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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
Advantage Learning Systems, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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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, as required under
Section 162(m) of the Internal Revenue Code of 1986 (which is the
provision that governs the deductibility of compensation paid to
certain executive officers); 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 12, 2001
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ADVANTAGE LEARNING SYSTEMS, INC.
2911 PEACH STREET
P.O. BOX 8036
WISCONSIN RAPIDS, WISCONSIN 54495-8036
MARCH 12, 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 12, 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 34,465,587 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.
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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.
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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(13)
------------------- ----------------------- ----------------------
Judith Ames Paul..................................... 12,228,233(2) 35.46%
Terrance D. Paul..................................... 12,228,233(3) 35.46%
Michael H. Baum...................................... 126,835(4) *
John R. Hickey....................................... 117,472(5) *
Timothy P. Welch..................................... 65,056(6) *
Perry S. Akins....................................... -- --
John H. Grunewald.................................... 16,500(7) *
Gordon H. Gunnlaugsson............................... 3,500(8) *
Harold E. Jordan..................................... 7,500(9) *
Steven A. Schmidt.................................... 2,968(10) *
All directors and executive officers as a group (10
persons)........................................... 24,796,297(11) 71.41%
Mark J. Bradley, as Trustee of the Terrance and
Judith Paul Descendants' Trust..................... 1,927,686(12) 5.59%
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* 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 94,740 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 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.
(8) Includes options for 1,500 shares of common stock which are currently
exercisable.
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(9) 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.
(10) Includes options for 2,968 shares of common stock which are currently
exercisable.
(11) Includes options for 256,810 shares of common stock which are currently
exercisable.
(12) The address of the Trustee of the Terrance and Judith Paul Descendants'
Trust is 500 Third Street, Suite 700, Wausau, Wisconsin 54403.
(13) Based on 34,465,587 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
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Judith Ames Paul Ms. Paul is the co-founder of the company and has been
Age 54 chairman of the board of directors since 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.
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NAME AND AGE
OF DIRECTOR OFFICE
------------ ------
Terrance D. Paul Mr. Paul is the co-founder of the company and has been vice
Age 54 chairman of the board of directors since 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
Math(R), STAR Reading(R), STAR Math(R) and Renaissance(TM)
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 since July
Age 53 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 and a
Age 45 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.
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NAME AND AGE
OF DIRECTOR OFFICE
------------ ------
Timothy P. Welch Mr. Welch has been a director since August 1996. Mr. Welch
Age 58 is the founder of the predecessor to IPS 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. Grunewald Mr. Grunewald has been a director since September 1997. From
Age 64 September 1993 to January 1997, Mr. 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. Gunnlaugsson Mr. Gunnlaugsson has been a director since April 2000. From
Age 56 1987 through 2000, Mr. Gunnlaugsson 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.
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NAME AND AGE
OF DIRECTOR OFFICE
------------ ------
Harold E. Jordan Mr. Jordan has been a director since April 2000. Since
Age 50 December 1990, Mr. Jordan has served as the 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.
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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 COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#)(1) COMPENSATION($)(2)
--------------------------- ---- --------- -------- ------------------ ------------------
Judith Ames Paul................ 2000 $204,846 -- 8,316 $8,112
Chairman of the Board 1999 191,173 -- 35,654 6,600
1998 181,186 -- 25,724 6,600
Terrance D. Paul................ 2000 $204,846 -- 8,316 $8,112
Vice Chairman of the Board 1999 191,173 -- 35,654 6,600
1998 181,186 -- 25,724 6,600
Michael H. Baum................. 2000 $215,244 -- 16,632 $8,522
Chief Executive Officer 1999 185,807 -- 71,307 6,600
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, Chief 1999 57,115 -- 11,866 --
Financial Officer and
Secretary
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(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 $0.
(3) Mr. Schmidt joined the company in August 1999.
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Option Grants. The following table provides information on options granted
to the named executive officers during 2000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------------------------
% OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR ($/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 $130,825
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(1) The vesting schedule for options is 25% per year with each option being
fully exercisable four years from the date of grant.
(2) All options have an exercise price equal to 100% of the fair market of the
common stock on the date of grant.
(3) The grant date present values were determined using the Black-Scholes model
with the following common assumptions: a 10 year expected period of time to
exercise; a risk-free rate of return of 6.14%; an expected dividend yield of
0.00%; and a volatility factor of 87.90%.
Option Exercises. The following table provides information on options
exercised during 2000, and options held at year end, by the named executive
officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
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
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(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.
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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.
In April 2000, options were also granted to Messrs. Gunnlaugsson and Jordan to
coincide with their initial election to the board of directors. At that time,
they each received options 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 affect 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
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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.
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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
Perry S. Akins
Gordon H. Gunnlaugsson
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.
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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
[PERFORMANCE GRAPH]
ADVANTAGE LEARNING NASDAQ STOCK MARKET
SYSTEMS, INC. NEW PEER GROUP* OLD PEER GROUP* (U.S.)
------------------ --------------- --------------- -------------------
9/25/97 100.00 100.00 100.00 100.00
12/31/97 134.00 111.00 111.00 94.00
12/31/98 411.00 91.00 91.00 132.00
12/31/99 140.00 74.00 75.00 260.00
12/31/00 420.00 130.00 130.00 156.00
- -------------------------
* 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. The figures in the old peer group index and the new peer
group index are substantially the same.
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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 (which was prior to the company's initial
public offering), 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 before the company became publicly held, shareholders
are again being asked to approve the plan, in the form attached to this proxy
statement as Exhibit B. The form of the plan the shareholders are being asked to
approve is the same plan that was approved by shareholders in March 1997, as
amended and restated to reflect changes approved by the board in October 1997.
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.
Pursuant to Code Section 162(m), no deduction is allowed for compensation
paid to certain executive officers in excess of $1,000,000, unless such
compensation is performance-based. Compensation resulting from the exercise of
stock options granted at the grant date fair market value of the company's stock
is generally treated as performance-based if certain requirements are met. If
the plan existed prior to the company going public, the plan must again be
approved by shareholders if subsequent grants are to continue to be treated as
performance-based for purposes of Section 162(m). Specifically, the plan must be
approved at the first
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meeting of shareholders at which directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which the
initial public offering occurs. This means that the plan must be approved by
shareholders at the 2001 annual meeting if the compensation expense arising in
connection with options granted after the 2001 annual meeting is to continue to
be deductible under Code Section 162(m).
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 an additional 6,000 shares of common stock at an
exercise price of $14.125 per share to two non-employee directors who
were first elected to the board in 2000; and
- options to purchase 159,538 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
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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 1,500,000 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 an 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 an 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
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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
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by us at our principal executive offices, 2911 Peach Street, P.O. Box 8036,
Wisconsin Rapids, Wisconsin 54495-8036 on or before November 12, 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
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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
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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.
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- 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.
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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.
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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
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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
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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
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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
B-4
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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.
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(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
B-6
31
(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.
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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.)
33
ADVANTAGE LEARNING SYSTEMS, INC. 2001 ANNUAL MEETING
1. ELECTION OF DIRECTORS:
(To serve until the 2002 1-Judith Ames Paul | | FOR all nominees | | WITHHOLD AUTHORITY
Annual Meeting and until 2-Terrance D. Paul listed to the left to vote for all
their successors are 3-Michael H. Baum (except as specified nominees listed
elected and qualified) 4-John R. Hickey below). to the left.
5-Timothy P. Welch
6-John H. Grunewald
7-Gordon H. Gunnlaugsson
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.