Document:

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

 

6Exhibit 10.4

SCHOOL SPECIALTY, INC.

2008 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

School Specialty, Inc. (the “Company”) has granted you one or more shares of Common Stock (the “Stock Grant”) under its 2008 Equity Incentive Plan (the “Plan”) on January 12, 2012.  This Stock Grant entitles you to the number of shares of Common Stock (the “Shares”) set forth in Schedule I to this Restricted Stock Agreement (this “Agreement”), subject to the terms and conditions set forth in this Agreement.

Schedule I to this Agreement provides the details for your Stock Grant.  It specifies the number of Shares you have been granted and the vesting schedule applicable to such Stock Grant.  

The Stock Grant 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 Stock Grant 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 the Stock Grant:

		
	Vesting

	The Shares you have been granted under this Stock Grant shall vest pursuant to the vesting schedule in Schedule I to this Agreement.  The period during which the Shares are unvested is referred to herein as the “Restricted Period.”

	 
	 

	Shareholder Status

	Prior to the vesting of the Shares, you shall have the right to vote the Shares, the right to receive and retain all regular cash dividends paid or distributed in respect of the Shares, and except as expressly provided otherwise herein, all other rights as a holder of outstanding shares of Common Stock.  Notwithstanding the foregoing, you shall not have the right to vote or to receive dividends with respect to the Shares with respect to record dates occurring after any of the Shares revert to the Company pursuant to this Agreement.  Until the Shares vest pursuant to Schedule I to this Agreement, the Company shall retain custody of the Shares.  As soon as practicable after the lapse of the restrictions, the Company shall issue or release or cause to be issued or released the Shares, less any Shares used to satisfy the obligation to withhold income and/or employment taxes in connection with the vesting of any Shares.

	 
	 

	Taxes

	The Company may require payment of or withhold any income or employment tax which it believes is payable as a result of the grant or vesting of the Shares or any payments thereon or in connection therewith, and the Company may defer making delivery with respect to the Shares until arrangements satisfactory 

		
	 
	to the Company have been made with regard to any such withholding obligation.  The Company may withhold Shares to satisfy such withholding obligations.

	 
	 

	Transfer Restrictions

	During the Restricted Period, the Shares may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) by you, or be subject to execution, attachment or similar process.  Any transfer in violation of this Agreement shall be void and of no further effect.

	 
	 

	No Right to Employment

	The granting of this Stock Grant shall not be construed as granting you any right with respect to continued employment by the Company.

	 
	 

	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 Participants 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 Participants.

	 
	 

	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.

	 
	 

	Election under 

Section 83(b) of the Code

	You may make an election under Code Section 83(b) in connection with receiving this Stock Grant.  This election must be made within thirty days of the Grant Date of the Stock Grant set forth in Schedule I.  By making such an election, you will be taxed for federal and state income and employment tax purposes on the Shares at their Fair Market Value on the Grant Date, ignoring the fact that the Shares may not vest.  You are responsible for paying these taxes with your own funds.  If you forfeit all or any portion of your Stock Grant, you will not be 

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	entitled to recover the amounts previously included in income from the filing of the election under Section 83(b) of the Code.  Please consult with your tax advisor about the advisability and mechanics of making an election under Section 83(b) of the Code.

	 
	 

	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 Stock Grant 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 Stock Grant to be subject to Code Section 409A. 

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SCHOOL SPECIALTY, INC.

PARTICIPANT 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 this Stock Grant 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 this Stock Grant.

		
	/s/ Michael P. Lavelle

	Date:  January 12, 2012

	Michael P. Lavelle

	 

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Schedule I

to

SCHOOL SPECIALTY, INC.

2008 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

NOTICE OF STOCK GRANT 

Name and Address of Employee

Michael P. Lavelle

8402 Lake Burden Circle

Windermere, Florida  34786

Grant Date

January 12, 2012

Shares Covered by Stock Grant

Grant # 1154

75,000 Shares 

Vesting Schedule

This Stock Grant will vest as to one-third of the Shares on the date on which you have purchased a number of shares of Common Stock with an aggregate purchase price of at least $400,000.00 (the “Purchase Date”), and will vest as to another one-third of the Shares on each of the first and second anniversaries of the Purchase Date, assuming you have been continuously employed by the Company since the Grant Date on such anniversary.  Provided that the Purchase Date occurred before your death or Disability, the unvested Shares will vest upon termination of your employment due to your death or Disability with respect to a number of Shares equal to the number of Shares that would have vested on the next anniversary of the Purchase Date 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 Stock Grant vested up to and including the date of termination of your employment and the denominator of which is 365.  In addition, any unvested Shares will become fully vested 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 Shares will be converted into such publicly traded equity securities, then the unvested Shares will become fully vested upon the first to occur of (a) the date on which such Shares would otherwise vest, (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.  If your employment is terminated for any reason not specified above, the vesting of the Shares shall, on the date of such termination, cease and any unvested Shares shall be forfeited by you and revert to the Company.

For purposes of this Stock Grant, the terms “Disability” and “Cause” have the same meanings ascribed to such terms in the Employment Agreement between the Company and you dated as of January 12, 2012 (the “Employment Agreement”).    

By your signature, you acknowledge and agree that this Stock Grant is governed by the terms and conditions of the Restricted Stock Agreement and the School Specialty, Inc. 2008 Equity Incentive Plan.

		
	/s/ Michael P. Lavelle

	Date:  January 12, 2012

	Michael P. Lavelle

	 

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