement for the
Company's sale or disposition of all or
substantially all the Company's assets, and
such liquidation, dissolution, sale, or
disposition is completed.
Even if other tests are met, a Change of
Control has not occurred under any
circumstance in which the Company files for
bankruptcy protection or is reorganized
following a bankruptcy filing.
The Administrator may allow conditional
exercises in advance of the completion of a
Change of Control that are then rescinded if
no Change of Control occurs.
The Adjustments Upon Changes in Capital Stock
provisions will also apply if the Change of
Control is a Substantial Corporate Change (as
defined in those sections).
LIMITATION An Option granted to an Employee will be an ISO only to the
ON ISOs extent that the aggregate Fair Market Value (determined at the
Date of Grant) of the stock with respect to which
ISOs are exercisable for the first time by the
Optionee during any calendar year (under the Plan
and all other plans of the Company and its
subsidiary corporations, within the meaning of
Code Section 422(d)), does not exceed $100,000.
This limitation applies to Options in the order in
which such Options were granted. If, by design or
operation, the Option exceeds this limit, the
excess will be treated as an NQSO.
METHOD OF To exercise any exercisable portion of an Award, the
EXERCISE Participant must:
Deliver a notice of exercise to the Assistant
Secretary of the Company designated by the
Board (or to whomever the Administrator
designates), in a form complying with any
rules the Administrator may issue, signed or
otherwise authenticated by the Participant,
and specifying the number of shares of Common
Stock underlying the portion of the Award the
Participant is exercising;
Pay the full Exercise Price, if any, by
cashier's or certified check for the shares
of Common Stock with respect to which the
Award is being exercised, unless the
Administrator consents to another form of
payment (which could include the use of
Common Stock); and
<PAGE>
Deliver to the Administrator such
representations and documents as the
Administrator, in its sole discretion, may
consider necessary or advisable.
Payment in full of the Exercise Price need not
accompany the written notice of exercise if the
exercise complies with a previously-approved
cashless exercise method, including, for example,
that the notice directs that the stock
certificates (or other indicia of ownership) for
the shares issued upon the exercise be delivered
to a licensed broker acceptable to the Company as
the agent for the individual exercising the Option
and at the time the stock certificates (or other
indicia) are delivered to the broker, the broker
will tender to the Company cash or cash
equivalents acceptable to the Company and equal to
the Exercise Price and any required withholding
taxes.
If the Administrator agrees to allow an Optionee
to pay through tendering Common Stock to the
Company, the individual can only tender stock he
or she has held for at least six months at the
time of surrender. Shares of stock offered as
payment will be valued, for purposes of
determining the extent to which the Participant
has paid the Exercise Price, at their Fair Market
Value on the date of exercise. The Administrator
may also, in its discretion, accept attestation of
ownership of Common Stock and issue a net number
of shares upon Option exercise or by having a
broker tender to the Company cash equal to the
Exercise Price and any withholding taxes.
AWARD No one may exercise an Award more than ten years after its
EXPIRATION Date of Grant (or five years, for an ISO granted to a
more-than-10% stockholder). A recipient will
immediately forfeit and can never exercise any
portion of an Award that is unexercisable at his
termination of service-providing relationship (for
any reason), unless the Award Agreement or the
Plan provides otherwise, either initially or by
amendment. Unless the Award Agreement or the Plan
provides otherwise, either initially or by
amendment, no one may exercise otherwise
exercisable portions of an Award after the first
to occur of:
EMPLOYMENT The 90th day after the date of termination of
TERMINATION service-providing relationship (other
than for death or Disability), where termination
of employment means the time when the
employer-employee or other service providing
relationship between the Employee, consultant,
independent contractor, advisor or Eligible
Officer and the Company (and the Eligible
Subsidiaries) ends for any reason, including
retirement. For grants after June ___, 2000, the
Administrator may provide that Awards terminate
immediately upon termination of employment for
"cause" under an Employee's employment or
consultant's services agreement or under another
definition specified in the Award Agreement.
Unless the Award Agreement provides otherwise,
termination of employment does not include
instances in which the Company immediately rehires
an Employee as a consultant, independent
contractor or advisor. The Administrator, in its
sole discretion, will determine all questions of
whether particular terminations or leaves of
absence are terminations of employment and may
decide to suspend the exercise schedule during a
leave rather than to terminate the Award. Unless
the Award Agreement or the Exercisability section
provides otherwise, terminations of employment
include situations in which the Participant's
employer ceases to be related to the Company
closely enough to be an Eligible Subsidiary for
new grants;
GROSS For the Company's termination of the Participant's
MISCONDUCT service-providing relationship as a
result of the Participant's Gross Misconduct, the
time of such termination. For purposes of this
Plan, "Gross Misconduct" means the Participant has
committed fraud, misappropriation,
embezzlement, or willful misconduct that has
resulted or is likely to result in material
harm to the Company or an Eligible
Subsidiary;
<PAGE>
committed or been indicted for or convicted
of, or pled guilty or no contest to, any
misdemeanor (other than for minor infractions
or traffic violations) involving fraud,
breach of trust, misappropriation, or other
similar activity or otherwise relating to the
Company or an Eligible Subsidiary, or any
felony; or
committed an act of gross negligence or
otherwise acted with willful disregard for
the Company's or an Eligible Subsidiary's
best interests in a manner that has resulted
or is likely to result in material harm to
the Company or an Eligible Subsidiary.
If the Participant has a written employment
or other agreement in effect at the time of
his termination that specifies "cause" for
termination, "Gross Misconduct" for purposes
of his termination will refer to "cause"
under the employment or other agreement,
rather than to the foregoing definition.
DlSABILITY For Disability, the earlier of (i) the first
anniversary of the Participant's termination of
employment for Disability and (ii) 30 days after
the Participant no longer has a Disability, where
"Disability" means the inability to engage in any
substantial gainful activity by reason of any
medically determinable physical or mental
impairment that can be expected to result in death
or that has lasted or can be expected to last for
a continuous period of not less than twelve
months; or
DEATH The date 24 months after the Participant's death.
If exercise is permitted after termination of
service-providing relationship, the Award will
nevertheless expire as of the date that the former
service provider violates any covenant not to
compete in effect between the Company or any
Eligible Subsidiary and such person. In addition,
an Optionee who exercises an Option more than 90
days after termination of employment with the
Company and/or an Eligible Subsidiary will only
receive ISO treatment to the extent permitted by
law, and becoming or remaining an employee of
another related company (that is not an Eligible
Subsidiary) or an independent contractor to the
Company and the Eligible Subsidiaries will not
prevent loss of ISO status because of the formal
termination of employment.
Nothing in this Plan extends the term of an Award
beyond the tenth anniversary of its Date of Grant,
nor does anything in this Award Expiration section
make an Award exercisable that has not otherwise
become exercisable.
AWARD Award Agreements will set forth the terms of each Award
AGREEMENT and will include such terms and conditions, consistent with
the Plan, as the Administrator may determine are
necessary or advisable. To the extent the
agreement is inconsistent with the Plan, the Plan
will govern. The Award Agreements may contain
special rules. The Administrator may, but is not
required to, issue agreements for Stock Grants.
STOCK SUBJECT Except as adjusted below under Adjustments upon
TO PLAN Changes in Capital Stock,
the aggregate number of shares of Common
Stock that may be issued under the Awards
(whether ISOs, NQSOs, or Stock Grants) may
not exceed 20% percent of the total number of
shares of Common Stock outstanding,
determined immediately after the grant of the
Award;
the maximum number of shares that may be
subject to ISOs may not exceed 3,487,600; and
the maximum number of shares that may be
granted under Awards for a single individual
in a calendar year may not exceed 1,200,000.
(The individual maximum applies only to
Awards first made under this Plan and not to Awards
<PAGE>
made in substitution of a prior
employer's options or other incentives,
except as Code Section 162(m) otherwise
requires.)
The Common Stock will come from either authorized
but unissued shares or from previously issued
shares that the Company reacquires, including
shares it purchases on the open market. If any
Award expires, is canceled, or terminates for any
other reason, the shares of Common Stock available
under that Award will again be available for the
granting of new Awards (but will be counted
against that calendar year's limit for a given
individual).
No adjustment will be made for a dividend or other
right (except a stock dividend) for which the
record date precedes the date of exercise.
The Participant will have no rights of a
stockholder with respect to the shares of stock
subject to an Award except to the extent that the
Company has issued certificates for, or otherwise
confirmed ownership of, such shares upon the
exercise of the Award.
The Company will not issue fractional shares
pursuant to the exercise of an Award, but the
Administrator may, in its discretion, direct the
Company to make a cash payment in lieu of
fractional shares.
PERSON WHO During the Participant's lifetime, only the
MAY EXERCISE Participant or his duly appointed guardian
or personal representative may exercise the
Awards. After his death, his personal
representative or any other person authorized
under a will or under the laws of descent and
distribution may exercise any then exercisable
portion of an Award. If someone other than the
original recipient seeks to exercise any portion
of an Award, the Administrator may request such
proof as it may consider necessary or appropriate
of the person's right to exercise the Award.
ADJUSTMENTS Subject to any required action by the Company
UPON CHANGES (which it shall promptly take)
IN CAPITAL or its stockholders, and subject to the
STOCK provisions of applicable corporate law, if,
after the Date of Grant of an Award,
the outstanding shares of Common Stock
increase or decrease or change into or are
exchanged for a different number or kind of
security because of any recapitalization,
reclassification, stock split, reverse stock
split, combination of shares, exchange of
shares, stock dividend, or other distribution
payable in capital stock, or
some other increase or decrease in such
Common Stock occurs without the Company's
receiving consideration
the Administrator may make a proportionate and
appropriate adjustment in the number of shares of
Common Stock underlying each Award, so that the
proportionate interest of the Participant
immediately following such event will, to the
extent practicable, be the same as immediately
before such event. (This adjustment does not
apply to Common Stock that the Optionee has
already purchased nor to Stock Grants that are
already nonforfeitable, except to the extent of
similar treatment for most stockholders.) Unless
the Administrator determines another method would
be appropriate, any such adjustment to an Award
will not change the total price with respect to
shares of Common Stock underlying the unexercised
portion of the Award but will include a
corresponding proportionate adjustment in the
Award's Exercise Price. The Administrator will
make a commensurate change to the maximum number
and kind of shares provided in the Stock Subject
to Plan section.
Any issue by the Company of any class of preferred
stock, or securities convertible into shares of
common or preferred stock of any class, will not
affect, and no adjustment by
<PAGE>
reason thereof will
be made with respect to, the number of shares of
Common Stock subject to any Award or the Exercise
Price except as this Adjustments section
specifically provides. The grant of an Award
under the Plan will not affect in any way the
right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure, or to merge or
to consolidate, or to dissolve, liquidate, sell,
or transfer all or any part of its business or
assets.
SUBSTANTIAL Upon a Substantial Corporate Change, the Plan and
CORPORATE any unexercised Awards will terminate unless provision
CHANGE is made in writing in connection
with such transaction for the assumption or
continuation of outstanding Awards, or the
substitution for such options or grants of any
options or grants covering the stock or securities
of a successor employer corporation, or a parent
or subsidiary of such successor, with appropriate
adjustments as to the number and kind of shares of
stock and prices, in which event the Awards will
continue in the manner and under the terms so
provided.
Unless the Administrator determines otherwise, if
an Award would otherwise terminate under the
preceding sentence, Participants who are then
Employees, consultants, advisors, independent
contractors, Eligible Officers and Eligible
Directors will have the right, at such time before
the consummation of the transaction causing such
termination as the Administrator reasonably
designates, upon such reasonable notice as
determined by the Administrator, to exercise any
unexercised portions of the Award, whether or not
they had previously become exercisable. However,
unless the Administrator determines otherwise, the
acceleration will not occur if it would render
unavailable "pooling of interest" accounting for
any reorganization, merger, or consolidation of
the Company.
A Substantial Corporate Change means:
the dissolution or liquidation of the
Company,
merger, consolidation, or reorganization of
the Company with one or more corporations in
which the Company is not the surviving
corporation,
the sale of substantially all of the assets
of the Company to another corporation, or
any transaction (including a merger or
reorganization in which the Company survives)
approved by the Board that results in any
person or entity (other than any affiliate of
the Company as defined in Rule 144(a)(1)
under the Securities Act, any Company
subsidiary, any Company benefit plan, or any
underwriter temporarily holding securities
for an offering of such securities) owning
100% of the combined voting power of all
classes of stock of the Company.
ELIGIBLE Eligible Subsidiary means each of the Company's Subsidiaries,
SUBSIDIARY except as the Administrator otherwise specifies. For ISO
grants, Subsidiary means any corporation (other
than the Company) in an unbroken chain of
corporations including the Company if, at the time
an ISO is granted to a Participant under the Plan,
each corporation (other than the last corporation
in the unbroken chain) owns stock possessing 50%
or more of the total combined voting power of all
classes of stock in another corporation in such
chain. For ISO purposes, Subsidiary also includes
a single-member limited liability company included
within the chain described in the preceding
sentence. For NQSOs, the Administrator may use a
different definition of Subsidiary in its
discretion and may include other forms of entity
at the same level of equity relationship (or such
other level as the Board or the Administrator
specifies).
<PAGE>
LEGAL The Company will not issue any shares of Common Stock under an
COMPLIANCE Award until all applicable requirements imposed by
Federal and state securities and other laws,
rules, and regulations, and by any applicable
regulatory agencies or stock exchanges, have been
fully met. To that end, the Company may require
the Participant to take any reasonable action to
comply with such requirements before issuing such
shares, including compliance with any Company
black-out periods or trading restrictions. No
provision in the Plan or action taken under it
authorizes any action that is otherwise prohibited
by Federal or state laws.
The Plan is intended to conform to the extent
necessary with all provisions of the Securities
Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and all regulations
and rules the Securities and Exchange Commission
issues under those laws. Notwithstanding anything
in the Plan to the contrary, the Administrator
must administer the Plan, and Awards may be
granted and exercised, only in a way that conforms
to such laws, rules, and regulations. To the
extent permitted by applicable law, the Plan and
any Awards will be deemed amended to the extent
necessary to conform to such laws, rules, and
regulations.
PURCHASE FOR Unless a registration statement under the Securities Act
INVESTMENT covers the shares of Common Stock a Participant receives upon
AND OTHER exercise of his Award, the Administrator may require, at
RESTRICTIONS the time of such exercise or
receipt of a grant, that the Participant agree in
writing to acquire such shares for investment and
not for public resale or distribution, unless and
until the shares subject to the Award are
registered under the Securities Act. Unless the
shares are registered under the Securities Act,
the Participant must acknowledge:
that the shares purchased on exercise of the
Award are not so registered,
that the Participant may not sell or
otherwise transfer the shares unless:
the shares have been registered under
the Securities Act in connection with
the sale or transfer thereof, or
counsel satisfactory to the Company has
issued an opinion satisfactory to the
Company that the sale or other transfer
of such shares is exempt from
registration under the Securities Act,
and
such sale or transfer complies with all
other applicable laws, rules, and
regulations, including all applicable
Federal and state securities laws,
rules, and regulations.
Additionally, the Common Stock, when issued upon
the exercise of an Award, will be subject to any
other transfer restrictions, rights of first
refusal, and rights of repurchase set forth in or
incorporated by reference into other applicable
documents, including the Company's articles or
certificate of incorporation, by-laws, or
generally applicable stockholders' agreements.
The Administrator may, in its sole discretion,
take whatever additional actions it deems
appropriate to comply with such restrictions and
applicable laws, including placing legends on
certificates and issuing stop-transfer orders to
transfer agents and registrars.
TAX The Participant must satisfy all applicable
WITHOLDING Federal, state, and local income
and employment tax withholding requirements before
the Company will deliver stock certificates or
otherwise recognize ownership upon the exercise of
an Award. The Company may decide to satisfy the
withholding obligations through additional
withholding on salary or wages. If the Company
does not or cannot withhold from other
compensation, the Participant must pay the
Company, with a cashier's check or certified
<PAGE>
check, the full amounts required by withholding.
Payment of withholding obligations is due before
the Company issues shares with respect to the
Award. If the Administrator so determines, the
Participant may instead satisfy the withholding
obligations by directing the Company to retain
shares from the Award exercise, by tendering
previously owned shares, or by attesting to his
ownership of shares (with the distribution of net
shares).
TRANSFERS, Unless the Administrator otherwise approves in advance in
ASSIGNMENTS, writing for estate planning or other purposes, an Award may not
AND PLEDGES be assigned, pledged, or otherwise transferred in any way,
whether by operation of law or otherwise or
through any legal or equitable proceedings
(including bankruptcy), by the Participant to any
person, except by will or by operation of
applicable laws of descent and distribution. If
necessary to comply with Rule 16b-3 of the
Exchange Act, the Participant may not transfer or
pledge shares of Common Stock acquired under a
Stock Grant or upon exercise of an Option until at
least six months have elapsed from (but excluding)
the Date of Grant, unless the Administrator
approves otherwise in advance in writing. The
Administrator may, in its discretion, expressly
provide that a Participant may transfer his Award
without receiving consideration to (i) members of
his immediate family (children, grandchildren, or
spouse); (ii) trusts for the benefit of such
family members; or (iii) partnerships where the
only partners are such family members.
AMENDMENT OR The Board may amend, suspend, or terminate the Plan at
TERMINATION any time, without the consent of the Participants or their
OF PLAN AND beneficiaries; provided however, that no amendment will
AWARDS deprive any Participant or beneficiary
of any previously declared Award. Except as
required by law or by the Adjustments upon Changes
in Capital Stock section, the Board may not,
without the Participant's or beneficiary's
consent, modify the terms and conditions of an
Award so as to adversely affect the Participant.
No amendment, suspension, or termination of the
Plan will, without the Participant's or
beneficiary's consent, terminate or adversely
affect any right or obligations under any
outstanding Awards.
PRIVILEGES No Participant and no beneficiary or other person claiming
OF STOCK under or through such Participant will have any right,
OWNERSHIP title, or interest in or to
any shares of Common Stock allocated or reserved
under the Plan or subject to any Award except as
to such shares of Common Stock if any, already
issued to such Participant.
EFFECT ON Whether exercising or receiving an Award causes the
OTHER PLANS Participant to accrue or receive additional benefits under
any pension or other plan is governed solely by the
terms of such other plan.
LIMITATIONS Notwithstanding any other provisions of the Plan, no individual
ON LIABILITY acting as an agent of the Company shall be liable
to any Participant, former Participant, spouse,
beneficiary, or any other person for any claim,
loss, liability, or expense incurred in connection
with the Plan, nor shall such individual be
personally liable because of any contract or other
instrument he executes in such other capacity.
The Company will indemnify and hold harmless each
agent of the Company to whom any duty or power
relating to the administration or interpretation
of the Plan has been or will be delegated, against
any cost or expense (including attorneys' fees) or
liability (including any sum paid in settlement of
a claim with the Administrator's approval) arising
out of any act or omission to act concerning this
Plan unless arising out of such person's own fraud
or bad faith.
<PAGE>
NO EMPLOYMENT Nothing contained in this Plan constitutes an employment
CONTRACT contract between the Company and the Participants. The
Plan does not give any Participant any right to be
retained in the Company's employ, nor does it
enlarge or diminish the Company's right to end the
Participant's employment or other relationship
with the Company.
APPLICABLE The laws of the State of Delaware (other than its choice of
LAW law provisions) govern this Plan and its interpretation.
DURATION Unless the Board extends the Plan's term, the
OF PLAN Administrator may not grant
Awards after June 8, 2008. The Plan will then
terminate but will continue to govern unexercised
and unexpired Awards.
<PAGE>
Preliminary Copies
Proxy Card
SCHOOL SPECIALTY, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned appoints Daniel P. Spalding and Mary M.
Kabacinski, and each of them, as proxies, each with the power to
appoint his or her substitute, and authorizes each of them to
represent and to vote, as designated on the reverse side, all of
the shares of stock of School Specialty held of record by the
undersigned on July 10, 2000 at the 2000 Annual Meeting of
Stockholders of School Specialty to be held on August 29, 2000
and at any adjournment thereof.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction
is indicated, this proxy will be voted "FOR" the election of each
of the individuals nominated to serve as Class II directors,
"FOR" approval of the proposal to change School Specialty's state
of incorporation from Delaware to Wisconsin, "FOR" approval of
the proposal to amend and restate School Specialty's 1998 Stock
Incentive Plan and "FOR" the appointment of the independent
auditors.
(Continued and to be signed on reverse side.)
<PAGE>
Please date, sign and mail your proxy card back as soon as possible.
Annual Meeting of Stockholders
School Specialty, Inc.
August 29, 2000
1. ELECT DIRECTORS:
<TABLE>
(To serve until the 2003 1-David J. Vander Zanden [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
Annual Meeting and until 2-Rochelle Lamm Wallach listed to the left to vote for all
their successors are (except as specified nominees listed
elected and qualified) below). to the left.
<S> <C> <C> <C>
</TABLE>
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to
the right.
2. CHANGE STATE OF INCORPORATION FROM DELAWARE TO WISCONSIN.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. AMEND AND RESTATE SCHOOL SPECIALTY'S 1998 STOCK INCENTIVE PLAN.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. RATIFY PRICEWATERHOUSECOOPERS LLP AS SCHOOL SPECIALTY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 28, 2001.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
(AND ANY ADJOURNMENT THEREOF).
No. of Shares ________
Date:____________________________
Check appropriate box
Indicate changes below: ______________________________________
(Signature of Stockholder)
Address Change? [ ] Name Change? [ ] ______________________________________
(Signature of Stockholder - if
held jointly)
Please sign exactly as name appears
hereon. When shares are held by
joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
