Exhibit 10.3

SCHOOL SPECIALTY, INC.

2008 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

School Specialty, Inc. (the “Company”) has granted you an option (the “Option”)
under its 2008 Equity Incentive Plan (the “Plan”).  The Option lets you purchase
a specified number of shares of the Common Stock (the “Option Shares”), at a
specified price per share (the “Exercise Price”).

Schedule I to this Agreement provides the details for your grant.  It specifies
the number of Option Shares, the Exercise Price, the Date of Grant, the latest
date the Option will expire (the “Term Expiration Date”), and any special rules
that apply to your Option.  Schedule I also specifies that the Company intends
this Option to be a nonqualified stock option (“NQSO”), not subject to the rules
contained in Code Section 422.

The Option is subject in all respects to the applicable provisions of the Plan.
 This Agreement does not cover all of the rules that apply to the Option under
the Plan, and the Plan defines any terms in this Agreement that the Agreement
does not define.

In addition to the terms and restrictions in the Plan, the following terms and
restrictions apply to each Option:

Option

While your Option remains in effect under the Expiration section below,

Exercisability

you may exercise any exercisable portions of that Option (and buy the Option
Shares) under the timing rules Schedule I specifies under “Option Exercisability
Provisions.”

Method of

Subject to this Agreement and the Plan, you may exercise the Option only

Exercise and

by providing a written notice (or notice through another previously

Payment for

approved method, which could include a voice- or e-mail system) to

Shares

the Assistant Secretary of the Company or to whomever the Administrator
designates, on or before the date the Option expires.  Each such notice must
satisfy whatever procedures then apply to the Option and must contain such
representations (statements from you about your situation) as the Company
requires.  You must, at the same time, pay the Exercise Price using one or more
of the methods described below.  Please note that until the Company notifies you
otherwise, or unless you indicate otherwise on your notice of option exercise,
all exercises of the Option will be done or a “Net Exercise” basis, which is the
preferred method under the Plan.

Net Exercise

The Company delivers the number of shares to you that equals the number of
Option Shares for which the Option was exercised, reduced by the 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; 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
the additional amount from your next pay check, or if you are not employed by
the Company, you must pay the additional amount in cash to the Company before
delivery of the shares will be made to you;

Cashless

an approved cashless exercise method, including directing

Exercise

the Company to send the stock certificates (or other acceptable evidence of
ownership) to be issued under the Option to a licensed broker acceptable to the
Company as your agent in exchange for the broker’s tendering to the Company cash
(or acceptable cash equivalents) equal to the Exercise Price and any required
tax withholdings (at the minimum required level); or

Cash/Check

cash, a cashier’s or certified check in the amount of the Exercise Price, and
any required tax withholdings, payable to the order of the Company.

Expiration

You cannot exercise the Option after it has expired.  The Option will expire no
later than the close of business on the Term Expiration Date shown on Schedule
I. The “Option Expiration Rules” in Schedule I provide the circumstances under
which the Option will terminate before the Term Expiration Date because of, for
example, your termination of employment.  The Administrator can override the
expiration provisions of Schedule I.

Compliance

You may not exercise the Option if the Company’s issuing stock upon

with Law

such exercise would violate any applicable federal or state securities laws or
other laws or regulations.  You may not sell or otherwise dispose of the Option
Shares in violation of applicable law.  As part of this prohibition, you may not
use the Cashless Exercise method if the Company’s insider trading policy then
prohibits you from selling to the market.

Additional

The Company may postpone issuing and delivering any Option Shares

Conditions

for so long as the Company determines to be advisable to satisfy the

to Exercise

following:

its completing or amending any securities registration or qualification of the
Option Shares or its or your satisfying any exemption from registration under
any Federal or state law, rule, or regulation;

its receiving proof it considers satisfactory that a person seeking to exercise
the Option after your death or Disability (as defined in Schedule I) is
authorized and entitled to do so;

your complying with any requests for representations under the Plan; and

your complying with any federal or state tax withholding obligations.

Additional

If you exercise the Option at a time when the Company does not have a

Representations

current registration statement (generally on Form S-8) under the

from You

Securities Act of 1933 (the “Act”) that covers issuances of shares to you, you
must comply with the following before the Company will issue the Option Shares
to you.  You must —

represent to the Company, in a manner satisfactory to the Company’s counsel,
that you are acquiring the Option Shares for your own account and not with a
view to reselling or distributing the Option Shares; and

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agree that you will not sell, transfer, or otherwise dispose of the Option
Shares unless:

a registration statement under the Act is effective at the time of disposition
with respect to the Option Shares you propose to sell, transfer, or otherwise
dispose of; or

the Company has received an opinion of counsel or other information and
representations it considers satisfactory to the effect that, because of Rule
144 under the Act or otherwise, no registration under the Act is required.

No Effect on

Nothing in this Agreement restricts the Company’s rights or those of any

Employment

of its affiliates to terminate your employment or other relationship at any

or Other

time, with or without cause.  The termination of employment or other

Relationship

relationship, whether by the Company or any of its affiliates or otherwise, and
regardless of the reason for such termination, has the consequences provided for
under the Plan and any applicable employment or severance agreement or plan.

Not a Shareholder

You understand and agree that the Company will not consider you a shareholder
for any purpose with respect to any of the Option Shares until you have
exercised the Option, paid for the shares, and received evidence of ownership.

Adjustments

Any adjustments made pursuant to Section 15 of the Plan shall be made in such a
manner as to ensure that, after such adjustment, the Option either continues not
to be subject to Code Section 409A or complies with the requirements of Code
Section 409A and the Committee shall not have the authority to make any
adjustments pursuant to Section 15 of the Plan to the extent that the existence
of such authority would cause the Option to be subject to Code Section 409A.

Governing Law

The laws of the State of Wisconsin will govern all matters relating to this
Agreement, without regard to the principles of conflict of laws, except to the
extent superseded by the laws of the United States of America.

Notices

Any notice you give to the Company must follow the procedures then in effect.
 If no other procedures apply, you must deliver your notice in writing by hand
or by mail to the office of the Corporate Assistant Secretary.  If mailed, you
should address it to the Company’s Corporate Assistant Secretary at the
Company’s then corporate headquarters, unless the Company directs optionees to
send notices to another corporate department or to a third party administrator
or specifies another method of transmitting notice.  The Company will address
any notices to you at your office or home address as reflected on the Company’s
personnel or other business records.  You and the Company may change the address
for notice by like notice to the other, and the Company can also change the
address for notice by general announcements to optionees.

Plan Governs

Wherever a conflict may arise between the terms of this Agreement and the terms
of the Plan, the terms of the Plan will control.

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SCHOOL SPECIALTY, INC.

OPTIONEE ACKNOWLEDGMENT

I acknowledge that I have received a copy of the Plan.  I represent that I have
read and am familiar with the Plan’s terms.  By signing where indicated on
Schedule I, I accept the Option subject to all of the terms and provisions of
this Agreement and the Plan, as the Plan may be amended in accordance with its
terms.  I agree to accept as binding, conclusive, and final all decisions or
interpretations of the Administrator concerning any questions arising under the
Plan with respect to the Option.

NO ONE MAY SELL, TRANSFER, OR DISTRIBUTE THE OPTION OR THE SECURITIES THAT MAY
BE PURCHASED UPON EXERCISE OF THE OPTION WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO SCHOOL
SPECIALTY, INC. OR OTHER INFORMATION AND REPRESENTATIONS SATISFACTORY TO SCHOOL
SPECIALTY, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

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 Grant No. 1153

SCHOOL SPECIALTY, INC.
2008 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT

Schedule I

Optionee Information:

Name:

Michael P. Lavelle

Option Information:

Option Shares: 250,000

Exercise Price per Share: $2.26

Date of Grant: January 12, 2012

Term Expiration Date:  January 12, 2022

Type of Option:  NQSO

Option Vesting Provisions

This Option will vest as to one-fourth of the Option Shares on the date the
Average Trading Price equals or exceeds $5.00, as to one-fourth of the Option
Shares on the date the Average Trading Price equals or exceeds $10.00, as to
one-fourth of the Option Shares on the date the Average Trading Price equals or
exceeds $15.00 and as to one-fourth of the Option Shares on the date the Average
Trading Price equals or exceeds $20.00.

The term “Average Trading Price” means the average of the average daily high and
low sales prices of a share of Common Stock on the Nasdaq Stock Market during
any 30 consecutive trading day period, or in the case of a Change in Control,
the cash purchase price or fair market value of non-cash consideration to be
paid in connection with the Change in Control.

Option Exercisability Provisions

No portion of this Option may be exercised until such portion vests.  In
addition, this Option may not be exercised prior to the first anniversary of the
Date of Grant.  On and after the first anniversary of the Date of Grant and
prior to the second anniversary of the Date of Grant, this Option will be
exercisable as to no more than 83,333 vested Option Shares, assuming you have
been continuously employed by the Company since the Date of Grant on the first
anniversary of the Date of Grant.  On and after the second anniversary of the
Date of Grant and prior to the third anniversary of the Date of Grant, this
Option will be exercisable as to no more than an additional 83,333 vested Option
Shares, assuming you have been continuously employed by the Company since the
Date of Grant on the second anniversary of the Date of Grant.  On and after the
third anniversary of the Date of Grant, this Option will be exercisable as to no
more than an additional 83,334 vested Option Shares, assuming you have been
continuously employed by the Company since the Date of Grant on the third
anniversary of the Date of Grant. If any portion of this Option has not vested

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as of the third anniversary of the Date of Grant, such portion will become
exercisable on the date on which such portion vests, assuming you have been
continuously employed by the Company since the Date of Grant on the third
anniversary of the Date of Grant.  Any unexpired portions of your Option that
have previously vested will become fully exercisable upon termination of your
employment pursuant to Section 3.1(d) of the Employment Agreement between the
Company and you dated as of January 12, 2012 (the “Employment Agreement”) or due
to your death or Disability.  In addition, any unexpired portions of the Option
that have previously vested or will vest as a result of a Change in Control will
become fully exercisable upon the occurrence of a Change in Control.

For purposes of this Schedule, the term “Disability” has the same meaning
ascribed to such term in the Employment Agreement.

 

 

Option Expiration Rules

Any unvested portions of the Option will expire immediately after you cease to
be employed by the Company. Any vested and exercisable portions of the Option
will remain exercisable until the earliest of the following to occur, and then
immediately expire:

 

 

 

·

on the 90th day after termination of employment pursuant to Section 3.1(c),
3.1(d) or 3.1(e) of the Employment Agreement

·

termination of your employment pursuant to Section 3.1(b) of the Employment
Agreement

·

the earlier of (i) the first anniversary of your termination of employment due
to a Disability and (ii) 30 days after you cease to have a Disability that
resulted in the termination of your employment

·

the second anniversary of the termination of your employment due to your death

·

a violation by you of Articles IV, V, VI, VII, VIII, IX or X of the Employment
Agreement

·

the Term Expiration Date

 

 

Employee

By:  /s/ Michael P. Lavelle                                  

       Michael P. Lavelle

Date:  January 12, 2012

SCHOOL SPECIALTY, INC.

By:  /s/ David N. Vander Ploeg                          

Title:  Chief Financial Officer

Date:  January 12, 2012

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