EXHIBIT 10.7

AMENDED AND RESTATED

SCHOOL SPECIALTY, INC.

2002 STOCK INCENTIVE PLAN

as of May 5, 2008

 

PURPOSE    SCHOOL SPECIALTY, INC., a Wisconsin 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. 2002 Stock
Incentive Plan (the “Plan”) to provide options (“Options”), direct grants of
stock (“Stock Grants”) and non-vested performance share units (“NSUs”, together
with the Options and Stock Grants, “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 June 11, 2002 (the “Effective Date”), and was amended
and restated as of June 13, 2007, subject to shareholder approval of the
amendment and restatement at the Company’s 2008 Annual Meeting of Shareholders,
and as of May 5, 2008. PARTICIPANTS    The following persons are eligible to
receive Options, Stock Grants and NSUs 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 or NSUs. (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 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
Committee 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 or Eligible Subsidiaries
and may, to the extent consistent with Wisconsin law, delegate to officers of
the Company the authority to make Option grants, other than grants to executive
officers of the Company, within the meaning of the federal securities laws.   
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 AWARDS   

Subject to the terms of the Plan, the Administrator will, in its sole AWARDS
discretion, determine:

 

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 must be NQSOs. The Administrator will not grant ISOs unless
the shareholders 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 or NSUs 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

 

2

--------------------------------------------------------------------------------

   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. 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%-shareholder), 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 Plan VALUE will
be determined as follows:

 

If the Common Stock trades on a national securities exchange, the closing sale
price on the Date of Grant;

 

3

--------------------------------------------------------------------------------

  

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;

 

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 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 and NSUs, “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

 

4

--------------------------------------------------------------------------------

   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.    Any
unexercisable portions of Awards will immediately become exercisable upon the
Participant’s death or termination of employment for Disability. Except as
provided in the preceding sentence, 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. CHANGE OF CONTROL   

Upon a Change of Control (as defined below), all Options held 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
anyone 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 shareholders of the Company approve (i) a plan 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.

 

5

--------------------------------------------------------------------------------

  

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 ON ISOs    An Option granted to an Employee will be an ISO
only to the 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
EXERCISE    (1) To exercise any exercisable portion of an Award, the 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.    (2)
Unless the Company notifies the Participants to the contrary in writing that
such method is no longer available, or in the event that a Participant shall
exercise their right to an alternative method of exercise as described below in
this paragraph (2), all exercises of Options after May 5, 2008 (other than for
ISOs) will be done on a “net exercise” basis. This means that the Company will
deliver that number of shares to the exercising Participant which equals the
number of shares of Common Stock for which the Option was exercised, reduced by
that number of whole shares of Common Stock with a Fair Market Value on the date
of exercise equal to the Exercise Price and the minimum tax withholding required
by law on the exercise. To the extent the combined value of the whole shares of
Common Stock, valued at their Fair Market Value on the date of exercise, is not
sufficient to equal the Exercise Price and minimum tax withholding obligation,
the Company will withhold such additional amount (equal in value to the
fractional share) from the Participant’s next pay check, or if the Participant
is not employed by the Company, the

 

6

--------------------------------------------------------------------------------

   Participant must pay such amount in cash to the Company before delivery of
the shares will be made to the Participant. Notwithstanding the foregoing, if
the Participant so elects on his or her exercise notice (or if the Participant
is exercising an ISO), the Participant shall pay cash for the Exercise Price and
tax withholding either by delivery of a cashier’s or certified check, or by
doing a broker-assisted exercise using the broker designated by the Company,
pursuant to subparagraph (4) hereof.    (3) To exercise any Awards other than
Options, the Participant shall 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).    (4) 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. AWARD EXPIRATION    No one may exercise an Award
more than ten years after its Date of Grant (or five years, for an ISO granted
to a more-than-10% shareholder). 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 TERMINATION    The 90th day after the date of
termination of 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. 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 Administrator provides otherwise, Termination of employment does not include
instances in which the Company immediately rehires an Employee as a consultant,
independent contractor

 

7

--------------------------------------------------------------------------------

   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. All determinations as to
whether a Participant has terminated employment will be made consistent with the
requirements of Section 409A of the Code and the applicable regulations
thereunder regarding separations from service; GROSS MISCONDUCT   

For the Company’s service-providing Gross Misconduct, this Plan, “Gross
termination of the participant’s relationship as a result of the Participant’s
the time of such termination. For purposes of 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;

 

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.

DISABILITY    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

 

8

--------------------------------------------------------------------------------

   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 AGREEMENT   
Award Agreements will set forth the terms of each Award 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 TO PLAN   

Except as adjusted below under Adjustments upon Changes in Capital Stock,

 

the aggregate number of shares of Common Stock that may be issued under the
Awards (whether ISOs, NQSOs, Stock Grants or NSUs) may not exceed 1,500,000;

 

the maximum number of such shares that may be subject to ISOs may not exceed
1,500,000; and

 

the maximum number of shares that may be granted under Options for a single
individual in a calendar year may not exceed 250,000, and the maximum number of
shares that may be granted under NSUs and Stock Grants for a single individual
in a calendar year may not exceed 80,000 (assuming that such NSUs are paid out
at the maximum level). The individual maximum applies only to Awards first made
under this Plan and not to Awards made in substitution of a prior employer’s
options or other incentives, except as Code Section 162(m) otherwise requires.

   If an Option is exercised by using the net exercise method set forth in
subparagraph (2) under the METHOD OF EXERCISE provision of this Plan, the gross
number of shares for which the Option is exercised shall be treated as issued
for purposes of counting the shares of Common Stock available for issuance under
the Plan, not just the net shares of Common Stock issued to the Participant
after reduction for the Exercise Price and any applicable withholding taxes.

 

9

--------------------------------------------------------------------------------

   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 shareholder 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 MAY EXERCISE    During the
Participant’s lifetime, only the 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 UPON
CHANGES IN CAPITAL STOCK   

Subject to any required action by the Company (which it shall promptly take) or
its shareholders, and subject to the 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 shall 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

 

10

--------------------------------------------------------------------------------

   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 shareholders.) 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
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 CORPORATE CHANGE
   Upon a Substantial Corporate Change, the Plan and any unexercised Awards will
terminate unless provision 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.

 

A Substantial Corporate Change means:

 

the dissolution or liquidation of the Company,

 

11

--------------------------------------------------------------------------------

  

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 SUBSIDIARY    Eligible Subsidiary means each of the Company’s
Subsidiaries, 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 Committee or the Administrator specifies), so long as
that definition meets the requirements of Section 409A of the Code and the
regulations promulgated thereunder. LEGAL COMPLIANCE    The Company will not
issue any shares of Common Stock under an 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,

 

12

--------------------------------------------------------------------------------

   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 INVESTMENT AND OTHER RESTRICTIONS   

Unless a registration statement under the Securities Act cover the shares of
Common Stock a Participant receives upon exercise of his Award, the
Administrator may require, at 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 shareholders’ 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 WITHHOLDING    The participant must satisfy
all applicable Federal, state, and local income and employment tax withholding
requirements before the Company will

 

13

--------------------------------------------------------------------------------

   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 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 minimum level of withholding obligations by
directing the Company to retain shares from the Award exercise, by tendering
shares previously owned for at least six months, or by attesting to his
ownership of shares (with the distribution of net shares). In no event will the
income and employment tax withholding be greater than the minimum required under
Federal, state and local law.    Notwithstanding the foregoing, if an Option is
exercised by using the net exercise method set forth in subparagraph (2) under
the METHOD OF EXERCISE provision of this Plan, the minimum level of tax
withholding shall be satisfied for purposes of this paragraph, provided that
payment for the fractional share, if any, is made in accordance with the
referenced subparagraph (2). TRANSFERS, ASSIGNMENTS, AND PLEDGES    Unless the
Administrator otherwise approves in advance in writing for estate planning or
other purposes, an Award may not 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 the Participant and/or such family members; or (iii)
partnerships where the only partners are the Participant and such family
members. AMENDMENT OR TERMINATION OF PLAN AND AWARD    The Board may amend,
suspend, or terminate the Plan at any time, without the consent of the
Participants or their beneficiaries; provided however, that no amendment will
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.

 

14

--------------------------------------------------------------------------------

PRIVILEGES OF STOCK OWNERSHIP    No Participant and no beneficiary or other
person claiming under or through such Participant will have any right, 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 OTHER PLANS    Whether exercising
or receiving an Award causes the Participant to accrue or receive additional
benefits under any pension or other plan is governed solely by the terms of such
other plan. LIMITATIONS ON LIABILITY    Notwithstanding any other provisions of
the Plan, no individual 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. NO EMPLOYMENT CONTRACT    Nothing
contained in this Plan constitutes an employment 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 LAW    The laws of the State of Wisconsin (other than its
choice of law provisions) govern this Plan and its interpretation. DURATION OF
PLAN    Unless the Board extends the Plan’s term, the Administrator may not
grant Awards after June 11, 2012. The Plan will then terminate but will continue
to govern unexercised and unexpired Awards. NON-VESTED PERFORMANCE SHARE UNITS
   Non-vested performance share units (“NSUs”) shall be subject to the terms
contained in a Performance Share Unit Award Agreement. Such Agreement shall
specify the threshold, target and maximum number of shares of Common Stock that
will be awarded to a Participant, depending on the achievement of one or more of
the designated Performance Goals, defined below. In addition, the Agreement
shall specify the term of the performance period and any other material terms of
the Award. To the

 

15

--------------------------------------------------------------------------------

   extent a Participant is a Covered Employee as defined in Section 162(m) of
the Code and the applicable regulations promulgated thereunder, the Performance
Goals will be designated no later than 90 days after the beginning of the
performance period, and no shares of Common Stock will be distributed to such
Participant until the Committee certifies to the attainment of such Performance
Goals. The number of shares of Common Stock distributed to a Participant shall
be determined at the end of the performance period based on the achievement of
the Performance Goals. If the achievement is between the threshold and target,
or the target and maximum Performance Goals, then the number of shares of Common
Stock distributed to the Participant will be determined by linear interpolation.
The distribution of shares of Common Stock will occur within ten business days
of the certification of the Committee as to the attainment of the Performance
Goals, subject to compliance with any federal, state or local income and
employment tax withholding requirements. NSUs will vest upon the occurrence of
the Participant’s death, Disability or a Change of Control and be payable at the
target level, prorated for the number of full months during that performance
period that the Participant was employed by the Company. Distribution of the
shares of Common Stock owing to the Participant will be made no later than
thirty business days after the occurrence of such events. PERFORMANCE GOALS   

“Performance Goals” shall mean the goals identified by the Committee to measure
one or more business criteria, which may include any of the following criteria
and which, where applicable (i) may be set on a pre-tax or after-tax basis, (ii)
may be applied on an absolute or relative basis, (iii) may be valued on a growth
or fixed basis, and (iv) may be applied on a Company-wide, business segment, or
individual basis:

 

1.      Revenue

 

2.      Gross profit

 

3.      Gross profit margin percentage

 

4.      Operating earnings

 

5.      Operating earnings margin percentage

 

6.      Diluted earnings per share

 

7.      Diluted earnings per share from continuing operations

 

8.      Earnings before interest, taxes, depreciation and amortization (or any
combination thereof)

 

9.      Net earnings

 

16

--------------------------------------------------------------------------------

  

10.    Return on Invested Capital

 

11.    Cash flow from operating activities

 

12.    Free Cash Flow

 

13.    Total shareholder return

   The above Performance Goals will be determined by applying U.S. generally
accepted accounting principles, adjusted for (i) changes in accounting or
(ii) extraordinary, unusual or nonrecurring items, including, without
limitation, the impact of acquisitions or divestitures, as specified by the
Committee upon the grant of an Award.

 

17