<PAGE>
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 33-51700
SUBJECT TO COMPLETION, DATED MARCH 25, 1994
- --------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 8, 1992)
- --------------------------------------------------------------------------------
$100,000,000
Houghton Mifflin Company
% Notes Due
Interest payable and Due
The Notes are not redeemable prior to maturity and no sinking fund is provided
for the Notes. The Notes are unsecured debt obligations of Houghton Mifflin
Company (the "Company") and will be represented by one or more global
Notes registered in the name of the nominee of The Depository Trust
Company ("DTC"), which will act as the Depositary. Interest in the
Notes represented by one or more global Notes will be shown on, and
transfers thereof will be effected only through, records maintained
by the Depositary and its direct and indirect participants.
Except as described herein, Notes in certificated form will not
be issued in exchange for global Notes.
Settlement for the Notes will be made in immediately available funds. The
Notes will trade in DTC's Same-Day Funds Settlement System until maturity,
and secondary market trading activity for the Notes will therefore
settle in immediately available funds. All payments of principal and
interest to DTC will be made by the Company in immediately
available funds. See "Description of Notes" herein.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM- MISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount Company(1)(2)
- ------------------------------------------------
<S> <C> <C> <C>
Per Note % % %
- ------------------------------------------------
Total $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from , 1994.
(2) Before deduction of expenses payable by the Company estimated at $ .
--------
The Notes are offered by the several Underwriters when, as and if issued by
the Company, delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that the Notes will
be ready for delivery in book-entry form only through the facilities of DTC on
or about , 1994 against payment in immediately available funds.
CS First Boston J.P. Morgan Securities Inc.
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is March , 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMPANY
Houghton Mifflin Company (the "Company") was incorporated in 1908 in
Massachusetts as the successor to a partnership formed in 1880. Antecedents of
the partnership date back to 1832. The Company's principal business is
publishing, and it is one of the largest publishers of elementary and high
school textbooks in the United States. The Company's operations are reported in
two industry segments: (1) textbooks and other educational materials and
services for the school and college markets and (2) general publishing,
including fiction, nonfiction, children's books, dictionary and reference
materials. With approximately 80% of the Company's net sales derived from
educational publishing, the Company's quarterly results reflect the seasonality
of the educational publishing market. The second and third calendar quarters
typically account for some 70% of annual net sales. Seasonal losses are
reported in the first and fourth quarters.
The Company's principal executive offices are located at 222 Berkeley Street,
Boston, Massachusetts 02116. Its telephone number is (617) 351-5000. Requests
for copies of documents incorporated by reference herein should be directed to
the Treasurer of the Company at this address.
RECENT DEVELOPMENTS
McDougal Acquisition. The Company acquired McDougal, Littell & Company
("McDougal, Littell"), a leading publisher of elementary and high school
textbooks based in Evanston, Illinois (the "McDougal Acquisition") in March
1994. McDougal, Littell's sales for the fiscal year ended October 31, 1993 were
$60.2 million, of which approximately two thirds were to the secondary school
market. The total cost of the McDougal Acquisition is approximately $140
million, of which $128 million was paid to the former McDougal, Littell
stockholders, $10 million represents liabilities of McDougal, Littell paid out
of corporate funds immediately prior to the acquisition and $2 million
represents estimated professional fees related to the acquisition. The
Company's sources of capital initially to finance the $140 million estimated
total acquisition cost included $40 million of cash and $100 million from
borrowings under short-term credit facilities arranged through Morgan Guaranty
Trust Company of New York and State Street Bank and Trust Company
(collectively, the "Revolving Credit Agreements"). The Company intends to repay
amounts borrowed under the Revolving Credit Agreements through the issuance of
the Notes offered hereby. See "Use of Proceeds."
The Company believes that with the addition of McDougal, Littell it is now
the third largest school textbook publisher in the country. The importance of
this acquisition to the Company is the strategic fit between the two school
textbook publishing operations. McDougal, Littell's strength in the secondary
school publishing area will complement the Company's leadership in the
elementary school market. The Company intends to form a separate Secondary
School Division (McDougal Littell/Houghton Mifflin) to be based in the Chicago
area. The Company will then have two separate school divisions and will be able
to provide more balanced coverage of textbook content areas as well as more
effective, specialized sales and service to the school market. The Elementary
and Secondary Divisions will each have a dedicated sales force. As a result,
the Company expects to be able to achieve greater specialization of services to
elementary and secondary schools. Integration of McDougal, Littell into the
Company is also expected to result in operational consolidation and cost
reductions from efficiencies of scale.
InfoSoft Spin-off. On March 8, 1994, the Company transferred the assets,
business and employees of its Software Division to InfoSoft International, Inc.
("InfoSoft"), a newly-formed company (the "InfoSoft
S-2
<PAGE>
Spin-off"). InfoSoft concurrently completed its initial public offering of
3,450,000 shares of common stock to the public. The Company retains a 40.3%
equity interest in InfoSoft. The Software Division accounted for less than 3%
of the Company's net sales for 1993. The Company received net pre-tax proceeds
of approximately $32.5 million from the InfoSoft Spin-off.
USE OF PROCEEDS
The entire net proceeds to be received by the Company from the sale of the
Notes offered hereby will be used to repay substantially all of the $100
million borrowed under the Revolving Credit Agreements. See "Recent
Developments." The Company borrowed $50 million from each of Morgan Guaranty
Trust Company of New York and State Street Bank and Trust Company, which
amounts are due no later than May 10, 1994 and April 15, 1994, respectively,
and bear interest at an average interest rate fixed through March 30, 1994
equal to approximately 3.8%. Morgan Guaranty Trust Company of New York and J.P.
Morgan Delaware, affiliates of J.P. Morgan Securities Inc., are expected to
receive up to an aggregate of $50 million as repayment of the indebtedness
outstanding under one of the Revolving Credit Agreements from the proceeds of
this offering. See "Recent Developments" and "Underwriting."
CAPITALIZATION
The following table sets forth the historical consolidated capitalization of
the Company at December 31, 1993, and on an adjusted basis giving effect to the
issuance of the Notes offered hereby and the use of proceeds of this offering
to repay the indebtedness outstanding under the Revolving Credit Agreements.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
--------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term Debt(1)....................................... $ 26,560 $ 26,560
Long-term Debt:
8.78% Senior Notes due 1997............................ 25,000 25,000(2)
Capital lease obligations.............................. 1,438 1,438
Debt securities........................................ 0 100,000
-------- --------
Total Debt........................................... 52,998 152,998
Stockholders' Equity..................................... 224,082 224,082
-------- --------
Total Capitalization................................... $277,080 $377,080
======== ========
</TABLE>
- --------
(1) This item consists of commercial paper and current installments of capital
lease obligations.
(2) The Company has given notice that it intends to prepay the 8.78% Senior
Notes on March 30, 1994.
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary information for the Company for each
of the fiscal years in the three year period ended December 31, 1993. The
summary financial information has been derived from the Company's consolidated
financial statements, which have been audited by Ernst & Young, independent
auditors. The information should be read in conjunction with the consolidated
financial statements, related notes and other financial information included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1993.
S-3
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net sales........................................ $462,969 $454,706 $466,801
Costs and expenses
Cost of sales.................................. 227,969 220,278 228,930
Selling and administrative..................... 173,070 190,118 190,477
Special charges................................ 10,560 -- 2,532
-------- -------- --------
411,599 410,396 421,939
-------- -------- --------
Operating income................................. 51,370 44,310 44,862
Other income (expense)
Loss on disposition of foreign publishing oper-
ations........................................ -- (13,527) (710)
Investment income.............................. 1,206 2,076 2,355
Interest expense............................... (3,553) (4,415) (6,061)
-------- -------- --------
(2,347) (15,866) (4,416)
-------- -------- --------
Income before taxes, extraordinary item, and cu-
mulative effect of accounting changes........... 49,023 28,444 40,446
Taxes on income before extraordinary item and cu-
mulative effect of accounting changes........... 17,650 9,373 15,369
-------- -------- --------
Income before extraordinary item and cumulative
effect of accounting changes.................... 31,373 19,071 25,077
-------- -------- --------
Extraordinary item, net of taxes
Loss on extinguishment of debt................. (1,002) -- --
Cumulative effect of accounting changes, net of
taxes
Postretirement healthcare benefits............. -- (13,357) --
Income taxes................................... -- (1,300) --
-------- -------- --------
Net income....................................... $ 30,371 $ 4,414 $ 25,077
======== ======== ========
FROM BALANCE SHEET:
Cash and marketable securities................... $ 85,349 $ 68,635 $ 92,804
Working capital.................................. 156,579 149,837 176,279
Total assets..................................... 398,221 371,421 381,780
Short- and long-term debt........................ 52,998 54,653 55,015
Stockholders' equity............................. 224,082 199,839 223,181
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges..................... 8.1 4.5 5.1 4.3 6.0
</TABLE>
For purposes of these computations, earnings before fixed charges consist of
income before provision for income taxes and fixed charges. Fixed charges
consist of interest on indebtedness, including amortization of debt issuance
costs, interest on capital lease obligations and the portion of rent expense
deemed to be the interest component of such rent expense. The information set
forth under this heading supersedes the information set forth under the same
heading in the accompanying Prospectus.
S-4
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered hereby
supplements the description of the general terms of the Securities set forth
under the heading "Description of Debt Securities" in the accompanying
Prospectus, to which description reference is hereby made.
GENERAL
The Notes offered hereby will be unsecured general obligations of the
Company, and will constitute a series of Securities to be issued under the
Indenture referred to in the accompanying Prospectus. The Notes will mature on
. The Notes will bear interest at the rate set forth on the cover page of
this Prospectus Supplement from , 1994, or the most recent date to which
interest has been paid or provided for, payable semi-annually in arrears on
and of each year, commencing , 1994 to the persons in whose
names the Notes are registered at the close of business on the preceding
and , as the case may be. The Notes are not redeemable prior to maturity
and do not provide for any sinking fund. The Notes are subject to legal
defeasance and discharge and covenant defeasance, as described under
"Defeasance," "Defeasance and Discharge" and "Defeasance of Certain
Obligations" under "Description of Debt Securities" in the accompanying
Prospectus.
BOOK-ENTRY SYSTEM
The Notes initially will be represented by a single global security (the
"Global Security") deposited with DTC and registered in the name of a nominee
of DTC, except as set forth below. The settlement of transactions with respect
to the Global Security will be facilitated through electronic computerized
book-entry changes in participants' accounts, thereby eliminating the physical
movement of Note certificates. The Notes will be available for purchase in
denominations of $1,000 and integral multiples thereof in book-entry form only.
Unless and until certified Notes are issued under the limited circumstances
described below, no beneficial owner of a Note shall be entitled to receive a
definitive certificate representing a Note. So long as DTC or any successor
depositary (the "Depositary") or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered to be the sole owner or the holder of the Notes for all purposes of
the Indenture. Unless and until it is exchanged in whole or in part for the
Notes represented thereby, the Global Security may not be transferred except as
a whole by the Depositary to a nominee of the Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
the Depositary or any nominee to a successor depositary or any nominee of such
successor.
So long as the Notes are represented by the Global Security, all payments of
principal and interest will be made to the Depositary or its nominee (or a
successor), as the case may be, as the sole registered owner of the Global
Security representing the Notes.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of the Global Security representing
the Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Security as shown on the records of the Depositary or such
nominee.
If DTC is at any time unwilling, unable or ineligible to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue certificated Notes in definitive form in exchange
for the Global Security. In addition, the Company may at any time determine not
to have the Notes represented by the Global Security and, in such event, will
issue certificated Notes in definitive form in exchange for the Global
Security. In either instance, an owner of a beneficial interest in the Global
Security will be entitled to physical delivery of certificated Notes in
definitive form equal in principal amount to such beneficial interest in the
Global Security and to have such certificated Notes registered in its name.
S-5
<PAGE>
Certificated Notes so issued in definitive form will be issued in denominations
of $1,000 and integral multiples thereof and will be issued in registered form
only, without coupons.
See "Description of Debt Securities" in the accompanying Prospectus for
additional information concerning the Notes, the Indenture and the book-entry
system.
SAME DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest to the Depositary will
be made by the Company in immediately available funds.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, the Notes will trade
in the DTC's Same-Day Funds Settlement System until maturity, and secondary
market trading activity in the Notes will therefore settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlements in immediately available funds on trading activity in the Notes.
UNDERWRITING
The Underwriters named below have severally agreed to purchase from the
Company the following respective principal amounts of the Notes:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
CS First Boston Corporation....................................... $
J.P. Morgan Securities Inc........................................ $
------------
Total......................................................... $100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Notes if any are purchased.
The Company has been advised by the Underwriters that they propose to offer
the Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus Supplement and to certain dealers at such price
less a concession of % the principal amount per Note; that the Underwriters
and such dealers may allow a discount of % of such principal amount on sales
to certain other dealers; and that after the initial public offering, the
public offering price and concession and discount to dealers may be changed by
the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Underwriters have advised the Company that one or more of them intends to
act as a market maker for the Notes. However, the Underwriters are not
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or contribute to payments which the Underwriters may be required to
make in respect thereof.
The Underwriters and their affiliates engage in transactions with, and
perform services for, the Company in the ordinary course of business, including
various investment banking and commercial banking services. See "Use of
Proceeds."
S-6
<PAGE>
HOUGHTON MIFFLIN COMPANY
DEBT SECURITIES
----------------
Houghton Mifflin Company (the "Company") may offer from time to time its
unsecured debt securities (the "Debt Securities") on terms to be determined, at
an aggregate initial offering price of not more than $100,000,000. The specific
designation, aggregate, principal amount, authorized denominations, purchase
price, maturity, rate (which may be fixed or variable) and time of payment of
any interest, any optional or mandatory redemption or repayment or other
required payment terms, terms for sinking fund payments, and other specific
terms in connection with the offering and sale of Debt Securities, and any
listing on a securities exchange of the Debt Securities in respect of which
this Prospectus is being delivered ("Offered Debt Securities") are set forth in
the accompanying prospectus supplement ("Prospectus Supplement"), together with
the terms of offering of the Offered Debt Securities.
The Debt Securities may be sold through agents designated from time to time,
through underwriters, which may include The First Boston Corporation or Salomon
Brothers, or dealers or directly by the Company. If any agents of the Company
or any underwriters are involved in the sale of the Offered Debt Securities in
respect of which this Prospectus is being delivered, the names of such agents
or underwriters and any applicable commissions or discounts will be set forth
in the Prospectus Supplement. The net proceeds to the Company from such sale
will also be set forth in the Prospectus Supplement.
Debt Securities of a series may be issuable in registered form without
coupons ("Registered Securities") or in the form of one or more global
securities (each a "Global Security") and may be issued in the name of a
depository institution as book-entry securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
This Prospectus may not be used to consummate sales of Debt Securities unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is October 8, 1992
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT, UNDERWRITER OR DEALER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission. Reports, proxy
statements and other information filed by the Company with the Securities and
Exchange Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, 75 Park Place, New York, New York 10007; and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. Such reports, proxy
statements and other information can also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 on
which certain of the Company's securities are listed. This Prospectus does not
contain all information set forth in the Registration Statement and Exhibits
thereto, which the Company has filed with the Commission under the Securities
Act of 1933, as amended (the "Act"), and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below heretofore filed with the Securities and Exchange
Commission are incorporated herein by reference.
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1991.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992.
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992.
(d) The Company's definitive proxy statement dated March 25, 1992,
relating to its 1992 Annual Meeting of Stockholders.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities and Exchange Act of 1934 after the date of this
Prospectus and prior to the termination of the offering of the Debt Securities
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be a statement contained herein, or
contained in the accompanying Prospectus Supplement, or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus has been delivered, on the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated by reference in this Prospectus, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates). Requests for such
copies should be directed to Treasurer, Houghton Mifflin Company, One Beacon
Street, Boston, Massachusetts 02108 (telephone 617-725-5051).
2
<PAGE>
THE COMPANY
Houghton Mifflin Company (the "Company") was incorporated in 1908 in
Massachusetts as the successor to a partnership formed in 1880. Antecedents of
the partnership date back to 1832. The Company's principal business is
publishing, and it is one of the largest publishers of elementary and high
school textbooks in the United States. The Company's operations are reported in
two industry segments: (1) educational publishing, comprising textbooks and
other educational materials and services for the school and college markets and
(2) general publishing, including fiction, nonfiction, children's books,
reference materials, and business software products. With approximately 80% of
the Company's net sales derived from educational publishing, the Company's
quarterly results reflect the seasonality of the educational publishing market.
The second and third calendar quarters typically account for some 70% of annual
net sales. Seasonal losses are reported in the first and fourth quarters.
Educational Publishing. The Company maintains a leading market position in
the publication of educational materials, including textbooks and instructional
support material, educational software, and group and individually administered
tests. The Company is a leading publisher of reading, English and social
studies materials for the elementary school market and mathematics, English and
social studies for the secondary school market. The Riverside Publishing
Company, a subsidiary, publishes standardized tests and clinical tests. The
Company also has a well established position in the college market in the major
disciplines of English, history, business and accounting, education, foreign
languages, mathematics, and political science.
General Publishing. The Trade and Reference Division publishes adult fiction
and non-fiction hardcover and trade paperback books under the Houghton Mifflin
and Ticknor & Fields imprints. The division also publishes children's books
under the imprints of Houghton Mifflin and Clarion Books and has just launched
a third children's imprint. A well established collection of reference books,
including the third edition of The American Heritage Dictionary of the English
Language are also published. The Business Software Division focuses on
developing technology-based versions of the Company's reference and other
publications to extend the reach of these works into new markets.
The Company's principal executive offices are located at One Beacon Street,
Boston, Massachusetts 02108. Its telephone number is (617) 725-5000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
TWELVE MONTHS YEARS ENDED DECEMBER 31,
ENDED ------------------------
JUNE 30, 1992 1991 1990 1989 1988 1987
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges....... 8.0 7.6 6.3 9.6 17.2 21.9
</TABLE>
For purposes of these computations, earnings before fixed charges consist of
income before provision for income taxes and fixed charges. Fixed charges
consist of interest on indebtedness, including amortization of debt issuance
costs and interest on capital lease obligations. The Company generally reports
a net loss for the first half of the calendar year due to the seasonality of
its business, therefore, the Company believes that presentation of ratios for a
period other than a full 12-month period is inappropriate.
USE OF PROCEEDS
Except as may otherwise be disclosed in the Prospectus Supplement, the net
proceeds to the Company from the sale of the Debt Securities offered hereby are
expected to be used for general operations (including capital expenditures and
working capital requirements), stock repurchases, acquisitions, or repayment or
refinancing of outstanding indebtedness. Proceeds will be added to general
corporate cash and invested in investment grade, interest-bearing short-term
securities until needed.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture") to be
entered into between the Company and The First National Bank of Boston as
Trustee (the "Trustee"). The statements under this caption are brief summaries
of certain provisions of the Indenture, do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provision
of the Indenture, including the definition therein of certain terms. The Debt
Securities may be issued from time to time in one or more series. The
particular terms of each series of Debt Securities offered by any Prospectus
Supplement or Prospectus Supplements will be described in the Prospectus
Supplement or Prospectus Supplements relating to such series. Wherever
particular sections of the Indenture or terms not defined herein that are
defined in the Indenture are referred to herein or in a Prospectus Supplement,
it is intended that such sections or defined terms be incorporated by reference
herein or therein, as the case may be.
GENERAL
The Indenture will not limit the aggregate amount of Debt Securities which
may be issued thereunder, and Debt Securities may be issued thereunder up to
the aggregate principal amount which may be authorized from time to time by the
Company for each series. The Debt Securities will be unsecured obligations of
the Company and will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company.
The Prospectus Supplement or Prospectus Supplements relating to Offered Debt
Securities will describe: (1) the title of the Securities of the series; (2)
any limit on the aggregate principal amount of the Securities of the series
which may be authenticated and delivered under this Indenture; (3) whether any
Securities of the series are to be issuable initially in temporary global form
and whether any Securities of the series are to be issuable in permanent global
form and, if so, whether beneficial owners of interest in any such permanent
Global Security may exchange such interests for Securities of such series and
of like tenor of any authorized form and denomination and the circumstances
under which any such exchanges may occur; (4) the Person to whom any interest
on any Registered Security of the series shall be payable, if other than the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, and the extent to which, or the manner in which, any interest payable
on a temporary global Security on an Interest Payment Date will be paid; (5)
the date or dates on which the principal of the Securities of the series is
payable; (6) the rate or rates at which the Securities of the series shall bear
interest, if any, or the formula pursuant to which such rate or rates shall be
determined, the date or dates from which any such interest shall accrue, the
Interest Payment Dates on which any such interest shall be payable, the Regular
Record Date for any interest on any Registered Securities on any Interest
Payment Date; (7) the place or places where the principal of and any premium
and interest on Securities of the series shall be payable, any Registered
Securities of the series may be surrendered for registration of transfer,
Securities of the series may be surrendered for exchange, and notices and
demands to or upon the Company in respect of the Securities of the series and
the Indenture may be served; (8) the period or periods within which, the price
or prices at which and the terms and conditions upon which Securities of the
series may be redeemed, in whole or in part, at the option of the Company; (9)
the period or periods within which, the price or prices at which and the terms
and conditions upon which Securities of the series may be redeemed, in whole or
in part, at the option of the Holders; (10) the obligation, if any, of the
Company to redeem or purchase Securities of the series, or particular
Securities within the series, pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof; (11) the denominations in
which any Securities of the series shall be issuable, if other than
denominations of $1,000 and any integral multiple thereof; (12) if other than
the principal amount thereof, the portion of the principal amount of any
Securities of the series which shall be payable upon declaration of
acceleration of the Maturity thereof; (13) the Person who shall be the Security
Registrar, if other than the Company; (14) whether the Securities of the series
shall be issued upon original issuance, in whole or in part, in the form of one
or more Book-Entry Securities and, in such cases, (a) the Depository with
respect to such Book-Entry Security or Securities and (b) the circumstances
under which any such Book-Entry Security may be exchanged for Securities
registered
4
<PAGE>
in the name of, and any transfer of such Book-Entry Security may be registered
to, a Person other than such depository or its nominee; (15) if the defeasance
provisions of the Indenture are applicable to Securities of the series; and
(16) any other terms of the series not inconsistent with the provisions of the
Indenture. (Section 301) Any such Prospectus Supplement will also describe any
special provisions for the payment of additional amounts with respect to the
Debt Securities.
The Debt Securities may be issuable in definitive form as Registered
Securities. Debt Securities of a series may be issuable, in whole or in part,
in the form of one or more Global Securities, as described below under "Global
Securities." Unless the Prospectus Supplement relating thereto specifies
otherwise, Registered Securities will be issued only in denominations of $1,000
or any integral multiple thereof. (Section 302) One or more Global Securities
will be issued in a denomination or aggregate denominations equal to the
aggregate principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. (Section 203) No service
charge will be made for any transfer or exchange of Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section 305)
Registered Securities may be presented for exchange and (other than a Global
Security) for transfer (with the form of transfer endorsed thereon duly
executed), at the office of the transfer agent or at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Debt Securities and referred to in
an applicable Prospectus Supplement, without service charge and upon payment of
any taxes and other governmental charges as described in the Indenture. Such
transfer or exchange will be effected upon the transfer agent or the Security
Registrar, as the case may be, being satisfied with the documents of title and
identity of the person making the request. (Section 305) If a Prospectus
Supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
such transfer agent, except that the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities. (Section 1002)
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on the day of mailing of the relevant notice of redemption or
(ii) register the transfer of or exchange any Registered Security, or portion
thereof, called for redemption, except the unredeemed portion of any Registered
Security being redeemed in part. (Section 305)
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount from their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any Original Issue Discount Securities will be
described in the Prospectus Supplement relating thereto. "Original Issue
Discount Securities" means any debt Securities that provide for an amount less
than the principal amount thereof to be due and payable upon declaration of
acceleration of the Maturity thereof upon the occurrence of an Event of Default
and the continuation thereof. (Section 101)
GLOBAL SECURITIES
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a Depository (the "Depository") identified in the Prospectus Supplement
relating to that series. Global Securities may be issued in registered form in
either temporary or definitive form. Unless and until it is exchanged, in whole
or in part, for Debt Securities in definitive form, a Global Security may not
be transferred except as a whole by the Depository for such Global Security to
a nominee of the Depository or by a nominee of the Depository to the Depository
or another
5
<PAGE>
nominee of the Depository or by the Depository of any such nominee to a
successor to the Depository or a nominee of such successor. In addition, the
Company at any time and in its sole discretion may determine not to have any
Debt Securities represented by one or more Global Securities and, in that
event, will issue Debt Securities of such series in definitive form in exchange
for the Global Security or Securities representing such Debt Securities.
(Sections 203 and 204)
The specific terms of the Depository arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to that series. The Company anticipates that the following provisions will
apply to all Depository arrangements.
Upon the issuance of a Global Security, the Depository for the Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such
Depository ("participants"). Ownership of beneficial interests in a Global
Security will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in such Global Security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depository for such Global Security with
respect to its participants' interests or by participants or persons that hold
through participants with respect to beneficial owners' interests.
So long as the Depository for a Global Security, or its nominee, is the owner
of the Global Security, the Depository or its nominee, as the case may be, will
be considered the sole owner or holder of the Debt Securities represented by
such Global Security for all purposes under the Indenture governing such Debt
Securities. Except as provided in the Indenture, owners of beneficial interests
in a Global Security will not be entitled to have Debt Securities of the series
represented by the Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series
in definitive form and will not be considered the owners or holders thereof
under the Indenture governing such Debt Securities.
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, or interest on Registered
Securities will be made against surrender of such Registered Securities at the
office of such Paying Agent or Paying Agents as the Company may designate from
time to time, except that, at the option of the Company, payment of any
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register. Unless otherwise
indicated in the Prospectus Supplement, payment of any installment of interest
on Registered Securities will be made to the person in whose name such Debt
Security is registered at the close of business on the Regular Record Date for
such interest. (Section 307) Unless otherwise indicated in the Prospectus
Supplement, payments of such interest will be made at the office or agency of
the Trustee or by a check mailed to each Holder at the Holder's registered
address. (Section 1002)
All moneys paid by the Company to a paying agent for the payment of principal
of or premium, if any, or interest on any Debt Security that remains unclaimed
at the end of two years after such principal, premium or interest shall have
become due and payable will be repaid to the Company and the Holder of such
Debt Security will thereafter look only to the Company for payment thereof.
(Section 1003)
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant that, so long as any of the Debt Securities remains
outstanding, it will not, nor will it permit any Subsidiary (as defined, see
"Definition of Certain Terms" below) to issue, assume or guarantee any debt for
money borrowed, including but not limited to any Funded Debt, (herein referred
to as "Debt") if such Debt is secured by a mortgage, pledge, security interest
or lien (herein referred to as a "mortgage") upon any assets, stock or other
indebtedness of the Company now owned or hereafter acquired, without in any
such case effectively providing, concurrently with the issuance, assumption or
guarantee of such Debt, that the Debt Securities (together with, if the Company
shall so determine, any other indebtedness
6
<PAGE>
of or guarantee by the Company or such Subsidiary ranking equally with the Debt
Securities then outstanding and existing or thereafter created) will be secured
equally and ratably with (or prior to) such Debt. This restriction, however,
shall not apply to: (1) mortgages on any property acquired, constructed or
improved by the Company or any Subsidiary after the date of the Indenture which
are created or assumed contemporaneously with, or within 180 days after, such
acquisition (or in the case of property constructed or improved, after the
completion and commencement of commercial operation of such property, whichever
is later) to secure or provide for the payment of any part of the purchase
price of such property or the cost of such construction or improvement, or
mortgages on any property existing at the time of acquisition thereof; except
that in the case of any such construction or improvement, the mortgage shall
not apply to any property theretofore owned by the Company or any Subsidiary,
other than any theretofore unimproved real property on which the property so
constructed, or the improvement, is located; (2) mortgages on any property
acquired from a corporation which is merged with or into the Company or a
Subsidiary or mortgages outstanding at the time any corporation becomes a
Subsidiary; (3) mortgages in favor of the Company or any Subsidiary; and (4)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any mortgage referred to in the
foregoing clauses (1) to (3), inclusive; provided, however, that the principal
amount of Debt secured thereby shall not exceed the principal amount of Debt so
secured at the time of such extension, renewal or replacement, and that such
extension, renewal or replacement shall be limited to all or part of the
property which secured the mortgage so extended, renewed or replaced, plus
improvements on such property. Notwithstanding the above, the Company or any
Subsidiary may issue, assume or guarantee secured Debt, including any Funded
Debt, which would otherwise be subject to the foregoing restrictions, in an
aggregate amount which together with all other such Debt and all Attributable
Debt in respect of Sale and Lease-Back Transactions (as defined) of the Company
and its Subsidiaries existing at such time does not at the time exceed 10% of
the stockholders' equity of the Company and its consolidated Subsidiaries,
computed in accordance with generally accepted accounting principles applied on
a consistent basis, as shown on the audited consolidated balance sheet
contained in the latest annual report to stockholders of the Company.
Notwithstanding the provisions described above, the Company's Subsidiaries may
not issue, assume, guarantee or otherwise incur Funded Debt in excess of
$5,000,000 in the aggregate at any time outstanding. (Section 1007)
The Company will covenant that it will not, nor will it permit any Subsidiary
to, enter into any arrangement with any person providing for the leasing to the
Company or a Subsidiary of any real property (except for temporary leases for a
term of not more than three years), which property has been owned and, in the
case of any such Facility, has been placed in commercial operation more than
180 days by the Company or such Subsidiary and has been or is to be sold or
transferred by the Company or such Subsidiary to such person (herein referred
to as "Sale and Lease-Back Transactions"), unless either (a) the Company or
such Subsidiary would be entitled to incur Debt secured by a mortgage on the
property to be leased in an amount equal to the Attributable Debt with respect
to such Sale and Lease-Back Transactions without equally and ratably securing
the Securities pursuant to the Indenture or (b) the Company will, and in any
such case the Company will covenant that it will, apply an amount equal to the
fair value (as determined by the Board of Directors) of the property so leased
to the retirement, within 180 days of the effective date of any such Sale and
Lease-Back Transactions, of Securities or of Funded Debt of the Company which
ranks on a parity with the Securities. (Section 1008)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Debt
Securities, may consolidate or merge with or into, sell, lease, transfer or
otherwise dispose of its assets substantially as an entirety to any Person (as
defined) which is a corporation, partnership or trust organized under the laws
of any domestic jurisdiction, or may permit any such Person to consolidate or
merge with or into the Company or sell, lease, transfer or otherwise dispose of
its assets substantially as an entirety to the Company, provided that any
successor Person assumes the Company's obligations on the Debt Securities that,
under the Indenture, after giving effect to the transaction no Event of
Default, and no event which, after notice or lapse of time, would
7
<PAGE>
become an Event of Default, shall have occurred and be continuing, and that
certain other conditions are met. (Section 801)
DEFINITION OF CERTAIN TERMS
"Subsidiary" means any corporation of which a majority of the outstanding
stock having by the terms thereof ordinary voting power to elect a majority of
the board of directors of such corporation (whether or not at the time stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Company, or by one or more Subsidiaries,
or by the Company and one more Subsidiaries.
"Funded Debt" means indebtedness for money borrowed which by its terms
matures at, or is extendible or renewable at the option of the obligor, to a
date more than twelve months after the date of the creation of such
indebtedness.
"Attributable Debt" means, at the time of determination, the present value
(discounted at the interest rate, compounded semiannually, equal to the
weighted average yield to maturity of the Debt Securities then outstanding) of
the obligation of a lessee for net rental payments during the remaining term of
any lease (including any period for which such lease has been extended) entered
into in connection with a Sale and Lease-Back Transaction.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
modification or amendment, except that no such modification or amendment may,
without the consent of the Holder of each Outstanding Security affected
thereby, (a) change the Stated Maturity of the principal of, or any installment
of principal of or interest on any Debt Security, (b) reduce the principal
amount of, or premium or rate of interest on, any Debt Security, (c) except as
contemplated by the Indenture, change any obligation of the Company to pay
additional amounts, (d) reduce the amount of principal of an Original Issue
Discount Security payable upon acceleration of the maturity thereof, (e) change
the coin or currency in which any Debt Security or any premium or interest
thereon is payable, (f) impair the right to institute suit for the enforcement
of any payment on or with respect to any Debt Security, (g) reduce the
percentage in principal amount of Outstanding Securities of any series, the
consent of whose Holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults, (h) reduce the requirements contained in the
Indenture for consent to or approval of certain matters, (i) change any
obligation of the Company to maintain an office or agency in the places and for
the purposes required by the Indenture, or (j) modify any of the above
provisions. (Section 902)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of the Holders of all the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Section 1010) The Holders of a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of Debt
Securities of that series, waive any past default under the Indenture with
respect to Debt Securities of that series, except a default (a) in the payment
of principal of, or premium, if any, or any interest on any Debt Security of
such series, and (b) in respect of a covenant or provision of the Indenture
which cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected. (Section 513)
The Indenture will provide that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
8
<PAGE>
thereunder, the principal amount of an Original Issue Discount Security deemed
to be outstanding shall be the amount of the principal thereof that would be
due and payable as of the date of such determination upon acceleration of the
maturity thereof. (Section 101)
EVENTS OF DEFAULT
The Indenture will define an Event of Default with respect to any series of
Debt Securities as being any one of the following events and such other event
as may be established for the Debt Securities of a particular series: (a)
failure to pay any payment of interest on Debt Securities of such series when
due, continuing for 30 days; (b) failure to pay principal or premium, if any,
on Debt Securities of such series when due; (c) failure to deposit any sinking
fund installment on Debt Securities of such Series when due; (d) the
acceleration of the Company's obligation to pay any indebtedness in an amount
greater than $10,000,000; (e) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture
solely for the benefit of series of Debt Securities other than that series),
continued for 60 days after written notice as provided in the Indenture; or (f)
certain events involving bankruptcy, insolvency or reorganization. (Section
501)
The Indenture will provide that if an Event of Default specified therein
shall occur and be continuing with respect to any series of Debt Securities,
either the Trustee or the Holders of 25% in principal amount of the Debt
Securities of such series then outstanding may declare the principal (or in the
case of Original Issue Discount Securities, such portion of the principal
amount thereof as may be specified in the terms thereof) of the Debt Securities
of such series (or of all the Debt Securities, as the case may be) to be due
and payable. (Section 502) In certain cases, the Holders of a majority in
principal amount of the outstanding Debt Securities of any series may on behalf
of the Holders of all the Debt Securities of any such series waive any past
default, except a default in payment of the principal of (or premium, if any)
continuing default in the payment of any interest on any of the Debt Securities
of such series. (Section 513)
The Indenture will contain a provision entitling the Trustee, subject to the
duty of the Trustee during default to act with the required standard of care,
to be indemnified by the Holders of the Debt Securities of any series before
proceeding to exercise any right or power under the Indenture with respect to
such series at the request of such Holders. (Section 601) The Indenture will
provide that no Holder of any Debt Securities of any series may institute any
proceeding, judicial or otherwise, to enforce such Indenture, except where the
Trustee has, for 60 days after it is given written notice of default, failed to
act and where there has been both a written request to enforce such Indenture
by the Holders of not less than 25% in aggregate principal amount of the then
outstanding Debt Securities of such series and an offer of reasonable indemnity
to the Trustee. (Section 507) This provision will not prevent any Holder of
Debt Securities from enforcing payment of the principal thereof and premium if
any, and interest thereon at the respective due dates thereof. (Section 508)
The Holders of a majority in aggregate principal amount of the Debt Securities
of any series then outstanding may direct the time, method and place of
conducting any proceedings for any remedy available to the Trustee or
exercising any trust or power conferred on it with respect to the Debt
Securities of such series. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture or which would be unjustly
prejudicial to Holders not joining therein. (Section 512)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1009)
DEFEASANCE
If so specified with respect to any particular series of Debt Securities, the
Company may discharge its indebtedness and its obligations or certain of its
obligations under the Indenture with respect to such series by depositing funds
or obligations issued or guaranteed by the United States of America with the
Trustee.
9
<PAGE>
DEFEASANCE AND DISCHARGE
The Indenture will provide that, if so specified with respect to the Debt
Securities of any series, the Company will be discharged from any and all
obligations in respect of the Debt Securities of such series (except for
certain obligations relating to temporary Debt Securities and exchange of Debt
Securities, registration of transfer or exchange of Debt Securities of such
series, replacement of stolen, lost or mutilated Debt Securities of such
series, maintenance of paying agencies, holding monies for payment in trust and
payment of additional amounts, if any, required in consequence of United State
withholding taxes imposed on payments to non-United States persons) upon the
deposit with the Trustee, in trust, of money or U.S. Government Obligations
which through the payment of interest and principal thereof in accordance with
their terms will provide money in an amount sufficient to pay the principal of
(and premium, if any), each installment of interest on and any sinking fund
payments on the Debt Securities of such series on the stated maturity of such
payments in accordance with the terms of the Indenture and the Debt Securities
of such series. Such a trust may only be established if, among other things,
(a) the Company has delivered to the Trustee an Opinion of Counsel to the
effect that (i) the company has received from, or there has been published by,
the Internal Revenue Service a ruling, or (ii) since the date of the Indenture
there has been a change in applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of Debt Securities of such series will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit, defeasance
and discharge, and will be subject to federal income tax on the same amounts
and in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge had not occurred; and (b) the Debt
Securities of such series, if then listed on any domestic or foreign securities
exchange, will not be delisted as result of such deposit, defeasance and
discharge. (Section 403) In the event of any such defeasance and discharge of
Debt Securities of such series, Holders of Debt Securities of such series would
be able to look only to such trust fund for payment of principal of and any
premium and any interest on their Debt Securities until maturity.
DEFEASANCE OF CERTAIN OBLIGATIONS
The Indenture will provide that, if so specified with respect to the Debt
Securities of any series, the Company may omit to comply with the restrictive
covenants described under "Certain Covenants of the Company" above and any such
omission shall not be an Event of Default with respect to the Debt Securities
of such series, upon the deposit with the Trustee, in trust, of money or U.S.
Government Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) each installment of
interest on and any sinking fund payments on the Debt Securities of such series
on the Stated Maturity of such payments in accordance with the terms of the
Indenture and the Debt Securities of such series. The obligations of the
Company under the Indenture and the Debt Securities of such series other than
with respect to such covenant shall remain in full force and effect. Such a
trust may be established only if, among other things, the Company has delivered
to the Trustee an Opinion of Counsel to the effect that (i) the Holders of the
Debt Securities of such series will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance of
certain obligations and will be subject to federal income tax on the same
amounts and in the same manner and at the same time as would have been the case
if such deposit and defeasance had not occurred and (ii) the Debt Securities of
such series, if then listed on any domestic or foreign securities exchange,
will not be delisted as a result of such deposit and defeasance. (Section 1011)
In the event the Company exercises its option to omit compliance with the
covenants described under "Certain Covenants of the Company" above with respect
to the Debt Securities of any series as described above and the Debt Securities
of such series are declared due and payable because of the occurrence of any
Event of Default, then the amount of money and U.S. Government Obligations on
deposit with the Trustee will be sufficient to pay amounts due on the Debt
Securities of such series at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the Debt Securities of such series at the time
of the acceleration resulting from such Default. The Company shall in any event
remain liable for such payments as provided in the Indenture.
10
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters or dealers
and also may sell Debt Securities directly to other purchasers or through
agents. Any such underwriter or agent involved in the offer and sale of the
Debt Securities will be named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Debt Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may offer and sell the Debt Securities in
exchange for one or more of its outstanding issues of debt or convertible debt
securities. The Company also may, from time to time, authorize underwriters
acting as the Company's agents to offer and sell the Debt Securities upon the
terms and conditions as shall be set forth in any Prospectus Supplement. In
connection with the sale of Debt Securities, underwriters may be deemed to have
received compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Debt Securities
for whom they may act as agent. Underwriters may sell Debt Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
(which may be changed for time to time) from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Debt Securities, and any discounts,
concessions or commission allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Debt Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Debt Securities may be deemed
to be underwriting discounts and commissions, under the Act. Underwriters,
dealers and agents may be entitled, under agreements with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Act, and to reimbursement by the Company for
certain expenses.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Debt Securities for the Company at the public offering
price set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount Debt Securities sold pursuant to
Contracts shall not be less nor more than, the respective amounts stated in
such Prospectus Supplement. Institutions with whom Contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Debt Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if any of the Debt
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by Contracts. Agents and underwriters will
have no responsibility in respect of the delivery or performance of Contracts.
All Debt Securities will be a new issue of securities with no established
trading market. Any underwriters to whom Debt Securities are sold by the
Company for public offering and sale may make a market in such Debt Securities,
but such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for any Debt Securities.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
11
<PAGE>
TAXATION
The following is a summary of certain federal income tax consequences to
original purchasers of the Debt Securities. The summary does not discuss all
aspects of federal income taxation which may be relevant to particular
investors in view of their specific investment circumstances, nor does it
discuss any foreign, state or local income or other tax considerations. The
summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), and on regulations, rulings and decisions that are in effect as of the
date of this Prospectus, all of which are subject to change. The summary
assumes that the Debt Securities are held as "capital assets" (generally,
property held for investment purposes) within the meaning of Section 1221 of
the Code.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF
PURCHASING, HOLDING AND DISPOSING OF THE DEBT SECURITIES.
STATED INTEREST
In general, interest payments on a Debt Security calculated on the basis of a
single fixed rate of interest, or a variable rate tied to a single objective
index of market interest rates, that is actually and unconditionally payable at
fixed periodic intervals of one year or less over the entire term of the Debt
Security (including short periods) will be included in the Holder's gross
income as ordinary interest income in accordance with such Holder's method of
tax accounting.
ORIGINAL ISSUE DISCOUNT
Debt Securities with a term greater than one year may be issued with original
issue discount for federal income tax purposes. Original Issue Discount will
arise if the stated principal amount at maturity of a debt Security exceeds its
issue price by more than a de minimis amount, or if a Debt Security has certain
interest payment characteristic (e.g., interest holidays, interest payable in
additional Debt Securities or stepped rates). If a Debt Security is issued with
original issue discount, the Holder of the Debt Security will be required to
include amounts in gross income for federal income tax purposes in advance of
the receipt of the cash payment to which such income is attributable. The
amount of original issue discount to be included in income in any tax period
will be determined using a constant yield to maturity method. Any amounts
included in income as original issue discount will, however, increase a
holder's tax basis in the Debt Security.
Any Debt Security issued with original issue discount will bear a legend
setting forth the issue date, the total amount of original issue discount, the
yield to maturity and certain other information. The Company will also report
annually to the Internal Revenue Service (the "IRS") and to each holder of such
Debt Security the original issue discount accrued with respect to the Debt
Security. Prospective holders are advised to consult their tax advisors with
respect to the particular original issue characteristics of the Debt Security
that is being purchased.
ACQUISITION DISCOUNT OF SHORT-TERM DEBT SECURITIES
Debt Securities that have a fixed maturity of one year or less may be issued
with acquisition discount. Acquisition discount will arise under the
circumstances set forth above with respect to original issue discount. Accrual
basis taxpayers and taxpayers in certain specified classes would be required to
include acquisition discount in income currently in an amount and manner
similar to that applicable to original issue discount. In addition, taxpayers
not required to include acquisition discount in income currently may elect to
include acquisition discount in income currently. A holder who makes such an
election cannot revoke such election without the consent of the IRS, and such
election applies to all short-term obligations acquired by the holder in the
taxable year in which the election is made and in all subsequent taxable years.
Taxpayers not subject to the above rules and not electing to be subject to such
rules and holding Debt Securities with acquisition
12
<PAGE>
discount are not required to include accrued acquisition discount in income
until the cash payments attributable to such amounts are received, which
amounts will be treated as ordinary income. A holder who does not recognize
acquisition discount currently may, however, be subject to limitations on the
deductability of interest on indebtedness incurred to purchase or carry such a
Debt Security.
DISPOSITION OF DEBT SECURITIES
In general, and subject to the foregoing discussion of acquisition discount,
an original holder of a Debt Security will recognize capital gain or loss on
the sale, redemption, exchange or other disposition of the Debt Security
measured by the difference between the amount of cash received (except to the
extent attributable to accrued interest) and the holder's adjusted tax basis in
the Debt Security.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the Company by
Goodwin, Procter & Hoar, and certain matters will be passed upon for any
underwriters or agents by Skadden, Arps, Slate, Meagher & Flom.
TRUSTEE'S RELATIONSHIP WITH ISSUER
The First National Bank of Boston will act as Trustee for Debt Securities
issued under the Indenture and act as Depository for funds of, make loans to,
and perform other services for the Company in the normal course of business. It
also will act as Registrar and transfer agent for the Company's common shares.
EXPERTS
The consolidated financial statements of Houghton Mifflin Company for the
year ended December 31, 1991, incorporated by reference or included in Houghton
Mifflin Company's Annual Report (Form 10-K) have been audited by Ernst & Young,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
13
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company................................................................ S-2
Recent Developments........................................................ S-2
Use of Proceeds............................................................ S-3
Capitalization............................................................. S-3
Summary Financial Information.............................................. S-3
Ratio of Earnings to Fixed Charges......................................... S-4
Description of the Notes................................................... S-5
Underwriting............................................................... S-6
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Use of Proceeds............................................................ 3
Description of Debt Securities............................................. 4
Plan of Distribution....................................................... 11
Taxation................................................................... 12
Validity of Debt Securities................................................ 13
Trustee's Relationship with Issuer......................................... 13
Experts.................................................................... 13
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Houghton Mifflin
Company
$100,000,000
% Notes Due
- -------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
- -------------------------------------------------------------------------------
CS First Boston
J.P. Morgan Securities Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
