EXHIBIT 10.26

SCHOOL SPECIALTY, INC.

STOCK OPTION AGREEMENT

School Specialty, Inc. (the “Company”) has granted you an option (the “Option”)
pursuant to this Stock Option Agreement (the “Agreement”). The Option lets you
purchase a specified number of shares of the Company’s common stock (the “Option
Shares”), at a specified price per share (the “Exercise Price”). The Exercise
Price per Option Share is 100% of the Fair Market Value of the Company’s common
stock, $0.0001 par value (“Common Stock”), on the Date of Grant set forth in
Schedule I. The “Fair Market Value” of the Common Stock is the closing sale
price of the Common Stock on the NASDAQ Stock Market as reported in the Midwest
Edition of the Wall Street Journal or other authoritative source on the
indicated date. If no sales of Common Stock were made on said exchange on that
date, “Fair Market Value” shall mean the closing sale price of Common Stock as
reported for the most recent preceding day on which sales of Common Stock were
made on said exchange, or, failing any such sales, such other market price as
the Board of Directors of the Company (“Board”) or the Compensation Committee of
the Board may determine in conformity with pertinent law and regulations of the
Treasury Department.

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 the rules
contained in Section 422 of the Internal Revenue Code of 1986, as amended
(“Code”). References to the Agreement also include Schedule I, unless the
context provides otherwise.

The following terms and restrictions apply to the Option:

 

Administrator

   The Agreement, and the Option contained therein, shall be administered by the
Compensation Committee of the Board (the “Administrator”). The Administrator
shall have full and exclusive power to administer and interpret the Agreement
and to grant waivers to restrictions that govern the Option. All determinations
made by the Administrator shall be binding and conclusive as regards the
Company, you, and any other interested persons, including your beneficiaries.

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 specified under “Option Exercisability
Provisions.” Method of Exercise and Payment for Shares    Subject to this
Agreement, you may exercise all or part of the Option (in whole shares only) by
providing a written notice (or notice through another previously approved
method, which could include a voice- or e-mail system) to 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.

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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 Exercise   
an approved cashless exercise method, including directing 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.

 

Tax Withholding

   The Company shall have the right to deduct applicable federal and state
income and employment taxes upon the exercise of all or any portion of the
Option, but in no event in excess of the minimum withholding required by law. If
the Option is exercised using the Net Exercise method referenced above, the
minimum level of tax withholding shall be satisfied for purposes of this
paragraph, provided payment for the fractional share, if any, is made in
accordance with the Net Exercise paragraph set forth above. Other Benefit and
Compensation Programs    Payments and other benefits received by you pursuant to
this Agreement shall not be deemed a part of your regular, recurring
compensation for purposes of the termination or severance plans of the Company
and shall not be included in, nor have any effect on, the determination of
benefits under any employee benefit plan, contract or similar arrangement,
unless the Administrator expressly determines otherwise.

Death or Disability

   If you die, your estate or beneficiaries shall have the period of time
specified in Schedule I within which to exercise any portion of the Option which
is then exercisable pursuant to the terms of this Agreement. Rights to the
Option shall pass by will or the laws of descent and distribution in the
following order: (a) to beneficiaries so designated by you; if none, then (b) to
your legal representative; if none, then (c) to the persons entitled thereto as
determined by applicable law or, absent applicable law, a court of competent
jurisdiction. If you have a Disability, as defined in Schedule I hereto, the
Option shall be exercisable for the period of time specified in Schedule I. The
Option may be exercised by you, if legally competent, or a legally designated
guardian or representative if you are legally incompetent by reason of such
Disability. After your death or Disability, the Administrator may, in its sole
discretion at any time, (1) terminate any restrictions in this Agreement,
(2) accelerate vesting or (3) extend the exercise period except to the extent
such extension is treated as an extension for purposes of Code Section 409A.

 

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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 with Law    You
may not exercise the Option if the Company’s issuing stock upon 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 Conditions to Exercise    The Company
may postpone issuing and delivering any Option Shares for so long as the Company
determines to be advisable to satisfy the 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 is authorized and entitled to do so;
and

  

your complying with any federal or state tax withholding obligations.

Additional Representations from You    If you exercise the Option at a time when
the Company does not have a current registration statement (generally on Form
S-8) under the 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

  

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.

 

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No Effect on No Effect on Employment or Other Relationship    Nothing in this
Agreement restricts the Company’s rights or those of any of its affiliates to
terminate your employment or other relationship at any time, with or without
Cause, as defined in Schedule I. The termination of any employment or other
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 this Agreement 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. Nonassignability    Except in the case of your death or
Disability, as set forth above, or in this paragraph, the Option is not
assignable or transferable, or payable to or exercisable by anyone other than
you. Notwithstanding the foregoing, the Administrator may permit the Option to
be transferred to members of your immediate family, to trusts for the benefit of
you and/or your immediate family members, or to partnerships or other entities
in which you and/or your immediate family members own all the equity interests.
For purposes of the preceding sentence, “immediate family” means your spouse,
issue and spouse of your issue. Adjustments    In the event of any change in the
outstanding Common Stock of the Company by reason of a stock split, stock
dividend, combination or reclassification of shares, recapitalization, merger or
similar event, the Administrator shall adjust proportionally (a) the number of
shares of Common Stock covered by the Option and (b) the per share Exercise
Price. In the event of any other change affecting the Common Stock or any
distribution (other than normal cash dividends) to holders of Common Stock, such
adjustments as may be deemed equitable by the Administrator, including
adjustments to avoid fractional shares, shall be made to give proper effect to
such event. In the event of a merger, consolidation, statutory share exchange,
acquisition of property or stock, separation, sale or disposition of all or
substantially all of the assets, reorganization or liquidation, the
Administrator shall be authorized to (A) issue or assume the Option, whether or
not in a transaction to which Code Section 424(a) applies, by means of
substitution of a new award for the Option or an assumption of the Option or
(B) convert the Option, if in-the-money, into cash on a basis to be determined
by the Administrator in its sole discretion, and cancel the Option if it is
underwater. Any such adjustment, waiver, conversion or other action taken by the
Administrator under this paragraph shall be conclusive and binding on you, the
Company and your respective successors, assigns and beneficiaries.    Any
adjustments made pursuant to the paragraph above 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 Administrator shall not have the authority to make any
adjustments pursuant to the paragraph above 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.   

 

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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.

 

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SCHOOL SPECIALTY, INC.

OPTIONEE ACKNOWLEDGMENT

By signing where indicated on Schedule I, I accept this Option, subject to all
of its terms and provisions. I agree to accept as binding, conclusive, and final
all decisions or interpretations of the Administrator concerning any questions
arising under this Agreement.

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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SCHOOL SPECIALTY, INC.

STOCK OPTION AGREEMENT

Schedule I

 

Optionee Information:

 

Name:             Kathryn L. Pepper-Miller

 

Option Information:

 

Option Shares: 15,000

  Exercise Price per Share: $3.16

Date of Grant: April 16, 2012

  Term Expiration Date: April 16, 2022

Type of Option: NQSO

 

 

Option Exercisability Provisions   

This Option will become exercisable as to one-fourth of the Option Shares on
each of the first, second, third and fourth anniversaries of the Date of Grant,
assuming you have been continuously employed by the Company since the Date of
Grant on such anniversary. The unexpired portion of your Option will become
exercisable upon termination of your employment due to your death or Disability
with respect to a number of Option Shares equal to the number of Option Shares
that would have become exercisable on the next anniversary of the Date of Grant
following the termination of your employment, multiplied by a fraction, the
numerator of which is the number of days following the most recent date on which
a portion of the Option became exercisable up to and including the date of
termination of your employment and the denominator of which is 365. In addition,
any unexpired portions of the Option will become fully exercisable upon the
occurrence of a Change in Control, provided however that if the consideration to
be received by the shareholders of the Company pursuant to the Change in Control
consists in part or in whole of publicly traded equity securities and the Option
will be converted into the right to purchase such publicly traded equity
securities, then the unexpired portions of the Option will become fully
exercisable upon the first to occur of (a) the date on which such Option would
otherwise become exercisable, (b) the date on which your employment terminates
due to death, Disability or termination of employment by the successor to the
Company without Cause or (c) upon a subsequent Change in Control of the
successor to the Company.

 

For purposes of this Option, the term “Cause” has the same meaning ascribed to
such term in the Offer of Employment between the Company and you dated as of
April 16, 2012 (the “Employment Agreement”). For purposes of this Option, the
terms “Change in Control” and “Disability” have the meanings set forth in the
Company’s 2008 Equity Incentive Plan.

 

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Option Expiration Rules

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

•        the 90th day after termination of your employment by the Company
without Cause or by you

 

•        termination of your employment by the Company for Cause

 

•        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 the covenants set forth in Exhibit A of the
Employment Agreement

 

•        the Term Expiration Date

 

Employee     SCHOOL SPECIALTY, INC. By:   /s/ Kathryn L. Pepper-Miller     By:  
/s/ Michael Lavelle   Kathryn L. Pepper-Miller     Title:   Chief Executive
Officer Date:   April 16, 2012     Date:   April 16, 2012

 

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