SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
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[ ] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to 240.14a-12
Advantage Learning Systems, Inc.
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(Name of Registrant as Specified In Its Charter)
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Preliminary Copies
ADVANTAGE LEARNING SYSTEMS, INC.
d/b/a Renaissance Learning, Inc.
2911 Peach Street
P.O. Box 8036
Wisconsin Rapids, Wisconsin 54495-8036
_____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 18, 2001
To the Shareholders of Advantage Learning Systems, Inc.
d/b/a Renaissance Learning, Inc.:
The 2001 annual meeting of shareholders of
Advantage Learning Systems, Inc. will be held at the
company's offices, 2911 Peach Street, Wisconsin Rapids,
Wisconsin, on Wednesday, April 18, 2001 at 1:00 p.m.,
local time (and at any adjournment thereof), for the
following purposes:
(1) To elect eight directors to serve until the
2002 annual meeting of shareholders and until
their successors are elected and qualified;
(2) To approve an amendment to the company's
amended and restated articles of
incorporation changing the company's name to
"Renaissance Learning, Inc.";
(3) To approve the company's 1997 stock incentive
plan; and
(4) To transact such other business as may
properly come before the annual meeting (and
any adjournment thereof), all in accordance
with the accompanying proxy statement.
Shareholders of record at the close of business on
February 28, 2001 are entitled to notice of and to vote
at the annual meeting.
All shareholders are cordially invited to attend
the annual meeting in person. However, whether or not
you expect to attend the annual meeting in person, you
are urged to complete, date and sign the accompanying
proxy card and return it as soon as possible in the
enclosed envelope which has been provided for your
convenience. If you send your proxy card and then
decide to attend the annual meeting to vote your shares
in person, you may still do so. Your proxy is
revocable in accordance with the procedures set forth
in the proxy statement.
By Order of the Board of Directors,
Steven A. Schmidt, Secretary
March 9, 2001
Preliminary Copies
ADVANTAGE LEARNING SYSTEMS, INC.
2911 Peach Street
P.O. Box 8036
Wisconsin Rapids, Wisconsin 54495-8036
March 9, 2001
PROXY STATEMENT
This proxy statement is furnished by our board of
directors for the solicitation of proxies from the
holders of our common stock in connection with the
annual meeting of shareholders to be held at our
offices, 2911 Peach Street, Wisconsin Rapids,
Wisconsin, on Wednesday, April 18, 2001 at 1:00 p.m.,
local time, and at any adjournment thereof. It is
expected that the notice of annual meeting of
shareholders, this proxy statement and the accompanying
proxy card, together with our annual report to
shareholders for fiscal 2000, will be mailed to
shareholders starting on or about March 9, 2001.
Shareholders can ensure that their shares are
voted at the annual meeting by signing and returning
the accompanying proxy card in the envelope provided.
The submission of a signed proxy will not affect a
shareholder's right to attend the annual meeting and
vote in person. Shareholders who execute proxies
retain the right to revoke them at any time before they
are voted by filing with the secretary of the company a
written revocation or a proxy bearing a later date.
The presence at the annual meeting of a shareholder who
has signed a proxy does not, by itself, revoke that
proxy unless the shareholder attending the annual
meeting files a written notice of revocation of the
proxy with the secretary of the company at any time
prior to the voting of the proxy.
Proxies will be voted as specified by the
shareholders. Where specific choices are not
indicated, proxies will be voted as follows:
* FOR the election of each of the individuals
nominated as a director,
* FOR the proposal to amend the company's amended
and restated articles of incorporation to change the
company's name to "Renaissance Learning, Inc.," and
* FOR approval of the company's 1997 stock incentive
plan.
The board of directors knows of no other matters
to be presented for shareholder action at the annual
meeting. If any other matters properly come before the
annual meeting, the persons named as proxies will vote
on the same in their discretion.
The expense of printing and mailing proxy
materials, including expenses involved in forwarding
proxy materials to beneficial owners of common stock
held in the name of another person, will be paid by us.
No solicitation, other than by mail, is currently
planned, except that certain of our officers or
employees may solicit the return of proxies from
shareholders by telephone.
Only shareholders of record at the close of
business on February 28, 2001 (this date is referred to
as the "record date") are entitled to receive notice of
and to vote the shares of common stock registered in
their name at the annual meeting. As of the record
date, we had outstanding _______________ shares of
common stock. Each share of common stock entitles its
holder to cast one vote on each matter to be voted upon
at the annual meeting.
Under Wisconsin law and our amended and restated
by-laws, the presence of a quorum is required to
conduct business at the annual meeting. A quorum is
defined as the presence, either in person
or by proxy, of a majority of the outstanding shares
of common stock entitled to vote at the annual meeting.
The shares represented at the annual meeting by proxies
that are marked, with respect to the election of
directors, "withhold authority" or, with respect to the
other proposals, "abstain," will be counted as shares
present for the purpose of determining whether a quorum
is present. Broker non-votes will also be counted as
shares present for purposes of determining a quorum.
With respect to the vote required to approve the
proposals at the annual meeting, the following rules
apply:
* The affirmative vote of a plurality of the shares
of common stock present, either in person or by proxy,
at the annual meeting and entitled to vote is required
for the election of the directors. For this purpose,
"plurality" means that the individuals receiving the
largest number of votes are elected as directors, up to
the maximum number of directors to be chosen at the
election. In the election of directors, votes may be
cast in favor or withheld. Votes that are withheld and
broker non-votes will have no effect on the outcome of
the election of directors.
* The proposal to amend the company's articles of
incorporation to change the company's name to
"Renaissance Learning, Inc." and the proposal to
approve the company's 1997 stock incentive plan require
that the votes cast to approve the respective proposals
exceed the votes cast against the respective proposals.
Abstentions and broker non-votes will have no effect on
the approval of these proposals.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information
as of the record date regarding the beneficial
ownership of shares of common stock by (i) each
director and nominee for director, (ii) the chief
executive officer of the company and the four most
highly compensated executive officers other than the
chief executive officer (collectively, these five
executives are referred to as the "named executive
officers"), (iii) all directors and executive officers
as a group, and (iv) each person believed by us to be
the beneficial owner of more than 5% of our outstanding
common stock. Except as otherwise indicated, the
business address of each of the following is 2911 Peach
Street, P.O. Box 8036, Wisconsin Rapids, Wisconsin
54495-8036.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership(1) Outstanding Shares(14)
Judith Ames Paul 12,249,233(2) [ ]%
Terrance D. Paul 12,249,233(3) [ ]
Michael H. Baum 138,835(4) *
John R. Hickey 127,472(5) *
Timothy P. Welch 65,056(6) *
Perry S. Akins 24,000(7) *
John H. Grunewald 16,500(8) *
Gordon H. Gunnlaugsson 3,500(9) *
Harold E. Jordan 7,500(10) *
Steven A. Schmidt 4,547(11)
All directors and
executive officers
as a group (10 persons) 24,885,876(12) [ ]
Mark J. Bradley,
as Trustee of the
Terrance and Judith Paul
Descendants' Trust 1,927,686(13) [ ]
_________________
* Less than 1% of the outstanding common stock.
(1) Except as otherwise noted, the persons named in
this table have sole voting and investment power
with respect to all shares of common stock listed.
(2) Includes options for 23,431 shares of common stock
which are currently exercisable. Ms. Paul is
married to Terrance D. Paul, and Mr. Paul's shares
of common stock are not included in the number of
shares beneficially owned by Ms. Paul.
(3) Includes options for 23,431 shares of common stock
which are currently exercisable. Mr. Paul is
married to Judith Ames Paul, and Ms. Paul's shares
of common stock are not included in the number of
shares beneficially owned by Mr. Paul.
(4) Includes options for 106,740 shares of common stock
which are currently exercisable.
(5) Includes options for 102,740 shares of common stock
which are currently exercisable.
(6) Includes 29,400 shares of common stock held by a
family trust, of which Mr. Welch is the trustee.
(7) Includes 5,000 shares of common stock held by a
family trust, of which Mr. Akins is the trustee.
Also includes options for 9,000 shares of common
stock which are currently exercisable.
(8) Includes options for 6,500 shares of common stock
which are currently exercisable. Mr. Grunewald
disclaims beneficial ownership of 1,000 of the
shares of common stock indicated above, as such
shares are held of record by his wife.
(9) Includes options for 1,500 shares of common stock
which are currently exercisable.
(10) Includes 6,000 shares of common stock held in a
joint account over which Mr. Jordan shares voting
power with his wife. Also includes options for
1,500 shares of common stock which are currently
exercisable.
(11) Includes options for 2,968 shares of common stock
which are currently exercisable.
(12) Includes options for 277,810 shares of common stock
which are currently exercisable.
(13) The address of the Trustee of the Terrance and
Judith Paul Descendants' Trust is 500 Third Street,
Suite 700, Wausau, Wisconsin 54403.
(14) Based on __________ shares outstanding as of the
record date.
PROPOSAL ONE: ELECTION OF DIRECTORS
The number of directors constituting the whole
board of directors is currently fixed at nine.
Directors are elected at each annual meeting of
shareholders to hold office for a one-year term and
until their successors are duly elected and qualified.
One of the current members of the board of directors,
Mr. Perry S. Akins, is not standing for re-election.
Accordingly, the board of directors has selected the
eight other members currently serving on the board as
nominees for election at the annual meeting. After the
annual meeting, the board will have eight members.
All nominees have indicated a willingness to serve
as directors, but if any of them should decline or be
unable to act as a director, the persons named in the
proxy card will vote for the election of another person
or persons as the board of directors recommends.
NOMINEES STANDING FOR ELECTION
Name and Age
of Director Office
Judith Ames Ms. Paul is the co-founder of the company and has
Paul been chairman of the board of directors since
Age 54 1986. Ms. Paul acts as our spokesperson and
coordinates our public relations and customer
communication policies. Ms. Paul is a leading
teacher advocate, an education activist and the
Executive Editor of Horizons and Math Advantage,
which are newsletters published by the School
Renaissance Institute, Inc., one of our wholly-
owned subsidiaries. Ms. Paul holds a bachelors
degree in elementary education from the University
of Illinois.
Terrance D. Mr. Paul is the co-founder of the company and has
Paul been vice chairman of the board of directors since
Age 54 July 1996. Mr. Paul is primarily responsible for
our long-term strategic planning and new product
development strategy. He conceptualized and led
the development of Accelerated MathTM, STAR
ReadingTM, STAR MathTM and RenaissanceTM professional
development. Mr. Paul coordinates the research
activities conducted by the School Renaissance
Institute, and supervises the research activities
of Generation21 Learning Systems, LLC, which is
one of our wholly-owned subsidiaries. From
November 1995 until July 1996, Mr. Paul served as
our chief executive officer. From January 1992
until August 1993 and again from September 1994
until November 1995, Mr. Paul served as our
president. For the 12 years prior to 1992, Mr.
Paul was president of Best Power Technology, a
manufacturer of uninterruptible power systems.
Mr. Paul has authored numerous research reports,
including Patterns of Reading Practice (1996) and
Theoretical Foundations of Learning Information
Systems (1997). Mr. Paul holds a law degree from
the University of Illinois and an MBA from Bradley
University. Terrance Paul is Judith Paul's husband.
Michael H. Baum Mr. Baum has been our chief executive officer
Age 53 since July 1996 and a director since September
1994. Mr. Baum served as our president between
November 1995 and June 1996. From September 1994
until November 1995, Mr. Baum served as the
managing director of the School Renaissance
Institute and from June 1994 until September 1994,
he served as the director of educational
consulting for the School Renaissance Institute.
From 1984 until June 1994, Mr. Baum held a variety
of positions with Francorp, Inc., an international
management consulting firm based in Chicago, his
last position being that of
executive vice president, which he held from
September 1991 until June 1994. Mr. Baum holds a
bachelors degree and a masters degree in teaching
from Yale University and an MBA from Northwestern
University.
John R. Hickey Mr. Hickey has been our president since July 1996
Age 45 and a director since October 1996. From January
1996 until June 1996, Mr. Hickey served as
executive vice president of R.F. Technologies,
Inc., a manufacturer of protection devices, and
from September 1995 until December 1995, he served
as executive vice president of Liebert Corporation
(a subsidiary of Emerson Electric), a manufacturer
of uninterruptible power supplies. From January
1989 until June 1995, Mr. Hickey held various
senior management positions with Best Power
Technology, including executive vice president of
operations, senior vice president of sales and
marketing and vice president-international. In
addition, Mr. Hickey spent approximately ten years
with Briggs and Stratton, a manufacturer of air-
cooled gasoline engines for outdoor power
equipment, headquartered in Milwaukee, Wisconsin.
While at Briggs and Stratton, Mr. Hickey served in
various management positions, eventually rising to
the position of the director of international
sales and finance administration, a position he
held from October 1985 until January 1989. Mr.
Hickey holds a bachelors degree in international
business from the University of Wisconsin.
Timothy P. Mr. Welch has been a director since August 1996.
Welch Mr. Welch is the founder of the predecessor to IPS
Age 58 Publishing, Inc. (IPS), which is one of our wholly-
owned subsidiaries. From June 1997 until October
1997, Mr. Welch served as a consultant to IPS, and
from November 1997 until August 1998, he worked
for us on special projects. From August 1996
until June 1997, Mr. Welch served as the chief
executive officer of IPS, and for the 15 years
prior thereto, he served as the president of its
predecessor. Mr. Welch is also the founder and
chief executive officer of Curriculum
Technologies, Inc., a firm specializing in multi-
media compact disk development for the adult
literacy and English as a second language markets,
and a member of the board of directors and the
chairman of the advisory board of ABACAST, Inc., a
company which provides engineering solutions to
media streaming bandwidth problems. Mr. Welch
holds a bachelors degree in journalism from the
University of Wisconsin.
John H. Mr. Grunewald has been a director since September
Grunewald 1997. From September 1993 to January 1997, Mr.
Age 64 Grunewald served as the executive vice president,
chief financial officer and secretary of Polaris
Industries Inc., a manufacturer of snowmobiles,
all-terrain vehicles and personal watercraft.
From June 1977 until June 1993, Mr. Grunewald
served as the vice president of finance, chief
financial officer and secretary of Pentair, Inc.,
a diversified manufacturing company. Mr.
Grunewald currently serves as a director of the
Nash Finch Company, a wholesale food distributor,
and Restaurant Technologies, Inc., a supplier of
full service cooking oil management systems to
restaurants. Mr. Grunewald also serves on the
board of Rise, Inc., a charitable institution
providing occupations for handicapped and disabled
children, and as a member of the board of
governors of the Bethel College Foundation. Mr.
Grunewald holds a bachelors degree in business
from St. Cloud State University and an MBA in
business finance from the University of Minnesota.
Gordon H. Mr. Gunnlaugsson has been a director since April
Gunnlaugsson 2000. From 1987 through 2000, Mr. Gunnlaugsson
Age 56 served as the executive vice president and chief
financial officer of Marshall & Ilsley Corporation
(M&I), a bank holding company headquartered in
Milwaukee, Wisconsin. In addition, Mr.
Gunnlaugsson served as a member of the board of
directors of M&I from February 1994 through
December 2000, and served as the vice president of
M&I Marshall & Ilsley Bank, which is a subsidiary
of M&I, from 1976 through 2000. Mr. Gunnlaugsson
serves as the chairman of the Milwaukee Economics
Development Commission, and on the board of
directors of Luther Manor, Forward Wisconsin,
Inc., Grede Foundries, Inc. and West Bend Mutual
Insurance Company. Mr. Gunnlaugsson holds a
bachelors degree in business and an MBA from the
University of Wisconsin, and is a certified public
accountant.
Harold E. Mr. Jordan has been a director since April 2000.
Jordan Since December 1990, Mr. Jordan has served as the
Age 50 president and chief executive officer of World
Computer Systems, Inc., a computer programming
services company, and from January 1986 until
December 1990, he served as its executive vice
president. In addition, since October 1997, Mr.
Jordan has served as the president and chief
executive officer of Madras Packaging, LLC, a
plastic molding company. From May 1987 until
December 1996, Mr. Jordan practiced law with
Jordan & Keys, a law firm which he founded, and
since January 1997, has been of counsel to the
firm. Mr. Jordan serves as the chairman of the
board of trustees of Lawrence University, a member
of the board of visitors of the University of
Wisconsin Law School and a member of the board of
directors of Paramount Theater. Mr. Jordan holds
a bachelors degree from Lawrence University and a
law degree from the University of Wisconsin Law
School.
The board of directors has standing compensation and
audit committees. The board of directors does not have a
nominating committee. The board of directors held four
meetings in 2000. Each incumbent director attended at
least 75% of the meetings of the board of directors held
during 2000 and at least 75% of the meetings of the board
committees on which the director served in 2000.
The compensation committee is responsible for making
recommendations to the board of directors concerning
compensation levels of our executive officers and for
administering our executive compensation plans, including
our 1997 stock incentive plan. The members of the
compensation committee during 2000 were Messrs. Akins
(Chairman), Grunewald and Jordan, none of whom was or is
an employee of the company. The compensation committee
held four meetings in 2000.
The audit committee is responsible for selecting our
independent auditors, reviewing the scope, results and
costs of the audit with our independent auditors and
reviewing our financial statements to ensure full
compliance with regulatory requirements and full
disclosure of necessary information to our shareholders.
The members of the audit committee during 2000 were
Messrs. Grunewald (Chairman), Akins, Gunnlaugsson and
Paul. The audit committee held four meetings in 2000.
The board of directors has adopted and approved a
formal written charter for the audit committee, a copy of
which is attached to this proxy statement as Exhibit A.
All but one member of the audit committee as currently
constituted are "independent," as defined in the listing
standards of the National Association of Securities
Dealers, Inc. (NASD), meaning they have no relationships
with the company that may interfere with the exercise of
their independence from management of the company. The
board of directors has determined that it would be in the
best interests of the company and our shareholders to
allow Mr. Paul, who is not deemed independent under the
NASD listing standards, to remain a member of the audit
committee until June 14, 2001 pursuant to the NASD
transition rules relating to audit committees. The board
made this determination after consideration of the
importance of Mr. Paul's role on the audit committee and
to allow
for an orderly transition to comply with the
NASD's rules relating to the composition of audit
committees. Mr. Paul is not considered independent
because he, along with his wife Judith Ames Paul, are
executive officers of the company.
EXECUTIVE COMPENSATION
Summary Compensation Information. The following
table sets forth the compensation for the past three
years for the named executive officers.
Summary Compensation Table
Long-Term
Compensation
Awards
Annual Securities
Name and Principal Compensation Underlying All Other
Position Year Salary($) Bonus($) Options/SARs(#)(1) Compensation($)(2)
Judith Ames Paul 2000 $204,846 - 8,316 $8,112
Chairman of the 1999 191,173 - 35,654 6,600
Board 1998 181,186 - 25,724 6,600
Terrance D. Paul 2000 $204,846 - 8,316 $8,112
Vice Chairman 1999 191,173 - 35,654 6,600
of the Board 1998 181,186 - 25,724 6,600
Michael H. Baum 2000 $215,244 - 16,632 $8,522
Chief Executive 1999 185,807 - 71,307 6,600
Officer 1998 164,873 - 62,578 6,509
John R. Hickey 2000 $209,095 - 16,632 $8,280
President 1999 180,968 - 71,307 6,600
1998 158,183 - 62,578 6,244
Steven A.
Schmidt(3) 2000 $157,002 $20,000 4,948 $6,216
Vice President, 1999 57,115 - 11,866 -
Chief Financial
Officer and
Secretary
________________
(1) Reflects options granted under our 1997 stock
incentive plan.
(2) For 1998 and 1999, these figures reflect 401(k)
plan matching amounts contributed by us. For 2000,
these figures reflect 401(k) plan and supplemental
executive retirement plan matching amounts
contributed by us as follows: Ms. Paul--$6,930 and
$1,182; Mr. Paul--$6,930 and $1,182; Mr. Baum--
$6,930 and $1,592; Mr. Hickey--$6,930 and $1,350;
and Mr. Schmidt--$6,216 and $0.
(3) Mr. Schmidt joined the company in August 1999.
Option Grants. The following table provides
information on options granted to the named executive
officers during 2000.
Option/SAR Grants In Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted(#)(1) Fiscal Year ($/sh)(2) Date Value($)(3)
Judith Ames Paul 8,316 3.53% $30.063 9/1/10 $219,875
Terrance D. Paul 8,316 3.53% $30.063 9/1/10 $219,875
Michael H. Baum 16,632 7.07% $30.063 9/1/10 $439,750
John R. Hickey 16,632 7.07% $30.063 9/1/10 $439,750
Steven A. Schmidt 4,948 2.10% $30.063 9/1/10 $130,825
______________
(1) The vesting schedule for options is 25% per year
with each option being fully exercisable four
years from the date of grant.
(2) All options have an exercise price equal to 100%
of the fair market of the common stock on the
date of grant.
(3) The grant date present values were determined
using the Black-Scholes model with the following
common assumptions: a 10 year expected period of
time to exercise; a risk-free rate of return of
6.14%; an expected dividend yield of 0.00%; and a
volatility factor of 87.90%.
Option Exercises. The following table provides
information on options exercised during 2000, and
options held at year end, by the named executive
officers.
Aggregated Option/SAR Exercises In Last Fiscal Year And
FY-End Option/SAR Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options/SARs
Aquired on Value Options/SARs at FY-End(#) at FY-End($)(1)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
Judith Ames Paul - - 21,777 47,917 $301,543 $569,208
Terrance D. Paul - - 21,777 47,917 $301,543 $569,208
Michael H. Baum - - 103,428 124,839 $2,244,439 $1,988,656
John R. Hickey - - 99,428 124,839 $2,141,939 $1,988,656
Steven A. Schmidt - - 2,968 13,846 $40,152 $138,015
______________
(1) For valuation purposes, a December 29, 2000
market price of $33.625 was used.
From time to time, our directors and officers may
sell shares of their common stock to us pursuant to our
stock repurchase program. The purchase price for any
such sales is the prevailing market price at the time
of such sale.
NON-EMPLOYEE DIRECTOR COMPENSATION
Directors who are not employees receive a fee of
$1,000 for each board meeting which they attend and
$500 for each committee meeting which they attend, plus
out-of-pocket expenses incurred in connection with
attendance at each such meeting. In addition, in
October 2000, each non-employee director received
options under our 1997 stock incentive plan to purchase
a total of 3,000 shares of common stock, which options
vest 50% after one year and 50% after two years.
COMPENSATION COMMITTEE REPORT
During 2000, the compensation committee consisted
of Messrs. Akins (Chairman), Grunewald and Jordan, none
of whom was or is an employee of the company. The
compensation committee is responsible for making
recommendations to the board of directors concerning
the compensation levels of our executive officers. The
compensation committee also administers our 1997 stock
incentive plan, with responsibility for determining the
awards to be made under such plan to our executive
officers and to other eligible individuals. The
compensation committee reviews compensation programs
for executive officers in July of each year, with any
changes to such compensation programs generally
commencing in September of each year. This results in
compensation decisions impacting portions of two
different calendar years. For example, compensation
changes effective in September of 2000 will effect four
months of 2000 and eight months of 2001.
In 2000, the compensation committee made
compensation decisions with respect to the base
salaries of and the stock option grants to our
executive officers. We generally do not have a cash
bonus program for executive officers. In making
compensation decisions, the compensation committee
reviewed a comparison of the compensation levels of our
executive officers with the compensation levels of
executive officers of other service industry businesses
as well as the peer group of companies used in the
performance graph. Companies included in the service
industry comparison group, which consist of private and
public companies located throughout the United States,
are of similar size to us in terms of annual revenues.
Compensation data for these companies were obtained
from a survey compiled by a national research firm.
The compensation committee did not set the compensation
of our executive officers at any specific level as
compared to either peer group of companies. Also, in
making its decisions, the committee did not assign
relative weights or importance to any specific measure
of our financial performance.
Base Salary. The compensation committee sets the
base salaries of our executive officers at levels
designed to attract and retain highly qualified
individuals. Based on the information available to it,
the committee determined to increase base salaries for
our executive officers. The committee believes that
the base salary increases were appropriate relative to
our financial performance compared with the peer groups
reviewed.
Cash Bonus Program. While we generally do not
have a cash bonus program for executive officers, the
compensation committee approved a cash bonus for our
chief financial officer. This cash bonus was part of
Mr. Schmidt's compensation arrangement with us when he
was initially hired in 1999.
Equity Based Compensation. Stock option grants
are the primary form of long-term incentive
compensation for our executive officers. The
compensation committee believes stock options are an
effective means of incenting senior management to
increase the long-term value of our common stock.
Based on the information described above and with the
exception of stock option grants to our chief financial
officer, the committee determined not to change the
current dollar value of stock option grants to
executive officers (i.e., the annual dollar value of
the shares subject to option at the date of grant).
The committee increased the dollar value of stock
option grants to Mr. Schmidt so that it is in the same
proportion to his salary as the proportion used for the
majority of our divisional presidents. The committee
believes that the total compensation package provided
to executive officers, including options, is
appropriate relative to all factors considered by the
committee.
CEO Compensation. In evaluating Mr. Baum's
compensation, the committee reviewed the compensation
levels for the chief executive officers of the peer
groups described above and the financial performance of
those peer group companies. The committee determined
to increase Mr. Baum's base salary and to make no
change in the dollar value of the annual stock option
grants to Mr. Baum. Mr. Baum's compensation was not
specifically tied to any specific financial performance
criteria. The committee believes Mr. Baum's
compensation is appropriate given our size and
financial performance.
In making compensation decisions, it is the
compensation committee's current intention to recommend
plans and awards which will meet the requirements for
deductibility for tax purposes under Section 162(m) of
the Internal Revenue Code of 1986.
The Compensation Committee:
Perry S. Akins, Chairman John H. Grunewald Harold E. Jordan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the compensation committee has ever
been an officer or employee of our company or any of
our subsidiaries and none of our executive officers has
served on the compensation committee or board of
directors of any company of which any of our directors
is an executive officer.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by
the board of directors, the audit committee assists the
board in fulfilling its responsibility to our
shareholders, the investment community and governmental
agencies relating to corporate accounting, financial
reporting practices and the quality and integrity of
our financial reports. During 2000, the committee met
four times, and the committee chair, as representative
of the committee, discussed the interim financial
information contained in each of our quarterly reports
on Form 10-Q with the chief financial officer,
controller and independent auditors prior to filing
with the Securities and Exchange Commission.
Auditor Independence and 2000 Audit. In
discharging its duties, the audit committee obtained
from the independent auditors a formal written
statement describing all relationships between the
auditors and us that might bear on the auditors'
independence consistent with Independence Standards
Board Standard No.1, "Independence Discussions with
Audit committees." In addition, the audit committee
discussed with the auditors any relationships that may
impact their objectivity and independence and satisfied
itself as to the auditors' independence. The committee
also discussed with management and the independent
auditors the quality and adequacy of our internal
controls. The committee reviewed with the independent
auditors their audit plans, audit scope and
identification of audit risks.
The committee discussed and reviewed with the
independent auditors all communications required by
generally accepted auditing standards, including those
described in Statement on Auditing Standards No. 61, as
amended, "Communication with Audit Committees" and,
with and without management present, discussed and
reviewed the results of the independent auditors'
examination of the financial statements. The committee
also discussed with management and the independent
auditors the objectives and scope of the internal audit
process and the results of the internal audit
examinations.
2000 Financial Statements and Recommendations of
the Committee. The committee reviewed our audited
financial statements as of and for the year ended
December 31, 2000, with management and the independent
auditors. Management has the responsibility for the
preparation of our financial statements and the
independent auditors have the responsibility for the
examination of those statements.
Based on the above-mentioned review and
discussions with management and the independent
auditors, the committee recommended to the board of
directors that our audited financial statements be
included in our annual report on Form 10-K for the year
ended December 31, 2000, for filing with the Securities
and Exchange Commission.
Audit Fees. The aggregate fees billed for
professional services rendered by the independent
auditors for (1) the audit of our financial statements
as of and for the year ended December 31, 2000 and (2)
the review of the financial statements included in our
Form 10-Q filings for the year, were $68,000.
Financial Information Systems Design and
Implementation Fees. The independent auditors did not
provide professional services during 2000 for the
operation of our information systems or the
management of our local area networks, nor did they
design or implement a hardware or software system that
aggregates source data underlying our financial
statements or generates information that is significant
to our financial statements taken as a whole. Accordingly,
no financial information systems design and implementation
fees were paid to the independent auditors.
All Other Fees. The aggregate fees billed by the
independent auditors during 2000 for non-audit and non-
information systems related services, were $131,000.
These services consisted of tax consultation, tax
compliance and research services. The audit committee
considered whether, and has determined that, the
provision of these types of services is compatible with
maintaining the independent auditors independence.
The Audit Committee:
John H. Grunewald, Chairman Gordon H. Gunnlaugsson
Perry S. Akins Terrance D. Paul
PENDING LEGAL PROCEEDINGS
None of our directors or executive officers is an
adverse party or has an interest adverse to us in any
material pending legal proceeding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of
1934 requires our directors and executive officers,
among others, to file reports with the Securities and
Exchange Commission disclosing their ownership, and
changes in their ownership, of our common stock.
Copies of these reports must also be furnished to us.
Based solely on a review of these copies, we believe
that during 2000, all filing requirements were complied
with, except that Harold E. Jordan filed two reports
late.
PERFORMANCE GRAPH
The following graph compares the total stockholder
return on our common stock since our initial public
offering on September 25, 1997 with that of the Nasdaq
Stock Market Index and two peer group indices
constructed by us. The companies included in our old
peer group index are Apollo Group, Inc. (APOL),
SmartForce PLC (SMTF), Computer Learning Centers, Inc.
(CLCX), Learning Tree International, Inc. (LTRE),
Sylvan Learning Systems, Inc. (SLVN), National Computer
Systems, Inc. (NLCS), Education Management Corporation
(EDMC) and TRO Learning, Inc. (TUTR). The companies
included in our new peer group index are the same as
the companies included in our old peer group index,
except that School Specialty, Inc. (SCHS) and Edison
Schools, Inc. (EDSN) have been substituted for National
Computer Systems, Inc.
The total return calculations set forth below
assume $100 invested on September 25, 1997, with
reinvestment of dividends into additional shares of the
same class of securities at the frequency with which
dividends were paid on such securities through December
31, 2000. The stock price performance shown in the
graph below should not be considered indicative of
potential future stock price performance.
Comparison of Cumulative Total Return
Among Advantage Learning Systems, Inc.,
The Nasdaq Stock Market (U.S.) Index, a New Peer
Group and an Old Peer Group
Cumulative Total Return
9/25/97 12/31/97 12/31/98 12/31/99 12/31/00
Advantage Learning
Systems, Inc. 100 134 411 140 420
New Peer Group 100 111 91 74 130
Old Peer Group* 100 111 91 75 130
Nasdaq Stock Market
(U.S.) 100 94 132 260 156
*The figures in the old peer group index have been
restated to exclude National Computer Systems, Inc.
because it was acquired during 2000 and is no longer
publicly traded.
PROPOSAL TWO: APPROVAL OF AMENDMENT TO THE
ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY
The board of directors has determined that it is
in the best interests of the company and our
shareholders to amend the company's amended and
restated articles of incorporation to change the
company's name from "Advantage Learning Systems, Inc."
to "Renaissance Learning, Inc." Accordingly, the board
of directors has proposed such an amendment for
submission to our shareholders at the 2001 annual
meeting.
If the amendment to the company's amended and
restated articles of incorporation is approved by
shareholders, Article I of the company's amended and
restated articles of incorporation will read as
follows:
"ARTICLE I
The name of the Corporation is Renaissance Learning, Inc."
The primary reason for the name change is to
better reflect the company's business and to capitalize
on the company's "Renaissance" brands. Changing the
name of the company will not alter any of the rights of
shareholders. Since September 2000, the company has
been doing business as Renaissance Learning, Inc. in
anticipation of shareholder approval of this proposed
amendment.
If the amendment to the company's amended and
restated articles of incorporation is approved, the
corporate name change will become effective upon the
filing of the amendment with the Wisconsin Department
of Financial Institutions, which filing will be made
promptly after the annual meeting.
If the amendment to the company's amended and restated
articles of incorporation is approved, our common stock
will be traded under the symbol "RLRN" on the Nasdaq
National Market.
PROPOSAL THREE: APPROVAL OF COMPANY'S 1997 STOCK INCENTIVE PLAN
General. The board of directors adopted the
company's 1997 stock incentive plan on March 28, 1997.
At that time, the shareholders of the company also
approved the plan. The plan was adopted to provide our
officers, key employees and non-employee directors with
additional incentives by increasing their proprietary
interest in the company. The plan was later amended
and restated by the board on October 23, 1997 to allow
prospective employees as well as consultants to
participate in the plan.
While shareholder approval of the plan was
previously obtained in 1997 when the plan was first
adopted, shareholders are again being asked to approve
the plan, in the form attached to this proxy statement
as Exhibit B. The plan is being submitted to
shareholders for approval at this time in order to meet
the requirements of Section 162(m) of the Internal
Revenue Code of 1986, which governs the deductibility
of compensation paid to certain executive officers.
Purpose. The purpose of the plan is to attract
and retain key personnel whose skills and talents are
important to our operations, and to reward them for
making major contributions to our success. The plan
does this by making awards under the plan to key
personnel, thereby providing them with a proprietary
interest in our growth and performance.
Eligibility. Persons who are eligible to
participate in the plan consist of current and
prospective employees, non-employee directors and
consultants of the company and its subsidiaries who
hold, or will hold, positions of responsibility and
whose performance can have a significant effect on our
success. As
of December 31, 2000, we had approximately 285
employees, five non-employee directors and one
consultant participating in the plan.
Administration. The plan is administered by the
compensation committee of the board of directors. The
compensation committee has exclusive authority to grant
awards under the plan and to make all interpretations
and determinations affecting the plan. The
compensation committee has the discretion to determine
the individuals to whom awards may be granted, the
amount of such awards, any applicable vesting schedules
and the other terms of such awards. Nevertheless, any
award made to a non-employee director under the plan
must be approved by the board of directors.
Awards. The plan authorizes the compensation
committee to grant awards in the form of stock options
(including both incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of
1986 and non-qualified stock options), stock
appreciation rights and restricted shares of common
stock. The terms and conditions of awards granted
under the plan are set out in an agreement between the
company and the individuals receiving the awards. All
stock options awarded under the plan are granted at an
exercise price of no less than the fair market value of
our common stock on the date of grant. Awards may be
exercised by delivery of notice of exercise to the
company accompanied by full payment of the exercise
price. No award may be granted under the plan after
March 28, 2007.
Awards Granted. The awards that will be granted
in the future under the plan are not currently
determinable. During 2000, we granted the following
non-qualified stock option awards under the plan:
* options to purchase 54,844 shares of common stock
at an exercise price of $30.063 per share to all
current executive officers, as a group;
* options to purchase 15,000 shares of common stock
at an exercise price of $36.125 per share to all
current non-employee directors, as a group; and
* options to purchase 165,538 shares of common stock
at exercise prices ranging from $12.875 to $36.125 per
share to the other persons participating in the plan,
as a group.
For information regarding stock option grants to
the named executive officers, see "Executive
Compensation - Option Grants."
Adjustments. The plan and any outstanding awards
shall be subject to adjustment, as determined by the
compensation committee, in the event of any change in
the outstanding common stock of the company due to a
stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger or
similar event. In the event of such changes, the
committee may make a proportionate adjustment to, among
other things, the number of shares of common stock
reserved under the plan, the number of shares of common
stock covered by outstanding awards and the exercise
price per share underlying each outstanding award.
Upon a change of control of the company, as defined in
the plan, any outstanding but unvested awards will
become fully vested.
Amendment and Termination. The board of directors
may, from time to time, to the extent permitted by
applicable law, amend or terminate the plan without the
consent of participants. However, the board may not
make an amendment or terminate the plan if the
amendment or termination would have an adverse effect
on outstanding awards without the consent of the
affected participants. In addition, the board may not,
unless otherwise permitted under applicable law,
without further approval of the shareholders of the
company, adopt an amendment to the plan which would
cause the plan to no longer comply with Section 162(m)
of the Internal Revenue Code of 1986, or any successor
provision or other regulatory requirement.
Shares Subject to the Plan. The aggregate number
of shares of common stock that may be issued under the
plan is 3,000,000, of which a maximum of 1,500,000 may
be subject to incentive stock options. The maximum
number of shares that may be issued with respect to
awards granted under the plan to any one person during
the term of the plan may not exceed 1.5 million shares.
Each of the foregoing numbers has been adjusted to
reflect a two-for-one stock split which occurred on
February 26, 1999. On December 29, 2000, the closing
price of our common stock was $33.625 per share. As of
that date, there were 1,205,346 shares of common stock
available for issuance under the plan.
Federal Income Tax Consequences. The federal
income tax consequences of non-qualified stock options
(NQSOs), incentive stock options (ISOs) and restricted
stock granted under the plan are generally as follows:
NQSOs. The grant of a NQSO will have no federal
income tax consequences to us or to a participant. A
participant will recognize taxable ordinary income at
the time of exercise of the option in an amount equal
to the excess of the fair market value of the stock
acquired at the time of exercise over the option price,
and we will ordinarily be entitled to a deduction for
such amount.
The holder of stock acquired upon exercise of a
NQSO will, upon a subsequent disposition of such stock,
generally recognize a short-term or long-term capital
gain or loss, depending upon the holding period of the
stock, equal to the difference between the amount
realized on the sale and the basis in such stock (the
sum of the option price and the amount taxed as
ordinary income at the time of exercise).
ISOs. Neither the grant nor exercise of an ISO
will generally have any federal income tax consequences
for a participant. The amount by which the fair market
value of the stock acquired upon the exercise of any
ISO exceeds the option price as of the date of
exercise, however, is an item of "tax preference" for
purposes of computing the alternative minimum tax on
individuals. If a participant has held the stock
acquired on the exercise of an ISO for at least two
years from the date of the grant of the option and at
least one year from the date of exercise, the
participant will recognize taxable long-term capital
gain or loss upon a subsequent disposition of the
stock. In such circumstances, we would not be allowed
to take a deduction for federal income tax purposes in
connection with the grant or exercise of the option or
the transfer of stock acquired upon such exercise.
If, however, the participant disposes of his or
her stock within the holding periods described above,
(i) the participant will recognize ordinary income in
an amount equal to the difference between the fair
market value of such stock on the date of exercise and
the option price, provided that, if the disposition is
a sale or exchange with respect to which a loss (if
sustained) would be recognized by the participant and
the amount realized from such sale or exchange is less
than the fair market value on the exercise date, then
the ordinary income will be limited to the excess of
the amount realized upon the sale or exchange of the
stock over the option price; (ii) we will be entitled
to a deduction for such year in the amount of the
ordinary income so recognized; and (iii) the
participant will recognize capital gain or loss, as the
case may be, in an amount equal to the difference
between the amount realized upon such sale or exchange
of the stock and the sum of the option price plus the
amount of ordinary income, if any, recognized upon such
disposition.
Restricted Stock. The grant of restricted stock
is not a taxable event to a participant, absent an
election under Section 83(b) of the Internal Revenue
Code of 1986. If no election is made, the participant
will recognize income, taxable for income tax purposes
at ordinary rates, upon the lapse of the restrictions
governing the stock. The amount of the income will
equal the fair market value of the
stock when the restrictions lapse. If the participant
makes a Section 83(b) election within 30 days of the
date of grant, he or she will be deemed to have received
ordinary income at the time of the grant of the restricted
stock equal to their fair market value at the date of
grant less any amount paid by the participant for the
stock, determined without regard to the restrictions
imposed thereon. If the restricted stock is subsequently
forfeited after a Section 83(b) election and before the
restrictions lapse, the participant is not entitled to
claim the loss for income tax purposes.
We will be entitled to a deduction for income tax
purposes when the participant recognizes ordinary
income, either as a result of a Section 83(b) election
or because of the lapse of the restrictions. The
amount of the deduction will equal the amount of
ordinary income recognized by the participant.
OTHER MATTERS
Although we are not aware of any other matters
that may come before the annual meeting, if any such
matters should be presented, the persons named in the
accompanying proxy card intend to vote such proxy in
accordance with their best judgment.
INDEPENDENT PUBLIC ACCOUNTANTS
We selected Arthur Andersen LLP as our independent
auditors for the fiscal year ended December 31, 2001.
Representatives of Arthur Andersen LLP will be present
at the annual meeting to make any statement they may
desire and to respond to questions from shareholders.
SUBMISSION OF SHAREHOLDER PROPOSALS
In accordance with our amended and restated by-
laws, nominations, other than by or at the direction of
the board of directors, of candidates for election as
directors at the 2002 annual meeting of shareholders
and any other shareholder proposed business to be
brought before the 2002 annual meeting of shareholders
must be submitted to us not later than December 19,
2001. Shareholder proposed nominations and other
shareholder proposed business must be made in
accordance with our amended and restated by-laws which
provide, among other things, that shareholder proposed
nominations must be accompanied by certain information
concerning the nominee and the shareholder submitting
the nomination, and that shareholder proposed business
must be accompanied by certain information concerning
the proposal and the shareholder submitting the
proposal. To be considered for inclusion in the proxy
statement solicited by the board of directors,
shareholder proposals for consideration at the 2002
annual meeting of shareholders must be received by us
at our principal executive offices, 2911 Peach Street,
P.O. Box 8036, Wisconsin Rapids, Wisconsin 54495-8036
on or before November 9, 2001. Proposals should be
directed to Mr. Steven A. Schmidt, Secretary. To avoid
disputes as to the date of receipt, it is suggested
that any shareholder proposal be submitted by certified
mail, return receipt requested.
You may obtain a copy of our annual report on Form
10-K for the fiscal year ended December 31, 2000 at no
cost by writing to Mr. Steven A. Schmidt, Secretary,
Advantage Learning Systems, Inc., 2911 Peach Street,
P.O. Box 8036, Wisconsin Rapids, Wisconsin 54495-8036.
By Order of the Board of Directors,
Steven A. Schmidt, Secretary
Exhibit A
ADVANTAGE LEARNING SYSTEMS, INC.
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
I. Purpose
The Audit Committee shall assist the Board of
Directors in fulfilling its responsibility to the
shareholders, to the investment community and to
governmental agencies relating to corporate accounting,
financial reporting practices, and the quality and
integrity of the financial reports of the Company.
II. Committee Composition
The Committee shall be comprised of at least three
members, comprised solely of "independent" directors
(except as noted below) who are "financially literate"
or become "financially literate" within a reasonable
period of time after his or her appointment to the
Committee. Committee members may enhance their
familiarity with finance and accounting by
participating in educational programs. Current
Committee members who are not "independent" may remain
on the Committee until June 14, 2001, pursuant to the
Nasdaq Stock Market's transition rules.
A director is "independent" and "financially
literate" if he or she meets the requirements set forth
in the rules of the Nasdaq Stock Market. The current
requirements for independence and financial literacy
are attached hereto as Appendix A, which may be
supplemented from time to time as such requirements are
modified. One director who is not independent and who
is not a current employee or an immediate family member
of a current executive officer may serve on the
Committee, provided that the Board determines that such
director's membership on the Committee is required by
the best interests of the Company and its shareholders.
At least one member of the Committee shall have
accounting or related financial management experience
in accordance with the Nasdaq Stock Market's
requirements.
The members of the Committee shall be elected by
the Board to hold such office until their successors
shall be duly elected and qualified. Unless a Chair is
elected by the Board, the members of the Committee may
designate a Chair by majority vote of the full
Committee membership.
III. Meetings and Reports
The Committee shall meet as frequently as the
Committee deems necessary, but the Committee shall meet
at least annually. Special Meetings of the Committee
may be called at any time by any member thereof on not
less than three days notice. In order to foster open
communication, the Committee should meet at least
annually with management, the director of the internal
auditing function, and the independent auditors in
separate executive sessions to discuss any matters that
the Committee or each of these groups believe should be
discussed privately. The Committee shall report
periodically to the Board of Directors regarding the
Committee's activities, findings and recommendations.
The Committee shall also meet with the independent
auditors to review the arrangements (including proposed
fees) and scope of the annual audit.
The Committee may conduct its business and affairs
at any time or location it deems appropriate.
Attendance and participation in a meeting may take
place by conference telephone or similar communications
equipment by means of which all persons participating
in the meeting can hear each other. Any action to be
taken at any meeting of the Committee may be taken
without a meeting, if all members of the Committee
consent thereto in writing and such writing or writings
are filed with the minutes of the Committee. All
decisions of the Committee shall be determined by the
affirmative vote of a majority of the members thereof,
and a report of any actions taken by the Committee
shall be delivered at the next meeting of the Board of
Directors.
IV. Responsibilities and Powers
The Committee shall be responsible for the following:
* Review and assess the adequacy of this Charter on
at least an annual basis.
* Review and assess on an annual basis whether the
Committee has satisfied its responsibilities during
the prior year in compliance with this Charter.
* Recommend to the Board of Directors the independent
public accountants to audit the books and records of
the Company and to review the fees charged for such
audits. Monitor and evaluate the performance,
independence and qualifications of the independent
public accountants. Approve any proposed discharge of
the independent public accountants when circumstances
warrant (or nominate the independent public accountants
to be proposed for shareholder approval in any proxy
statement of the Company). Review the scope, costs and
results of the independent audit of the Company's books
and records through conferences and direct, private
communications with the independent public accountants.
* Review and discuss with the independent public
accountants the independent public accountants'
ultimate accountability to the Board of Directors and
the Audit Committee.
* Ensure the independence of the Company's independent
public accountants. The Committee shall obtain a
formal written statement listing all relationships
between the independent public accountants and the
Company from the independent public accountants on an
annual basis. Review and discuss with the independent
public accountants any disclosed relationships or
services that may impact the objectivity and
independence of the independent public accountants and
recommend that the Board of Directors take appropriate
action to ensure the independent public accountants'
independence.
* Review the programs that the Company has instituted to
correct any deficiencies noted by the independent
public accountants in their annual review.
* Review and approve significant non-audit services,
such as management consulting services, proposed by the
independent public accountants or other professionals
retained by the Company.
* Review with management and the independent public
accountants the objectives and scope of the internal
audit process; monitor with management the competency
and quality of the internal auditors; and review
periodically the internal audit program.
* Review with management and the independent public
accountants the independent public accountants'
judgments about the quality of the Company's accounting
principles as applied in the Company's financial
reporting, including the clarity of the Company's
financial disclosures, the degree of aggressiveness or
conservatism of the Company's accounting principles and
underlying estimates and other significant decisions
made by management in preparing the Company's financial
disclosures.
* Review audit reports received from the independent
public accountants and internal auditors and take such
action in respect of such reports as the Committee
deems appropriate to ensure the integrity of financial
information and the compliance with all applicable
laws, regulations and Company policies.
* Review with management the programs established to
provide for compliance with applicable laws and
regulations, including, without limitation, the Foreign
Corrupt Practices Act, and to review lawsuits and
claims against the Company which pose significant risk
of loss.
* Review and discuss with management and discuss
with the independent public accountants the Company's
audited financial statements to be included in the
Company's Annual Report on Form 10-K and all major
accounting and disclosure policies involved in the
preparation of such report. Make a recommendation to
the Board of Directors regarding inclusion of the
audited financial statements in the Company's Form 10-K.
* When required under the SEC's rules, provide an
Audit Committee Report to be included in the Company's
annual proxy statement, which states whether the
Committee has: (a) reviewed and discussed with
management the Company's audited financial statements;
(b) discussed with the independent public accountants
the matters required to be discussed by SAS 61;
(c) received the written disclosures and the letter
from the independent public accountants required by ISB
Standard No. 1 and discussed with the independent
public accountants the independent public accountants'
independence; and (d) based on the review and
discussion of the audited financial statements with
management and discussions with the independent public
accountants, the Committee recommended to the Board of
Directors that the audited financial statements be
included in the Company's Form 10-K for the last fiscal
year for filing with the SEC.
* Periodically review with management and the
independent public accountants the Company's unaudited
financial statements included in the Company's
Quarterly Reports on Form 10-Q and all major
accounting and disclosure policies involved in the
preparation of such reports.
* Review with management any changes in accounting
principles significantly affecting the Company, as well
as any significant unusual nonoperating or nonrecurring
items and the general quality of earnings reported by
the Company.
* Review any significant disagreements between
management and the independent public accountants or
the internal auditors in connection with the
preparation of the Company's financial statements.
* Review any material transaction to which the
Company is a party involving a conflict of interest
with a director, executive officer or other affiliate
of the Company.
* Establish, review and update periodically an
Ethical Code of Conduct and ensure that management has
established a system to enforce this Code.
* Direct and supervise an investigation into any
matter the Committee deems necessary and appropriate,
including the authority to retain outside counsel or
other professional services.
* Review the Company's protection of assets programs
including insurance.
* Take action in connection with such other powers
and responsibilities as the Board of Directors may,
from time to time, determine.
Appendix A
Definitions
NASD Definition of "Independent" Directors
The following directors would not be considered independent:
(a) a director who is currently an employee of the
Company or any of its affiliates or who was an employee
of the Company or any of its affiliates during the past
three years;
(b) a director who accepted any compensation from the
Company or any of its affiliates in excess of $60,000
during the previous fiscal year, other than
compensation for Board service, benefits under a tax-
qualified retirement plan or non-discretionary
compensation;
(c) a director who is an immediate family member of an
individual who is or has been during the past three
years an executive officer of the Company or any of its
affiliates;
(d) a director who is a partner in, or a controlling
shareholder or an executive officer of, any for-
business organization to which the Company made, or
from which the Company received, payments (other than
those arising from investments in the Company's
securities) that exceeded 5% of the Company's or
business organization's consolidated gross revenues for
that year, or $200,000, whichever is more, in any of
the past three years; and
(e) a director who is employed as an executive of
another entity where any of the Company's executives
serves on that entity's compensation committee.
NASD Definition of "Financially Literate"
A financially literate director is one who is able to
read and understand fundamental financial statements,
including a company's balance sheet, income statement
and cash flow statement.
NASD Definition of Accounting/Financial Expertise
A director has accounting or related financial
management expertise if he or she has past employment
experience in finance or accounting, requisite
professional certification in accounting, or any other
comparable experience or background which results in
the director's financial sophistication, including
being or having been a chief executive officer, chief
financial officer or other senior officer with
financial oversight responsibilities.
Exhibit B
ADVANTAGE LEARNING SYSTEMS, INC.
1997 STOCK INCENTIVE PLAN
(as amended and restated on October 23, 1997)
1. Objectives. The Advantage Learning
Systems, Inc. 1997 Stock Incentive Plan is designed to
attract and retain certain selected officers and key
employees and non-employee directors and consultants
whose skills and talents are important to the Company's
operations, and reward them for making major
contributions to the success of the Company. These
objectives are accomplished by making awards under the
Plan, thereby providing Participants with a proprietary
interest in the growth and performance of the Company.
2. Definitions.
(a) "Award" shall mean the grant of any
form of stock option, stock appreciation right, or
stock award, whether granted singly, in
combination or in tandem, to a Plan Participant
pursuant to such terms, conditions, performance
requirements, and limitations as the Board or
Committee may establish in order to fulfill the
objectives of the Plan.
(b) "Award Agreement" shall mean an
agreement between the Company and a Participant
that sets forth the terms, conditions, performance
requirements, and limitations applicable to an
Award.
(c) "Board" shall mean the Board of
Directors of Advantage Learning Systems, Inc.
(d) "Cause" shall mean termination of a
Participant's employment with the Company for (i)
any failure of the Participant to substantially
perform his duties with the Company (other than by
reason of illness) which occurs after the Company
has delivered to the Participant a demand
for performance which specifically identifies the
manner in which the Company believes the
Participant has failed to perform his duties, (ii)
the commission by the Participant of any act of
dishonesty or disloyalty involving the Company or
its business, or (iii) the conviction of the
Participant of a felony or misdemeanor which, in
the reasonable judgment of the Committee, is
substantially related to the employee's position
with the Company.
(e) "Change in Control" shall mean any
of the following events:
i) the acquisition by an individual,
entity or group (within the meaning of Section
13(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (a "Person") of
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20%
or more of either (a) the then outstanding shares
of common stock of the Company (the "Outstanding
Company Common Stock") or (b) the combined voting
power of the then outstanding voting securities of
the Company entitled to vote generally in the
election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for
purposes of this subsection (i), the following
acquisitions shall not constitute a Change of
Control: (a) any acquisition directly from the
Company, (b) any acquisition by the Company, (c)
any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the
Company, (d) any acquisition by any corporation
pursuant to a transaction which complies with
clauses (a), (b) and
(c) of subsection (iii) of this Section 2(e) or
(e) any acquisition by a "related person" as
defined below; or
ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority
of the Board; provided, however, that any
individual becoming a director subsequent to the
date hereof whose election, or nomination for
election by the Company's shareholders, was
approved by a vote of at least a majority of the
directors then constituting the Incumbent Board
shall be considered as though such individual were
a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose
initial assumption of office occurs as a result of
an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than
the Board; or
iii) consummation of a reorganization,
merger or consolidation or sale or other
disposition of all or substantially all of the
assets of the Company for which approval of the
shareholders of the Company is required (a
"Business Combination"), in each case, unless,
immediately following such Business Combination,
(a) all or substantially all of the individuals
and entities who were the beneficial owners,
respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding
shares of common stock and the combined voting
power of the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the corporation
resulting from such Business Combination
(including, without limitation, a corporation
which as a result of such transaction owns the
Company or all or substantially all of the
Company's assets either directly or through one or
more subsidiaries) in substantially the same
proportions as their ownership, immediately prior
to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (b) no
Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination or a
related person, as defined below) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding Common Stock of
the Corporation resulting from such Business
Combination or the combined voting power of the
then outstanding voting securities of such
corporation except to the extent that such
ownership existed prior to the Business
Combination and (c) at least a majority of the
members of the Board of Directors of the
corporation resulting from such Business
Combination were members of the Incumbent Board at
the time of the execution of he initial agreement,
or of the action of the Board, providing for such
Business Combination; or
iv) approval by the shareholders of the
Company of a complete liquidation or dissolution
of the Company.
For the purposes hereof, a "related person" shall
mean any one or more members of a group consisting
of (a) Terrence and Judith Paul, their issue
and/or spouses of their issue; (b) a trust or
estate of which one or more persons described in
(a) are beneficiaries; (c) a corporation or other
entity in which any one or more persons, trusts or
estates described in (a) and/or (b) own a majority
of the profits of such entity; or (d) any
corporation or other entity which is controlled by
any corporation or other entity described in (c),
above.
(f) "Common Stock" or "stock" shall
mean the authorized and issued or unissued $0.01
par value common stock of the Company.
(g) "Code" shall mean the Internal
Revenue Code of 1986, as amended from time to
time.
(h) "Committee" shall mean the
Compensation Committee of the Board of Directors
of Advantage Learning Systems Inc. The Committee
shall be comprised of at least two non-employee
directors, all of whom are "disinterested" within
the meaning of Rule 16b-3 promulgated under the
Exchange Act and "outside directors" within the
meaning of Section 162(m) of the Code.
(i) "Company" shall mean Advantage
Learning Systems, Inc. and its subsidiaries
including subsidiaries of subsidiaries and
partnerships and other business ventures in which
Advantage Learning Systems Inc. has a significant
equity interest, as determined in the sole
discretion of the Committee.
(j) "Fair Market Value" shall mean the
closing sale price of Common Stock on the NASDAQ
National Market System as reported in the Midwest
Edition of the Wall Street Journal for the date in
question, provided that, 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 exchange, or, failing any such
sales, such other market price as the Board or the
Committee may determine in conformity with
pertinent law and regulations of the Treasury
Department.
(k) "Participant" shall mean a current
or prospective employee, non-employee director or
consultant of the Company to whom an Award has
been made under the Plan.
(l) "Plan" shall mean the Advantage
Learning Systems, Inc. 1997 Stock Incentive Plan.
(m) "Retirement" shall mean termination
of employment with the Company or service as a
member of the Board after the attainment of age 62
with at least ten years of service with the
Company or the Board.
3. Eligibility. Current and prospective
employees, non-employee directors and consultants of
the Company eligible for an Award under the Plan are
those who hold, or will hold, positions of
responsibility and whose performance, in the judgment
of the Board, the Committee or the management of the
Company, can have a significant effect on the success
of the Company.
4. Common Stock Available for Awards. The
number of shares that may be issued under the Plan for
Awards granted wholly or partly in stock during the
term of the Plan is 1,500,000, subject to adjustment as
provided in Section 14 hereof, provided that not more
than 750,000 shares may be subject to incentive stock
options. Included in this share limit are Awards
denominated in units of stock that may be redeemed or
exercised for cash as well as for stock. The Company
shall take whatever actions are necessary to file
required documents with the U.S. Securities and
Exchange Commission and any other appropriate
governmental authorities and stock exchanges to make
shares of Common Stock available for issuance pursuant
to Awards. Common Stock related to Awards that are
forfeited, terminated, expire unexercised, settled in
cash in lieu of stock or in such manner that all or
some of the shares covered by an Award are not issued
to a Participant, shall immediately become available
for Awards. No employee shall be eligible to receive
Awards aggregating more than 750,000 shares of Common
Stock reserved under the Plan during the term of the
Plan, subject to adjustment as provided in Section 14
hereof.
5. Administration. The Plan shall be
administered by the Board prior to the initial public
offering of the Common Stock (the "IPO"), and after the
IPO by the Committee, which shall respectively have
full and exclusive power to interpret the Plan, to
determine which current and prospective employees, non-
employee directors and consultants are Plan
Participants, to grant waivers of Award restrictions,
and to adopt such rules, regulations and guidelines for
carrying out the Plan as it may deem necessary or
proper, all of which powers shall be executed in the
best interests of the Company and in keeping with the
objectives of the Plan. These powers include the
adoption of modifications, amendments, procedures,
subplans and the like as are necessary to comply with
provisions of the laws and regulations of the countries
in which the Company operates in order to assure the
viability of Awards granted under the Plan and to
enable Participants regardless of where employed to
receive advantages and benefits under the Plan and such
laws and regulations. Notwithstanding the foregoing,
any Award made to a non-employee director must be
approved by the Board.
6. Delegation of Authority. The Committee
may delegate to the chief executive officer and to
other senior officers of the Company its duties under
the Plan pursuant to such conditions or limitations as
the Committee may establish.
7. Awards. The Committee shall determine
the type or types of Award(s) to be made to each
Participant and shall set forth in the related Award
Agreement the terms, conditions, performance
requirements, and limitations applicable to each Award
including, but not limited to, continuous service with
the Company, achievement of specific business
objectives, increases in specified indices, attaining
growth rates, and other comparable measurements of
Company performance. Awards may include, but are not
limited to, those listed in this Section 7. Awards may
be granted singly, in combination or in tandem. Awards
may also be made in combination or in tandem with, in
replacement of, or as alternatives to, grants or rights
under any other employee plan of the Company, including
the plan of any acquired entity. In all events, upon
the occurrence of a Change in Control, all Awards will
become fully vested and immediately exercisable.
(a) Stock Option. A grant of a right
to purchase a specified number of shares of Common
Stock the purchase price of which shall be not
less than 100% of Fair Market Value on the date of
grant, as determined by the Committee. A stock
option may be in the form of a nonqualified stock
option or an incentive stock option ("ISO"). An
ISO, in addition to being subject to applicable
terms, conditions and limitations established by
the Committee, complies with Section 422 of the
Code which, among other limitations, provides that
the aggregate Fair Market Value (determined at the
time the option is granted) of Common Stock for
which ISOs are exercisable for the first time by a
Participant during any calendar year shall not
exceed $100,000; that ISOs shall be priced at not
less than 100% of the Fair Market Value on the
date of the grant (110% in the case of a
Participant who is a 10% shareholder of the
Company within the meaning of Section 422 of the
Code); and that ISOs shall be exercisable for a
period of not more than ten years (five years in
the case of a Participant who is a 10% shareholder
of the Company).
(b) Stock Appreciation Right. A right
to receive a payment, in cash and/or Common Stock,
equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the
date the stock appreciation right ("SAR") is
exercised over the Fair Market Value on the date
of grant of the SAR as set forth in the applicable
Award Agreement.
(c) Stock Award. An Award made in
stock or denominated in units of stock. Such
Awards may be based on Fair Market Value or other
specified valuation with the eventual payment
amount subject to future service and such other
restrictions and conditions as may be established
by the Committee and as set forth in the Award
Agreement.
8. Payment of Awards. Payment of Awards may
be made in the form of cash, stock or combinations
thereof and may include such restrictions as the
Committee shall determine, including in the case of
stock, restrictions on transfer and forfeiture
provisions. When transfer of stock is so restricted or
subject to forfeiture provisions, it is referred to as
"Restricted Stock." The Committee may permit selected
Participants to elect to defer payments of some or all
types of Awards in accordance with procedures
established by the Committee which are intended to
permit such deferrals to comply with applicable
requirements of the Code including, at the choice of
Participants, the capability to make further deferrals
for payment after retirement. Dividends or dividend
equivalent rights may be extended to and made part of
any Award denominated in stock or units of stock,
subject to such terms, conditions and restrictions as
the Committee may establish. The Committee may also
establish rules and procedures for the crediting of
interest on deferred cash payments and dividend
equivalents for deferred payments denominated in stock
or units of stock.
9. Stock Option Exercise. The price at
which shares of Common Stock may be purchased under a
Stock Option shall be paid in full at the time of the
exercise in cash or, if permitted by the Committee, by
means of tendering Common Stock, either directly or by
attestation, valued at Fair Market Value on the date of
exercise, or any combination thereof.
10. Tax Withholding. The Company shall have
the right to deduct applicable taxes from any Award
payment and withhold, at the time of delivery or
vesting of shares under the Plan, an appropriate number
of shares for payment of taxes required by law or to
take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for
withholding of such taxes. The Company may defer
making delivery with respect to cash and/or Common
Stock obtained pursuant to an Award hereunder until
arrangements satisfactory to it have been made with
respect to any such withholding obligation. If Common
Stock is used to satisfy tax withholding, such stock
shall be valued based on the Fair Market Value when the
tax withholding is required to be made.
11. Amendment, Modification, Suspension or
Discontinuance of the Plan. The Board may terminate
the Plan or make such modifications or amendments
thereto as it shall deem advisable in order to conform
to any law or regulation applicable thereto; provided,
however, that the Board may not, unless otherwise
permitted under applicable law, without further
approval of the shareholders of the Company, adopt any
amendment to the Plan which would cause the Plan to no
longer comply with Section 162(m) of the Code, or any
successor provision or other regulatory requirements.
No such termination, modification or amendment of the
Plan may, without the consent of a Participant,
adversely affect the rights of such Participant under
an outstanding Award then held by the Participant.
12. Termination of Employment. If the
employment of a Participant terminates, or a non-
employee director no longer serves on the Board, other
than pursuant to paragraphs (a) through (c) of this
Section 12, all unexercised, deferred and unpaid Awards
shall terminate 90 days after such termination of
employment or service, unless the Award Agreement
provides otherwise, and during such 90-day period shall
be exercisable only to the extent provided in the Award
Agreement. Notwithstanding the foregoing, if a
Participant's employment is terminated for Cause, to
the extent the Award is not effectively exercised or
has not vested prior to such termination, it shall
lapse or be forfeited to the Company immediately upon
termination. In all events, an Award will not be
exercisable after the end of its term as set forth in
the Award Agreement.
(a) Retirement. When a Participant's
employment or service terminates as a result of
Retirement, or early retirement with the consent
of the Committee, the Committee (in the form of an
Award Agreement or otherwise) may permit Awards to
continue in effect beyond the date of Retirement,
or early retirement, and/or the exercisability and
vesting of any Award may be accelerated.
(b) Resignation in the Best Interests
of the Company. When a Participant resigns from
the Company or the Board and, in the judgment of
the chief executive officer or other senior
officer designated by the Committee, the
acceleration and/or continuation of outstanding
Awards would be in the best interests of the
Company, the Committee may (i) authorize, where
appropriate, the acceleration and/or continuation
of all or any part of Awards granted prior to such
termination and (ii) permit the exercise, vesting
and payment of such Awards for such period as may
be set forth in the applicable Award Agreement.
(c) Death or Disability of a
Participant.
(i) In the event of a
Participant's death, the Participant's estate
or beneficiaries shall have a period
specified in the Award Agreement within which
to receive or exercise any outstanding Award
held by the Participant under such terms, and
to the extent, as may be specified in the
applicable Award Agreement. Rights to any
such outstanding Awards shall pass by will or
the laws of descent and distribution in the
following order: (a) to beneficiaries so
designated by the Participant; if none, then
(b) to a legal representative of the
Participant; if none, then (c) to the persons
entitled thereto as determined by a court of
competent jurisdiction. Subject to
subparagraph (iii) below, Awards so passing
shall be exercised or paid out at such times
and in such manner as if the Participant were
living.
(ii) In the event a
Participant is deemed by the Company to be
disabled within the meaning of Section
22(e)(3) of the Code, the Award shall be
exercisable for the period, and to the
extent, specified in the Award Agreement.
Awards and rights to any such Awards may be
paid to or exercised by the Participant, if
legally competent, or a legally designated
guardian or representative if the Participant
is legally incompetent by virtue of such
disability.
(iii) After the death or
disability of a Participant, the Committee
may in its sole discretion at any time (1)
terminate restrictions in Award Agreements;
(2) accelerate any or all installments and
rights; and (3) instruct the Company to pay
the total of any accelerated payments in a
lump sum to the Participant, the
Participant's estate, beneficiaries or
representative, notwithstanding that, in the
absence of such termination of restrictions
or acceleration of payments, any or all of
the payments due under the Awards might
ultimately have become payable to other
beneficiaries.
(iv) In the event of
uncertainty as to interpretation of or
controversies concerning this paragraph (c)
of Section 12, the Committee's determinations
shall be binding and conclusive.
(d) No Employment Rights. The Plan
shall not confer upon any Participant any right
with respect to continuation of employment by the
Company or service on the Board, nor shall it
interfere in any way with the right of the Company
to terminate any Participant's employment or
service on the Board at any time.
13. Nonassignability. Except as provided in
subsection (c) of Section 12 and this Section 13, no
Award or any other benefit under the Plan shall be
assignable or transferable, or payable to or
exercisable by anyone other than the Participant to
whom it was granted. Notwithstanding the foregoing,
the Committee (in the form of an Award Agreement or
otherwise) may permit Awards to be transferred to
members of the Participant's immediate family, to
trusts for the benefit of the Participant
and/or such immediate family members, and to
partnerships or other entities in which the Participant
and/or such immediate family members own all the equity
interests. For purposes of the preceding sentence,
"immediate family" shall mean a Participant's spouse,
issue, and spouses of his issue.
14. 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 Committee may adjust
proportionally (a) the number of shares of Common Stock
(i) reserved under the Plan, (ii) available for ISOs,
(iii) for which Awards may be granted to an individual
Participant, and (iv) covered by outstanding Awards
denominated in stock or units of stock; (b) the stock
prices related to outstanding Awards; and (c) the
appropriate Fair Market Value and other price
determinations for such Awards. 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 Committee, including
adjustments to avoid fractional shares, shall be made
to give proper effect to such event. In the event of a
corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or
liquidation, the Committee shall be authorized to issue
or assume Stock Options, whether or not in a
transaction to which Section 424(a) of the Code
applies, by means of substitution of new Stock Options
for previously issued Stock Options or an assumption of
previously issued Stock Options.
15. Notice. Any notice to the Company
required by any of the provisions of the Plan shall be
addressed to the chief human resources officer or to
the chief executive officer of the Company in writing,
and shall become effective when it is received by the
office of either of them.
16. Unfunded Plan. The Plan shall be
unfunded. Although bookkeeping accounts may be
established with respect to Participants who are
entitled to cash, Common Stock or rights thereto under
the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be
required to segregate any assets that may at any time
be represented by cash, Common Stock or rights thereto,
nor shall the Plan be construed as providing for such
segregation, nor shall the Company nor the Board nor
the Committee be deemed to be a trustee of any cash,
Common Stock or rights thereto to be granted under the
Plan. Any liability of the Company to any Participant
with respect to a grant of cash, Common Stock or rights
thereto under the Plan shall be based solely upon any
contractual obligations that may be created by the Plan
and any Award Agreement; no such obligation of the
Company shall be deemed to be secured by any pledge or
other encumbrance on any property of the Company.
Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the
performance of any obligation that may be created by
the Plan.
17. Governing Law. The Plan and all
determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by the laws of the
United States, shall be governed by the laws of the
State of Wisconsin and construed accordingly.
18. Effective and Termination Dates. The
effective date of the Plan, as amended and restated, is
October 23, 1997. The Plan shall terminate on March
28, 2007 subject to earlier termination by the Board
pursuant to Section 11, after which no Awards may be
made under the Plan, but any such termination shall not
affect Awards then outstanding or the authority of the
Committee to continue to administer the Plan.
19. Other Benefit and Compensation Programs.
Payments and other benefits received by a Participant
pursuant to an Award shall not be deemed a part of such
Participant's regular, recurring compensation for
purposes of the termination, indemnity or severance pay
law of any country and shall not be included in, nor
have any effect on, the determination of benefits under
any other employee benefit plan, contract or similar
arrangement, unless the Committee expressly determines
otherwise.
Preliminary Copies
Proxy Card
ADVANTAGE LEARNING SYSTEMS, INC.
This Proxy is Solicited on Behalf of the Board of
Directors
The undersigned appoints Michael H. Baum and John
R. Hickey, and each of them, as proxies, each with the
power to appoint his substitute, and authorizes each of
them to represent and to vote, as designated below, all
of the shares of common stock of Advantage Learning
Systems, Inc. held of record by the undersigned on
February 28, 2001 at the 2001 annual meeting of
shareholders of Advantage Learning Systems, Inc. to be
held on April 18, 2001 and at any adjournment thereof.
This proxy, when properly executed, will be voted
in the manner directed herein by the undersigned
shareholder. If no direction is made, this proxy will
be voted "FOR" the election of all nominees for
directors, "FOR" the amendment to the articles of
incorporation of the company to change the company's
name and "FOR" the approval of the company's 1997 stock
incentive plan.
(Detach below and return using the envelope provided.)
Advantage Learning Systems, Inc. 2001 Annual Meeting
1.ELECTION OF DIRECTORS:
(To serve until the 1-Judith Ames Paul [ ] FOR all [ ] WITHHOLD
2002 Annual Meeting 2-Terrance D. Paul nominees AUTHORITY
and until their 3-Michael H. Baum listed to to vote
successors are 4-John R. Hickey the left for all
elected and qualified) 5-Timothy P. Welch (except as nominees
6-John H. Grunewald specified listed to
7-Gordon H. Gunnlaugsson below). the left.
8-Harold E. Jordan
(Instructions: To withhold authority to vote for
any indicated nominee, write the number(s) of the
nominee(s) in the box provided to the right.) [ ]
2.AMENDMENT TO ARTICLES OF INCORPORATION TO CHANGE THE
COMPANY'S NAME TO "RENAISSANCE LEARNING, INC.":
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3.APPROVAL OF COMPANY'S 1997 STOCK INCENTIVE PLAN:
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4.IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
No. of Shares ________
Date:____________________________
Check appropriate box
Indicate changes below: ____________________________
(Signature of Shareholder)
Address Change? [ ] Name Change? [ ]
____________________________
(Signature of Shareholder -
if held jointly)
Please sign exactly as
name appears hereon.
When shares are held by
joint tenants, both
should sign. When
signing as attorney,
executor, administrator,
trustee or guardian,
please give full title
as such. If a
corporation, please sign
in full corporate name by
President or other
authorized officer. If a
partnership, please sign
in partnership name by
authorized person.