1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
STECK-VAUGHN PUBLISHING CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction
applies:_____________________________________________
(2) Aggregate number of securities to which transaction
applies:_____________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:__________
(4) Proposed maximum aggregate value of
transaction:_____________________________________________________
(5) Total fee
paid:_________________________________________________________________
[ ] Fee paid previously with preliminary materials: __________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously
paid:_________________________________________________________________
(2) Form, Schedule or Registration Statement
no.:__________________________________________________________________
(3) Filing
Party:________________________________________________________________
(4) Date
Filed:________________________________________________________________
================================================================================
2
April 4, 1997
Dear Stockholder:
You are cordially invited to attend the May 29, 1997, Annual Meeting of
Stockholders of Steck-Vaughn Publishing Corporation to be held at the
Renaissance Austin Hotel, 9721 Arboretum Boulevard, San Antonio Room, Austin,
Texas 78759, beginning at 8:30 a.m., local time.
The business to be conducted at the Annual Meeting includes the election of
six directors, ratification of the selection of independent public accountants,
approval of technical amendments to the 1993 Stock Option Plan, as amended, to
address certain Internal Revenue Code requirements and consideration of any
other matters which may properly come before the Annual Meeting and any
adjournment thereof.
Enclosed please find a copy of the Company's Annual Report on Form 10-K for
year ended December 31, 1996, containing audited financial statements, five-year
highlights, financial review and certain other information about the Company. In
addition, the Company's summary annual report, which will be mailed shortly,
will contain our letter to stockholders, a financial and operating review and
outlook and condensed financial statements, as well as other information of
topical interest.
It is important that your shares be represented; therefore, even if you
presently plan to attend the Annual Meeting, please complete, sign, date and
promptly return the enclosed proxy card. If you do attend the Annual Meeting and
wish to vote in person, you may withdraw your proxy at that time.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/S/ SAM YAU
-------------------------------
Sam Yau
Chairman of the Board
3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1997
To the Stockholders of Steck-Vaughn Publishing Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Steck-Vaughn Publishing Corporation, a Delaware corporation, (the
"Company") will be held at the Renaissance Austin Hotel, 9721 Arboretum
Boulevard, San Antonio Room, Austin, Texas 78759, on Thursday, May 29, 1997, at
8:30 a.m., local time, for the following purposes:
(1) To elect six Directors of the Company to hold office for a one-year term
or until their respective successors are elected and qualified;
(2) To consider and act upon the ratification of the selection of Price
Waterhouse LLP as the independent public accountants for the Company;
(3) To consider and act upon the approval of technical amendments to the
1993 Stock Option Plan, as amended, to address certain Internal Revenue
Code requirements; and
(4) To transact any other business as may properly come before the Annual
Meeting and any adjournment thereof.
Stockholders of record as of the close of business on March 31, 1997, are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment
thereof. A list of such stockholders will be available for examination by any
stockholder at the Annual Meeting and, for any purpose germane to the Annual
Meeting, at the principal business office of the Company, 4515 Seton Center
Parkway, Suite 300, Austin, Texas, for a period of ten days prior to the Annual
Meeting.
By Order of the Board of Directors
/s/ PHILIP C. MAYNARD
Philip C. Maynard
Secretary
Irvine, California
April 4, 1997
YOUR VOTE IS IMPORTANT
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ACCOMPANYING PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE PREADDRESSED ENVELOPE PROVIDED. NO POSTAGE
IS NECESSARY IF MAILED IN THE UNITED STATES.
4
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Steck-Vaughn Publishing
Corporation (the "Company") for use at the Annual Meeting of Stockholders of the
Company (the "Annual Meeting") to be held on Thursday, May 29, 1997, at 8:30
a.m., local time. The Annual Meeting will be held at the Renaissance Austin
Hotel, 9721 Arboretum Boulevard, San Antonio Room, Austin, Texas 78759. This
Proxy Statement and the accompanying proxy are first being mailed on or about
April 4, 1997. The principal executive office of the Company is located at 4515
Seton Center Parkway, Suite 300, Austin, Texas 78759-8364.
REVOCABILITY OF PROXIES
An executed proxy may be revoked at any time before its exercise by filing
with the Secretary of the Company a written notice of revocation or a duly
executed proxy bearing a later date. Prior to the date of the Annual Meeting,
any such notice or subsequent proxy must be delivered to the Secretary of the
Company at 2601 Main Street, Suite 700, Irvine, California 92614. On the date of
the Annual Meeting, such notice or subsequent proxy should be delivered in
person at the Annual Meeting prior to the time of the vote. Accordingly, the
execution of the enclosed proxy will not affect a stockholder's right to vote in
person should such stockholder find it convenient to attend the Annual Meeting
and desire to vote in person, so long as the stockholder has revoked his or her
proxy prior to its exercise in accordance with these instructions.
VOTING AND SOLICITATION
On March 31, 1997, the record date with respect to this solicitation,
14,472,167 shares of the Company's common stock ("Common Stock") were
outstanding. No shares of any other class of stock were outstanding. Only
stockholders of record on such date are entitled to notice of and to vote at the
Annual Meeting and at any adjournment thereof. Each stockholder of record is
entitled to one vote for each share held as of the record date on all matters to
come before the Annual Meeting and at any adjournment thereof.
QUORUM. In order to have a valid Annual Meeting, stockholders holding at
least one-half of the Company's Common Stock that is issued, outstanding and
entitled to vote at the Annual Meeting must be present in person or by proxy (a
"Quorum"). Both abstentions (also referred to as withheld votes) and broker
non-votes are counted by the Company for purposes of determining whether a
Quorum is present at the Annual Meeting for the transaction of business.
VOTE REQUIRED. The six Director nominees receiving the highest number of
affirmative votes of the shares present or represented and entitled to be voted
will be elected as Directors. Accordingly, abstentions and broker non-votes will
have no effect in determining which Directors receive the highest number of
votes. Ratification of the selection of Price Waterhouse LLP as the Company's
independent public accountants, approval of technical amendments to the 1993
Stock Option Plan, as amended, to address certain Internal Revenue Code
requirements and any other matter that properly comes before the Annual Meeting
must be accomplished by the affirmative votes of a majority of the shares
present or represented and entitled to be voted at the Annual Meeting;
accordingly, an abstention will have the same effect as a vote against those
matters, but broker non-votes will not be counted for purposes of determining
whether those matters are approved.
The shares represented by all valid proxies received will be voted in
accordance with the specifications therein. Unless otherwise directed in the
proxy, the persons named therein will vote FOR the election of the six nominees
listed below, FOR the ratification of the Company's selection of independent
public accountants and FOR the approval of technical amendments to the 1993
Stock Option Plan, as amended, to address certain Internal Revenue Code
requirements. As to any other business that may properly come before the Annual
Meeting, they will vote in accordance with their best judgment. The Company
presently does not know of any other such business.
1
5
SOLICITATION. Proxies will be solicited principally by mail, and the costs
will be borne by the Company. These costs include reimbursements to banks,
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding proxy materials to beneficial owners of the
Company's Common Stock. Officers and other employees of the Company may conduct
solicitation of proxies personally, by telephone, or by special letter without
any additional compensation. The Company has engaged D.F. King & Co., Inc.
("King") to solicit proxies and distribute materials to banks, brokerage houses
and other custodians and nominees. The Company will pay King $750 for these
services.
PROPOSAL 1:
ELECTION OF DIRECTORS
A Board of Directors consisting of six individuals is to be elected at the
Annual Meeting. Six incumbent Directors have been nominated for re-election.
Each Director elected will serve until the Company's 1998 Annual Meeting of
Stockholders or until the election and qualification of his or her successor or
his or her earlier resignation or removal.
On September 23, 1996, the Board appointed Ms. Anita Kopec a member of the
Board of Directors to fill the vacancy created by Mr. Roy Mayers' resignation as
President, Chief Executive Officer and Director.
Effective May 16, 1996, the Board of Directors passed a resolution
decreasing the size of the Board from seven members to six members upon the
retirement from the Board of Mr. Jerome W. Cwiertnia. The Board reserves the
right to increase its size to accommodate qualified potential Board members who,
from time to time, may be identified by the Board of Directors and who would add
to the Board's expertise, experience and diversity, particularly in the
education and new technologies fields.
Each stockholder is entitled to one vote per share for each office of
Director to be elected. The six candidates receiving the greatest number of
votes cast at the Annual Meeting in person or by proxy will be elected. The
shares represented by the proxies solicited hereunder will be voted in favor of
the six nominees named below unless authorization to do so is withheld in the
proxy. If any nominee should become unavailable to serve as a Director, which
contingency is not presently anticipated, the persons named in the proxy, or
their substitutes, will be authorized to vote for such other person or persons
as the Board of Directors may designate.
The following table provides information regarding each nominee including
each person's age as of March 31, 1997. Titles are as officers of the Company
unless otherwise indicated.
[The remainder of page intentionally left blank]
2
6
Business Experience During Director
Name and Age Last Five Years and Other Directorships Since
- ------------ --------------------------------------- --------
Sam Yau (48) Chairman of the Board since May 05-17-95
1995. President, Chief Executive
Officer and a Director of National
Education Corporation ("NEC"), which
owns a controlling interest in the
Company, since May 1995. Chief
Operating Officer of Advacare, Inc.,
a medical management company, from
May 1993 to November 1994. Senior
Vice President of Finance and
Administration for Archive
Corporation (now part of Seagate
Technologies, Inc.), a computer
storage (tape) company, from May
1987 to May 1993. Director of
Powerwave, Inc.
Anita Kopec (50) President and Chief Executive 09-23-96
Officer of the Company, President of
Steck-Vaughn Company, President of
SV Distribution Company and Director
of Edunetics Ltd. in Israel since
September 23, 1996. Vice President
of Product Planning and Strategic
Alliances and Vice President of
Curriculum Development at Computer
Curriculum Corporation, a division
of Simon and Schuster, from 1991 to
1996.
Leonard W. Jaffe (78) Private investor and consultant. 05-05-93
Vice Chairman of the Board of NEC
since July 1989. Director of NEC
since 1976.
Michael R. Klein (54) Partner, Wilmer, Cutler & Pickering 05-05-93
law firm since 1974. Director of NEC
since May 1991 and Perini Corporation
since January 1997. Chairman of
Realty Information Group, Inc. since
1987.
Manuel J. Justiz (48) Dean of the College of Education, 08-04-93
University of Texas at Austin, since
1990. Director of National
Institute of Education, Washington,
D.C. from 1982 to 1985. Director of
Wackenhut Corrections Corporation.
N. Colin Lind (40) Managing Director of Richard C. Blum 02-10-94
& Associates, L.P. since 1986.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
Directors' Fees and Benefits
The Company pays to each of its Directors who is not an employee of the
Company or of NEC and/or is not a Director or affiliated with a Director of NEC
an annual fee of $12,000. Nonemployee Directors of the Company who are also
Directors of NEC or affiliated with a Director of NEC receive an annual fee of
$8,000. Such annual fees are payable in the form of Common Stock of the Company
valued at the fair market value of such Common Stock pursuant to the Company's
1995 Directors' Stock Option and Award Plan. In addition, all
3
7
Directors receive cash payments of $1,000 for each Board meeting attended and
$500 for each committee meeting attended. Directors who are employees of the
Company or of NEC receive no additional compensation for their services as
Directors.
Under the 1995 Directors' Stock Option and Award Plan, each eligible
Director receives an initial option to purchase 1,500 shares of Common Stock at
fair market value. In addition, at the first regular Board meeting of each
calendar year through the year 1999, each eligible Director receives an option
to purchase 1,500 shares of Common Stock at fair market value. The initial
options and the annual options each vest and are exercisable twelve months
following the date of grant. All of the Directors of the Company are eligible to
participate in the 1995 Directors' Stock Option and Award Plan except Mr. Yau
and Ms. Kopec.
Under the 1993 Stock Option Plan, as amended (the "1993 Plan"), Directors
who are regular employees of the Company are eligible to receive options to
purchase Company Common Stock under the 1993 Plan. Nonemployee Directors
(excluding Option Committee members) may participate in the 1993 Plan at the
discretion of the Option Committee of the Board appointed to administer the 1993
Plan. Nonemployee Directors have not been granted options under the 1993 Plan.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1996, the Board of Directors of
the Company met four times. Director N. Colin Lind attended two of the four
Board of Directors' meetings and the one joint meeting of the Compensation and
Option Committees held during the year. No other incumbent Director attended
fewer than 75% of the aggregate 1996 meetings of the Board of Directors and of
the committees of the Board on which he or she served (during the periods that
he or she served).
The Board of Directors has three committees: the Audit Committee, the
Compensation Committee and the Option Committee. The Board of Directors does
not have a Nominating Committee. During 1996, the functions of a Nominating
Committee were performed by the Board as a whole.
During 1996, the Audit Committee of the Board of Directors consisted of
Michael R. Klein (Chairman), Manuel Justiz and Jerome W. Cwiertnia whose term as
Director expired on May 16, 1996. The Audit Committee recommends engagement of
the Company's independent public accountants and primarily is responsible for
approving the services performed by the Company's independent public accountants
and for reviewing and evaluating the Company's accounting principles and its
system of internal accounting controls. The Audit Committee held two meetings in
1996.
The Compensation Committee of the Board of Directors consists of Leonard W.
Jaffe (Chairman), Sam Yau and N. Colin Lind. The Compensation Committee is
responsible for reviewing and recommending the salaries and bonuses of officers
and certain key employees of the Company, establishing compensation and
incentive plans and determining other fringe benefits.
The Option Committee of the Board of Directors consists of Leonard W. Jaffe
(Chairman) and N. Colin Lind. The Option Committee is responsible for reviewing
and administering the 1993 Plan and authorizing and approving the granting of
stock options in accordance with the 1993 Plan. In 1996, the Compensation
Committee and the Option Committee held one joint meeting.
4
8
COMMON STOCK OWNERSHIP
The following table sets forth information as of February 28, 1997,
concerning the shares of the Company's Common Stock and, for Directors and
executive officers only, the shares of NEC's Common Stock beneficially owned by
(i) each beneficial owner of more than 5% of the outstanding shares of Common
Stock, (ii) each incumbent Director of the Company, (iii) each person serving as
Chief Executive Officer of the Company during the fiscal year ending December
31, 1996, and each of the four most highly compensated other executive officers
of the Company serving in such capacity at December 31, 1996, and (iv) all
Directors and executive officers of the Company serving in such capacity at
March 31, 1997 ("Current Directors and Officers") as a group. Except as
otherwise noted, each beneficial owner listed has sole investment and voting
power (or shares such power with his or her spouse) of the shares indicated.
Beneficial ownership includes any shares the individual has the right to acquire
within 60 days following February 28, 1997, through the exercise of any stock
option or other right. As of February 28, 1997, there were 14,345,917 issued and
outstanding shares of Common Stock of the Company, not including treasury shares
or shares issuable upon exercise of options.
Amount and Percent Amount and
Name of Individual Nature of of Class Nature of Percent
or Entity Beneficial of Beneficial of Class
or Number of Position With Ownership of Company Ownership of of NEC
Persons in Group the Company Company Stock(3) Stock NEC Stock(4) Stock
- ---------------- ----------- ---------------- ----- ------------ -----
National Education 11,900,000 (1) 83.0% N/A N/A
Corporation
Westport Asset 1,438,200 (2) 10.0% N/A N/A
Management, Inc.
Anita Kopec President, Chief Executive 0 * 0 *
Officer and Director (from and
after September 23, 1996)
Roy E. Mayers Former President, Chief 237,500 1.6% 73,179 *
Executive Officer and Director
(through September 20, 1996)
Gunnar C. Voltz Former Vice President - Sales 20,781 * 0 *
(through March 14, 1997)
Floyd D. Rogers Vice President - Finance 31,000 * 0 *
and Chief Financial Officer
Richard Y. Blumenthal Vice President - Alternate 32,500 * 0 *
Channels
Leslie M. Ford Vice President - 33,000 * 8,671 *
Editor-in-Chief
Leonard W. Jaffe Director 5,248 * 23,326 *
5
9
Manuel J. Justiz Director 3,988 * 0 *
Michael R. Klein Director 2,158 * 27,326 *
N. Colin Lind Director 4,748 * 0 *
Sam Yau Chairman of the Board 0 * 1,189,906 3.3%
All Current Directors 115,642 0.8% 1,453,635 4.0%
and Officers, as a group (13 persons)
- ---------------------------
* Less than 1%.
(1) As of December 31, 1996, NEC had sole voting and dispositive power over
11,900,000 shares constituting approximately 83% of the total outstanding
shares of the Company. NEC's principal business address is 2601 Main
Street, Suite 700, Irvine, California 92614.
(2) Based on a Form 13G dated February 13, 1997, and filed with the Securities
and Exchange Commission, Westport Asset Management, Inc. ("Westport")
reported sole voting and dispositive power over 10,000 shares beneficially
owned by officers and stockholders of Westport and shared voting and
dispositive power over 1,428,200 shares held in discretionary accounts
managed by Westport. Westport disclaims beneficial ownership of shares
held by such officers and stockholders and disclaims the existence of a
group. Westport's principal business address is 253 Riverside Avenue,
Westport, Connecticut 06880.
(3) The Company shares listed include shares subject to stock options
currently exercisable or exercisable within 60 days after February 28,
1997, as follows: Mr. Mayers - 227,500; Mr. Voltz - 20,781; Mr. Rogers -
31,000; Mr. Blumenthal - 32,500; Ms. Ford - 31,000; Mr. Jaffe - 3,000; Mr.
Justiz - 3,000; Mr. Klein - 1,500; Mr. Lind - 3,000; and Current Directors
and Officers as a group (13 persons) - 105,000.
(4) The NEC shares listed include the following NEC shares issuable upon
conversion of 6 1/2% Convertible Subordinated Debentures due 2011: Mr.
Jaffe - 4,000 NEC shares. The NEC shares listed also include NEC shares
subject to stock options currently exercisable or exercisable within 60
days after February 28, 1997, as follows: Mr. Mayers - 55,800 NEC shares;
Ms. Ford - 7,000 NEC shares; Mr. Jaffe - 15,744 NEC shares; Mr. Klein -
13,000 NEC shares; Mr. Yau - 919,447 NEC shares; and Current Directors and
Officers as a group (13 persons) - 1,085,540 NEC shares.
[The remainder of page intentionally left blank]
6
10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following tables present information regarding the compensation paid
and stock options granted to each of the persons serving as Chief Executive
Officer of the Company during the fiscal year ended December 31, 1996, and each
of the four most highly compensated other executive officers of the Company
serving in such capacity at December 31, 1996, (collectively the "Named
Officers") during the years ended December 31, 1996, 1995 and 1994.
TABLE I
SUMMARY COMPENSATION
Long-Term
Compensation
Annual Compensation Awards (2)
Number of Securities All Other
Name and Principal Position Year Salary (1) Bonus Underlying Options Compensation (3)
- --------------------------- ---- ---------- ----- ------------------ ----------------
Anita Kopec, 1996 $80,805 $ 18,201 210,000 $ 0
President and Chief Executive
Officer (from and after
September 23, 1996)
Roy E. Mayers 1996 $308,765 (4) $ 0 15,000 $ 3,800
Former President and Chief 1995 $234,640 $ 0 160,000 $ 6,000
Executive Officer (through 1994 $219,019 $ 0 0 $ 6,000
September 20, 1996)
Gunnar C. Voltz, 1996 $128,732 $ 0 10,000 $ 5,114
Former Vice President - Sales 1995 $121,876 $ 0 24,000 $ 4,875
(through March 14, 1997) 1994 $116,448 $ 0 0 $ 5,470
Floyd D. Rogers, 1996 $117,249 $ 0 10,000 $ 4,634
Vice President - Finance 1995 $109,862 $ 0 20,000 $ 4,391
and Chief Financial Officer 1994 $103,865 $ 0 0 $ 4,766
Richard Y. Blumenthal 1996 $112,509 $ 0 10,000 $ 4,422
Vice President - Alternate 1995 $106,481 $ 0 20,000 $ 4,260
Channels 1994 $ 97,034 $ 0 0 $ 4,459
Leslie M. Ford, 1996 $107,784 $ 0 10,000 $ 4,274
Vice President - 1995 $100,817 $ 0 20,000 $ 4,029
Editor-in-Chief 1994 $ 92,839 $ 0 0 $ 4,308
- ----------
(1) Amounts shown include cash compensation earned and received by the Named
Officers as well as amounts earned but deferred at the election of these
officers under the NEC 401(k) Retirement Plan.
(2) No options were issued to the Named Officers in 1994.
(3) Amounts shown are matching contributions made by the Company on behalf of
the Named Officers to the NEC 401(k) Retirement Plan.
7
11
(4) The amount shown includes $61,615 paid to Mr. Mayers in consideration of
vacation benefits earned as of September 20, 1996, the effective date of
Mr. Mayers' resignation as an officer and Director of the Company, and
$68,331 paid to Mr. Mayers subsequent to September 20, 1996, as
compensation for certain consulting services provided the Company. (See
"Board Compensation Committee Report on Executive Compensation -- Chief
Executive Officer 1996 Compensation" below.)
TABLE II
OPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE EXPIRATION OPTION TERM (10 YEARS)(4)
OPTIONS EMPLOYEES PRICE DATE -------------------------
NAME GRANTED IN FISCAL YEAR (PER SHARE) (M/D/Y) 5% 10%
- ------------------- ---------- -------------- ------------ ---------- ---------- ----------
Anita Kopec 210,000(1) 52.73% $ 11.15 9/23/06 $1,472,557 $3,731,748
Roy E. Mayers 15,000(2) 3.77% $ 7.6875 2/07/06 $ 72,519 $ 183,778
Gunnar C. Voltz 10,000(3) 2.51% $ 7.6875 2/07/06 $ 48,346 $ 122,519
Floyd D. Rogers 10,000(3) 2.51% $ 7.6875 2/07/06 $ 48,346 $ 122,519
Richard Y. Blumenthal 10,000(3) 2.51% $ 7.6875 2/07/06 $ 48,346 $ 122,519
Leslie M. Ford 10,000(3) 2.51% $ 7.6875 2/07/06 $ 48,346 $ 122,519
- ----------
(1) This option vests in three equal annual installments beginning September
23, 1997. The option becomes exercisable in full after a change of control
of the Company.
(2) This option expired in full upon Mr. Mayers' resignation as an officer
and Director of the Company.
(3) Each of these options vests in four equal annual installments beginning
February 7, 1997, and accordingly is one-quarter vested.
(4) In accordance with Instruction 6 to Item 402(c) of Regulation S-K
promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") stock
price appreciation has been calculated using a base price of the per share
exercise price for each option, which exercise price equals the average
closing price for the Company's Common Stock as reported on The Nasdaq
National Market for the ten trading days prior to the date of grant.
Annual 5% and 10% appreciation represents a per share increase from (i)
$11.15 per share to $18.16 (5%) and $28.92 (10%), and (ii) $7.6875 per
share to $12.52 (5%) and $19.94 (10%)
8
12
STECK-VAUGHN STOCK OPTION EXERCISES AND YEAR-END VALUES
The following Table III presents certain information regarding the
exercise of options to purchase shares of the Company's Common Stock by each
Named Officer during the year ended December 31, 1996, and the number and value
of outstanding Company options at December 31, 1996.
TABLE III
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 (1)
---------------------------- ---------------------------
NUMBER OF
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Anita Kopec 0 $ 0 0 210,000 $ 0 $ 0
Roy E. Mayers 0 $ 0 227,500 0 $ 691,291 $ 0
Gunnar C. Voltz 18,000 $ 88,550 18,281 22,094 $ 0 $ 65,975
Floyd D. Rogers 0 $ 0 28,500 19,500 $ 82,125 $ 60,500
Richard Y. Blumenthal 0 $ 0 30,000 20,000 $ 82,125 $ 60,500
Leslie M. Ford 0 $ 0 28,500 19,500 $ 82,125 $ 60,500
- ------------
(1) Based upon the difference between the closing price for the Common Stock
reported on The Nasdaq National Market on December 27, 1996, of $11.00 and
the option exercise price.
[The remainder of page intentionally left blank]
9
13
NEC STOCK OPTION EXERCISES AND YEAR-END VALUES
The following Table IV presents certain information regarding the exercise
of options to purchase shares of NEC's common stock by each Named Officer during
the year ended December 31, 1996, and the number and value of outstanding NEC
options at December 31, 1996.
TABLE IV
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 (1)
---------------------------- ----------------------------
NUMBER OF
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Anita Kopec 0 $ 0 0 0 $ 0 $ 0
Roy E. Mayers 0 $ 0 55,800 0 $617,302 $ 0
Gunnar C. Voltz 1,625 $ 11,639 0 0 $ 0 $ 0
Floyd D. Rogers 3,000 $ 22,988 4,535 0 $ 43,295 $ 0
Richard Y. Blumenthal 5,500 $ 18,700 0 $ 0 $ 0 $ 0
Leslie M. Ford 0 $ 0 7,000 0 $ 73,750 $ 0
- ------------
(1) Based upon the difference between the closing price on the New York Stock
Exchange on December 31, 1996, of $15.25 and the option exercise price.
SEVERANCE BENEFITS
Pursuant to an NEC policy for its executive officers and subsidiary
presidents, including persons serving as President and Chief Executive Officer
of the Company, in the event any such officer's employment is terminated without
cause or after a change of control of NEC, the officer would be entitled to
continuation of his or her salary and fringe benefits for one year or, at the
officer's option, a lump sum payment equal to one year's salary (as of February
28, 1997, such lump sum payment to Ms. Kopec would be $210,000). Accordingly,
Mr. Mayers, who resigned as President and Chief Executive Officer of the Company
as of September 20, 1996, but continued his employment with the Company as a
consultant through December 31, 1996, is receiving continuation of his annual
base salary ($246,750) and fringe benefits for one year beginning January 1,
1997.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
NEC has a Supplemental Executive Retirement Plan ("SERP") for its
executive officers and certain subsidiary presidents, including persons serving
as President and Chief Executive Officer of the Company. Under the SERP,
participating officers will receive lifetime retirement income at age 65 equal
to 60% of his or her average earnings (as defined in the SERP) (reduced by the
amount of his or her primary social security benefits)
10
14
multiplied by a percentage based on the number of years of credited service. The
credited service percentage is 10% after the sixth year and increases 10% per
year thereafter until it reaches 100% at 15 years of credited service. Based on
his years of credited service as of December 31, 1996, the date on which Mr.
Mayers' employment with the Company terminated, Mr. Mayers is 40% vested and
accordingly will be entitled to receive an annual retirement benefit (after
deduction for social security benefits) from the Company of an estimated
$61,600. Ms. Kopec, based on her current level of compensation and continued
employment until age 65, would be entitled to receive an annual retirement
benefit (after deduction for social security benefits) from the Company of
approximately $184,600. In each case, a proportionately smaller retirement
benefit would be provided if Mr. Mayers or Ms. Kopec elects to receive benefits
after age 60 and prior to age 65. The SERP provides for disability benefits of
up to 60% of a participant's average earnings and provides for a death benefit
of two times average earnings. A surviving spouse and minor children also
receive certain benefits under the SERP. In addition to the severance benefits
described above, pursuant to the SERP, if Ms. Kopec's employment terminates
within two years following a change of control of NEC effected after March 23,
1998, she would be entitled to receive a cash sum equal to the present value of
full retirement benefits without regard to years of service completed. Based on
her current level of compensation, this amount would be approximately
$1,049,000.
The following Table V presents information regarding estimated annual
benefits payable under the SERP upon retirement by a participating executive at
age 65 (normal retirement age under the SERP) in specified compensation and
years of service classifications.
TABLE V
PENSION PLAN TABLE (1)(2)
YEARS OF SERVICE
REMUNERATION 3 6 9 12 15
- ------------ - - - -- --
$ 125,000 $0 $ 7,500 $ 30,000 $ 52,500 $ 75,000
150,000 0 9,000 36,000 63,000 90,000
175,000 0 10,500 42,000 73,500 105,000
200,000 0 12,000 48,000 84,000 120,000
225,000 0 13,500 54,000 94,500 135,000
250,000 0 15,000 60,000 105,000 150,000
300,000 0 18,000 72,000 126,000 180,000
400,000 0 24,000 96,000 168,000 240,000
450,000 0 27,000 108,000 189,000 270,000
500,000 0 30,000 120,000 210,000 300,000
- ---------
(1) Estimated benefits shown are before reduction for social security
benefits.
(2) Ms. Kopec is the only current Company employee participating in the SERP.
She has been employed with the Company since September 23, 1996, and is
not yet vested under the SERP.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
ADMINISTRATION.
Decisions on compensation of the Company's executive officers are made by
the Compensation Committee (the "Committee") of the Board of Directors of the
Company. All decisions made by the Committee relating to the compensation of the
Company's executive officers are reviewed by the full Board, except decisions
regarding awards under the Company's 1993 Plan, which are made solely by the
Option Committee of the Board
11
15
(the "Option Committee"). The members of the Option Committee are Messrs. Jaffe
and Lind, each of whom is a non-employee director under Rule 16(b)(3) of the
Exchange Act.
EXECUTIVE OFFICER COMPENSATION POLICY.
The Company's executive compensation policies are designed to provide
appropriate levels of compensation as related to the Company's annual
performance and long-term goals, reward attainment of management objectives and
assist the Company in attracting and retaining qualified executives. The
Committee believes that a substantial portion of each executive officer's
compensation should be dependent upon the Company's financial performance.
Accordingly, executive officers are eligible for annual bonuses based upon
achievement of predetermined levels of Company financial performance (see "Cash
Bonus Plan and Relationship to Executive and Company Performance" below).
BASE SALARY. The compensation of each executive officer is reviewed
annually by the Committee, with reference to the executive's performance, level
of responsibility and experience to determine whether the current base salary is
appropriate. If significant changes in an executive officer's salary are
contemplated, the Committee refers to the median salary range paid to executives
with comparable duties at companies in the service industry of similar size in
the same geographical area, and, if appropriate, the executive officer's salary
is adjusted according to salary surveys provided by nationally recognized
research organizations. The base salary of each executive officer other than the
Chief Executive Officer ultimately is fixed by the Committee after consultation
with the Chief Executive Officer. The base salary of the Chief Executive Officer
is recommended by the Committee and approved by the Board (see "Chief Executive
Officer 1996 Compensation" below). In 1996, the Committee adjusted Ms. Ford's
and Messrs. Rogers', Blumenthal's and Voltz's salary upward by approximately
5.5%. Mr. Mayers' base salary for 1996 was increased by 5% over his 1995 salary.
Ms. Kopec's annual base salary of $210,000 for 1996 was established by arms
length negotiation and was set forth in her Employment Agreement dated September
10, 1996. Ms. Kopec's base salary will remain unchanged for 1997.
CASH BONUS PLAN AND RELATIONSHIP TO EXECUTIVE AND COMPANY PERFORMANCE. At
the commencement of each fiscal year, a business plan for the Company is
prepared and submitted to the Committee and full Board of Directors for review
and approval. Based upon the approved 1996 business plan, the Committee
established the 1996 EVA Incentive Compensation Plan (the "1996 EVA Plan") which
set forth the methodology for determining incentive (bonus) compensation for
executive officers. The Board and the Committee believe a significant part of
each executive officer's compensation should be based upon the Company's
financial performance. The Committee establishes the target bonus level for the
Company's Chief Executive Officer and, in consultation with the Chief Executive
Officer, also establishes the target bonus levels for each of the Company's
other participating executives. For 1996, the target bonus level established for
Mr. Mayers was 60% of base salary. Similarly, the target bonus level established
for Ms. Kopec was 60% of her base salary. The target bonus levels established
for the other participating executives were between 20% and 25% of base salary.
The 1996 EVA Plan bases annual bonus compensation upon the Company's
attainment of a predetermined level of economic profit for the year. Economic
profit, under the 1996 EVA Plan, equals adjusted income less a capital charge.
Adjusted income, essentially, is the Company's net income calculated in
accordance with Generally Accepted Accounting Principles adjusted for certain
items, such as unusual and nonrecurring charges and the amortization of
intangibles, to better match the revenue and expense of operations. The capital
charge, by which adjusted income is reduced to reach economic profit, is a
predetermined minimum return on the Company's debt and equity capital. If the
Company's economic profit equals the target economic profit established by the
Committee pursuant to the Company's business plan for the year, then the
participating officers receive their respective target bonuses. If economic
profit was at least 85% but less than 100% of the target economic profit, then
the participating officers receive, prorated, between 50% and 99% of their
respective target bonuses. If the economic profit exceeds the target economic
profit, then the participating officers collectively earn an overachievement
bonus equal to a predetermined portion of the economic profit in excess of the
target economic profit.
12
16
In no event is any part of the bonus earned if the economic profit is
below 85% of the target economic profit amount for the year. In 1996, the
Company did not achieve the target level of economic profit, and accordingly
participating officers did not earn or receive bonus incentive compensation for
1996 under the 1996 EVA Plan.
STOCK OPTION GRANTS. The Committee and the Option Committee endorse the
position that granting stock options to the Company's executive officers can be
very beneficial to stockholders because it aligns management's and stockholders'
interests in the enhancement of stockholder values. Accordingly, at a meeting of
the Board of Directors held February 7, 1996, executive officers were granted
the following options to purchase Company Common Stock at a per share exercise
price of $7.6875 based on the average closing price for the Company's Common
Stock as reported on the The Nasdaq National Market for the ten trading days
prior to February 7, 1996: Mr. Voltz - 10,000 shares; Mr. Rogers - 10,000; Mr.
Blumenthal - 10,000; and Ms. Ford - 10,000. The options vest in four equal,
annual installments beginning February 7, 1997 through February 7, 2000. All of
the options expire on February 7, 2006. Mr. Mayers and Ms. Kopec also were
granted options to purchase Company Common Stock as discussed below under "Chief
Executive Officer 1996 Compensation."
OTHER BENEFITS. The executive officers participate in broad-based employee
benefit plans, including health care insurance plans and a 401(k) Retirement
Plan sponsored by NEC in which the Company contributes some matching
contributions. In addition to these plans, Mr. Mayers participated in, and Ms.
Kopec now participates in, the NEC Supplemental Executive Medical Plan and,
together with other executive officers, certain other executive benefits. The
incremental cost to the Company of providing these additional executive officer
benefits (which is not set forth in any of the preceding tables) equaled, on
average, approximately 6% of the salaries paid to these executive officers in
1996. No benefits under any of these plans are directly or indirectly tied to
Company performance, other than under the NEC 401(k) Retirement Plan, which may
be partially invested at the direction of the participant in a fund comprised of
NEC Common Stock.
CHIEF EXECUTIVE OFFICER 1996 COMPENSATION.
MR. MAYERS. During the fiscal year ended December 31, 1996, Mr. Mayers
participated in the executive compensation plans described above. Mr. Mayers'
annual base salary for the year was increased approximately 5% over his 1995
annual base salary based upon the Committee's evaluation of his performance,
level of responsibility and experience and the Company's performance. Mr. Mayers
did not receive bonus incentive compensation for 1996 under the 1996 EVA Plan
because the Company did not achieve the minimum economic profit established by
the Committee. On February 7, 1996, Mr. Mayers was granted an option to purchase
15,000 shares of Company Common Stock at a per share exercise price of $7.6875
(the average closing price for the Company's Common Stock as reported on The
Nasdaq National Market for the ten trading days prior to February 7, 1996.) None
of these options vested prior to the effective date of Mr. Mayers' resignation
from the Company and, due to such resignation, will not vest.
Mr. Mayers resigned as President and Chief Executive Officer and a
Director of the Company effective September 20, 1996. He remained employed by
the Company as a consultant through December 31, 1996. Mr. Mayers is
receiving separation benefits equal to 12 months of base salary and benefits
continuation beginning January 1, 1997.
MS. KOPEC. Ms. Kopec was appointed President and Chief Executive Officer
of the Company on September 23, 1996, and subsequently was appointed a Director
of the Company to fill the vacancy created by Mr. Mayers' resignation. Ms.
Kopec's annual base salary was $210,000 for 1996 and was not adjusted for 1997.
She also participates in the executive compensation plans described above. Ms.
Kopec did not receive bonus incentive compensation for 1996 under the Company's
1996 EVA Plan because the Company did not achieve the minimum economic profit
established by the Committee. Pursuant to her Employment Agreement, however, for
1996 only, she received a guaranteed minimum bonus equal to 30% of her annual
base salary pro rated from her employment start date through December 31, 1996.
This amount was $18,201. On September 23, 1996, Ms. Kopec was granted an option
to purchase 210,000 shares of Company Common Stock at a per share exercise price
of $11.15 (the average closing price for the Company's Common Stock as reported
on The Nasdaq National
13
17
Market for the ten trading days prior to September 23, 1996). The option vests
in equal annual installments over the first three years of her employment
beginning September 23, 1997, and expires September 23, 2006.
POLICY REGARDING DEDUCTIBILITY OF COMPENSATION.
Section 162(m) of the Internal Revenue Code of 1986, as amended, (the
"Section") provides that, for federal income tax purposes, the otherwise
allowable deduction for compensation paid or accrued to a covered employee of a
publicly held corporation is limited to no more than $1 million per year, unless
certain requirements are met. The Company presently is not affected by the
Section because, for the fiscal year ended December 31, 1996, no executive
officer's compensation exceeded $1 million, and the Company does not believe
that the compensation of any executive officer of the Company will exceed $1
million for the 1997 fiscal year. Notwithstanding the foregoing, the Company is
committed to complying with the requirements of the Section for future
compensation awards so that the corporate tax deduction is maximized without
limiting the Company's flexibility to attract and retain qualified executives to
manage the Company.
Compensation Committee
Leonard W. Jaffe, Chairman
Sam Yau
N. Colin Lind
STOCK PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage changes in
the Company's cumulative total shareholder return to the Total Return Index for
The Nasdaq National Market (U.S. companies) and a peer group index for the
period commencing with the consummation of the Company's initial public offering
(July 15, 1993) and ending December 31, 1996. The total return calculation
assumes reinvestment of all dividends for both indexes. The comparison assumes
$100 invested July 15, 1993, the date of the Company's initial public offering,
in Company Common Stock (at the initial public offering price of $12.00 per
share), the Total Return Index for The Nasdaq National Market (U.S. companies)
and the self-determined peer group. Except for the dividend declared by the
Company on April 1, 1993, and paid from proceeds of its initial public offering,
the Company has not paid any dividends on its stock during the time frame set
forth below. There is no published index for companies in educational
publishing. The Company developed a peer group consisting of the following
companies: Goodheart Willcox, Inc., Intervisual Books, Inc., Scholastic Corp.,
John Wiley & Sons, Inc., Houghton Mifflin Co., McGraw Hill, Inc., and Western
Publishing Group, Inc.
14
18
COMPARISON OF CUMULATIVE TOTAL RETURNS AMONG THE COMPANY, THE TOTAL RETURN
INDEX FOR THE NASDAQ NATIONAL MARKET (U.S. COMPANIES)
AND PEER GROUP INDEX
[PERFORMANCE GRAPH]
7/15/93 12/31/93 12/30/94 12/29/95 12/31/96
------- -------- -------- -------- --------
Steck-Vaughn Publishing 100.0 78.1 47.9 61.5 91.7
Corporation
CRSP Index for Nasdaq National 100.0 109.8 107.4 151.8 186.7
Market (US Companies)
Self-Determined Peer Group 100.0 114.8 115.2 151.3 162.5
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Messrs. Yau, Jaffe and Lind served on the Compensation
Committee of the Board of Directors. Mr. Yau is President, Chief Executive
Officer and a Director of NEC. Mr. Jaffe is a Director and a member of the
Compensation and Option Committee of the Board of NEC. Mr. Lind is an
officer of Richard C. Blum & Associates, L.P. ("RCBA") which is a beneficial
owner of a significant percentage of NEC's outstanding common stock. RCBA's
principal shareholder, Mr. Richard C. Blum, is a member of the Board of
Directors of NEC and a member of the Compensation and Option Committee of the
Board of NEC.
TRANSACTIONS BETWEEN THE COMPANY AND NEC
PRINCIPAL STOCKHOLDER; Control of the Company. NEC owns approximately 83%
of the outstanding Common Stock of the Company. As long as NEC controls the
majority of the voting stock of the Company, it will be able, acting alone, to
elect at least a majority of the Board of Directors of the Company and to
approve any action requiring the affirmative vote of the majority of the total
outstanding shares. At present, four out of six of the Company's Directors are
also Directors or affiliates of Directors of NEC. The retention by NEC of more
than 50% of the Company's outstanding voting securities precludes any
acquisition of control of the Company not favored by NEC and places NEC in a
position to direct the management policy, strategic direction and financial
decisions of the Company.
INTERCOMPANY AGREEMENT. NEC provides various services to the Company,
including, but not limited to, payroll, taxes, legal, treasury, employee
benefits administration, financial and accounting, executive services
15
19
and insurance administration. For 1994, 1995 and 1996, the amounts charged for
these services were $821,000, $848,000 and $901,000, respectively, exclusive of
insurance and employee benefits, which totaled $588,000 for 1994 and $1,240,000
for each of 1995 and 1996, and outside professional services which are billed
separately. The Company does not believe that there would have been a material
impact on its net income if the Company had obtained such services independent
of NEC.
The Company and NEC have entered into an Intercompany Agreement for the
purpose of defining their ongoing relationships. The Intercompany Agreement was
developed in the context of a parent/subsidiary relationship and therefore is
not the result of arms-length negotiations between independent parties. The
Company believes that the Intercompany Agreement, taken as a whole, is fair to
both parties, and that the amount of the expenses contemplated by the
Intercompany Agreement would not be materially different if the Company operated
on a stand-alone basis.
The term of the Intercompany Agreement initially extended through December
31, 1994. Thereafter, the Intercompany Agreement automatically renews for
successive one-year terms unless terminated by either party by notice given at
least 90 days prior to the end of any term. It automatically has renewed for
1995, 1996 and 1997.
In addition to the other services provided under the Intercompany
Agreement, NEC provides the Company with insurance coverage and self-insurance
programs, including general liability, workers' compensation, group health,
automobile, property damage, business interruption, directors and officers'
liability, criminal liability, fidelity liability and surety bonds. The charge
to the Company for coverage generally will be based upon a pro rata portion of
the costs to NEC of the various policies.
Under the Intercompany Agreement, the Company participates on a daily
basis in a cash management program administered by NEC. The Company's cash is
transferred to a separate bank account in its name. Under the cash management
program, NEC invests the Company's excess cash pursuant to the Company's
Investment Policy, and interest earned on Company funds is credited directly to
the Company's account. The Company has access to the cash invested.
The fees charged for services under the Intercompany Agreement are subject
to renegotiation by NEC and the Company from time to time to reflect significant
changes in the Company's or NEC's operations that affect the cost of the
services provided. The Intercompany Agreement provides that NEC shall have no
liability with respect to any loss or damage arising in connection with the
provision of services to the Company, except to the extent of amounts billed or
billable for a particular service.
Intercompany Loan Agreement. The Intercompany Agreement originally
provided for borrowing by NEC of Company funds. Effective February 28, 1995, the
Company and NEC entered into a loan agreement pursuant to which the Company
provided to NEC a $10,000,000 revolving line of credit. On July 25, 1996, NEC
paid the loan in full, terminated the revolving loan agreement and terminated
NEC's right to borrow Company funds in the future. At December 31, 1995,
$4,000,000 was outstanding under the NEC loan. During 1996, NEC paid to the
Company interest expense and other charges required under the revolving loan
agreement of $430,000.
Tax Sharing Agreement. As long as NEC continues to own 80% or more of the
voting power and value of the Common Stock (with certain exceptions) of the
Company, NEC will be required to continue to include the Company and its
subsidiaries in NEC's consolidated federal income tax returns. Under federal tax
law, the Company and each of its subsidiaries that are included in an NEC
consolidated federal income tax return are jointly and severally liable for all
the federal income tax liabilities with respect to such NEC consolidated federal
income tax return, including tax liabilities not attributable to income of the
Company or its subsidiaries ("Non-Steck-Vaughn Taxes"). This is true for all
years in which the Company or its subsidiaries, respectively, are included in an
NEC consolidated federal income tax return.
To allocate the tax liabilities among them, NEC and its subsidiaries,
including the Company and its subsidiaries, entered into a Tax Sharing Agreement
as of January 1, 1993. In general, the Tax Sharing Agreement provides that, so
long as NEC is required to file consolidated federal income tax returns that
include the Company
16
20
or its subsidiaries, the Company and its subsidiaries will be responsible for
paying to NEC its Separate Tax Liability (as defined in the Tax Sharing
Agreement) computed as a flat tax on its income at the highest marginal rate
applicable to corporations under the various income tax systems provided under
the Internal Revenue Code. Similarly, NEC will be required to reimburse the
Company or its subsidiaries for the use of such member's tax attributes (i.e.,
net operating losses, capital losses or credits) to reduce federal income tax
liability on an NEC consolidated federal income tax return at the highest
marginal rate applicable to corporations under the appropriate taxing system
applied to such return under the Internal Revenue Code when such attributes are
realized. Similar provisions apply with respect to the filing of combined or
consolidated state income or franchise tax returns and the payment of tax.
Under the Tax Sharing Agreement, NEC will determine the reporting of all
items on the NEC consolidated federal income tax returns and will be responsible
for all audits and controversies. Separate Tax Liabilities of each member will
be adjusted to reflect adjustments resulting from resolved audits or other
controversies and appropriate payments or reimbursements will be made.
Pursuant to the Tax Sharing Agreement, NEC will indemnify the Company and
its subsidiaries, subject to certain conditions, for (i) Non-Steck-Vaughn Taxes
and (ii) tax liabilities with respect to NEC consolidated federal income tax
returns that are attributable to the Company or its subsidiaries and for which
each such corporation has paid its Separate Tax Liability to NEC. The Tax
Sharing Agreement will bind all parties to it with respect to all covered tax
returns even after a particular member is no longer affiliated with NEC. The Tax
Sharing Agreement is not binding on the Internal Revenue Service.
DIVIDENDS
No dividends were paid by the Company in 1996, and the Company does not
anticipate paying dividends in 1997.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
Directors and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission").
Officers, Directors and stockholders owning greater than 10% of the Common Stock
of the Company are required by Commission regulation to furnish the Company with
copies of all reports filed pursuant to Section 16(a).
Based solely on review of the copies of such reports required by Section
16(a) or written representations that no such reports were required, the Company
believes that its officers, Directors and stockholders owning greater than 10%
of the Common Stock of the Company complied with all applicable Section 16(a)
filing requirements during 1996.
PROPOSAL 2:
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse LLP to continue as
the Company's independent certified public accountants for the year ending
December 31, 1997, and to audit the books and accounts of the Company for that
year, subject to ratification of its selection by the stockholders at the Annual
Meeting. Price Waterhouse LLP has served as the independent accountants of the
Company since the Company's inception in 1993. Price Waterhouse LLP has served
as the independent accountants of the Company's wholly owned subsidiary,
Steck-Vaughn Company, since 1979. A representative of Price Waterhouse LLP will
be present at the Annual Meeting. The representative will be available to
respond to questions and will have an opportunity to make a statement if
desired.
17
21
PROPOSAL 3:
APPROVAL OF TECHNICAL AMENDMENTS TO THE 1993 STOCK OPTION PLAN,
AS AMENDED, TO ADDRESS CERTAIN INTERNAL REVENUE CODE REQUIREMENTS
GENERAL
The Company's 1993 Stock Option Plan, as amended (the "1993 Plan"),
provides for the grant of options to purchase up to an aggregate 1,360,000
shares of Common Stock to key employees, officers and directors of the Company
or any of its subsidiaries. On February 5, 1997, the Board of Directors
approved, subject to stockholder approval, certain technical amendments to the
1993 Plan necessary under Section 162(m) of the Internal Revenue Code of 1986,
as amended ("Section 162(m)"). Section 162(m) provides that, for federal income
tax purposes, the otherwise allowable deduction for compensation paid or accrued
to certain executive officers of a publicly held corporation is limited to no
more than $1 million per year, unless certain requirements are met; the
technical amendments are necessary to ensure that compensation paid to executive
officers in the form of stock option grants under the 1993 Plan meets such
requirements.
The technical amendments to the 1993 Plan consist of the following: (i)
limiting the maximum number of shares of Common Stock for which options may be
granted under the 1993 Plan to any person in one calendar year (see
"Administration" below); and (ii) confirming that the Directors who administer
the 1993 Plan must be "outside directors" under Section 162(m) and "non-employee
directors" under Rule 16b-3 of the Securities Exchange Act of 1934, as amended
(see "Administration" below"). The following is a summary of the principal
features of the 1993 Plan as amended by the technical amendments set forth in
this Proposal; such summary is qualified in its entirety by reference to the
full text of the 1993 Plan itself, as set forth in Exhibit A to this Proxy
Statement.
DESCRIPTION OF THE 1993 PLAN
Shares Subject to the 1993 Plan. Up to an aggregate of 1,360,000 shares of
the Company's Common Stock may be issued upon the exercise of all options under
the 1993 Plan. Shares subject to options that are reacquired by the Company
prior to vesting or that expire or terminate prior to exercise thereafter may be
available for future grants of options under the 1993 Plan and will not be
deemed to increase the aggregate number of shares available under the 1993 Plan.
The 1993 Plan provides for appropriate adjustment of shares available under the
1993 Plan and of shares subject to outstanding options in the event of any
changes in the outstanding Common Stock of the Company by reason of merger,
stock splits or similar events or in the event of payment of dividends in Common
Stock. As of February 28, 1997, participants in the 1993 Plan held options to
acquire an aggregate of 929,959 shares at an average exercise price of $9.85 per
share, and a total of 391,791 shares remained available for grant under the 1993
Plan.
TYPE OF OPTIONS. All options granted under the 1993 Plan will be
"non-qualified" stock options; that is, options not specifically authorized or
qualified for favorable federal income tax consequences.
ADMINISTRATION. The 1993 Plan is administered by the Option Committee of
the Board of Directors of the Company consisting of two directors designated by
the Board (the "Option Committee"), each of whom is a "Non-Employee Director"
for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and an "outside director" under Section 162(m). Subject to
the provisions of the 1993 Plan, the Option Committee has the authority to
determine (i) the individuals to whom, and the time or times at which, options
will be granted, (ii) the number of shares to be subject to each option, (iii)
the option price and terms of payment, (iv) the duration of each option, and (v)
such other terms and conditions as may be deemed appropriate by the Option
Committee. Notwithstanding the foregoing, the maximum number of shares of Common
Stock for which options may be granted under the 1993 Plan to any person in one
calendar year may not exceed 500,000, except that the Company may grant options
to acquire up to 1,000,000 shares of Common Stock to a person in connection with
his or her initial employment with the Company.
18
22
ELIGIBILITY AND PARTICIPATION. All executives and other key employees of
the Company or of any subsidiary corporation, including directors, are eligible
for selection to participate in the 1993 Plan. Directors of the Company who are
not regular employees of the Company (excluding Option Committee members) and
other non-employees may participate in the 1993 Plan at the discretion of the
Option Committee. An individual who has been granted an option, if such
individual otherwise is eligible, may be granted an additional option or options
if the Option Committee so determines, subject to the other provisions of the
1993 Plan.
DURATION OF OPTIONS. Each option is of a duration specified in the
option agreement as determined by the Option Committee.
PURCHASE PRICE. The purchase price payable upon the exercise of an option
will be determined by the Option Committee at the time of grant. Payment in full
for the number of shares purchased upon the exercise of an option must be made
in cash or its equivalent acceptable to the Option Committee at the time the
option is exercised. To the extent provided in the option agreement executed by
the option holder, the purchase price may be paid by the assignment and delivery
to the Company of shares of Common Stock, a combination of cash and shares of
Common Stock equal in value to the exercise price, or with the proceeds of a
loan made by the Company pursuant to the 1993 Plan. Any shares assigned and
delivered to the Company in payment or partial payment of the purchase price
will be valued at their fair market value on the exercise date as determined
under the 1993 Plan.
LOANS. The Company may make a loan to any option holder in connection with
the exercise of the option holder's option in the discretion of the Option
Committee upon such terms and conditions consistent with the provisions of the
1993 Plan, as the Option Committee may determine, in an amount not to exceed the
exercise price of the options being exercised plus an amount equal to reasonably
estimated income taxes payable by the option holder by reason of the exercise.
Such loans shall be secured by shares of the Company's Common Stock with a fair
market value not less than the principal amount of the loan and shall comply
with all applicable laws, rules and regulations of the Federal Reserve Board and
of any other governmental agency having jurisdiction.
BASIC TERMS OF OPTIONS. Each option will be evidenced by a stock option
agreement containing terms and conditions not inconsistent with the provisions
of the 1993 Plan. Options shall be exercisable in installments during the period
prior to expiration as the Option Committee may determine, provided that no
option is exercisable in any event for at least six months after the date of
grant. To the extent that an option is not exercised when it becomes
exercisable, it shall continue to be exercisable until the option terminates or
expires. No option holder has any rights as a stockholder with respect to shares
covered by the option until the date of issuance of a stock certificate to the
option holder for such shares upon exercise of the option. During the lifetime
of the option holder, the option is exercisable only by the option holder.
Options are transferable only by will or the laws of descent and distribution.
TERMINATION OF EMPLOYMENT. The 1993 Plan provides that no stock option is
exercisable more than three months after termination of the employment of the
option holder except that, if such termination is due to death or disability of
the employee, then it is exercisable for up to one year after such employee's
death or disability. Options held by an employee who is terminated for "cause"
(as defined in the 1993 Plan) terminate immediately upon such termination of
employment.
DURATION AND AMENDMENT OF THE 1993 PLAN. The 1993 Plan will remain in
effect until all stock subject to the 1993 Plan shall have been purchased
pursuant to the exercise of options granted under the 1993 Plan; provided,
however, that no options may be granted after May 5, 2003. The Board of
Directors or the Option Committee can amend the 1993 Plan as it deems advisable
but unless the stockholders approve, no amendment can increase the maximum
number of common shares subject to the 1993 Plan or make other material changes
to the 1993 Plan, and no amendment to the 1993 Plan may alter, terminate, impair
or adversely affect any outstanding option without the written consent of the
option holder.
19
23
FEDERAL INCOME TAX CONSEQUENCES
The grant of an option is not expected to result in income to the option
holder or in a tax deduction for the Company at the time of the grant. The
exercise of a stock option would result in ordinary income for the option holder
and a tax deduction for the Company measured by the difference between the
option price and the fair market value of the shares received at the time of
exercise, except in the case of officers subject to Section 16(b) of the
Exchange Act, who are subject to special rules. Income tax withholding is
required.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Company present and voting at the Annual Meeting is required for
approval of the technical amendments. Proxies solicited hereby will be voted FOR
approval of the technical amendments, unless a vote against approval or
abstention specifically is indicated. If the technical amendments are not
approved by the stockholders, all options previously granted under the 1993 Plan
will remain in full force and effect; however, no further option grants will be
made under the 1993 Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
TECHNICAL AMENDMENTS TO THE 1993 PLAN.
NEW PLAN BENEFITS
The following table sets forth certain information regarding the options
that have been granted, or are expected to be granted, in 1997 under the 1993
Plan. Each option has an exercise price per share equal to the average closing
sale price per share of Common Stock on the Nasdaq National Market for the ten
trading days prior to the date of grant.
NUMBER OF
NAME AND POSITION OPTION SHARES (1)
- ----------------- -----------------
Anita Kopec, President, Chief Executive Officer and Director 0
(from and after September 30, 1996)
Richard Y. Blumenthal, Vice President-Alternate Channels 10,000
Leslie M. Ford, Vice President-Editor-in-Chief 10,000
Floyd D. Rogers, Vice President-Finance and Chief Financial Officer 10,000
Roy E. Mayers, former President, Chief Executive Officer and Director
(through September 20, 1996) 0
Gunnar C. Voltz, former Vice President-Sales (through March 14, 1997) 10,000
Sam Yau, Director and Chairman of the Board 0
Leonard W. Jaffe, Director 0
Manuel J. Justiz, Director 0
Michael R. Klein, Director 0
N. Colin Lind, Director 0
All executive officers serving in such capacity at March 31, 1997,
as a group (8 persons) 100,000
All Directors who are not executive officers, as a group (5 persons) 0
All employees other than executive officers, as a group 45,000
- ----------
20
24
(1) The number of option shares issuable each year is in the discretion of the
Option Committee of the Board of Directors. (See "Proposal 3: Approval of
Technical Amendments to the 1993 Stock Option Plan, as amended.") All
options (except as to 20,000 shares discussed below) were granted February
5, 1997, at an exercise price of $11.125 per share; options to acquire
20,000 shares (included only in the "All executive officers as a group"
listing) were granted January 1, 1997, also at an exercise price of
$11.125 per share. The options listed vest pro rata over four years
beginning one year following the date of grant and expire ten years
following the date of grant. Mr. Voltz's options expired March 14, 1997,
upon his resignation from the Company.
OTHER MATTERS
Enclosed please find a copy of the Company's Annual Report on Form 10-K for
year ended December 31, 1996, containing audited financial statements, five-year
highlights, financial review and certain other information about the Company. In
addition, the Company's summary annual report, which will be mailed shortly,
will contain our letter to stockholders, a financial and operating review and
outlook and condensed financial statements, as well as other information of
topical interest.
STOCKHOLDER PROPOSALS
For stockholder proposals to be considered for inclusion in the proxy
materials for the Company's 1998 Annual Meeting, they must be received by the
Company no later than December 5, 1997. Proposals should be addressed to:
Corporate Secretary, Steck-Vaughn Publishing Corporation, c/o National Education
Corporation, 2601 Main Street, Suite 700, Irvine, California 92614.
By Order of the Board of Directors
Philip C. Maynard
Secretary
Dated: April 4, 1997
21
25
STECK-VAUGHN PUBLISHING CORPORATION EXHIBIT A
AMENDED AND RESTATED
1993 STOCK OPTION PLAN
I. GENERAL PROVISIONS
1.1 Purposes of the Plan. The purposes of the Amended and Restated 1993
Stock Option Plan of Steck-Vaughn Publishing Corporation are to provide a means
to attract and retain competent personnel, to provide participating officers and
other key employees, and such other persons (other than Directors who are not
employees of the Company) as the Committee may from time to time determine, with
long-term incentives for high levels of performance and for unusual efforts to
improve the financial performance of Steck-Vaughn Publishing Corporation, and to
align the interests of Plan participants with the interests of the stockholders.
These purposes may be achieved through the grant of Options under the Plan.
1.2 Definitions.
(a) "Board" means the Board of Directors of Steck-Vaughn Publishing
Corporation.
(b) "Cause" means, with respect to the discharge by the Company of any
Participant, (i) refusal to perform duties assigned in accordance with the
Participant's employment agreement with the Company, if any, or assigned by any
officer of the Company, or overt and willful disobedience of orders or
directives issued to the Participant by the Company and within the scope of the
Participant's duties to the Company; (ii) commission of illegal acts in
connection with the performance of duties on behalf of the Company; or (iii)
material violation of the Company's policies and procedures.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board of Directors
to administer the Plan. The Committee shall be composed entirely of members who
meet the requirements of Section 1.4(a) hereof. If no committee is appointed,
for purposes of this Plan the Committee shall consist of the Board.
(e) "Common Stock" means the common stock of Steck-Vaughn Publishing
Corporation, par value $0.01 per share.
(f) "Company" means Steck-Vaughn Publishing Corporation and any present
or future parent or subsidiary corporations (as defined in Section 425 of the
Code) or any successor to such corporations.
(g) "Employee" means any regular full-time employee of the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means the fair market value of a share of Common
Stock as determined by the Committee on the basis of such factors as it may deem
appropriate, provided that (i) if on the date such determination is made, the
Common Stock is then traded on a national securities exchange, the fair market
value of the Common Stock shall be determined by reference to the closing sale
price of the Common Stock as of 4:00 p.m. Eastern Time as reported by the Wall
Street Journal; (ii) if the Common Stock is not listed or admitted to trade on a
national securities exchange, the fair market value of the Common Stock shall be
the closing sale price for the Common Stock (or if no closing sale price is
available, then the mean of the last reported bid and asked price) as furnished
by the National Association of Securities Dealers, Inc. through the Nasdaq
National Market or a similar organization if The Nasdaq National Market is no
longer reporting such information; or (iii) if the Common Stock is not admitted
to trade on a national securities exchange and if bid and asked prices for the
Common Stock are not so furnished through The Nasdaq National Market or a
similar organization, the fair market value shall be determined by the
Committee.
1
26
(j) "Option" means a right to purchase Common Stock granted under this
Plan.
(k) "Participant" means any Employee or other person selected to receive
an Option pursuant to Section 1.5 hereof.
(l) "Plan" means the Company's Amended and Restated 1993 Stock Option
Plan as set forth herein, as amended from time to time.
1.3 Shares of Common Stock Subject to the Plan.
(a) Subject to the provisions of Section 1.3(c) and Section 3.1 of the
Plan, the aggregate number of shares of Common Stock that may be issued pursuant
to Options under the Plan will not exceed 1,360,000 shares of Common Stock. The
maximum number of shares of Common Stock for which Options may be granted under
this Plan to any Participant in a calendar year shall not exceed 500,000, except
that the Company may grant Options to acquire up to 1,000,000 shares of Common
Stock to a Participant in connection with his or her initial employment with the
Company (in each case subject to adjustment under Section 3.1 below). Any shares
related to grants that are forfeited, terminated, cancelled, expire unexercised,
settled in cash in lieu of shares or in such manner that some or all of the
shares covered by a grant are not issued, will immediately be available under
the Plan.
(b) The Common Stock to be issued under the Plan will be made available,
at the discretion of the Board or the Committee, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common Stock
reacquired by the Company, including shares purchased on the open market.
(c) If any Option shall expire or terminate for any reason, the shares
of Common Stock available under such Option shall again be available for the
granting of Options.
1.4 Administration of the Plan.
(a) The Plan will be administered by the Committee, which will consist
of at least two directors of the Company, or such lesser number of directors as
permitted by Rule 16b-3 of the Exchange Act, all of whom shall be "Non-Employee
Directors" (within the meaning of Rule 16b-3 of the Exchange Act) and "outside
directors" (within the meaning of Section 162(m) of the Code and the treasury
regulations thereunder), to whom administration of the Plan has been duly
delegated. The Committee may, in turn, delegate its administrative powers except
for selection and determination of Options for persons subject to Section 16 of
the Exchange Act or subject to the limitations on deductibility of compensation
imposed under Section 162(m) of the Code. Any action of the Committee with
respect to administration of the Plan shall be taken by a majority vote or
written consent of its members.
(b) The Committee has and may exercise such powers and authority of the
Board as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. The Committee has authority in its
discretion to determine the persons to whom, and the time or times at which,
Options may be granted, the nature of the Option, the form of payment (cash or
Common Stock or a combination thereof) payable upon the event or events giving
rise to payment of an Option and such other terms and conditions applicable to
each individual Option as the Committee shall determine. The Committee may grant
at any time new Options as the Committee shall determine. The Committee may
grant at any time new Options to a Participant who has previously received
Options whether such prior Options are still outstanding, have previously been
exercised in whole or in part, or are cancelled in connection with the issuance
of new Options. Further, the Committee may, with the consent of a Participant,
amend the terms of any existing Option previously granted to include or amend
any provisions which could be incorporated in such an Option at the time of such
amendment. Solely to illustrate the foregoing power, but without limiting its
scope, such amendments may accelerate the period of exercise or the vesting
period of any Option, or installment thereof, either absolutely or conditionally
for whatever reasons the
2
27
Committee deems appropriate, including without limitation, compensatory
considerations, significant changes in the management or control of the Company,
or the occurrence of any attempt to effect such change.
(c) Each Option will be evidenced by a written instrument signed by the
Participant and may include any other terms and conditions consistent with the
Plan as the Committee may in its discretion determine. The Committee also has
authority to interpret the Plan, to determine the terms and provisions of the
Option agreements and to make all other determinations necessary or advisable
for the administration of the Plan. The Committee has authority to prescribe,
amend and rescind rules and regulations relating to the Plan. All
interpretations, determinations and actions by the Committee will be final,
conclusive and binding upon all parties. Any action of the Committee with
respect to the administration of the Plan shall be taken pursuant to a majority
vote or by the unanimous written consent of its members.
(d) No member of the Board or the Committee will be liable for any
action or determination made in good faith by the Board or the Committee with
respect to the Plan or any transaction arising under the Plan.
1.5 Participation. All executive and other key employees of the Company
or of any subsidiary corporation (as defined in Section 425(f) of the Code) and
directors of the Company who are regular employees of the Company shall be
eligible for selection to participate in the Plan. Other nonemployees and other
directors who are not regular employees of the Company (excluding Committee
members for the periods specified in paragraph 1.4 hereof) may participate in
the Plan at the discretion of the Committee. An individual who has been granted
an Option may, if such individual is otherwise eligible, be granted an
additional Option or Options if the Committee shall so determine, subject to the
provisions of the Plan.
II. TERMS AND CONDITIONS OF OPTIONS
2.1 Option Price. The purchase price of Common Stock under each Option
will be determined by the Committee.
2.2 Exercise of Options.
(a) Each Option granted under this Plan shall be exercisable in such
installments during the period prior to its expiration date as the Committee
shall determine, but in no event shall any Option be exercisable for at least
six months after grant except in the case of the death or disability of the
Participant; provided that, unless otherwise determined by the Committee, if the
Participant shall not in any given installment period purchase all of the shares
which the Participant is entitled to purchase in such installment period, then
the Participant's right to purchase any shares not purchased in such installment
period shall continue until the expiration date or sooner termination of the
Participant's Option.
(b) Upon the exercise of an Option, the purchase price shall be paid in
full in cash or its equivalent acceptable to the Company. To the extent provided
by the Option agreement executed by the Participant, the purchase price may be
paid by the assignment and delivery to the Company of shares of Common Stock, a
combination of cash and shares of Common Stock equal in value to the exercise
price, or with the proceeds of a loan made by the Company pursuant to the Plan.
Any shares assigned and delivered to the Company in payment or partial payment
of the purchase price will be valued at their Fair Market Value on the exercise
date. No fractional shares will be issued pursuant to the exercise of an Option
nor will any cash payment be made in lieu of fractional shares. Upon the
exercise of an Option, not less than 100 shares of Common Stock may be purchased
at one time unless the number then available for purchase is less than 100
shares in which case the full number available must be purchased.
2.3 Termination of Employment.
(a) In the event of the termination of a Participant's employment with
the Company for Cause, all of the Participant's unexercised Options shall expire
as of the date of termination. In the event of a Participant's
3
28
termination of employment for any reason other than for Cause, death or
disability, the Participant's Options shall expire three (3) months after the
date of termination, unless a shorter period is provided for in Participant's
Option agreement; provided, however, that such Option shall be exercisable only
to the extent that installments thereof had become exercisable on the date of
termination, unless the Committee, in its discretion, elects to accelerate the
vesting of all or any portion of the unvested shares on the date of termination.
The Option shall expire at the end of such three (3) month period (or such
shorter period provided in the Option agreement) to the extent not exercised
within that period.
(b) In the event of a termination of a Participant's employment as a
result of death or disability, the Participant shall have twelve (12) months, or
such shorter period as is provided in the Option agreement, from the date of
termination of employment to exercise his or her Option to the extent, and only
to the extent, that installments had become exercisable as of the date of
termination of employment, unless the Committee, in its discretion, elects to
accelerate the vesting of all or any portion of the unvested shares on the date
of termination. The Option shall expire at the end of such twelve (12) month
period (or such shorter period as is provided in the Option agreement) to the
extent not exercised within that period.
III. OTHER PROVISIONS
3.1 Adjustment Provisions.
(a) Subject to Section 3.1(b) below, if the outstanding shares of Common
Stock of the Company are increased, decreased or exchanged for a different
number or kind of shares or other securities, or if additional shares or new or
different shares or other securities are distributed with respect to such shares
of Common Stock or other securities, through merger, consolidation, sale of all
or substantially all of the property of the Company, reorganization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (i) the maximum number
and kind of shares provided in Section 1.3, (ii) the number and kind of shares
or other securities subject to the outstanding Options, and (iii) the price for
each share or other unit of any other securities subject to outstanding Options
without change in the aggregate purchase price or value as to which such Options
remain exercisable or subject to restrictions.
(b) In addition to the adjustments required by Section 3.1(a) above, at
the discretion of the Committee, any Option may contain provisions to the effect
that upon the occurrence of certain events, including a change in control of the
Company (as defined by the Committee in the Option), any outstanding Options not
theretofore exercisable, payable or free from restrictions, as the case may be,
shall immediately become exercisable, payable or free from restrictions, as the
case may be, in their entirety, and any shares of Common Stock acquired pursuant
to an Option which are not fully vested shall immediately become fully vested,
notwithstanding any of the other provisions of the Option or the Plan.
(c) Adjustments under Sections 3.1(a) and 3.1(b) will be made by the
Committee, whose determination as to what adjustments will be made and the
extent thereof will be final, binding and conclusive. No fractional interests
will be issued under the Plan resulting from any such adjustments.
3.2 Loans.
(a) The Company may make loans to a Participant in connection with the
exercise of Options, subject to the following terms and conditions and such
other terms and conditions not inconsistent with the Plan, including the rate of
interest, if any, as the Committee shall impose from time to time.
(b) No loan made under the Plan shall exceed the sum of (i) the
aggregate Option price payable upon exercise of the Option in relation to which
the loan is made, plus (ii) the amount of the reasonably estimated income taxes
payable by a Participant. In no event may any such loan exceed the Fair Market
Value, at the date of exercise, of the related shares of Common Stock.
4
29
(c) No loan shall have an initial term exceeding ten (10) years;
provided that loans under the Plan shall be renewable at the discretion of the
Committee; and provided, further, that the indebtedness under each loan shall
become due and payable, as the case may be, on a date no later than (i) one year
after termination of the Participant's employment due to death, retirement or
disability, or (ii) the day of termination of the Participant's employment for
any reason other than death, retirement or disability.
(d) Loans under the Plan may be satisfied by a Participant, as
determined by the Committee, in cash or, with the consent of the Committee, in
whole or in part in Common Stock at Fair Market Value on the date of such
payment.
(e) A loan shall be secured by a pledge of shares of Common Stock with a
Fair Market Value of not less than the principal amount of the loan. After
partial repayment of a loan, pledged shares no longer required as security may
be released to a Participant.
(f) Every loan shall meet all applicable laws, regulations and rules of
the Federal Reserve Board and any other governmental agency having jurisdiction.
3.3 Continuation of Employment. Nothing in the Plan or in any instrument
executed pursuant to the Plan will confer upon any Participant any right to
continue in the employ of the Company or affect the right of the Company to
terminate the employment of any Participant at any time with or without Cause.
3.4 Compliance with Government Regulations. No shares of Common Stock
will be issued pursuant to an Option unless and until all applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges upon which the Common Stock may be listed, have been fully met. As a
condition precedent to the issuance of shares of Common Stock pursuant to an
Option, the Company may require the Participant to take any reasonable action to
comply with such requirements.
3.5 Privileges of Stock Ownership. No Participant and no beneficiary or
other person claiming under or through such Participant will have any right,
title or interest in or to any shares of Common Stock allocated or reserved
under the Plan or subject to any Option except as to such shares of Common
Stock, if any, that have been issued to such Participant.
3.6 Withholding. The Company may make such provisions as it deems
appropriate to withhold any taxes the Company determines it is required to
withhold in connection with any Option. The Company may require the Participant
to satisfy any relevant tax requirements before authorizing any issuance of
Common Stock to the Participant. To the extent authorized by the instrument
executed by the Participant evidencing any Option, Participant may satisfy
withholding obligations by delivering to the Company Common Stock having any
aggregate Fair Market Value equal to such withholding obligation.
3.7 Nontransferability of Options. An Option may be exercised during the
life of the Participant solely by the Participant or the Participant's duly
appointed guardian or personal representative. No Option and no right under the
Plan, contingent or otherwise, will be assignable or subject to any encumbrance,
pledge or charge of any nature except that, under such rules and regulations as
the Company may establish pursuant to the terms of the Plan, a beneficiary may
be designated with respect to an Option in the event of a death of a
Participant. If such beneficiary is the executor or administrator of the estate
of the Participant, any rights with respect to such Option may be transferred to
the person or persons or entity (including a trust) entitled thereto under the
will of the Participant of such Option.
3.8 Amendment and Termination of Plan; Amendment of Options.
(a) The Board or the Committee will have the power, in its discretion,
to suspend or terminate the Plan at any time, and may amend it from time to time
in such respects as the Board or the Committee may deem
5
30
advisable provided that such amendment, suspension or termination complies with
all applicable state and federal requirements and requirements of any stock
exchange on which the stock is then listed, including any applicable requirement
that the Plan or an amendment to the Plan be approved by the stockholders of the
Company.
(b) Except as otherwise provided by Section 1.4, the Committee may not,
without the consent of a Participant, make modifications in the terms and
conditions of an Option.
(c) No amendment, suspension or termination of the Plan will, without
the consent of the Participant, alter, terminate, impair or adversely affect any
right or obligation under any Option previously granted under the Plan.
IV. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon its approval by the stockholders of
the Company at the Company's 1997 annual meeting or any adjournment thereof,
and, upon such approval, shall replace the Company's 1993 Stock Option Plan as
previously in effect. Notwithstanding the foregoing, if the Plan is not so
approved by the stockholders, all Options previously granted under the prior
1993 Stock Option Plan shall remain in full force and effect.
31
PROXY
STECK-VAUGHN PUBLISHING CORPORATION
4515 SETON CENTER PARKWAY, SUITE 300
AUSTIN, TEXAS 78759
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Philip C. Maynard, Floyd D. Rogers and
Keith K. Ogata, and each of them, the undersigned's proxy, with full power of
substitution, to attend the Annual Meeting of Stockholders of Steck-Vaughn
Publishing Corporation on Thursday, May 29, 1997, at the Renaissance Austin
Hotel, 9721 Arboretum Boulevard, San Antonio Room, Austin, Texas, at 8:30 a.m.,
local time, and any and all adjournments or postponements thereof, and to vote
all shares of Company common stock held by the undersigned as of March 31, 1997
(the record date with respect to this solicitation) as designated on the
reverse side.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
[SEE REVERSE SIDE]
Please mark
[X] votes as in
this example
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED, BUT WHEN NO
DIRECTION IS GIVEN, THEY WILL BE VOTED IN FAVOR OF ITEMS 1, 2 AND 3.
1. ELECTION OF DIRECTORS
Nominees: Sam Yau, Leonard W. Jaffe, Manual J. Justiz,
Michael R. Klein, N. Colin Lind, Anita Kopec
FOR WITHHELD
[ ] [ ]
[ ] MARK HERE
-------------------------------------- FOR ADDRESS [ ]
For all nominees except as noted above CHANGE AND
NOTE BELOW
2. AUDITORS
Ratification of selection of Price Waterhouse LLP as the Company's
independent public auditors for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of technical amendments to the 1993 Stock Option Plan, as amended,
to address certain Internal Revenue Code requirements.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxy holders are authorized to vote on all such
other matters as may properly come before the meeting or any adjournment or
postponement thereof.
Please sign exactly as your name appears hereon, date, and return this Proxy
promptly in the reply envelope provided. Please correct your address before
returning this Proxy. Persons signing in a fiduciary capacity should indicate
that fact and give their full title. If a corporation, please sign in full
corporate name by the president or other authorized officer. If a partnership,
please sign in partnership name by an authorized person. Joint owners each must
sign personally.
PLEASE BE CERTAIN YOU HAVE DATED AND SIGNED THIS PROXY.
SIGNATURE: DATE:
------------------------------------ ---------------------
SIGNATURE: DATE:
------------------------------------ ---------------------