-------------------------------
SCHOLASTIC CORPORATION
557 Broadway
New York, NY
10012-3999
(212) 343-6100
SCHOLASTIC CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO HOLDERS OF COMMONCLASS A STOCK AND CLASS ACOMMON STOCK:
The Annual Meeting of Stockholders of Scholastic Corporation (the "Company")
will be held at the Company's corporate headquarters located at 557 Broadway,
New York, New York on Thursday,Tuesday, September 20, 200124, 2002, at 9:00 a.m., local time, for
the following purposes:
MATTERS TO BE VOTED UPON BY HOLDERS OF THE CLASS A STOCK
- Electing tennine directors ofto the Board of Directors.
- Approval of the 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 ofto the Board of Directors.
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
CommonClass A Stock and the Class ACommon Stock at the close of business on August 10, 20012002
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 VOTE YOUR SHARES.SHARES PROMPTLY. 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 CARDCARD; OR (III) BY PROMPTLY RETURNING THE ENCLOSED PROXY CARD.
By Order of the Board of Directors
[SIG]
Charles B. Deull
Senior Vice President, General
Counsel and Secretary
August 24, 200126, 2002
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.....Beneficial Ownership Reporting
Compliance.......................................... 5
Share Ownership of Management......................... 6
Executive Compensation...................................... 8
Summary Compensation Table............................ 8
Option Grants in Fiscal 2001..........................2002.......................... 9
Aggregated Option Exercises in Fiscal 20012002 and 20012002
Fiscal Year-End Option Values....................... 910
Pension Plan.......................................... 10
Employment Agreement.................................. 11
Stock Price Performance Graph......................... 11
The Human Resources and Compensation Committee's
Report on Executive Compensation.................... 12
MATTERS SUBMITTED TO STOCKHOLDERS...........................11
Stock Price Performance Graph......................... 16
Matters Submitted to Stockholders........................... 17
-
- Election of Directors.....................................Directors................................... 17
Nominees for Election by Holders of the Class A
Stock............................................... 18
Nominees for Election by Holders of the Common
Stock............................................... 18
Meetings of the Board of Directors and Itsits
Committees.......................................... 21
Director Compensation................................. 24
Certain Transactions and Certain Relationships........ 24
- - Approval of the Scholastic Corporation 2001 Stock
Incentive Plan............................................Independent Public Accountants.............................. 25
- - Ratification of the Selection of the Independent
Auditors.................................................. 31
Audit Committee Report...................................... 31Committee's Report.............................. 25
Stockholder Proposals for 20012003 Annual Meeting............... 3327
Other Matters............................................... 33
Appendix A: The Scholastic Corporation 2001 Stock Incentive
Plan...................................................... A-1
Appendix B: Audit Committee Charter......................... B-127
SCHOLASTIC CORPORATION
557 BROADWAY
NEW YORK, NEW YORK 10012
---------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 20, 200124, 2002
---------------------
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 557 Broadway, New York, New York
at 9:00 a.m., local time, on Thursday,Tuesday, September 20, 2001,24, 2002, and at any
adjournments thereof.
Shares represented by each proxy properly executed and returnedsubmitted, either by mail, the
internet or telephone as indicated on the enclosed form of proxy, will be voted
in accordance with the instructions indicated in such proxies unless revoked. A
stockholder may revoke a proxy at any time before it is exercised by:
(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
internet 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, 557 Broadway, New York, New York 10012.
This proxy statement and the accompanying form of proxy, together with
the Company's 2001 Annual Report to Stockholders,on Form 10-K for the fiscal year ended May 31, 2002,
are being mailed to stockholders on or about August 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.26, 2002.
The cost of soliciting proxies will be borne by the Company. In addition
to the solicitationSolicitation
other than by mail proxies may be solicitedmade personally, by telephone, facsimile or e-mail by
regularly employed officers directors and employees of the Company in person or by telephone, telegraph or facsimile. The
Company has retained
Mellon Investor Services, L.L.C. to assist in the solicitation of proxies for a
fee estimated at $5,000 plus reasonable expenses.who will not be additionally
compensated therefor. 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$0.01 par value
("Class A Stock"), and Common Stock, $0.01 par value ("Common Stock"), at the
close of business on August 10, 20012002 (the "Record Date") are entitled to vote at
the Annual Meeting. As of the Record Date, there were outstanding 33,577,492
shares of Common Stock and 1,656,200
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
stockholders37,424,421 shares of record as of December 29, 2000, payable as of January 16, 2001.
AllCommon Stock. Unless otherwise
indicated, all references to share and option amounts in this proxy statement
reflect the 2-for-1 stock split effected through the payment of a 100% stock
dividend on January 16, 2001 on each outstanding share of Class A Stock Split, except as otherwise indicated.and
Common Stock (the "2-for-1 Stock Split").
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 right: (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 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 CommonClass A Stock and Class ACommon Stock is entitled to one vote. No
holders of either class of stock have cumulative voting rights. At the Annual
Meeting, holders of the Class A Stock will vote on the election of nine members
of the Board of Directors and the holders of the Common Stock will vote on the
election of three directors tomembers of the Board of Directors. AllIf any other proposals set forth inmatters were
to properly come before the notice
attached to this proxy statement willAnnual Meeting, they would be voted on by the
holders of the Class A Stock.
The vote required for approvalthe election of each of the proposals before the
stockholders at the Annual Meetingdirectors is specified in the
description of such proposal. In the election of directors, withheld votes and
abstentions have no effect on the vote. Under the Company's Bylaws, for the
purpose of determining whether a proposal has received the required vote,
abstentions will not be considered as votes cast and will have no effect.
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. Because the
only proposal before the holders of Common Stock is the election of three
directors, the effect of broker non-votes is not applicable in the case of the
Common Stock.
2
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 sharesClass A Stock or the Common Stock outstanding on August 10, 2001. All such
information reflects2002. Under the
2-for-1 Stock Split. Under theapplicable 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 OWNERSHIP PERCENT OF
BENEFICIAL OWNER (1) CLASS (2) CLASS
Richard Robinson
c/o Scholastic Corporation
557 Broadway 1,656,200 100% 6,337,586(3) 17.5%6,337,910(3) 15.8%
New York, NY 10012
Barbara Robinson Buckland
c/o Scholastic Corporation
557 Broadway 648,620 39.2% 2,830,228 8.3%2,821,147 7.4%
New York, NY 10012
Mary Sue Robinson Morrill
c/o Scholastic Corporation
557 Broadway 765,296 46.2% 3,549,468(4) 10.3%9.3%
New York, NY 10012
William W. Robinson
c/o Scholastic Corporation
557 Broadway 648,620 39.2% 2,732,960(5) 8.0%6.1%
New York, NY 10012
Trust under the Will of
Maurice R. Robinson
c/o Scholastic Corporation 648,620 39.2% 2,331,712 6.8%6.1%
557 Broadway
New York, NY 10012
Trust under the Will of
Florence L. Robinson
c/o Scholastic Corporation 116,676 7.0% 466,676 1.4%1.2%
557 Broadway
New York, NY 10012
Massachusetts Financial Services
Company
500 Boylston Street -- -- 4,206,972(6) 12.5%3,910,481(6) 10.4%
Boston, MA 02116
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
3
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 truststrust is deemed to be the beneficial owner of the shares directly owned
by such trust. Based on thetheir 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--890,904 shares (sole
voting and investment power) and 765,296 shares (shared voting and
investment power); Barbara Robinson Buckland- 0Buckland--0 shares (sole voting and
investment power) and 648,620 shares (shared voting and investment power);
Mary Sue Robinson Morrill--0 shares (sole voting and investment power) and
765,296 shares (shared voting and investment power); William W. Robinson--0
shares (sole voting and investment power) and 648,620 shares (shared voting
and investment power); Maurice R. Robinson Trust--648,620 shares (sole
voting and investment power); and Florence L. Robinson trust--116,676Trust--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 thetheir 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--3,378,298Robinson--3,378,622 shares (sole voting and investment power) and 2,958,2882,959,288
shares (shared voting and investment power); Barbara Robinson
Buckland--404,516Buckland--395,435 shares (sole voting and investment power) and 2,425,712
shares (shared voting and investment power); Mary Sue Robinson Morrill--0
shares (sole voting and investment power) and 3,549,468 shares (shared
voting and investment power); William W. Robinson--391,948 shares (sole
voting and investment power) and 2,341,012 shares (shared voting and
investment power); Maurice R. Robinson Trust--2,331,712 (sole voting and
investment power); and Florence L. Robinson Trust--466,676 (sole voting and
investment power).
(3) Includes 1,656,200 shares of Common Stock issuable on conversion of the
Class A Stock described in Note 2; 1,453,224 shares of Common Stock held
directly by Richard Robinson; 1,014,152 shares of Common Stock under options
exercisable by Mr. Robinson within 60 days; 20,01820,342 shares of Common Stock
with respect to which Mr. Robinson had voting rights at May 31, 20012002 under
the Scholastic Corporation 401(k) Plan;Savings and Retirement Plan (the "401(k)
Plan"); 1,683,092 shares of Common Stock owned by the Maurice R. Robinson
Trust; 350,000 shares of Common Stock owned by the Florence L. Robinson
Trust; 7,594 shares of Common Stock for which Mr. Robinson is custodian
under a separate custodial account for one of his sons; 4,212 shares of
Common Stock owned directly by his sons; and 149,094 shares of Common Stock
owned by the Richard Robinson and Helen Benham Charitable Fund. Does not
include 310,224310,511 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.ownership and 18,382
restricted stock units ("RSUs") held under the Scholastic Corporation
Management Stock Purchase Plan (the "MSPP"), as more fully described herein.
(4) Does not include an aggregate of 337,376 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 44,000 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 onThe information for Massachusetts Financial Services Company ("MFS") is
derived from Amendment No. 34 to Schedule 13G dated February 5, 2001,12, 2002, as
filed with the SEC.SEC, which states that, as of December 31, 2001, MFS had the
sole voting power with regard to 3,422,668 shares and the sole dispositive
power with regard to 3,910,481 shares.
4
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.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACTBENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 as amended,(the "Exchange Act")
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 their ownership and
changes in ownership of the Company's equity securities with the SEC. ReportingThe
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, basedBased 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, 2001,2002,
the Company believes its directors, executive officers and greater than ten
percent beneficial owners timely filed all required Section 16(a) reports,
except forin respect of an exercise of stock options to purchase 500 shares of
Common Stock by Linda B. Keene, a transaction by Ernest Fleishmandirector of the Company, that was required to
be reported on a Form 4 in JanuarySeptember 2001 whichand was later reported on a Form 54
filed in JulyOctober 2001.
5
SHARE OWNERSHIP OF MANAGEMENT
On August 10, 2001,2002, each director, director nominee and named executive
officerNamed Executive
reported under the caption "Executive 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 1,656,200(2) 100% 6,337,586(3) 17.5%6,337,910(3) 15.8%
Rebeca M. Barrera -- -- 18,574(4)7,574(4) *
Helen V. Benham -- -- 471,124(5) 1.4%471,411(5) 1.3%
Ramon C. Cortines -- -- 18,574(4)24,574(6) *
John L. Davies -- -- 06,000(4) *
Charles T. Harris III -- -- 34,306(6)40,306(7) *
Andrew S. Hedden -- -- 2,000 *
Mae C. Jemison -- -- 25,004(6)31,004(7) *
Linda B. Keene -- -- 6,000(7)12,000(8) *
Peter M. Mayer -- -- 32,000(8)28,000(9) *
John G. McDonald -- -- 25,004(6) *
Augustus K. Oliver -- -- 20,574(9)26,574(10) *
Richard M. Spaulding -- -- 281,081(10)259,085(11) *
NAMED EXECUTIVE OFFICERS
Richard Robinson 1,656,200(2) 100% 6,337,586(3) 17.5%6,337,910(3) 15.8%
Barbara A. Marcus -- -- 434,402(11) 1.3%431,902(12) 1.1%
Deborah A. Forte -- -- 409,552(12) 1.2%353,552(13) *
Jean L. Feiwel -- -- 182,016(13)137,016(14) *
Kevin J. McEnery -- -- 442,405(14) 1.3%418,578(15) 1.1%
Margery A. Mayer -- -- 45,444(16) *
All directors director nominees and executive
officers as a group (34(27 persons
including those named above) 1,656,200(2) 100% 9,598,516(15) 25.9%9,147,287(17) 21.6%
- --------------------------------------------------------------------------------
+ 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 890,904 shares of Class A Stock held directly by Richard Robinson,
648,620 shares of Class A Stock owned by the Maurice R. Robinson Trust and
116,676 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 1,656,200 shares of Common Stock issuable on conversion of the
Class A Stock described in Note 2; 1,453,224 shares of Common Stock held
directly by Richard Robinson; 1,014,152 shares of Common 6
Stock under options
exercisable by Mr. Robinson within 60 days; 20,01820,342 shares of Common Stock
with
6
respect to which Mr. Robinson had voting rights at May 31, 20012002 under the Scholastic Corporation
401(k) Plan; 1,683,092 shares of Common Stock owned by the Maurice R.
Robinson Trust; 350,000 shares of Common Stock owned by the Florence L.
Robinson Trust; 7,594 shares of Common Stock for which Mr. Robinson is
custodian under a separate custodial account for one of his sons; 4,212
shares of Common Stock owned directly by his sons; and 149,094 shares of
Common Stock owned by the Richard Robinson and Helen Benham Charitable Fund.
Does not include 310,224310,511 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.ownership
and 18,382 RSUs held under the MSPP.
(4) Includes options under which such director may purchase 18,000 shares6,000 share of
Common Stock within 60 days.
(5) Includes 259,386 shares of Common Stock held directly by Ms. Benham; 49,722
shares of Common Stock under options exercisable by her within 60 days;
1,1161,403 shares of Common Stock with respect to which Ms. Benham had voting
rights as of May 31, 20012002 under the 401(k) Plan; 7,594 shares of Common
Stock for which Ms. Benham is custodian under a separate custodial account
for one of her sons; 4,212 shares of Common Stock owned directly by her
sons; and 149,094 shares of Common Stock owned by the Richard Robinson and
Helen Benham Charitable Fund. Excludes 6,176,6866,177,010 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 24,000 shares of
Common Stock within 60 days.
(7) Includes options under which such director may purchase 5,50030,000 shares of
Common Stock within 60 days.
(8) Includes 25,000options under which such director may purchase 11,500 shares of
Common Stock within 60 days.
(9) Includes 15,000 shares of Common Stock held directly by Mr. Mayer, 1,000
shares held through a pension plan in which he has an interest and options
under which he may purchase 6,00012,000 shares of Common Stock within 60 days.
(9)(10) Includes 2,574 shares of Common Stock held directly by Mr. Oliver and
options under which he may purchase 18,00024,000 shares of Common Stock within
60 days.
Does not include 3,700 shares of Common Stock owned by
Mr. Oliver's daughter, as to which Mr. Oliver disclaims beneficial
ownership.
(10)(11) Includes 198,409198,158 shares of Common Stock held directly by Mr. Spaulding,
19,096 shares of Common Stock under options exercisable by him within
60 days and 63,57641,580 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)7,177 RSUs held under the Scholastic
Corporation Management Stock Purchase Plan (the "MSPP"), as more fully
described herein.
(11)MSPP.
(12) Includes 26,317 shares of Common Stock held directly by Ms. Marcus, 406,294403,794
shares of Common Stock under options exercisable by Ms. Marcus within
60 days and 1,791 shares of Common Stock with respect to which Ms. Marcus
had voting rights at May 31, 20012002 under the 401(k) Plan. Does not include
2,3883,893 RSUs held under the MSPP.
(12)(13) Includes 9,152 shares of Common Stock held directly by Ms. Forte and
400,400344,400 shares of Common Stock under options exercisable by Ms. Forte within
60 days. Does not include 4,5786,551 RSUs held under the MSPP.
(13)(14) Includes 182,016137,016 shares of Common Stock under options exercisable by
Ms. Feiwel within 60 days.
(14)(15) Includes 8,3939,393 shares of Common Stock held directly by Mr. McEnery, 431,766406,766
shares of Common Stock under options exercisable by Mr. McEnery within
60 days and 2,2462,419 shares of Common Stock with respect to which Mr. McEnery
had voting rights at May 31, 20012002 under the 401(k) Plan. Does not include
2,6545,071 RSUs held under the MSPP.
(15)(16) Includes 14,834 shares of Common Stock held directly by Ms. Mayer and
30,610 shares of Common Stock under options exercisable by Ms. Mayer within
60 days. Does not include 2,858 RSUs held under the MSPP.
(17) Includes an aggregate of 3,542,0623,236,172 shares of Common Stock under options
exercisable by members of the group within 60 days, an aggregate of 33,79631,110
shares of Common Stock with respect to which the group had voting rights at
May 31, 2002 under the 401(k) Plan and 1,626,2001,656,200 shares of Common Stock
issuable on the conversion of Class A Stock into shares of Common Stock.
Does not include an aggregate of 24,98661,659 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, as well as Jean L. Feiwel, an officer of the Company
who was an executive officer for a portion of the most recent fiscal year
(collectively, the "Named Executives"), in respect of the fiscal years ended
May 31, 2002, 2001 2000 and 1999:2000:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL BONUS COMPENSATION UNDERLYING COMPENSATION
POSITIONPOSITIONS YEAR SALARY (1) (2) OPTIONS (3) (4)
RICHARD ROBINSON 2002 $781,731 $476,550 $150,457 0 $238,840
Chairman of the Board, 2001 $731,731 $562,500 $0 250,000 $242,485
Chairman of the Board,$238,727
President and CEO 2000 $700,000 $735,000 $0 250,000 $243,659
President and CEO 1999 $642,308 $298,935 $0 0 --$233,874
BARBARA A. MARCUS 2002 $663,407 $413,708 $12,318 25,000 $5,550
EVP; President, 2001 $629,224 $460,525 $23,630 50,000 EVP,$5,150
Children's Book 2000 $570,711 $540,000 $0 100,000 --$5,149
Publishing 1999 $510,574 $284,555 $0 0 --
DEBORAH A. FORTE 2002 $541,816 $247,270 $16,149 30,000 $5,550
EVP; President, 2001 $517,617 $301,875 $45,301 0 EVP, Division Head,$5,150
Scholastic Entertainment 2000 $500,601 $345,000 $0 100,000 --$5,150
KEVIN J. MCENERY 2002 $435,788 $177,618 $19,783 0 $5,746
EVP and Chief Financial 2001 $406,731 $246,500 $26,262 100,000 $5,294
Officer 2000 $365,865 $300,000 $0 100,000 $5,571
MARGERY W. MAYER 2002 $391,346 $206,723 $13,129 25,000 $3,381
EVP; President, 2001 $359,423 $413,625(4) $12,409 50,000 $3,262
Scholastic Entertainment 1999 $477,693 $301,884Education 2000 $309,519 $94,500 $0 0 --$0
JEAN L. FEIWEL 2002 $491,852 $171,514 $0 0 $5,550
Publisher, Children's 2001 $479,029 $185,028 $0 50,000 --
Publisher, Children's$5,150
Book Publishing 2000 $435,101 $499,375 $0 0 --
Book Publishing 1999 $366,346 $141,952 $0 0 --
KEVIN J. MCENERY 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 --$5,623
- --------------------------------------------------------------------------------
1)(1) Mr. Robinson, Ms. Marcus, Ms. Forte, and Mr. McEnery and Ms. Mayer have elected
to deferinvest 100%, 5%, 30%, 40% and 30%, respectively, of his/her fiscal 2002
bonus in RSUs under the MSPP. Previously, Mr. Robinson, Ms. Marcus,
Ms. Forte, Mr. McEnery and Ms. Mayer elected to invest 100%, 10%, 20%, 30%
and 30%, respectively, of his/her fiscal 2001 bonus and 0%, 10%, 30%, 20%
and 30%, respectively, of his/her fiscal 20012000 bonus to invest in RSUs under the MSPP.
In addition, on July 18, 2002, each of Mr. Robinson, Ms. Marcus, Ms. Forte,
and Mr. McEnery previously elected to deferand Ms. Mayer received stock options in lieu of 10%, 30% and 20%, respectively, of her/histhe bonus
he or she would otherwise have received for fiscal 2000 bonus to invest in RSUs2002 under the MSPP.
2) IncludedCompany's
Executive Performance Incentive Plan. Options to purchase 5,850, 5,080,
3,040, 2,180 and 2,540 shares of Common Stock, which are not reflected in
Other Annual Compensation isthis table, were issued to Mr. Robinson, Ms. Marcus, Ms. Forte, Mr. McEnery
and Ms. Mayer, respectively.
(2) Amounts shown represent the value of the 15% discount received on the
purchase of restricted stock units (RSUs)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,RSUs on the
date of allocation. Mr. Robinson, Ms. Marcus, Ms. Forte, and Mr. McEnery and
Ms. Mayer elected to deferinvest 100%, 10%, 20%, 30% and 30%, respectively, of
her/his fiscal 2001 bonus, in respect of which 18,382, 1,505, 1,973, 2,417
and 1,604 RSUs, respectively, were allocated to them on August 31, 2001.
Ms. Marcus, Ms. Forte, Mr. McEnery and Ms. Mayer elected to invest 10%, 30%,
20% and 30%, respectively, of her/his fiscal 2000 bonus, in respect of which
2,388, 4,578, 2,654 and 2,6541,604 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.(3) For Mr. Robinson, All Other Compensation for fiscal 2002, 2001 and fiscal 2000
includes: (a) $3,758 and
$4,636, respectively, for premiums related to term life insurance;
(b)$5,550, $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)(b) $233,290, $233,577 and $233,874, respectively,
representing the annual premium paid
8
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 premiums 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. 8
The
amounts shown for the other Named Executives reflect the matching
contributions made by the Company under the 401(k) Plan.
(4) Includes a non-recurring bonus of $250,000.
OPTION GRANTS IN FISCAL 20012002
The following table sets forth information concerning individual stock
option grants made to the Named Executives during the fiscal 2001, together with the
number and grant date present value atyear ended May 31,
2001.2002.
POTENTIAL REALIZABLE VALUE
AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM (2)
% OF TOTAL
NUMBER OF OPTIONS
OPTIONSSECURITIES GRANTED TO
GRANTEDUNDERLYING EMPLOYEES EXERCISE OR
(SHARES)OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME (3) 2001GRANTED YEAR ($/SHARE)(3) DATE 5%
Richard Robinson 250,000 15.0% $31.565 7/19/10 $4,962,765
Barbara A. Marcus 50,000 3.0% $31.565 7/19/10 $ 992,553
Deborah A. Forte -- -- -- -- --
Barbara A. Marcus 25,000 3.9% $42.85 12/18/11 $673,703
Deborah A. Forte 30,000 4.7% $42.85 12/18/11 $808,444
Kevin J. McEnery -- -- -- -- --
Margery W. Mayer 25,000 3.9% $42.85 12/18/11 $673,703
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$1,707,297
Deborah A. Forte $2,048,756
Kevin J. McEnery --
Margery W. Mayer $1,707,297
Jean L. Feiwel $2,515,324
Kevin J. McEnery $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 equal annual installments beginning one year from
the date of grant. On July 18, 2002, each of Mr. Robinson, Ms. Marcus,
Ms. Forte, Mr. McEnery and Ms. Mayer received stock options in lieu of 10%
of the bonus he or she would otherwise have received for fiscal 2002 under
the Company's Executive Performance Incentive Plan. Options to purchase
5,850, 5,080, 3,040, 2,180 and 2,540 shares of Common Stock, which are not
reflected in this table, were issued to Mr. Robinson, Ms. Marcus,
Ms. Forte, Mr. McEnery and Ms. Mayer, respectively.
(2) The dollar amounts under the 5% and 10% columns in the table above are the
resultsresult of calculations required by the SEC and therefore are not intended to
forecast the possible future appreciation of the stock price of the Company.Common Stock.
Although permitted by the SEC'sSEC rules, the Company did not use an alternate
formula for grant date valuation because the Company is not aware of any
formula whichthat will determine with reasonable accuracy a present value based
on future unknown or volatilevolatility 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.
(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.9
AGGREGATED OPTION EXERCISES IN FISCAL 20012002 AND 20012002 FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning options exercised
during Fiscal 2001the fiscal year ended May 31, 2002 by the Named Executives together with
the number and value of exercisable / unexercisablethe unexercised options held by such persons at May 31,
2001.2002.
NUMBER OF
SHARES SHARESSECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON EXERCISE REALIZED AT FY-END (#)(1) AT FY-END($)(2)FY-END(1)
NAME (#)(1) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
Richard Robinson -- -- 764,1521,014,152 / 250,000 $14,558,8680 $24,403,239 / $2,096,25$0
Barbara A. Marcus 8,00015,000 $ 194,000 393,794506,250 391,294 / 50,000 $7,320,55537,500 $10,074,354 / $419,250$719,438
Deborah A. Forte 59,634 $1,111,065 400,40056,000 $1,723,930 344,400 / 30,000 $7,236,019 / $142,200
Kevin J. McEnery 25,000 $ 805,290 406,766 / 0 $5,824,183$9,171,646 / $0
Margery W. Mayer -- -- 18,110 / 62,500 $364,834 / $708,188
Jean L. Feiwel 10,000 $ 271,550 132,01645,000 $1,265,725 137,016 / 50,000 $2,491,6500 $2,951,727 / $419,250
Kevin J. McEnery 50,000 $1,342,731 314,266 / 117,500 $5,405,116 / $1,217,71$0
- --------------------------------------------------------------------------------
(1) All reported options reflect the 2-for-1 Stock Split.
(2) Based on the per share closing price of $39.95the Common Stock of $47.59 on
May 31, 20012002 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 balanceCompany maintains a retirement plan which became effective June 1, 1999for substantially all of its
employees based in the United States, including the Named Executives (the
"Retirement Plan"), except for Mr. Robinson who elected to continue
participation in. As a cash balance plan, 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 benefits upon the earlier of the completion of
five years of participation or attainment of age 65, payable upon retirement. At
August 1, 2001, Richard Robinson had earned an estimated annual benefit payment
under the Prior Plan of $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%4.0%
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, 2001,2002, Ms. Marcus, Ms. Feiwel,Forte, Mr. McEnery, Ms. ForteMayer and
Mr. McEneryMs. Feiwel, had earned estimated annual benefit payments under the Retirement
Plan of $55,596, $4,418, $4,555$56,642, $6,586, $19,250, $5,292 and $18,358,$6,387, respectively.
The Retirement Plan was amended and restated to a cash balance plan
effective June 1, 1999. All plan participants as of July 1, 1998 who were at
least age 50 at such time were given the option to remain under a modified
version of the Retirement Plan's benefit formula used prior to the such
amendment and restatement. Mr. Robinson elected to continue participation under
such prior benefit formula. This formula provides participants
10
covered thereby with retirement benefits based upon career average compensation.
Individual participant contributions are not required and the Company makes all
required contributions. The formula 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. At
August 1, 2002, Richard Robinson had earned an estimated annual benefit payment
using the prior benefit formula of $70,871, payable upon retirement.
EMPLOYMENT AGREEMENT
Effective October 1, 1999, Scholastic Inc., a wholly-owned 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.Feiwel. 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 providesprovided 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 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 employees, 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.
STOCK 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,
including financial performance of the Company, individual contributions,
teamwork and division results. Such factors are critical to enhancing the value
and continued development of the Company's operating segments, which in turn
builds stockholder value. In determining the compensation payable toof the Company's
executive officers, the HRCC seeks to achieve the following objectives through a
combination of fixed and variable compensation:
- PAY COMPETITIVELY--Provide a total compensation package that is consistent
with competitive practices, enabling the Company to attract, motivate and
retain qualified executives; and
- PAY FOR PERFORMANCE--Create a direct link between the aggregate
compensation paid to each executive officer and the financial performance
of the Company and the
11
results of the specific business division for which the executive is
responsible;responsible, as well as specific corporate goals identified from time to
time; and
- EXECUTIVES 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 independent consultants and counsel. The HRCC
periodically reviews itsthe Company's compensation practices in light of itsthe HRCC's
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. At 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 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. 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 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 discounted purchase price.
BASE SALARY.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 retainingrecruiting and recruitingretaining
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 competitorscompanies 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. Asofficers, although as previously reported,
the HRCC approvedCompany has a three-year employment agreement with Ms. Feiwel, which expires
in 2002. During fiscal 2001,2002, the base salaries of executive officers were
generally increased in accordance with the foregoing practices.
In fiscal 2001,
the HRCC increased Mr. Robinson's annual base salary from $700,000 to $750,000,
having honored Mr. Robinson's request that he receive no increase in his base
salary during fiscal 2000.
ANNUAL BONUS INCENTIVE.INCENTIVE
For fiscal 2001,2002, 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 divisionbased on divisional
performance and earnings per share.share targets. In addition, for fiscal 2002, a
target based on meeting certain diversity goals was added for members of senior
management comprising the Company's management executive committee, including
the Chief Executive Officer. Bonus awards for the Named Executives were set and
determined under the Company's stockholder
approvedstockholder-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 ("the Code"). Based on its
review of the Company's overall performance during fiscal 2002, and to further
align management interests with those of other stockholders, the HRCC
recommended that, with respect to the fifteen members of senior management
serving on the Company's management executive committee, the fiscal
12
2002 bonuses otherwise payable to them should be reduced by 10%, in lieu of
which such persons were granted options to purchase Common Stock as amended.described
herein. Bonuses for fiscal 20012002 were paidpayable in August 2001. The HRCC awarded
Mr. Robinson a bonus of $562,500 for fiscal 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 in fiscal 2001 under
Mr. Robinson's leadership.2002.
EQUITY-BASED INCENTIVES.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 HRCCCompany
grants stock options as part of executive compensation as a means to motivateencourage
superior performance and to more directly link the economic interests of
executives with those of other stockholders.
In fiscal 2001,
Mr. Robinson, Ms. Marcus, Ms. Feiwel and Mr. McEnery were awarded options to
purchase 125,000 shares, 25,000 shares, 25,000 shares and 50,000 shares of
Common
13
Stock, respectively, which were adjusted asAs 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. Robinsona review 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 in September 1997, pursuant to
which he has received options each year under the plan to purchase 125,000
shares of Common Stock at an exercise price per share equal to 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 2001, 90 individuals, 18 of whom are executive officers,
received stock option awards to purchase an aggregate of 1,670,000 shares of
Common Stock, as adjusted to reflect the 2-for-1 Stock Split. Consistent with
the HRCC's goals, all such option awards in fiscal 2001 were made at the fair
market value of the Common Stock at the date of grant. The size of each 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.
In recent months, the HRCC, with the assistance
of a consulting firm, has
been reviewingindependent consultants and counsel, of the Company's general compensation
philosophy and overall compensation programs, including a review of the Company's long-term stock-based
incentive programs. Based on the results of this reviewHRCC and the HRCC's
recommendations, the Board of
Directors hasin fiscal 2002 adopted the Scholastic Corporation 2001 Stock Incentive
Plan (the "2001 Plan"), which was approved the establishment of the
2001 Plan, which is being submitted for approval ofby 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, theStockholders. The 2001 Plan would provideprovides for the grant
of stock options, restricted stock and other stock-based awards, and the HRCC
would
also havehas the authority to grant to specified employees of the Company reload and
transfer 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 onfeatures in order to make the review by the Company's
consultants, the proposed plan features are2001 Plan more competitive with
the Company's peer group and giveprovide the Company with 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 bewere reserved for
the purpose of granting awardsissuance under the 2001 Plan.
As with the Company's prior
stocked-based plans, the purposeDuring fiscal 2002, 99 individuals, including ten executive officers,
received stock option awards to purchase an aggregate of 638,000 shares of
Common Stock. All of the 2001 Plan is to provideoption awards in fiscal 2002 were made at fair market
value (the average of the high and low price) of the Common Stock on the date of
grant. The size of each senior management option award was based on the HRCC's
subjective evaluation of a continuing
means to raisenumber of factors, including the level of
responsibility of the individual, competitive market practice, past grants and
other matters relating to the individual's performance and ability to influence
corporate results. The actual grant of stock ownershipoptions is made by employeesthe Stock Grant
Committee of the Board of Directors, which is comprised solely of non-employee
directors, each of whom is also a member of the HRCC. In fiscal 2002,
Ms. Marcus, Ms. Forte and Ms. Mayer were awarded options to purchase 25,000,
30,000 and 25,000 shares of Common Stock, respectively. Additionally, in
orderJuly 2002, options to attract,
retainpurchase an aggregate of 33,490 shares of Common Stock
were granted to fifteen members of senior management in lieu of 10% of their
fiscal 2002 cash bonus awards referred to above. These options, with an exercise
price at fair market value on the date of grant, have a one year vesting period.
Of these options, Mr. Robinson, Ms. Marcus, Ms. Forte, Mr. McEnery and
reward such individualsMs. Mayer received options to purchase 5,850, 5,080, 3,040, 2,180 and strengthen2,540
shares of Common Stock, respectively.
13
In addition to its stock option plans, the mutuality of interests
between such individualsCompany also maintains two
stockholder-approved, stock-based incentive programs: the Scholastic Corporation
Employee Stock Purchase Plan (the "ESPP") and the Company's stockholders.
14
MSPP. The MSPPESPP and the ESPP, referred to above,MSPP
were designed to augment the Company's stock-based incentive programs by
providing participating employees with equity opportunities intended to further
align their interests with the Company and its stockholders. As partThe purpose of the
HRCC's initiativesESPP is to increaseencourage broad-based employee stock ownership levels by senior managementownership. The ESPP is offered
to U.S. employees generally. The ESPP permits participating employees to
purchase, through after-tax payroll deductions, Common Stock at a 15% discount
from the lower of the Company,fair market value of the HRCC implementedCommon Stock on the MSPP duringfirst or last
business day of each fiscal 2000.quarter.
Under the MSPP, eligible members of senior management may use all or a
portion of their annual bonus payments on a tax-deferred basis to make equity
investments in the Company at a discounted purchase price. In order to encourage
increased participation in the MSPP and based on the recommendation of the
Company's independent consultants and a review of practices adopted by other
companies, the HRCC recommended that, commencing for fiscal 20012002, the previous
15% discount in respect of RSU purchases under the MSPP should be increased to
25% and that MSPP participants should also be entitled to participate in the
ESPP, for which they were previously ineligible. Accordingly, under the amended
MSPP, participants could use all or a portion of their fiscal 20012002 annual bonus
payments ("Bonus") on a tax deferred basis to acquire shares of the Company's Common StockRSUs at a 15%25% discount from the
lowest fair market value of the underlying Common Stock during the fiscal
quarter ending on the August 31, immediately following such fiscal year.2002. 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"),RSUs, based on the applicable acquisition price, which RSUs are converted into shares
of the
Company's Common Stock on a 1-to-1 basis upon expiration of the deferral period. During
fiscal 2001, 212002, 22 members of senior management participated in the MSPP, including
Mr. Robinson, Ms. Marcus, Ms. Forte, and Mr. McEnery and Ms. Mayer, who allocated to
the purchase of RSUs under the MSPP $562,500$476,550 (100% of Bonus)bonus), $46,053 (10%$20,685 (5% of
Bonus)bonus), $60,375 (20% of Bonus) and $73,950$74,181 (30% of Bonus)bonus), respectively, the$71,047 (40% of bonus), and $62,017 (30% of
bonus), respectively. The RSUs in respect of whichsuch elections will be allocated on
August 31, 2001.
As part of the HRCC's review, andSeptember 3, 2002.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Robinson's compensation is based on the recommendationsame objectives and policies
applicable to all members of the
Company's consultantssenior management and includes base salary, bonus
opportunities and stock option grants. Effective October 1, 2002,
Mr. Robinson's base salary was increased from $750,000 to $800,000.
Mr. Robinson was awarded a reviewbonus for fiscal 2002 of similar plans adopted by other companies,
the MSPP was amended$476,550, which he has
elected to use in July 2001full to increase the discount on shares of the
Company's Common Stock that may be acquiredpurchase RSUs under the MSPP, from 15% to 25%, such
changes to become effective commencingas noted above.
Mr. Robinson's fiscal 2002 bonus was awarded at the rate of 95% of his corporate
target and 50% of his diversity target opportunities, and it also reflects the
10% reduction recommended by the HRCC as discussed above, in respect of which he
received, in July 2002, options to purchase 5,850 shares of Common Stock. No
stock options were granted to Mr. Robinson during fiscal 2002. In determining
Mr. Robinson's compensation for fiscal
14
2002, annual bonus
awards. Thethe HRCC also increasedconsidered 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 interestscompensation of the chief executive officers of
the peer companies, as well as the Company's employeesfinancial performance for fiscal
2001 and stockholders.
15
2002 and Mr. Robinson's individual performance and long-term
contributions to the success of the Company.
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 basedequity-based awards available for grant under the
Company's equity compensation plans, and all of the equity-based awards actually
granted to executive officers, willare intended to so qualify. Amounts payable under
the Company's stockholder
approvedstockholder-approved Executive Performance Incentive Plan shouldare also
intended to 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 HRCC comprises five voting outside directors, none of whom is an
employee or former employee of the Company. In addition, none of these 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 (Chairman)L. Davies (Chairperson)
Ramon C. Cortines
John L. Davies
Linda B. Keene
Peter M. Mayer
John G. McDonald
15
STOCK PRICE PERFORMANCE GRAPH
The graph below provides an indicator of cumulative total stockholder
returns for the Common Stock for the period June 1, 1997 to May 31, 2002
compared with the NASDAQ Composite Index and a composite peer group of publicly
traded companies with which the Company competes in its principal operating
segments. In the Company's proxy materials regarding its Annual Meeting of
Stockholders held in 2001, the peer group chosen by the Company for this graph
included Harcourt General, Inc. and Houghton Mifflin Co., neither of which
continues as a publicly traded company. Accordingly, the Company has substituted
John Wiley and Sons, Inc. and Pearson plc as members of the peer group, which
together with The McGraw-Hill Companies and Reader's Digest Association Inc.
comprise the peer group reflected in the graph below. The graph assumes a $100
investment on June 1, 1997, together with the reinvestment of all dividends, if
any, except in the case of Pearson plc, which is included on the basis of a $100
investment as of September 1, 2000, following the initial public offering of its
American Depository Receipts in the United States.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
5/31/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02
Scholastic Corporation 100 134.45 163.03 178.78 268.57 319.93
Peer Group 100 140.23 190.14 184.09 215.34 211.1
NASDAQ STOCK MARKET (U.S.) 100 126.81 179.03 245.44 152.33 117.1
16
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 October 3, 2000,
theThe holders of the
Class A Stock unanimously approvedexecuted a written consent in August 2002 fixing the
number of directors constituting the full board of Directors at thirteen.twelve,
effective as of the Annual Meeting.
The Board of Directors has designated the thirteentwelve 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 tennine 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 may 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 CLASS A STOCK VOTE FOR
EACH OF THE TENNINE 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 each of 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 each of the nominees.
17
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 6465 1971
Officer of the Company
Rebeca M. Barrera President, National Latino Children's Institute, 5455 1995
Austin, TX
Helen V. Benham Corporate Vice President, Early Childhood Advisor of 51 1992
the Company
Ramon C. Cortines Executive Director of the Pew Network for Standards- 69 1995
Based Reform at Stanford University,Education Consultant, Stanford, CA 70 1995
Charles T. Harris III Managing Director, Goldman, Sachs & Co., New York, 4950 1996
NY
Andrew S. Hedden Partner, Coudert Brothers LLP, New York, NY 6061 1991
Mae C. Jemison President The Jemison Group, Inc.,and Founder, BioSentient Corporation, 45 1993
Houston, TX 44 1993
Peter Mayer President, The Overlook Press/Peter Mayer 6566 1999
Publishers, Inc., New York, NY
Augustus K. Oliver Managing Director, WaterView Advisors L.L.C.,LLC, New 51York, 52 1995
York,
NY
Richard M. Spaulding Executive Vice President of the Company 6465 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 5152 2000
Linda B. Keene Principal, Waterford Marketing Group, Minneapolis, 4950 1999
MN
John G. McDonald The IBJ Professor of Finance, Graduate School of 6465 1985
Business, 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 beenis the President of the National Latino
Children's Institute, since 1997.a non-profit organization founded in 1997 and located in
San Antonio, Texas. NLCI creates a voice for young Latinos and implements
programs and services that help
18
build healthy communities throughout the country. From 1990 to 1997,
sheMs. Barrera was the Executive Director of 18
the Corporate Child Development Fund, for Children,and
she also owned and managed childcare centers, developed curriculum and was a
non-profit organization dedicated tofaculty member at both the strengthening of childpublic school 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.university level.
RAMON C. CORTINES. Mr. Cortines has beenwas Executive Director of the Pew
Network for Standards-Based Reform at Stanford University since 1996.from 1996 until
December 31, 2001. 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 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 LLP since 1975 and has been associated with the firm since
1968.
MAE C. JEMISON. Dr. Jemison has beenis the president of BioSentient Corporation,
a medical technology company she founded in 2001 that develops and markets
ambulatory equipment to monitor the autonomic nervous system and to train people
to respond favorably in stressful situations. She is also the 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 circumstancesfocuses on the integration
of the users. JG also advocates for science and technology literacyinto everyday life and education. Ms.social responsibility.
Dr. Jemison founded and chairs The Earth We Share (TEWS), an international
science camp for students age 12-16 from around the world. Dr. Jemison is alsoan
A.D. White Professor-at-Large at Cornell University and was a professor of
environmental studiesEnvironmental 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 thefrom 1996-2002. She served as a
National Aeronautics and Space Administration (NASA) astronaut from 1987 to 1993
and was a member of the Space Shuttle EndeavorEndeavour Flight in September 1992.
19
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
19
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.,LLC, 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 Boards of Directors of
Varian, Inc., Plum Creek Timber Co., Capstone Turbine, Inc., CMGI, Inc.Corp., iStar
Financial, Inc. and eight investment companies managed by
20
Capital Research and Management Co. 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.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
Seven meetings of the Board of Directors were held during the 20012002 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, withexcept for Helen V. Benham, who attended 71% of the
exception of Mr. Mayer, who was not present
at two Human Resource and Compensation Committee and Stock Grant Committee
meetings and one Board meeting.relevant meetings.
The following are the current members and functions of the standing
committees of the Board of Directors.
EXECUTIVE COMMITTEE. Richard Robinson (Chairperson), Helen V. Benham,
Charles T. Harris III, Andrew S. Hedden, Peter M. 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. No meetings of the Executive Committee were held during the fiscal
year ended May 31, 2001.2002.
AUDIT COMMITTEE. Augustus K. Oliver (Chairperson), John L. Davies and
Linda B. Keene 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 havehas accounting or
related financial management expertise. ToDuring fiscal 2002, in order to fulfill
its responsibilities to the stockholders and the investment community, this
committee reviewsreviewed 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 recommendsrecommended to the Board of Directors the
accounting firm to act as independent auditors for the upcoming fiscal year ended
May 31, 2002. During fiscal 2002, the committee met with both the internal and meets with
the independent auditors as appropriate, to discuss the scope, staffing and procedures of their
respective audit plan,plans for the year. The committee also discussed the proposed
fee for the audit and the results of the audit (including their comments or
recommendations 21
arising therefrom). with the independent auditors. In addition,
this committee reviewsreviewed the Company's financial accounting policies and
decisions and reportsreported thereon to the Board prior to the issuance of the annual
financial statements. Furthermore, this committee reviewsreviewed any non-audit
services to be performed by the
21
independent auditors and considersconsidered the possible effects of such services on the
auditors' independence. The Audit Committee held three meetings during the
fiscal year ended May 31, 2001.2002.
RETIREMENT PLAN 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, comprised of
Company employees who are responsible for the day to dayday-to-day administration of the
Plans. Also,In addition, 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 publishing industry. The Retirement Plan Committee held one meetingtwo meetings
during the fiscal year ended May 31, 2001.2002.
HUMAN RESOURCES AND COMPENSATION COMMITTEE. John G. McDonald (Chairman)L. Davies
(Chairperson), Ramon C. Cortines, John L. Davies, Linda B. Keene, and Peter Mayer and John G.
McDonald 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 and other members of
senior management 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 Company's Executive Performance 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 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 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 16b-3 under the Securities Exchange Act
22
of 1934, as amended (the "Exchange Act").Act. The Human
Resources and Compensation Committee held fourtwo meetings during the fiscal year
ended May 31, 2001.2002.
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
22
election as directors and any changes it believes desirable in the size and
composition of the 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 twoone meeting during
the fiscal year ended May 31, 2001.2002. 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, 557 Broadway, New York, New York
10012.
STOCK GRANT COMMITTEE. John G. McDonald (Chairman), John L. Davies,
Linda B. Keene and Peter M. Mayer are the standing members of the Stock Grant
Committee and, as permitted under Delaware law, Ramon C. Cortines is an
alternate member 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 stock-based compensation plans in effect from time to time, currently the 1992 Stock Option
Plan and the 1995 Stock Option Plan.plans. 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 their membership on this committee
disqualify the Company for available exemptions pursuant to Section 162(m) of
the Code or Rule 16b-3 under the Exchange Act. This committee held fourthree
meetings during the fiscal year ended May 31, 2001.
PUBLISHING AND PROGRAM2002.
STRATEGIC PLANNING COMMITTEE. Mae C. Jemison (Chairperson), Rebeca M.
Barrera, Helen V. Benham, Ramon Cortines, Peter Mayer and Richard M. Spaulding
are members of the Publishing and ProgramStrategic Planning Committee. This committee reviews and
advises management of the Company on the strategic development of properties and
programs and reports its findings to the Board of Directors. This committee held
no meetings during the fiscal year ended May 31, 2001.2002.
23
DIRECTOR COMPENSATION
For the fiscal year ended May 31, 2001,2002, 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 was the chair.chair of a standing
Board Committee and an attendance fee of $1,500 for attendance at each Board or
Committee meeting, whether in person or telephonically. The Company reimburses
directors for travel, lodging and related expenses they may incur in connection
with their services as directors.
Under the terms ofThe Company maintains the Outside Directors' Stock Option Plan as amended
(the "1997
Directors' Plan"), eachpursuant to which annual grants of stock options are made to
non-employee director is automatically
granted, on January 7directors. During fiscal 2002, following the 2-for-1 Stock Split,
the 1997 Directors' Plan was amended to increase the annual grant of each year (or, if not a business day,stock
options from 3,000 to 6,000 and, commencing in fiscal 2003, to provide that 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 Stockgrant be made on the date of grant. On January 7, 2001,the annual meeting of stockholders, rather than in
January. As a result, each non-employee directorsdirector (other than Andrew S. Hedden,
who declined his award) were eachwas granted options to purchase 6,000 shares of Common
Stock on January 7, 2002, at an exercise price of $43.875, after adjustment for the 2-for-1fair market value
of the Common Stock Split.on the date of grant. The options vest one year from the
date of grant and expire on January 7, 2011.2012.
Under the terms of the Scholastic Corporation 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 thethat
extrapolates a 30-year treasuryTreasury 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. ThreeTwo
directors have chosen to have 100% of their director's compensation deferred.
For the fiscal year ended May 31, 2001,2002, the Company recorded $11,283$16,911 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 LLP,
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. Goldman Sachs & Co. did not provide any investment banking services to
the Company during fiscal 2002.
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 regardingdescription of the Split Dollar Life
Insurance Agreementarrangement in Footnote 43 to the Summary Compensation Table herein.
24
APPROVAL OF THE SCHOLASTIC CORPORATION
2001 STOCK INCENTIVE PLAN
Upon the recommendation of the Human Resources and Compensation
Committee, the Board of Directors has unanimously approved and is submitting to
the holders of the Class A Stock, for their consideration, the Scholastic
Corporation 2001 Stock Incentive Plan (the "2001 Plan"). The Board approved the
establishment of the 2001 Plan at a meeting of the 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 principal form of
long-term incentive compensation and have been granted as a means to motivate
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 of Directors believes that the ability to provide other types of
compensation awards in appropriate circumstances is consistent with and
supportive of the purpose underlying the 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 principal provisions of the 2001
Plan. This summary does not purport to be complete and is qualified in its
entirety by reference to the text of the 2001 Plan, set forth as Appendix A
hereto.
SUMMARY OF THE 2001 PLAN.
PURPOSE. The purpose of the 2001 Plan is to enhance the profitability
and value of the Company for 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 administered by the Stock Grant
Committee of (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
Code, a non-employee director as defined in Rule 16b-3 and an outside director
as defined under Section 162(m).
The Committee will have the full authority to administer and interpret
the 2001 Plan, including the authority: (i) to grant discretionary awards under
the 2001 Plan, (ii) to determine the persons to whom discretionary awards will
be granted, (iii) to determine the types of discretionary awards to be granted,
(iv) to determine the terms and conditions of each 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 Appendix 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 other awards that are valued in whole or in part by reference to, or are
payable in or otherwise based on, Common Stock, which awards may be granted
either alone or in addition to or in tandem with grants of stock options or
restricted stock. Subject to the provisions of the 2001 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 shares of Common Stock to be awarded
pursuant to, or to be used for reference purposes in respect of, 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.
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,
except that no such amendment, suspension or termination may increase the
aggregate number of shares of Common Stock reserved for awards or the maximum
individual share limits, change the classification of employees or consultants
eligible to receive 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 Code
unless such amendment receives stockholder approval to the extent required by
Section 162(m) or Section 422 of the Code or Rule 16 b-3 under the Exchange Act.
SHARE AND OTHER LIMITATIONS. A maximum of 4,000,000 shares of Common
Stock may be issued or used for reference purposes pursuant to the 2001 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 statutory
provisions, which may also vary in individual circumstances. The following
summary is designed to provide a general understanding of the material 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 excess of the fair market value of the Common Stock on
the date of exercise over the exercise price. Upon a subsequent sale of such
Common Stock by the recipient, 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 allowed a deduction equal to the
amount 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 grant of
the 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 such 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 2-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 caption "Director's Compensation."
CURRENT STOCK INFORMATION. On August 10, 2001, the closing price of the
Company's Common Stock on the NASDAQ National Market System was $38.37.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE CLASS A STOCK
VOTE FOR THE APPROVAL AND ADOPTION OF THE SCHOLASTIC CORPORATION 2001 STOCK
INCENTIVE PLAN. Assuming the presence of a quorum, the affirmative vote of a
majority of the votes cast by the holders of the Class A Stock present and
entitled to vote on this item at the Annual Meeting is required to approve the
Scholastic Corporation 2001 Stock Incentive Plan.
30
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORSPUBLIC ACCOUNTANTS
The Audit Committee has recommended to the Board of Directors the
selection ofappointed Ernst & Young LLP ("Ernst & Young") to be the independent
auditors of the Company for the fiscal year ending May 31, 2002.2003. A
representative of 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 & YoungLLP will be present at the Annual Meeting. TheyMeeting and
will havebe afforded the opportunity to make a statement if they
desire to do so andstatement. Such representative will
also 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, 2001, Ernst & Young's services
included auditing the Company's consolidated financial statements and reviewing
unaudited quarterly financial information and advising the Company on various
accounting, tax and regulatory matters.
The fees for services provided by Ernst & Young to the Company during the
fiscal year ended May 31, 20012002 were as follows:
Audit Fees.................................................. $1,227,100$1,240,000
Financial Information Systems Design and Implementation
Fees...................................................... $ --
Audit Related Fees.......................................... $ 806,7500
All Other Fees.............................................. $ 268,700876,000
----------
TOTAL FEES PAID............................................. $2,302,550$2,116,000
==========
During the fiscal year ended May 31, 2002, Audit related services generally includeFees included fees for
auditing the Company's consolidated financial statements and reviewing the
Company's Quarterly Reports on Form 10-Q. In fiscal 2002, All Other Fees
generally included (i) fees for audit-related services, such as benefit plan
audits, business acquisitions, accounting consultations and SEC registration
statements. All other fees generally includeRegistration
Statements, and (ii) fees for tax consulting and tax return preparation.
RECOMMENDATION THE BOARD OF DIRECTORS 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, 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. TheFor fiscal 2002, the Board has determined that each Committee member iswas
independent as defined under the National Association of Securities Dealers
listing standards.
It isDuring fiscal 2002, it was 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 iswas
included in thisas Appendix B to the Proxy Statement as
Appendix B.for the 2001 Annual Meeting. Under
the charter in existence during 2002, Company management hashad the primary
responsibility for the financial statements and the reporting process, including
the Company's systems of internal controls. The independent auditors arewere
responsible for expressing an opinion on the conformity of the audited financial
statements with generally accepted accounting principles.
In fulfilling its oversight responsibilities during the 2002 fiscal year,
the Audit Committee discussesdiscussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Audit
Committee meetsmet with the internal and independent auditors, with and without
management present, to discuss the results of their
25
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 of the Company for the
fiscal year ended May 31, 2001,2002, including a discussion of critical accounting
policies, 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 provided to the Company 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 and the independent
auditors, 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 fiscal year ended May 31, 20012002 in the Company's Annual Report
to be filed on Form 10-K for filing with the SEC.
The Audit Committee has also recommendedis reviewing its charter and the Board has approved, subject to
stockholder approval, the selectionresponsibilities in
light of the Company's independent auditors.Sarbanes-Oxley Act of 2002, which was enacted on July 30, 2002.
AUDIT COMMITTEE
Augustus K. Oliver, Chairperson
John L. Davies
Linda B. Keene
26
STOCKHOLDER PROPOSALS FOR 20022003 ANNUAL MEETING
Stockholders who intend to present proposals atfor inclusion in the 2002proxy
materials regarding the Company's annual meeting of stockholders to be held in
2003 (the "2003 Annual Meeting
under SEC Rule 14a-8Meeting") must insureensure that such proposals are received by
the Secretary of the Company not later than April 24, 2002. Such2003 and that such
proposals must meet the other requirements of thecontained in SEC to be eligible for inclusion in the Company's 2002
proxy materials.Rule 14a-8. In order for
a proposal submitted outside of Rule 14a-8 to be considered "timely" within the
meaning of SEC Rule 14a-4(c), for consideration at the 2003 Annual Meeting, but
not included in the Company's proxy materials, such proposal must be received no
later than July 10, 2002.2003.
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
33
APPENDIX A
-------------------------------
SCHOLASTIC CORPORATION 2001 STOCK INCENTIVE PLAN
-------------------------------
ARTICLE I
PURPOSE
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
A-1
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
A-2
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.
A-3
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
A-16
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.
A-17
(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 PLAN
Notwithstanding any other provision of this Plan, the Board or the
Committee may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions 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, to 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
A-18
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.
A-19
12.4 WITHHOLDING OF TAXES. The Company shall have the right to deduct from
any payment to be made to a Participant, 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.
A-20
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.
A-22
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.
A-23
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
(the "Company") shall be comprised of no fewer than three (3) directors. Each
member of the Audit Committee shall 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 will be financially literate, and
at least one member will have accounting or related financial management
expertise.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling its responsibilities to the stockholders of the 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 Board of Directors 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 behalf of
the Board of Directors:
- Review and recommend to the Board of Directors the independent auditors to
be selected to audit the financial statements of the Company and its
divisions and subsidiaries for each fiscal year.
B-1
- Review and consider management's appointment, termination or replacement
of the Director of Internal Audit and make recommendations thereon.
- Have a clear understanding with the independent auditors that they are
ultimately accountable to the Board of Directors and the Audit Committee,
as the representatives of the stockholders with the ultimate authority in
deciding to engage, evaluate and, if appropriate, terminate their
services.
- Meet with the independent auditors and financial management of the 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 same presented, with the participation
of the independent auditors, to the 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 financial statements.
- Provide sufficient opportunity for the internal auditor and the
independent auditors to meet with the members of the Audit Committee
without members of management present. (Among the items to be discussed in
these meetings are the independent auditors' evaluation of the Company'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.
- Obtain the full Board of Directors' approval of this Charter and review
and reassess this Charter as conditions dictate (at least once per fiscal
year).
B-327
SCHOLASTIC CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 20, 200124, 2002
(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 Tuesday,
September 24, 2002, 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 24, 2002
IN THE ABSENCE OF SPECIFIC DIRECTIONS NOTED BELOW, IT IS UNDERSTOOD THAT THE
UNDERSIGNED'S SHARES OF CLASS A STOCK WILL BE VOTED FOR PROPOSAL 1.
The undersigned hereby votes the above number of shares of Class A Stock of
Scholastic Corporation as follows:
1. Upon the election of: Richard Robinson, Rebeca M. Barrera, Charles T.
Harris III, Andrew S. Hedden, Mae C. Jemison, Peter M. Mayer, Augustus K.
Oliver, Richard M. Spaulding
FOR __________ AGAINST __________
2. In their discretion the proxies will vote upon such other matters as may
properly come before the meeting and as may properly be voted upon by the
holders of Class 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
-
--------------------------
Shareholder Name (Please Print)
No. of Shares ______
1
SCHOLASTIC CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 24, 2002
Please mark
your votes as
indicated in
this example /X/
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.
1. Proposal to elect 01 John L. Davies,
02 Linda B. Keene and 03 John G. McDonald
as directors:
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.
- -------------------------------------------------------------
FOR all nominees WITHHOLD
listed to the left AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the left
/ / / /
2. In their discretion, the proxies will vote upon such other matters as
may 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 INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO
VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED
YOUR PROXY CARD.
INTERNET
http://www.eproxy.com/schl
Use the Internet to vote your proxy.
Have your proxy card in hand when
you access the web site. You will be
prompted to enter your control
number, located in the box below, to
create and submit an electronic
ballot.
OR
TELEPHONE
1-800-435-6710
Use any touch-tone telephone to
vote your proxy. Have your proxy
card in hand when you call. You will
be prompted to enter your control
number, located in the box below,
and then follow the directions
given.
OR
MAIL
Mark, sign and date
your proxy card
and
return it in the
enclosed postage-paid
envelope.
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 24, 2002
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 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,Tuesday,
September 20, 200124, 2002 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 instructare instructing 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, 20012002 by completing the reverse side of this card and
returning it by September 10, 2001.2002.
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 20, 2001
IN THE ABSENCE OF SPECIFIC DIRECTIONS NOTED BELOW, IT IS UNDERSTOOD THAT THE
UNDERSIGNED'S SHARES OF CLASS A STOCK WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
The undersigned hereby votes the above number of shares of Class A Stock of
Scholastic Corporation as follows:
1. Upon the election of: Richard Robinson, Rebeca M. Barrera, Helen V.
Benham, Charles T. Harris III, Mae C. Jemison, Peter M. Mayer,
Augustus K. Oliver, Richard M. Spaulding, Andrew S. Hedden:
FOR AGAINST
---------- ----------
2. Upon the proposal to approve the Scholastic Corporation 2001 Stock
Incentive Plan:
FOR AGAINST
---------- ----------
3. Upon the proposal to ratify the appointment of Ernst & Young as
independent auditors for the fiscal year ending May 31, 2002:
FOR AGAINST
---------- ----------
4. In their discretion the proxies will vote upon such other matters as
may properly come before the meeting and as may properly be voted
upon by the holders of Class 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
-
------------------------------
Shareholder Name (Please Print)
No. of Shares
-------
1