<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1996
REGISTRATION NO. 333-17365
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SCHOLASTIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 555 BROADWAY 13-3385513
(STATE OR OTHER JURISDICTION OF NEW YORK, NEW YORK 10012 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (212) 343-6100 IDENTIFICATION NUMBER)
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHARLES B. DEULL, ESQ.
SENIOR VICE PRESIDENT--LEGAL AND BUSINESS AFFAIRS
SCHOLASTIC CORPORATION
555 BROADWAY
NEW YORK, NEW YORK 10012
(212) 343-6100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
JAMES C. COLIHAN, ESQ. ROBERT S. RISOLEO, ESQ.
COUDERT BROTHERS SULLIVAN & CROMWELL
1114 AVENUE OF THE AMERICAS 125 BROAD STREET
NEW YORK, NEW YORK 10036-7703 NEW YORK, NEW YORK 10004
(212) 626-4400 (212) 558-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /x/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /___________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION> PROPOSED MINIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE(6)
<S> <C> <C> <C> <C>
Debt Securities(3)..........
Preferred Stock ($1 par
value per share)(3)......... $175,000,000(4) 100% $175,000,000(4)(5) $53,031
Common Stock ($.01 par
value per share)(3).........
</TABLE>
(1) In United States dollars or the equivalent thereof in any other currency,
currency unit or units, or composite currency or currencies.
(2) Estimated for the sole purpose of computing the registration fee in
accordance with Rule 457(o).
(3) Also includes such indeterminate amounts of Debt Securities and Preferred
Stock and indeterminate number of shares of Common Stock as may be issued
upon conversion of or exchange for any other Debt Securities or Preferred
Stock that provide for conversion or exchange into other Securities.
(4) Such amount represents the principal amount of any Debt Securities issued at
their principal amount, the issue price rather than the principal amount of
any Debt Securities issued at an original issue discount, the liquidation
preference of any Preferred Stock and the amount computed pursuant to Rule
457(c) for any Common Stock.
(5) No separate consideration will be received for the Debt Securities,
Preferred Stock or Common Stock issuable upon conversion of or in exchange
for Debt Securities or Preferred Stock.
(6) $45,455 of the $53,031 was previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE OR UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 11, 1996
$175,000,000
SCHOLASTIC CORPORATION
DEBT SECURITIES, PREFERRED STOCK AND COMMON STOCK
------------------------
Scholastic Corporation (the 'Company') may from time to time offer,
together or separately, (1) its debt securities (the 'Debt Securities'), which
may be either senior debt securities (the 'Senior Debt Securities') or
subordinated debt securities (the 'Subordinated Debt Securities'), (2) shares of
its preferred stock, par value $1 per share, in one or more series (the
'Preferred Stock') and (3) shares of its common stock, par value $.01 per share
(the 'Common Stock'). The Debt Securities, the Preferred Stock and the Common
Stock are collectively referred to herein as the 'Securities'.
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuance and will be limited to $175,000,000 aggregate public
offering price (or its equivalent (based on the applicable exchange rate at the
time of sale) in one or more foreign currencies, currency units or composite
currencies as shall be designated by the Company). Certain specific terms of the
particular Securities in respect of which this Prospectus is being delivered are
set forth in the accompanying Prospectus Supplement (the 'Prospectus
Supplement'), including, where applicable, in the case of Debt Securities, the
specific title, aggregate principal amount, the denomination, whether such Debt
Securities are secured or unsecured obligations, maturity, premium, if any, the
interest rate (which may be fixed, floating or adjustable), the time and method
of calculating payment of interest, if any, the place or places where principal
of (and premium, if any) and interest, if any, on such Debt Securities will be
payable, the currency in which principal of (and premium, if any) and interest,
if any, on such Debt Securities will be payable, any terms of redemption at the
option of the Company or the holder, any sinking fund provisions, terms for any
conversion or exchange into other Securities, the initial public offering price
and other special terms, and, in the case of Preferred Stock, the specific
title, the aggregate amount, any dividend (including the method of calculating
payment of dividends), liquidation, redemption, voting and other rights, any
terms for any conversion or exchange into other Securities, the initial pubic
offering price and other special terms. If so specified in the applicable
Prospectus Supplement, Debt Securities of a series may be issued in whole or in
part in the form of one or more temporary or permanent global securities. The
Company's Common Stock is listed on the Nasdaq National Market System under the
symbol 'SCHL'. Any Common Stock sold pursuant to a Prospectus Supplement will be
listed on such exchange, subject to official notice of issuance.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities, when issued, will be subordinated in right of payment to all Senior
Debt (as defined herein) of the Company, including any outstanding Senior Debt
Securities. See 'Description of Debt Securities--Subordination of Subordinated
Debt Securities'.
The Prospectus Supplement may contain information concerning U.S. federal
income tax considerations, if applicable to the Securities offered.
The Securities may be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. See 'Plan of Distribution'. If agents of the Company or any dealers or
underwriters are involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the names of such agents, dealers or underwriters
and any applicable commissions or discounts, if any, are set forth in or may be
calculated from the Prospectus Supplement with respect to such Securities.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the 'Commission'). Such
reports, proxy statements and other information can be inspected and copied at
prescribed rates at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
Commission's regional offices in Chicago (Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661) and in New York (7 World Trade Center,
13th Floor, New York, New York 10048). Copies of such materials can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a website
that contains reports, proxy and information statements and other information
regarding registrants that file electronically. The address of the website is
http://www.sec.gov. The Common Stock is listed on the Nasdaq National Market
System ('Nasdaq'), and these records and other information can also be inspected
at the reading room of the library of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., 2nd Floor, Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (the 'Registration Statement') under the Securities Act of 1933, as amended
(the 'Securities Act'). This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996 (the 'Form 10-K');
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 31, 1996 (the 'Form 10-Q');
(c) the Company's Current Report on Form 8-K filed June 24, 1996 (the
'Form 8-K'); and
(d) all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act on or after the date of this
Prospectus and prior to the termination of the offering made hereby.
Any statement contained herein or in any document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for the purpose of this Prospectus to the extent that a subsequent statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of any such person, a copy of any or all of the information incorporated
herein by reference other than exhibits to such information (unless such
exhibits are specifically incorporated by reference into such information).
Requests should be made to the Investor Relations Department of the Company at
555 Broadway, New York, New York 10012 (telephone 212-343-6100).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS, IF ANY, MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
THE COMPANY
The Company (including, for the purposes of this Section only, the
Company's direct and indirect subsidiaries) is one of the leading publishers and
distributors of children's books, classroom and professional magazines and other
educational materials, with operations in the United States, Canada, the United
Kingdom, Australia, New Zealand, France and Mexico. The Company distributes most
of its products directly to children and teachers in elementary and secondary
schools. During its seventy-six years of serving schools, the Company has
developed strong name recognition associated with quality and dedication to
learning and has achieved a leading market position in the school-based
distribution of children's books and magazines.
The Company's domestic book publishing business consists primarily of the
publication and distribution of children's books in paperback editions through
school book clubs, school book fairs, trade distribution in retail stores and
classroom and library sales. Based on its market research, competitive
intelligence and information obtained through the conduct of its business, the
Company believes that it operates the largest school book club program and the
largest school book fair business in the United States. In fiscal 1996, the
Company sold in excess of 200 million children's books in the United States. The
Company's book publishing operations also include the publication of
supplementary texts for classroom use as well as professional books and other
materials sold to classroom teachers. Additionally, the Company has entered the
market for core-curriculum materials and has been investing in this area as a
source of future growth in sales and profits.
The Company's domestic magazine publishing business consists primarily of
the publication of classroom magazines distributed to children in school,
professional magazines directed to teachers and other education professionals
and consumer magazines. In fiscal 1996, the United States circulation of the
Company's classroom magazines was 7.1 million. The Company's other domestic
operations include the distribution of educational computer software, the
production and distribution of child and family-oriented video and television
programming and the merchandising and licensing of book properties.
Most of the Company's domestic revenues are generated by targeted direct
mail programs to schools and by telephone sales representatives. Additionally,
the Company has a school sales force of full-time and part-time representatives
calling on schools to sell its supplementary texts, educational software and
library book programs as well as its newly developed core-curriculum materials.
For trade distribution, the Company has a retail sales force calling on
bookstores and other retail outlets that include the sale of children's books.
The Company's international business consists of six operating
subsidiaries, four of which publish and distribute children's books, magazines,
supplementary text products, and educational software and two of which serve
primarily as distributors of children's books published by the Company as well
as outside publishers. For the fiscal year ended May 31, 1996, approximately 80%
of international revenues were derived from the sale of children's books.
Scholastic Corporation was incorporated under the laws of the State of
Delaware in 1986. The Company (including its predecessors) was originally
established as a publishing company in 1920 by Maurice R. Robinson and was a
public company (with its common stock traded on Nasdaq) from 1969 until 1987.
The Company became a public company again in 1992. The Company's principal
executive offices are located at 555 Broadway, New York, New York 10012, and its
telephone number is (212) 343-6100.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company and its consolidated subsidiaries for the periods indicated. The
ratio of earnings to fixed charges represents the number of times that fixed
charges were covered by earnings. In computing the ratio, earnings represent
pretax income or (loss) (excluding cumulative effect of accounting changes) plus
fixed charges (excluding capitalized interest). Fixed charges consist of
interest expense (including capitalized interest), a portion of rental expense
which is considered representative of the interest factor, and amortization of
debt discount and expense. This table will be updated in any Prospectus
Supplements to the extent required.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED FISCAL YEAR ENDED MAY 31,
AUGUST 31, --------------------------------------------
1996 1996 1995 1994 1993 1992
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges................ (a) 3.54(b) 6.26 7.74 8.05 2.39(c)
</TABLE>
- ------------------
(a) Earnings did not cover fixed charges by $22.6 million for the three months
ended August 31, 1996. The Company's first fiscal quarter historically
produces an operating loss due to higher expenses without accompanying
revenues during the summer months.
(b) Includes a non-recurring charge of $24.3 million pretax relating to the
impairment of certain assets. Excluding this charge, the ratio of earnings
to fixed charges would have been 4.86.
(c) Includes a provision for non-recurring charges of $10.3 million pretax
related to the relocation of the New York staff and the restructuring of the
Company's financial commitment for theatrical motion picture productions.
Excluding these charges, the ratio of earnings to fixed charges would have
been 3.05.
USE OF PROCEEDS
Except as may otherwise be set forth in the applicable Prospectus
Supplement, the net proceeds from the sale of the Securities will be added to
the Company's general funds and used for general corporate purposes, which may
include the repayment of indebtedness, capital expenditures and possible
acquisitions.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture (the 'Senior
Indenture'), between the Company, as issuer, and Citibank, N.A., as Trustee (the
'Trustee'). The Subordinated Debt Securities are to be issued under a separate
Indenture (the 'Subordinated Indenture'), also between the Company, as issuer,
and Citibank, N.A., as Trustee. The Senior Indenture and Subordinated Indenture
are sometimes referred to collectively as the 'Indentures'. A copy of the form
of each Indenture is filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The Debt Securities may be issued from time to time
in one or more series. The particular terms of each series, or of Debt
Securities forming a part of a series, which are offered by a Prospectus
Supplement will be described in such Prospectus Supplement.
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indentures, including the definitions
therein of certain terms, and, with respect to any particular Debt Securities,
to the description of the terms thereof included in the Prospectus Supplement
relating thereto. Wherever particular Sections or defined terms of the
Indentures are referred to herein or in a Prospectus Supplement, such Sections
or defined terms are incorporated by reference herein or therein, as the case
may be.
GENERAL
The Indentures will provide that Debt Securities in separate series may be
issued thereunder from time to time without limitation as to aggregate principal
amount. The Company may specify a maximum aggregate principal amount for the
Debt Securities of any series. (Section 301) The Debt Securities are to have
such terms and provisions which are not inconsistent with the Indentures,
including as to maturity, principal and interest, as the Company may determine.
Unless otherwise specified in the applicable Prospectus Supplement, the Senior
4
<PAGE>
Debt Securities when issued will be unsecured and unsubordinated obligations of
the Company and will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company. The Subordinated Debt Securities
when issued will be subordinated in right of payment to the prior payment in
full of all Senior Debt of the Company, including any outstanding Senior Debt
Securities, as described under 'Subordination of Subordinated Debt Securities'
and in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will set forth whether the Debt
Securities offered shall be Senior Debt Securities or Subordinated Debt
Securities, the price or prices at which the Debt Securities to be offered will
be issued and will describe the following terms of such Debt Securities: (1) the
title of such Debt Securities; (2) any limit on the aggregate principal amount
of such Debt Securities or the series of which they are a part; (3) the Person
to whom any interest on a Debt Security of the series shall be payable, if other
than the Person in whose name that Debt Security (or one or more predecessor
Debt Securities) is registered at the close of business on the Regular Record
Date for such interest; (4) the date or dates on which the principal of any of
such Debt Securities will be payable; (5) the rate or rates at which any of such
Debt Securities will bear interest, if any, the date or dates from which any
such interest will accrue, the Interest Payment Dates on which any such interest
will be payable and the Regular Record Date for any such interest payable on any
Interest Payment Date; (6) the place or places where the principal of and any
premium and interest on any of such Debt Securities will be payable; (7) the
period or periods within which, the price or prices at which and the terms and
conditions on which any of such Debt Securities may be redeemed, in whole or in
part, at the option of the Company; (8) the obligation, if any, of the Company
to redeem or purchase any of such Debt Securities pursuant to any sinking fund
or analogous provision or at the option of the Holder thereof, and the period or
periods within which, the price or prices at which and the terms and conditions
on which any of such Debt Securities will be redeemed or purchased, in whole or
in part, pursuant to any such obligation; (9) the denominations in which any of
such Debt Securities will be issuable, if other than denominations of $1,000 and
any integral multiple thereof; (10) if the amount of principal of or any premium
or interest on any of such Debt Securities may be determined with reference to
an index or pursuant to a formula, the manner in which such amounts will be
determined; (11) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any premium
or interest on any of such Debt Securities will be payable (and the manner in
which the equivalent of the principal amount thereof in the currency of the
United States of America is to be determined for any purpose, including for the
purpose of determining the principal amount deemed to be Outstanding at any
time); (12) if the principal of or any premium or interest on any of such Debt
Securities is to be payable, at the election of the Company or the Holder
thereof, in one or more currencies or currency units other than those in which
such Debt Securities are stated to be payable, the currency, currencies or
currency units in which payment of any such amount as to which such election is
made will be payable, the periods within which and the terms and conditions upon
which such election is to be made and the amount so payable (or the manner in
which such amount is to be determined); (13) if other than the entire principal
amount thereof, the portion of the principal amount of any of such Debt
Securities which will be payable upon declaration of acceleration of the
Maturity thereof; (14) if the principal amount payable at the Stated Maturity of
any of such Debt Securities will not be determinable as of any one or more dates
prior to the Stated Maturity, the amount which will be deemed to be such
principal amount as of any such date for any purpose, including the principal
amount thereof which will be due and payable upon any Maturity other than the
Stated Maturity or which will be deemed to be Outstanding as of any such date
(or, in any such case, the manner in which such deemed principal amount is to be
determined); (15) if applicable, that such Debt Securities, in whole or any
specified part, are defeasible pursuant to the provisions of the Indentures
described under 'Defeasance and Covenant Defeasance--Defeasance and Discharge'
or 'Defeasance and Covenant Defeasance--Defeasance of Certain Covenants,' or
under both such captions; (16) if applicable, the terms of any right to convert
Debt Securities into shares of Common Stock of the Company or other securities
or property; (17) whether any of such Debt Securities will be issuable in whole
or in part in the form of one or more Global Securities and, if so, the
respective Depositaries for such Global Securities, the form of any legend or
legends to be borne by any such Global Security in addition to or in lieu of the
legends referred to under 'Form, Exchange and Transfer' or 'Global Securities'
and, if different from those described under such captions, any circumstances
under which any such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security in whole or in
part may be registered, in the names of Persons other than the Depositary for
such Global Security or its nominee; (18) any addition to or change in the
Events of Default applicable to any of such Debt Securities and any change in
the
5
<PAGE>
right of the Trustee or the Holders to declare the principal amount of any of
such Debt Securities due and payable; (19) any addition to or change in the
covenants in the Indentures described under 'Restrictive Covenants' applicable
to any of such Securities; and (20) any other terms of such Debt Securities not
inconsistent with the provisions of the relevant Indenture. (Section 301)
Debt Securities, including Original Issue Discount Securities, may be sold
at a substantial discount below their principal amount. Certain special United
States federal income tax considerations (if any) applicable to Debt Securities
sold at an original issue discount will be described in the applicable
Prospectus Supplement under 'United States Taxation'. In addition, certain
special United States federal income tax or other considerations (if any)
applicable to any Debt Securities which are denominated in a currency or
currency unit other than United States dollars will be described in the
applicable Prospectus Supplement.
CONVERSION RIGHTS
The terms on which Debt Securities of any series are convertible into
Common Stock or other securities or property will be set forth in the Prospectus
Supplement relating thereto. Such terms shall include provisions as to whether
conversion is mandatory or at the option of the holder and may include
provisions pursuant to which the number of shares of Common Stock or other
securities or property to be received by the Holders of Debt Securities upon
conversion would be calculated according to the market price of Common Stock or
other securities or property as of a time stated in the applicable Prospectus
Supplement. (Article Fourteen)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt, including the Senior Debt Securities. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Debt will first be
entitled to receive payment in full of all amounts due thereon or to be due
thereon, if any, on such Senior Debt before the Holders of the Subordinated Debt
Securities will be entitled to receive or retain any payment in respect of the
principal of (and premium, if any) or interest, if any, on the Subordinated Debt
Securities. (Section 1502)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are not holders of Senior Debt or Holders of
Subordinated Debt Securities may recover less, ratably, than holders of Senior
Debt and may recover more, ratably, than the Holders of the Subordinated Debt
Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Subordinated Debt Securities. (Section 1503)
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Debt, or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default. (Section 1504) For purposes of the
subordination provisions, the payment, issuance and delivery of cash, property
or securities (other than stock and certain subordinated securities of the
Company) upon conversion of a Subordinated Debt Security will be deemed to
constitute payment on account of the principal of such Subordinated Debt
Security.
'Senior Debt' means the principal of (and premium, if any) and interest, if
any, (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company to the extent that such
claim for post-petition interest is allowed in such proceeding) on Debt (as
defined below), including all fees and other amounts payable in connection with
such indebtedness, any obligations of the Company in respect of overdrafts,
foreign exchange contracts and currency exchange agreements, letters of credit,
bankers' acceptances,
6
<PAGE>
interest rate protection agreements, and any loans or advances from banks,
whether or not evidenced by notes or similar instruments and all amendments,
renewals, extensions, modifications and refundings of any such indebtedness or
obligation, whether incurred on or prior to the date of the Subordinated
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Subordinated
Debt Securities or to other Debt which is pari passu with, or subordinated to,
the Subordinated Debt Securities; provided, however, that Senior Debt shall not
be deemed to include the Subordinated Debt Securities.
'Debt' means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) the maximum fixed redemption or repurchase
price of redeemable stock of such Person at the time of determination, (vi)
every obligation to pay rent or other payment amounts of such Person with
respect to any Sale and Lease-Back Transaction (as defined under 'Restrictive
Covenants--Limitations on Sale and Lease-Back Transactions') to which Person is
a party and (vii) every obligation of the type referred to in the foregoing
clauses (i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities, when issued, will constitute Senior Debt.
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
FORM, EXCHANGE AND TRANSFER
The Debt Securities of each series will be issuable only in fully
registered form, without coupons, and, unless otherwise specified in the
applicable Prospectus Supplement, only in denominations of $1,000 and integral
multiples thereof. (Section 302)
At the option of the Holder, subject to the terms of the Indentures and the
limitations applicable to Global Securities, Debt Securities of each series will
be exchangeable for other Debt Securities of the same series of any authorized
denomination and of a like tenor and aggregate principal amount. (Section 305)
Subject to the terms of the Indentures and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or with the form of
transfer endorsed thereon duly executed) at the office of the Security Registrar
or at the office of any transfer agent designated by the Company for such
purpose. No service charge will be made for any registration of transfer or
exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Company
has appointed the Trustee as Security Registrar. Any transfer agent (in addition
to the Security Registrar) initially designated by the Company for any Debt
Securities will be named in the applicable Prospectus Supplement. (Section 305)
The Company may at any time designate additional transfer agents or rescind the
designation of any transfer agent or approve a change in the office through
which any transfer agent acts, except that the Company will be required to
maintain a transfer agent in each Place of Payment for the Debt Securities of
each series. (Section 1002)
If the Debt Securities of any series (or of any series and specified terms)
are to be redeemed in part, the Company will not be required to (i) issue,
register the transfer of or exchange any Debt Security of that series (or of
that series and specified terms, as the case may be) during a period beginning
at the opening of business
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15 days before the day of mailing of a notice of redemption of any such Debt
Security that may be selected for redemption and ending at the close of business
on the day of such mailing or (ii) register the transfer of or exchange any Debt
Security so selected for redemption, in whole or in part, except the unredeemed
portion of any such Debt Security being redeemed in part. (Section 305)
GLOBAL SECURITIES
Some or all of the Debt Securities of any series may be represented, in
whole or in part, by one or more global securities which will have an aggregate
principal amount equal to that of the Debt Securities represented thereby (a
'Global Security'). Each Global Security will be registered in the name of a
depositary (the 'Depositary') or a nominee thereof identified in the applicable
Prospectus Supplement, will be deposited with such Depositary or nominee or a
custodian therefor and will bear a legend regarding the restrictions on
exchanges and registration of transfer thereof referred to below and any such
other matters as may be provided for pursuant to the Indentures.
Notwithstanding any provision of the Indentures or any Debt Security
described herein, no Global Security may be exchanged in whole or in part for
Debt Securities registered, and no transfer of a Global Security in whole or in
part may be registered, in the name of any Person other than the Depositary for
such Global Security or any nominee of such Depositary unless (i) the Depositary
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or has ceased to be qualified to act as such
as required by the Indentures, (ii) there shall have occurred and be continuing
an Event of Default with respect to the Debt Securities represented by such
Global Security or (iii) there shall exist such circumstances, if any, in
addition to or in lieu of those described above as may be described in the
applicable Prospectus Supplement. All securities issued in exchange for a Global
Security or any portion thereof will be registered in such names as the
Depositary may direct. (Sections 204 and 305)
As long as the Depositary, or its nominee, is the registered Holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Security and the Debt
Securities represented thereby for all purposes under the Debt Securities and
the Indentures. Except in the limited circumstances referred to above, owners of
beneficial interests in a Global Security will not be entitled to have such
Global Security or any Debt Securities represented thereby registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange therefor and will not be considered to
be the owners or Holders of such Global Security or any Debt Securities
represented thereby for any purpose under the Debt Securities or the Indentures.
All payments of principal of and any premium and interest on a Global Security
will be made to the Depositary or its nominee, as the case may be, as the Holder
thereof. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to transfer beneficial interests in a Global
Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
('participants') and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Debt Securities represented by the Global
Security to the accounts of its participants. Ownership of beneficial interests
in a Global Security will be shown only on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to participants' interests) or any such participant (with respect
to interests of persons held by such participants on their behalf). Payments,
transfers, exchanges and others matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary from time to time. None of the Company, the Trustee or any agent of
the Company or the Trustee will have any responsibility or liability for any
aspect of the Depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a Global Security, or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
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PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to the
Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to time, except that at the
option of the Company payment of any interest may be made by check mailed to the
address of the Person entitled thereto as such address appears in the Security
Register. Unless otherwise indicated in the applicable Prospectus Supplement,
the corporate trust office of the Trustee in The City of New York will be
designated as the Company's sole Paying Agent for payments with respect to Debt
Securities of each series. Any other Paying Agents initially designated by the
Company for the Debt Securities of a particular series will be named in the
applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Debt Securities of a particular series. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Company, and the Holder of such
Debt Security thereafter may look only to the Company for payment thereof.
(Section 1003)
RESTRICTIVE COVENANTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
following provisions will apply to the Senior Debt Securities.
Limitations on Liens
The Senior Indenture will provide that the Company will not issue, incur,
create, assume or guarantee, and will not permit any Restricted Subsidiary (as
defined below) to issue, incur, create, assume or guarantee, any debt for
borrowed money secured by a mortgage, security interest, pledge, lien, charge or
other encumbrance ('mortgages') upon any Principal Property (as defined below)
of the Company or any Restricted Subsidiary or upon any shares of stock or
indebtedness of any Restricted Subsidiary (whether such Principal Property,
shares or indebtedness are now existing or owned or hereafter created or
acquired) without in any such case effectively providing concurrently with the
issuance, incurrence, creation, assumption or guarantee of any such secured
debt, or the grant of a mortgage with respect to any such indebtedness, that the
Senior Debt Securities (together with, if the Company shall so determine, any
other indebtedness of or guarantee by the Company or such Restricted Subsidiary
ranking equally with the Senior Debt Securities) shall be secured equally and
ratably with (or, at the option of the Company, prior to) such secured debt. The
foregoing restriction, however, will not apply to: (a) mortgages on property
existing at the time of acquisition thereof by the Company or any Subsidiary,
provided that such mortgages were in existence prior to the contemplation of
such acquisition; (b) mortgages on property, shares of stock or indebtedness or
other assets of any corporation existing at the time such corporation becomes a
Restricted Subsidiary, provided that such mortgages are not incurred in
anticipation of such corporation becoming a Restricted Subsidiary; (c) mortgages
on property, shares of stock or indebtedness existing at the time of acquisition
thereof by the Company or a Restricted Subsidiary or mortgages thereon to secure
the payment of all or any part of the purchase price thereof, or mortgages on
property, shares of stock or indebtedness to secure any indebtedness for
borrowed money incurred prior to, at the time of, or within 270 days after, the
latest of the acquisition thereof, or, in the case of property, the completion
of construction, the completion of improvements, or the commencement of
substantial commercial operation of such property for the purpose of financing
all or any part of the purchase price thereof, such construction, or the making
of such improvements; (d) mortgages to secure indebtedness owing to the Company
or to a Restricted Subsidiary; (e) mortgages existing at the date of the Senior
Indenture; (f) mortgages on property of a corporation existing at the time such
corporation is merged into
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or consolidated with the Company or a Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of a corporation as an
entirety or substantially as an entirety to the Company or a Restricted
Subsidiary, provided that such mortgage was not incurred in anticipation of such
merger or consolidation or sale, lease or other disposition; (g) mortgages in
favor of the United States or any State, territory or possession thereof (or the
District of Columbia), or any department, agency, instrumentality or political
subdivision of the United States or any State, territory or possession thereof
(or the District of Columbia), to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of constructing or improving the property subject to such mortgages;
(h) mortgages created in connection with the acquisition of assets or a project
financed with, and created to secure, a Nonrecourse Obligation (as defined
below); and (i) extensions, renewals, refinancings or replacements of any
mortgage referred to in the foregoing clauses (a), (b), (c), (d), (e), (f), (g),
and (h) provided, however, that any mortgages permitted by any of the foregoing
clauses (a), (b), (c), (d), (e), (f), (g), and (h) shall not extend to or cover
any property of the Company or such Restricted Subsidiary, as the case may be,
other than the property, if any, specified in such clauses and improvements
thereto, and provided further that any refinancing or replacement of any
mortgages permitted by the foregoing clauses (g) and (h) shall be of the type
referred to in such clauses (g) or (h), as the case may be.
Notwithstanding the restrictions described in the preceding paragraph, the
Company or any Restricted Subsidiary will be permitted to issue, incur, create,
assume or guarantee debt secured by a mortgage which would otherwise be subject
to such restrictions, without equally and ratably securing the Senior Debt
Securities, provided that after giving effect thereto, the aggregate amount of
all debt so secured by mortgages (not including mortgages permitted under
clauses (a) through (i) above) does not exceed 15% of the Consolidated Net
Tangible Assets (as defined below) of the Company as most recently determined on
or prior to such date.
Limitations on Sale and Lease-Back Transactions
The Senior Indenture will provide that the Company will not, nor will it
permit any Restricted Subsidiary to, enter into any Sale and Lease-Back
Transaction (as defined below) with respect to any Principal Property, other
than any such transaction involving a lease for a term of not more than three
years or any such transaction between the Company and a Restricted Subsidiary or
between Restricted Subsidiaries, unless (a) the Company or such Restricted
Subsidiary would be entitled to incur indebtedness secured by a mortgage on the
Principal Property involved in such transaction at least equal in amount to the
Attributable Debt (as defined below) with respect to such Sale and Lease-Back
Transaction, without equally and ratably securing the Senior Debt Securities,
pursuant to the limitation on liens in the Senior Indenture; or (b) the Company
shall apply an amount equal to the greater of the net proceeds of such sale or
the Attributable Debt with respect to such Sale and Lease-Back Transaction
within 180 days of such sale to either (or a combination of) the retirement
(other than any mandatory retirement, mandatory prepayment or sinking fund
payment or by payment at maturity) of debt for borrowed money of the Company or
a Restricted Subsidiary that matures more than 12 months after the creation of
such indebtedness or the purchase, construction or development of other
comparable property.
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Certain Definitions Applicable to Covenants
The term 'Attributable Debt' when used in connection with a Sale and
Lease-Back Transaction involving a Principal Property shall mean, at the time of
determination, the lesser of: (a) the fair value of such property (as determined
in good faith by the Board of Directors of the Company); or (b) the present
value of the total net amount of rent required to be paid under such lease
during the remaining term thereof (including any renewal term or period for
which such lease has been extended), discounted at the rate of interest set
forth or implicit in the terms of such lease or, if not practicable to determine
such rate, the weighted average interest rate per annum (in the case of Original
Issue Discount Securities, the imputed interest rate) borne by the Senior Debt
Securities of each series outstanding pursuant to the Indenture compounded
semi-annually. For purposes of the foregoing definition, rent shall not include
amounts required to be paid by the lessee, whether or not designated as rent or
additional rent, on account of or contingent upon maintenance and repairs,
insurance, taxes, assessments, water rates and similar charges. In the case of
any lease which is terminable by the lessee upon the payment of a penalty, such
net amount shall be the lesser of the net amount determined assuming termination
upon the first date such lease may be terminated (in which case the net amount
shall also include the amount of the penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated) and the net amount determined assuming no such
termination.
The term 'Consolidated Net Tangible Assets' shall mean, as of any
particular time, total assets (excluding applicable reserves and other properly
deductible items) less: (a) total current liabilities, except for (1) notes and
loans payable, (2) current maturities of long-term debt and (3) current
maturities of obligations under capital leases; and (b) goodwill, patents and
trademarks, to the extent included in total assets; all as set forth on the most
recent consolidated balance sheet of the Company and its Restricted Subsidiaries
and computed in accordance with generally accepted accounting principles.
The term 'Nonrecourse Obligation' means indebtedness or other obligations
substantially related to (i) the acquisition of assets not previously owned by
the Company or any Restricted Subsidiary or (ii) the financing of a project
involving the development or expansion of properties of the Company or any
Restricted Subsidiary, as to which the obligee with respect to such indebtedness
or obligation has no recourse to the Company or any Restricted Subsidiary or any
assets of the Company or any Restricted Subsidiary other than the assets which
were acquired with the proceeds of such transaction or the project financed with
the proceeds of such transaction (and the proceeds thereof).
The term 'Principal Property' shall mean the land, land improvements,
buildings and fixtures (to the extent they constitute real property interests,
including any leasehold interest therein) constituting the principal corporate
office, any manufacturing facility or any distribution center (whether now owned
or hereafter acquired) which: (a) is owned by the Company or any Subsidiary; (b)
is located within any of the present 50 states of the United States (or the
District of Columbia); (c) has not been determined in good faith by the Board of
Directors of the Company not to be materially important to the total business
conducted by the Company and its Subsidiaries taken as a whole; and (d) has a
market value on the date as of which the determination is being made in excess
of 2.0% of Consolidated Net Tangible Assets of the Company as most recently
determined on or prior to such date.
The term 'Restricted Subsidiary' shall mean any Subsidiary that owns any
Principal Property.
The term 'Sale and Lease-Back Transaction' shall mean any arrangement with
any person providing for the leasing by the Company or any Restricted Subsidiary
of any Principal Property which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such person.
The term 'Subsidiary' shall mean any corporation of which at least a
majority of the outstanding voting stock having the power to elect a majority of
the board of directors of such corporation is at the time owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
'voting stock' means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures will provide that the Company may not consolidate with or
merge into, or convey, transfer or lease its properties and assets substantially
as an entirety to, any Person (a 'successor Person'), and may not permit any
Person to merge into, or convey, transfer or lease its properties and assets
substantially as an entirety to, the Company, unless (i) the successor Person
(if any) is a corporation, partnership, trust or other entity organized and
validly existing under the laws of any domestic jurisdiction and assumes the
Company's obligations on the Debt Securities and under the Indentures, (ii)
immediately after giving effect to the transaction, and treating any
indebtedness which becomes an obligation of the Company or any Subsidiary as a
result of the transaction as having been incurred by it at the time of the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, (iii) if, as a result of the transaction, property of the Company
would become subject to a Lien that would not be permitted under the limitation
on liens described above under 'Restrictive Covenants--Limitations on Liens',
the Company takes such steps as shall be necessary to secure the Debt
Securities, if any, equally and ratably with (or prior to) the indebtedness
secured by such Lien and (iv) certain other conditions are met. (Section 801)
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indentures with respect to Debt Securities of any series: (a) failure to pay
principal of or any premium on any Debt Security of that series when due,
whether or not such payment is prohibited by the subordination provisions of the
Subordinated Indenture; (b) failure to pay any interest on any Debt Securities
of that series when due, continued for 30 days, whether or not such payment is
prohibited by the subordination provisions of the Subordinated Indenture; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series, whether or not such deposit is prohibited by the
subordination provisions of the Subordinated Indenture; (d) failure to perform
any other covenant of the Company in the Indentures (other than a covenant
included in the Indentures solely for the benefit of a series other than that
series), continued for 60 days after written notice has been given by the
Trustee, or the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series, as provided in the Indentures; (e)
certain events in bankruptcy, insolvency or reorganization; and (f) any other
Event of Default specified in the applicable Prospectus Supplement. (Section
501)
The Indentures will provide that if an Event of Default (other than an
Event of Default described in clause (e) above) with respect to the Debt
Securities of any series at the time Outstanding shall occur and be continuing,
either the Trustee or the Holders of at least 25% in aggregate principal amount
of the Outstanding Securities of that series by notice as provided in the
Indentures may declare the principal amount of the Debt Securities of that
series (or, in the case of any Debt Security that is an Original Issue Discount
Security or the principal amount of which is not then determinable, such portion
of the principal amount of such Debt Security, or such other amount in lieu of
such principal amount, as may be specified in the terms of such Debt Security)
to be due and payable immediately. If an Event of Default described in clause
(e) above with respect to the Debt Securities of any series at the time
Outstanding shall occur, the principal amount of all the Debt Securities of that
series (or, in the case of any such Original Issue Discount Security or other
Debt Security, such specified amount) will automatically, and without any action
by the Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of the Outstanding Securities of
that series may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal (or other specified amount), have been cured or waived as provided in
the Indentures. (Section 502) For information as to waiver of defaults, see
'Modification and Waiver'.
Subject to the provisions of the Indentures relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indentures at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Section 603)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Debt Securities of that
series. (Section 512)
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No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indentures, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of that series, (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Securities of
that series have made a written request, and such Holder or Holders have offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee and
(iii) the Trustee has failed to institute such proceeding, and has not received
from the Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series a direction inconsistent with such request, within 60
days after such notice, request and offer. (Section 507) However, such
limitations do not apply to a suit instituted by a Holder of a Debt Security for
the enforcement of payment of the principal of or any premium or interest on
such Debt Security on or after the applicable due date specified in such Debt
Security. (Section 508)
The Indentures will include a covenant requiring the Company to furnish to
the Trustee annually a statement by certain of its officers as to whether or not
the Company, to their knowledge, is in default in the performance or observance
of any of the terms, provisions and conditions of the Indentures and, if so,
specifying all such known defaults. (Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debt Security, (b) reduce the
principal amount of, or any premium or interest on, any Debt Security, (c)
reduce the amount of principal of an Original Issue Discount Security or any
other Debt Security payable upon acceleration of the Maturity thereof, (d)
change the place or currency of payment of principal of, or any premium or
interest on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) in the
case of Subordinated Debt Securities, modify the subordination provisions in a
manner adverse to the Holders of the Subordinated Debt Securities, (g) reduce
the percentage in principal amount of Outstanding Securities of any series, the
consent of whose Holders is required for modification or amendment of the
Indentures, (h) reduce the percentage in principal amount of Outstanding
Securities of any series necessary for waiver of compliance with certain
provisions of the Indentures or for waiver of certain defaults or (i) modify
such provisions with respect to modification and waiver. (Section 902)
The Indentures will provide that the Holders of a majority in aggregate
principal amount of the Outstanding Securities of any series may waive, on
behalf of the Holders of all Debt Securities of such series, compliance by the
Company with certain restrictive provisions of the Indentures. (Sections 1010
and 1008 of the Senior Indenture and the Subordinated Indenture, respectively)
The Holders of a majority in principal amount of the Outstanding Securities of
any series may waive any past default under the Indentures, except a default in
the payment of principal, premium or interest and certain covenants and
provisions of the Indentures which cannot be amended without the consent of the
Holder of each Outstanding Security of such series affected. (Section 513)
The Indentures will provide that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given or taken any
direction, notice, consent, waiver or other action under the Indentures as of
any date, (i) the principal amount of an Original Issue Discount Security that
will be deemed to be Outstanding will be the amount of the principal thereof
that would be due and payable as of such date upon acceleration of the Maturity
thereof to such date, (ii) if, as of such date, the principal amount payable at
the Stated Maturity of a Debt Security is not determinable (for example, because
it is based on an index), the principal amount of such Debt Security deemed to
be Outstanding as of such date will be an amount determined in the manner
prescribed for such Debt Security and (iii) the principal amount of a Debt
Security denominated in one or more foreign currencies or currency units that
will be deemed to be Outstanding will be the U.S. dollar equivalent, determined
as of such date in the manner prescribed for such Debt Security, of the
principal amount of such Debt Security (or, in the case of a Debt Security
described in clause (i) or (ii) above, of the amount described in such clause).
Certain Debt Securities, including those for whose payment or redemption money
has
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been deposited or set aside in trust for the Holders and those that have been
fully defeased pursuant to Section 1302, will not be deemed to be Outstanding.
(Section 101)
Except in certain limited circumstances, the Company will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give or take any direction,
notice, consent, waiver or other action under the Indentures, in the manner and
subject to the limitations provided in the Indentures. In certain limited
circumstances, the Trustee will be entitled to set a record date for action by
Holders. If a record date is set for any action to be taken by Holders of a
particular series, such action may be taken only by persons who are Holders of
Outstanding Securities of that series on the record date. To be effective, such
action must be taken by Holders of the requisite principal amount of such Debt
Securities within a specified period following the record date. For any
particular record date, this period will be 180 days or such other shorter
period as may be specified by the Company (or the Trustee, if it set the record
date), and may be shortened or lengthened (but not beyond 180 days) from time to
time. (Section 104)
DEFEASANCE AND COVENANT DEFEASANCE
If and to the extent indicated in the applicable Prospectus Supplement, the
Company may elect, at its option at any time, to have the provisions of Section
1302, relating to defeasance and discharge of indebtedness, or Section 1303,
relating to defeasance of certain restrictive covenants in the Indentures,
applied to the Debt Securities of any series, or to any specified part of a
series. (Section 1301)
Defeasance and Discharge. The Indentures will provide that, upon the
Company's exercise of its option (if any) to have Section 1302 applied to any
Subordinated Debt Securities, the provisions of Article Fifteen of the
Subordinated Indenture relating to subordination will cease to be effective and,
with respect to any Debt Securities, the Company will be discharged from all its
obligations with respect thereto (except for certain obligations to exchange or
register the transfer of Debt Securities, to replace stolen, lost or mutilated
Debt Securities, to maintain paying agencies and to hold moneys for payment in
trust) upon the deposit in trust for the benefit of the Holders of such Debt
Securities of money or U.S. Government Obligations, or both, which, through the
payment of principal and interest in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of and
any premium and interest on such Debt Securities on the respective Stated
Maturities in accordance with the terms of the Indentures and such Debt
Securities. Such defeasance or discharge may occur only if, among other things,
the Company has delivered to the Trustee an Opinion of Counsel to the effect
that the Company has received from, or there has been published by, the United
States Internal Revenue Service a ruling, or there has been a change in tax law,
in either case to the effect that Holders of such Debt Securities will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge were not to occur. (Sections 1302
and 1304)
Defeasance of Certain Covenants. The Indentures will provide that, upon
the Company's exercise of its option (if any) to have Section 1303 applied to
any Debt Securities, the Company may omit to comply with certain restrictive
covenants, including those described under 'Restrictive Covenants' and in the
last sentence under 'Consolidation, Merger and Sale of Assets' and any that may
be described in the applicable Prospectus Supplement, and the occurrence of
certain Events of Default, which are described above in clause (d) (with respect
to such restrictive covenants) under 'Events of Default' and any that may be
described in the applicable Prospectus Supplement, will be deemed not to be or
result in an Event of Default, in each case with respect to such Debt
Securities, and, in the case of the Subordinated Indenture, the provisions of
Article Fifteen relating to subordination will cease to be effective with
respect to any Subordinated Debt Securities. The Company, in order to exercise
such option, will be required to deposit, in trust for the benefit of the
Holders of such Debt Securities, money or U.S. Government Obligations, or both,
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and any premium and interest on such Debt Securities on the
respective Stated Maturities in accordance with the terms of the Indentures and
such Debt Securities. The Company will also be required, among other things, to
deliver to the Trustee an Opinion of Counsel to the effect that Holders of such
Debt Securities will not recognize gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain obligations and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would have been
14
<PAGE>
the case if such deposit and defeasance were not to occur. In the event the
Company exercised this option with respect to any Debt Securities and such Debt
Securities were declared due and payable because of the occurrence of any Event
of Default, the amount of money and U.S. Government Obligations so deposited in
trust would be sufficient to pay amounts due on such Debt Securities at the time
of their respective Stated Maturities but may not be sufficient to pay amounts
due on such Debt Securities upon any acceleration resulting from such Event of
Default. In such case, the Company would remain liable for such payments.
(Sections 1303 and 1304)
NOTICES
Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the Security Register. (Sections
101 and 106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the purpose
of making payment and for all other purposes. (Section 308)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the law of the State of New York. (Section 112)
15
<PAGE>
DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock will
be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below. Certain provisions applicable to the Preferred Stock are set
forth below in 'Description of Capital Stock'.
The summary of terms of the Company's Preferred Stock contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Certificate of Incorporation
and the certificate of designations relating to each series of the Preferred
Stock (each, a 'Certificate of Designations'), which will be filed with the
Commission and incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part at or prior to the time of issuance
of such series of the Preferred Stock.
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of preferred stock, par value $1 per share. The Company's
Preferred Stock may be issued from time to time in one or more series, without
shareholder approval, when authorized by the Board of Directors. Subject to
limitations prescribed by law, the Board of Directors is authorized to fix,
before the issuance of any shares of a particular series of Preferred Stock, the
number of shares to be included in such series, the dividend rate per annum and
any restrictions, limitations and conditions upon the payment of dividends, the
redemption price or prices, if any, and the terms and conditions of redemption,
any sinking fund provisions for the redemption or purchase of the shares of such
series of Preferred Stock, the terms and conditions on which the shares of such
series are convertible, if they are convertible, the amount or amounts to which
the holders of shares of such series shall be entitled upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company and any other
rights, preferences and limitations pertaining to such series as may be
determined by the Board of Directors. Thus, the Board of Directors, without
shareholder approval, could authorize the issuance of Preferred Stock with
voting, conversion and other rights that could adversely affect the voting power
and other rights of holders of Common Stock or other series of Preferred Stock.
No Preferred Stock is currently outstanding.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise described in a Prospectus
Supplement relating to a particular series of the Preferred Stock. The
applicable Prospectus Supplement will describe the following terms of the series
of Preferred Stock in respect of which this Prospectus is being delivered: (1)
the designations and stated value per share of such Preferred Stock and the
number of shares offered; (2) the amount of liquidation preference per share;
(3) the initial public offering price at which such Preferred Stock will be
issued; (4) the dividend rate (or method of calculation), the dates on which
dividends shall be payable and the dates from which dividends shall commence to
cumulate, if any; (5) any redemption or sinking funds provisions; (6) any
conversion or exchange rights; and (7) any additional voting, dividend,
liquidation, redemption, sinking fund and other rights, preferences, privileges,
limitations and restrictions.
GENERAL
The Preferred Stock offered hereby will be issued in one or more series.
Shares of Preferred Stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. Neither the par value nor
the liquidation preference is indicative of the price at which the Preferred
Stock will actually trade on or after the date of issuance. The Prospectus
Supplement will contain, if applicable, a description of certain United States
federal income tax consequences relating to the purchase and ownership of the
series of Preferred Stock offered by such Prospectus Supplement.
RANK
The Preferred Stock shall, with respect to dividend rights and rights upon
liquidation, winding up and dissolution of the Company, rank prior to the
Company's Common Stock and to all other classes and series of equity securities
of the Company now or hereafter authorized, issued or outstanding (the Common
Stock and such other classes and series of equity securities collectively may be
referred to herein as the 'Junior Stock'), other than any classes or series of
equity securities of the Company ranking on a parity with (the 'Parity Stock')
or senior to (the 'Senior Stock') the Preferred Stock as to dividend rights and
rights upon liquidation, winding
16
<PAGE>
up or dissolution of the Company. The Preferred Stock shall be junior to all
outstanding indebtedness for borrowed money of the Company. The Preferred Stock
shall be subject to creation of Senior Stock, Parity Stock and Junior Stock to
the extent not expressly prohibited by the Company's Certificate of
Incorporation.
DIVIDENDS
Holders of shares of Preferred Stock of any series shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds of the
Company legally available for payment, cash dividends, payable at such dates and
at such rates per share per annum as described in the applicable Prospectus
Supplement. Such rate may be fixed or variable or both. Each declared dividend
shall be payable to holders of record as they appear at the close of business on
the stock books of the Company on such record dates, not more than 60 calendar
days preceding the payment dates therefor, as are determined by the Board of
Directors (each of such dates, a 'Record Date').
Such dividends may be cumulative or noncumulative, as described in the
applicable Prospectus Supplement. If dividends on a series of Preferred Stock
are noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Stock will have no right to receive a dividend in respect of such
dividend period, and the Company will have no obligation to pay the dividend for
such period, whether or not dividends are declared payable on any future
dividend payment dates.
No full dividends shall be declared or paid or set apart for payment on
preferred stock of the Company of any series ranking, as to dividends, on a
parity with or junior to the series of Preferred Stock offered by the applicable
Prospectus Supplement for any period unless full dividends for the immediately
preceding dividend period on such Preferred Stock (including any accumulation in
respect of unpaid dividends for prior dividend periods, if dividends on such
Preferred Stock are cumulative) have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment. When dividends are not so paid in full (or a sum sufficient for
such full payment is not so set apart) upon such Preferred Stock and any other
preferred stock of the Company ranking on a parity as to dividends with the
Preferred Stock, dividends upon shares of such Preferred Stock and dividends on
such other preferred stock shall be declared pro rata so that the amount of
dividends declared per share on such Preferred Stock and such other preferred
stock shall in all cases bear to each other the same ratio that accrued
dividends for the then-current dividend period per share on the shares of such
Preferred Stock (including any accumulation in respect of unpaid dividends for
prior dividend periods, if dividends on such Preferred Stock are cumulative) and
accrued dividends, including required or permitted accumulations, if any, on
shares of such other preferred stock, bear to each other.
CONVERTIBILITY
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into shares of Common
Stock of the Company or another series of Preferred Stock or other securities or
property of the Company will be set forth in the applicable Prospectus
Supplement. See 'Description of Capital Stock'.
REDEMPTION
The terms, if any, on which shares of Preferred Stock of any series may be
redeemed will be set forth in the applicable Prospectus Supplement.
LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of a series of Preferred
Stock will be entitled, subject to the rights of creditors, but before any
distribution or payment to the holders of Common Stock or any other security
ranking junior to the Preferred Stock on liquidation, dissolution or winding up
of the Company, to receive an amount per share as set forth in the applicable
Prospectus Supplement plus accrued and unpaid dividends for the then-current
dividend period (including any accumulation in respect of unpaid dividends for
prior dividend periods, if dividends on such series of Preferred Stock are
cumulative). If the amounts available for distribution with respect to the
Preferred Stock
17
<PAGE>
and all other outstanding stock of the Company ranking on a parity with the
Preferred Stock upon liquidation are not sufficient to satisfy the full
liquidation rights of all the outstanding Preferred Stock and stock ranking on a
parity therewith, then the holders of each series of such stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amount (which in the case of preferred stock may include
accumulated dividends) to which they are entitled. After payment of the full
amount of the liquidation preference, the holders of shares of Preferred Stock
will not be entitled to any further participation in any distribution of assets
by the Company.
VOTING
The Preferred Stock of a series will not be entitled to vote, except as
described below or in the applicable Prospectus Supplement and as required by
applicable law. The Board of Directors, in its discretion, may, upon issuance of
any series of Preferred Stock, grant voting power to the holders of such
Preferred Stock to elect not more than two additional members of the Board of
Directors in the event of an arrearage in the payment of dividends on any such
series; however, such right to elect two additional directors is applicable to
all series of Preferred Stock in the aggregate and not to each series thereof in
the event that more than one series is outstanding. Notwithstanding the election
of two directors by the holders of Preferred Stock, the holders of Common Stock
shall only be entitled to elect at least one-fifth of the members of the Board
of Directors as constituted prior to the election of such two additional
directors by the holders of the Preferred Stock.
Without the affirmative vote of a majority of the shares of Preferred Stock
any series then outstanding (voting separately as a class together with any
Parity Stock), the Company may not (i) increase or decrease the aggregate number
of authorized shares of such series, (ii) increase or decrease the par value of
the shares of such series or (iii) alter or change the powers, preferences or
special rights of the shares of such series so as to affect them adversely.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the applicable Prospectus Supplement, the
Certificate of Incorporation and in the applicable Certificate of Designations
or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The voting power of the Company's capital stock is vested exclusively in
the holders of shares of Class A Stock, as long as any shares of Class A Stock
shall remain outstanding, subject only to the right of the holders of shares of
Common Stock, voting as a class at each annual meeting of the Company, to elect
such minimum number of directors as shall equal at least one-fifth of the
members of the Board of Directors (with a minimum of one director) and except as
otherwise provided by law. The total number of directors of which holders of
Common Stock are entitled to elect one-fifth does not include any directors
elected by holders of any series of Preferred Stock which may be issued by the
Company. Neither the Certificate of Incorporation nor the By-laws of the Company
may be amended to deny the holders of the Common Stock such right to elect at
least one-fifth of the members of the Board of Directors, without the consent of
the holders of a majority of the Common Stock.
The Certificate of Incorporation does not provide for cumulative voting.
Accordingly, the holders of more than 50% of the Class A Stock voting for the
election of directors can elect up to four-fifths of the members of the Board of
Directors if they choose to do so, in which event the holders of the remaining
shares of Class A Stock will not be able to elect any person or persons to the
Board of Directors.
18
<PAGE>
The holders of Class A Stock have the right, at their option, at any time
and from time to time, to convert such shares into shares of Common Stock on a
share-for-share basis. Shares of Class A Stock surrendered for conversion must
be canceled and may not be reissued.
With the exception of voting rights and conversion rights, and subject to
the rights of the holders of Preferred Stock at any time outstanding, the Class
A Stock and the Common Stock, both of which are classes of common stock, are of
equal rank and entitle the holders thereof to the same and identical rights and
privileges. Consequently, subject to the prior rights of the holders of
Preferred Stock at any time outstanding, the holders of Class A Stock and Common
Stock are equally entitled to receive dividends as declared by the Board of
Directors and are equally entitled to receive any distributions made to
stockholders upon any liquidation, dissolution or winding up of the Company.
All outstanding shares of Class A Stock and Common Stock are validly
issued, fully paid and nonassessable. The Class A Stock and the Common Stock
carry no preemptive rights and are not redeemable or entitled to the benefits of
any sinking fund and, except as described above in the case of Class A Stock are
not convertible into any other security of the Company.
The Company is subject to Section 203 of the Delaware General Corporation
Law ('Section 203'). Under Section 203 certain 'business combinations' between a
Delaware corporation, whose stock generally is publicly traded or held of record
by more than 2,000 stockholders, and an 'interested stockholder' are prohibited
for a three-year period following the date that such stockholder became an
interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation not to be governed by Section 203 (the Company has
not made such an election), (ii) the business combination was approved by the
board of directors of the corporation before the other party to the business
combination became an interested stockholder, (iii) upon consummation of the
transaction that made it an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction (excluding voting stock owned by directors who
are also officers or held in employee benefit plans in which the employees do
not have a confidential right to tender stock held by the plan) or (iv) the
business combination is approved by the board of directors of the corporation
and ratified by two-thirds of the voting stock which the interested stockholder
does not own. The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with approval of a majority of the
corporation's directors. The term 'business combination' is defined generally to
include mergers or consolidations between a Delaware corporation and an
interested stockholder, transactions with an interested stockholder involving
the assets or stock of the corporation or its majority-owned subsidiaries, and
transactions which increase an interested stockholder's percentage ownership of
stock. The term 'interested stockholder' is defined generally as those
stockholders who become beneficial owners of 15% or more of a Delaware
corporation's voting stock. However, in the case of the Company, certain
exceptions to the definition of the term "interested stockholder" apply to
Richard Robinson, Chairman of the Board, President and Chief Executive Officer
of the Company and to the Trust under the Will of Maurice R. Robinson, each of
whom owns in excess of 15% of the Company's Class A Stock.
Pursuant to an Indenture, dated as of August 15, 1995, between the Company
and Bankers Trust Company, as trustee, the Company has agreed not to amend its
Certificate of Incorporation or By-laws if, as a result of such amendment, (a)
the Company could (i) pay dividends to the holders of the Class A Stock without
paying to the holders of the Common Stock a dividend per share at least equal to
the dividend per share paid to holders of the Class A Stock or (ii) reclassify,
subdivide or combine one class of its common stock without reclassifying,
subdividing or combining the other class of common stock, on an equal per share
basis, (b) the holders of Common Stock would cease to elect at least one-fifth
of the directors (with a minimum of at least one director), except as otherwise
provided by law and provided that the total number of directors of which holders
of Common Stock are entitled to elect one-fifth does not include any directors
elected by holders of any series of preferred stock which may be issued by the
Company, (c) the holders of Class A Stock and the Common Stock would not share
equally, on a share-for-share basis, in any distribution of the Company's assets
upon any liquidation, dissolution or winding-up of the Company or would not have
equal rights, on a share-for-share basis, in the event of any merger or
consolidation of the Company in which shares of common stock of the Company are
converted
19
<PAGE>
into cash, securities or other property, or (d) a share of Class A Stock could
be converted into more than one share of Common Stock. (Section 1209 of the
Indenture)
The Company's Transfer Agent and Registrar for its Common Stock is
ChaseMellon Shareholder Services, L.L.C. Proxy statements and other materials
concerning annual or special meetings of stockholders of the Company are
distributed by mail to holders of record in accordance with applicable law and
the Certificate of Incorporation and By-laws of the Company.
The foregoing summary is qualified in its entirety by reference to the
provisions of the Certificate of Incorporation of the Company, as amended, its
By-laws and the Delaware General Corporation Law.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters and also may
sell Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities for whom they may
act as agents in the form of discounts, concessions or commissions. Underwriters
may sell Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Company and any profit on the resale of Securities by
them may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the relevant
Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
If so indicated in the relevant Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the offered Securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject. The underwriters
and such other agents will not have any responsibility in respect of the
validity or performance of such contracts.
VALIDITY OF THE SECURITIES
The validity of the Securities offered hereby will be passed upon for the
Company by Coudert Brothers, New York, New York and for any underwriters by
Sullivan & Cromwell, New York, New York. Andrew S. Hedden, a partner of Coudert
Brothers, is a director of the Company.
EXPERTS
The consolidated financial statements of Scholastic Corporation appearing
or incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended May 31, 1996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements and financial
statement schedule are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
20
<PAGE>
================================================================================
================================================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY RELATED PROSPECTUS
SUPPLEMENT AND/OR PRICING SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN
THIS PROSPECTUS AND SUCH PROSPECTUS SUPPLEMENT AND/OR PRICING SUPPLEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY SCHOLASTIC CORPORATION OR ANY UNDERWRITERS, AGENTS OR
DEALERS. THIS PROSPECTUS AND ANY RELATED PROSPECTUS SUPPLEMENT AND/OR PRICING
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AND ANY RELATED
PROSPECTUS SUPPLEMENT AND/OR PRICING SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF SCHOLASTIC CORPORATION SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company.................................... 3
Ratio of Earnings to Fixed Charges............. 4
Use of Proceeds................................ 4
Description of Debt Securities................. 4
Description of Preferred Stock................. 16
Description of Common Stock.................... 18
Plan of Distribution........................... 20
Validity of the Securities..................... 20
Experts........................................ 20
</TABLE>
================================================================================
================================================================================
$175,000,000
SCHOLASTIC CORPORATION
DEBT SECURITIES,
PREFERRED STOCK AND
COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1996
================================================================================
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions,
are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................................ $53,031
Blue Sky Qualification Fees and Expenses*.......................................... 3,000
Trustee's Fees and Expenses*....................................................... 8,000
Transfer Agent and Registrar Fees*................................................. 4,000
Legal Fees and Expenses*........................................................... 35,000
Accounting Fees and Expenses*...................................................... 35,000
Printing Expenses*................................................................. 7,000
Miscellaneous*..................................................................... 2,000
-------
Total.............................................................................. $147,031
-------
-------
</TABLE>
- ------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware permits
indemnification of directors, officers and employees of corporations under
certain conditions and subject to certain limitations. Article FIFTH of the
Amended and Restated Certificate of Incorporation of the Registrant and Article
VII of the By-laws of the Registrant contain provisions for the indemnification
of directors, officers and employees within the limitations permitted by Section
145.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
*1.1 -- Form of Underwriting Agreement for Debt Securities
*1.2 -- Form of Underwriting Agreement for Preferred Stock
*1.3 -- Form of Underwriting Agreement for Common Stock
*1.4 -- Form of Underwriting Agreement for Convertible Securities
*4.1 -- Form of Senior Indenture between the Company and Citibank, N.A. as Trustee thereunder
*4.2 -- Form of Subordinated Indenture between the Company and Citibank, N.A. as Trustee thereunder
5 -- Opinion of Coudert Brothers
*12 -- Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Coudert Brothers (contained in Exhibit 5)
*24 -- Powers of Attorney (included on pages II-3 through II-4)
*25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Citibank, N.A.
as Trustee under the Senior Indenture
*25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Citibank, N.A.
as Trustee under the Subordinated Indenture
</TABLE>
* Previously filed
II-1
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the high end of the estimated maximum
offering range may be reflected in the form of a prospectus
filed with the Commission under Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the 'Calculation of Registration Fee' table in the
effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement, provided, however, that paragraphs
(1)(i) and (1)(ii) do not apply if the information required to
be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant
to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the 'Securities
Act'), each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the
'Exchange Act') (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim of indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in a successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, the State of New York, on the 11th day of
December, 1996.
SCHOLASTIC CORPORATION
(Registrant)
By: /s/ RICHARD ROBINSON
-----------------------------
Richard Robinson
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on December 11, 1996.
<TABLE>
<CAPTION>
- ------------------------------------------ ----------------------------------------------
<S> <C>
/s/RICHARD ROBINSON Director, Chairman of the Board, President and
- ------------------------------------------ Chief Executive Officer (Principal Executive
Richard Robinson Officer)
RICHARD M. SPAULDING* Director and Executive Vice President
- ------------------------------------------
Richard M. Spaulding
/s/KEVIN J. MCENERY Executive Vice President and Chief Financial
- ------------------------------------------ Officer (Principal Financial and Principal
Kevin J. McEnery Accounting Officer)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------ ----------------------------------------------
<S> <C>
REBECA M. BARRERA* Director
- ------------------------------------------
Rebeca M. Barrera
HELEN V. BENHAM*
---------------------------------------- Director
Helen V. Benham
FREDERIC J. BISCHOFF* Director
- ------------------------------------------
Frederic J. Bischoff
- ------------------------------------------ Director
John Brademas
JOHN C. BURTON* Director
- ------------------------------------------
John C. Burton
RAMON C. CORTINES* Director
- ------------------------------------------
Ramon C. Cortines
ALONZO A. CRIM* Director
- ------------------------------------------
Alonzo A. Crim
CHARLES T. HARRIS* Director
- ------------------------------------------
Charles T. Harris
ANDREW S. HEDDEN* Director
- ------------------------------------------
Andrew S. Hedden
MAE C. JEMISON* Director
- ------------------------------------------
Mae C. Jemison
RICHARD A. KRINSLEY* Director
- ------------------------------------------
Richard A. Krinsley
JOHN G. MCDONALD* Director
- ------------------------------------------
John G. McDonald
AUGUSTUS K. OLIVER* Director
- ------------------------------------------
Augustus K. Oliver
* By: /s/KEVIN McEVERY
------------------------------------
Kevin J. McEvery
as Attorney-in-Fact pursuant to the
Power of Attorney previously filed
with the Commission.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ----------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
* 1.1 -- Form of Underwriting Agreement for Debt Securities
* 1.2 -- Form of Underwriting Agreement for Preferred Stock
* 1.3 -- Form of Underwriting Agreement for Common Stock
* 1.4 -- Form of Underwriting Agreement for Convertible Securities
* 4.1 -- Form of Senior Indenture between the Company and Citibank, N.A. as Trustee thereunder
* 4.2 -- Form of Subordinated Indenture between the Company and Citibank, N.A. as Trustee thereunder
5 -- Opinion of Coudert Brothers
*12 -- Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Coudert Brothers (contained in Exhibit 5)
*24 -- Powers of Attorney (included on pages II-4 through II-5)
*25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Citibank, N.A.
as Trustee under the Senior Indenture
*25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Citibank, N.A.
as Trustee under the Subordinated Indenture
</TABLE>
*Previously filed.
<PAGE>
Exhibit 5
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
(212) 626-4400
December 11, 1996
Scholastic Corporation
555 Broadway
New York, New York 10012
Re: Scholastic Corporation
Registration Statement on Form S-3
Dear Sirs:
We have acted as counsel to Scholastic Corporation, a Delaware corporation (the
"Company"), in connection with the preparation of the registration statement of
the Company on Form S-3 (File No. 333-17365) filed with the Securities and
Exchange Commission (the "Commission") on December 6, 1996, as amended by
Amendment to No. 1 thereto filed with the Commission on December 11, 1996 (the
registration statement as so amended, the "Registration Statement"), relating to
the registration under the Securities Act of 1933, as amended, of (a) shares of
its common stock, $0.01 par value per share (the "Common Stock"), (b) shares of
its preferred stock, $1 par value per share (the "Preferred Stock"), in one or
more series, and (c) unsecured senior or subordinated debt securities of the
Company (the "Debt Securities") or any combination of the foregoing, either
individually or as units consisting of one or more of the foregoing, each on
terms to be determined at the time of sale, having an aggregate initial public
offering price of U.S. $175,000,000 or the equivalent thereof. The Common Stock,
the Preferred Stock and the Debt Securities are collectively referred to herein
as the "Securities."
In so acting, we have examined originals, or copies identified to our
satisfaction, of such documents, corporate records, certificates of public
officials and officers of the Company and of such other instruments as we have
deemed relevant or necessary for the purpose of this opinion.
In rendering this opinion, we have assumed the authenticity of all
documents submitted to us as originals and the conformity with originals of all
documents submitted to us as copies, and we have assumed the genuineness of the
signatures of the respective parties to such documents.
<PAGE>
Scholastic Corporation
December 11, 1996
Page 2
Based upon the foregoing, and having regard for legal considerations
that we deem relevant, we are of the opinion that:
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
2. With respect to the Common Stock, when (a) the Board of Directors
of the Company or a duly authorized committee of the Board (such Board of
Directors or committee being referred to herein as the "Board") has taken all
necessary corporate action to approve the issuance of and establish the terms
of the offering of the Common Stock and related matters and (b) the Common
Stock has been issued, sold and delivered in the manner and for the
consideration (not less than the par value of the Common Stock) stated in the
applicable definitive purchase, underwriting or similar agreement, or upon
conversion, exchange or exercise of any other Security in accordance with the
terms of such Security or the instrument governing such Security providing for
such conversion, exchange or exercise as approved by the Board, for the
consideration approved by the Board (not less than the par value of the Common
Stock), the Common Stock will be duly authorized, validly issued, fully paid
and nonassessable.
3. With respect to the Preferred Stock, when (a) the Board has taken
all necessary corporate action to approve the issuance of and establish the
terms of any particular series of Preferred Stock, the offering thereof and
related matters, including the filing of a certificate of designation
conforming to the Delaware General Corporation Law regarding the Preferred
Stock with the Secretary of State of the State of Delaware, and (b) the
Preferred Stock has been issued, sold and delivered in the manner and for the
consideration (not less than the par value of the Preferred Stock) stated in
the applicable definitive purchase, underwriting or similar agreement, or upon
conversion, exchange or exercise of any other security in accordance with the
terms of such Security or the instrument governing such Security providing for
such conversion, exchange or exercise as approved by the Board, for the
consideration approved by the Board (not less than the par value of the
Preferred Stock), the Preferred Stock will be duly authorized, validly issued,
fully paid and nonassessable.
4. With respect to the Debt Securities to be issued under the senior
debt indenture filed as Exhibit 4.1 to the Registration Statement (the "Senior
Debt Indenture"), when (a) the Senior Debt Indenture has been duly qualified
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"),
(b) the Board has taken all necessary corporate action to approve the issuance
of and establish the terms of such Debt Securities, the terms of the offering
and related matters, (c) the Debt Securities have been executed and
authenticated in accordance with the terms of the Senior Debt Indenture and (d)
the Debt Securities have been issued, sold and delivered in the manner and for
the consideration stated in the applicable definitive purchase, underwriting or
similar agreement approved by the Board, upon payment of the consideration
provided for therein, the Debt Securities to be issued under the Senior Debt
Indenture will be legal, valid and binding obligations of the Company,
enforceable
<PAGE>
Scholastic Corporation
December 11, 1996
Page 3
against the Company in accordance with their terms, except that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting generally the enforcement of creditors' rights and by
equitable principles of general application (whether applied at law or in
equity).
5. With respect to the Debt Securities to be issued under the
subordinated debt indenture filed as Exhibit 4.2 to the Registration Statement
(the "Subordinated Debt Indenture"), when (a) the Subordinated Debt Indenture
has been duly qualified under the Trust Indenture Act, (b) the Board has taken
all necessary corporate action to approve the issuance of and establish the
terms of such Debt Securities, the terms of the offering and related matters,
(c) the Debt Securities have been executed and authenticated in accordance with
the terms of the Subordinated Debt Indenture and (d) the Debt Securities have
been issued, sold and delivered in the manner and for the consideration stated
in the applicable definitive purchase, underwriting or similar agreement
approved by the Board, upon payment of the consideration provided for therein,
the Debt Securities to be issued under the Subordinated Debt Indenture will be
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting generally the enforcement of creditors' rights and by equitable
principles of general application (whether applied at law or in equity).
In connection with our opinions expressed above, we have assumed that,
at or prior to the time of the delivery of any such Security, the Registration
Statement and any amendments thereto (including post-effective amendments) will
have been declared effective, a prospectus supplement will have been prepared
and filed with the Commission describing the Securities offered thereby, the
authorization of such Security will not have been modified or rescinded by the
Board and there will not have occurred any change in law affecting the validity
or enforceability of such Security. We have also assumed that none of the terms
of any Security to be established subsequent to the date hereof, nor the
issuance and delivery of such Security or the compliance by the Company with
the terms thereof, will violate any applicable federal or state law or will
result in a violation of any provision of any instrument or agreement then
binding upon the Company or any restriction imposed by any court or
governmental body having jurisdiction over the Company. Insofar as the
foregoing opinions relate to the legality, validity, binding effect or
enforceability of any agreement or obligation of the Company, we have assumed
that the Company and each other party to any such agreement or obligation has
satisfied those legal requirements that are applicable to the extent necessary
to make such agreement or obligation enforceable against it (except that no
such assumption is made as to the Company regarding matters of the Federal law
of the United States of America, the law of the State of New York or the
General Corporation Law of the State of Delaware). We have also assumed that
the interest rate on any Securities will not exceed the maximum rate permitted
by law.
<PAGE>
Scholastic Corporation
December 11, 1996
Page 4
We are members of the bar of the State of New York and we express no
opinion as to any laws other than the Federal laws of the United States of
America, the General Corporation Law of the State of Delaware and the laws of
the State of New York.
We hereby consent to the filing of this opinion with the Commission in
connection with the filing of the Registration Statement referred to above. We
also consent to the use of our name in the related prospectus and any
prospectus supplement under the heading "Validity of the Securities." The
opinions expressed herein are intended solely for your use and may not be
relied upon by any other person.
Very truly yours,
/s/ Coudert Brothers
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-17365) and related
Prospectus of Scholastic Corporation for the registration of its common stock,
preferred stock and debt securities, and to the incorporation by reference
therein of our report dated July 3, 1996, with respect to the consolidated
financial statements and schedule of Scholastic Corporation included in its
Annual Report (Form 10-K) for the year ended May 31, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
_______________________________
Hackensack, New Jersey
December 11, 1996
