10. CAPITAL STOCK AND STOCK-BASED AWARDS

Class A Stock and Common Stock

Capital stock consisted of the following as of May 31, 2014:



	Class A Stock	Common Stock	Preferred Stock
Authorized	4,000,000	70,000,000	2,000,000
Reserved for Issuance	1,499,000	7,245,021	—
Outstanding	1,656,200	30,605,978	—

The only voting rights vested in the holders of Common Stock, except as required by law, are the election of such number of directors as shall equal at least one-fifth of the members of the Board. The Class A Stockholders are entitled to elect all other directors and to vote on all other matters. The Class A Stockholders and the holders of Common Stock are entitled to one vote per share on matters on which they are entitled to vote. The Class A Stockholders have the right, at their option, to convert shares of Class A Stock into shares of Common Stock on a share-for-share basis. With the exception of voting rights and conversion rights, and as to any rights of holders of Preferred Stock if issued, the Class A Stock and the Common Stock are equal in rank and are entitled to dividends and distributions, when and if declared by the Board.

Preferred Stock

The Preferred Stock may be issued in one or more series, with the rights of each series, including voting rights, to be determined by the Board before each issuance. To date, no shares of Preferred Stock have been issued.

Stock-based awards

At May 31, 2014, the Company maintained three stockholder-approved stock-based compensation plans with regard to the Common Stock: the Scholastic Corporation 1995 Stock Option Plan (the “1995 Plan”), under which no further awards can be made; the Scholastic Corporation 2001 Stock Incentive Plan (the “2001 Plan”), under which no further awards can be made; and the Scholastic Corporation 2011 Stock Incentive Plan (the “2011 Plan”). The 2011 Plan was adopted in July 2011 and provides for the issuance of incentive stock options; options that are not so qualified, called non-qualified stock options; restricted stock; and other stock-based awards.

The Company’s stock-based compensation vests over periods not exceeding four years. Provisions in the Company’s stock-based compensation plans allow for the acceleration of vesting for certain retirement-eligible employees, as well as in certain other events.

Stock Options – At May 31, 2014, non-qualified stock options to purchase 161,500 shares, 1,135,360 shares and 1,300,640 shares of Common Stock were outstanding under the 1995 Plan, the 2001 Plan and the 2011 Plan, respectively. During fiscal 2014, 753,720 options were granted under the 2011 Plan at a weighted average exercise price of $30.11.

At May 31, 2014, 464,873 shares of Common Stock were available for additional awards under the 2011 Plan.

The Company also maintains the 1997 Outside Directors Stock Option Plan (the “1997 Directors Plan”), a stockholder-approved stock option plan for outside directors under which no further awards may be made. The 1997 Directors Plan, as amended, provided for the automatic grant to each non-employee director on the date of each annual stockholders’ meeting of non-qualified stock options to purchase 6,000 shares of Common Stock. At May 31, 2014, options to purchase 96,000 shares of Common Stock were outstanding under the 1997 Directors Plan.

In September 2007, the Corporation adopted the stockholder-approved Scholastic Corporation 2007 Outside Directors Stock Incentive Plan (the “2007 Directors Plan”). From September 2007 through September 2011, the 2007 Directors Plan provided for the automatic grant to each non-employee director, on the date of each annual meeting of stockholders, of non-qualified stock options to purchase 3,000 shares of Common Stock at a purchase price per share equal to the fair market value of a share of Common Stock on the date of grant and 1,200 restricted stock units. In July 2012, the Board approved an amended and restated 2007 Outside Directors stock incentive Plan (the “Amended 2007 Directors Plan”), which was approved by the stockholders in September 2012. The Amended 2007 Directors Plan provides for the automatic grant to each non-employee director, on the date of each annual meeting of stockholders, of stock options and restricted stock units with a value equal to a fixed dollar amount. Such dollar amount, as well as the split of such amount between stock options and restricted stock units, will be determined annually by the Board (or committee designated by the Board) in advance of the grant date. The value of the stock option portion of the annual grant is determined based on the Black-Scholes option pricing method, with the exercise price being the fair market value of the Common Stock on the grant date, and the value of the restricted stock unit portion is the fair market value of the Common Stock on the grant date. In September 2013, stock options and restricted stock units with a value of $70,000 for each non-employee director, with 40% of such value in the form of options and 60% in the form of restricted stock units, were approved, and an aggregate of 24,714 options at an exercise price of $30.56 per share and 12,366 restricted stock units were granted to the non-employee directors under the amended 2007 Directors Plan.

As of May 31, 2014, 162,867 options were outstanding under the Amended 2007 Directors Plan and 274,391 shares of Common Stock remained available for additional awards under the Amended 2007 Directors Plan.

The Scholastic Corporation 2004 Class A Stock Incentive Plan (the “Class A Plan”) provided for the grant to Richard Robinson, the Chief Executive Officer of the Corporation as of the effective date of the Class A Plan, of options to purchase Class A Stock (the “Class A Options”). As of May 31, 2014, there were 1,499,000 Class A Options granted to Mr. Robinson outstanding under the Class A Plan, and no shares of Class A Stock remained available for additional awards under the Class A Plan.

Generally, options granted under the various plans may not be exercised for a minimum of one year after the date of grant and expire approximately ten years after the date of grant. The intrinsic value of these stock options is deductible by the Company for tax purposes upon exercise. The Company amortizes the fair value of stock options as stock-based compensation expense over the requisite service period on a straight-line basis, or sooner if the employee effectively vests upon termination of employment under certain circumstances.

The following table sets forth the intrinsic value of stock options exercised, pretax stock-based compensation cost and related tax benefits for the Class A Stock and Common Stock plans for the fiscal years ended May 31:



	2014		2013		2012
Total intrinsic value of stock options exercised	$	4.6	$	2.3	$	5.0
Stock-based compensation cost (pretax)	$	9.3	$	6.3	$	12.2
Tax benefits related to stock-based compensation cost	$	1.7	$	0.8	$	1.8
Weighted average grant date fair value per option	$	10.37	$	9.77	$	9.30

As of May 31, 2014, the total pretax compensation cost not yet recognized by the Company with regard to outstanding unvested stock options was $3.3. The weighted average period over which this compensation cost is expected to be recognized is 2.3 years.

The following table sets forth the stock option activity for the Class A Stock and Common Stock plans for the fiscal year ended May 31, 2014:



	Options		Weighted Average Exercise Price		Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at May 31, 2013	4,185,480		$	29.49
Granted	778,434		$	30.12
Exercised	(506,380	)	$	23.94
Expired	(41,000	)	$	31.43
Cancellations and forfeitures	(61,167	)	$	28.82
Outstanding at May 31, 2014	4,355,367		$	30.23	4.8	$	12.3
Exercisable at May 31, 2014	3,156,844		$	30.70	3.3	$	8.8

Restricted Stock Units – In addition to stock options, the Company has issued restricted stock units to certain officers and key executives under the 2011 Plan (“RSUs”). The RSUs automatically convert to shares of Common Stock on a one-for-one basis as the award vests, which is typically over a four-year period beginning thirteen months from the grant date and thereafter annually on the anniversary of the grant date. There were 121,860 shares of Common Stock issued upon vesting of RSUs during fiscal 2014. The Company measures the value of RSUs at fair value based on the number of RSUs granted and the price of the underlying Common Stock on the grant date. The Company amortizes the fair value of outstanding Stock Units as stock-based compensation expense over the requisite service period on a straight-line basis, or sooner if the employee effectively vests upon termination of employment under certain circumstances.

The following table sets forth the RSU award activity for the fiscal years ended May 31:



	2014		2013		2012
RSUs granted	67,670		125,584		205,620
Weighted average grant date price per unit	$	30.34	$	23.05	$	27.92

As of May 31, 2014, the total pretax compensation cost not yet recognized by the Company with regard to unvested RSUs was $2.5. The weighted average period over which this compensation cost is expected to be recognized is 1.9 years.

Management Stock Purchase Plan - The Company maintains a Management Stock Purchase Plan (“MSPP”), which allows certain members of senior management to defer up to 100% of their annual cash bonus payments in the form of restricted stock units (“MSPP Stock Units”) which are purchased by the employee at a 25% discount from the lowest closing price of the Common Stock on NASDAQ on any day during the fiscal quarter in which such bonuses are payable. The MSPP Stock Units are converted into shares of Common Stock on a one-for-one basis at the end of the applicable deferral period. The Company measures the value of MSPP Stock Units based on the number of awards granted and the price of the underlying Common Stock on the grant date, giving effect to the 25% discount. The Company amortizes this discount as stock-based compensation expense over the vesting term on a straight-line basis, or sooner if the employee effectively vests upon termination of employment under certain circumstances.

The following table sets forth the MSPP Stock Unit activity for the fiscal years ended May 31:



	2014		2013
MSPP Stock Units allocated	827		87,317
Purchase price per unit	$	21.15	$	19.73

At May 31, 2014, there were 331,453 shares of Common Stock remaining authorized for issuance under the MSPP.

As of May 31, 2014, the total pretax compensation cost not yet recognized by the Company with regard to unvested MSPP Stock Units under the MSPP was $0.1. The weighted average period over which this compensation cost is expected to be recognized is 1.2 years.

The following table sets forth the RSU and MSPP Stock Unit activity for the year ended May 31, 2014:



	Stock Units/RSUs		Weighted Average grant date fair value
Nonvested as of May 31, 2013	559,403		$	29.98
Granted	68,497		$	30.07
Vested	(295,572	)	$	16.84
Forfeited	(9,834	)	$	28.90
Nonvested as of May 31, 2014	322,494		$	21.33

The total fair value of shares vested during the fiscal years ended May 31, 2014, 2013 and 2012 was $5.0, $6.4 and $6.0, respectively.

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan (the “ESPP”), which is offered to eligible United States employees. The ESPP permits participating employees to purchase Common Stock, with after-tax payroll deductions, on a quarterly basis at a 15% discount from the closing price of the Common Stock on NASDAQ. In fiscal 2012, the ESPP was amended to provide that the purchase of Common Stock occurs on the last business day of the calendar quarter. The Company recognizes the discount on the Common Stock issued under the ESPP as stock-based compensation expense in the quarter in which the employees participated in the plan.

The following table sets forth the ESPP share activity for the fiscal years ended May 31:



	2014		2013
Shares issued	57,835		68,228
Weighted average purchase price per share	$	26.92	$	24.78

At May 31, 2014, there were 161,910 shares of Common Stock remaining authorized for issuance under the ESPP.