<PAGE> 1
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
HOUGHTON MIFFLIN COMPANY
(Name of Registrant as Specified In Its Charter)
LOIS M. NOVOTNY
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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:
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<PAGE> 2
HOUGHTON MIFFLIN COMPANY
[LOGO
March 28, 1994
Dear Stockholder:
I am delighted to invite you to attend the 1994 Annual Meeting of
Stockholders of Houghton Mifflin Company on Wednesday, April 27, 1994, at 11:00
A.M. at The New England Hall, 225 Clarendon Street, Boston, Massachusetts.
The formal business to be considered and acted upon by stockholders at
this meeting is the election of four Class II directors, each for a three-year
term, and the ratification of the selection of the Company's independent public
accountants. These matters are described in detail in the accompanying Notice of
Annual Meeting and Proxy Statement. We shall also use this opportunity to report
to you on Houghton Mifflin's 1993 performance and outlook for the future.
It is important that your shares be represented whether or not you are
able to be there in person. I urge you, therefore, to register your vote now by
completing, signing, and returning the enclosed proxy card promptly.
All stockholders will receive a report of the meeting in the mail.
Sincerely,
/s/ Nader F. Darehshori
Nader F. Darehshori
Chairman, President, and
Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING
TO BE HELD APRIL 27, 1994
Boston, Massachusetts
March 28, 1994
To the Stockholders of Houghton Mifflin Company:
The Annual Meeting of Stockholders of Houghton Mifflin Company will be
held at The New England Hall, 225 Clarendon Street, Boston, Massachusetts, on
Wednesday, April 27, 1994, at 11:00 A.M. to consider and act on the following
matters:
1. Election of four Class II directors, each for a three-year term;
2. Ratification of the selection of Ernst & Young as independent auditors
of the Company for the current year; and
3. Any other matter that may properly come before the meeting or any
adjournment thereof.
By Order of the Board of Directors,
Paul D. Weaver, Clerk
WHETHER OR NOT YOU ATTEND IN PERSON, IT WOULD BE APPRECIATED IF YOU WOULD
FILL IN AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY, OF COURSE, VOTE YOUR SHARES EVEN
THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE> 4
HOUGHTON MIFFLIN COMPANY
222 Berkeley Street
Boston, Massachusetts 02116
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 1994
GENERAL INFORMATION
This statement is furnished in connection with the solicitation of Proxies
by the Board of Directors of Houghton Mifflin Company, hereinafter called the
"Company." The cost of soliciting Proxies will be borne by the Company. The
solicitation of Proxies by mail may be followed by personal solicitation of
certain stockholders by officers or employees of the Company. In addition, the
Company has retained Hill and Knowlton, Inc., as a proxy solicitor at an
estimated cost of $6,000 plus expenses. The enclosed Proxy, if executed and
returned, may be revoked at any time before it has been exercised.
The Annual Report for the year ended December 31, 1993, is enclosed or has
been furnished previously under separate cover.
Stock transfer books will not be closed, but the Board of Directors has
fixed the close of business on March 4, 1994, as the record date for determining
the stockholders entitled to notice of, and to vote at, this meeting and any
adjournment thereof. On that date there were outstanding 14,550,497 shares of
common stock (par value $1 per share), and the holders thereof will be entitled
to one vote for each share held by them.
This Proxy Statement and enclosed form of Proxy are first being sent or
given to security holders on or about March 28, 1994.
BOARD OF DIRECTORS
The Board of Directors of the Company currently consists of 13 members. The
Board is divided into three classes as nearly equal in number as possible, with
one class elected each year at the Annual Meeting of Stockholders. The directors
in each class serve for a term of three years and until their successors are
duly elected and qualified. The terms of office for the Class II directors
expire at this meeting.
The Board has voted to fix the number of directors at 13. There are four
incumbent directors in Class I and five in Class III. Consequently, at the
Annual Meeting of Stockholders, four nominees in Class II are standing for
election. These nominees are Gail Deegan, James O. Freedman, Charles R.
Longsworth, and Alfred L. McDougal, all of whom are presently Class II
directors.
<PAGE> 5
The affirmative vote of a plurality of shares present and voting at the
Annual Meeting of Stockholders is necessary to elect a director. With regard to
the election of directors, votes may be cast in favor of or withheld from each
nominee; votes that are withheld will be excluded entirely from the vote and
will have no effect on the election of directors. Abstentions may be specified
on proposals other than the election of directors, will be counted as present
for purposes of determining the existence of a quorum regarding the item on
which the abstention is noted, and will have the effect of a vote against
proposals that require a majority of either the outstanding shares or the shares
present in person or by proxy and entitled to vote on the matter. Under the
rules of the New York Stock Exchange, brokers who hold shares in street name
have the authority to vote on certain items when they have not received
instructions from beneficial owners. Brokers that do not receive instructions
are entitled to vote on the election of directors. Under applicable
Massachusetts law and the Company's By-laws, broker non-votes will have no
effect on the outcome of the election of directors or proposals that require a
majority of the shares present in person or by proxy and entitled to vote on the
matter involved but would have the effect of a negative vote on proposals that
require a majority of the outstanding shares.
The Board met 11 times during 1993. All incumbent directors attended at
least 75% of the aggregate number of meetings of the Board of Directors and
committees of which they were members.
Committees of the Board
The Board of Directors has appointed the following five standing committees
elected from its own members.
The Executive Committee. The principal duty of the Committee is to act for
the Board when the Board is not in session. The Committee did not meet during
1993. Messrs. Darehshori, Baute, Magee, Putnam, and Ms. Malone are members of
the Committee.
The Compensation & Nominating Committee. This Committee is made up
exclusively of non-employee directors. The duties of the Committee are (i) to
review and approve compensation plans, generally, for the Company, (ii) to
consider and administer stock option grants, other stock award plans, and
incentive compensation, and (iii) to fix the compensation of directors employed
by the Company and certain officers. The Committee also submits to the Board
names of persons it believes should be considered for election as directors of
the Company. The Committee will consider timely recommendations for nominations
submitted by stockholders. Any stockholder wishing to make a recommendation
should submit it in writing to the attention of the Clerk of the Company at its
executive offices. The Committee met four times during 1993. Messrs. Baute,
Freedman, Putnam, Thomas, and Mrs. Lindsay are members of the Committee.
The Audit Committee. This Committee is made up exclusively of non-employee
directors. The purpose of the Committee is to review the integrity of the
Company's financial statements. The Company's internal auditors and its
independent public accountants have direct access to the Committee. The
Committee annually considers the qualifications of the independent public
accountants for the Company and makes recommendations to the Board as to their
selection, fee, and the scope of their audit and other services. The Committee
is empowered to conduct investigations into any matters concerning the integrity
of reported facts and figures, ethical conduct, and appropriate disclosure. The
Committee met four times during 1993. Ms. Deegan, Mr. Freedman, Mrs. Lindsay,
Mr. Longsworth, and Dr. Sorenson are members of the Committee.
2
<PAGE> 6
The Finance Committee. This Committee reviews and makes recommendations
relating to offerings of debt and equity securities, major borrowing
commitments, dividend policy, and other significant financial matters. The
Committee met twice during 1993. Messrs. Jaeger, Longsworth, Putnam, Thomas, Ms.
Malone, and Ms. Deegan are members of the Committee.
The Diversity Committee. This Committee reviews and monitors the Company's
policies and practices, with specific attention to the Company's commitment to
ensuring that its employees and suppliers represent the diversity of America's
population. The Committee met twice during 1993. Its members are Messrs. Jaeger,
Longsworth, Magee, and Dr. Sorenson.
Directors' Compensation
Directors who are not employees of the Company receive an annual $7,000
retainer, $700 for each Board meeting attended, and $500 for each committee
meeting attended. Members of the Executive Committee receive an annual retainer
of $4,000 in lieu of Executive Committee attendance fees. Directors who chair
committees receive an additional $2,500 retainer. In addition to the cash
remuneration, non-employee directors receive shares of Company common stock
pro-rated for service during the year. For service in 1993, directors received
500 shares. Directors who are employees receive no compensation for attendance
at Board or committee meetings.
The Company maintains a deferred compensation plan for non-employee
directors under which such directors may defer all or a portion of their cash
compensation until retirement from the Board. Interest is credited on deferred
balances annually at the average sixty-day Treasury-bill yield. No directors
participated in the plan during 1993.
The Company also maintains a Non-Employee Directors' Retirement Benefit
Plan, under which non-employee directors or their beneficiaries shall receive,
after service as a director has terminated, one-and-one-half times the annual
directors' cash retainer in effect at the time of such termination, for a period
equal to the time of service as a director.
1. ELECTION OF CLASS II DIRECTORS
Information regarding nominees and directors is set forth below. Except as
noted, each of the nominees and directors has held his or her principal position
for at least five years.
It is believed that each of the nominees will be able to serve. If any one
or more of the nominees should be unable to serve, the individuals named in the
enclosed Proxy may vote in favor of such other person or persons as the Board of
Directors at the time recommends.
NOMINEES FOR CLASS II DIRECTORS -- TERM EXPIRES IN 1997
<TABLE>
<S> <C>
- ----------------- GAIL DEEGAN is Vice President, Chief Financial Officer, and Treasurer of
NYNEX New England, which she joined in 1991. From 1990 until mid-1991,
- ----------------- she was Senior Vice President, Chief Financial Officer, and Chief
Administrative Officer of Eastern Enterprises, the parent of companies
involved in barge operations, natural gas distribution, and manufacturing
and distribution of water systems and components. Prior to that, she was
elected Senior Vice President and Chief Financial Officer of Eastern
Enterprises in 1988. Ms. Deegan, who is 47 years old, has served as a
director since 1989 and is a member of the Audit and Finance Committees.
She is a director of EG&G, Inc., and a member of the Board of Overseers,
Wellesley College Center for Research on Women.
</TABLE>
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<TABLE>
<S> <C>
- ----------------- JAMES O. FREEDMAN has been President of Dartmouth College since 1987. Mr.
Freedman, who is 58 years old, has served as a director since 1991 and is
- ----------------- a member of the Audit and Compensation & Nominating Committees. He is the
author of Crisis and Legitimacy: The Administrative Process and American
Government, published by Cambridge University Press in 1978, and is a
member of the American Law Institute, the Jacob K. Javits Fellowship
Board, the Board of Trustees of the Jewish Publication Society of
America, the Board of Directors of the Salzburg Seminar, and the Council
of the American Antiquarian Society. In 1991, President Freedman received
the William O. Douglas First Amendment Freedom Award from the
Anti-Defamation League of B'nai B'rith.
- ----------------- CHARLES R. LONGSWORTH is Chairman and a trustee of the Colonial
Williamsburg Foundation in Williamsburg, Virginia. Mr. Longsworth, who is
- ----------------- 64 years old, has served as a director since 1985 and is a member of the
Audit, Diversity, and Finance Committees. He is also a director of
FlightSafety International; American Public Radio; Roadway Services,
Inc.; Saul Centers, Inc.; Crestar Bank and Bank Shares, Inc.; and
Chairman of the Center for Public Resources; Chairman of the Board of
Trustees of Amherst College; and President Emeritus of Hampshire College.
- ----------------- ALFRED L. MCDOUGAL was Chairman and Chief Executive Officer of McDougal,
Littell & Company until its acquisition by the Company in March 1994. Mr.
- ----------------- McDougal, who is 63 years old, has served as a director since March 1994.
He is a past chairman of the Northern Illinois Business Association and
of the School Division of the Association of American Publishers, and a
former director of the Association of American Publishers. Mr. McDougal
also serves as a director of Literacy Chicago and the Youth Job Center,
Evanston, Illinois, where he was formerly the Chairman, and as a Governor
of Opportunity International.
CLASS I DIRECTORS CONTINUING IN OFFICE -- TERM EXPIRES IN 1996
- ----------------- JOSEPH A. BAUTE is a principal in Baute & Baute, a consulting firm for
family businesses. He retired in 1992 as Chairman and Chief Executive
- ----------------- Officer of Markem Corporation, which provides systems, supplies, and
services to mark customers' products. Mr. Baute, who is 66 years old, has
served as a director since 1982 and is Chairman of the Compensation &
Nominating Committee and a member of the Executive Committee. He is also
a director of Markem Corporation, Amsterdam Printing & Lithography, Dead
River Group, Nashua Corporation, State Street Bank and Trust Company,
State Street Boston Corporation, InfoSoft International, Inc., and the
Rodney Hunt Company; a member of the Board of Advisors of Kearsarge
Capital Fund, L.P.; and past Chairman of the Board of the Federal Reserve
Bank of Boston.
</TABLE>
4
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<TABLE>
<S> <C>
- ----------------- NADER F. DAREHSHORI has been Chairman of the Board and Chief Executive
Officer of the Company since 1990 and was named President in October
- ----------------- 1991. Mr. Darehshori became Senior Vice President, College Division, in
1987; he was promoted to Executive Vice President and then to Vice
Chairman in 1989. Mr. Darehshori, who is 57 years old, has served as a
director since 1989 and is Chairman of the Executive Committee. Mr.
Darehshori is a director of Commercial Union Corporation, State Street
Bank and Trust Company, State Street Boston Corporation, the U.S. Chamber
of Commerce, and the Boston Public Library Foundation. He is a trustee of
Wellesley College, the New England Aquarium, and the WGBH Foundation. Mr.
Darehshori is a member of the National Executive Board of the National
Conference of Christians and Jews and also serves on the board of The
Boston Symphony Orchestra.
- ----------------- GEORGE PUTNAM is Chairman of the Putnam Management Company, Inc.;
Chairman and President of each of the Putnam Group Funds; and a director
- ----------------- of The Putnam Advisory Company, Inc., and Putnam Financial Services
Company, Inc. Mr. Putnam, who is 67 years old, has served as a director
since 1985 and is a member of the Compensation & Nominating, Finance, and
Executive Committees. He is also a director of The Boston Company and The
Boston Safe Deposit & Trust Company (subsidiaries of Mellon Bank
Corporation); Freeport-McMoRan, Inc.; General Mills, Inc.; Marsh &
McLennan Companies, Inc.; and the Rockefeller Group, Inc. In addition, he
serves as a trustee of the Museum of Fine Arts, Boston; the Colonial
Williamsburg Foundation; the Massachusetts General Hospital; McLean
Hospital; The Jackson Laboratory; and the Trustees of Reservations; and
as Chairman of the WGBH Educational Foundation. He is also a Governor and
past Chairman of The Investment Company Institute and a Public Governor
of The National Association of Securities Dealers, Inc.
- ----------------- DEROY C. THOMAS is a partner in the law firm of LeBoeuf, Lamb, Leiby &
MacRae. He retired from The Hartford Insurance Group as Chairman and
- ----------------- Chief Executive Officer in 1988, having served in various capacities
since 1964. He was elected Vice Chairman of ITT Corporation in 1985, and
President and Chief Operating Officer in 1988. He served in that capacity
until his retirement in 1991. Mr. Thomas, who is 68 years old, has served
as a director since 1990 and is a member of the Finance and Compensation
& Nominating Committees. He is a director of Hartford Insurance Group,
Connecticut Natural Gas Corporation, The Bushnell, the Old State House
Association, the World Affairs Council, and Goodspeed Opera House. He is
Chairman of Connecticut Health System and a corporator of St. Francis
Hospital, The Institute of Living, and the VNA Group, and a trustee of
Fordham University.
</TABLE>
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<TABLE>
<S> <C>
CLASS III DIRECTORS CONTINUING IN OFFICE -- TERM EXPIRES IN 1995
- ----------------- STEPHEN O. JAEGER is Executive Vice President, Chief Financial Officer,
and Treasurer of the Company. Mr. Jaeger joined Houghton Mifflin in 1987
- ----------------- as Senior Vice President, Finance. He became Senior Vice President, Chief
Financial Officer, in 1988 and was named Treasurer in 1990. He was
promoted to his current position in April 1991, and elected to the Board
of Directors in October 1991. Mr. Jaeger, who is 49 years old, is a
member of the Finance and Diversity Committees. He is also a member of
the Accounting Advisory Council of Suffolk University, Boston; the
Trustee Advisory Council of Fairfield University; and the Executive
Committee of the American Red Cross of Massachusetts Bay; and a director
of Cassell PLC and InfoSoft International, Inc.
- ----------------- MARY H. LINDSAY has served as a director since 1975 and is Chairman of
the Audit Committee and a member of the Compensation & Nominating
- ----------------- Committee. Mrs. Lindsay, who is 67 years old, also is a member of the
President's Council of the Museum of the City of New York and the Board
of Directors of Theatre Development Fund, Inc.
- ----------------- JOHN F. MAGEE is Chairman of Arthur D. Little, Inc., a contract research
and consulting firm. Mr. Magee, who is 67 years old, has served as a
- ----------------- director since 1976 and is a member of the Diversity and Executive
Committees. He is also a director of John Hancock Mutual Life Insurance
Company. In addition, he is a member of the Boards of Trustees of Bowdoin
College, the New England Aquarium, the Boston Museum of Science, Emerson
Hospital, and Thompson Island Outward Bound Education Center.
- ----------------- CLAUDINE B. MALONE is President of Financial & Management Consulting,
Inc. Ms. Malone, who is 57 years old, has served as a director since 1982
- ----------------- and is Chairman of the Finance Committee and a member of the Executive
Committee. She is also a director of The Union Pacific; The Limited,
Inc.; Scott Paper Company; Hasbro, Inc.; Dell Computer Corporation; SAIC;
Imcera Group Inc.; and Hannaford Brothers, Inc.; and a trustee of the
Penn Mutual Life Insurance Company and Massachusetts Institute of
Technology. In addition, she is Deputy Chairman of the Federal Reserve
Bank of Richmond.
</TABLE>
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<TABLE>
<S> <C>
- ----------------- RALPH Z. SORENSON is a Professor at the College of Business and
Administration at the University of Colorado, Boulder, where he was named
- ----------------- Dean in 1992. He resigned the position of Dean in 1993. He had been an
Adjunct Professor of Management at the Harvard University Graduate School
of Business since 1989. He was formerly Chairman and Chief Executive
Officer of Barry Wright Corporation, a diversified industrial company.
Dr. Sorenson, who is 60 years old, has served as a director since 1976
and is Chairman of the Diversity Committee and a member of the Audit
Committee. He is also a director of Eaton Vance Corporation; Polaroid
Corporation; Exabyte Corporation; and Sweetwater Inc. In addition, he is
a member and former chairman of the Board of Trustees of the Boston
Museum of Science; overseer emeritus of The Boston Symphony Orchestra;
and a member of the corporations of Massachusetts General Hospital and
Babson College.
</TABLE>
Mr. Darehshori and Mr. Baute are directors of State Street Boston
Corporation and its principal subsidiary, State Street Bank and Trust Company.
State Street Bank and Trust Company is the Trustee of the Company's Employees'
Savings and Thrift Plan, Pension Plan, and Benefits Trust. Arthur D. Little,
Inc., of which Mr. Magee is Chairman, provided consulting services to the
Company during 1993 at standard commercial terms. InfoSoft International, Inc.
("InfoSoft"), of which Messrs. Baute and Jaeger are directors, was formed to
succeed to the business of the Company's Software Division; the Company holds
approximately 40% of InfoSoft's common stock, and has licensed rights to certain
reference publications to InfoSoft, at rates that the Company believes are
commercially reasonable.
<TABLE>
The following table shows information furnished by the persons listed as to
the beneficial ownership of common stock of the Company by each of the directors
and nominees, by the individuals named in the Summary Compensation Table, and by
all directors and executive officers as a group, as of January 31, 1994.
<CAPTION>
AMOUNT AND PERCENT
NATURE OF OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2)(3) CLASS
- ---------------------------------------------------------------- ------------------ -------
<S> <C> <C>
Joseph A. Baute................................................. 3,823 *
Nader F. Darehshori............................................. 44,248(4) *
Gail Deegan..................................................... 1,650 *
James O. Freedman............................................... 1,150 *
Stephen O. Jaeger............................................... 15,294(5) *
Joseph A. Kanon................................................. 14,378(6) *
Mary H. Lindsay................................................. 3,800 *
Charles R. Longsworth........................................... 2,370(7) *
John F. Magee................................................... 5,000 *
Claudine B. Malone.............................................. 2,839 *
Alfred L. McDougal.............................................. 0
Michael E. Melody............................................... 9,441(8) *
George Putnam................................................... 4,218 *
Ralph Z. Sorenson............................................... 3,600 *
DeRoy C. Thomas................................................. 2,350 *
William J. Wisneski............................................. 7,377 *
All directors and executive officers as a group (23 persons).... 159,382(9) 1.2%
<FN>
- ---------------
* Less than one percent
</TABLE>
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<PAGE> 11
(1) Unless otherwise noted, the holder has sole voting and investment power over
the shares listed.
(2) Includes shares subject to options exercisable within sixty days as follows:
Mr. Darehshori, 15,534; Mr. Jaeger, 4,900; Mr. Kanon, 8,000; Mr. Melody,
2,800; Mr. Wisneski, 3,040; and all executive officers as a group, 47,714
shares. For purposes of calculating the "percent of class" with respect to
each such individual and the group, the shares subject to such options have
been treated as if they were issued and outstanding.
(3) Includes vested interest in shares under the Employees' Savings and Thrift
Plan as of December 31, 1993, the most recent date for which such
information is available.
(4) Includes 465 shares as to which Mr. Darehshori has sole voting power only.
(5) Includes 200 shares as to which Mr. Jaeger has sole voting power only.
(6) Includes 156 shares as to which Mr. Kanon has sole voting power only.
(7) Includes 400 shares owned by Mr. Longsworth's wife as to which he disclaims
beneficial ownership.
(8) Includes 200 shares owned by Mr. Melody's wife as to which he disclaims
beneficial ownership.
(9) Five members of this group share with others voting and investment power
over 6,538 of the shares listed, and with respect to 1,789 shares the holder
has sole voting power only.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive 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
("SEC") and the New York Stock Exchange. Officers, directors, and greater than
10% shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on review of the copies of such reports furnished to the Company and
written representations that no other reports were required during the fiscal
year ended December 31, 1993, all Section 16(a) filing requirements applicable
to its executive officers, directors, and greater than 10% beneficial owners
were satisfied.
Compensation & Nominating Committee's Report to Stockholders
The Company's executive compensation program is administered by the
Compensation & Nominating Committee of the Board of Directors (the "Committee"),
which is composed of the individuals listed below, none of whom is an employee
of the Company. The Committee approves compensation plans for the Company's
senior management.
The Company's executive compensation program has been designed to attract,
motivate, retain, and reward highly qualified senior management by providing a
competitive total compensation opportunity based on performance. The components
of compensation for Mr. Darehshori and the other executive officers of the
Company include salary, incentive compensation awards for the achievement of
annual financial and nonfinancial performance goals, and long-term stock-based
incentive opportunities which strengthen the mutuality of interest between
senior management and the Company's stockholders by increasing the equity
interest of Company management.
Base salaries are initially established with reference to an independently
designed system, which provides a mechanism for evaluating the relative value of
positions within the Company. The procedure involves a consideration of the
accountabilities and job requirements of each position. Salary ranges are
derived from the evaluations and incorporate market compensation data. In
addition, the Committee is advised by an independent compensation consultant who
relies in part on
8
<PAGE> 12
survey data garnered from many companies. Data about the pay levels determined
by the survey are a factor used by the Committee in developing its compensation
data. During 1993, the Company's targets for total compensation for, and the
actual compensation paid to, Mr. Darehshori and the other senior executives were
in the second quartile of the surveyed companies, which included the Publishing
Peer Group, a comparator group for purposes of the Stock Performance Graph on
page 11. The surveyed companies also included 15 companies in other industries
with similar characteristics, such as total revenue and recent financial
performance. The Committee annually reviews the salaries of Mr. Darehshori and
the other executive officers of the Company. Adjustments to base salaries of
executive officers are based on the Committee's review of Mr. Darehshori's
assessment of each executive officer's contribution, and the financial
performance of the Company as a whole and of the business unit for which the
executive was responsible during the prior year. Adjustments to Mr. Darehshori's
base salary are based upon the Committee's subjective independent review of
similar factors. Although the Company's financial performance does not have an
objective or quantifiable correlation to the establishment of base salaries for
Mr. Darehshori or the other senior executives, the Committee views the Company's
financial performance as an important factor in determining or reviewing salary
adjustments for executives. Salary adjustments generally are effective April 1.
In reviewing Mr. Darehshori's salary for 1993, the Committee reviewed the
Company's operating and financial performance for 1992. The Company's financial
results for the year included above budget net income and operating cash flow
performance. Consequently, returns on both stockholders' equity and capital
employed increased in 1992. In addition, business units in England and Canada,
which had produced losses for a number of years, were sold. The acquisitions of
a profitable line of clinical and special needs tests for The Riverside
Publishing Company and the publishing assets of College Survival, Inc., were
completed. The Committee also considered Mr. Darehshori's achievements in
strengthening the senior management group and in accomplishing certain other
objectives which had been set in discussions with the Committee early in 1992.
After considering these factors, the Committee increased Mr. Darehshori's salary
from $360,000 to $410,000.
Annual incentive compensation for Mr. Darehshori and other senior
executives for 1993 was determined pursuant to the terms of the 1993 Senior
Executive Incentive Compensation Plan ("Incentive Plan"), which was approved by
the Committee early in 1993. The Incentive Plan rewards division heads primarily
on the basis of the performance of the division for which they are responsible;
senior corporate staff executives are rewarded on overall corporate performance.
Awards up to targeted levels (50% of salary for Mr. Darehshori and 40% for other
participants) are paid in cash. Mr. Darehshori and senior corporate staff
officers earn their awards in part (40% for Mr. Darehshori and 30% for other
participants) based on the quantified extent of achievement of budgeted net
income, cash flow, and return on capital employed. The remaining 10% of the
target award is based on Mr. Darehshori's subjective determination of the extent
to which each executive has achieved operating objectives determined early in
the year. In Mr. Darehshori's case, the remaining 10% of the target award is
based on the Committee's subjective determination of the extent to which he has
achieved his operating objectives, which also are set early in the year. In
addition, division heads have a revenue target for their business unit. The
weight accorded to each financial factor varies depending on the strategy for
each division. In order to earn incentive compensation for a given financial
objective, at least 80% of budget for that objective must be achieved and the
weighted average achievement of all financial factors must exceed 70% of budget.
Incentive compensation may be paid for achievement of operating objectives so
long as overall corporate financial performance is at least 50% of budgeted
earnings per share. Any amounts
9
<PAGE> 13
earned in excess of target are paid in three-year restricted common stock of the
Company. The maximum payment under the Incentive Plan is 100% of salary. Mr.
Darehshori's incentive award pursuant to the Incentive Plan for 1993 was
$205,011 in cash and 465 shares of three-year restricted common stock of the
Company.
The Committee also seeks to strengthen the mutuality of interest between
senior management and the Company's stockholders by increasing the equity
interest of Company management by means of performance share awards and option
grants pursuant to the Company's 1992 Stock Compensation Plan to Mr. Darehshori
and other named officers on the Summary Compensation Table.* The Committee
believes it is important for Mr. Darehshori and the other executive officers of
the Company to hold equity stakes in the Company, in part to insure that they
have a financial interest in the long-term success of the Company, and that
stock options and performance shares provide good vehicles for executives to
attain equity ownership. In 1993, the Committee received the results of a study
it had commissioned by an independent consultant which reviewed the long-term
incentive practices of many companies, including those which comprise the
Publishing Peer Group, a comparator group for the Company's cumulative total
return for purposes of the Stock Performance graph on page 11. After reviewing
the results of that study, the Committee has decided to issue annual grants of
options and make annual performance share awards in order to maintain Mr.
Darehshori's total compensation in the target range of the second quartile of
the companies surveyed, which were the same companies surveyed with respect to
total compensation practices, as described above. The Committee believes that
long-term awards should be more significant than salary and annual incentive
compensation and Mr. Darehshori's compensation meets that objective in that more
of his compensation is tied to the long-term performance of the Company than was
the case with the median of the survey participants. The award of stock options
and performance shares supports this Committee policy and also more closely
aligns Mr. Dahreshori's interests with those of the Company's stockholders,
which the Committee believes in the stockholder's best interest. The number and
mix of grants between performance share and stock options are based upon the
Committee's judgment and the advice of an independent consultant, as well as
recommendations by Mr. Darehshori for all officers except himself. Criteria
include an evaluation of each executive's total compensation compared to his or
her responsibilities and performance and consideration of the appropriate mix of
compensation between annual salary, annual incentive, and long-term equity
opportunity, and among types of equity opportunity. The mix between stock
options and performance shares is at the median of the companies surveyed.
The SEC requires that this report comment upon the Company's policy with
respect to Section 162(m) of the Internal Revenue Code of 1986, as amended,
which limits the deductibility on the Company's tax return of compensation over
$1 million to any of the named executive officers of the Company unless, in
general, the compensation is paid pursuant to a plan which is performance-
related, non-discretionary and has been approved by the Company's stockholders.
The Committee's policy with respect to Section 162(m) is to make every
reasonable effort to insure that compensation is deductible to the extent
permitted while simultaneously providing Company executives with appropriate
rewards for their performance.
This report is submitted by the Company's Compensation & Nominating
Committee, the members of which are Mr. Baute (the Chairman), Mr. Freedman, Mrs.
Lindsay, Mr. Putnam, and Mr. Thomas.
- ---------------
* Performance share awards and options granted are set forth on the tables on
pages 20 and 18, respectively.
10
<PAGE> 14
STOCK PERFORMANCE GRAPH
The line graph below compares the yearly percentage change in cumulative
total stockholder return on the Company's common stock, assuming an investment
of $100 on December 31, 1988, and reinvestment of dividends, with the cumulative
total return of the Standard & Poor's MidCap 400 Index and a peer group index
composed of the publicly traded common stock of eight companies with significant
publishing activities, for the period from December 31, 1988, to December 31,
1993. The companies in the peer group are Commerce Clearing House, Inc.;
Harcourt General, Inc.; McGraw-Hill, Inc.; Paramount Communications Inc.; Thomas
Nelson, Inc.; Waverly, Inc.; Western Publishing Group, Inc.; and John Wiley &
Sons, Inc. The returns of each common stock in the peer group have been weighted
to reflect relative stock market capitalization. The price of Houghton Mifflin
Company's common stock was $38.375 on December 30, 1988, and $48.625 on December
31, 1993.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
HOUGHTON MIFFLIN COMPANY, S&P MIDCAP 400 INDEX, AND PUBLISHING PEER GROUP
<CAPTION>
HOUGTON
MEASUREMENT PERIOD MIFFLIN COM- S&P MIDCAP PUBLISHING
(FISCAL YEAR COVERED) PANY 400 INDEX PEER GROUP
<S> <C> <C> <C>
1988 100 100 100
1989 91.42 135.54 110.54
1990 75.31 128.61 94.10
1991 89.20 193.03 96.69
1992 127.96 216.03 123.22
1993 159.12 246.17 170.03
</TABLE>
Total return data provided by S&P's Compustat Services, Inc.
11
<PAGE> 15
<TABLE>
Summary Compensation Table
The following table sets forth compensation paid to the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company during 1993, for each of the three years ended December
31, 1991, 1992, and 1993, for services rendered in all capacities to the Company
and its subsidiaries. Similar information is provided with respect to two former
officers who, but for the fact that neither was an employee of the Company at
December 31, 1993, would have been among the four most highly compensated
officers. Information is furnished for each full fiscal year during which such
persons were executive officers.
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------ ----------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)
- ------------------------- ----- --------- --------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nader F. Darehshori...... 1993 $ 397,500 $ 205,011 $ 435,319(2) $ 20,983(3) 10,000 $ 8,994(4)
Chairman, President, 1992 353,750 180,000 -- 0 0 8,728(5)
and Chief Executive 1991 323,750 150,000 -- 286,500(3) 4,200 8,475(6)
Officer
Stephen O. Jaeger........ 1993 231,000 94,000 217,660(2) 9,025(7) 4,200 8,994(8)
Executive Vice 1992 212,417 72,270 -- 0 0 8,372(9)
President and Chief 1991 195,583 66,660 -- 143,250(7) 4,200 5,663(10)
Financial Officer
William J. Wisneski...... 1993 246,000 81,460 307,023(11) 0 4,000 8,994(12)
Executive Vice 1992 195,333 79,200 57,425(13) 0 0 7,050(14)
President 1991 132,500 39,680 53,682(15) 71,625(16) 1,800 2,241(17)
Joseph A. Kanon.......... 1993 206,950 84,018 169,232(2) 7,049(18) 4,000 7,983(19)
Executive Vice 1992 196,350 59,142 -- 0 0 7,267(20)
President 1991 183,250 45,888 -- 95,500(18) 1,000 5,377(17)
Michael E. Melody........ 1993 205,750 75,433 217,660(2) 0 4,000 6,173(17)
Executive Vice 1992 188,000 62,700 -- 0 0 5,363(17)
President 1991 178,000 57,694 -- 143,250(21) 4,200 0
C. Michael Shaw(22)...... 1993 100,333 0 -- 0 0 384,854(23)
Executive Vice 1992 240,250 61,468 69,500(24) 0 0 7,792(25)
President 1991 213,000 71,440 37,055(26) 165,750(27) 6,800 5,867(28)
Damaris Ames(29)......... 1993 72,500 0 -- 0 0 454,842(30)
Executive Vice 1992 213,500 63,425 -- 0 0 8,411(31)
President 1991 205,500 66,880 -- 143,250(32) 4,200 5,955(33)
</TABLE>
12
<PAGE> 16
- ---------------
(1) The restricted shares awarded in 1991 became fully vested on January 25,
1994, upon attainment of the targeted amount of cumulative pre-tax
operating income including interest for the years 1991, 1992, and 1993. The
restricted shares awarded in 1993 were awarded on January 25, 1994 as part
of the 1993 bonus. These shares will be fully vested in three years
provided that the recipient is still employed by the Company. Dividends are
paid on all restricted stock at the same rate as are paid to all
shareholders. The value shown is the fair market value at date of grant.
(2) Payment to cover estimated tax liability in connection with the vesting of
restricted shares awarded in 1991.
(3) As of December 31, 1993, restricted shares held or to be awarded for the
year then ended totaled 12,465 shares, having a then-current market value
of $606,111. Of this amount, $22,611 was attributable to 465 shares awarded
on January 25, 1994 as part of the bonus for the year ended December 31,
1993.
(4) Includes $7,075 in Company contributions to the Employees' Savings and
Thrift Plan and $1,919 under the defined contribution component of the
Supplemental Benefits Plan.
(5) Includes $6,866 in Company contributions to the Employees' Savings and
Thrift Plan and $1,862 under the defined contribution component of the
Supplemental Benefits Plan.
(6) Includes $4,444 in Company contributions to the Employees' Savings and
Thrift Plan and $4,031 under the defined contribution component of the
Supplemental Benefits Plan.
(7) As of December 31, 1993, restricted shares held or to be awarded for the
year then ended totaled 6,200 shares, having a then-current market value of
$301,474. Of this amount, $9,725 was attributable to 200 shares awarded on
January 25, 1994 as part of the bonus for the year ended December 31, 1993.
(8) Includes $7,075 in Company contributions to the Employees' Savings and
Thrift Plan and $1,919 under the defined contribution component of the
Supplemental Benefits Plan.
(9) Includes $6,175 in Company contributions to the Employees' Savings and
Thrift Plan and $2,197 under the defined contribution component of the
Supplemental Benefits Plan.
(10) Includes $5,472 in Company contributions to the Employees' Savings and
Thrift Plan and $191 under the defined contribution component of the
Supplemental Benefits Plan.
(11) Includes $122,688 for relocation expenses and payments totaling $75,505 to
cover estimated tax liability with respect to such expenses; and $108,830
to cover estimated tax liability in connection with the vesting of
restricted shares awarded in 1991.
(12) Includes $7,075 in Company contributions to the Employees' Savings and
Thrift Plan and $1,919 under the defined contribution component of the
Supplemental Benefits Plan.
(13) Includes $40,289 for relocation expenses and payments totaling $17,136 to
cover estimated tax liability with respect to such expenses.
(14) Includes $6,865 in Company contributions to the Employees' Savings and
Thrift Plan and $185 under the defined contribution component of the
Supplemental Benefits Plan.
(15) Includes $44,848 for relocation expenses and payments totaling $8,834 to
cover estimated tax liability with respect to such expenses.
13
<PAGE> 17
(16) As of December 31, 1993, restricted shares held totaled 3,000 shares,
having a then-current market value of $145,875.
(17) Company contributions to the Employees' Savings and Thrift Plan.
(18) As of December 31, 1993, restricted shares held or to be awarded for the
year then ended totaled 4,156 shares, having a then-current market value of
$202,086. Of this amount, $7,587 was attributable to 156 shares awarded on
January 25, 1994 as part of the bonus for the year ended December 31, 1993.
(19) Includes $7,075 in Company contributions to the Employees' Savings and
Thrift Plan and $908 under the defined contribution component of the
Supplemental Benefits Plan.
(20) Includes $6,866 in Company contributions to the Employees' Savings and
Thrift Plan and $401 under the defined contribution component of the
Supplemental Benefits Plan.
(21) As of December 31, 1993, restricted shares held totaled 6,000 shares,
having a then-current market value of $291,750.
(22) Mr. Shaw resigned from the Company on July 1, 1993.
(23) Includes $380,000 in severance and $4,854 in Company contributions to the
Employees' Savings and Thrift Plan.
(24) Includes $49,831 for relocation expenses and payments totaling $19,669 to
cover estimated tax liability with respect to such expenses.
(25) Includes $4,364 in Company contributions to the Employees' Savings and
Thrift Plan and $3,428 under the defined contribution component of the
Supplemental Benefits Plan.
(26) Includes $24,900 for relocation expenses and payments totaling $12,155 to
cover estimated tax liability with respect to such expenses.
(27) The 6,000 shares of restricted stock held by Mr. Shaw vested on June 30,
1993, with a then-current value of $243,750.
(28) Includes $4,822 in Company contributions to the Employees' Savings and
Thrift Plan and $1,045 under the defined contribution component of the
Supplemental Benefits Plan.
(29) Ms. Ames resigned from the Company on April 30, 1993.
(30) Includes $450,764 in severance and $4,078 in Company contributions to the
Employees' Savings and Thrift Plan.
(31) Includes $6,546 in Company contributions to the Employees' Savings and
Thrift Plan and $1,865 under the defined contribution component of the
Supplemental Benefits Plan.
(32) The 6,000 shares of restricted stock held by Ms. Ames vested on June 25,
1993, with a then-current value of $226,500.
(33) Includes $5,257 in Company contributions to the Employees' Savings and
Thrift Plan and $698 under the defined contribution component of the
Supplemental Benefits Plan.
14
<PAGE> 18
Pension Plan
The Company maintains the Houghton Mifflin Pension Plan (the "Pension
Plan") for the benefit of its non-union employees and those of its domestic
subsidiaries. Under the Pension Plan, each eligible employee is entitled to an
annual retirement benefit equal to:
1 2/3% X the employee's years of credited service (to a thirty-year maximum)
plus
1/2% X any additional years of credited service (to a ten-year maximum)
multiplied by
the average annual earnings of the employee for the five highest consecutive
calendar years in the fifteen calendar years preceding retirement
reduced by
1 2/3% X the employee's estimated annual Social Security Benefit X years
of credited service (to a thirty-year maximum).
Benefits are reduced if the employee retires and begins receiving pension
payments prior to age 65. An employee whose employment terminates with less than
five years of service has no vested pension benefit.
For purposes of calculating the Company's contribution to the Pension Plan,
remuneration consists primarily of salary, wages, commissions, and incentive
compensation earned by and paid to participants. The following table sets forth
a range of the estimated annual retirement benefits under the Pension Plan and
the Supplemental Benefits Plan at the normal retirement age of 65 (calculated as
of January 1, 1994).
<TABLE>
PENSION PLAN TABLE
<CAPTION>
ESTIMATED ANNUAL BENEFIT FUNDED BY THE COMPANY
AVERAGE ANNUAL FOR YEARS OF PARTICIPATION INDICATED
COMPENSATION (SINGLE LIFE ANNUITY AFTER SOCIAL SECURITY OFFSET) (2)
FOR FIVE HIGHEST -------------------------------------------------------------------------------
CONSECUTIVE YEARS (1) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- --------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$125,000............. $ 27,900 $ 37,000 $ 46,400 $ 55,600 $ 58,700 $ 61,900
150,000............. 34,100 45,400 56,900 68,100 71,900 75,600
175,000............. 40,400 53,700 67,300 80,600 85,000 89,400
200,000............. 46,600 62,000 77,700 93,100 98,100 103,100
225,000............. 52,900 70,300 88,100 105,600 111,200 116,900
250,000............. 59,100 78,700 98,600 118,100 124,400 130,600
300,000............. 71,600 95,300 119,400 143,100 150,600 158,100
400,000............. 96,600 128,600 161,100 193,100 203,100 213,100
450,000............. 109,100 145,300 182,000 218,100 229,400 240,600
500,000............. 121,600 161,900 202,800 243,100 255,600 268,100
550,000............. 134,100 178,600 223,700 268,100 281,900 295,600
600,000............. 146,600 195,200 244,500 293,100 308,100 323,100
650,000............. 159,100 211,900 265,400 318,100 334,400 350,600
700,000............. 171,600 228,500 286,200 343,100 360,600 378,100
</TABLE>
15
<PAGE> 19
- ---------------
(1) As of December 31, 1993, Mr. Darehshori, Mr. Jaeger, Mr. Wisneski, Mr.
Kanon, Mr. Melody, Mr. Shaw, and Ms. Ames were credited with 28, 7, 4, 5,
3, 24, and 23 years, respectively, and, for the fiscal year ended December
31, 1993, the compensation that will be taken into account by the Pension
Plan and the Supplemental Benefits Plan (described in note (2) below) for
Mr. Darehshori, Mr. Jaeger, Mr. Wisneski, Mr. Kanon, Mr. Melody, Mr. Shaw,
and Ms. Ames is $577,500, $303,270, $325,200, $266,092, $268,450, $471,801,
and $310,925, respectively. Differences between these amounts and those
shown in the Summary Compensation Table on page 12 reflect differences in
accounting for incentive compensation payments, which for purposes of
pension calculations are included in the year paid.
(2) Effective January 1, 1994, the Internal Revenue Code limits the annual
benefit payable under the Pension Plan at normal retirement to $118,800 and
the amount of 1994 compensation that can be considered under the Pension
Plan to $150,000. The Company has a non-qualified Supplemental Benefits
Plan with a defined benefit component under which eligible employees
receive supplemental pension payments equal to the difference between the
maximum annual benefit which the law allows to be paid under the Pension
Plan and their regular pension as calculated under the formula above.
Severance Agreements and Related Agreements
Severance Agreements. Twelve executive officers, including the executive
officers named in the Summary Compensation Table other than Mr. Shaw and Ms.
Ames, have severance agreements with the Company. These agreements expire on
December 31, 1994, and are automatically extended on an annual basis for an
additional twelve-month period unless the Company gives the executive at least
eighteen months' notice that the agreement will not be extended.
Severance benefits under the senior executives' severance agreements are
payable if, within two years after a "change in control" of the Company, the
executive terminates his or her employment for "good reason" as defined in the
agreement or the Company terminates the executive's employment other than for
certain permitted reasons. A change in control of the Company is defined (for
purposes of the agreements) to include the acquisition by any "person" of 25% or
more of the voting power of the Company's outstanding securities; a change, over
a two-year period, of a majority of the members of the Company's Board of
Directors, so that persons who constitute the Board at the beginning of such
period (and their successors as recommended by at least two-thirds of the
directors who were in office at the beginning of such period) fail to constitute
a majority of the Board at the end of the period; certain mergers or
consolidations; or liquidation of the Company or sale of substantially all of
its assets.
The agreements provide for the following severance benefits: (i) a lump sum
payment of an amount equal to three times annual compensation (i.e., salary plus
any incentive compensation under the Incentive Compensation Plan in the same
amount as paid in the preceding year), (ii) all amounts earned but previously
deferred and not yet distributed to the executive under the Incentive
Compensation Plan, (iii) an amount equal to any unvested portion of the
executive's account under the Employees' Savings and Thrift Plan, (iv) cash
payments in lieu of certain stock options, (v) an amount equal to the aggregate
present value of benefits under the Company's Supplemental Benefits Plan, and
(vi) the present value of additional retirement benefits which would have been
earned by the executive under existing retirement plans had he or she remained
in the Company's employ for an additional thirty-six months. In addition, the
agreements require the Company to maintain certain insurance benefits for the
executive for a period of thirty-six months following termination of employment.
The Company also agrees to reimburse employees for legal fees
16
<PAGE> 20
incurred in enforcing the terms of the agreements and certain tax liabilities
resulting from payments under the agreement.
Key Editor's Severance Benefit Plan. The Company recognizes that certain
key editors are critical to the success of its business. The identification of
promising authors, the ability to work with them to develop ideas into
properties of value, and the process of bringing these works to market all
depend upon the insight, judgment, and management skills of these individuals.
The Key Editors' Severance Benefit Plan (the "Editors' Plan") is designed to
encourage this essential group to remain with the Company despite concerns about
a possible change in control of the Company. The Editors' Plan is designed to
shield this group from distractions and threats to editorial integrity by
providing a cushion against the financial and career impacts which a change in
control might entail.
The editor will be entitled to severance benefits if his or her employment
is terminated for any reason by the editor or by the Company within one year of
a change in control. A change in control of the Company is defined (for purposes
of the Editors' Plan) to include the acquisition by any "person" of 25% or more
of the voting power of the Company's outstanding securities) other than by the
Company or any of its employee benefit plans); or a change, over a two-year
period, of a majority of the members of the Company's Board of Directors, so
that persons who constitute the Board at the beginning of such period (and their
successors as recommended by at least two-thirds of the directors who were in
office at the beginning of such period) fail to constitute a majority of the
Board at the end of the period.
Severance benefits under the Editors' Plan include (i) a lump sum payment
of an amount equal to one and one-half times annual compensation (i.e., salary
plus any incentive compensation under the Incentive Compensation Plan in the
same amount as paid in the preceding year); (ii) cash payments in lieu of
certain stock options; (iii) an amount equal to the difference between the
present value of an editor's benefits under the Employees' Savings and Thrift
Plan and Pension Plan, determined as if such editor had retired on the date of
termination of employment, and the present value of such editor's actual
benefits under such plans; and (iv) and amount equal to the aggregate present
value of the editor's benefits under the Company's Supplemental Benefits Plan
and the Company's Incentive Compensation Plan determined as if the editor had
retired on the date of termination of employment. In addition, the Editors' Plan
requires the Company to maintain certain insurance benefits for the participant
for a period of eighteen months following termination of employment. Any amounts
received as compensation for other employment in the eighteen months following
termination of employment will reduce the amount otherwise payable under the
clause (i) of this paragraph. Severance payments received by the editor pursuant
to the Editors' Plan following a change in control may not exceed the amount
that the Company may deduct for federal income tax purposes.
At the present time, no executive officers are enrolled in the Editors'
Plan. The Editors' Plan covers any change in control which may occur before
September 30, 1994.
Stock Option Agreements. The option agreements between the Company and all
employees, including the executive officers named in the Summary Compensation
Table, provide that all options shall vest immediately upon a change in control,
as defined in the option agreements.
Pension Plan. The Pension Plan was amended, effective January 1, 1992, to
provide that, in the event of a termination of the Pension Plan within two years
of a change in control of the Company which occurs prior to December 31, 1994,
all surplus assets of the Pension Plan, not required by law to satisfy
liabilities to eligible employees, shall be first applied, to the extent
permissible under applicable law and in the following order of priority, to the
purchase of retiree
17
<PAGE> 21
medical insurance benefits; the purchase of retiree life insurance benefits;
unfunded non-qualified deferred compensation obligations; and any other benefit
obligations. A change in control of the Company is defined (for purposes of the
Pension Plan) to include the acquisition, prior to December 31, 1994, of 50% or
more of the Company's voting securities (without the approval of the Board of
Directors of the Company) or a change, over a two-year period, of a majority of
the members of the Company's Board of Directors, so that persons who constitute
the Board at the beginning of such period (and their successors as recommended
by at least two-thirds of the directors who were in office at the beginning of
such period) fail to constitute a majority of the Board at the end of the
period.
Supplemental Benefit Trust. The Company has established a Supplemental
Benefit Trust in connection with the Supplemental Benefits Plan, Non-Employee
Directors' Retirement Benefits Plan, and Deferred Compensation Agreements with
its employees and directors, to preserve the benefits earned thereunder in the
event of a change in control. The Board may designate payments under additional
employee plans to be covered by the Supplemental Benefit Trust. Upon the
occurrence of any "potential change in control," as defined in the Supplemental
Benefit Trust, the Company will contribute additional cash and property to the
Supplemental Benefit Trust which will be sufficient to pay, in accordance with
the terms of the covered plans, the benefits authorized under such plans.
However, the assets in the Supplemental Benefit Trust will become available to
the Company's creditors if the Company becomes insolvent or bankrupt. If the
funds in the Supplemental Benefit Trust are insufficient to pay amounts due
under the covered plans, the Company remains obligated to pay any deficiency.
Stock Compensation Plan
The following table shows, with respect to each individual named below,
information with respect to options granted to each during the year ended
December 31, 1993:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS*
--------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM
GRANTED EMPLOYEES IN BASE PRICE ---------------------
NAME (#) FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
- ------------------------ ---------- ------------ ----------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Nader F. Darehshori..... 10,000 5.10% $ 44.625 7/27/98 $ 123,291 $ 272,440
Stephen O. Jaeger....... 4,000 2.04 44.625 7/27/98 49,316 108,976
William J. Wisneski..... 4,000 2.04 44.625 7/27/98 49,316 108,976
Joseph A. Kanon......... 4,000 2.04 44.625 7/27/98 49,316 108,976
Michael E. Melody....... 4,000 2.04 44.625 7/27/98 49,316 108,976
</TABLE>
- ---------------
* No grants were made to Mr. Shaw or Ms. Ames.
18
<PAGE> 22
The following table shows, with respect to each individual named below, the
information concerning the exercise of options during the year ended December
31, 1993, and unexercised options held as of December 31, 1993:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED VALUE ------------- ----------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)* UNEXERCISABLE UNEXERCISABLE*
- -------------------------------- ----------- --------- ------------- ----------------
<S> <C> <C> <C> <C>
Nader F. Darehshori............. 0 0 16,434/24,700 $282,311/$60,264
Stephen O. Jaeger............... 0 0 4,900/8,100 $104,675/$12,800
William J. Wisneski............. 0 0 2,680/6,800 $ 45,330/$34,470
Joseph A. Kanon................. 0 0 7,400/11,200 $157,550/$25,400
Michael E. Melody............... 0 0 2,600/6,500 $ 48,500/$30,312
C. Michael Shaw................. 8,800 $ 146,840 0/0 0/ 0
Damaris Ames.................... 4,200 $ 86,100 0/0 0/ 0
- ---------------
<FN>
* Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
</TABLE>
19
<PAGE> 23
The following table provides information concerning performance share
awards made during the year ended December 31, 1993, under the Company's Stock
Compensation Plan. Each performance share represents the right to receive on the
payout date, an amount half in cash and half in shares of the Company's common
stock, which depends on whether specified rates of total return to stockholders
have been met during the performance period. A base share price is determined by
taking the Company's average closing share price during the fourth quarter of
the year preceding the award period, and the specified rates of stockholder
return are applied to the base share price to obtain the threshold and target
stockholder return. The award share price is the higher of the closing price of
the Company's stock on the last business day of the award period or the average
closing share price (including reinvested dividends) during the fourth quarter
of the last year of the award period. The valuation of each performance share
will depend on the level of stockholder return achieved and thus there is no
means of calculating a maximum award, but there will be no payout unless the
threshold stockholder return has been met.
<TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN THE LAST FISCAL YEAR
<CAPTION>
ESTIMATED FUTURE
PAYOUTS
NUMBER OF UNDER NON-STOCK
SHARES, PERFORMANCE OR PRICE-BASED PLANS
UNITS OR OTHER PERIOD --------------------
OTHER UNTIL MATURATION THRESHOLD TARGET
NAME* RIGHTS (#) OR PAYMENT ($) ($)
- ---------------------------------------- ----------- ----------------- --------- --------
<S> <C> <C> <C> <C>
Nader F. Darehshori..................... 3,000 December 31, 1995 $ 157,125 $163,500
Stephen O. Jaeger....................... 2,000 December 31, 1995 104,750 109,000
William J. Wisneski..................... 2,000 December 31, 1995 104,750 109,000
Joseph A. Kanon......................... 1,500 December 31, 1995 78,563 81,750
Michael E. Melody....................... 1,500 December 31, 1995 78,563 81,750
<FN>
- ---------------
* No awards were made to Mr. Shaw or Ms. Ames.
</TABLE>
2. SELECTION OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected Ernst & Young to continue as independent auditors for the fiscal year
ending December 31, 1994. The Board believes, however, that it is desirable to
obtain stockholder ratification of the selection of the Company's independent
auditors. During 1993 Ernst & Young provided services to the Company that
included auditing the Company's consolidated statements, consulting in
connection with unaudited quarterly financial information, and advising the
Company on various accounting, tax and regulatory matters.
Ratification will require the affirmative vote of the holders of a majority
of the shares represented in person or by proxy and entitled to vote at the
meeting. If the stockholders do not ratify the selection of the Company's
independent auditors, the Board of Directors will reconsider its selection.
Representatives of Ernest & Young will be present at the meeting with the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
The Board of Directors unanimously recommends a vote FOR Proposal Two.
20
<PAGE> 24
<TABLE>
PRINCIPAL STOCKHOLDERS
The following table shows the beneficial ownership of common stock of the
Company by the only person who is known by the Company to be the beneficial
owner of more than 5% of such stock. The information has been obtained solely
from such person and the Schedule 13G filed by the person listed with the
Securities and Exchange Commission. Such Schedule contains fuller information as
to beneficial ownership of shares by the person listed therein.
<CAPTION>
PERCENT OF AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER CLASS OF BENEFICIAL OWNERSHIP
- ---------------------------------------------- ---------- ------------------------------
<S> <C> <C>
State Street Bank and Trust Company, 10.3% As of December 31, 1993,
Trustee 1,501,121 shares:
225 Franklin Street 820,350 shares -- sole
Boston, MA 02110 voting power
656,171 shares -- shared
voting power*
194,850 shares -- sole
investment power
656,171 shares -- shared
investment power*
- ---------------
<FN>
* These shares, representing 4.5% of total common stock outstanding, are held
as Trustee of the Houghton Mifflin Company Employees' Savings and Thrift
Plan.
</TABLE>
PROPOSALS OF STOCKHOLDERS FOR CONSIDERATION AT THE 1995 ANNUAL MEETING
In order for a proposal by a stockholder to be included in the Board of
Directors' Proxy Statement for the Company's Annual Meeting in 1995, it must be
received at the Company's executive offices in Boston on or before November 24,
1994. Such a proposal must also comply with the requirements as to form and
substance established by applicable laws and regulations in order to be included
in the Proxy Statement and should be directed to the Clerk of the Company.
Stockholders wishing to present business for action, other than proposals
included in the Board of Directors' Proxy Statement, or to nominate candidates
for election as directors at a meeting of the Company's stockholders, must do so
in accordance with the Company's By-laws. The By-laws provide that in order to
be presented at the 1995 Annual Meeting such stockholder proposals or
nominations may be made only by a stockholder of record who shall have given
notice of the proposed business or nomination to the Company between December
28, 1994, and February 11, 1995. In the case of a special meeting, or if the
Annual Meeting is called for a date prior to February 11, 1995, the notice must
be received not later than the close of business on the 20th day following the
day on which notice of the date of the meeting was mailed or public disclosure
was made, whichever occurs first. The notice must also contain certain
background information concerning the stockholder making the proposal or
nomination, the stockholder's ownership of the Company's capital stock, and, in
the case of nominations, background and stock ownership information with respect
to each nominee. Stockholders are referred to the By-laws for further
information.
21
<PAGE> 25
VOTING OF PROXIES
The persons named in the enclosed Proxy will vote as directed in the Proxy,
and in the absence of such direction will vote to elect the nominees for the
Board of Directors and in favor of the actions specified in Item 2 of the
enclosed Proxy.
The Board of Directors of the Company is not aware of any other matters
which may come before the meeting. The persons named in the enclosed Proxy
intend to vote the Proxy in accordance with their best judgment if any other
matters shall properly come before the meeting including, for example, a motion
to adjourn the meeting to a later date for the purpose of continuing to solicit
proxies.
WHETHER OR NOT YOU ATTEND THE MEETING IN PERSON, PLEASE FILL IN AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY,
OF COURSE, VOTE YOUR SHARES EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
22
<PAGE> 26
/X/ PLEASE MARK VOTES AS IN
THIS EXAMPLE
<TABLE>
<S> <C>
With- For All
For hold Except For Against Abstain
1) Election of Class II Directors / / / / / / 2) Ratify Ernst & Young as independent / / / / / /
for a three-year term. auditors for 1994.
GAIL DEEGAN, JAMES O. FREEDMAN,
CHARLES R. LONGSWORTH, ALFRED L. MCDOUGAL
For Against Abstain
If you do not wish your shares voted "FOR" a particular 3) Transact such other business as may / / / / / /
nominee, mark the "For All Except" box and strike a properly come before the Meeting.
line through the nominee(s) name. Your shares will be
voted for the remaining nominee(s).
ESOP SHARES:
SAVINGS PLAN SHARES:
- ------------------------------------------------------------
(Signature) X: ______________________ Date: __________ Mark box at right if comments or address change / /
have been noted on the reverse side of this card.
(Signature) X: ______________________ Date: __________
Please be sure to sign and date this Proxy.
- ------------------------------------------------------------
</TABLE>
(over)
- -------------------------------------------------------------------------------
HOUGHTON MIFFLIN COMPANY
DIRECTION SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1994 ANNUAL MEETING OF STOCKHOLDERS
TO STATE STREET BANK AND TRUST COMPANY, TRUSTEE
As a participant in the Houghton Mifflin Company Employees' Savings and Thrift
Plan, I hereby direct State Street, as Trustee, to vote as shown on the reverse
those shares for which I am entitled to give direction as the Annual Meeting of
Stockholders of Houghton Mifflin Company to be held at The New England Hall,
225 Clarendon Street, Boston, Massachusetts, on Wednesday, April 27, 1994 at
11:00 A.M. and at any adjournment thereof.
I hereby revoke any direction previously given, and acknowledge receipt of
notice of said meeting, the related Proxy Statement, and a copy of the 1993
Annual Report.
Unless otherwise instructed, this direction will be voted in favor of the
proposals set forth on the reverse side.
- -------------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
- -------------------------------------------------------------------------------
Please sign this proxy exactly as your name appears on the books of the
Company. Joint owners should sign personally. Trustees and other fiduciaries
should indicate the capcity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be that
of an authorized officer who should state his or her title.
- -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
___________________________________________ _______________________________
___________________________________________ _______________________________
___________________________________________ _______________________________
<PAGE> 27
PROXY
HOUGHTON MIFFLIN COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1994 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Nader F. Darehshori and Stephen O.
Jaeger, and each of them, Proxies with power of substitution to vote for and on
behalf of the undersigned at the Annual Meeting of Stockholders of Houghton
Mifflin Company to be held at The New England Hall, 225 Clarendon Street,
Boston, Massachusetts, on Wednesday, April 27, 1994, at 11:00 a.m. and at any
adjournment thereof, hereby granting full power and authority to act on behalf
of the undersigned at said meeting or any adjournment thereof.
The undersigned hereby revokes any Proxy previously given, and
acknowledges receipt of notice of said meeting, the related Proxy Statement,
and a copy of the 1993 Annual Report.
(continued and to be signed on reverse side)
Unless Otherwise Instructed This Proxy Will Be Voted
In Favor of the Proposals Set Forth on the Reverse Side
-----------
SEE REVERSE
SIDE
-----------
- -------------------------------------------------------------------------------
/X/ PLEASE MARK VOTES AS IN
THIS EXAMPLE
<TABLE>
<S> <C>
1) Election of Class II Directors for a three-year term.
Nominees. Gail Deegan, James O. Freedman, For Against Abstain
Charles R. Longsworth, Alfred L. McDougal 2) Ratify Ernst & Young as independent / / / / / /
auditors for 1994.
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES 3) Transact such other business as may / / / / / /
/ / / / properly come before the Meeting.
/ /___________________________________
For all nominees except as noted above MARK HERE / / MARK HERE / /
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
PLEASE SIGN IN THE SAME FORM AS NAME APPEARS HEREON.
FIDUCIARIES AND CORPORATE OFFICERS SHOULD INDICATE
THEIR TITLE.
(Signature): ______________________ Date __________
(Signature): ______________________ Date __________
</TABLE>
