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 Section 240.14a-12
SCHOLASTIC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / 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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SCHOLASTIC CORPORATION
555557 Broadway
New York, NY
10012-3999
(212) 343-6100
SCHOLASTIC CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO HOLDERS OF COMMON STOCK AND CLASS A STOCK:
The Annual Meeting of Stockholders of Scholastic Corporation (the "Company")
will be held at the Company's corporate headquarters located at 555557 Broadway,
New York, New York on Tuesday,Thursday, September 19, 200020, 2001 at 9:00 a.m., local time, for
the following purposes:
MATTERS TO BE VOTED UPON BY HOLDERS OF THE CLASS A STOCK
- Electing nineten directors of the Board of Directors.
- Approval of certain amendments to the Company's Amended and Restated
Certificate of Incorporation to (i) increase the number of authorized
shares of stock of the Company and (ii) effect certain other amendments
as set forth in the proposed charter amendment to the Amended and
Restated Certificate of Incorporation.Scholastic Corporation 2001 Stock Incentive Plan.
- Ratifying the appointment of Ernst & Young LLP as independent auditors.
MATTERS TO BE VOTED UPON BY HOLDERS OF THE COMMON STOCK
- Electing three directors of the Board of Directors.
- Approval of the amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares
of Common Stock of the Company.
In addition to the foregoing purposes, such other business may be transacted as
may properly come before the meeting and any adjournment thereof.
A proxy statement describing the matters to be considered at the Annual Meeting
of Stockholders is attached to this notice. Only stockholders of record of the
Common Stock and the Class A Stock at the close of business on August 9, 200010, 2001
are entitled to notice of, and to vote at, the meeting and any adjournments
thereof.
WE HOPE THAT YOU WILL BE ABLE TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
BE PRESENT AT THE MEETING, WE URGE YOU TO COMPLETE, DATE, SIGN ANDVOTE YOUR SHARES. YOU CAN NOW VOTE
YOUR SHARES IN THREE WAYS: (I) VIA THE INTERNET AT THE WEBSITE INDICATED ON YOUR
PROXY CARD; (II) VIA TELEPHONE BY CALLING THE TOLL FREE NUMBER ON YOUR PROXY
CARD OR (III) BY PROMPTLY RETURNRETURNING THE ENCLOSED PROXY CARD.
By Order of the Board of Directors
[SIG]
Charles B. Deull
Senior Vice President, General
Counsel and Secretary
August 24, 2001
SCHOLASTIC LOGO
SCHOLASTIC CORPORATION
PROXY STATEMENT
TABLE OF CONTENTS
Solicitation of Proxies..................................... 1
General Information................................... 1
Voting Securities of the Company...................... 2
Principal Holders of Class A Stock and Common Stock... 3
Change of Control Arrangements........................ 5
Compliance with Section 16(a) of the Exchange Act..... 65
Share Ownership of Management......................... 76
Executive Compensation...................................... 98
Summary Compensation Table............................ 98
Option Grants in Fiscal 2000.......................... 102001.......................... 9
Aggregated Option Exercises in Fiscal 20002001 and 20002001
Fiscal Year-End Option Values....................... 119
Pension Plan.......................................... 1110
Employment Agreement.................................. 1211
Stock Price Performance Graph......................... 11
The Human Resources and Compensation Committee's
Report on Executive Compensation........ 13
Stock Price Performance Graph......................... 17Compensation.................... 12
MATTERS SUBMITTED TO STOCKHOLDERS........................... 1817
- - Election of Directors..................................... 1817
Nominees for Election by Holders of the Class A
Stock............................................... 1918
Nominees for Election by Holders of the Common
Stock............................................... 1918
Meetings of the Board of Directors and Its
Committees.......................................... 2221
Director Compensation................................. 24
Certain Transactions and Certain Relationships........ 2524
- - Approval of Amendment to the Company's Amended and
Restated Certificate of Incorporation.....................Scholastic Corporation 2001 Stock
Incentive Plan............................................ 25
Amendment to the Certificate to Increase the Number of
Authorized Shares of Common Stock and Preferred Stock
of the Company......................................... 26
Other Amendments to the Certificate................... 28
- - Ratification of the Selection of the Independent
Auditors.................................................. 3031
Audit Committee Report...................................... 31
Stockholder Proposals for 2001 Annual Meeting............... 3133
Other Matters............................................... 3133
Appendix I..................................................A: The Scholastic Corporation 2001 Stock Incentive
Plan...................................................... A-1
Appendix B: Audit Committee Charter......................... B-1
SCHOLASTIC CORPORATION
555557 BROADWAY
NEW YORK, NEW YORK 10012
---------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 19, 200020, 2001
---------------------
SOLICITATION OF PROXIES
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Scholastic Corporation, a Delaware
corporation (the "Company"), to be voted at its Annual Meeting of Stockholders
(the "Annual Meeting"), which will be held at 555557 Broadway, New York, New York
at 9:00 a.m., local time, on Tuesday,Thursday, September 19, 2000,20, 2001, and at any
adjournments thereof.
Shares represented by each proxy properly executed and returned will be
voted unless revoked. A stockholder may revoke a proxy at any time before it is
exercised byby: (i) filing with the Secretary of the Company a written revocation
thereof or a duly executed proxy bearing a later date, (ii) providing subsequent
telephone or byinternet voting instructions or (iii) voting in person at the
Annual Meeting. Any written notice revoking a proxy should be sent to the
attention of Charles B. Deull, Senior Vice President, General Counsel and
Secretary, Scholastic Corporation, 555557 Broadway, New York, New York 10012.
This proxy statement and the accompanying form of proxy, together with
the Company's 20002001 Annual Report to Stockholders, are being mailed to
stockholders on or about August 25, 2000.24, 2001.
If a stockholder is the beneficial owner of the Company's Common Stock
under the Scholastic Corporation 401(k) Savings and Retirement Plan, a direction
and proxy will be delivered to Putnam Fiduciary Trust Company, as trustee, in
connection with the shares beneficially owned by such stockholder and held by
the trustee. The trustee will vote the Common Stock in accordance with the
directions received from the beneficial owners.
The cost of soliciting proxies will be borne by the Company. In addition
to the solicitation by mail, proxies may be solicited by officers, directors and
employees of the Company in person or by telephone, telegraph or facsimile. The
Company has retained
ChaseMellon Shareholder
Mellon Investor Services, L.L.C. to assist in the solicitation of proxies for a
fee estimated at $4,500$5,000 plus reasonable expenses. The Company may also reimburse
brokers, custodians, nominees and other fiduciaries for their reasonable
expenses in forwarding proxy materials to principals.
VOTING SECURITIES OF THE COMPANY
Only holders of record of the Company's Common Stock, $.01 par value
("Common Stock"), and Class A Stock, $.01 par value ("Class A Stock"), at the
close of business on August 9, 200010, 2001 (the "Record Date") are entitled to vote at
the Annual Meeting. As of the Record Date, there were outstanding 16,238,58133,577,492
shares of Common Stock and 828,1001,656,200 shares of Class A Stock.
On December 14, 2000, the Board of Directors declared a 2-for-1 stock
split in the form of a 100% stock dividend (the "2-for-1 Stock Split") for each
outstanding share of the Company's Common Stock and Class A Stock, to
stockholders of record as of December 29, 2000, payable as of January 16, 2001.
All references to share and option amounts in this proxy statement reflect the
2-for-1 Stock Split, except as otherwise indicated.
The Amended and Restated Certificate of Incorporation of the Company (the
"Certificate") provides that, except as otherwise provided by law, the holders
of shares of Class A Stock, voting as a class, have the rightright: (i) to fix the
size of the Board of Directors so long as it does not consist of less than three
nor more than 15 directors, (ii) to elect all the directors, subject to the
right of the holders of shares of Common Stock, voting as a class, to elect such
minimum number of the members of the Board of Directors as shall equal at least
one-fifth of the members of the Board of Directors, and (iii) to exercise,
exclusive of the holders of the shares of Common Stock, all other voting rights
of stockholders of the Company. The Certificate also provides that, except as
otherwise provided by statute,law, the voting rights of the holders of shares of Common
Stock are limited to the right, voting as a class, to elect such minimum number
of the members of the Board of Directors as shall equal at least one-fifth of
the members of the Board of Directors.
Each share of Common Stock and Class A Stock is entitled to one vote. No
holders of either class of stock have cumulative voting rights. At the Annual
Meeting, holders of the Common Stock will vote on the election of three
directors to the Board of Directors and, in accordance with the Delaware General
Corporation Law, the proposal to amend the Certificate to increase the number of
authorized shares of Common Stock.Directors. All other proposals set forth in the notice
attached to this proxy statement will be voted on by the holders of the Class A
Stock, which holders will also vote on the proposal to amend the Certificate to
increase the number of authorized shares of Common
Stock.
The vote required for approval of each of the proposals before the
stockholders at the Annual Meeting is specified in the description of such
proposal. Under the Company's Bylaws, for the purpose of determining whether a
proposal other than the proposal to approve the proposed amendment to the
Certificate, has received the required vote, abstentions will not be considered as
votes cast and will have no effect. In the case of the proposal to approve
the proposed amendments to the Certificate, including the proposed increase in
the number of authorized shares of Common Stock, abstentions and broker
non-votes (which may occur if a beneficial owner of Common Stock whose shares
are held
2
in a brokerage or bank account fails to provide the broker or bank with voting
instructions as to such shares) effectively count as votes against the
amendments. Because none of the
2
shares of Class A Stock are held by brokers, the effect of broker non-votes is
not applicable in the case of the Class A Stock.
PRINCIPAL HOLDERS OF CLASS A STOCK AND COMMON STOCK
The following sets forth information regarding persons who, to the best
of the Company's knowledge, beneficially owned five percent or more of any class
of the Company's voting shares outstanding on August 9, 2000.10, 2001. All such
information reflects the 2-for-1 Stock Split. Under the rules and regulations of
the Securities and Exchange Commission (the "SEC"), a person who directly or
indirectly has, or shares, voting power or investment power with respect to a
security is considered a beneficial owner of such security. Voting power is the
power to vote or direct the voting of shares, and investment power is the power
to dispose of or direct the disposition of shares.
CLASS A STOCK COMMON STOCK
AMOUNT AND
AMOUNT AND NATURE OF
NATURE OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT OF BENEFICIALOWNERSHIP PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1)(1) CLASS OWNERSHIP(2)(2) CLASS
Richard Robinson
c/o Scholastic Corporation
555557 Broadway 828,1001,656,200 100% 3,043,022(3) 17.4%6,337,586(3) 17.5%
New York, NY 10012
Barbara Robinson Buckland
c/o Scholastic Corporation
555557 Broadway 324,310648,620 39.2% 1,424,195 8.6%2,830,228 8.3%
New York, NY 10012
Mary Sue Robinson Morrill
c/o Scholastic Corporation
555557 Broadway 382,648765,296 46.2% 1,734,734(4) 10.7%3,549,468(4) 10.3%
New York, NY 10012
William W. Robinson
c/o Scholastic Corporation
555557 Broadway 324,310648,620 39.2% 1,366,480(5) 8.3%2,732,960(5) 8.0%
New York, NY 10012
Trust under the Will of
Maurice R. Robinson
c/o Scholastic Corporation 324,310648,620 39.2% 1,165,856 7.0%
5552,331,712 6.8%
557 Broadway
New York, NY 10012
Trust under the Will of
Florence L. Robinson
c/o Scholastic Corporation 58,338116,676 7.0% 233,338466,676 1.4%
555557 Broadway
New York, NY 10012
Massachusetts Financial Services
Company
500 Boylston Street -- -- 1,896,842(6) 11.7%4,206,972(6) 12.5%
Boston, MA 02116
SF Advisory Corp.
SF Advisory Corp. II
591 Redwood Highway -- -- 1,237,100(7) 7.6%
Suite 3215
Mill Valley, CA 94941
3
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(1) Each of Richard Robinson, Barbara Robinson Buckland, Mary Sue Robinson
Morrill, William W. Robinson and the Maurice R. Robinson Trust have filed
Statements on Schedule 13G with the SEC (the "13G Filings") regarding their
beneficial ownership of the Company's Common Stock. Richard Robinson,
Chairman of the Board, President and Chief Executive Officer of the Company,
and Barbara Robinson Buckland, Mary Sue Robinson Morrill and William W.
Robinson, all of whom are siblings of Richard Robinson, are trustees of the
Trust under the Will of Maurice R. Robinson (the "Maurice R. Robinson
Trust"), with shared voting and investment power with respect to the shares
owned by the Maurice R. Robinson Trust. Under the terms of the Maurice R.
Robinson Trust, the vote of a majority of the trustees is required to vote
or direct the disposition of the shares held by the Maurice R. Robinson
Trust. In addition, Richard Robinson and Mary Sue Robinson Morrill are the
co-trustees of the Trust under the Will of Florence L. Robinson (the
"Florence L. Robinson Trust"), with shared voting and investment power with
respect to the shares owned by the Florence L. Robinson Trust. Any acts by
the Florence L. Robinson Trust require the approval of each Trustee. Each
such trust directly owns the shares attributed to it in the table and each
person listed herein as a trustee of such trusts is deemed to be the
beneficial owner of the shares directly owned by such trust. Based on the
13G filings and subsequent information made available to the Company, the
aggregate beneficial ownership of the Class A Stock by the following persons
is: Richard Robinson--445,452Robinson--890,904 shares (sole voting and investment power) and
382,648765,296 shares (shared voting and investment power); Barbara Robinson
Buckland--0Buckland- 0 shares (sole voting and investment power) and 324,310648,620 shares
(shared voting and investment power); Mary Sue Robinson Morrill--0 shares
(sole voting and investment power) and 382,648765,296 shares (shared voting and
investment power); William W. Robinson--0 shares (sole voting and investment
power) and 324,310648,620 shares (shared voting and investment power); Maurice R.
Robinson Trust--324,310Trust--648,620 shares (sole voting and investment power); and
the
Florence L. Robinson trust--58,338trust--116,676 shares (sole voting and investment
power).
(2) The shares of Class A Stock are convertible at the option of the holder into
shares of Common Stock at any time on a share-for-share basis. The number of
shares of Common Stock and percentage of the outstanding shares of Common
Stock for each beneficial owner of Class A Stock assumes the conversion of
such holder's shares of Class A Stock. Based on the 13G filings and
subsequent information made available to the Company, the aggregate
beneficial ownership of the Company's Common Stock by the following holders
is: Richard Robinson--1,563,928Robinson--3,378,298 shares (sole voting and investment power)
and 1,479,0942,958,288 shares (shared voting and investment power); Barbara Robinson
Buckland -211,339Buckland--404,516 shares (sole voting and investment power) and 1,212,8562,425,712
shares (shared voting and investment power); Mary Sue Robinson Morrill--0
shares (sole voting and investment power) and 1,734,7343,549,468 shares (shared
voting and investment power); William W. Robinson--195,974Robinson--391,948 shares (sole
voting and investment power) and 1,192,5062,341,012 shares (shared voting and
investment power); Maurice R. Robinson Trust--1,165,856Trust--2,331,712 (sole voting and
investment power); and Florence L. Robinson Trust--233,338Trust--466,676 (sole voting and
investment power).
(3) Includes 828,1001,656,200 shares of Common Stock issuable on conversion of the
Class A Stock described in Note 2; 726,5191,453,224 shares of Common Stock held
directly by Richard Robinson; 382,0761,014,152 shares of Common Stock under options
exercisable by Mr. Robinson within 60 days; 9,88120,018 shares of Common Stock
with respect to which Mr. Robinson had voting rights at May 31, 20002001 under
the 401(k) Plan; 841,5461,683,092 shares of Common Stock owned by the Maurice R.
Robinson Trust; 175,000350,000 shares of Common Stock owned by the Florence L.
Robinson Trust; 3,7977,594 shares of Common Stock for which Mr. Robinson is
custodian under a separate custodial account for one of his sons; 1,5564,212
shares of Common Stock owned directly by his sons; and 74,547149,094 shares of
Common Stock owned by the Richard Robinson and Helen Benham Charitable Fund.
Does not include 148,907310,224 of the shares of Common Stock beneficially owned by
Helen V. Benham, an officer and director of the Company and the wife of
Richard Robinson, as to which Mr. Robinson disclaims beneficial ownership.
(4) Does not include an aggregate of 168,698337,376 shares of Common Stock held under
Trusts for which Ms. Morrill's spouse and sister are trustees, as to which
Ms. Morrill disclaims beneficial ownership.
4
(5) Does not include 22,00044,000 shares of Common Stock held under Trusts for which
Mr. William Robinson's spouse is a trustee, as to which Mr. Robinson
disclaims beneficial ownership.
(6) Based on aAmendment No. 3 to Schedule 13G/A13G dated February 12, 20005, 2001, as filed
with the SEC.
(7) Based on Amendment No. 3 to a Schedule 13D filed with the SEC on July 25,
2000 on behalf of Main Street Partners, L.P. ("MSP"); MSP's sole general
partner, MS Advisory Partners, L.P. ("MSAP"); San Francisco Partners II,
L.P. ("SFP"); SFP's sole general partner, SF Advisory Partners, L.P.
("SFAP"); SF Advisory Corp. and SF Advisory Corp. II, the general partners
of each of MSAP and SFAP; John H. Scully, the sole stockholder and director
and chief executive officer of SF Advisory Corp.; and William E. Oberndorf,
the sole stockholder and director and chief executive officer of SF Advisory
Corp. II. Of such 1,237,100 shares, 787,300 shares represent the holdings of
MSP, in respect of which MSP and MSAP have sole voting and investment power,
and 178,300 shares represent the holdings of SFP, of which SFP and SFAP have
sole voting and investment power. By virtue of their positions, SF Advisory
Corp., SF Advisory Corp. II and Messrs. Scully and Oberndorf have shared
voting and investment power in respect of the shares held by MSP and SFP.
Such shares do not include an additional 267,500 shares in respect of which
Mr. Oberndorf has shared voting and investment power.
CHANGE OF CONTROL ARRANGEMENTS
Pursuant to an agreement dated July 23, 1990 between the Maurice R.
Robinson Trust and Richard Robinson, the Maurice R. Robinson Trust has agreed
that if it receives an offer from any person to purchase any or all of the
shares of Class A Stock owned by the Maurice R. Robinson Trust and it desires to
accept such offer, Richard Robinson shall have the right of first refusal to
purchase all, but not less than all, of the shares of Class A Stock that such
person has offered to purchase for the same price and on the same terms and
conditions offered by such person. In the event Richard Robinson does not elect
to exercise such option, the Maurice R. Robinson Trust shall be free to sell
such shares of Class A Stock in accordance with the offer it has received. In
addition, if Richard Robinson receives an offer from any person to purchase any
or all of his shares of Class A Stock and the result of that sale would be to
transfer to any person other than Richard Robinson or his heirs voting power
sufficient to enable such other person to elect the majority of the Board of
Directors, either alone or in concert with any person other than Richard
Robinson, his heirs or the Maurice R. Robinson Trust (a "Control Offer"), and
Mr. Robinson desires to accept the Control Offer, the Maurice R. Robinson Trust
shall have the option to sell any or all of its shares of Class A Stock to the
person making the Control Offer at the price and on the terms and conditions set
forth in the Control Offer. If the Maurice R. Robinson Trust does not exercise
its option, Mr. Robinson shall be free to accept the Control Offer and to sell
the shares of Class A Stock in accordance with the terms of the Control Offer.
If the Maurice R. Robinson Trust exercises its option, Mr. Robinson cannot
accept the Control Offer unless the person making the Control Offer purchases
the shares of Class A Stock that the Maurice R. Robinson Trust has elected to
sell.
5
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors, executive officers and persons who are the beneficial owners
of more than 10% of the Company's Common Stock to file reports of ownership with
the SEC. Reporting persons are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. To the best of the Company's
knowledge, based solely on a review of the copies of such forms furnished to the
Company and other written representations that no other reports were required
during the fiscal year ended May 31, 2000,2001, the Company believes its directors,
executive officers and greater than ten percent beneficial owners timely filed
all required Section 16(a) reports, except with respectfor a transaction by Ernest Fleishman
that was required to one reportbe reported on a Form 4 in January 2001, which was later
reported on a Form 5 filed after the due date with respect to a sale transaction by Ruth L. Otte.
6in July 2001.
5
SHARE OWNERSHIP OF MANAGEMENT
On August 9, 2000,10, 2001, each director, director nominee and named executive
officer reported under the caption "Executive Compensation,"Compensation" and all directors,
director nominees and executive officers as a group beneficially owned shares of
the Company's Class A Stock and Common Stock as follows:
CLASS A STOCK + COMMON STOCK +
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME AND TITLE OWNERSHIP(1) CLASS OWNERSHIP(1) CLASS
DIRECTORS
Richard Robinson 828,100(2)1,656,200(2) 100% 3,043,022(3) 17.4%6,337,586(3) 17.5%
Rebeca M. Barrera -- -- 7,287(4)18,574(4) *
Helen V. Benham -- -- 228,507(5)471,124(5) 1.4%
Ramon C. Cortines -- -- 6,287(6)18,574(4) *
John L. Davies -- -- 0 *
Charles T. Harris III -- -- 14,153(7)34,306(6) *
Andrew S. Hedden -- -- 1,0002,000 *
Mae C. Jemison -- -- 9,502(7)25,004(6) *
Linda B. Keene -- -- 0 06,000(7) *
Peter M. Mayer -- -- 16,000(8)32,000(8) *
John G. McDonald -- -- 9,502(7)25,004(6) *
Augustus K. Oliver -- -- 7,287(9)20,574(9) *
Richard M. Spaulding -- -- 140,490(10)281,081(10) *
NAMED EXECUTIVE OFFICERS
Richard Robinson 828,100(2)1,656,200(2) 100% 3,043,022(3) 17.4%6,337,586(3) 17.5%
Barbara A. Marcus -- -- 214,950(11)434,402(11) 1.3%
Deborah A. Forte -- -- 409,552(12) 1.2%
Jean L. Feiwel -- -- 71,008(12)182,016(13) *
Deborah A. Forte -- -- 232,093(13) 1.4%
Kevin J. McEnery -- -- 166,355(14) 1.0%442,405(14) 1.3%
All directors, director nominees
and executive officers as a
group (32(34 persons including
those named above) 828,100(3)1,656,200(2) 100% 4,752,959(15) 25.4%9,598,516(15) 25.9%
- --------------------------------------------------------------------------------
+ Reported shares reflect the 2-for-1 Stock Split.
* Less than 1.0%
(1) Except as indicated in the notes below, each person named has sole voting
and investment power with respect to the shares shown opposite his or her
name.
(2) Includes 445,452890,904 shares of Class A Stock held directly by Richard Robinson,
324,310648,620 shares of Class A Stock owned by the Maurice R. Robinson Trust and
58,338116,676 shares of Class A Stock owned by the Florence L. Robinson Trust. See
the information with respect to Richard Robinson under "Principal Holders of
Class A Stock and Common Stock" above. The shares of Class A Stock are
convertible at the option of the holder into shares of Common Stock at any
time on a share-for-share basis.
(3) Includes 828,1001,656,200 shares of Common Stock issuable on conversion of the
Class A Stock described in Note 2; 726,5191,453,224 shares of Common Stock held
directly by Richard Robinson; 382,0761,014,152 shares of Common
6
Stock under options exercisable by Mr. Robinson within 60 days; 9,88120,018
shares of Common Stock with respect to
7
which Mr. Robinson had voting rights
at May 31, 20002001 under the Scholastic Corporation 401(k) Plan; 841,5461,683,092
shares of Common Stock owned by the Maurice R. Robinson Trust; 175,000350,000
shares of Common Stock owned by the Florence L. Robinson Trust; 3,7977,594 shares
of Common Stock for which Mr. Robinson is custodian under a separate
custodial account for one of his sons; 1,5564,212 shares of Common Stock owned
directly by his sons; and 74,547149,094 shares of Common Stock owned by the
Richard Robinson and Helen Benham Charitable Fund. Does not include 148,607310,224
of the shares of Common Stock beneficially owned by Helen V. Benham, an
officer and director of the Company and the wife of Richard Robinson, as to
which Mr. Robinson disclaims beneficial ownership.
(4) Includes options under which such director may purchase 7,00018,000 shares of
Common Stock within 60 days.
(5) Includes 130,336259,386 shares of Common Stock held directly by Ms. Benham; 17,86149,722
shares of Common Stock under options exercisable by her within 60 days;
4101,116 shares of Common Stock with respect to which sheMs. Benham had voting
rights as of May 31, 20002001 under the 401(k) Plan; 3,7977,594 shares of Common
Stock for which Ms. Benham is custodian under a separate custodial account
for one of her sons; 1,5564,212 shares of Common Stock owned directly by her
sons; and 74,547149,094 shares of Common Stock owned by the Richard Robinson and
Helen Benham Charitable Fund. Excludes 2,963,1226,176,686 of the shares of Common
Stock beneficially owned by Richard Robinson, as to which Ms. Benham
disclaims beneficial ownership.
(6) Includes options under which such director may purchase 6,00024,000 shares of
Common Stock within 60 days.
(7) Includes options under which such director may purchase 9,0005,500 shares of
Common Stock within 60 daysdays.
(8) Includes 12,50025,000 shares of Common Stock held directly by Mr. Mayer, 5001,000
shares held through a pension plan in which he has an interest and options
under which he may purchase 3,0006,000 shares of Common Stock within 60 days.
(9) Includes 1,2872,574 shares of Common Stock held directly by Mr. Oliver and
options under which he may purchase 6,00018,000 shares of Common Stock within
60 days. Does not include 1,8503,700 shares of Common Stock owned by
Mr. Oliver's daughter, as to which Mr. Oliver disclaims beneficial
ownership.
(10) Includes 100,404198,409 shares of Common Stock held directly by Mr. Spaulding,
8,29819,096 shares of Common Stock under options exercisable by him within
60 days and 31,78863,576 shares of Common Stock for which Mr. Spaulding is
custodian under separate custodial accounts for his children. Does not
include 2,384 restricted stock units (RSUs) held under the Scholastic
Corporation Management Stock Purchase Plan (the "MSPP"), as more fully
described herein.
(11) Includes 13,15826,317 shares of Common Stock held directly by Ms. Marcus, 200,897406,294
shares of Common Stock under options exercisable by Ms. Marcus within
60 days and 8951,791 shares of Common Stock with respect to which sheMs. Marcus
had voting rights at May 31, 20002001 under the 401(k) Plan. Does not include
2,388 RSUs held under the MSPP.
(12) Includes 71,0089,152 shares of Common Stock held directly by Ms. Forte and
400,400 shares of Common Stock under options exercisable by Ms. Forte within
60 days. Does not include 4,578 RSUs held under the MSPP.
(13) Includes 182,016 shares of Common Stock under options exercisable by
Ms. Feiwel within 60 days.
(13) Includes 2,076 shares of Common Stock held directly by Ms. Forte and
230,017 shares of Common Stock under options exercisable by Ms. Forte within
60 days.
(14) Includes 3,1968,393 shares of Common Stock held directly by Mr. McEnery, 162,133431,766
shares of Common Stock under options exercisable by himMr. McEnery within
60 days and 1,0262,246 shares of Common Stock with respect to which Mr. McEnery
had voting rights at May 31, 20002001 under the 401(k) Plan. Does not include
2,654 RSUs held under the MSPP.
(15) Includes an aggregate of 1,676,8243,542,062 shares of Common Stock under options
exercisable by members of the group within 60 days, an aggregate of 17,38833,796
shares of Common Stock with respect to which the group had voting rights
under the 401(k) Plan and 828,1001,626,200 shares of Common Stock issuable on the
conversion of Class A Stock into shares of Common Stock. 8Does not include an
aggregate of 24,986 RSUs held under the MSPP.
7
EXECUTIVE COMPENSATION
The following table sets forth information regarding the cash
compensation paid or accrued by the Company and its subsidiaries for services of
the Chief Executive Officer and the four other most highly compensated executive
officers of the Company (collectively, the "Named Executives") in respect of the
fiscal years ended May 31, 2001, 2000 1999 and 1998:1999:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINICPALPRINCIPAL FISCAL BONUS COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR SALARY BONUS(1) (2) OPTIONS (1)(3) (4)
RICHARD ROBINSON 2000 $700,000 $735,000 125,000 $243,6592001 $731,731 $562,500 $0 250,000 $242,485
Chairman of the Board, 2000 $700,000 $735,000 $0 250,000 $243,659
President and CEO 1999 $642,308 $298,935 $0 0 --
President and CEO 1998 $600,000 $270,000 257,076 --
BARBARA A. MARCUS 2000 $570,711 $540,000(2)2001 $629,224 $460,525 $23,630 50,000 --
EVP, Children's Book 2000 $570,711 $540,000 $0 100,000 --
Publishing 1999 $510,574 $284,555 $0 0 --
Publishing 1998 $500,000 $187,500 105,897DEBORAH A. FORTE 2001 $517,617 $301,875 $45,301 0
EVP, Division Head, 2000 $500,601 $345,000 $0 100,000 --
Scholastic Entertainment 1999 $477,693 $301,884 $0 0 --
JEAN L. FEIWEL 2000 $435,101 $499,375(3) 02001 $479,029 $185,028 $0 50,000 --
Publisher, Children's 2000 $435,101 $499,375 $0 0 --
Book Publishing 1999 $366,346 $141,952 $0 0 --
Publishing 1998 $350,000 $235,000 78,258 --
DEBORAH A. FORTE 2000 $500,601 $345,000(2) 50,000 --
EVP, Division Head, 1999 $477,693 $301,884 0 --
Scholastic Entertainment 1998 $315,000 $127,500 110,317 --
KEVIN J. MCENERY 2000 $365,865 $300,000(2) 50,000 --2001 $406,731 $246,500 $26,262 100,000
EVP and CFO 2000 $365,865 $300,000 $0 100,000 --
1999 $352,385 $148,300 $0 0 --
1998 $318,000 $119,250 70,833 --
- --------------------------------------------------------------------------------
(1)1) Mr. Robinson, Ms. Marcus, Ms. Forte and Mr. McEnery have elected to defer
100%, 10%, 20% and 30%, respectively, of his/her fiscal 2001 bonus to invest
in RSUs under the MSPP. In addition, Ms. Marcus, Ms. Forte and Mr. McEnery
previously elected to defer 10%, 30% and 20%, respectively, of her/his
fiscal 2000 bonus to invest in RSUs under the MSPP.
2) Included in Other Annual Compensation is the value of the discount received
on the purchase of restricted stock units (RSUs) allocated to the Named
Executives' accounts under the MSPP, based on the market value on the date
of allocation of the Common Stock underlying such RSUs. During fiscal 2001,
Ms. Marcus, Ms. Forte, and Mr. McEnery elected to defer 10%, 30% and 20%,
respectively, of her/his fiscal 2000 bonus, in respect of which 2,388, 4,578
and 2,654 RSUs, respectively, were allocated to them on August 31, 2000.
3) All reported options have been adjusted to reflect the 2-for-1 Stock Split.
4) Other than for Mr. Robinson for fiscal 2001 and fiscal 2000, All Other
Compensation is not required to be reported for the Named Executives because
the amount in any year did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus for any Named Executive. For Mr. Robinson, other compensationAll
Other Compensation for fiscal 2001 and fiscal 2000 includes: (a) $3,758 and
$4,636, respectively, for premiums related to term life insurance,insurance;
(b) $5,150 and $5,149, respectively, in matching contributions made by the
Company for Mr. Robinson's benefit under the 401(k) Plan; and (c) $233,577
and $233,874, respectively, representing the annual premium paid by the
Company during fiscal 2001 and fiscal 2000 in respect of a split dollar life
insurance policy for the benefit of Mr. Robinson and Helen Benham, which
premium representspremiums represent the non-term life insurance portion of such policy. The
Company is not responsible for payment of the premium attributable to the
term life insurance portion of such policy. All premiums paid by the Company
in respect of the non-term portion of the split dollar life insurance policy
will be repaid to the Company (without interest) not later than upon the
death of the last to survive of Mr. Robinson and Ms. Benham. The split
dollar life insurance arrangements for the benefit of Mr. Robinson and
Ms. Benham were approved by the Board of Directors of the Company.
(2) Ms. Marcus, Ms. Forte, and Mr. McEnery have elected to use 10%, 30% and 20%,
respectively, of her/his fiscal 2000 bonus to invest in Common Stock of the
Company through the purchase in August 2000 of restricted stock units under
the Management Stock Purchase Program (as described herein).
(3) Includes $250,000 paid as a signing bonus under an employment agreement
between Ms. Feiwel and a subsidiary of the Company, Scholastic Inc. entered
into in fiscal 2000.
98
OPTION GRANTS IN FISCAL 20002001
The following table sets forth information concerning individual stock
option grants made to the Named Executives during fiscal 2000,2001, together with the
number and grant date present value at May 31, 2000.2001.
POTENTIAL REALIZABLE VALUE
AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
OPTION
INDIVIDUAL GRANTS (1)GRANTS(1) OPTION TERM (2)
% OF TOTAL
OPTIONS
OPTIONS GRANTED TO
GRANTED EMPLOYEES EXERCISE OR
(SHARES) IN FISCAL BASE PRICE EXPIRATION
NAME (3) 2001 ($/SHARE)(3) DATE 5%
NAME OPTIONS % OF TOTAL EXERCISE/SHARE) EXPIRATION 5% 10%
GRANTED OPTIONS OR DATE
(SHARES) GRANTED TO BASE
EMPLOYEES PRICE
IN ($
FISCAL 2000
Richard Robinson 125,000 19.9% $ 51.38250,000 15.0% $31.565 7/21/09 $4,039,076 $10,235,81119/10 $4,962,765
Barbara A. Marcus 50,000 8.0%3.0% $31.565 7/19/10 $ 51.38 7/21/09 $1,615,630 $ 4,094,324
Jean L. Feiwel992,553
Deborah A. Forte -- -- -- -- --
--Jean L. Feiwel 50,000 3.0% $31.565 7/19/10 $ 992,553
Kevin J. McEnery 60,000 6.0% $31.565 7/19/10 $1,191,064
40,000 6.0% $31.865 9/20/10 $ 801,589
POTENTIAL REALIZABLE VALUE
AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
NAME 10%
Richard Robinson $12,576,620
Barbara A. Marcus $2,515,324
Deborah A. Forte 50,000 8.0% $ 51.38 7/21/09 $1,615,630 $ 4,094,324--
Jean L. Feiwel $2,515,324
Kevin J. McEnery 30,000 $ 51.38 7/21/09 $ 969,378 $ 2,456,595
20,000 8.0% $ 59.42 12/16/09 $ 747,378 $ 1,894,004$3,018,389
$2,031,384
- --------------------------------------------------------------------------------
(1) All options are exercisable for Common Stock at an exercise price equal to
the fair market value of the Common Stock at the date of grant. All options
are 100% exercisable beginning one year from the date of grant, except for
Ms. Marcus' grant which is exercisable in four annual installments beginning
one year from the date of grant.
(2) The dollar amounts under the 5% and 10% columns in the table above are the
results of calculations required by the SEC and therefore are not intended
to forecast the possible future appreciation of the stock price of the
Company. Although permitted by the SEC's rules, the Company did not use an
alternate formula for grant date valuation because the Company is not aware
of any formula which will determine with reasonable accuracy a present value
based on future unknown or volatile factors. No gain on the stock options
awarded to the Named Executives or other employees is possible without
appreciation in the price of the Company's Common Stock during the
applicable period.
10
(3) As a result of the 2-for-1 Stock Split, the number of options granted
increased by 100% and the exercise price decreased by 50%. The share amounts
and exercise prices set forth in the table reflect the 2-for-1 Stock Split.
AGGREGATED OPTION EXERCISES IN FISCAL 20002001 AND 20002001 FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning options exercised
during Fiscal 20002001 by the Named Executives together with the number and value of
exercisable/exercisable / unexercisable options held by such persons at May 31, 2000.2001.
NUMBER OF
SHARES ACQUIRED NUMBER OFSHARES UNDERLYING VALUE OF UNEXERCISED
ONACQUIRED VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON EXERCISE REALIZED AT FY-END (SHARES) (#)(1) AT FY-END ($FY-END($)(1)(2)
NAME (#)(1) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
Richard Robinson -- -- 257,076764,152 / 125,000 $4,126,725/ $225,938250,000 $14,558,868 / $2,096,25
Barbara A. Marcus 23,000 $1,095,510 150,8978,000 $ 194,000 393,794 / 50,000 $ 2,154,631/$90,375$7,320,555 / $419,250
Deborah A. Forte 59,634 $1,111,065 400,400 / 0 $5,824,183 / $0
Jean L. Feiwel 35,00010,000 $ 474,625 71,008271,550 132,016 / 0 $ 896,01150,000 $2,491,650 / $0
Deborah A. Forte 25,000 $ 620,250 165,642 / 64,375 $ 1,365,499 /$90,375$419,250
Kevin J. McEnery -- -- 123,38350,000 $1,342,731 314,266 / 67,500 $ 1,584,386/$369,181117,500 $5,405,116 / $1,217,71
- --------------------------------------------------------------------------------
(1) All reported options reflect the 2-for-1 Stock Split.
(2) Based on the per share closing price of $53.19$39.95 on May 31, 20002001 as reported
on the NASDAQ-National Market System.
9
PENSION PLAN
The Named Executives are entitled to benefits under the Company's defined
benefit cash balance retirement plan, which became effective June 1, 1999 (the
"Retirement Plan"), except for Mr. Robinson who elected to continue
participation in the Company's prior defined benefit retirement plan (the "Prior
Plan"). Ms. Marcus and Mr. McEnery, who also participated in the Prior Plan,
elected to move their respective Prior Plan contributions to the Retirement
Plan. Ms. Feiwel and Ms. Forte had elected not to participate in the Prior Plan,
but are participants in the Retirement Plan.
The Prior Plan provides participants with retirement benefits based upon
career average compensation. These benefits are subject to limitations under the
provisions of the Internal Revenue Code. Prior to June 1, 1999, each participant
under the Prior Plan was required to contribute 3.0% of his or her basic annual
compensation (excluding overtime pay, bonuses and other special compensation) in
excess of $20,000. Effective June 1, 1999, participant contributions are no
longer required and the Company makes all required contributions under the Prior
Plan. For periods after July 1, 1990, the benefit formula under the Prior Plan
provides for an annual benefit payable at retirement equal to, for each year of
credited service, 1.5% of that portion of the participant's basic annual
compensation up to $13,650, plus 2.0% of that portion of the participant's basic
annual compensation in excess of $13,650. Participants in the Prior Plan become
fully vested in their accrued 11
benefits upon the earlier of the completion of
five years of participation or attainment of age 65, payable upon retirement. At
August 1, 2000,2001, Richard Robinson had earned an estimated annual benefit payment
under the Prior Plan of $64,763$67,676 payable upon retirement at age 65. The Prior
Plan does not provide for Social Security or other deductions from the monthly
benefit payable thereunder.
The Retirement Plan provides participants with retirement benefits based
on monthly contributions and interest credits. Benefits under the Retirement
Plan are subject to limitations under the provisions of the Internal Revenue
Code. Individual participant contributions are not required under the Retirement
Plan. The benefit formula under the Retirement Plan provides for an annual
allocation by the Company to a participant's account, calculated as follows: for
less than five years of service, 3.5% of the first $25,000 of annual base pay
and 2.0% of the remainder; for five years but less than ten years of service,
4.5% of the first $25,000 of annual base pay and 3.0% of the remainder; for ten
years of service but less than 20 years of service, 5.5% of the first $25,000 of
annual base pay and 2.0% of the remainder; and for 20 years or more of service,
6.5% of the first $25,000 of annual base pay and 5% of the remainder. Interest
on account balances is accrued monthly based on the average rate for one-year
U.S. Treasury Bills plus 1.0%. Participants in the Retirement Plan become fully
vested in their accrued benefits upon the earlier of the completion of five
years of service or attainment of age 65. Vested retirement benefits are payable
in the form of a lump-sum or annuity payment upon retirement, termination, death
or disability. At August 1, 2000,2001, Ms. Marcus, Ms. Feiwel, Ms. Forte and
Mr. McEnery had earned estimated annual benefit payments under the Retirement
Plan of $54,369, $2,445, $2,520,$55,596, $4,418, $4,555 and $17,405,$18,358, respectively.
10
EMPLOYMENT AGREEMENT
Effective October 1, 1999, Scholastic Inc., a subsidiary of the Company,
entered into a three year Employment Agreement (the "Agreement") with Jean L.
Feiwel, as Senior Vice President and Publisher, Children's Book Publishing. In
addition to a signing bonus of $250,000 paid upon execution of the Agreement in
May 2000, the Agreement provides for an annual salary of $475,000 through
September 30, 2000, $485,000 as of October 1, 2000 and $500,000 as of
October 1, 2001. The Agreement also provides for a maximum annual performance
bonus equal to 35% of Ms. Feiwel's annual salary, of which one half of such
target bonus is guaranteed. The Agreement further provides for an award of
25,000 nonqualified stock options 2-for-1 with a one year vesting period, which
options were granted in July 2000.2000 and were subsequently adjusted to 50,000
options to give effect to the 2-for-1 Stock Split. Ms. Feiwel is also entitled
to receive the employee group health, life and disability benefits that the
Company provides to its other employees similarly situated, and she is furnished
with a leased car. The Agreement also provides for varying lump sum payments in
the event Ms. Feiwel ceases to be employed for specified reasons.
12STOCK PRICE PERFORMANCE GRAPH
The graph below provides an indicator of cumulative total stockholder
returns for the Company for the period June 1, 1996 to May 31, 2001 compared
with the NASDAQ Composite Index and a composite peer group. The graph assumes a
$100 investment on June 1, 1996, together with the reinvestment of all
dividends, if any. The peer group is comprised of the largest publicly traded
companies that compete against the Company in its principal industry segment.
The members of the peer group are as follows: Harcourt General, Inc., Houghton
Mifflin Co., The McGraw-Hill Companies and Reader's Digest Association, Inc.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
SCHOLASTIC CORPORATION PEER GROUP AVERAGE NASDAQ COMPOSITE INDEX
5/31/96 100 100 100
5/31/97 47.79 101.06 112.62
5/31/98 64.26 127.57 143.06
5/31/99 77.91 158.72 194.55
5/31/00 85.44 149.98 273.51
5/31/01 128.35 191.29 169.73
11
THE HUMAN RESOURCES AND COMPENSATION
COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program for its executive officers and other
senior management is administered by the Human Resources and Compensation
Committee (the "HRCC") of the Board of Directors.
The HRCC believes that compensation for executive officers and other
senior management should be determined according to a competitive framework,
based onincluding financial performance of the Company, individual contributions,
teamwork and business division or area results. Such factors are critical to enhancing the value
and development of the Company's operating segments, which in turn builds
shareholderstockholder value. In determining the compensation payable to the Company's
executive officers, the HRCC seeks to achieve the following objectives through a
combination of fixed and variable compensation:
- Pay Competitively--ProvidePAY COMPETITIVELY--Provide a total compensation package that is consistent
with competitive practices, enabling the Company to attract, motivate and
retain qualified executives;
- Pay for Performance--CreatePAY FOR PERFORMANCE--Create a direct link between the aggregate
compensation payablepaid to each executive officer and the financial performance
of the Company generally and the results of the specific business division or area for which
the executive is responsible; and
- Executives as Stockholders--LinkEXECUTIVES AS STOCKHOLDERS--Link a portion of each executive officer's
compensation opportunity directly to the value of the Company's Common
Stock through the use of stock-based awards.
The programs adopted in order to implement the HRCC's compensation
philosophy and to reflect the Company's financial performance have been
developed with the assistance of consultants and counsel. The HRCC periodically
reviews its compensation practices in light of its compensation philosophy, and
views variable compensation as an integral part of the total compensation
package. The Company has historically focused on stock options in the context of
equity-based incentives. DuringAt the 2001 Annual Meeting of Stockholders, the
Scholastic Corporation 2001 Stock Incentive Plan (the "2001 Plan") will be
submitted for approval by the holders of the Class A Stock. The 2001 Plan, which
provides for the grant of stock options, as well as other equity-based awards,
is discussed below and is further described herein.
In fiscal 2000, the HRCC implemented two additional
stockholder approved,stockholder-approved,
stock-based incentive programs: the Scholastic Corporation Employee Stock
Purchase Plan (the "ESPP") and the Scholastic Corporation Management Stock
Purchase Plan (the "MSPP"). The purpose of the ESPP is to encourage broad-based
employee stock ownership and align employee interests in the Company with
shareholders' interests. The ESPP is offered to U.S. employees generally, except certain
executive officers and other senior management of the Company who are eligible
to participate in the MSPP.generally. The
ESPP permits participating employees to purchase, through after-tax payroll
deductions, the Company's Common Stock at a 15% discount from the lower of the
fair market value of the Common Stock on the first or last business day of each
12
fiscal quarter. The MSPP discussed
13
(discussed below) is also designed to increase stock
ownership by certain employees by allowing eligible participants to use all or a
portion of their annual bonus payments on a tax-deferred basis to make equity
investments in the Company at a 15%
discount.discounted purchase price.
BASE SALARY. In establishing each executive officer's base salary, the
HRCC considers several factors, including individual performance, competitive
market conditions for recruiting and retaining executive talent and changes in
responsibilities.
Base salaries are reviewed annually and generally approximate the median
level of competitive rates, as adjusted for individual performance. In
determining base salaries, the HRCC's focus is on retaining and recruiting
executive talent. Accordingly, the HRCC considers the executive compensation of
a broad group of companies in the publishing and entertainment fields, including
the Company's direct competitors comprising the "Peer Group" used in the Stock
Performance Graph in this proxy statement. As a general practice the Company
does not enter into employment agreements with executive officers. As previously
described, during fiscal 2000reported, the HRCC approved and a subsidiary of the Company entered into, a three-year employment agreement with Ms. Feiwel.Feiwel,
which expires in 2002.
During fiscal 2000,2001, the base salaries of executive officers were
generally increased in accordance with the foregoing practices, althoughpractices. In fiscal 2001,
the HRCC increased Mr. Robinson did not receive an increase in his currentRobinson's annual base salary offrom $700,000 pursuant to the Committee honoring$750,000,
having honored Mr. Robinson's request that he receive no increase in his base
salary during fiscal 2000.
ANNUAL BONUS INCENTIVE. For fiscal 2000,2001, the Company's annual bonus
targets were established by the HRCC based on divisional and corporate
performance. Bonus potentials for executive officers were set at percentages of
their base salaries deemed appropriate for their current positions and are
generally tied to operatingdivision performance and earnings per share. Bonus awards for
the Named Executives were set and determined under the Company's stockholder
approved Executive Incentive Performance Plan, which is designed to be exempt
from the application of Section 162(m) of the Internal Revenue Code of 1986, as
amended. Bonuses for fiscal 20002001 were paid in August 2000.2001. The HRCC awarded
Mr. Robinson a bonus of $735,000$562,500 for fiscal 2000.2001. This amount was determined in
accordance with pre-established targets tied to Company's earnings per share,
and the size of the award reflects the Company's results the Company achieved in fiscal 20002001 under
Mr. Robinson's leadership.
EQUITY-BASED INCENTIVES. Stock options historically have been the
Company's form of equity-based incentives and its primary form of long-term
incentive compensation. Pursuant to the terms of the Company's stock-based
plans, outstanding options were adjusted to reflect the 2-for-1 Stock Split
effected on January 16, 2001. The HRCC grants stock options as part of executive
compensation as a means to motivate superior performance and to directly link
the economic interests of executives with those of stockholders. In fiscal 2000,2001,
Mr. Robinson, Ms. Marcus, Ms. ForteFeiwel and Mr. McEnery were awarded options to
purchase 125,000 shares, 50,00025,000 shares, 50,00025,000 shares and 50,000 shares of
Common
13
Stock, respectively, which were adjusted as a result of the 2-for-1 Stock Split
to 250,000 shares, 50,000 shares, 50,000 shares and 100,000 shares of Common
Stock, respectively. The grant to Mr. Robinson in fiscal 2001 reflects the
fourth and final award under a previously reported four year long-term incentive
plan established for Mr. Robinson by the HRCC awarded as a significant portion of
such officer's total compensation opportunity for fiscal 2000. In fiscal 2000,
Ms. Feiwel did not
14
receive any option grants; however, shein September 1997, pursuant to
which he has received grants in prior years and
received an option grant in July 2000options each year under the plan to purchase 25,000125,000
shares pursuantof Common Stock at an exercise price per share equal to her
employment agreement.the fair market
value of a share of Common Stock on each date of grant and vesting one year from
the date of grant. Given the critical importance of Mr. Robinson to the Company
and his essential role in its management and operations, the HRCC believes this
program for Mr. Robinson was in the best interests of the Company and its
stockholders.
During fiscal 2000, 1622001, 90 individuals, 1618 of whom are executive officers,
received stock option awards to purchase an aggregate of 628,1001,670,000 shares of
Common Stock, underas adjusted to reflect the Company's stock option plans.2-for-1 Stock Split. Consistent with
the HRCC's goals, all such option awards in fiscal 20002001 were made at the fair
market value of the Common Stock at the date of grant. The size of aneach option
award was based on the HRCC's subjective evaluation of a number of factors,
including the level of responsibility of the individual, competitive market
practice, past grants and other matters relating to an individual's performance
and ability to influence corporate results. The HRCC believes that these awards
are within the competitive range for awards made by the Company's competitors
for executive talent. The actual grant of stock options is made by the Stock
Grant Committee of the Board of Directors, which is comprised solely of
non-employee directors.
As previously reported, in September 1997In recent months, the HRCC, established a four
year long-term incentive plan for Mr. Robinson under which he has received
annual grants of options to purchase 125,000 shares of Common Stock at an
exercise price per share equal towith the fair market valueassistance of a shareconsulting firm, has
been reviewing the Company's general compensation philosophy and overall
compensation programs, including a review of Common
Stockthe Company's long-term stock-based
incentive programs. Based on each datethe results of grantthis review and vesting one year from the dateHRCC's
recommendations, the Board of grant. Given
the critical importance of Mr. Robinson to the Company and his essential role in
its management and operations, the HRCC believes thatDirectors has approved the establishment of the
longer-term incentive program involving option grants2001 Plan, which is being submitted for approval of the holders of the Class A
Stock at the 2001 Annual Meeting of Stockholders and is described herein. As
approved by the Board of Directors, the 2001 Plan would provide for the grant of
stock options, restricted stock and other stock-based awards and the HRCC would
also have the authority to Mr. Robinson was in the
best interestsgrant to specified employees of the Company reload
and itstransfer rights in connection with stock option grants. While the HRCC
anticipates that stock options will remain the Company's primary form of
long-term compensation, the HRCC has recommended that the proposed 2001 Plan
include optional design and award features. Based on the review by the Company's
consultants, the proposed plan features are competitive with the Company's peer
group and give the Company additional flexibility in structuring an individual's
total compensation package, when, and if, deemed appropriate by the HRCC. As
proposed, 4,000,000 shares of the Company's Common Stock will be reserved for
the purpose of granting awards under the 2001 Plan. As with the Company's prior
stocked-based plans, the purpose of the 2001 Plan is to provide a continuing
means to raise the level of stock ownership by employees in order to attract,
retain and reward such individuals and strengthen the mutuality of interests
between such individuals and the Company's stockholders.
14
The MSPP and the ESPP, (as discussed above)referred to above, were designed to augment the
Company's stock option programstock-based incentive programs by providing participating employees
with equity opportunities intended to further align their interests with the
Company and its stockholders. As part of the HRCC's initiatives to increase
stock ownership levels by senior management of the Company, the HRCC implemented
the MSPP during fiscal 2000. TheUnder the MSPP, allowsfiscal 2001 participants tocould use
all or a portion of their fiscal 2001 annual bonus payments for a fiscal year("Bonus") on a tax
deferred basis (no less than
three years) to acquire shares of the Company's Common Stock at a 15% discount
from the lowest fair market value of the Common Stock during the fiscal quarter
ending on the August 31 immediately following such fiscal year. During the
deferral period, which may not be less than three years, bonus payments deferred
under the MSPP are allocated as restricted stock units ("RSUs"), based on the
applicable acquisition price, which RSUs are converted into shares of the
Company's Common Stock on a 1 to 11-to-1 basis upon expiration of the deferral period.
During fiscal 2000, nineteen2001, 21 members of senior management participated in the MSPP,
including Mr. Robinson, Ms. Marcus, Ms. Forte and Mr. McEnery, who allocated $54,000, $103,500 and $60,000, respectively,to
the purchase of their
bonuses. Bonus amounts deferred by participantsRSUs under the MSPP, during fiscal
2000 reflect$562,500 (100% of Bonus), $46,053 (10% of
Bonus), $60,375 (20% of Bonus) and $73,950 (30% of Bonus), respectively, the
RSUs in respect of which will be allocated on August 31, 2001.
As part of the HRCC's review, and based on the recommendation of the
Company's consultants and a proportional amountreview of their fiscal 2000 bonus award prorated for
the four month period during fiscal 2000 thatsimilar plans adopted by other companies,
the MSPP was amended in effect.July 2001 to increase the discount on shares of the
Company's Common Stock that may be acquired under the MSPP from 15% to 25%, such
changes to become effective commencing in respect of fiscal 2002 annual bonus
awards. The HRCC also increased the number of employees eligible to participate
in the MSPP in fiscal 2002 to approximately 100 persons in senior management
from the 26 persons eligible in fiscal 2001. The HRCC believes that such changes
are consistent with competitive practices and will further link the interests of
the Company's employees and stockholders.
15
POLICY AS TO SECTION 162(M) OF THE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally denies a publicly traded company a Federal income tax deduction for
compensation in excess of $1 million paid to certain of its executive officers,
unless the amount of such excess is payable based solely upon the attainment of
objective performance criteria. The Company has undertaken to qualify
substantial components of the incentive compensation it makes available to its
executive officers for the performance exception to nondeductibility. Most
equity based awards available for grant under the Company's equity compensation
plans, and all of the equity basedequity-based awards actually granted to executive
officers, will so qualify. Amounts payable under the Company's stockholder
approved Executive Performance Incentive Plan should also be exempt from the
application of Section 162(m) as performance based compensation. However, in
appropriate circumstances, the HRCC may in the future deem it appropriate to pay
compensation or make incentive or retentive awards that do not meet the
performance based criteria and therefore may not be deductible by reason of
Section 162(m).
The four HRCC members arecomprises five voting outside directors, none of whom is an
employee or former employee of the Company. In addition, none of those fourthese five
directors has a relationship with another corporation or entity that would
require specific disclosure of such relationship in the proxy statement or
preclude him or her from serving on this committee.
HUMAN RESOURCES AND COMPENSATION
COMMITTEE
John G. McDonald (Chairperson)(Chairman)
Ramon C. Cortines
Mae C. JemisonJohn L. Davies
Linda B. Keene
Peter Mayer
16
STOCK PRICE PERFORMANCE GRAPH
The graph below provides an indicator of cumulative total stockholder
returns for the Company for the period June 1, 1995 to May 31, 2000 compared
with the NASDAQ Composite Index and a composite peer group. The graph assumes a
$100 investment on June 1, 1995, together with the reinvestment of all
dividends, if any. The peer group is comprised of the largest publicly traded
companies that compete against the Company in its principal industry segment.
The members of the peer group are as follows: Harcourt General, Inc., Houghton
Mifflin Co., The McGraw-Hill Companies and Reader's Digest Association, Inc.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
5/31/95 5/31/96 5/31/97 5/31/98 5/31/99 5/31/00
SCHOLASTIC COPORATION 100.00 112.67 53.85 72.40 87.78 96.27
PEER GROUP AVERAGE 100.00 113.06 114.36 145.66 180.44 171.72
NASDAQ COMPSITE INDEX 100.00 143.82 161.97 205.75 279.81 393.36
17
MATTERS SUBMITTED TO STOCKHOLDERS
- -
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation of the Company
provides that the holders of shares of Class A Stock, voting as a class, have
the right to fix the size of the Board of Directors so long as it does not
consist of less than three nor more than fifteen directors. On August 14,October 3, 2000,
the holders of the 828,100 shares of Class A Stock (comprising all outstanding
shares of Class A Stock) unanimously approved fixing the number of
directors constituting the full board of Directors to be elected at the Annual Meeting at
twelve.thirteen.
The Board of Directors has designated the thirteen persons listed below
under the sections captioned "Nominees for Election by Holders of Class A Stock"
and "Nominees for Election by Holders of Common Stock" of this proxy statement
for nomination to serve as directors of the Company until the next annual
meeting and until their respective successors are elected and qualified, or
until their earlier retirement, resignation or removal.
Proxies are solicited in favor of the nineten nominees to be elected by the
holders of Class A Stock and the three nominees to be elected by the holders of
Common Stock, and it is intended that the proxies will be voted for such
nominees unless otherwise specified. Should any one or more of the nominees
become unable to serve for any reason, unless the holders of the Class A Stock
provide for a lesser number of directors, the persons named in the enclosed
proxy will vote formay act with discretionary authority in respect of the election of a
substitute nominee or nominees. The Board of Directors has no reason to believe
that any nominees will be unable to serve.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF THE CLASS A STOCK VOTE FOR
EACH OF THE NINETEN NOMINEES FOR ELECTION BY SUCH HOLDERS. Assuming the presence of
a quorum, the affirmative vote of a plurality of the votes cast by the holders
of shares of the Class A Stock present and entitled to vote on this item at the
Annual Meeting is required to elect the nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF COMMON STOCK VOTE FOR
EACH OF THE THREE NOMINEES FOR ELECTION BY SUCH HOLDERS. Assuming the presence
of a quorum, the affirmative vote of a plurality of the votes cast by the
holders of shares of Common Stock present and entitled to vote on this item at
the Annual Meeting is required to elect the nominees.
1817
NOMINEES FOR ELECTION BY HOLDERS OF CLASS A STOCK
DIRECTOR
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE SINCE*
Richard Robinson Chairman of the Board, President and Chief Executive 6364 1971
Officer of the Company
Rebeca M. Barrera President, National Latino Children's Institute, 5354 1995
Austin, TX
Helen V. Benham Corporate Vice President, Early Childhood Advisor of 5051 1992
the Company
Ramon C. Cortines Executive Director of the Pew Network for Standards- 6869 1995
Based Reform at Stanford University, Stanford, CA
Charles T. Harris III Managing Director, Goldman, Sachs & Co., New York, 4849 1996
NY
Andrew S. Hedden Partner, Coudert Brothers, New York, NY 5960 1991
Mae C. Jemison President, The Jemison Group, Inc., Houston, TX 4344 1993
Peter Mayer President, The Overlook Press/Peter Mayer 65 1999
Publishers, Inc., New York, NY
Augustus K. Oliver Managing Director, WaterView Advisors L.L.C., New 5051 1995
York, NY
Richard M. Spaulding Executive Vice President of the Company 6364 1974
NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK
DIRECTOR
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE SINCE*
John L. Davies Senior Advisor and Founder, AOL International 51 2000
Linda B. Keene Vice President, Market Development, American Express 48Principal, Waterford Marketing Group, Minneapolis, 49 1999
Financial Services, Minneapolis, MN
Peter Mayer President, The Overlook Press/Peter Mayer 64 1999
Publishers, Inc., New York, NY
John G. McDonald The IBJ Professor of Finance, Graduate School of 64 1985
Business, 63 1985 Stanford University, Stanford, CA
- --------------------------------------------------------------------------------
* The dates set forth above indicate the date such director was elected as a
director of the Company or its predecessor entity.
RICHARD ROBINSON. Mr. Robinson has served as Chairman of the Board of
the Company and/or Scholastic Inc. since 1982, as Chief Executive Officer since
1975 and as President since 1974. He has held various executive management and
editorial positions with the Company since joining in 1962.
REBECA M. BARRERA. Ms. Barrera has been the President of the National
Latino Children's Institute since 1997. From 1990 to 1997, she was the Executive
Director of
18
Corporate Fund for Children, a non-profit organization dedicated to the
strengthening of
19
child and family programs through community resources. From
1981 to 1992, she was president of Ninos Group, Inc., a private corporation
specializing in child care programs.
HELEN V. BENHAM. Ms. Benham has been Corporate Vice President, Early
Childhood Advisor of the Company since 1996 and Vice President and Publisher of
the Early Childhood Division (1990 to 1996). Her other positions with the
Company, since joining in 1974, include Editorial Director in the Classroom
Magazine Division.
RAMON C. CORTINES. Mr. Cortines has been Executive Director of the Pew
Network for Standards-Based Reform at Stanford University since 1996. In the
spring of 1999, he was a Lecturer of Education at Harvard University. During
1998, he served as interim director of the Annenberg Institute for School Reform
at Brown University. From March to August 1997, he was the acting Assistant
Secretary for the office for Educational Research and Improvement. From February
through August of 1993, he served as Assistant Secretary (designate) for
Intergovernmental and Interagency Affairs and for Human Resources, United States
Department of Education. From 1993 to 1995, he was Chancellor of the New York
City Public School System. In December 1992, Mr. Cortines chaired a Department
of Education transition team for then President-elect Bill Clinton. Since 1956,
Mr. Cortines has served six school districts, including as Superintendent of
Schools for Pasadena (11 years), San Jose (2 years) and San Francisco
(6 years). Mr. Cortines is also a Trustee of The J. Paul Getty Trust and of Brown
University and a member of the Board of Directors of Special Olympics
International.
CHARLES T. HARRIS III. Mr. Harris has been a managing director with the
investment firm of Goldman, Sachs & Co. since 1999 and a general partner from
1988 to 1996. He is a trustee of Phillips Exeter Academy, a trustee of the New
Canaan Country School and a director and Chairman of the Alliance for Young
Artists & Writers, Inc. Mr. Harris is also a director of the Georgia Gulf
Corporation.
ANDREW S. HEDDEN. Mr. Hedden has been a partner of the law firm of
Coudert Brothers since 1975 and has been associated with the firm since 1968.
MAE C. JEMISON. Dr. Jemison has been President of The Jemison
Group, Inc. ("JG") since 1993. JG is a technology consulting company that
applies and integrates science and advanced technology considering worldwide
social and technological circumstances of the users. JG also advocates for
science and technology literacy and education. Ms. Jemison is also a professor
of environmental studies at Dartmouth College and directs the Jemison Institute
for Advancing Technology in Developing Countries at Dartmouth College. From 1987
to 1993, she was an astronaut with the National Aeronautics and Space
Administration (NASA) and was a member of the Space Shuttle Endeavor Flight in
September 1992.
2019
AUGUSTUS K. OLIVER. Since October 1999, Mr. Oliver has been a Senior
Managing Director of WaterView Advisors L.L.C., which manages private equity
investment funds. From 1984 to 1999, he was a partner at the investment banking
and management firm of Gollust, Tierney and Oliver, and from 1975 to 1984, he
practiced law with the firm of Skadden, Arps, Slate, Meagher and Flom, becoming
a partner in 1983. Mr. Oliver is the grandson of a former Chairman of the Board
of Directors of Scholastic Inc.
RICHARD M. SPAULDING. Mr. Spaulding has served as Executive Vice
President of the Company and/or Scholastic Inc. since 1974. He has held various
executive management positions with the Company since joining in 1960.
LINDA B. KEENE. Ms. Keene has been Vice President of Market Development
for American Express Financial Advisors since 1994. In this capacity she is
responsible for marketing and business research, competitive analysis,
advertising, brand development, consumer communications and seminar event
marketing. From 1987 to 1994, she was with The Pillsbury Company, serving as
Vice President of Marketing Services from 1992 to 1994. Her professional
associations include memberships in the Executive Leadership Council, the
National Black MBA Association and the National Association of Female
Executives. Ms. Keene serves as Board Secretary of the YMCA of Metropolitan
Minneapolis. She is also a director of The Huffy Corporation.
PETER MAYER. Mr. Mayer has been President of The Overlook Press/Peter
Mayer Publishers, Inc. since 1997. From 1978 to 1996, he was Chairman of the
Board and Chief Executive Officer of the Penguin Group Companies, overseeing its
operations in the United States, the United Kingdom, Canada, Australia, New
Zealand, Holland and India. From 1976 to 1978, he was President and Publisher of
Pocket Books. He has also served as Editor-in-Chief, Publisher and President of
Avon Books. In 1996, Mr. Mayer was awarded the Chevalier and Officier of the
Order des Arts et des Lettres by the French Ministry of Culture and the
Foundation of Publishers' and Booksellers' Association's India Award for
Outstanding Contribution to International Publishing. In 1995, he was the
recipient of the Literary Marketplace Person of the Year Award (New York City)
as the Most Distinguished Publisher of 1995.
AUGUSTUS K. OLIVER. Mr. Oliver has been a Senior Managing Director of
WaterView Advisors L.L.C., a private equity investment firm, since
October 1999. Prior to joining WaterView, Mr. Oliver was a private investor with
Oliver Management. From 1984 to 1995, he was a partner at the investment banking
and management firm of Gollust, Tierney and Oliver, and from 1975 to 1984, he
practiced law with the firm of Skadden, Arps, Slate, Meagher and Flom, becoming
a partner in 1983. Mr. Oliver is the grandson of a former Chairman of the Board
of Directors of Scholastic Inc.
RICHARD M. SPAULDING. Mr. Spaulding has served as Executive Vice
President of the Company and/or Scholastic Inc. since 1974. He has held various
executive management positions with the Company since joining in 1960.
JOHN L. DAVIES. Mr. Davies is a senior advisor for AOL International.
Mr. Davies joined AOL Services in July 1993 as a Senior Vice President and
founded AOL International in 1994, serving as its President from 1994 to 2000.
Before joining AOL, Mr. Davies was Managing Director of Citicorp's London-based
consumer mortgage business. Prior to that, he was Vice President, Europe for RCA
records, having previously been employed at General Electric for ten years in
consumer marketing management positions.
LINDA B. KEENE. Ms. Keene is a principal of Waterford Marketing Group,
an independent consultant agency for marketing and organizational issues.
Previously, she was Vice President of Market Development for American Express
Financial Advisors from 1994 to 2001, where she was responsible for marketing
and business research, competitive analysis, advertising, brand development,
consumer communications and seminar event marketing. From 1987 to 1994, she was
with The Pillsbury Company, serving as Vice President of Marketing Services from
1992 to 1994. Her professional associations include memberships in the Executive
Leadership Council, the National Black MBA Association and the National
Association of Female Executives. Ms. Keene serves as Board Secretary of the
YMCA of Metropolitan Minneapolis. She is also a director of The Huffy
Corporation.
20
JOHN G. MCDONALD. Professor McDonald joined the faculty of Stanford
University Graduate School of Business, where he is The IBJ Professor of
Finance, in 1968. Professor McDonald serves on the boardBoards of directorsDirectors of
Varian, Inc.;, Plum Creek Timber Co.;, Capstone Turbine, Inc., CMGI, Inc., iStar
Financial, Inc. and eight investment companies managed by Capital Research and
Management Co. and affiliates. From January 1987 until January 1990, Professor McDonald was a
member (and Vice Chairman in 1989-90) of the Board of Governors of the National
Association of Securities Dealers, Inc.
21
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
FiveSeven meetings of the Board of Directors were held during the 20002001 fiscal
year. All incumbent directors attended 75% or more of the aggregate of such
meetings and of the meetings held by all standing committees of the Board of
which they were a member, with the exception of Mr. Cortines. Mr. Cortines, with
the knowledgeMayer, who was not present
at two Human Resource and consent of theCompensation Committee and Stock Grant Committee
meetings and one Board did not participate in meetings during a
portion of the 2000 fiscal year while he was engaged as the interim
superintendent of the Los Angeles County School District.meeting.
The following are the current members and functions of the standing
committees of the Board of Directors.
EXECUTIVE COMMITTEE. Richard Robinson (Chairperson), Helen Benham,
Charles T. Harris III, Andrew S. Hedden, Peter Mayer, Augustus K. Oliver and
Richard M. Spaulding are the members of the Executive Committee. In the
intervals between meetings of the Board of Directors, the Executive Committee is
authorized to exercise, with certain exceptions, all of the powers of the Board
in the management of the business and affairs of the Company. All actions taken
by the Executive Committee are submitted for ratification by the Board of
Directors. TheNo meetings of the Executive Committee were held three meetings during the fiscal
year ended May 31, 2000.2001.
AUDIT COMMITTEE. Augustus K. Oliver (Chairperson), John L. Davies and
Linda B. Keene and
Peter Mayer are the members of the Audit Committee. Each member of the Audit
Committee is required to be independent of the management of the Company,
neither a current nor former employee of the Company or its subsidiaries, and
free of any relationship that, in the judgment of the Board of Directors, would
interfere with his or her exercise of independent judgment as a committee
member. All Audit Committee members are also required to be financially
literate, and at least one member must have accounting or related financial
management expertise. To fulfill its responsibilities to the stockholders and
the investment community, this committee reviews the corporate accounting and
financial reporting practices of the Company and the quality and integrity of
the financial reports of the Company. This committee also recommends to the
Board of Directors the accounting firm to act as independent auditors for the
upcoming fiscal year and meets with the independent auditors, as appropriate, to
discuss scope, staffing and procedures of their audit plan, the proposed fee for
the audit and the results of theirthe audit (including their comments or
recommendations
21
arising therefrom). In addition, this committee reviews the Company's financial
accounting policies and decisions and reports thereon to the Board prior to the
issuance of the annual financial statements. Furthermore, this committee reviews
any non-audit services to be performed by the independent auditors and considers
the possible effects of such services on the auditors' independence. The Audit
Committee held three meetings during the fiscal year ended May 31, 2000.
22
2001.
RETIREMENT PLAN COMMITTEE (FORMERLY FIDUCIARY COMMITTEE).COMMITTEE. Richard M. Spaulding (Chairperson), Charles
T. Harris III, Andrew S. Hedden and Augustus K. Oliver are the members of the
Retirement Plan Committee. This committee acts on behalf of the Board in its
capacity as settlor of the trust underlying the Company's Retirement Plan and
the 401(k) Plan (collectively "the Plans"), and with respect to the powers
enumerated therein, including, without limitation, the power to amend or
terminate the Plans. This committee also oversees the Administrative Committee, which is
comprised of Company employees who are responsible for the day to day
administration of the Plans. Also, this committee approves the appointment of
one or more trustees, or other professionals, necessary for the proper
administration and operation of the Plans. Furthermore, this committee, which
reports its actions to the Board of Directors, oversees the policies and
practices related to the Plans and evaluates the Company's overall retirement
benefit plan philosophy and the Plans in the context of the Company as a
separate company and competitively within the industry. The Retirement Plan
Committee held one meeting during the fiscal year ended May 31, 2000.2001.
HUMAN RESOURCES AND COMPENSATION COMMITTEE. John G. McDonald (Chairperson)(Chairman),
Ramon C. Cortines, Mae C. Jemison andJohn L. Davies, Linda B. Keene and Peter Mayer are the
members of the Human Resources and Compensation Committee. This committee has
the responsibility for setting the compensation of the Chief Executive Officer
and reviewing the recommendations of the Chief Executive Officer for
compensation of the other executive officers prior to approval by the Board. In
addition, the names of all other staff members whose salaries are $150,000 or
more per annum are made available to the committee. This committee evaluates the
Company's overall compensation plans and practices as a separate company and
competitively within the industry. This committee, in overseeing the
administration of all of the Company's compensation plans and arrangements,
reviews and approves the annual bonus award target payouts (including awards
under the Executive Incentive Performance Plan), and any proposed contractual
relationships with executive officers and also reviews the Company's recruitment
practices, including the Company's Human Resource and Diversity Programs. Each
member of thisthe committee is independent of the management of the Company and free
of any relationship that, in the judgment of the Board of Directors, would
interfere with his or her exercise of independent judgment as a committee
member. Members of this committee may not be employees or former employees of
the Company or its subsidiaries, nor may their membership on this committee
disqualify the Company for available exemptions pursuant to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), or Rule 16 b-316b-3 under
the Securities Exchange Act
22
of 1934, as amended.amended (the "Exchange Act"). The Human Resources and Compensation
Committee held four meetings during the fiscal year ended May 31, 2000.2001.
NOMINATING COMMITTEE. Ramon C. Cortines (Chairperson), Rebeca M.
Barrera, Charles T. Harris III and Mae C. Jemison are the members of the
Nominating Committee. This committee identifies and recommends to the Board of
Directors candidates for election as directors and any changes it believes
desirable in the size and composition of the 23
Board and also recommends to the
Board of Directors committee structure and membership and fees to be paid to
directors for service on the Board and on Board committees. The Nominating
Committee held onetwo meeting during the fiscal year ended May 31, 2000.2001. The
Nominating Committee would be pleased to receive suggestions from stockholders
about persons it should consider recommending as possible members of the Board
of Directors. Any such suggestions should be sent to the Nominating Committee of
the Board of Directors, c/o Corporate Secretary, Scholastic Corporation, 555557
Broadway, New York, New York 10012.
STOCK GRANT COMMITTEE (FORMERLY STOCK OPTION COMMITTEE).COMMITTEE. John G. McDonald (Chairperson) and(Chairman), John L. Davies,
Linda B. Keene and Peter Mayer are the standing members of the Stock Grant
Committee and, as permitted under Delaware law, Ramon C. Cortines and Mae C.
Jemison areis an
alternate membersmember of the Stock Grant Committee. This committee provides
assistance to the Board of Directors in fulfilling its responsibilities to the
stockholders of the Company with regard to the issuance of the Company's
securities. The committee authorizes and approves grants, awards or issuances of
options, warrants, restricted stock or other rights under the Company's
compensation plans in effect from time to time, currently the 1992 Stock Option
Plan and the 1995 Stock Option Plan. Each member (or alternate) of the committee
is independent of the management of the Company and free of any relationship
that, in the judgment of the Board of Directors, would interfere with his or her
exercise of independent judgment as a committee member. Members of this
committee may not be employees or former employees of the Company or its
subsidiaries, nor may any Director be a member oftheir membership on this committee if such
membership would disqualify the Company
for available exemptions pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, or Rule 16-b-316b-3
under the Securities Exchange Act of 1934, as amended.Act. This committee held four meetings during the fiscal year
ended May 31, 2000.2001.
PUBLISHING AND PROGRAM COMMITTEE. Mae C. Jemison (Chairperson), Rebeca
M. Barrera, Helen Benham, Ramon Cortines, Peter Mayer and Richard Spaulding are
members of the Publishing and Program Committee. This committee reviews and
advises management of the Company on the strategic development of properties and
programs and reports its findings regularly to the Board of Directors. This committee held
no meetings during the fiscal year ended May 31, 2000.2001.
23
DIRECTOR COMPENSATION
For the fiscal year ended May 31, 2000,2001, each non-employee director of the
Company was paid a cash annual retainer of $25,000 for his or her services as a
director and a $1,500 per committee fee for each committee of which he or she
was a member or a chairperson fee of $5,000 if he or she chaired a committee.was the chair. The
Company reimburses directors for travel, lodging and related expenses they may
incur in connection with their services as directors.
24
Under the terms of the Outside Directors' Stock Option Plan, as amended
(the "1997 Directors' Plan"), each non-employee director is automatically
granted, on January 7 of each year (or, if not a business day, the next
succeeding business day), an option to purchase 3,000 shares of the Company's
Common Stock at a purchase price per share equal to the fair market value of a
share of Common Stock on the date of grant. On January 7, 2000,2001, non-employee
directors (other than Andrew S. Hedden, who declined his award) were each
granted options to purchase 3,0006,000 shares of Common Stock at an exercise price of
$60.77.$43.875, after adjustment for the 2-for-1 Stock Split. The options vest one year
from the date of grant and expire on January 7, 2010.2011.
Under the terms of the Directors' Deferred Compensation Plan, as amended,
directors are permitted to defer 50% or 100% of their cash retainers and meeting
fees. Deferred amounts accrue interest at a rate equal to the 30-year treasury
bill rate and are paid in cash upon the later of termination from Board service
or age 62, unless paid earlier due to death, disability, change of control of
the Company or severe financial hardship. TwoThree directors have chosen to have
100% of their director's compensation deferred. For the fiscal year ended
May 31, 2000,2001, the Company recorded $13,212.59$11,283 in accrued interest expense under
this plan.
CERTAIN TRANSACTIONS AND CERTAIN RELATIONSHIPS
Andrew S. Hedden is a partner of the law firm of Coudert Brothers, which
has provided legal services to the Company in the past and is expected to
continue to do so in the future.
From time to time, the Company may receive investment banking services
from Goldman, Sachs & Co., of which Charles T. Harris III is a managing
director.
There are no family relationships among the directors and executive
officers of the Company, except for Richard Robinson and Helen V. Benham who are
directors and executive officers of the Company and husband and wife. See also
the disclosure regarding the Split Dollar Life Insurance Agreement in Footnote 14
to the "SummarySummary Compensation Table."Table herein.
24
APPROVAL OF AMENDMENT
TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
On July 18, 2000,SCHOLASTIC CORPORATION
2001 STOCK INCENTIVE PLAN
Upon the recommendation of the Human Resources and Compensation
Committee, the Board of Directors has unanimously adopted resolutions
recommendingapproved and declaring advisable certain amendments (together, the "Charter
Amendment")is submitting to
the Company's Amended and Restated Certificateholders of Incorporationthe Class A Stock, for their consideration, the Scholastic
Corporation 2001 Stock Incentive Plan (the "Certificate""2001 Plan") to (i) increase. The Board approved the
numberestablishment of authorized sharesthe 2001 Plan at a meeting of Common
Stock, par value $0.01 ("Common Stock"), and Preferred Stock, par value $1.00
("Preferred Stock"), and
25
(ii) effect certain other amendments, in each case as set forth in the proposed
Charter Amendment to the Certificate in the form attached hereto as Appendix I,Board on July 18, 2001,
subject to the approval of the holders of the Class A Stock.
Stock options have historically been the Company's stockholders entitledprincipal form of
long-term incentive compensation and have been granted as a means to vote thereon.
Themotivate
superior performance and to directly link the economic interests of executives
and other key employees with those of stockholders. As of July 31, 2001, there
were outstanding options to purchase an aggregate of 5,781,970 shares of Common
Stock under the Company's existing stock option plans, and 111,180 shares of
Common Stock were available for future grants thereunder.
Because only 111,180 shares of Common Stock remain available for grant
under the existing stock option plans, approval is sought from the holders of
the Class A Stock of the 2001 Plan, covering an aggregate of 4,000,000 shares of
Common Stock. As described below, the 2001 Plan is designed to provide greater
flexibility than the previously approved stock option plans by permitting the
grant of restricted stock and other stock-based awards in addition to stock
option grants. While it is expected that stock options will continue to be the
principal form of long-term incentive compensation used by the Company, the
Board has recommendedof Directors believes that the Charter Amendment be submittedability to the
stockholdersprovide other types of
compensation awards in appropriate circumstances is consistent with and
supportive of the Company atpurpose underlying the Annual Meeting.Company's long-term incentive programs,
to attract and retain employees and to motivate superior performance. The 2001
Plan also permits stock based awards to be granted under certain conditions in
foreign jurisdictions.
The following is a brief summary of the proposed amendments toprincipal provisions of the Certificate2001
Plan. This summary does not purport to be effected by the Charter Amendment. Such summarycomplete and is qualified in its
entirety by reference to the proposed Charter Amendment attachedtext of the 2001 Plan, set forth as Appendix I
to this proxy statement which is incorporated herein by reference.
AMENDMENT TO THE CERTIFICATE TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK AND PREFERRED STOCKA
hereto.
SUMMARY OF THE COMPANY.2001 PLAN.
PURPOSE. The Company is currently
authorized to issue twenty-eight million five hundred thousand (28,500,000)
shares of capital stock, consisting of twenty-five million (25,000,000) shares
of Common Stock; two million five hundred thousand (2,500,000) shares of
Class A Stock, par value $0.01 ("Class A Stock"); and one million (1,000,000)
shares of Preferred Stock. The Board of Directors recommends adoption of
amendments to the Certificate to increase the number of shares of authorized
Common Stock from twenty-five million (25,000,000) shares of Common Stock to
seventy million (70,000,000) shares and the number of shares of Preferred Stock
from one million (1,000,000) shares to two million (2,000,000) shares, subject
to the approvalpurpose of the Company's stockholders entitled2001 Plan is to vote thereon.
The proposed increase inenhance the authorized shares of Common Stockprofitability
and Preferred Stockvalue of the Company wouldfor the benefit of its stockholders by enabling the
Company to offer stock-based incentives to employees of, and consultants to, the
Company and its affiliates (as defined in the 2001 Plan), thereby creating a
means to raise the level of stock ownership by such individuals in order to
attract, retain and reward such individuals and strengthen the mutuality of
interests between such individuals and stockholders.
25
ADMINISTRATION. The 2001 Plan will be effectedadministered by amending in its entirety the first paragraphStock Grant
Committee of Article FOURTH(or other committee designated by) the Board (the "Committee"),
comprised of two or more non-employee directors, each of whom will be, to the
extent required by Rule 16b-3 under the Exchange Act and Section 162(m) of the
CertificateCode, a non-employee director as defined in the manner set forth in
Appendix I of this proxy statement. Pursuant to the Delaware General Corporation
Law, the holders of the Common StockRule 16b-3 and an outside director
as defined under Section 162(m).
The Committee will have the rightfull authority to vote, separately as a
class, uponadminister and interpret
the proposal2001 Plan, including the authority: (i) to increasegrant discretionary awards under
the authorized shares2001 Plan, (ii) to determine the persons to whom discretionary awards will
be granted, (iii) to determine the types of Common Stock.
REASONS FOR AND EFFECTS OF THE INCREASE OF AUTHORIZED CAPITAL STOCK. Of
the 28,500,000 shares of capital stock of the Company currently authorized, at
August 9, 2000, 16,238,581 shares of Common Stock, 828,100 shares of Class A
Stock and no shares of Preferred Stock were outstanding, 788,609 shares of
Common Stock were held as treasury shares and an additional 6,260,375 shares of
Common Stock were reserved for issuance as follows: 3,683,452 shares upon the
exercise of options granted ordiscretionary awards to be granted,
under(iv) to determine the Company's stock option
plans, 317,649 shares upon the sale thereof under the MSPPterms and ESPP, 828,100
shares upon conversionconditions of the Class A Stock and 1,131,174 shares upon conversion
of the Company's 5% Convertible Subordinated Debentures. Accordingly, at
August 9, 2000, the Company had 3,289,653 shares of authorized Common Stock,
including treasury shares, 1,671,900 shares of Class A Stock and 1,000,000
shares of Preferred Stock remaining authorized, unreserved and available for
issuance.
26
The Board of Directors recommends an increase of forty-five million
(45,000,000) of shares of authorized Common Stock which would be available for
issuance from time to time in connection with possible future financing
programs, stock dividends, acquisitions, stock option and other employee benefit
plans and other general corporate purposes. Having such additional authorized
shares of Common Stock available for issuance in the future will give the
Company greater flexibility and allow additional shares of Common Stock, in
excess of the number of such shares presently authorized, to be issued from time
to time by action of the Board of Directors, without the expense and delay of a
special meeting of stockholders. Accordingly, no additional action or
authorization by the Company's stockholders would be necessary prior to the
issuance of such shares, unless required for the particular transaction by
applicable law or the rules of the NASDAQ Stock Market, on which the Company's
Common Stock is quoted, or any other stock exchange or other national securities
association trading system on which the Company's authorized shares may then be
listed or quoted.
The Board of Directors also recommends an increase of one million
(1,000,000) shares of authorized Preferred Stock to provide additional
flexibility in respect of possible future financing programs or acquisitions, if
the issuance of the Preferred Stock is determined to be advantageous under the
particular circumstances involved at the time any such issuance is under
consideration. Under the Certificate, shares of Preferred Stock may be issued
from time to time in one or more series, and the Board of Directors, without any
further action on the part of the stockholders of the Company, is authorizedeach discretionary award, (v) to
determine the number of shares of Common Stock to be covered by each
discretionary award, (vi) to prescribe the form or forms of instruments
evidencing awards, and (vii) to make all other determinations in connection with
the 2001 Plan and awards made thereunder as the Committee, in its sole
discretion, deems necessary or desirable.
The Committee may also, in its discretion, extend or accelerate the
exercisability of an award granted under the 2001 Plan, accelerate the vesting
of or eliminate or make less restrictive any restrictions contained in any
award, waive any restriction or other provision of the 2001 Plan or of any award
or otherwise amend or modify any award in any manner that is either (i) not
adverse to that participant to whom the award was granted or (ii) consented to
by that participant.
The terms and conditions of individual awards will be set forth in
written agreements which will be consistent with the terms of the 2001 Plan.
Awards under the 2001 Plan may not be made on or after July 18, 2011, the tenth
anniversary of the date the Plan was adopted by the Board, but awards granted
prior to such date may extend beyond that date.
ELIGIBILITY. Pursuant to the 2001 Plan, all employees of, and
consultants to, the Company or any of its affiliates (including prospective
employees and consultants) are eligible to be granted non-qualified stock
options, restricted stock and other stock-based awards. In addition, employees
of the Company and employees of the Company's affiliates that qualify as
subsidiaries or parent corporations (within the meaning of Section 424 of the
Code) are eligible to be granted incentive stock options ("ISOs") under the 2001
Plan.
TYPES OF AWARDS UNDER THE 2001 PLAN.
OPTIONS. The Committee may grant non-qualified stock options and ISOs to
purchase shares of Common Stock. The Committee will determine the number of
shares of Common Stock subject to each option, the term of each option (which
may not exceed 10 years (or five years in the case of an ISO granted to a 10%
stockholder)), the exercise price, the vesting schedule (which may not be less
than one year) and the other material
26
terms of each option. No non-qualified stock option or ISO may have an exercise
price less than the fair market value of the Common Stock at the time of grant
(or, in the case of an ISO granted to a 10% stockholder, 110% of such fair
market value).
Options will be exercisable at such time or times and subject to such
terms and conditions as determined by the Committee at grant, and the Committee,
in its sole discretion, may accelerate the exercisability of such options.
Payment of the exercise price may be made: (i) in cash or by check, bank draft
or money order, (ii) through a "cashless exercise" procedure whereby the
recipient delivers irrevocable instructions to a broker to deliver to the
Company promptly upon the sale of the underlying shares an amount equal to the
exercise price, or (iii) on such other terms and conditions as may be acceptable
to the Committee, which may include surrender of options or other shares of
Common Stock owned by the optionee.
The 2001 Plan authorizes the Committee, if deemed appropriate in its
discretion, to permit "reloads" of stock options exercised, whereby an
equivalent number of stock options would be granted upon exercise of an option
as the number of shares, if any, used to pay for the exercise price of such
options or to pay withholding taxes. Unless otherwise determined by the
Committee, any such reload options would have an exercise price equal to the
fair market value of the Common Stock on the date of the "reload" and a term
equal to the remaining term of the options exercised.
RESTRICTED STOCK. The Committee may award "restricted" shares of Common
Stock, which are grants of Common Stock that are subject to risk of forfeiture
or other restrictions. Upon the award of restricted stock, the recipient has the
rights of a stockholder with respect to the right to receive dividends and the
right to vote the shares. The Committee may, in its sole discretion, determine
at grant that the payment of dividends, if any, shall be deferred until the
expiration of the applicable restriction period. Recipients of restricted stock
are required to enter into a restricted stock agreement with the Company, which
sets forth the restrictions to which the shares are subject, including, as
applicable, the date or dates on which such restrictions will lapse or any
performance criteria to be met for such restrictions to lapse.
If the grant of restricted stock or the lapse of the relevant
restrictions is based on the attainment of performance goals, the Committee
shall establish for each recipient the applicable performance goals, formulae or
standards and the applicable vesting percentages with reference to the
attainment of such goals or satisfaction of such formulas or standards while the
outcome of the performance goals are substantially uncertain. Such performance
goals may incorporate provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar events or circumstances.
Section 162(m) of the Code requires that performance awards be based upon
objective performance measures. The performance goals will be based on one or
more of the objective criteria set forth on Exhibit A to the
27
2001 Plan, included in any seriesAppendix A hereto. To the extent permitted under
Section 162 (m) of the Code, the Committee may, with respect to the Performance
Criteria set forth in Exhibit A to the 2001 Plan (i) designate additional
performance criteria on which the performance goals may be based, or
(ii) adjust, modify or amend the current performance criteria.
OTHER STOCK-BASED AWARDS. The Committee may grant awards of Common Stock
and any other rights, preferences and limitations pertainingawards that are valued in whole or in part by reference to, such series as the Boardor are
payable in or otherwise based on, Common Stock, which awards may determine, subject onlybe granted
either alone or in addition to or in tandem with grants of stock options or
restricted stock. Subject to the provisions of the Certificate. The Board2001 Plan, the Committee has
the authority to determine the recipients to whom and the time or times at which
such awards will be made, the number of Directors,shares of Common Stock to be awarded
pursuant to, or to be used for reference purposes in its discretion, may, upon issuance of any series of Preferred
Stock, grant voting power to the holdersrespect of, such Preferredawards,
and all other conditions of the awards. The Committee may also provide for the
grant of Common Stock to elect not
more than two additional membersunder such awards upon the completion of a specified
performance period.
AMENDMENT AND TERMINATION. The 2001 Plan provides that it may be
amended, in whole or in part, suspended or terminated by the Board of Directors,
in the event of an
arrearage in the payment of dividends on anyexcept that no such series; however, such right to
elect two additional directors is applicable to all series of the Preferred
Stock inamendment, suspension or termination may increase the
aggregate and not to each series thereof in the event more than one
series is outstanding. Notwithstanding the electionnumber of two directors by the
holders of the Preferred Stock, the holdersshares of Common Stock shall only be
entitledreserved for awards or the maximum
individual share limits, change the classification of employees or consultants
eligible to elect one-fifthreceive awards, decrease the minimum exercise price of any option,
extend the maximum option period or otherwise effect an amendment that would
require stockholder approval under the Section 162(m) or Section 422 of the membersCode
unless such amendment receives stockholder approval to the extent required by
Section 162(m) or Section 422 of the BoardCode or Rule 16 b-3 under the Exchange Act.
SHARE AND OTHER LIMITATIONS. A maximum of Directors as
constituted prior4,000,000 shares of Common
Stock may be issued or used for reference purposes pursuant to the election2001 Plan. In
general, upon termination, cancellation or expiration of an award, the unissued
shares of Common Stock subject to the award will again be available for an award
under the 2001 Plan. The maximum number of shares of Common Stock subject to
options or any other awards intended to comply with Section 162(m) of the Code
that may be granted to any individual under the 2001 Plan will be 250,000 per
type of award for any fiscal year of the Company.
The Committee may make appropriate adjustments to the number of shares
available for awards and the terms of outstanding awards under the 2001 Plan to
reflect any change in the Company's capital structure or business, stock
dividend, stock split, recapitalization, reorganization, merger, consolidation,
sale of all or substantially all the assets of the Company or similar event.
28
MISCELLANEOUS. Although awards will generally be nontransferable (except
by will or the laws of descent and distribution), the Committee may determine at
the time of grant or thereafter that a non-qualified stock option that is
otherwise nontransferable will be transferable in whole or in part to family
members (as defined in the 2001 Plan) and may specify the circumstances and
conditions which such option may be transferred.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE 2001 PLAN
The rules concerning the federal income tax consequences with respect to
options granted pursuant to the 2001 Plan are quite technical. Moreover, the
applicable statutory provisions are subject to change, possibly with retroactive
effect, as are the interpretations and applications of such two additional directors by the
holdersstatutory
provisions, which may also vary in individual circumstances. The following
summary is designed to provide a general understanding of the Preferred Stock. Asmaterial federal
income tax consequences relating to the 2001 Plan under current law:
NONQUALIFIED STOCK OPTIONS. In general, a recipient will not realize any
taxable income upon the grant of a non-qualified stock option and the Company
will not receive a deduction at the time of grant. Upon the exercise of a
non-qualified stock option, the recipient generally will realize ordinary income
in an amount equal to the caseexcess of the fair market value of the Common Stock no
additional action or authorizationon
the date of exercise over the exercise price. Upon a subsequent sale of such
Common Stock by the Company's stockholders wouldrecipient, the recipient will recognize short-term or
long-term capital gain or loss depending upon his or her holding period for the
Common Stock. The Company will generally be necessary priorallowed a deduction equal to the
issuanceamount recognized by the recipient as ordinary income, subject to certain tax
law limitations.
ISOS. In general, an employee will not realize taxable income upon
either the grant or the exercise of an ISO unless required by the alternative
minimum tax, and the Company will not realize an income tax deduction at either
time. If the recipient does not sell the Common Stock received pursuant to the
exercise of an ISO within either (1) two years after the date of the additional sharesgrant of
Preferredthe ISO or (2) one year after the date of exercise, a subsequent sale of the
Common Stock will result in long-term capital gain or loss to the recipient and
will not result in a tax deduction to the Company.
If the recipient disposes of the Common Stock acquired upon exercise of
the ISO within either of the above-mentioned time periods, the recipient will
generally realize as ordinary income an amount equal to the lesser of: (1) the
fair market value of the Common Stock on the date of exercise over the exercise
price, or (2) the amount realized upon disposition over the exercise price. In
such event, the Company generally will be entitled to an income tax deduction
equal to the amount recognized as ordinary income, subject to tax law certain
limitations. Any gain in excess of the amount realized by the recipient as
ordinary income will be taxed at the rates applicable to short-term or long-term
capital gains, depending on the holding period.
29
SECTION 162(M) OF THE CODE. Section 162(m) of the Code disallows
deductions for compensation in excess of $1 million for certain executives of
publicly held corporations, unless requiredsuch compensation meets the requirements of
Section 162(m) as "performance-based" compensation. If the 2001 Plan is approved
by stockholders, the Company will be entitled to deduct for federal income tax
purposes certain performance-based compensation paid under the 2001 Plan to the
Chief Executive Officer and other participating officers notwithstanding the
$1 million limitation under Section 162(m) of the Code. The Company expects that
all options and certain awards that may be granted to participating officers
under the 2001 Plan will qualify as performance-based compensation under
Section 162(m).
ALLOCATION OF AWARDS UNDER THE 2001 PLAN. As of the date of this proxy
statement, no awards have been made under the 2001 Plan. Because of the
flexibility that the 2001 Plan provides, the cost of the 2001 Plan will vary
depending on the terms of the individual grants awarded to employees. In
addition, the allocation of awards under the 2001 Plan is not currently
determinable since such allocation is dependent upon future decisions to be made
by the Committee in its sole discretion, subject to the provisions of the 2001
Plan. Accordingly, it is not possible to determine the amounts of benefits that
will be received under the 2001 Plan by the Named Executives, all executive
officers as a group or all employees other than executive officers. For
comparison purposes, please refer to the stock option awards under the Company's
existing stock option plans in fiscal 2001, shown in the table titled "Option
Grants in Fiscal 2001" herein. In addition to the grants shown in that table, in
fiscal 2001, 730,000 stock options were granted to other executive officers as a
group and 450,000 stock options were granted to all other employees, in each
case as adjusted for the particular transaction by applicable law or2-for-1 Stock Split. The Scholastic Corporation 1997
Outside Directors' Stock Option Plan provides for grants of stock options to
non-employee directors. Grants to directors are more fully described herein
under the rules ofcaption "Director's Compensation."
CURRENT STOCK INFORMATION. On August 10, 2001, the NASDAQ Stock Market or any other stock exchange or national securities
association trading system on which the Company's authorized shares may then be
listed or quoted.
The additional shares of Common Stock and Preferred Stock proposed to be
authorized would be identical to the shares of Common Stock and Preferred Stock
now authorized, and this proposal would not affect or change the rights of the
holders of the
27
Common Stock or Class A Stock. Holdersclosing price of the
Company's Common Stock and
Class A Stock do not have pre-emptive rights to purchase any shares of
authorized capital stock of the Company. The issuance of additional shares of
Common Stock and Preferred Stock for other than a stock split or dividend could,
under certain circumstances, have the effect of diluting the existing economic
rights of the holders of Common Stock and Class A Stock and the existing voting
rights of holders of Common Stock. As provided in the Company's Certificate,
voting control will continue to rest with the holders of the Class A Stock
except for the right of the holders of shares of Common Stock, voting as a
class, to elect such minimum number of the members of the Board of Directors as
shall equal at least one-fifth of the members of the Board of Directors.
There are no present agreements or arrangements which would require the
issuance of any of the additional authorized shares of Common Stock or Preferred
Stock. However, based on market conditions, the Company may seek to refinance
all or a portion of the debt incurred in connection with the June 22, 2000
acquisition by Scholastic Inc. of Grolier Incorporated, a Delaware corporation
("Grolier"), for $400 million in cash. The cash consideration paid for the
Grolier acquisition was financed by the Company through bank debt under
committed facilities. Based on market conditions, the Company may seek to
refinance all or a portion of the Grolier purchase price through an offering of
debt or a combination of debt and equity, and should the Company do so, it may
use a portion of the newly authorized Common Stock for this purpose. Unless
market conditions are favorable, however, the Company will continue to utilize
its credit facilities and anticipates no problems in renewing such facilities or
negotiating new facilities should the need arise.
OTHER AMENDMENTS TO THE CERTIFICATE. The Board of Directors has also
recommended certain additional amendments to the Certificate, as described
below.
1. It is recommended that Section (b)(1) of Article FOURTH be amended to
provide that, pursuant to the voting power granted under the Certificate, the
holders of the Class A Stock may from time to time set the number of directors
constituting the full Board of Directors, subject to there being a minimum of
three and a maximum of fifteen directors. The current Certificate provides for
the number to be set annually by the holders of the Class A Stock.
The Board of Directors seeks amendment of this provision to clarify and
establish the right of the holders of the Class A stock to change the number of
Board members between meetings. The Board believes that this proposed amendment,
which would permit the holders of the Class A Stock to vary the size of the
Board more frequently than annually, would give the Board better flexibility to
assure the timely recruitment of qualified director candidates. With the
enactment in recent years of rules and regulations which effectively restrict
membership on the Audit and Compensation Committees unless specified
qualification standards are met, the Board believes that this flexibility is all
the more
28
necessary to assure it has a sufficient number of members who qualify to serve
on these committees.
Should the Board recommend, and the holders of the Class A Stock approve,
an increase in the number of directors constituting the full Board during the
period between annual meetings, depending on the increased size of the Board,
the new director would be designated a Common Stock Director or a Class A Stock
Director, as applicable, and, in accordance with the current Certificate, those
directors comprising the class of Common Stock Directors or Class A Stock
Directors, as the case may be, would vote on the election of such director to
fill the additional directorship created until the next succeeding annual
meeting, when the holders of the applicable class of stock would vote on the
election of such director, if renominated.
This proposed amendment would be effected by amending in its entirety
Section (b)(1) of Article FOURTH of the Company's Certificate in the manner set
forth in Appendix I of this proxy statement.
2. It is also recommended that a new Section (b)(iii) to Article FOURTH
be added to clarify and establish that, with respect to any stock dividend or
distribution declared by the Company in shares of Common Stock or Class A Stock,
such dividends or distributions shall be payable in shares of Common Stock or
other securities exchangeable for or convertible into shares of Common Stock
with respect to the holders of Common Stock and in shares of Class A Stock or
other securities exchangeable for or convertible into Class A Stock with respect
to the holders of Class A Stock. Except as clarified by this Amendment, the
charter would continue to provide that the holders of the Common Stock and
Class A Stock shall have the same and identical rights to dividends or
distributions.
The Board of Directors believes that this amendment clarifies the current
provisions of Article FOURTH as they relate to dividends or distributions
payable in Common Stock and Class A Stock and will avoid any ambiguity in the
event the Board should authorize a stock dividend or other distribution
involving the Common or Class A Stock.
This proposed amendment would be effected by adding a new
Section (b)(iii) to Article FOURTH of the Certificate in the manner set forth in
Appendix I of this proxy statement.
3. The final proposed amendment is to amend the fourth sentence of
Article FIFTH to correct a typographical error in the Certificate by removing
duplicative language. This proposed amendment would be effected by amending in
its entirety the fourth sentence of Article FIFTH of the Company's Certificate
in the manner set forth in Appendix I of this proxy statement in order to remove
the duplicate language, which consisted of the repetition of the words "official
capacities and as to action in another capacity while holding such office."
29
NASDAQ National Market System was $38.37.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT YOUTHE HOLDERS OF THE CLASS A STOCK
VOTE FOR THE APPROVAL AND ADOPTION OF THE FOREGOING
AMENDMENTS TO THE CERTIFICATE TO (I) INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMONSCHOLASTIC CORPORATION 2001 STOCK
AND PREFERRED STOCK OF THE COMPANY AND (II) EFFECT THE OTHER
AMENDMENTS AS SET FORTH IN THE PROPOSED CHARTER AMENDMENT APPENDED TO THIS PROXY
STATEMENT AS APPENDIX I.INCENTIVE PLAN. Assuming the presence of a quorum, the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock and
Class A Stock, each voting as a separate class, is required to adopt the
amendment to the Certificate to increase the number of authorized shares of
Common Stock and the affirmative vote of the holders of a majority of the
outstanding shares of Class A Stock is required to adopt the amendment to the
Certificate to increase the number of authorized shares of Preferred Stock and
to approve the other amendments to the Certificate described above. In the event
the amendment to the Certificate to increase the number of authorized shares of
Common Stock is not approved, the amendment to the Certificate to increase the
number of authorized shares of Preferred Stock will not be implemented,
notwithstanding the approval of the holders of the Class A Stock. The remaining
amendments to the Certificate will, however, be implemented if approvedvotes cast by the holders of the Class A Stock. For the foregoing purposes, the following
resolutions will be offered by the Board of DirectorsStock present and
entitled to vote on this item at the Annual Meeting:
FOR SUBMISSION TO THE HOLDERS OF COMMON STOCK AND CLASS A STOCK:
RESOLVED, thatMeeting is required to approve the
proposal to amend the Amended and Restated Certificate
of Incorporation of the Company in the form appended to this proxy
statement as Appendix I so as to increase the number of authorized shares
of CommonScholastic Corporation 2001 Stock par value $0.01, of the Company be, and is hereby,
approved.
FOR SUBMISSION TO THE HOLDERS OF CLASS A STOCK:
RESOLVED, that the proposal to amend the Amended and Restated Certificate
of Incorporation of the Company in the form appended to this proxy
statement as Appendix I so as to (i) increase the number of authorized
shares of Preferred Stock, par value $1.00, of the Company and
(ii) effect the other amendments as set forth in the proposed amendment to
the Amended and Restated Certificate of Incorporation be, and is hereby,
approved.Incentive Plan.
30
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has recommended to the Board of Directors the
selection of Ernst & Young LLP ("Ernst & Young") to be the independent auditors
of the Company for the fiscal year ending May 31, 2001.2002. Ernst & Young and its
predecessors have acted as independent auditors for the Company and its
predecessors since 1938. This selection will be submitted for ratification at
the Annual Meeting. Representatives of Ernst & Young will
30
be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions. If
the holders of Class A Stock do not elect to ratify the appointment of Ernst &
Young, the selection of independent auditors will be reconsidered by the Audit
Committee.
During the fiscal year ended May 31, 2000,2001, Ernst & Young served asYoung's services
included auditing the Company's independent auditors. It is the belief of the Audit Committee that theconsolidated financial relationship betweenstatements and reviewing
unaudited quarterly financial information and advising the Company on various
accounting, tax and its independent auditors should
be fully disclosed to the stockholders.regulatory matters. The fees and expenses for audit services provided by
Ernst & Young to the Company and its domestic and foreign
subsidiaries forduring the fiscal year ended May 31, 20002001 were approximately $970,000.
This fee includes approximately $190,000 (20% of totalas
follows:
Audit Fees.................................................. $1,227,100
Financial Information Systems Design and Implementation
Fees...................................................... $ --
Audit Related Fees.......................................... $ 806,750
All Other Fees.............................................. $ 268,700
----------
TOTAL FEES PAID............................................. $2,302,550
==========
Audit related services generally include fees for benefit plan audits,
business acquisitions, accounting consultations, and expenses) in
connection with certain non-audit services provided to the Company, which were
related primarily toSEC registration
statements. All other fees generally include fees for tax consulting and financial accounting advice on various proposed
transactions, tax
return preparation and general accounting assistance.preparation.
RECOMMENDATION THE BOARD OF DIRECTORDIRECTORS RECOMMENDS THAT HOLDERS OF THE
CLASS A STOCK RATIFY THE SELECTION OF ERNST & YOUNG LLP TO BE THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING MAY 31, 2001.2002. Assuming the
presence of a quorum, the affirmative vote of a majority of the votes cast by
the holders of shares of the Class A Stock present and entitled to vote on this
item at the Annual Meeting is required to ratify the selection.
THE AUDIT COMMITTEE'S REPORT TO STOCKHOLDERS
The Audit Committee of the Board of Directors is comprised of three
directors. The Board has determined that each Committee member is independent as
defined under the National Association of Securities Dealers listing standards.
It is the responsibility of the Audit Committee to oversee the Company's
financial reporting process on behalf of the Board of Directors. The Audit
Committee operates
31
under a written charter, which is included in this Proxy Statement as
Appendix B. Under the charter, Company management has the primary responsibility
for the financial statements and the reporting process, including the Company's
systems of internal controls. The independent auditors are responsible for
expressing an opinion on the conformity of the audited financial statements with
generally accepted accounting principles.
In fulfilling its oversight responsibilities, the Audit Committee
discusses with the Company's internal and independent auditors the overall scope
and plans for their respective audits. The Audit Committee meets with the
internal and independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The Audit Committee has reviewed and discussed, with both management and
the independent auditors, the audited financial statements for the year ended
May 31, 2001, including a discussion of the quality, not just the acceptability,
of the accounting principles followed, the reasonableness of significant
judgments reflected in such financial statements, and the clarity of disclosures
in the financial statements.
The Audit Committee has also reviewed with the independent auditors the
other matters required to be discussed by Statement on Auditing Standards
No. 61 (Communications with Audit Committees). In addition, the Audit Committee
discussed with the independent auditors their independence from management and
considered the compatibility of nonaudit services with the auditors'
independence. The Audit Committee has received from the independent auditors the
written disclosures and letter required by the Independence Standards Board
(including Independence Standards Board Standard No. 1).
32
Based on its review and discussions with management, the Audit Committee
recommended to the Board of Directors (and the Board of Directors has approved)
the inclusion of the audited financial statements for the year ended May 31,
2001 in the Company's Annual Report to be filed on Form 10-K with the SEC. The
Audit Committee has also recommended and the Board has approved, subject to
stockholder approval, the selection of the Company's independent auditors.
AUDIT COMMITTEE
Augustus K. Oliver, Chairperson
John L. Davies
Linda B. Keene
STOCKHOLDER PROPOSALS FOR 20012002 ANNUAL MEETING
Stockholders who intend to present proposals at the 20012002 Annual Meeting
under SEC Rule 14a-8 must insure that such proposals are received by the
Secretary of the Company not later than April 25, 2001.24, 2002. Such proposals must meet
the requirements of the SEC to be eligible for inclusion in the Company's 20012002
proxy materials. In order for a proposal submitted outside of Rule 14a-8 to be
considered "timely" within the meaning of SEC Rule 14a-4(c), such proposal must
be received prior tono later than July 25, 2001.10, 2002.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
to come before the Annual Meeting. If any other matter should come before the
meeting, the persons named in the enclosed proxy intend to vote the proxy
according to their best judgment.
By Order of the Board of Directors
Charles B. Deull
Senior Vice President, General
Counsel
and Secretary
3133
APPENDIX A
-------------------------------
SCHOLASTIC CORPORATION 2001 STOCK INCENTIVE PLAN
-------------------------------
ARTICLE I
CERTIFICATEPURPOSE
The purpose of this Scholastic Corporation 2001 Stock Incentive Plan is
to enhance the profitability and value of the Company for the benefit of its
stockholders by enabling the Company to offer employees of, and Consultants to,
the Company and its Affiliates stock-based incentives in the Company, thereby
creating a means to raise the level of stock ownership by employees and
Consultants in order to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and the Company's
stockholders.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "ACQUISITION EVENT" has the meaning set forth in Section 4.2(d).
2.2 "AFFILIATE" means each of the following: (i) any Subsidiary; (ii) any
Parent; (iii) any corporation, trade or business (including, without limitation,
a partnership or limited liability company) which is directly or indirectly
controlled 50% or more (whether by ownership of stock, assets or an equivalent
ownership interest or voting interest) by the Company or one of its Affiliates;
(iv) any corporation, trade or business (including, without limitation, a
partnership or limited liability company) which directly or indirectly controls
50% or more (whether by ownership of stock, assets or an equivalent ownership
interest or voting interest) of the Company or a Parent; and (v) any other
entity in which the Company or any of its Affiliates has a material equity
interest and which is designated as an "Affiliate" by resolution of the
Committee.
2.3 "AWARD" means any award under this Plan of any (a) Stock Option;
(b) Restricted Stock; (c) Other Stock-Based Award; or (d) other award providing
benefits similar to (a) through (c) designed to meet the requirements of a
Foreign Jurisdiction.
2.4 "AWARD AGREEMENT" means, with respect to each Award, a written
agreement between the Company and the Participant setting forth the terms and
conditions of the
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Award, including, without limitation, a Stock Option Agreement and Restricted
Stock Agreement.
2.5 "BOARD" means the Board of Directors of the Company.
2.6 "CAUSE" shall mean, with respect to the Termination of Employment of
an employee or Termination of Consultancy of a Consultant, (1) in the case where
there is no employment agreement or consultancy agreement between the Company or
an Affiliate and the Participant in effect at the time of the relevant grant or
where there is an employment agreement or consultancy agreement in effect at
such time, but such agreement does not define "cause" (or words of like import),
termination due to a Participant's dishonesty, fraud, insubordination, willful
misconduct, refusal to perform services (for any reason other than illness or
incapacity) or materially unsatisfactory performance of his or her duties for
the Company or an Affiliate, as determined by the Committee in its sole
discretion; or (2) in the case where there is an employment agreement or
consultancy agreement between the Company or an Affiliate and the Participant in
effect at the time of grant that defines cause (or words of like import),
termination that is or would be deemed to be "for cause" (or words of like
import) as defined under such employment agreement or consultancy agreement at
the time of grant, as determined by the Committee in its sole discretion.
2.7 "CODE" means the Internal Revenue Code of 1986, as amended. Any
reference to any section of the Code shall also be a reference to any successor
provision.
2.8 "COMMITTEE" means a committee or subcommittee of the Board appointed
from time to time by the Board, which committee or subcommittee shall consist of
two or more non-employee directors, each of whom is intended to be, to the
extent required by Rule 16b-3, a "non-employee director" as defined in
Rule 16b-3 and, to the extent required by Section 162(m) of the Code and any
regulations thereunder, an "outside director" as defined under Section 162(m) of
the Code; provided, however, that if and to the extent that no Committee exists
which has the authority to administer this Plan, the functions of the Committee
shall be exercised by the Board and all references herein to the Committee shall
be deemed to be references to the Board.
2.9 "COMMON STOCK" means the Common Stock, $.01 par value per share, of
the Company.
2.10 "COMPANY" means Scholastic Corporation, a Delaware corporation, and
its successors by operation of law.
2.11 "CONSULTANT" means any advisor or consultant to the Company or its
Affiliates.
2.12 "DISABILITY" means (1) in the case where there is no employment
agreement or consultancy agreement between the Company or an Affiliate and the
Participant in effect at the time of the relevant grant, or where there is an
employment agreement or consultancy agreement in effect at such time, but such
agreement does not define disability, total and permanent disability, as defined
in Section 22(e)(3) of the Code, as determined by the Committee in its sole
discretion; or (2) in the case where there is an employment agreement or
consultancy agreement between the Company or an Affiliate and the Participant at
the
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time of the relevant grant that defines disability, disability as defined under
such employment agreement or consultancy agreement, as determined by the
Committee in its sole discretion.
2.13 "EFFECTIVE DATE" means the effective date of this Plan as defined in
Article XIII.
2.14 "ELIGIBLE EMPLOYEE" means each employee of the Company or an
Affiliate.
2.15 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
Any references to any section of the Exchange Act shall also be a reference to
any successor provision.
2.16 "FAIR MARKET VALUE" means, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, as of any
date, the mean between the high and low sales prices of a share of Common Stock
on the applicable date: (i) as reported on the principal national securities
exchange on which it is then traded or The Nasdaq Stock Market, Inc. ("NASDAQ")
or (ii) if not traded on any such national securities exchange or NASDAQ the
mean of the closing bid and asked prices of a share of Common Stock as reported
by an automated quotation system sponsored by the National Association of
Securities Dealers, Inc. If the Common Stock is not readily tradable on a
national securities exchange, NASDAQ or any automated quotation system sponsored
by the National Association of Securities Dealers, Inc., its Fair Market Value
shall be set in good faith by the Committee. Notwithstanding anything herein to
the contrary, "Fair Market Value" means the price for Common Stock set by the
Committee in good faith based on reasonable methods set forth under Section 422
of the Code and the regulations thereunder including, without limitation, a
method utilizing the average of prices of the Common Stock reported on the
principal national securities exchange on which it is then traded during a
reasonable period designated by the Committee. For purposes of the grant of any
Stock Option, the applicable date shall be the date for which a mean sales price
is available at the time of grant.
2.17 "FAMILY MEMBER" means, solely to the extent provided for in
Securities Act Form S-8, any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, any person sharing the employee's household
(other than a tenant or employee), a trust in which these persons have more than
50% of the beneficial interest, a foundation in which these persons (or the
employee) control the management of assets, and any other entity in which these
persons (or the employee) own more than 50% of the voting interests or as
otherwise defined in Securities Act Form S-8.
2.18 "FOREIGN JURISDICTION" means any jurisdiction outside of the United
States including, without limitation, countries, states, provinces and
localities.
2.19 "INCENTIVE STOCK OPTION" means any Stock Option awarded to an
Eligible Employee under this Plan intended to be, and designated as, an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
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2.20 "NON-QUALIFIED STOCK OPTION" means any Stock Option awarded under
this Plan that is not an Incentive Stock Option.
2.21 "OTHER STOCK-BASED AWARD" means an Award of Common Stock and other
Awards made pursuant to Article VIII that are valued in whole or in part by
reference to, or are payable in or otherwise based on, Common Stock, including,
without limitation, an Award valued by reference to performance of an Affiliate.
2.22 "PARENT" means any parent corporation of the Company within the
meaning of Section 424(e) of the Code.
2.23 "PARTICIPANT" means any Eligible Employee or Consultant to whom an
Award has been made under this Plan.
2.24 "PLAN" means this Scholastic Corporation 2001 Stock Incentive Plan,
as amended from time to time.
2.25 "RESTRICTED STOCK" means an Award of shares of Common Stock under
this Plan that is subject to restrictions under Article VII.
2.26 "RESTRICTION PERIOD" has the meaning set forth in Section 7.3(a) with
respect to Restricted Stock.
2.27 "RULE 16B-3" means Rule 16b-3 under Section 16(b) of the Exchange Act
as then in effect or any successor provisions.
2.28 "SECTION 162(M) OF THE CODE" means Section 162(m) of the Code and any
Treasury regulations thereunder.
2.29 "SECURITIES ACT" means the Securities Act of 1933, as amended. Any
reference to any section of the Securities Act shall also be a reference to any
successor provision.
2.30 "STOCK OPTION" or "OPTION" means any option to purchase shares of
Common Stock granted to Eligible Employees or Consultants under Article VI.
2.31 "SUBSIDIARY" means any subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code.
2.32 "TEN PERCENT STOCKHOLDER" means a person owning stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, its Subsidiaries or its Parent.
2.33 "TERMINATION OF CONSULTANCY" means (i) that the Consultant is no
longer acting as a consultant to the Company or an Affiliate; or (ii) when an
entity which is retaining a Participant as a Consultant ceases to be an
Affiliate unless the Participant otherwise is, or thereupon becomes, a
Consultant to the Company or another Affiliate at the time the entity ceases to
be an Affiliate. In the event that a Consultant becomes an Eligible Employee or
a non-employee director upon the termination of his or her consultancy, the
Committee, in its sole and absolute discretion, may determine that no
Termination of Consultancy shall be deemed to occur until such time as such
individual is no longer a Consultant, an Eligible Employee or a non-employee
director. Notwithstanding the foregoing, the Committee may
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otherwise define Termination of Consultancy in the Award Agreement or, if no
rights of a Participant are reduced, may otherwise define Termination of
Consultancy thereafter.
2.34 "TERMINATION OF EMPLOYMENT" means: (i) a termination of employment
(for reasons other than a military or personal leave of absence granted by the
Company) of a Participant from the Company and its Affiliates; or (ii) when an
entity which is employing a Participant ceases to be an Affiliate, unless the
Participant otherwise is, or thereupon becomes, employed by the Company or
another Affiliate at the time the entity ceases to be an Affiliate. In the event
that an Eligible Employee becomes a Consultant or non-employee director upon the
termination of his or her employment, the Committee, in its sole and absolute
discretion, may determine that no Termination of Employment shall be deemed to
occur until such time as such individual is no longer an Eligible Employee, a
Consultant or a non-employee director. Notwithstanding the foregoing, the
Committee may otherwise define Termination of Employment in the Award Agreement
or, if no rights of a Participant are reduced, may otherwise define Termination
of Employment thereafter.
2.35 "TRANSFER" means (a) when used as a noun, any direct or indirect
transfer, sale, assignment, pledge, hypothecation, encumbrance or other
disposition (including the issuance of equity in a Person), whether for value or
no value and whether voluntary or involuntary (including by operation of law),
and (b) when used as a verb, to directly or indirectly transfer, sell, assign,
pledge, hypothecate, encumber, or otherwise dispose of (including the issuance
of equity in a Person), whether for value or no value and whether voluntarily or
involuntarily (including by operation of law).
ARTICLE III
ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered and interpreted by the
Committee. If for any reason the appointed Committee does not meet the
requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance
with the requirements of Rule 16b-3 or Section 162(m) of the Code shall not
affect the validity of Awards, grants, interpretations or other actions of the
Committee.
3.2 GRANTS OF AWARDS. The Committee shall have full authority to grant to
Eligible Employees and Consultants, pursuant to the terms of this Plan,
(i) Stock Options, (ii) Restricted Stock, (iii) Other Stock-Based Awards or
(iv) other awards providing benefits similar to (i) through (iii) designed to
meet the requirements of Foreign Jurisdictions. All Awards shall be granted by,
confirmed by, and subject to the terms of, a written Award Agreement executed by
the Company and the Participant. In particular, the Committee shall have the
authority:
(a) to select the Eligible Employees and Consultants to whom Awards may
from time to time be granted hereunder;
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(b) to determine whether and to what extent Awards, including any
combination of two or more Awards, are to be granted hereunder to one or
more Eligible Employees or Consultants;
(c) to determine, in accordance with the terms of this Plan, the number
of shares of Common Stock to be covered by each Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Award granted hereunder (including, but not
limited to, the exercise or purchase price (if any), any restriction or
limitation, any vesting schedule or acceleration thereof and any forfeiture
restrictions or waiver thereof, regarding any Award and the shares of Common
Stock relating thereto, based on such factors, if any, as the Committee
shall determine, in its sole discretion);
(e) to determine whether and under what circumstances or method a Stock
Option may be settled;
(f) to determine whether a Stock Option is an Incentive Stock Option or
Non-Qualified Stock Option or whether an Award is intended to satisfy
Section 162(m) of the Code;
(g) to determine whether to require an Eligible Employee or Consultant,
as a condition of the granting of any Award, not to sell or otherwise
dispose of shares of Common Stock acquired pursuant to the exercise of an
Option or an Award for a period of time as determined by the Committee, in
its sole discretion, following the date of the acquisition of such Option or
Award;
(h) to modify, extend or renew an Award, subject to Articles X and XIV
herein, provided, however, that if an Award is modified, extended or renewed
and thereby deemed to be the issuance of a new Award under the Code or the
applicable accounting rules, the exercise price of an Award may continue to
be the original exercise price even if less than the Fair Market Value of
the Common Stock at the time of such modification, extension or renewal; and
(i) to offer to buy out an Option previously granted, based on such
terms and conditions as the Committee shall establish and communicate to the
Participant at the time such offer is made.
3.3 GUIDELINES. Subject to Articles X and XIV hereof, the Committee shall
have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing this Plan and perform all acts, including the
delegation of its administrative responsibilities, as it shall, from time to
time, deem advisable; to construe and interpret the terms and provisions of this
Plan and any Award issued under this Plan (and any agreements relating thereto);
and to otherwise supervise the administration of this Plan. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in this
Plan or in any Award Agreement relating thereto in the manner and to the extent
it shall deem necessary to effectuate the purpose and intent of this Plan. The
Committee may adopt special guidelines and provisions for persons who are
residing in, or subject to the
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taxes of, Foreign Jurisdictions to comply with applicable tax, securities and
other laws and may impose any limitations and restrictions that it deems
necessary to comply with the applicable tax, securities and other laws of such
Foreign Jurisdictions. To the extent applicable, this Plan is intended to comply
with Section 162(m) of the Code and the applicable requirements of Rule 16b-3
and shall be limited, construed and interpreted in a manner so as to comply
therewith.
3.4 DECISIONS FINAL. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board or the
Committee (or any of its members) arising out of or in connection with this Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective heirs, executors, administrators,
successors and assigns.
3.5 RELIANCE ON COUNSEL. The Company, the Board or the Committee may
consult with legal counsel, who may be counsel for the Company or other counsel,
with respect to its obligations or duties hereunder, or with respect to any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6 PROCEDURES. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee shall hold
meetings, subject to the By-Laws of the Company, at such times and places as it
shall deem advisable. A majority of the Committee members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by all the
Committee members, in accordance with the By-Laws of the Company, shall be fully
as effective as if it had been made by a vote at a meeting duly called and held.
The Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
3.7 DESIGNATION OF CONSULTANTS/LIABILITY.
(a) The Committee may designate employees of the Company and Affiliates and
professional advisors to assist the Committee in the administration of this Plan
and may grant authority to officers to execute Award Agreements or other
documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of this Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of any such counsel, consultant or agent shall be paid by the
Company. The Committee, its members and any employee of the Company or Affiliate
designated pursuant to Paragraph (a) above shall not be liable for any action or
determination made in good faith with respect to this Plan. To the maximum
extent permitted by applicable law, no officer of the Company or Affiliate or
member or former member of the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any Award granted
under it. To the
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maximum extent permitted by applicable law or the Certificate of Incorporation
or By-Laws of the Company (or if applicable, of an Affiliate) and to the extent
not covered by insurance, each officer and member or former member of the
Committee shall be indemnified and held harmless by the Company (or if
applicable, an Affiliate) against any cost or expense (including reasonable fees
of counsel reasonably acceptable to the Company) or liability (including any sum
paid in settlement of a claim with the approval of the Company), and shall be
advanced amounts necessary to pay the foregoing at the earliest time and to the
fullest extent permitted, arising out of any act or omission to act in
connection with this Plan, except to the extent arising out of such officer's,
member's or former member's own fraud or bad faith. Such indemnification shall
be in addition to any rights of indemnification the officers, directors or
members or former officers, directors or members may have under applicable law
or under the Certificate of Incorporation or By-Laws of the Company or any
Affiliate. Notwithstanding anything else herein, this indemnification will not
apply to the actions or determinations made by an individual with regard to
Awards granted to him or her under this Plan.
ARTICLE IV
SHARE AND OTHER LIMITATIONS
4.1 SHARES.
(a) GENERAL LIMITATION. The aggregate number of shares of Common Stock
which may be issued or used for reference purposes under this Plan or with
respect to which Awards may be granted shall not exceed 4,000,000 shares of
Common Stock (subject to any increase or decrease pursuant to Section 4.2)
with respect to all types of Awards. The shares of Common Stock available
under this Plan may be either authorized and unissued Common Stock or Common
Stock held in or acquired for the treasury of the Company. If any Stock
Option granted under this Plan expires, terminates or is canceled for any
reason without having been exercised in full or, with respect to Stock
Options, the Company repurchases any Stock Option, the number of shares of
Common Stock underlying such unexercised or repurchased Stock Option shall
again be available for the purposes of Awards under this Plan. If any shares
of Restricted Stock awarded under this Plan to a Participant are forfeited
or repurchased by the Company for any reason, the number of forfeited or
repurchased shares of Restricted Stock shall again be available for the
purposes of Awards under this Plan. If Common Stock has been delivered or
exchanged by a Participant as full or partial payment to the Company of an
exercise price or the price of the purchase of an Award other than an
Incentive Stock Option, the number of shares of Common Stock exchanged as
payment in connection with the exercise or purchase shall again be available
for purposes of determining the number of shares of Common Stock available
for Awards other than Incentive Stock Options. If Common Stock has been
delivered by a Participant for payment of withholding taxes, or if the
number of shares of Common Stock otherwise deliverable has been reduced for
payment of withholding
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taxes, the number of shares of Common Stock delivered by such Participant or
reduced for payment of withholding taxes shall again be available for
purposes of determining the number of shares of Common Stock available for
Awards other than Incentive Stock Options.
(b) INDIVIDUAL PARTICIPANT LIMITATIONS.
(i) The maximum number of shares of Common Stock subject to any
Stock Option or other Award intended to comply with Section 162(m) of the
Code which may be granted under this Plan during any fiscal year of the
Company to each Eligible Employee or Consultant shall be 250,000 shares
per type of Award (subject to any increase or decrease pursuant to
Section 4.2).
(ii) There are no annual individual Eligible Employee or Consultant
share limitations on Restricted Stock awards unless the grant of such
Award or the lapse of the relevant Restriction Period is subject to
attainment of Performance Goals in accordance with
Section 7.3(a)(ii) hereof.
(iii) The individual Participant limitations set forth in this
Section 4.1(b) shall be cumulative; that is, to the extent that shares of
Common Stock for which Awards are permitted to be granted to an Eligible
Employee or a Consultant during a fiscal year are not covered by an Award
to such Eligible Employee or Consultant in a fiscal year, the number of
shares of Common Stock available for Awards to such Eligible Employee or
Consultant shall automatically increase in the subsequent fiscal years
during the term of the Plan until used.
4.2 CHANGES.
(a) The existence of this Plan and the Awards granted hereunder shall
not affect in any way the right or power of the Board or the stockholders of
the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company or any Affiliate, any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or any
Affiliate, any sale or transfer of all or part of the assets or business of
the Company or any Affiliate or any other corporate act or proceeding.
(b) Subject to the provisions of Section 4.2(d), in the event of any
change in the capital structure or business of the Company by reason of any
stock split, reverse stock split, stock dividend, combination or
reclassification of shares, recapitalization, or other change in the capital
structure of the Company, non-cash distribution with respect to its
outstanding Common Stock or capital stock other than Common Stock, merger,
consolidation, spin-off, reorganization, partial or complete liquidation,
issuance of rights or warrants to purchase any Common Stock or securities
convertible into Common Stock, or any other corporate transaction or event
having an effect similar to any of the foregoing and effected, then the
aggregate number and kind of shares which thereafter may be issued under
this Plan, the number and kind of shares or other property (including cash)
to be issued upon exercise of an outstanding Stock Option or
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other Award granted under this Plan and the purchase price thereof shall be
appropriately adjusted consistent with such change in such manner as, and to
the extent that, the Committee may deem equitable to prevent substantial
dilution or enlargement of the rights granted to, or available for,
Participants under this Plan, and any such adjustment determined by the
Committee in good faith shall be final, binding and conclusive on the
Company and all Participants and employees and their respective heirs,
executors, administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any adjustment in
Options or Awards pursuant to Section 4.2(b) shall be aggregated until, and
eliminated at, the time of exercise by rounding-down for fractions less than
one-half and rounding-up for fractions equal to or greater than one-half. No
cash settlements shall be made with respect to fractional shares eliminated
by rounding. Notice of any adjustment shall be given by the Committee to
each Participant whose Award has been adjusted and such adjustment (whether
or not such notice is given) shall be effective and binding for all purposes
of this Plan.
(d) In the event of a merger or consolidation in which the Company is
not the surviving entity or in the event of any transaction that results in
the acquisition of substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (all of the foregoing being
referred to as "Acquisition Events"), then the Committee may, in its sole
discretion, terminate, effective as of the date of the Acquisition Event,
all outstanding Stock Options and Other Stock-Based Awards with respect to
which a Participant has a right to exercise, by delivering notice of
termination to each Participant at least 30 days prior to the date of
consummation of the Acquisition Event, in which case during the period from
the date on which such notice of termination is delivered to the
consummation of the Acquisition Event, each such Participant shall have the
right to exercise in full all of such Awards held by the Participant that
are then outstanding (without regard to any limitations on exercisability
otherwise contained in the Stock Option or Award Agreements), but any such
exercise shall be contingent upon and subject to the occurrence of the
Acquisition Event, and, provided that, if the Acquisition Event does not
take place within a specified period after giving such notice for any reason
whatsoever, the notice and exercise pursuant thereto shall be null and void.
If an Acquisition Event occurs but the Committee does not terminate the
outstanding Stock Options pursuant to this Section 4.2(d), then the provisions
of Section 4.2(b) shall apply.
4.3 MINIMUM PURCHASE PRICE. Notwithstanding any provision of this Plan to
the contrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
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ARTICLE V
ELIGIBILITY
5.1 GENERAL ELIGIBILITY. All Eligible Employees and Consultants and
prospective employees of and Consultants to the Company and its Affiliates are
eligible to be granted Non-Qualified Stock Options, Restricted Stock, Other
Stock-Based Awards and awards providing benefits similar to each of the
foregoing designed to meet the requirements of Foreign Jurisdictions under this
Plan. Eligibility for the grant of an Award and actual participation in this
Plan shall be determined by the Committee in its sole discretion. The vesting
and exercise of Awards granted to a prospective employee or Consultant are
conditioned upon such individual actually becoming an Eligible Employee or
Consultant.
5.2 INCENTIVE STOCK OPTIONS. All Eligible Employees of the Company, its
Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock
Options under this Plan. Eligibility for the grant of an Award and actual
participation in this Plan shall be determined by the Committee in its sole
discretion.
ARTICLE VI
STOCK OPTIONS
6.1 STOCK OPTIONS. Each Stock Option granted hereunder shall be one of two
types: (i) a Non-Qualified Stock Option; or (ii) an Incentive Stock Option
intended to satisfy the requirements of Section 422 of the Code.
6.2 GRANTS. The Committee shall have the authority to grant to any
Eligible Employee one or more Non-Qualified Stock Options, Incentive Stock
Options or both types of Stock Options. To the extent that any Stock Option does
not qualify as an Incentive Stock Option (whether because of its provisions or
the time or manner of its exercise or otherwise), such Stock Option, or the
portion thereof which does not qualify, shall constitute a separate
Non-Qualified Stock Option. The Committee shall have the authority to grant to
any Consultant one or more Non-Qualified Stock Options. Notwithstanding any
other provision of this Plan to the contrary or any provision in an Award
Agreement evidencing the grant of a Stock Option to the contrary, any Stock
Option granted to an Eligible Employee of an Affiliate (other than an Affiliate
which is a Parent or a Subsidiary) shall be a Non-Qualified Stock Option.
6.3 TERMS OF STOCK OPTIONS. Stock Options granted under this Plan shall be
subject to the following terms and conditions, and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem desirable:
(a) EXERCISE PRICE. The exercise price per share of Common Stock shall
be determined by the Committee, but shall not be less than 100% of the Fair
Market Value of a share of Common Stock at the time of grant; provided,
however, that if an
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Incentive Stock Option is granted to a Ten Percent Stockholder, the exercise
price shall be no less than 110% of the Fair Market Value of the Common
Stock at the time of grant.
(b) STOCK OPTION TERM. The term of each Stock Option shall be fixed by
the Committee; provided, however, that no Stock Option shall be exercisable
more than 10 years after the date such Stock Option is granted; and further
provided that the term of an Incentive Stock Option granted to a Ten Percent
Stockholder shall not exceed 5 years.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at grant. If the Committee provides, in its discretion, that any
Stock Option is exercisable subject to certain limitations (including,
without limitation, that such Stock Option is exercisable only in
installments or within certain time periods), the Committee may waive such
limitations on exercisability at any time at or after grant in whole or in
part (including, without limitation, waiver of the installment exercise
provisions or acceleration of the time at which such Stock Option may be
exercised), based on such factors, if any, as the Committee shall determine,
in its sole discretion. Notwithstanding anything herein to the contrary, no
Option shall be granted with an initial exercise or vesting date prior to
the one-year anniversary of the date of the grant of the Option.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions apply under Paragraph (c) above, Stock Options may
be exercised in whole or in part at any time and from time to time during
the Stock Option term by giving written notice of exercise to the Company
specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price as follows: (i) in cash
or by check, bank draft or money order payable to the order of the Company;
(ii) if the Common Stock is traded on a national securities exchange, The
Nasdaq Stock Market, Inc. or quoted on a national quotation system sponsored
by the National Association of Securities Dealers, through a "cashless
exercise" procedure whereby the Participant delivers irrevocable
instructions to a broker to deliver promptly to the Company an amount equal
to the purchase price; or (iii) on such other terms and conditions as may be
acceptable to the Committee (including, without limitation, the
relinquishment of Stock Options or by payment in full or in part in the form
of Common Stock owned by the Participant for a period of at least 6 months
or such other period necessary to avoid an accounting charge to the
Company's earnings on its financial statements (and for which the
Participant has good title free and clear of any liens and encumbrances)
based on the Fair Market Value of the Common Stock on the payment date as
determined by the Committee). No shares of Common Stock shall be issued
until payment therefor, as provided herein, has been made or provided for.
(e) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect
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to which Incentive Stock Options are exercisable for the first time by an
Eligible Employee during any calendar year under this Plan and/or any other
stock option plan of the Company, any Subsidiary or any Parent exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options. In
addition, if an Eligible Employee does not remain employed by the Company,
any Subsidiary or any Parent at all times from the time an Incentive Stock
Option is granted until 3 months prior to the date of exercise thereof (or
such other period as required by applicable law), such Stock Option shall be
treated as a Non-Qualified Stock Option. Should any provision of this Plan
not be necessary in order for the Stock Options to qualify as Incentive
Stock Options, or should any additional provisions be required for such
purpose, the Committee may amend this Plan accordingly, without the
necessity of obtaining the approval of the stockholders of the Company.
(f) FORM, MODIFICATION, EXTENSION AND RENEWAL OF STOCK
OPTIONS. Subject to the terms and conditions and within the limitations of
this Plan, Stock Options shall be evidenced by such form of Award Agreement
or grant as is approved by the Committee, and the Committee may (i) modify,
extend or renew outstanding Stock Options granted under this Plan (provided
that the rights of a Participant are not reduced without his or her
consent), and (ii) accept the surrender of outstanding Stock Options (up to
the extent not theretofore exercised) and authorize the granting of new
Stock Options in substitution therefor (to the extent not theretofore
exercised).
(g) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms
of this Plan, as the Committee shall deem appropriate including, without
limitation, permitting "reloads" such that the same number of Options are
granted as the number of shares used to pay for the exercise price of
Options and/or shares used to pay withholding taxes ("Reloads"). With
respect to Reloads, the exercise price of the new Stock Option shall be the
Fair Market Value on the date of the "reload" and the term of the Stock
Option shall be the same as the remaining term of the Options that are
exercised, if applicable, or such other exercise price and term as
determined by the Committee.
ARTICLE VII
RESTRICTED STOCK
7.1 AWARDS OF RESTRICTED STOCK. Shares of Restricted Stock may be issued
to Eligible Employees or Consultants either alone or in addition to other Awards
granted under this Plan. The Committee shall determine the Eligible Employees or
Consultants to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the price (if any) to be paid
by the recipient (subject to Section 7.2), the time or times within which such
Awards may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the Awards. The
Committee may condition the grant or vesting of Restricted Stock upon the
attainment of specified
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performance goals, including established Performance Goals in accordance with
Section 162(m) of the Code, or such other factors as the Committee may
determine, in its sole discretion.
7.2 AWARDS AND CERTIFICATES. An Eligible Employee or Consultant selected
to receive Restricted Stock shall not have any rights with respect to such
Award, unless and until such Participant has delivered to the Company a fully
executed copy of the applicable Award Agreement relating thereto and has
otherwise complied with the applicable terms and conditions of such Award.
Further, such Award shall be subject to the following conditions:
(a) PURCHASE PRICE. The purchase price of Restricted Stock shall be
fixed by the Committee. Subject to Section 4.3, the purchase price for
shares of Restricted Stock may be zero to the extent permitted by applicable
law, and, to the extent not so permitted, such purchase price may not be
less than par value.
(b) ACCEPTANCE. Awards of Restricted Stock must be accepted within a
period of 90 days (or such shorter period as the Committee may specify at
grant) after the Award date by executing a Restricted Stock Award Agreement
and by paying whatever price (if any) the Committee has designated
thereunder.
(c) CUSTODY. Shares of Restricted Stock shall be recorded by book
entry by the transfer agent, unless the Committee elects to use another
system, and no stock certificates evidencing shares of Common Stock relating
to the Restricted Stock shall be issued until the restrictions thereon shall
have lapsed.
7.3 RESTRICTIONS AND CONDITIONS ON RESTRICTED STOCK AWARDS. Shares of
Restricted Stock awarded pursuant to this Plan shall be subject to Article XII
and the following restrictions and conditions:
(a) RESTRICTION PERIOD; VESTING AND ACCELERATION OF VESTING.
(i) The Participant shall not be permitted to Transfer shares of
Restricted Stock awarded under this Plan during the period or periods set
by the Committee (the "Restriction Period") commencing on the date of
such Award, as set forth in the Restricted Stock Award Agreement, and
such agreement shall set forth a vesting schedule and any events which
would accelerate vesting of the shares of Restricted Stock. Within these
limits, based on service, attainment of Performance Goals pursuant to
Section 7.3(a)(ii) below and/or such other factors or criteria as the
Committee may determine in its sole discretion, the Committee may provide
for the lapse of such restrictions in installments in whole or in part,
or may accelerate the vesting of all or any part of any Restricted Stock
Award and/or waive the deferral limitations for all or any part of any
Restricted Stock Award.
(ii) OBJECTIVE PERFORMANCE GOALS, FORMULAE OR STANDARDS. If the grant
of shares of Restricted Stock or the lapse of restrictions is based on
the attainment of Performance Goals, the Committee shall establish the
Performance Goals and the applicable vesting percentage of the Restricted
Stock Award applicable to each Participant or class of Participants in
writing prior to the beginning of the
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applicable fiscal year or at such later date as otherwise determined by
the Committee and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may incorporate
provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar type events or
circumstances. With regard to a Restricted Stock Award that is intended
to comply with Section 162(m) of the Code, to the extent any such
provision would create impermissible discretion under Section 162(m) of
the Code or otherwise violate Section 162(m) of the Code, such provision
shall be of no force or effect. The applicable Performance Goals shall be
based on one or more of the Performance Criteria set forth in Exhibit A
hereto.
(b) RIGHTS AS STOCKHOLDER. Except as provided in this Paragraph (b)
and Paragraph (a) above and as otherwise determined by the Committee, the
Participant shall have, with respect to the shares of Restricted Stock, the
rights of a holder of shares of Common Stock of the Company to receive any
dividends and the right to vote such shares. The Committee may, in its sole
discretion, determine at the time of grant that the payment of dividends
shall be deferred until, and conditioned upon, the expiration of the
applicable Restriction Period.
(c) LAPSE OF RESTRICTIONS. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the certificates for such shares shall be delivered at
the direction of the Participant. All legends shall be removed from said
certificates at the time of such delivery to the Participant except as
otherwise required by applicable law or other limitations imposed by the
Committee.
ARTICLE VIII
OTHER STOCK-BASED AWARDS
8.1 OTHER AWARDS. Other Stock-Based Awards may be granted either alone or
in addition to or in tandem with Stock Options or Restricted Stock. Subject to
the provisions of this Plan, the Committee shall have authority to determine the
persons to whom and the time or times at which such Awards shall be made, the
number of shares of Common Stock to be awarded pursuant to such Awards, and all
other conditions of the Awards. The Committee may also provide for the grant of
Common Stock under such Awards upon the completion of a specified performance
period.
8.2 TERMS AND CONDITIONS. Other Stock-Based Awards made pursuant to this
Article VIII shall be subject to the following terms and conditions:
(a) NON-TRANSFERABILITY. Subject to the applicable provisions of the
Award Agreement and this Plan, shares of Common Stock subject to Awards made
under this Article VIII may not be Transferred prior to the date on which
the shares are issued,
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or, if later, the date on which any applicable restriction, performance or
deferral period lapses.
(b) DIVIDENDS. Unless otherwise determined by the Committee at the
time of Award, subject to the provisions of the Award Agreement and this
Plan, the recipient of an Award under this Article VIII shall be entitled to
receive, currently or on a deferred basis, dividends or dividend equivalents
with respect to the number of shares of Common Stock covered by the Award,
as determined at the time of the Award by the Committee, in its sole
discretion.
(c) VESTING. Any Award under this Article VIII and any Common Stock
covered by any such Award shall vest or be forfeited to the extent so
provided in the Award Agreement, as determined by the Committee, in its sole
discretion.
(d) WAIVER OF LIMITATION. The Committee may, in its sole discretion,
waive in whole or in part any or all of the limitations imposed hereunder
(if any) with respect to any or all of an Award under this Article VIII.
(e) PRICE. Subject to the next sentence, Common Stock or Other
Stock-Based Awards issued on a bonus basis under this Article VIII may be
issued for no cash consideration; Common Stock or Other Stock-Based Awards
purchased pursuant to a purchase right awarded under this Article VIII shall
be priced as determined by the Committee. Subject to Section 4.3, the
purchase price of shares of Common Stock or Other Stock-Based Awards may be
zero to the extent permitted by applicable law, and, to the extent not so
permitted, such purchase price may not be less than par value. The purchase
of shares of Common Stock or Other Stock-Based Awards may be made on either
an after-tax or pre-tax basis, as determined by the Committee; provided,
however, that if the purchase is made on a pre-tax basis, such purchase
shall be made pursuant to a deferred compensation program established by the
Committee, which will be deemed a part of this Plan.
ARTICLE IX
NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY
9.1 NON-TRANSFERABILITY. Except as otherwise provided herein, no Stock
Option shall be Transferable by the Participant otherwise than by will or by the
laws of descent and distribution. Except as otherwise provided herein, all Stock
Options shall be exercisable, during the Participant's lifetime, only by the
Participant. Shares of Restricted Stock under Article VII may not be Transferred
prior to the date on which shares are issued, or, if later, the date on which
any applicable restriction, performance or deferral period lapses. No Award
shall, except as otherwise specifically provided by law or herein, be
Transferable in any manner, and any attempt to Transfer any such Award shall be
void, and no such Award shall in any manner be liable for or subject to the
debts, contracts, liabilities, engagements
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or torts of any person who shall be entitled to such Award, nor shall it be
subject to attachment or legal process for or against such person.
Notwithstanding any provision herein to the contrary, the Committee may
determine at the time of grant or thereafter that a Non-Qualified Stock Option
that is otherwise not Transferable pursuant to this Section 9.1 is Transferable
to a Family Member in whole or in part and in such circumstances, and under such
conditions, as specified by the Committee. A Non-Qualified Stock Option that is
Transferred to a Family Member pursuant to the preceding sentence (i) may not be
subsequently Transferred other than by will or by the laws of descent and
distribution and (ii) remains subject to the terms of this Plan and the Award
Agreement.
9.2 TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY. The following
rules apply with regard to the Termination of Employment or Termination of
Consultancy of a Participant:
(a) RULES APPLICABLE TO STOCK OPTIONS. Unless otherwise determined by
the Committee at grant or, if no rights of the Participant are reduced,
thereafter:
(i) TERMINATION BY REASON OF DEATH OR DISABILITY. If a Participant's
Termination of Employment or Termination of Consultancy is by
reason of death, or Disability, all Stock Options held by such
Participant shall become fully exercisable on the date of such
Termination of Employment or Termination of Consultancy and may be
exercised by the Participant (or, in the case of death, by the
legal representative of the Participant's estate) at any time
within a period of one year from the date of such Termination of
Employment or Termination of Consultancy, but in no event beyond
the expiration of the stated terms of such Stock Options.
(ii) TERMINATION BY REASON OF RETIREMENT. In the event of a
Participant's Termination of Employment or Termination of
Consultancy on or after age 55 in accordance with the Company's
standard retirement policies, all Stock Options held by such
Participant may be exercised, to the extent exercisable at the
Participant's Termination of Employment or Termination of
Consultancy, by the Participant at any time within a period of
three years from the date of such Termination of Employment or
Termination of Consultancy, but in no event beyond the expiration
of the stated terms of such Stock Options.
(iii) INVOLUNTARY TERMINATION WITHOUT CAUSE. If a Participant's
Termination of Employment or Termination of Consultancy is by
involuntary termination without Cause, all Stock Options held by
such Participant may be exercised, to the extent exercisable at
Termination of Employment or Termination of Consultancy, by the
Participant at any time within a period of 90 days from the date
of such Termination of Employment or Termination of Consultancy,
but in no event beyond the expiration of the stated term of such
Stock Options.
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(iv) TERMINATION FOR CAUSE OR FOR ANY REASON OTHER THAN DEATH,
DISABILITY, RETIREMENT OR INVOLUNTARY TERMINATION WITHOUT
CAUSE. If a Participant's Termination of Employment or Termination
of Consultancy (A) is for Cause or (B) for any reason, other than
death, Disability, retirement (as described in clause (ii) above),
or an involuntary Termination of Employment or Termination of
Consultancy without Cause, including without limitation, a
voluntary Termination of Employment or Termination of Consultancy,
all Stock Options held by such Participant shall thereupon
terminate and expire as of the date of such Termination of
Employment or Termination of Consultancy.
9.3 RULES APPLICABLE TO RESTRICTED STOCK. Subject to the applicable
provisions of the Restricted Stock Award Agreement and this Plan, upon a
Participant's Termination of Employment or Termination of Consultancy for any
reason during the relevant Restriction Period, all Restricted Stock still
subject to restriction will vest or be forfeited in accordance with the terms
and conditions established by the Committee at grant or thereafter.
ARTICLE X
TERMINATION OR AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SCHOLASTIC CORPORATION
SCHOLASTIC CORPORATION, a corporation organizedPLAN
Notwithstanding any other provision of this Plan, the Board or the
Committee may at any time, and existing under and by
virtuefrom time to time, amend, in whole or in part,
any or all of the General Corporation Lawprovisions of this Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article XII), or suspend or terminate it entirely, retroactively
or otherwise; provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to Awards
granted prior to such amendment, suspension or termination may not be impaired
without the consent of such Participant and, provided further, without the
approval of the stockholders of the Company in accordance with the Company's
Certificate of Incorporation and the laws of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: Thatto the
extent required by the applicable provisions of Rule 16b-3 or Section 162(m) of
the Code or, to the extent applicable to Incentive Stock Options, Section 422 of
the Code, no amendment may be made which would (i) increase the aggregate number
of shares of Common Stock that may be issued under this Plan; (ii) increase the
maximum individual Participant limitations for a fiscal year under
Section 4.1(b); (iii) change the classification of employees or Consultants
eligible to receive Awards under this Plan; (iv) decrease the minimum option
price of any Stock Option; (v) extend the maximum option period under
Section 6.3; (vi) materially alter the Performance Criteria for the Award of
Restricted Stock as set forth in Exhibit A; or (vii) require stockholder
approval in order for this Plan to continue to comply with the applicable
provisions of Section 162(m) of the Code or, to the extent applicable to
Incentive Stock Options, Section 422 of the Code.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV above or as otherwise
specifically provided
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herein, no such amendment or other action by the Committee shall impair the
rights of any holder without the holder's consent.
ARTICLE XI
UNFUNDED PLAN
11.1 UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE XII
GENERAL PROVISIONS
12.1 LEGEND. The Committee may require each person receiving shares
pursuant to an Award under this Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by this Plan, the
certificates for any shares issued under the Plan shall include any legend which
the Committee deems appropriate to reflect any restrictions on Transfer if the
shares of Common Stock available under Plan are no longer registered under a
Securities Act Form S-8 or any successor form. All certificates for shares of
Common Stock delivered under this Plan shall be subject to such stock transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is then listed or any
national securities association system upon whose system the Common Stock is
then quoted, any applicable Federal or state securities law, and any applicable
corporate law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
12.2 OTHER PLANS. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
12.3 NO RIGHT TO EMPLOYMENT/CONSULTANCY. Neither this Plan nor the grant
of any Award hereunder shall give any Participant or other employee or
Consultant any right with respect to continuance of employment or Consultancy by
the Company or any Affiliate, nor shall they be a limitation in any way on the
right of the Company or any Affiliate by which an employee is employed or a
Consultant is retained to terminate his or her employment or Consultancy at any
time.
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12.4 WITHHOLDING OF TAXES. The Company shall have the right to deduct from
any payment to be made to a meetingParticipant, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld. Upon the vesting of Restricted Stock, or upon
making an election under Code Section 83(b), a Participant shall pay all
required withholding to the Company.
Any such withholding obligation with regard to any Participant may be
satisfied, subject to the consent of the Committee, by reducing the number of
shares of Common Stock otherwise deliverable by the Company or by delivering
shares of Common Stock already owned by the Participant. Any fraction of a share
of Common Stock required to satisfy such tax obligations shall be disregarded
and the amount due shall be paid instead in cash by the Participant.
12.5 LISTING AND OTHER CONDITIONS.
(a) Unless otherwise determined by the Committee, as long as the Common
Stock is listed on a national securities exchange or system sponsored by
a national securities association, the issue of any shares of Common
Stock pursuant to an Award shall be conditioned upon such shares being
listed on such exchange or system. The Company shall have no obligation
to issue such shares unless and until such shares are so listed, and the
right to exercise any Stock Option with respect to such shares shall be
suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that any
sale or delivery of shares of Common Stock pursuant to an Award is or may
in the circumstances be unlawful or result in the imposition of excise
taxes on the Company under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make
such sale or delivery, or to make any application or to effect or to
maintain any qualification or registration under the Securities Act or
otherwise with respect to shares of Common Stock or Awards, and the right
to exercise any Stock Option shall be suspended until, in the opinion of
said counsel, such sale or delivery shall be lawful or will not result in
the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section 12.5,
any Award affected by such suspension which shall not then have expired
or terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available
during the period of such suspension, but no such suspension shall extend
the term of any Stock Option.
(d) A Participant shall be required to supply the Company with any
certificates, representations and information that the Company requests
and otherwise cooperate with the Company in obtaining any listing,
registration, qualification, exemption, consent or approval the Company
deems necessary or appropriate.
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12.6 GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
12.7 CONSTRUCTION. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
12.8 OTHER BENEFITS. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its subsidiaries nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
12.9 COSTS. The Company shall bear all expenses incurred in administering
this Plan, including expenses of issuing Common Stock pursuant to any Awards
hereunder.
12.10 NO RIGHT TO SAME BENEFITS. The provisions of Awards need not be the
same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
12.11 DEATH/DISABILITY. The Committee may in its discretion require the
transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may also require the agreement of the transferee to be bound by all of
the terms and conditions of this Plan.
12.12 SECTION 16(B) OF THE EXCHANGE ACT. All elections and transactions
under this Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with any applicable exemptive
condition under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act, as it may deem necessary or proper for the administration
and operation of this Plan and the transaction of business hereunder.
12.13 SUCCESSOR AND ASSIGNS. This Plan shall be binding on all successors
and permitted assigns of a Participant, including, without limitation, the
estate of such Participant and the executor, administrator or trustee of such
estate.
12.14 SEVERABILITY OF PROVISIONS. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provision had not been included.
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12.15 HEADINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan,
and shall not be employed in the construction of this Plan.
ARTICLE XIII
EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board, subject to
the approval of this Plan by the stockholders of the Company in accordance with
the requirements of the Company's Certificate of Incorporation and the laws of
the State of Delaware, or on such later date as provided in the adopting
resolution.
ARTICLE XIV
TERM OF PLAN
No Award shall be granted pursuant to this Plan on or after, July 18,
2011 (the tenth anniversary) of the date this Plan was adopted by the Board, but
Awards granted prior to such tenth anniversary may extend beyond that date.
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EXHIBIT A TO THE 2001 STOCK INCENTIVE PLAN
PERFORMANCE CRITERIA
Performance Goals established for purposes of conditioning the grant of
an Award based on performance or the vesting of performance-based Awards shall
be based on one or more of the following performance criteria ("Performance
Criteria"): (i) the attainment of certain target levels of, or a specified
percentage increase in, revenues, income before income taxes and extraordinary
items, net income, earnings before income tax, earnings before interest, taxes,
depreciation and amortization or a combination of any or all of the foregoing;
(ii) the attainment of certain target levels of, or a percentage increase in,
after-tax or pre-tax profits including, without limitation, that attributable to
continuing and/or other operations; (iii) the attainment of certain target
levels of, or a specified increase in, operational cash flow; (iv) the
achievement of a certain level of, reduction of, or other specified objectives
with regard to limiting the level of increase in, all or a portion of the
Company's bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of such cash balances and/or other offsets and adjustments as may be established
by the Committee; (v) the attainment of a specified percentage increase in
earnings per share or earnings per share from continuing operations; (vi) the
attainment of certain target levels of, or a specified increase in, return on
capital employed or return on invested capital; (vii) the attainment of certain
target levels of, or a percentage increase in, after-tax or pre-tax return on
stockholders' equity; (viii) the attainment of certain target levels of, or a
specified increase in, economic value added targets based on a cash flow return
on investment formula; (ix) the attainment of certain target levels in the fair
market value of the shares of the Company's Common Stock; and (x) the growth in
the value of an investment in the Company's Common Stock assuming the
reinvestment of dividends. For purposes of item (i) above, "extraordinary items"
shall mean all items of gain, loss or expense for the fiscal year determined to
be extraordinary or unusual in nature or infrequent in occurrence or related to
a corporate transaction (including, without limitation, a disposition or
acquisition) or related to a change in accounting principle, all as determined
in accordance with standards established by Opinion No. 30 of the Accounting
Principles Board.
In addition, such Performance Criteria may be based upon the attainment
of specified levels of Company (or subsidiary, division or other operational
unit of the Company) performance under one or more of the measures described
above relative to the performance of other corporations. To the extent permitted
under Code Section 162(m), but only to the extent permitted under Code
Section 162(m) (including, without limitation, compliance with any requirements
for stockholder approval), the Committee may: (i) designate additional business
criteria on which the Performance Criteria may be based or (ii) adjust, modify
or amend the aforementioned business criteria.
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APPENDIX B
CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS OF
SCHOLASTIC CORPORATION
ORGANIZATION
The Audit Committee of the Board of Directors of Scholastic Corporation
resolutions were duly adopted setting forth proposed amendments to
the Amended and Restated Certificate(the "Company") shall be comprised of Incorporation of said corporation,
declaring said amendments to be advisable and proposing that the amendments be
considered at the next annual meetingno fewer than three (3) directors. Each
member of the stockholders of said corporation
for consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, That the Amended and Restated Certificate of Incorporation of this
corporation be amended by changing the first sentence of Article FOURTH to read
as follows:
"The total number of shares which may be issued by the Corporation
is Seventy-four and one-half Million (74,500,000) shares, of which
Seventy Million (70,000,000) sharesAudit Committee shall be Common Stock having a
par valueindependent of one cent ($.01) per share; Two and one-half Million
(2,500,000) shares shall be Class A Stock having a par value of
one cent ($.01) per share; and Two Million (2,000,000) shares
shall be Preferred Stock having a par value of one dollar ($1.00)
per share."
RESOLVED, That the Amended and Restated Certificate of Incorporation of this
corporation be amended by changing Section (b)(i) of Article FOURTH to read as
follows:
(i) VOTING RIGHTS. Except as otherwise hereinafter provided or
as may be provided by law, and for so long as any shares of
Class A Stock remain outstanding, the entire voting power of the
Corporation shall be vested exclusively in the holders of the
shares of the Class A Stock and the holders of no other class of
the Corporation's stock shall have any voting power, or right to
participate in any meeting, or be entitled to any voice in the management of the
Corporation's affairs; provided, however, that
the holdersCompany, neither a current nor former employee of the sharesCompany or its
subsidiaries and free of any relationship that, in the Common Stock voting as a class at
each annual meeting of the Corporation shall elect such minimum
number of the membersjudgment of the Board of
Directors, would interfere with his or her exercise of independent judgment as shall equala
committee member. All Audit Committee members will be financially literate, and
at least one-fifth of the members of the Board of Directors, whichone member will have accounting or related financial management
expertise.
STATEMENT OF POLICY
The Audit Committee shall consist of not less
A-1
than three nor more than fifteen members, such numberprovide assistance to be
determined from time to time by the holders of the Class A Stock.
Without the consent of the holders of the Common Stock voting as a
class, neither the Certificate of Incorporation or the By-laws of
the Corporation shall hereafter be amended to deny to the holders
of the Common Stock the right to elect at least one-fifth of the
members of the Board of Directors. In the event of a vacancy in
the seat of a director who has been elected by the holders of the
Common Stock (including a successor thereto appointed to fill a
vacancy) or a newly created directorship which would be filled by
the holders of the Common Stock, such vacancy or newly created
directorship shall be filled solely by the remaining directors who
have been elected by the holders of the Common Stock (including
successors thereto appointed to fill a vacancy) and, in the event
of a vacancy in the seat of a director who has been elected by the
holders of the Class A Stock (including a successor thereto
appointed to fill a vacancy) or a newly created directorship which
would be filled by the holders of the Class A Stock, such vacancy
or newly created directorship shall be filled solely by the
remaining directors who have been elected by the holders of the
Class A Stock (including successors thereto appointed to fill a
vacancy). Notwithstanding the foregoing, in connection with the
right of the Board of Directors to fix the rights, preferences and
limitations of the Preferred Stock, the Board of Directors may
grant voting power to the holders of one or more series of the
Preferred Stock to elect not more than two additional members of the Board of Directors in
fulfilling its responsibilities to the eventstockholders of an arrearagethe Company and the
financial and investment communities relating to the corporate accounting and
financial reporting practices of the Company and the quality and integrity of
the financial reports of the Company. In so doing, it is the responsibility of
the Audit Committee to maintain free and open communication among the Board of
Directors, the independent auditors, the internal auditors and the financial
management of the Company.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee, its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the paymentBoard of dividendsDirectors and the stockholders of the
Company that the corporate accounting and financial reporting practices of the
Company are in accordance with all requirements and are of the highest quality.
The Audit Committee shall perform the following functions on any such series as may be stated in the resolution
or resolutionsbehalf of
the Board of Directors providing for the
issuance of such series, such rightDirectors:
- Review and recommend to elect two additional
directors to be applicable to all series of Preferred Stock in the
aggregate and not to each series thereof in the event more than
one series is outstanding. Any increase in the number of members
of the Board of Directors as a resultthe independent auditors to
be selected to audit the financial statements of the rightCompany and its
divisions and subsidiaries for each fiscal year.
B-1
- Review and consider management's appointment, termination or replacement
of the holdersDirector of one or more series ofInternal Audit and make recommendations thereon.
- Have a clear understanding with the Preferred Stockindependent auditors that they are
ultimately accountable to elect two
additional members of the Board of Directors shall not alter or
increaseand the voting powerAudit Committee,
as the representatives of the holdersstockholders with the ultimate authority in
deciding to engage, evaluate and, if appropriate, terminate their
services.
- Meet with the independent auditors and financial management of Common Stock who shall
continuethe Company
to review the scope of the proposed audit for the current year and the
audit procedures to be utilized, the staffing for such audit and the
proposed compensation and, for each fiscal year, to review the results of
such audit, including any comments or recommendations of the independent
auditors arising therefrom.
- Review with the independent auditors, the Company's internal auditor and
financial and accounting personnel the adequacy and effectiveness of the
accounting and financial controls of the Company, elicit any
recommendations for the improvement of such internal controls or
particular areas where new or more detailed controls or procedures are
desirable, including the adequacy of internal controls to expose any
payments, transactions, or procedures that might be deemed illegal or
otherwise improper, and review periodically Company policy statements and
the status of compliance therewith.
- Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements of the
Company or related compliance policies.
- Review the internal audit function of the Company, including the
independence and line of authority for its reporting obligations, the
proposed audit plan for the succeeding fiscal year, the coordination of
such plan with the independent auditors and appropriate staffing levels.
- Inquire of financial management, the internal auditor and the independent
auditors about significant risks or exposures and assess the steps
management has taken to minimize such risks to the Company.
- Receive, prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit plan,
with explanations for any deviations from the original plan.
- Review with financial management and the independent auditors: (i) the
results of their timely analysis of significant financial reporting issues
and practices, including changes in, or adoptions of, accounting
principles and disclosure practices and any other matters required to be
communicated to the committee by the auditors, and (ii) their qualitative
judgments about the quality, as well as acceptability, of the accounting
principles and financial disclosure practices used or proposed to be used,
including the degree of aggressiveness or conservatism of the Company's
accounting principles and underlying estimates.
B-2
- Review the audited results for each fiscal year and the unaudited results
for each fiscal quarter or have the right onlysame presented, with the participation
of the independent auditors, to electthe full Board of Directors at its
regularly scheduled meetings. (If requested by the Board of Directors, the
independent auditors may attend any full Board of Directors meeting to
assist in reporting financial results or to answer other directors'
questions; alternatively, directors, who are not Audit Committee members,
may be invited to attend any Audit Committee meeting during which
financial results are reviewed.)
- Review the financial statements to be included in the Annual Report to
Stockholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of such minimum number offinancial statements.
- Provide sufficient opportunity for the internal auditor and the
independent auditors to meet with the members of the BoardAudit Committee
without members of Directors as shall equal at least
one-fifthmanagement present. (Among the items to be discussed in
these meetings are the independent auditors' evaluation of the membersCompany's
financial, accounting and auditing personnel and the cooperation that the
independent auditors received during the course of audit.)
- Investigate any matter brought to the attention of the Audit Committee
within the scope of its duties, with the power to retain outside counsel
for this purpose if, in its judgment, such action is appropriate.
- Review appropriate staffing levels for the accounting, financial and
internal audit functions and succession planning related thereto.
- Review the nature and scope of other professional services provided to the
Company by the independent auditors and consider their relationship to the
auditors' independence.
- Submit the minutes of all meetings of the Audit Committee to, or report on
the matters discussed at each committee meeting with, the Board of
Directors as constituted
prior toDirectors.
- Obtain the election of such two additional members of thefull Board of Directors by the holders of the Preferred Stock. With respect
to the election of directors, no holders of any class of stock
shall have cumulative voting rights."
A-2
RESOLVED, That the Amended and Restated Certificate of IncorporationDirectors' approval of this corporation be amended by adding new Section (b)(iii) of Article FOURTH to readCharter and review
and reassess this Charter as follows:
(iii) STOCK DIVIDENDS. The holders of the Class A Stock and the
Common Stock shall have the same and identical rights to dividends
or distributions, provided that, in the event of dividends or
distributions payable in shares of the Class A or Common Stock of
the Corporation or the distribution of rights, warrants or other
securities exercisable or exchangeable for, or convertible into,
shares of the Class A or Common Stock of the Corporation, such
dividends or distributions shall be payable in shares, or rights,
warrants or other securities exercisable or exchangeable for, or
convertible into, shares, as the case may be, of Class A Stock in
respect of the holders of Class A Stock of the Corporation and
Common Stock in respect of the holders of Common Stock of the
Corporation;
RESOLVED, That the Amended and Restated Certificate of Incorporation of this
corporation be amended by changing the fourth sentence of Article FIFTH to read
as follows:
(i) The indemnification provided for in this Article (a) shall
not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement or vote of
stockholders or disinterested directors or otherwise, both as to
action in their official capacities and as to action in another
capacity while holding such office, (b) shall continue as to a
person who has ceased to be a director or officer and (c) shall
inure to the benefit of the heirs, executors and administrators of
such a person.
SECOND: That thereafter, pursuant to resolutions of its Board of
Directors, at the annual meeting of the stockholders, duly called and held on
September 19, 2000 upon notice and in accordance with Section 222 of the General
Corporation Law of the State of Delaware, the necessary number of shares as
required by statute were voted in favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
A-3conditions dictate (at least once per fiscal
year).
B-3
SCHOLASTIC CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 19, 200020, 2001
PLEASE COMPLETE AND RETURN
(THE SOLICITATION OF THIS PROXY IS MADE OF BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints RICHARD ROBINSON and ANDREW S. HEDDEN, or eacheither
of them, each with full power of substitution and revocation, as proxies to
represent the undersigned at the Annual Meeting of Stockholders of Scholastic
Corporation to be held at 555557 Broadway, New York, New York on Tuesday,Thursday,
September 19, 2000,20, 2001 at 9:00 A.M. local time, and at any adjournment thereof, and
to vote the shares of Common Stock the undersigned would be entitled to vote if
personally present.
If all or a portion of the shares you are voting are a result of your being a
participant in the Scholastic Corporation 401(k) Savings and Retirement Plan,
then you may instruct the plan Trustee how to vote all full and fractional
shares attributable to your account invested in the Scholastic Corporation Stock
Fund on August 10, 2001 by completing the reverse side of this card and
returning it by September 10, 2001.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY TODAY
SCHOLASTIC CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 20, 2001
IN THE ABSENCE OF SPECIFIC DIRECTIONS NOTED BELOW, IT IS UNDERSTOOD THAT THE
UNDERSIGNED'S SHARES OF COMMON STOCK WILL BE VOTED FOR PROPOSAL 1.
Please mark your vote as indicated in this example: X
1. Proposal to elect John L. Davies, Linda B. Keene and John G. McDonald as
directors:
For /_/ Against /_/
If you wish to vote for the election of directors and withhold authority to vote
for any of the individual nominees, enter the name(s) of such nominee(s) below.
- -------------------------------------------------------------
2. In their discretion the proxies will vote upon such other matters as may
be properly come before the meeting and as may properly be voted upon by
the holders of Common Stock.
Signature(s): Date:
-------------------------------------- ----------------
Please sign as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such.
- --------------------------- FOLD AND DETACH HERE -----------------------------
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 4PM EASTERN TIME
THE BUSINESS DAY PRIOR TO ANNUAL MEETING DAY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE
YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND
RETURNED YOUR PROXY CARD.
- -------------------------------------- ------------------------------------ --------------------------
INTERNET TELEPHONE MAIL
HTTP://WWW.PROXYVOTING.COM/SCHL 1-800-840-1208
Use the Internet to vote your Use any touch-tone telephone to Mark, sign and date
proxy. Have your proxy card in vote your proxy. Have your proxy your proxy card
hand when you access the web OR card in hand when you call. You will OR and
site. You will be prompted to enter be prompted to enter your control return it in the
your control number, located in number, located in the box below enclosed postage-paid
the box below, to create and and then follow the directions given. envelope.
submit an electronic ballot.
- -------------------------------------- ------------------------------------ --------------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
SCHOLASTIC CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 20, 2001
(THE SOLICITATION OF THIS PROXY IS MADE OF BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints RICHARD ROBINSON and ANDREW S. HEDDEN, or either
of them, each with full power of substitution and revocation, as proxies to
represent the undersigned at the Annual Meeting of Stockholders of Scholastic
Corporation to be held at 557 Broadway, New York, New York, on Thursday,
September 20, 2001, at 9:00 A.M. local time, and at any adjournment thereof and
to vote the shares of Class A Stock the undersigned would be entitled to vote if
personally present.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY TODAY
SCHOLASTIC CORPORATION
CLASS A STOCK PROXY
ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 19, 200020, 2001
IN THE ABSENCE OF SPECIFIC DIRECTIONS NOTED BELOW, IT IS UNDERSTOOD THAT THE
UNDERSIGNED'S SHARES OF CLASS A STOCK WILL BE VOTED IN FAVOR OF MATTERSFOR PROPOSALS 1, 2,3,
4,2 AND 5.
CLASS A STOCK
Ballot No. _________ _________________________________
Shareholder Name (Please Print)
No. of Shares ______
BALLOT3.
The undersigned hereby votes the above number of shares of Class A Stock of
Scholastic Corporation as follows:
1. Upon the election of 9 directors as follows:
For Against
--- -------of: Richard Robinson, _________ _________ Rebeca M. Barrera, _________ _________
Helen V.
Benham, _________ _________ Charles T. Harris III, _________ _________
Andrew S. Hedden _________ _________
Ramon Cortines _________ _________
Mae C. Jemison, _________ _________Peter M. Mayer,
Augustus K. Oliver, _________ _________
Richard M. Spaulding, _________ _________Andrew S. Hedden:
FOR AGAINST
---------- ----------
2. Upon the proposal to amendapprove the Amended and Restated
Certificate of Incorporation to increase the number of
authorized shares of CommonScholastic Corporation 2001 Stock
of the Company .
Incentive Plan:
FOR __________ AGAINST
__________ ABSTAIN __________---------- ----------
3. Upon the proposal to amend the Amended and Restated
Certificate of Incorporation to increase the number of
authorized shares of Preferred Stock of the Company .
FOR __________ AGAINST __________ ABSTAIN __________
4. Upon the proposal to amend the Amended and Restated
Certificate of Incorporation to effect the other amendments as
set forth in the proposed Charter Amendment .
FOR __________ AGAINST __________ ABSTAIN __________
5. Upon the proposal to ratify the appointment of Ernst & Young as
independent auditors for the fiscal year ending May 31, 2001:2002:
FOR __________ AGAINST
__________ ABSTAIN __________
6.---------- ----------
4. In their discretion the proxies will vote upon such other matters as
may be properly come before the meeting and as may properly be voted
upon by the holders of CommonClass A Stock.
Signature(s): ______________________________________ Date:
________________-------------------------------------- ----------------
Please sign as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such.
Please mark your vote as indicated in this example |X|
SCHOLASTIC CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 19, 2000
(THE SOLICITATION OF THIS PROXY IS MADE OF BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints RICHARD ROBINSON and ANDREW S. HEDDEN, or eachX
-
------------------------------
Shareholder Name (Please Print)
No. of them, with full power of substitution and revocation, as proxies to represent
the undersigned at the Annual Meeting of Stockholders of Scholastic Corporation
to be held at 555 Broadway, New York, New York, on Tuesday, September 19, 2000,
at 9:00 A.M. local time, and at any adjournment thereof and to vote the shares
of Common Stock the undersigned would be entitled to vote if personally present.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE DATE, SIGN AND MAIL THIS PROXY TODAY
FOLD AND DETACH HERE
SCHOLASTIC CORPORATION
IN THE ABSENCE OF SPECIFIC DIRECTIONS NOTED BELOW, IT IS UNDERSTOOD THAT THE
UNDERSIGNED'S SHARES OF COMMON STOCK WILL BE VOTED IN FAVOR OF MATTERSShares
-------
1
& 2.
Please mark your vote as indicated in this example |X|
1. Proposal to elect Linda B. Keene, Peter M. Mayer and John G. McDonald
as directors:
For |_| Against |_|
If you wish to vote for the election of directors and withhold authority to vote
for any of the individual nominees, enter the names of such nominees below.
_____________________________________________________________
2. Proposal to amend the Amended and Restated Certificate of Incorporation
to increase the number of authorized Common Stock Shares to 70,000,000:
For |_| Against |_|
3. In their discretion the proxies will vote upon such other matters as
may be properly come before the meeting and as may properly be voted
upon by the holders of Common Stock.
Signature(s): ______________________________________ Date:________________
Please sign as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such.
SCHOLASTIC CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 19, 2000
SCHOLASTIC CORPORATION 401(K) SAVINGS AND RETIREMENT PLAN
IMPORTANT
PLEASE COMPLETE AND RETURN
(THE SOLICITATION OF THIS PROXY IS MADE OF BEHALF OF THE BOARD OF DIRECTORS)
The enclosed Notice of the 2000 Annual Meeting of Stockholders and Proxy
Statement are being provided to you as a participant in the Scholastic
Corporation 401(k) Savings and Retirement Plan. Participants who had funds
invested in the Scholastic Corporation Common Stock Fund on August 9, 2000, the
record date for the 2000 Annual Meeting of Stockholders, may instruct the
Trustee how to vote all full and fractional shares attributable to their account
by completing the reverse side of this card and returning it by September 10,
2000.
Scholastic Corporation urges you to complete, date, sign, and return this
confidential voting instruction card TODAY.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE DATE, SIGN AND MAIL THIS PROXY TODAY
FOLD AND DETACH HERE
SCHOLASTIC CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 19, 2000
IN THE ABSENCE OF SPECIFIC DIRECTIONS NOTED BELOW, IT IS UNDERSTOOD THAT THE
UNDERSIGNED'S SHARES OF COMMON STOCK WILL BE VOTED IN FAVOR OF MATTERS NO. 1 &
2.
Please mark your vote as indicated in this example |X|
1. Proposal to elect Linda Keene, Peter M. Mayer and John G. McDonald as
directors:
For |_| Against |_|
If you wish to vote for the election of directors and withhold authority to vote
for any of the individual nominees, enter the names of such nominees below.
_____________________________________________________________
2. Proposal to amend the Amended and Restated Certificate of Incorporation
to increase the number of authorized Common Stock Shares to 70,000,000:
For |_| Against |_|
3. In their discretion the proxies will vote upon such other matters as
may be properly come before the meeting and as may properly be voted
upon by the holders of Common Stock.
Signature(s): ______________________________________ Date: ________________
Please sign as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such.