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                                                                    EXHIBIT 10.7

                             SCHOOL SPECIALTY, INC.
                              INCENTIVE BONUS PLAN

     1. Purpose. The Board of Directors of School Specialty, Inc. adopted this
Incentive Bonus Plan to establish a correlation between the annual incentives
awarded to the Participants and the Company's financial performance. Subject to
the terms and conditions of this Plan, the Participants will receive a
discretionary incentive bonus and/or an incentive bonus tied to Performance
Goals. The Plan will be applicable to Fiscal Year 2003 and subsequent years
unless and until terminated by the Committee.

     2. Definitions. As used in the Plan, the following terms have the meanings
indicated:

          (a) "Board" means the Board of Directors of the Company.

          (b) "Committee" means the Board or the Executive Performance
     Compensation Committee or any other authorized committee of the Board.

          (c) "Company" means School Specialty, Inc. and its consolidated
     subsidiaries.

          (d) "Disability" means a condition that entitles the Participant to
     disability payments under the terms of the Company's long-term disability
     plan.

          (e) "Participant" means any executive or other associate of the
     Company participating in the Plan for the applicable Fiscal Year.

          (f) "Performance Goal" means a goal established by the Committee to
     measure the performance of the Company for the purpose of determining
     whether, and to what extent, an award will be payable under the Plan for
     the Fiscal Year.

          (g) "Fiscal Year" means the Company's fiscal year. The initial Fiscal
     Year is the fiscal year ended April 26, 2003.

          (h) "Plan" means this School Specialty, Inc. Incentive Bonus Plan, as
     amended from time to time.

          (i) "Retirement" means the termination of employment of a Participant
     due to retirement with the consent of the Committee.

          (j) "Salary" means base salary actually earned by a Participant during
     the applicable Fiscal Year.

     3. Participation. Participation in the Plan for any Fiscal Year shall be
limited to the Participants designated by the Committee by name or position. At
the Committee's discretion, a

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person who becomes a Participant after the commencement of a Fiscal Year shall
be eligible to receive an award pursuant to Section 4 on such terms as the
Committee may determine.

     4. Determination of Awards.

     (a) From time to time, the Committee may approve one or more Performance
Goals and the terms and amount of an award for each Participant. Awards are
based on a percentage of a Participant's Salary for the Fiscal Year. Awards may
include awards that are paid at the discretion of the Committee and awards
payable if and/or to the extent that Performance Goals are achieved.

     (b) The Committee expressly reserves the right to increase, reduce or
eliminate entirely any award at any time before it is paid. Such determination
shall be conclusive and binding on the Participant(s) and the Company.

     5. Payment of Awards.

     (a) Subject to the other terms and conditions of this Plan, awards shall be
payable promptly following the completion of the audit of the Fiscal Year for
which they are computed. Notwithstanding the foregoing, a Participant may defer
receipt of an award otherwise payable by filing a timely election pursuant to
any deferred compensation plan maintained by the Company. All awards under the
Plan are subject to federal, state and local income and payroll tax withholding.

     (b) Even if the Performance Goals have been met, Participant shall receive
no payment if the Participant's employment with the Company terminates prior to
the date of payment for any reason other than death, Disability or Retirement. A
Participant who terminates employment for death, Disability or Retirement shall
be eligible to receive an award based on Salary earned in the applicable Fiscal
Year through the date of termination, if an award is otherwise payable pursuant
to Section 4.

     (c) If a Participant dies and is subsequently entitled to receive an award
under the Plan, the award shall be paid to the Participant's estate.

     6. Administration. The Plan shall be administered by the Committee. The
Committee may adopt rules and regulations for carrying out the Plan, and the
Committee may take such actions as it deems appropriate to ensure that the Plan
is administered in the best interests of the Company. The Committee has the
authority to construe and interpret the Plan, resolve any ambiguities, grant
waivers or exceptions to the terms of the Plan or an award, and make
determinations with respect to the eligibility for or amount and terms of any
award. The interpretation, construction and administration of the Plan by the
Committee shall be final and conclusive. The Committee may consult with counsel,
who may be counsel to the Company, and shall not incur any liability for any
action taken in good faith in reliance upon the advice of counsel. The
Committee, in its discretion, may delegate its authority and duties under the
Plan to the Chief Executive Officer, President and/or other senior officers of
the Company under such conditions and/or limitations as the Committee may
establish.

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     7. Rights. Participation in the Plan and the right to receive awards under
the Plan shall not give a Participant any proprietary interest in the Company or
any of its assets or create contractual or other legal duties in favor of a
Participant. A Participant shall for all purposes be a general creditor of the
Company. The interests of a Participant cannot be assigned, anticipated, sold,
encumbered or pledged and shall not be subject to the claims of his creditors.
Nothing in the Plan shall confer upon any Participant the right to receive an
award, be selected as a Participant or continue in the employ of the Company, or
shall interfere with or restrict in any way the right of the Company to
discharge a Participant at any time for any reason whatsoever, with or without
cause. A person's selection to be a Participant in any Fiscal Year does not give
such person any right to be selected a Participant in any other Fiscal Year.

     8. Successors. The Plan shall be binding on the Participants and their
personal representatives. If the Company becomes a party to any merger,
consolidation, reorganization or other corporate transaction, the Plan shall
remain in full force and effect as an obligation of the Company or its successor
in interest.

     9. Amendment and Termination. The Committee may amend or terminate the Plan
or any awards hereunder at any time as it deems appropriate.

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                                                                   EXHIBIT 10.12

                                 AMENDMENT NO. 4
                                       to
                         RECEIVABLES PURCHASE AGREEMENT

          THIS AMENDMENT NO. 4 ("Amendment") is entered into as of May 2, 2002
by and among New School, Inc., as Seller ("Seller"), School Specialty, Inc., as
Servicer ("SSI"), Falcon Asset Securitization Corporation ("Falcon"), the
Financial Institutions party hereto, and Bank One, NA (Main Office Chicago), as
agent (the "Agent").

                              PRELIMINARY STATEMENT

          A.   Seller, SSI, Falcon, the Financial Institutions and the Agent are
parties to that certain Receivables Purchase Agreement dated as of November 22,
2000 and amended by that certain Amendment No. 1 dated as of January 1, 2001,
that certain Amendment No. 2 dated as of June 13, 2001 and that certain
Amendment No. 3 dated as of November 20, 2001 (as the same may be further
amended, restated, supplemented or otherwise modified from time to time, the
"Purchase Agreement"). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Purchase Agreement.

          B.   Seller, SSI, Falcon, the Financial Institutions and the Agent
have agreed to amend the Purchase Agreement, subject to the terms and conditions
hereinafter set forth.

          NOW, THEREFORE, in consideration of the premises set forth above, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

          SECTION 1. Amendment. Effective as of the date hereof, subject to the
satisfaction of the condition precedent set forth in Section 2 below, the
Purchase Agreement is hereby amended as follows:

          1.1  Section 5.1(g) is hereby amended to insert the phrase "Weekly
Reports," immediately prior to the phrase "Semi-Monthly Reports" appearing
therein;

          1.2  Section 6.2 is hereby amended to insert the phrase "Weekly
Reports," immediately prior to the phrase "Semi-Monthly Reports" appearing
therein and to insert the phrase "Weekly Report," immediately prior to the
phrase "Semi-Monthly Report" appearing therein;

          1.3  Section 8.5 is hereby amended to delete the phrase "and (iii)"
appearing therein and to replace the phrase ", (iii) on each Weekly Reporting
Date and at such times as the Agent shall request, a Weekly Report and (iv)"
therefor;

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          1.4  the definition of "Adjusted Liquidity Price" appearing in Exhibit
I is hereby amended to delete the number "1.05" appearing in the denominator of
the formula appearing therein and to replace the number "1.045" therefor;

          1.5  the definition of "Dilution Ratio" appearing in Exhibit I is
hereby amended to insert the phrase ", Premier Receivables" immediately prior to
the phrase "and Childcraft Receivables" appearing therein.

          1.6  the definition of "Dilution Trigger Ratio" appearing in Exhibit I
is hereby amended to insert the phrase ", Premier Receivables" immediately prior
to the phrase "and Childcraft Receivables" appearing therein.

          1.7  the definition of "Eligible Receivable" appearing in Exhibit I is
hereby amended (i) to delete the word "and" appearing at the end of clause (xv)
thereof, (ii) to delete the period (.) appearing at the end of clause (xvi)
thereof and to replace the word "and," therefor, and (iii) to insert the
following new clause (xvii) at the end thereof:

          "(xvii) which, if the related Originator is Premier Agendas, Inc., was
          generated by either PG Commercial Printing or PAI Agenda Sales, each a
          division of Premier Agendas, Inc."

          1.8  the definition of "Loss Reserve" appearing in Exhibit I is hereby
amended (a) to delete the number "3" appearing in clause (i) thereof and to
replace the number "2.25" therefor, and (b) to delete the percentage "10%"
appearing in clause (ii) thereof and to replace the percentage "9%" therefor;

          1.9  the definition of "Net Receivables Balance" appearing in Exhibit
I is hereby amended to insert the phrase "and further reduced by (i) the State
Overconcentration Amount and (ii) the PG Commercial Printing Overconcentration
Amount" at the end thereof;

          1.10 the definition of "Purchase Price" appearing in Exhibit I is
hereby amended to insert the phrase "Weekly Report," immediately prior to the
phrase "Monthly Report" appearing therein;

          1.11 the definition of "Purchase Limit" appearing in Exhibit I is
hereby amended to delete the amount "$50,000,000" appearing therein and to
replace the amount "$100,000,000" therefor;

          1.12 Exhibit I is hereby amended to insert the following definitions
in alphabetical order:

               "PG Commercial Printing Overconcentration Amount" means, at any
     time, the amount by which the aggregate Outstanding Balance of all Eligible
     Receivables generated by PG Commercial Printing, a division of Premier
     Agendas, Inc., exceeds the product of (i) five percent (5%) and (ii) the
     aggregate Outstanding Balance of all Eligible Receivables at such time.

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               "Premier Receivables" means all Receivables for which the
     Original Seller is Premier Agendas, Inc., a Washington corporation.

               "State Overconcentration Amount" means, at any time, the amount
     by which the aggregate Outstanding Balance of all Eligible Receivables of
     all Obligors located in any one state exceeds the product of (i) fifteen
     percent (15%) and (ii) the aggregate Outstanding Balance of all Eligible
     Receivables at such time.

               "Weekly Report" means a report, in substantially the form of
     Exhibit XII hereto (appropriately completed), furnished by the Servicer to
     the Agent pursuant to Section 8.5.

               "Weekly Reporting Date" means each Tuesday of each week.

          1.11 Exhibit X (Form of Monthly Report) is hereby deleted in its
entirety and replaced with Exhibit 1 hereto.

          1.12 Exhibit 2 hereto (Form of Weekly Report) is hereby attached to
the Purchase Agreement as a new Exhibit XII.

          SECTION 2. Conditions Precedent. This Amendment shall become effective
and be deemed effective, as of the date first above written, upon receipt by the
Agent of (i) one copy of this Amendment duly executed by each of the parties
hereto, and (ii) a fully-earned, non-refundable amendment fee from the Seller in
the amount of $75,000.

          SECTION 3. Covenants, Representations and Warranties of the Seller and
the Servicer.

          3.1  Upon the effectiveness of this Amendment, each of Seller and SSI
hereby reaffirms all covenants, representations and warranties made by it, to
the extent the same are not amended hereby, in the Purchase Agreement and agrees
that all such covenants, representations and warranties shall be deemed to have
been re-made as of the effective date of this Amendment.

          3.2  Each of Seller and SSI hereby represents and warrants as to
itself (i) that this Amendment constitutes the legal, valid and binding
obligation of such party enforceable against such party in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity which may limit the
availability of equitable remedies and (ii) upon the effectiveness of this
Amendment, no event shall have occurred and be continuing which constitutes an
Amortization Event or a Potential Amortization Event.

          SECTION 4. Reference to and Effect on the Investor Agreement.

          4.1  Upon the effectiveness of this Amendment, each reference in the
Purchase Agreement to "this Agreement," "hereunder," "hereof," "herein,"
"hereby" or words of like import shall mean and be a reference to the Purchase
Agreement as amended hereby, and each

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reference to the Purchase Agreement in any other document, instrument or
agreement executed and/or delivered in connection with the Purchase Agreement
shall mean and be a reference to the Purchase Agreement as amended hereby.

          4.2  Except as specifically amended hereby, the Purchase Agreement and
other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.

          4.3  The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Falcon, the Financial
Institutions or the Agent under the Purchase Agreement or any of the other
Transaction Documents, nor constitute a waiver of any provision contained
therein, except as specifically set forth herein.

          SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

          SECTION 6. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.

          SECTION 7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.

                                    * * * * *

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed on the date first set forth above by their respective officers
thereto duly authorized, to be effective as hereinabove provided.

                                         NEW SCHOOL, INC., as Seller

                                         By: /s/ Mary M. Kabacinski
                                           -----------------------------
                                             Name:  Mary M. Kabacinski
                                             Title: Treasurer

                                         SCHOOL SPECIALTY, INC., as Servicer

                                         By: /s/ Mary M. Kabacinski
                                           -----------------------------
                                             Name:  Mary M. Kabacinski
                                             Title: CFO

                                         FALCON ASSET SECURITIZATION CORPORATION

                                         By:  /s/ Patrick J. Power
                                           -----------------------------
                                             Name:  Patrick J. Power
                                             Title: Authorized Signatory

                                         BANK ONE, NA (MAIN OFFICE CHICAGO),
                                         as a Financial Institution and as Agent

                                         By:  /s/ Patrick J. Power
                                           -----------------------------
                                             Name:  Patrick J. Power
                                             Title: Authorized Signatory

                       Signature Page to Amendment No. 4

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