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As filed with the Securities and Exchange Commission on December 11, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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HOUGHTON MIFFLIN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
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MASSACHUSETTS 04-1456030
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
222 BERKELEY STREET
BOSTON, MA 02116
(617) 351-5000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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PAUL D. WEAVER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
HOUGHTON MIFFLIN COMPANY
222 BERKELEY STREET
BOSTON, MA 02116
(617) 351-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
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RICHARD A. SODEN LOUIS A. GOODMAN
GOODWIN, PROCTER & HOAR SKADDEN, ARPS, SLATE, MEAGHER & FLOM
EXCHANGE PLACE ONE BEACON STREET
BOSTON, MA 02109 BOSTON, MASSACHUSETTS 02108
(617) 570-1000 (617) 573-4800
</TABLE>
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /X/
If this form is used to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE(1)(2) AMOUNT OF REGISTRATION FEE(3)
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Debt Securities................. $300,000,000 $103,450
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</TABLE>
(1) In U.S. Dollars or the equivalent thereof denominated in one or more foreign
currencies or units of two or more foreign currencies or composite
currencies.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of the Securities Act of 1933, as amended.
(3) Calculated in accordance with Rule 457(o) under the Securities Act of 1933,
as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 11, 1995
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 $300,000,000. 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, 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 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 collectively, "Global Securities") and
may be issued in the name of a depositary 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 December 11, 1995
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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 (the "Commission").
Reports, proxy statements and other information filed by the Company with the
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 Commission's Regional Offices at 7 World Trade Center, Suite 1300,
New York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
also be obtained from the Public Reference Section of the Commission 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.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), with
respect to the Debt Securities to be offered by this Prospectus. This Prospectus
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto in accordance with the rules and regulations of
the Commission. For further information regarding the Company and the Debt
Securities offered hereby, reference is made to the Registration Statement and
the exhibits and schedules filed therewith, which may be inspected and copied at
the locations set forth above. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are
incorporated herein by reference: (a) the Company's Annual Report on Form 10-K
for the year ended December 31, 1994; (b) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, June 30 and September 30, 1995; (c)
the Company's definitive proxy statement dated March 27, 1995, relating to its
1995 Annual Meeting of Stockholders; (d) the Company's Current Report on Form
8-K filed with the Commission on October 6, 1995; and (e) the Company's Current
Report on Form 8-K filed with the Commission on November 15, 1995.
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 Bradley D. Lehan, Assistant Treasurer, Houghton
Mifflin Company, 222 Berkeley Street, Boston, Massachusetts 02116 (telephone
617-351-5000).
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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, and
reference materials in a variety of formats and media. With approximately 85% 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 a majority of
annual net sales. Seasonal losses are generally 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 English, health, mathematics,
modern languages, science, and social studies materials 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 business and accounting,
chemistry, education, English, history, mathematics, modern languages, and
political science. The Company's acquisition of D.C. Heath and Company ("D.C.
Heath"), a former division of Raytheon Company, described below, is expected to
expand the Company's presence in the educational publishing market. The Company
has also established a new division that will market existing and
newly-developed reference, audio-visual, and display materials; workbooks;
manipulatives; and other supplemental materials that complement the Company's
elementary and secondary educational publications.
General Publishing. The Company publishes fiction and nonfiction trade
books for adults and children, dictionaries and other reference works (including
the third edition of The American Heritage Dictionary of the English Language),
and a new line of multimedia products for the consumer market, which will
include children, reference and adult hobby titles. The principal markets for
trade books and reference works in this segment are retail stores.
D.C. Heath Acquisition. On October 31, 1995, the Company acquired D.C.
Heath for $455 million in cash (the "Heath Acquisition"). The Heath Acquisition
was financed with a combination of operating cash and short-term bank financing.
D.C. Heath, which had revenues of approximately $180 million in 1994, is a
leading publisher of textbooks in modern languages, science, language arts,
social studies and mathematics. The Heath Acquisition significantly increases
the Company's revenue base, product breadth and editorial expertise in the
educational publishing market. The Company will integrate its combined product
development, sales and marketing areas and anticipates that the Heath
Acquisition will increase the Company's market presence, operating efficiency
and sales.
The Company's principal executive offices are located at 222 Berkeley
Street, Boston, Massachusetts 02116. Its telephone number is (617) 351-5000.
3
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
TWELVE MONTHS ENDED ----------------------------------------
SEPTEMBER 30, 1995 1994 1993 1992 1991 1990
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Ratio of Earnings to Fixed
Charges(1).......................... 5.6 9.6 8.1 4.5 5.1 4.3
</TABLE>
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(1) 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 expense, including amortization of debt issuance costs
and interest on capital lease obligations, and the portion of rent expense
for each period presented that is deemed by management to be the interest
component of such rentals. 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 twelve-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.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture dated as of March 15,
1994, as supplemented by a First Supplemental Indenture dated as of July 27,
1995 (collectively, the "Indenture"), each between the Company and State Street
Bank and Trust Company (the "Trustee"), as successor trustee to The First
National Bank of Boston. 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 provisions
of the Indenture, including the definitions 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 such Prospectus Supplement or
Prospectus Supplements. 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.
TERMS
The Indenture does 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 Debt Securities of the
series; (2) any limit on the aggregate principal amount of the Debt Securities
of the series which may be authenticated and delivered under the Indenture; (3)
whether any Debt Securities of the series are to be issuable initially in
temporary global form and whether any Debt 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
Debt 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 Debt 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 Debt Security on an Interest
Payment Date will be paid;
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(5) the date or dates on which the principal of the Debt Securities of the
series is payable; (6) the rate or rates at which the Debt 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, and 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 Debt Securities of the series shall
be payable, any Registered Securities of the series may be surrendered for
registration of transfer, Debt Securities of the series may be surrendered for
exchange, and notices and demands to or upon the Company in respect of the Debt
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 Debt 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 Debt 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 Debt
Securities of the series, or particular Debt 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 Debt 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 Debt 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 Debt 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 Depositary with respect to such Book-Entry Security
or Securities and (b) the circumstances under which any such Book-Entry Security
may be exchanged for Debt Securities registered in the name of, and any transfer
of such Book-Entry Security may be registered to, a Person other than such
depositary or its nominee; (15) if the defeasance provisions of the Indenture
are applicable to Debt 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 is 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
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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)
Except as may be set forth in any Prospectus Supplement, the Debt
Securities will not contain any provisions that would limit the ability of the
Company to incur indebtedness or that would afford holders ("Holders") of any
series of Debt Securities protection in the event of a highly leveraged or
similar transaction, or in the event of a change of control, involving the
Company that may adversely affect Holders of Debt Securities. To the extent that
any covenant or provision governing any series of Debt Securities that would
afford protection to Holders of such series of Debt Securities in the event of a
highly leveraged or similar transaction or a change of control may be (a) waived
by the Board of Directors of the Company or the Trustee or (b) limited in its
applicability in the event of a leveraged buy-out or similar transaction
initiated or supported by the Company, management of the Company or any
affiliate, the relevant Prospectus Supplement will describe such provisions.
Reference is made to the applicable Prospectus Supplement for information
with respect to any deletions from, modifications of, or additions to, the
Events of Default or covenants of the Company that are described below,
including any covenant or other provision providing event risk or similar
protection.
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 depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities, if any, issued in the United States
are expected to be deposited with The Depository Trust Company ("DTC"), as
Depositary. Global Securities may be issued in fully registered form and may be
issued in either temporary or permanent form. Unless and until it is exchanged
in whole or in part for the individual Debt Securities represented thereby, a
Global Security may not be transferred except as a whole by the Depositary to a
nominee of the Depositary or to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
The Company expects that, pursuant to procedures established by DTC,
ownership of beneficial interests in any Global Security with respect to which
DTC is the Depositary will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to beneficial interests of Participants) and records of Participants (with
respect to beneficial interests of persons who hold through Participants).
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of DTC or for maintaining, supervising or
reviewing any records of DTC or any of its Participants relating to beneficial
ownership interests in the Debt Securities. The laws of some states require
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that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to own, pledge
or transfer beneficial interest in a Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary or such 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
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interests in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or Holders thereof under the Indenture for any
purpose, including with respect to the giving of any direction, instruction or
approval to the Trustee thereunder. Accordingly, each person owning a beneficial
interest in a Global Security with respect to which DTC is the Depositary must
rely on the procedures of DTC and, if such person is not a Participant, on the
procedures of the Participant through which such person owns its interests, to
exercise any rights of a Holder under the Indenture. The Company understands
that, under existing industry practice, if it requests any action of Holders or
if an owner of a beneficial interest in a Global Security desires to give or
take any action which a Holder is entitled to give or take under the Indenture,
DTC would authorize the Participants holding the relevant beneficial interest to
give or take such action, and such Participants would authorize beneficial
owners through such Participants to give or take such actions or would otherwise
act upon the instructions of beneficial owners holding through them.
Payments of principal of, any premium and any interest on individual Debt
Securities represented by a Global Security registered in the name of a
Depositary or its nominee will be made to or at the direction of the Depositary
or its nominee, as the case may be, as the registered owner of the Global
Security under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose name Debt Securities, including a
Global Security, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of Debt Securities (including principal, premium, if any, and
interest). The Company believes, however, that it is currently the policy of DTC
to immediately credit the accounts of relevant Participants with such payments,
in amounts proportionate to their respective holdings of beneficial interests in
the relevant Global Security as shown on the records of DTC or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Security held through such Participants will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
street name, and will be the responsibility of such Participants. Redemption
notices with respect to any Debt Securities represented by a Global Security
will be sent to the Depositary or its nominee. If less than all of the Debt
Securities of any series are to be redeemed, the Company expects the Depositary
to determine the amount of the interest of each Participant in such Debt
Securities to be redeemed to be determined by lot. None of the Company, the
Trustee, any Paying Agent, or the Security Registrar for such Debt Securities
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Security for such Debt Securities or for maintaining, supervising or reviewing
any records related to such beneficial ownership interests.
Neither the Company nor the Trustee will be liable for any delay by the
Holders of a Global Security or the Depositary in identifying the beneficial
owners of Debt Securities and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the Holder of a
Global Security or the Depositary for all purposes. The rules applicable to DTC
and its Participants are on file with the Commission.
If a Depositary for any Debt Securities 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, or after an Event of Default has occurred and is
continuing, or after an event that would be an Event of Default after notice or
lapse of time has occurred, Debt Securities registered in the name of persons
other than the Depositary will be issued in exchange for the Global Security
representing such Debt Securities. In addition, the Company may at any time and
in its sole discretion, subject to any limitations described in the Prospectus
Supplement
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relating to such Debt Securities, determine not to have any of such Debt
Securities represented by one or more Global Securities and in such event Debt
Securities registered in the name of persons other than the Depositary will be
issued in exchange for the Global Security or Securities representing such Debt
Securities. Individual Debt Securities so issued will be issued in denominations
of $1,000 and integral multiples thereof. (Section 305)
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 Indenture contains a covenant of the Company that, so long as any of
the Debt Securities remains outstanding, it will not, nor will it permit any
Subsidiary (as herein defined) 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 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, does 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 causes (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 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
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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 Indenture also provides that the Company 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
shall, and in any such case the Company covenants 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)
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.
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 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 become an Event of Default,
shall have occurred and be continuing, and that certain other conditions are
met. (Section 801)
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
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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 purpose, 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 provides that in determining whether the Holders of the
requisite principal amount of Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver 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 defines 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, which
failure continues 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), which
failure continues for 60 days after written notice as provided in the Indenture;
or (f) certain events involving bankruptcy, insolvency or reorganization.
(Section 501)
The Indenture provides that if an Event of Default shall occur and be
continuing with respect to any series of Debt Securities, either the Trustee or
the Holders of not less than 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 (i) a
default in payment of the principal of (or premium, if any) or a continuing
default in the payment of any interest on any of the Debt Securities of such
series or (ii) a default in respect of a covenant or provision which cannot be
modified or amended without the consent of the Holders of all the Debt
Securities of such series. (Section 513)
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during any default under the Indenture 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 provides 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
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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 does 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 is required to furnish to the Trustee annually a certificate 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 U.S.
Government Obligations in an amount sufficient to pay and discharge the
Company's obligations with respect to such series of Debt Securities with the
Trustee.
DEFEASANCE AND DISCHARGE
The Indenture provides 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 States
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 provides 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
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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.
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 issues of its outstanding debt securities or
exchangeable 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 from 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 commissions 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 of 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
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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 thereof 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.
TAXATION
The following is a summary of certain federal income tax consequences to
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 characteristics (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.
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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 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 deductibility of interest on
indebtedness incurred to purchase or carry such a Debt Security.
MARKET DISCOUNT
If a Holder purchases a Debt Security for an amount that is less than its
principal amount, the amount of the difference will be treated as "market
discount" for federal income tax purposes, unless such difference is less than a
specified de minimis amount. Under the market discount rules, a Holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Debt Security as ordinary income to the
extent of the market discount which has not previously been included in income
and is treated as having accrued on such Debt Security at the time of such
payment or disposition. In addition, the Holder may be required to defer, until
the maturity of the Debt Security or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Debt Security.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Debt Security, unless
the Holder elects to accrue on a constant interest method. A Holder of a Debt
Security may elect to include market discount in income currently as it accrues
(on either a ratable or constant interest method), in which case the rule
described above regarding deferral of interest deductions will not apply. This
election to include market discount in income currently, once made, applies to
all market discount obligations acquired on or after the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS.
AMORTIZABLE BOND PREMIUM
A Holder that purchases a Debt Security for an amount in excess of the sum
of its principal amount will be considered to have purchased the Debt Security
at a "premium." A Holder generally may elect to amortize the premium over the
remaining term of the Debt Security on a constant yield method. The amount
amortized in any year will be treated as a reduction of the Holder's interest
income from the Debt Security. Bond premium on a Debt Security held by a Holder
that does not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the Debt Security. The election to
amortize premium on a constant yield method once made applies to all debt
obligations held or subsequently acquired by the electing Holder on or after the
first day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF DEBT SECURITIES
A Holder's tax basis in a Debt Security will, in general, be the Holder's
cost therefor, increased by market discount previously included in income by the
Holder and reduced by any amortized premium. Upon the sale, exchange or
retirement of a Debt Security, a Holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued interest, which will be taxable as such) and the adjusted tax
basis of the Debt Security. Except as described above with respect to market
discount, such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange or retirement the Debt
Security has been held for more than one year. Under current law, long-
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term capital gains of individuals are, under certain circumstances, taxed at
lower rates than items of ordinary income. The deductibility of capital losses
is subject to limitations.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Debt Securities and to the
proceeds of sale of a Debt Security made to Holders other than certain exempt
recipients (such as corporations). A 31% backup withholding tax will apply to
such payments if the Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such Holder's United States federal income tax
liability provided the required information is furnished to the IRS.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the Company by
Goodwin, Procter & Hoar, Boston, Massachusetts, and certain legal matters in
connection with the offering of the Debt Securities will be passed upon for any
underwriters or agents by Skadden, Arps, Slate, Meagher & Flom, Boston,
Massachusetts.
TRUSTEE'S RELATIONSHIP WITH ISSUER
State Street Bank and Trust Company acts as Trustee for Debt Securities
issued under the Indenture and from time to time makes or participates in loans
to, and performs other services for, the Company in the normal course of
business. It also acts as trustee for certain of the Company's employee benefit
plans. Nader F. Darehshori, the Chairman of the Board, President, and Chief
Executive Officer, and a director of the Company, and Joseph A. Baute, a
director of the Company, serve as directors of State Street Bank and Trust
Company.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
15
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the distribution of the securities being
registered (other than underwriting discounts and commissions) are estimated as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................... $103,450
Printing and Engraving Fees.......................................................
Legal Fees and Expenses...........................................................
Accounting Fees and Expenses......................................................
Rating Agencies Fees..............................................................
Blue Sky Fees and Expenses........................................................
Trustees and Registrar Fees and Expenses..........................................
Miscellaneous.....................................................................
--------
Total................................................................... $
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Underwriting Agreement (a form of which appears as Exhibit 1 hereto)
provides for indemnification of the directors and officers of the Company in
certain circumstances.
As permitted by Massachusetts law, the Restated Articles of Organization of
the Company (the "Articles of Organization") contain indemnification provisions
to the effect that, subject to certain standards, directors and officers may be
indemnified by the Company for all liabilities incurred by them in connection
with any proceeding in which they are involved as a result of serving or having
served as a director or officer of the Company or, at the request of the
Company, as a director or officer of any other organization or in any capacity
with respect to any employee benefit plan.
As permitted by Massachusetts law, the Articles of Organization provide
that a director of the Company will not be personally liable to the Company or
its stockholders for monetary damages arising out of the director's breach of
his or her fiduciary duty, except to the extent that the Massachusetts Business
Corporation Law ("MBCL") does not permit exemption from such liability.
Currently, the MBCL provides that a director remains potentially liable for
monetary damages for (i) any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) any acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law; (iii) an
improper payment of a dividend, improper repurchase of the Company's stock, or
certain loans to directors and officers of the Company in violation of Sections
61 or 62 of MBCL; or (iv) any transaction from which a director derives an
improper benefit.
As also permitted by Massachusetts law, the Company has purchased
directors' and officers' liability insurance, which insures against certain
liabilities incurred in connection with the performance of their duties.
II-1
<PAGE> 18
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement*
4.1 Indenture dated as of March 15, 1994 between Houghton Mifflin Company and State
Street Bank and Trust Company, as successor trustee to The First National Bank of
Boston (incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (No. 33-51700))
4.2 First Supplemental Indenture dated as of July 27, 1995 between the Company and State
Street Bank and Trust Company, as successor trustee to The First National Bank of
Boston*
4.3 Form of Debt Securities (included in Exhibit 4.1)
5 Opinion of Goodwin, Procter & Hoar regarding legality of securities being
registered*
12 Calculation of Ratios of Earnings to Fixed Charges*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of Goodwin, Procter & Hoar (included in Exhibit 5)
24 Power of Attorney*
25 Statement of Eligibility and Qualification of Trustee on Form T-1*
</TABLE>
- ---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to securityholders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15
II-2
<PAGE> 19
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-3
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, the Commonwealth of Massachusetts, on
December 11, 1995.
HOUGHTON MIFFLIN COMPANY
By:/s/ NADER F. DAREHSHORI
Nader F. Darehshori
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- -------------------------------- ------------------
<S> <C> <C>
/s/ NADER F. DAREHSHORI Chairman of the Board, December 11, 1995
Nader F. Darehshori President, Chief Executive
Officer and Director (principal
executive officer)
/s/ JAMES F. STACK Executive Vice President, Chief December 11, 1995
James F. Stack Financial Officer and Treasurer
(principal financial officer)
/s/ MICHAEL J. LINDGREN Vice President and Corporate December 11, 1995
Michael J. Lindgren Controller (principal accounting
officer)
* Director December 11, 1995
Joseph A. Baute
* Director December 11, 1995
Gail Deegan
* Director December 11, 1995
James O. Freedman
* Director December 11, 1995
Mary H. Lindsay
* Director December 11, 1995
Charles R. Longsworth
* Director December 11, 1995
John F. Magee
</TABLE>
II-4
<PAGE> 21
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- -------------------------------- ------------------
<S> <C> <C>
* Director December 11, 1995
Claudine B. Malone
* Director December 11, 1995
Alfred L. McDougal
* Director December 11, 1995
George Putnam
* Director December 11, 1995
Ralph Z. Sorenson
Director December , 1995
DeRoy C. Thomas
By: /s/ PAUL D. WEAVER December 11, 1995
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
1 -- Form of Underwriting Agreement*
4.1 -- Indenture dated as of March 15, 1994 between Houghton Mifflin Company and State
Street Bank and Trust Company, as successor trustee to The First National Bank of
Boston (incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (No. 33-51700))
4.2 -- First Supplemental Indenture dated as of July 27, 1995 between the Company and
State Street Bank and Trust Company, as successor trustee to The First National
Bank of Boston*
4.3 -- Form of Debt Securities (included in Exhibit 4.1)
5 -- Opinion of Goodwin, Procter & Hoar regarding legality of securities being
registered*
12 -- Calculation of Ratios of Earnings to Fixed Charges*
23.1 -- Consent of Ernst & Young LLP*
23.2 -- Consent of Goodwin, Procter & Hoar (included in Exhibit 5)
24 -- Power of Attorney*
25 -- Statement of Eligibility and Qualification of Trustee on Form T-1*
</TABLE>
- ---------------
* Filed herewith.
II-6
<PAGE> 1
EXHIBIT 4.2
================================================================================
HOUGHTON MIFFLIN COMPANY
AND
THE FIRST NATIONAL BANK OF BOSTON
Trustee
--------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of July 27, 1995
--------------------
Supplemental to Indenture dated as of March 15, 1994
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of July 27, 1995 (this
"Supplemental Indenture"), made and entered into by and between HOUGHTON MIFFLIN
COMPANY, a corporation organized and existing under the laws of the Commonwealth
of Massachusetts having its principal office at 222 Berkeley Street, Boston,
Massachusetts 02116 (the "Company"), and THE FIRST NATIONAL BANK OF BOSTON, a
national banking association, as trustee (the "Trustee").
WHEREAS the Company entered into an Indenture dated as of March 15,
1994 with the Trustee (the "Indenture") for the purposes of issuing unsecured
debentures, notes or other evidences of indebtedness to be issued in one or more
series (the "Securities") in such principal amount or amounts as may from time
to time be authorized by or pursuant to the authority granted in one or more
resolutions of the Board of Directors of the Company; all capitalized terms used
herein and not otherwise defined will have the respective meanings ascribed
thereto in the Indenture; and
WHEREAS the Company has issued pursuant to the Indenture a series of
Securities denominated its 7 1/8% Senior Notes due 2004 in the aggregate
principal amount of $100,000,000 with respect to which The First National Bank
of Boston has been appointed to serve as Trustee; and
WHEREAS the Company proposes to issue a series of Securities consisting
of up to 2,000,000 Securities denominated its "6% Exchangeable Notes due 1999"
(individually, a "Stock Appreciation Income Linked Security (SAILS)" or a
"SAILS" and, collectively, the "Stock Appreciation Income Linked Securities
(SAILS)" or the "SAILS"), the principal amount of each of which SAILS at
Maturity is exchangeable or redeemable into shares of common stock, par value
$.01 per share ("INSO Common Stock"), of INSO Corporation, a Delaware
corporation ("INSO"), or, at the option of the Company, cash, in either case at
the Exchange Rate (as defined below); and
WHEREAS Section 901 of the Indenture provides that without the consent
of the Holders of Securities, the Company, when authorized by or pursuant to the
authority granted in a Board Vote, may enter into one or more indentures
supplemental to the Indenture to, among other things, establish the form or
terms of Securities of any series as permitted by Sections 201 and 301 thereof,
to cure any ambiguity, to correct or supplement any provision in the Indenture
which may be defective or inconsistent with any other provision of the Indenture
or to make any other provisions with respect to matters or questions arising
under the Indenture which shall not adversely affect the interests of the
Holders of Securities in any material respect; and
WHEREAS the entry into this Supplemental Indenture by the parties
hereto is in all respects authorized by the provisions of the Indenture; and
<PAGE> 3
WHEREAS this Supplemental Indenture has been authorized, adopted and
approved by a Board Vote, and all other things necessary to make this
Supplemental Indenture a valid agreement of the Company in accordance with its
terms have been done:
NOW, THEREFORE:
In consideration of the premises and the mutual covenants herein
contained and of the purchase and acceptance of the SAILS by the Holders thereof
and for other valuable consideration, the receipt and sufficiency whereof is
hereby acknowledged, the Company, for itself and its successors, does hereby
covenant and agree to and with the Trustee and its successors in said trust, as
follows:
SECTION 1. The Indenture is hereby amended as follows:
(a) By amending Section 101, solely with respect to a series of
Securities that consists of SAILS, to add new definitions thereto, in the
appropriate alphabetical sequence, as follows:
"Closing Price": See Section 1301.
"Current Market Price": See Section 1301.
"Exchange Rate": See Section 1301.
"Extraordinary Cash Dividend": See Section 1303.
"Final Maturity": See Section 1301.
"Initial Price": See Section 1301.
"INSO": See Section 1301.
"INSO Common Stock": See Section 1301.
"INSO Successor": See Section 1303.
"NNM": See Section 1301.
"Notice Date": See Section 1301.
"Optional Redemption Date": See Section 1301.
2
<PAGE> 4
"Reorganization Event": See Section 1303.
"Threshold Appreciation Price": See Section 1301.
"Trading Day": See Section 1301.
"Transaction Value": See Section 1303.
(b) By amending Section 301 of the Indenture by (i) adding as a
new subsection (16) the following: "(16) the obligation, if any, of the Company
to permit the conversion or exchange of the Securities of such series into other
securities (whether or not issued by, or the obligation of, the Company), and
the terms and conditions upon which such conversion or exchange shall be
effected (including, without limitation, the initial conversion or exchange
price or rate, the conversion or exchange period and any other provision in
addition to or in lieu of those set forth in this Indenture relative to such
obligation; and"; and by (ii) renumbering current subsection (16) of Section 301
to subsection (17).
(c) By amending Section 902(1) of the Indenture by adding to
the end thereof the following: "change the terms under which the SAILS are
exchangeable or redeemable as set forth in Article XIII of this Indenture, or"
(d) By adding, solely with respect to the series of Securities
that consists of the SAILS, a new Article XIII as follows:
ARTICLE XIII
EXCHANGE OF SAILS
SECTION 1301. Mandatory Exchange; Optional Redemption.
(a) Mandatory Exchange. Unless previously redeemed by
the Company as provided herein and in the form of SAILS attached
hereto as Exhibit A, on August 1, 1999 or such earlier date on
which the SAILS become due and payable as a result of acceleration
("Final Maturity"), the principal amount payable with respect to each
SAILS shall be automatically and mandatorily exchanged (subject to
Section 1301(d)) into a number of shares of common stock, par value
$.01 per share ("INSO Common Stock"), of INSO Corporation, a Delaware
corporation ("INSO"), at the Exchange Rate (as defined below). As a
result of such mandatory exchange, Holders of the SAILS may receive an
amount less than the principal amount thereof. The "Exchange Rate" is
equal to, subject to adjustment as a result of certain dilution events
relating to the INSO Common Stock as provided for in Section 1303, (i)
if the Current Market Price (as defined below) per share of INSO Common
Stock is greater than or equal to $78 7/8 per
3
<PAGE> 5
share of INSO Common Stock (the "Threshold Appreciation Price"), 0.8621
shares of INSO Common Stock per SAILS, (ii) if the Current Market Price
is less than the Threshold Appreciation Price but is greater than
$68.00 per share of INSO Common Stock (the "Initial Price"), a
fractional share of INSO Common Stock per SAILS so that the value
thereof (determined at the Current Market Price) is equal to the
Initial Price (such fractional share being calculated to the nearest
1/10,000th of a share or, if there is no nearest 1/10,000th of a share,
to the next higher 1/10,000th of a share) and (iii) if the Current
Market Price is less than or equal to the Initial Price, one share of
INSO Common Stock per SAILS. On or after Final Maturity, all rights of
the Holders of the SAILS will terminate except the right to receive for
each SAILS exchanged, a number of shares of INSO Common Stock (or, at
the Company's option, cash pursuant to Section 1301(d)), unless the
Company defaults on such exchange or payment. No fractional shares of
INSO Common Stock will be issued at Final Maturity, as provided in
Section 1302. Such mandatory exchange shall be subject to the right of
the Company to redeem the SAILS as provided in Section 1301(b) and in
the form of SAILS attached hereto as Exhibit A.
(b) Optional Redemption. The SAILS are not redeemable by the
Company prior to August 1, 1998. At any time on or after August 1, 1998
and before Final Maturity, the Company may, at its option, redeem up to
fifty percent (50%) of the then Outstanding SAILS upon mailing of
notice of such redemption to Holders of SAILS to be redeemed not less
than 30 nor more than 60 days prior to the date fixed for redemption by
the Company (the "Optional Redemption Date"), in accordance with the
terms of the Indenture; provided, however, that the Company shall have
the right to redeem the SAILS on only one occasion prior to Final
Maturity. Upon such redemption, the Company will deliver to the Holders
thereof in exchange for each of the SAILS so redeemed, (i) subject to
Section 1301(d), a number of shares of INSO Common Stock at the
Exchange Rate and (ii) cash in an amount equal to all accrued and
unpaid interest thereon to the Optional Redemption Date; provided,
however , that if the Optional Redemption Date falls on an Interest
Payment Date or between a Regular Record Date and the next succeeding
Interest Payment Date, then the interest payable on such Interest
Payment Date shall be paid to the Holder of record on the next
preceding Regular Record Date. On and after the Optional Redemption
Date, all rights of the Holders of the SAILS called for redemption will
terminate except the right to receive, for each SAILS redeemed, a
number of shares of INSO Common Stock or, at the Company's option, cash
pursuant to Section 1301(d), unless the Company defaults on such
redemption or payment. No fractional shares of INSO Common Stock will
be issued on the Optional Redemption Date, as provided in Section 1302.
(c) Current Market Price. The "Current Market Price" for
purposes of determining the Exchange Rate at Final Maturity shall be
the average Closing Price per share of INSO Common Stock on the 20
Trading Days (as defined below) immediately
4
<PAGE> 6
prior to, but not including, Final Maturity. The "Current Market Price"
for purposes of determining the Exchange Rate on the Optional
Redemption Date shall be the lesser of (i) the Closing Price on the
second Trading Day preceding the Notice Date (as defined below) or, if
such day is not a Trading Day, on the last Trading Day immediately
prior to such day and (ii) the average Closing Price per share of INSO
Common Stock on the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding the Notice Date. The
"Notice Date" in connection with the optional redemption of the SAILS
is defined as the date on which first occurs either the public
announcement of such redemption or the commencement of mailing of a
notice of redemption to the Holders of the SAILS. The "Closing Price"
of any security on any date of determination means the closing sale
price (or, if no closing sale price is reported, the last reported sale
price) of such security on the Nasdaq National Market ("NNM") on such
date or, if such security is not listed on the NNM on any such date, as
reported by the principal United States securities exchange on which
such security is so traded, or if such security is not so traded on a
United States national or regional securities exchange, as otherwise
reported by The Nasdaq Stock Market, Inc., or, if such security is not
so reported, the last quoted bid price for such security in the
over-the-counter market as reported by the National Quotation Bureau or
similar organization, or, if such bid price is not available, the
market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for
this purpose by the Company. A "Trading Day" is defined as any day that
is not a Saturday, Sunday or a day on which the NNM is closed or
banking institutions or trust companies in the City of New York or the
City of Boston are authorized or obligated by law or executive order to
close and on which the security the Closing Price of which is being
determined (i) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market
at the close of business and (ii) has traded at least once on the
national or regional securities exchange or association or over-the-
counter market that is the primary market for the trading of such
security.
(d) Notwithstanding anything to the contrary in this Section
1301, the Company may, at its option, in lieu of delivering shares of
INSO Common Stock at Maturity, deliver cash in an amount (calculated to
the nearest 1/100th of a dollar per SAILS or, if there is not a nearer
1/100th of a dollar, then to the next higher 1/100th of a dollar) equal
to the value of the number of shares of INSO Common Stock otherwise
deliverable by the Company in exchange for the SAILS pursuant to
Section 1301(a) or 1301(b), as the case may be, at the Current Market
Price. In addition, the Company may, at its option, deliver cash in
lieu of INSO Common Stock to beneficial Holders of any SAILS in any
jurisdiction where delivery of shares of INSO Common Stock would
require registration or qualification of such shares under applicable
securities or similar laws or subject the Company to other regulatory
requirements in connection with such delivery.
5
<PAGE> 7
SECTION 1302. No Fractional Shares.
No fractional shares or scrip representing fractional shares of
INSO Common Stock shall be issued or delivered upon the mandatory
exchange or optional redemption at Maturity of any SAILS. If more than
one SAILS shall be surrendered for mandatory exchange or optional
redemption at one time by the same Holder, the number of full shares of
INSO Common Stock which shall be delivered upon mandatory exchange or
optional redemption, in whole or in part, as the case may be, shall be
computed on the basis of the aggregate number of SAILS so surrendered
at Maturity. Instead of any fractional shares of INSO Common Stock
which would otherwise be deliverable upon mandatory exchange or
optional redemption of any SAILS at Maturity, the Company, through any
applicable Paying Agent, shall make a cash payment in respect of such
fractional interest in an amount equal to the value of such fractional
shares at the Current Market Price. The Company shall, upon mandatory
exchange or optional redemption of any SAILS, provide cash to any
applicable Paying Agent in an amount equal to the cash payable with
respect to any fractional shares of INSO Common Stock deliverable upon
mandatory exchange or optional redemption of such SAILS, and the
Company shall retain such fractional shares of INSO Common Stock.
SECTION 1303. Adjustment of Exchange Rate.
(a) The Exchange Rate shall be subject to adjustment
from time to time as follows:
(i) If INSO shall:
(A) pay a dividend or make a
distribution with respect to the
INSO Common Stock in shares of such
stock,
(B) subdivide or split the outstanding
shares of INSO Common Stock into a
greater number of shares,
(C) combine the outstanding shares of
INSO Common Stock into a smaller
number of shares, or
(D) issue by reclassification of shares
of INSO Common Stock any shares of
capital stock of INSO,
then, in any such event, the Exchange Rate in effect
immediately prior to such event shall be adjusted so that the
Holder of any SAILS shall thereafter be entitled to receive,
upon mandatory exchange or optional redemption of the principal
amount of such SAILS at Maturity, as set forth in Section 1301,
the number of
6
<PAGE> 8
shares of INSO Common Stock which such Holder would have owned
or been entitled to receive immediately following any event
described above had such SAILS been exchanged or redeemed
immediately prior to such event or any record date with respect
thereto. Each such adjustment shall become effective at the
opening of business on the business day next following the
record date for determination of stockholders of INSO Common
Stock entitled to receive such dividend or distribution in the
case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a
subdivision, split, combination or reclassification. Each such
adjustment shall be made successively.
(ii) If INSO shall, after the date hereof, issue rights or
warrants to all stockholders of INSO Common Stock entitling
them to subscribe for or purchase shares of INSO Common Stock
(other than rights to purchase INSO Common Stock pursuant to a
plan for the reinvestment of dividends or interest) at a price
per share less than the current market price of INSO Common
Stock (determined for purposes of this clause (ii) as the
average Closing Price per share of INSO Common Stock on the 20
Trading Days immediately prior to the date such rights or
warrants are issued), then in each case the Exchange Rate shall
be adjusted by multiplying the Exchange Rate in effect
immediately prior to the date of issuance of such rights or
warrants, by a fraction, of which the numerator shall be the
number of shares of INSO Common Stock outstanding on the date
of issuance of such rights or warrants, immediately prior to
such issuance, plus the number of additional shares of INSO
Common Stock offered for subscription or purchase pursuant to
such rights or warrants, and of which the denominator shall be
the number of shares of INSO Common Stock outstanding on the
date of issuance of such rights or warrants, immediately prior
to such issuance, plus the number of additional shares of INSO
Common Stock which the aggregate offering price of the total
number of shares of INSO Common Stock so offered for
subscription or purchase pursuant to such rights or warrants
would purchase at such current market price (calculated as the
average Closing Price per share of INSO Common Stock on the 20
Trading Days immediately prior to the date such rights or
warrants are issued), which shall be determined by multiplying
such total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained by such
current market price. Such adjustment shall become effective at
the opening of business on the business day next following the
record date for the determination of stockholders entitled to
receive such rights or warrants. To the extent that shares of
INSO Common Stock are not delivered after the expiration of
such rights or warrants, the Exchange Rate shall be readjusted
to the Exchange Rate which would then be in effect had such
adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the
7
<PAGE> 9
number of shares of INSO Common Stock actually delivered. Each
such adjustment shall be made successively.
(iii) If INSO shall pay a dividend or make a
distribution to all stockholders of INSO Common Stock of
evidences of its indebtedness or other assets (excluding any
dividends or distributions referred to in subparagraph (i)
above or any ordinary periodic cash dividends that do not
constitute Extraordinary Cash Dividends (as defined in clause
(vi) below) or shall issue to all stockholders of INSO Common
Stock rights or warrants to subscribe for or purchase any of
its securities (other than those referred to in subparagraph
(ii) above), then in each such case, the Exchange Rate shall be
adjusted by multiplying the Exchange Rate in effect on the
record date mentioned below, by a fraction of which the
numerator shall be the current market price per share of INSO
Common Stock on the record date for the determination of
stockholders entitled to receive such dividend or distribution
(such current market price being determined for purposes of
this clause (iii) as the average Closing Price per share of
INSO Common Stock on the 20 Trading Days immediately prior to
such record date), and of which the denominator shall be such
current market price per share of INSO Common Stock less the
fair market value (as determined by the Board of Directors of
the Company, whose determination shall be conclusive, and
described in a resolution adopted with respect thereto) as of
such record date of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or
warrants applicable to one share of INSO Common Stock. Each
such adjustment shall become effective on the opening of
business on the business day next following the record date for
the determination of stockholders entitled to receive such
dividend or distribution. Each such adjustment shall be made
successively.
(iv) Any shares of INSO Common Stock issuable in
payment of a dividend shall be deemed to have been issued
immediately prior to the close of business on the record date
for such dividend for purposes of calculating the number of
outstanding shares of INSO Common Stock under subparagraph (ii)
above.
(v) All adjustments to the Exchange Rate shall be
calculated to the nearest 1/10,000th of a share of INSO Common
Stock (or if there is not a nearest 1/10,000th of a share to
the next lower 1/10,000th of a share). No adjustment in the
Exchange Rate shall be required unless such adjustment would
require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by
reason of this clause (v) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. If an adjustment is made to the Exchange Rate
pursuant to subparagraph (i), (ii) or (iii) of this Section
1303(a), an adjustment shall also be made to the Current Market
8
<PAGE> 10
Price solely to determine which of paragraphs (a), (b) or (c)
of the definition of Exchange Rate in Section 1301 will apply
at Maturity. The required adjustment shall be determined by
multiplying the Current Market Price by the reciprocal of the
number determined under subparagraph (i), (ii) or (iii) by
which the then existing Exchange Rate was multiplied to adjust
such rate. This subparagraph (v) shall be so used to adjust
the definition of Current Market Price only as such term is
used for the first time in each of subparagraphs (a), (b) and
(c) of the definition of Exchange Rate.
(vi) For purposes of the foregoing, the term
"Extraordinary Cash Dividend" shall mean, with respect to any
consecutive 365-day period, any cash dividend with respect to
INSO Common Stock the amount of which, together with the
aggregate amount of all other such cash dividends on the INSO
Common Stock occurring in such 365-day period, exceeds on a per
share basis 10% of the average of the Closing Prices per share
of the INSO Common Stock for each Trading Day during such
365-day period, and for purposes of applying the formula set
forth in clause (iii) above, the fair market value of such
dividend being calculated pursuant to such clause (iii) shall
be equal to (x) the aggregate amount of such cash dividend
together with the amounts of such other cash dividends
occurring in such period minus (y) the aggregate amount of such
other cash dividends occurring in such period for which a prior
adjustment in the Exchange Rate was previously made under this
Section 1303(a). In making the determinations required by the
foregoing sentence, the amount of cash dividends paid on a per
share basis shall be appropriately adjusted to reflect the
occurrence during such period of any event described in this
Section 1303(a).
(b) In the event of (i) any consolidation or merger of INSO, or
any surviving entity or subsequent surviving entity of INSO (an "INSO
Successor"), with or into another entity (other than a merger or
consolidation in which INSOis the continuing corporation and in which
the INSO Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property
of INSO or another corporation), (ii) any sale, transfer, lease or
conveyance to another corporation of the property of INSO or any INSO
Successor as an entirety or substantially as an entirety, (iii) any
statutory exchange of securities of INSO or any INSO Successor with
another corporation (other than in connection with a merger or
acquisition) or (iv) any liquidation, dissolution or winding up of INSO
or any INSO Successor (any such event, a "Reorganization Event"), the
Exchange Rate used to determine the amount payable upon exchange or
redemption at Maturity for each SAILS will be adjusted to provide that
each Holder of SAILS will receive at Maturity cash in an amount equal
to (a) if the Transaction Value (as defined below) is greater than or
equal to the Threshold Appreciation Price, 0.8621 multiplied by the
Transaction Value, (b) if the Transaction Value is less than the
Threshold Appreciation Price but greater than the Initial Price, the
9
<PAGE> 11
Initial Price or (c) if the Transaction Value is less than or equal to the
Initial Price, the Transaction Value. "Transaction Value" means (x) for any cash
received in any such Reorganization Event, the amount of cash received per share
of INSO Common Stock, (y) for any property other than cash or securities
received in any such Reorganization Event, an amount equal to the market value
at Maturity of such property received per share of INSO Common Stock as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Company and (z) for any securities received in
any such Reorganization Event, an amount equal to the average Closing Price per
share of such securities on the 20 Trading Days immediately prior to Maturity,
multiplied by the number of such securities received for each share of INSO
Common Stock. Notwithstanding the foregoing, in lieu of delivering cash as
provided above, the Company may at its option deliver an equivalent value of
securities or other property received in such Reorganization Event, determined
in accordance with clause (y) or (z) above, as applicable. The kind and amount
of securities into which the SAILS shall be exchangeable after consummation of
such transaction shall be subject to adjustment as described in paragraph (a)
above following the date of consummation of such transaction.
SECTION 1304. Notice of Adjustments and Certain Other
Events.
(a) Whenever the Exchange Rate is adjusted as herein
provided, the Company shall:
(i) forthwith compute the adjusted Exchange Rate in
accordance with Section 1303 and prepare an Officers'
Certificate setting forth the adjusted Exchange Rate, the
method of calculation thereof in reasonable detail, and the
facts requiring such adjustment and upon which such adjustment
is based, which Officers' Certificate shall be conclusive,
final and binding evidence of the correctness of the
adjustment, and file such certificate forthwith with the
Trustee for the SAILS; and
(ii) within 10 Business Days following the occurrence
of an event that requires an adjustment to the Exchange Rate
pursuant to Section 1303 (or if the Company is not aware of
such occurrence, as soon as practicable after becoming so
aware), provide written notice to the Trustee and to the
Holders of the Outstanding SAILS of the occurrence of such
event and a statement in reasonable detail setting forth the
method by which the adjustment to the Exchange Rate was
determined and setting forth the revised Exchange Rate per
SAILS.
(b) In case at any time while any of the SAILS are
Outstanding the Company receives notice that:
10
<PAGE> 12
(i) INSO shall declare a dividend (or any other
distribution) on or in respect of the INSO Common Stock to
which Section 1303(a)(i) or (ii) shall apply (other than any
cash dividends and distributions, if any, paid from time to
time by INSO that do not constitute Extraordinary Cash
Dividends);
(ii) INSO shall authorize the issuance to all
stockholders of INSO Common Stock of rights or warrants to
subscribe for or purchase shares of INSO Common Stock or of
any other subscription rights or warrants;
(iii) there shall occur any conversion or
reclassification of INSO Common Stock (other than a
subdivision or combination of outstanding shares of such INSO
Common Stock) or any consolidation, merger or reorganization
to which INSO is a party and for which approval of any
stockholders of INSO is required, or the sale or transfer of
all or substantially all of the assets of INSO; or
(iv) there shall occur the voluntary or
involuntary dissolution, liquidation or winding up of INSO;
then the Company shall promptly cause to be delivered to the
Trustee and any applicable Paying Agent and filed at the
office or agency maintained for the purpose of mandatory
exchange or optional redemption of SAILS at Maturity in the
Borough of Manhattan, in the City of New York by the Trustee
(or any applicable Paying Agent), and shall promptly cause to
be mailed to the Holders of SAILS at their last addresses as
they shall appear upon the registration books of the Security
Registrar, at least 10 days before the date hereinafter
specified (or the earlier of the dates hereinafter specified,
in the event that more than one is specified), an Officers'
Certificate stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or grant
or rights or warrants, or, if a record is not to be taken, the
date as of which the stockholders of INSO Common Stock of
record to be entitled to such dividend, distribution or grant
of rights or warrants are to be determined, or (y) the date,
if known by the Company, on which such reclassification,
consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective.
(c) On or prior to seven Business Days preceding Final
Maturity or any Optional Redemption Date, as the case may be, the
Company will provide notice to the Holders of record of the SAILS and
to the Trustee and will publish a notice in a daily newspaper of
national circulation stating whether the Company has irrevocably
elected to deliver INSO Common Stock pursuant to Section 1301(a) or
(b), as the case may be, or cash pursuant to Section 1301(d) (or any
other property or securities that may be delivered pursuant to Section
1303(b)) at Final Maturity or, with respect to SAILS called for
redemption, on the Optional Redemption Date, as the case may be.
11
<PAGE> 13
(d) The Trustee may rely without inquiry on any Officers'
Certificate or written notice furnished to it pursuant to this Section
1304 and shall not be deemed to have knowledge of any adjustment or
other event described herein unless it shall have received such
Officers' Certificate or notice.
SECTION 1305. Taxes.
(a) The Company will pay any and all documentary, stamp,
transfer or similar taxes that may be payable in respect of the
transfer and delivery of INSO Common Stock pursuant hereto; provided,
however, that the Company shall not be required to pay any such tax
which may be payable in respect of any transfer involved in the
delivery of INSO Common Stock in a name other than that in which the
SAILS so exchanged or redeemed were registered, and no such transfer
or delivery shall be made unless and until the Person requesting each
transfer has paid to the Company the amount of any such tax, or has
established, to the satisfaction of the Company, that such tax has
been paid.
(b) The parties hereto hereby agree, and each Holder of a
SAILS by its purchase of a SAILS hereby agrees:
(i) to treat, for U.S. federal income tax
purposes, each SAILS as a unit (the "unit characterization")
consisting of (x) an exchange note (the "Exchange Note"), which
is a debt obligation with a fixed principal amount and issue
price equal to the principal amount of the SAILS, bearing
interest at the stated interest rate, and with the principal
amount unconditionally payable at Maturity, and (y) a forward
purchase contract (the "Purchase Contract") pursuant to which
the Holder agrees to use the principal payment due on the
Exchange Note to purchase, at Maturity, the INSO Common Stock
which the Holder is entitled to receive at that time (subject
to the Company's right to deliver cash in lieu of such INSO
Common Stock pursuant to Section 1301(d)), which treatment will
require, among other things, the Holder to include in income as
interest, in accordance with its method of accounting, payments
made with respect to the SAILS that are denominated as
interest;
(ii) in the case of an initial purchase, to
allocate the entire purchase price of a SAILS to the Exchange
Note and to allocate no part thereof to the Purchase Contract;
and
(iii) to file all U.S. federal, state and local
income and franchise tax returns consistent with the unit
characterization (unless required otherwise by an applicable
taxing authority).
12
<PAGE> 14
SECTION 1306. Shares Free and Clear.
The Company hereby warrants that upon exchange or redemption
of a SAILS for INSO Common Stock at Maturity pursuant to this
Indenture, the Holder of a SAILS shall receive all rights held by the
Company in the INSO Common Stock for which such SAILS is at such time
exchangeable or redeemable pursuant to this Indenture, free and clear
of any and all liens, claims, charges and encumbrances other than any
liens, claims, charges and encumbrances which may have been placed on
any INSO Common Stock by the owner thereof prior to the time such INSO
Common Stock was acquired by the Company. Except as provided in
Section 1305(a), the Company will pay all taxes and charges with
respect to the delivery of INSO Common Stock delivered in exchange
for the SAILS hereunder.
SECTION 1307. Cancellation of Security.
Upon receipt by the Trustee of the SAILS delivered to it for
mandatory exchange or optional redemption under this Article XIII, the
Trustee shall cancel and dispose of the same as provided in Section
309.
SECTION 1308. Limitations on Trading During Certain Days.
The Company hereby agrees that it will not, and it will cause
each of its Subsidiaries not to, buy or sell shares of INSO Common
Stock for their own account during the 20 Trading Days prior to
Maturity of the SAILS.
(e) By amending the table of contents of the Indenture to
reflect the additions described in subsections (a) and (d) of this Section 1.
SECTION 2. The form of SAILS attached hereto as Exhibit A is
hereby adopted, pursuant to Section 201 of the Indenture, as a form of
Securities of a series that consists of the SAILS.
SECTION 3. The Indenture, as supplemented and amended by this
Supplemental Indenture and all other indentures supplemental thereto, is in all
respects ratified and confirmed and approved, and the Indenture, this
Supplemental Indenture and all indentures supplemental thereto shall be read,
taken and construed as one and the same instrument.
SECTION 4. If any provision hereof limits, qualifies or
conflicts with another provision hereof which is required to be included in
this Supplemental Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
13
<PAGE> 15
SECTION 5. All covenants and agreements in this Supplemental
Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 6. In case any provision in this Supplemental Indenture
or in the Securities of any series shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions (or of
the other series of Securities) shall not in any way be affected or impaired
thereby.
SECTION 7. Nothing in this Supplemental Indenture, expressed or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Holders of each series of Securities any benefit
or any legal or equitable right, remedy or claim under this Supplemental
Indenture.
SECTION 8. This Supplemental Indenture and each Security of any
series shall be deemed to be a contract made under the laws of the State of New
York and this Supplemental Indenture and each such Security for all purposes
shall be governed by and construed in accordance with the laws of the State of
New York.
SECTION 9. All terms used in this Supplemental Indenture not
otherwise defined herein that are defined in the Indenture shall have the
meanings set forth therein.
SECTION 10. This Supplemental Indenture may be executed in one or
more counterparts, each of which shall be an original; but such counterparts
shall together constitute but one and the same instrument.
SECTION 11. The recitals contained herein and in the Securities,
except the certificate of authentication of the Trustee thereon, shall be taken
as statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of the Indenture, this Supplemental Indenture or of the Securities
and shall not be accountable for the use or application by the Company of the
Securities or the proceeds thereof.
[END OF TEXT]
14
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
HOUGHTON MIFFLIN COMPANY
By:/s/ NADER F. DAREHSHORI
-------------------------------------
Name: Nader F. Darehshori
Title: Chairman, President and Chief
Executive Officer
[Seal]
Attest:
/s/ LOIS M. NOVOTNY
- -----------------------------
Name: Lois M. Novotny
Title: Assistant Clerk
THE FIRST NATIONAL BANK OF
BOSTON, as Trustee
By:/s/ DONNA GERMANO
-------------------------------------
Name: Donna Germano
Title: Account Manager
[Seal]
Attest:
/s/ CARLA A. MASTROMATTEO
- -----------------------------
Name: Carla A. Mastromatteo
Title: Account Manager
15
<PAGE> 17
COMMONWEALTH OF MASSACHUSETTS)
) ss.:
COUNTY OF SUFFOLK )
On the second day of August, 1995, before me personally came Nader F.
Darehshori, to me known, who, being by me duly sworn, did depose and say that
he is Chairman of the Board, President and Chief Executive Officer of Houghton
Mifflin Company, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
/s/ KATHLEEN A. RIDEOUT
--------------------------------------------
[Seal] Notary Public, Commonwealth of Massachusetts
Qualified in Suffolk County
Commission Expires: 6/28/02
16
<PAGE> 18
COMMONWEALTH OF MASSACHUSETTS)
) ss.:
COUNTY OF SUFFOLK )
On the second day of August, 1995, before me personally came Donna L.
Germano, to me known, who, being by me duly sworn, did depose and say that she
is an Account Manager of The First National Bank of Boston, a national banking
association described in and which executed the foregoing instrument; that she
knows the seal of said association; that the seal affixed to said instrument is
such association seal; that it was so affixed by authority of the Board of
Directors of said association, and that she signed her name thereto by like
authority.
/s/ KECIA R. BANKS
----------------------------------------
[Seal] Notary Public, Commonwealth of Massachusetts
Qualified in Massachusetts
Commission Expires: July 18, 2002
17
<PAGE> 19
EXHIBIT A
[Form of Face of SAILS]
No. [R-_________] CUSIP NO. 441560AC3
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS
DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
HOUGHTON MIFFLIN COMPANY
______________ SAILS(SM)*
(Stock Appreciation Income Linked Securities (SAILS)(SM)*)
6% Exchangeable Note due 1999
(Subject to Exchange at Maturity
into Shares of Common Stock, Par Value $.01
Per Share, of INSO Corporation)
HOUGHTON MIFFLIN COMPANY, a corporation duly organized and existing
under the laws of the Commonwealth of Massachusetts (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
________________________ or registered assigns, the principal sum of
_____________________ Dollars (or Sixty Eight Dollars per Stock Appreciation
Income Linked Security (each a "SAILS")) on August 1, 1999 (subject to the
mandatory exchange provisions at Final Maturity described below), subject to
prior redemption by the Company on or after August 1, 1998 as hereinafter
provided, and to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) thereon from August 2, 1995 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
quarterly in arrears on February 1, May 1, August 1 and November 1 in each
year, commencing November 1, 1995 at the rate per annum specified in the title
of this note computed quarterly, until the principal hereof is paid or made
available for payment. The interest so
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<PAGE> 20
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the Person in whose name this
SAILS (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
January 15, April 15, July 15 or October 15 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date. Except as
otherwise provided in the Indenture, any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
SAILS (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of the SAILS
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the SAILS may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
Unless previously redeemed by the Company as provided herein and in
the Indenture, at Final Maturity the principal amount of this SAILS will be
mandatorily exchanged into a number of shares of common stock, par value $.01
per share ("INSO Common Stock"), of INSO Corporation, a Delaware corporation
("INSO"), at the Exchange Rate (as defined below) and, as a result, the Holder
of this SAILS may receive an amount less than the principal amount hereof. The
"Exchange Rate" is equal to, subject to adjustment as a result of certain
dilution events relating to the INSO Common Stock as provided for in the
Indenture, (i) if the Current Market Price (as defined below) per share of INSO
Common Stock is greater than or equal to $78 7/8 per share of INSO Common Stock
(the "Threshold Appreciation Price"), 0.8621 shares of INSO Common Stock per
SAILS, (ii) if the Current Market Price is less than the Threshold Appreciation
Price but is greater than $68.00 per share of INSO Common Stock (the "Initial
Price"), a fractional share of INSO Common Stock per SAILS so that the value
thereof (determined at the Current Market Price) is equal to the Initial Price
or (iii) if the Current Market Price is less than or equal to the Initial
Price, one share of INSO Common Stock per SAILS. Notwithstanding the
foregoing, as provided in the Indenture, the Company may, at its option, in
lieu of delivering shares of INSO Common Stock at Maturity, deliver cash in an
amount (calculated to the nearest 1/100th of a dollar per SAILS or, if there is
not a nearer 1/100th of a dollar, then to the next higher 1/100th of a dollar)
equal to the value of the number of shares of INSO Common Stock otherwise
deliverable by the Company in exchange for the SAILS pursuant to Section
1301(a) or 1301(b) of the Indenture, as the case may be, at the Current Market
Price. In addition, the Company may, at its option, deliver cash in lieu of
INSO Common Stock to beneficial Holders of any SAILS in any jurisdiction where
delivery of shares of INSO Common Stock would require registration or
qualification of such shares under applicable securities or similar laws or
subject the Company to other regulatory requirements in connection with such
delivery. No fractional shares of INSO Common Stock will be issued at Final
Maturity, as provided in the Indenture. Such mandatory exchange shall be
subject to the
A-2
<PAGE> 21
right of the Company to redeem up to fifty percent (50%) of the SAILS then
Outstanding on or after August 1, 1998, and before Final Maturity, as described
herein and in the Indenture.
On a single occasion on or after August 1, 1998 and before Final
Maturity, the Company may, at its option, redeem up to fifty percent (50%) of
the then Outstanding SAILS upon mailing of notice of such redemption to Holders
of the SAILS to be redeemed not less than 30 nor more than 60 days prior to the
date fixed for redemption by the Company (the "Optional Redemption Date"), in
accordance with the terms of the Indenture. The Company may not redeem the
SAILS prior to August 1, 1998. Upon any such redemption, the Company will
deliver to the Holder thereof in exchange for each of the SAILS so redeemed,
(i) a number of shares of INSO Common Stock (or, at the option of the Company,
cash as provided in Section 1301(d) of the Indenture) at the Exchange Rate and
(ii) cash in an amount equal to all accrued and unpaid interest thereon to the
Optional Redemption Date; provided, however, that if the Optional Redemption
Date falls on an Interest Payment Date or between a Regular Record Date and the
next succeeding Interest Payment Date, then the interest payable on such
Interest Payment Date shall be paid to the Holder of record on the next
preceding Regular Record Date. On and after the Optional Redemption Date, all
rights of the Holders of the SAILS called for redemption will terminate except
the right to receive for each SAILS redeemed a number of shares of INSO Common
Stock (or, at the Company's option, cash as provided in Section 1301(d) of the
Indenture), unless the Company defaults on such exchange or payment. No
fractional shares of INSO Common Stock will be issued on the Optional
Redemption Date, as provided in the Indenture.
The "Current Market Price" for purposes of determining the Exchange
Rate at Final Maturity shall be the average Closing Price per share of INSO
Common Stock on the 20 Trading Days immediately prior to, but not including,
Final Maturity. The "Current Market Price" for purposes of determining the
Exchange Rate on the Optional Redemption Date shall be the lesser of (i) the
Closing Price on the second Trading Day preceding the Notice Date (as defined
below) or, if such day is not a Trading Day, on the last Trading Day
immediately prior to such day and (ii) the average Closing Price per share of
INSO Common Stock on the 20 Trading Days immediately prior to, but not
including, the second Trading Day preceding the Notice Date. The "Notice Date"
in connection with the optional redemption of the SAILS is defined as the date
on which first occurs either the public announcement of such redemption or the
commencement of mailing of a notice of redemption to the Holders of the SAILS.
The "Closing Price" of any security on any date of determination means the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such security on the Nasdaq National Market ("NNM") on such date
or, if such security is not listed on the NNM on any such date, as reported by
the principal United States securities exchange on which such security is so
listed, or if such security is not so listed on a United States national or
regional securities exchange, as otherwise reported by The Nasdaq Stock Market,
Inc., or, if such security is not so reported, the last quoted bid price for
such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such
A-3
<PAGE> 22
security on such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company. A "Trading
Day" is defined as any day that is not a Saturday, Sunday or a day on which the
NNM is closed or banking institutions or trust companies in the City of New
York or the City of Boston are authorized or obligated by law or executive
order to close and on which the security the Closing Price of which is being
determined (A) is not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the close of
business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
Interest on this SAILS will be payable, and delivery of INSO Common
Stock (or, at the Company's option, cash in an amount equal to the value of
such INSO Common Stock) in exchange for the principal amount of this SAILS at
Maturity will be made upon surrender of this SAILS, at the office or agency of
the Company maintained for that purpose in the City of New York, New York, and
payment of interest on (and, if the Company elects not to deliver INSO Common
Stock upon exchange at Maturity, the cash equivalent thereof payable upon
exchange for the principal amount of) this SAILS will be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or by wire transfer to an account maintained by such Person
with a bank in The City of New York (so long as the Company has received proper
transfer instructions in writing).
ADDITIONAL PROVISIONS OF THIS SAILS ARE CONTAINED ON THE REVERSE
HEREOF AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH
IN THIS PLACE.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof, directly or through an
Authenticating Agent, by manual signature of an authorized signatory, this
SAILS shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
*"SAILS" and "Stock Appreciation Income Linked Securities" are service
marks of CS First Boston, Inc.
A-4
<PAGE> 23
IN WITNESS WHEREOF, HOUGHTON MIFFLIN COMPANY has caused this
instrument to be duly executed under its corporate seal.
Dated:
HOUGHTON MIFFLIN COMPANY
By
-------------------------------------
Name:
Title:
Attest:
----------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This SAILS is one of the Securities of
the series designated herein and
referred to in the within-mentioned
Indenture.
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By
-----------------------------------
Authorized Signatory
A-5
<PAGE> 24
[Form of Reverse of SAILS]
HOUGHTON MIFFLIN COMPANY
___________ SAILS(SM)*
Stock Appreciation Income Linked Securities (SAILS)(SM)*)
6% Exchangeable Note due 1999
(Subject to Exchange at Maturity
into Shares of Common Stock, Par Value $.01
Per Share, of INSO Corporation)
This note is one of a duly authorized issue of debentures, notes or
other evidence of indebtedness (hereinafter called the "Securities") of the
Company of the series hereinafter specified, which series is limited to
2,000,000 SAILS, all such Securities issued and to be issued under an indenture
dated as of March 15, 1994, between the Company and The First National Bank of
Boston, as Trustee as supplemented by a First Supplemental Indenture dated as
of July 27, 1995 (as supplemented, the "Indenture"), pursuant to which the
Company has designated The First National Bank of Boston as Trustee for the
SAILS, to which Indenture and all other Indentures supplemental hereto or
thereto reference is hereby made for a statement of the rights and limitation
of rights thereunder of the Holders of the Securities and of the rights,
obligations, duties and immunities of the Trustee for each series of Securities
and of the Company, and the terms upon which the Securities are and are to be
authenticated and delivered. As provided in the Indenture and subject to
certain limitations therein set forth, Registered Securities of this series are
exchangeable for a like aggregate principal amount of Registered Securities of
this series and of like tenor of any authorized denominations, as requested by
the Holder surrendering the same, upon surrender of the Registered Security or
Registered Securities to be exchanged at any office or agency described below
where Registered Securities of this series may be presented for registration of
transfer. This note is one of a series of the Securities designated 6%
Exchangeable Notes due 1999 (referred to herein as the "SAILS").
If an Event of Default with respect to the SAILS, as defined in the
Indenture, shall occur and be continuing, the principal of all the SAILS may be
declared due and payable and therefore will result in the mandatory exchange of
the principal amount thereof for INSO Common Stock (or, at the Company's
option, cash as provided in Section 1301(d) of the Indenture), all in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of a majority in principal amount of
A-6
<PAGE> 25
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all the Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences with respect
to such series. Any such consent or waiver by the Holder of this SAILS shall
be conclusive and binding upon such Holder and upon all future Holders of this
SAILS and of any SAILS issued upon the transfer hereof or in exchange herefor
or in lieu thereof, whether or not notation of such event or waiver is made
upon this SAILS.
As set forth in, and subject to, the provisions of the Indenture, no
Holder of any SAILS will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default with respect to the SAILS, the Holders of not less than 25% in
principal amount of the Outstanding SAILS shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall have received from the Holders of a majority in
principal amount of the Outstanding SAILS a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days;
provided, however, that such limitations do not apply to a suit instituted by
the Holder hereof for the enforcement of payment of the principal of or
interest on this SAILS on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this SAILS or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this SAILS
at the times, place and rate, and in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this SAILS is registrable in the Security
Register, upon surrender of this SAILS for registration of transfer at the
office or agency of the Company to be maintained for that purpose in the City
of New York, or at any other office or agency of the Company maintained for
that purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new SAILS of like tenor, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
No service charge shall be made for any such transfer or exchange, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of such
transfer or charge, other than certain exchanges not involving any transfer.
A-7
<PAGE> 26
Certain terms used in this SAILS which are defined in the Indenture
have the meanings set forth therein.
The Indenture and this SAILS shall for all purposes be governed by,
and construed in accordance with, the laws of the State of New York.
Prior to due presentment of this SAILS for registration of transfer,
the Company, the Trustee for the SAILS and any agent of the Company or such
Trustee may treat the Person in whose name this SAILS is registered as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this SAILS be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
A-8
<PAGE> 27
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COMM -- as tenants in common UNIF GIFT MIN ACT --
TEN ENT -- as tenants by the entireties Custodian
JT TEN -- as joint tenants with right of -------- ---------
survivorship and not as (Cust) (Minor)
tenants in common Under Uniform Gifts to Minors Act
-----------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
-------------------------------------------------------
Social Security or taxpayer I.D. or other identifying number of assignee
- --------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(name and address of assignee)
the within SAILS and all rights thereunder, hereby irrevocably constituting and
appointing , attorney to transfer said SAILS on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated:
---------------------
----------------------
A-9
<PAGE> 1
EXHIBIT 5
December 11, 1995
Houghton Mifflin Company
222 Berkeley Street
Boston, MA 02116
Ladies and Gentlemen:
This opinion is rendered to you in connection with the preparation of
the registration statement (the "Registration Statement") on Form S-3 under the
Securities Act of 1933, as amended (the "Act"), with respect to the offering by
Houghton Mifflin Company, a Massachusetts corporation (the "Company"), of up to
$300,000,000 aggregate principal amount of its debt securities (the "Debt
Securities"). The Debt Securities will be issued under an Indenture dated as of
March 15, 1994, as supplemented by the First Supplemental Indenture dated as of
July 27, 1995 (the "Indenture"), between the Company and State Street Bank and
Trust Company as successor trustee to The First National Bank of Boston.
We have acted as counsel to the Company in connection with the
preparation of the Registration Statement and the proposed issuance and sale of
the Debt Securities. For purposes of this opinion we have reviewed the Company's
Restated Articles of Organization and Amended and Restated By-Laws, each as
amended to date. We have also examined such records of corporate proceedings of
the Company and such other documents as we have deemed necessary to enable us to
render this opinion.
We are attorneys admitted to practice in the Commonwealth of
Massachusetts. We express no opinion concerning the laws of any jurisdiction
other than the laws of the United States of America and the Commonwealth of
Massachusetts.
Based upon and subject to the foregoing, and having regard for such
legal considerations as we have deemed relevant, it is our opinion that, upon
the due execution and delivery of the Indenture and issuance of the Debt
Securities pursuant thereto, the Debt Securities will have been duly authorized
for issuance by all necessary corporate action on the part of the Company and,
upon execution and authentication of the Debt Securities as provided in the
Indenture and payment for the Debt Securities against delivery thereof, will be
the legal, valid and binding obligations of the Company, enforceable in
accordance with their terms, except that (i) enforcement of the rights and
remedies created thereby may be limited by
<PAGE> 2
Houghton Mifflin Company
December 11, 1995
Page 2
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and by equitable principles which may limit the right to obtain the remedy of
specific performance or other injunctive relief and (ii) we express no opinion
as to the legality, validity or binding nature of any choice of law provision.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus included as part of the Registration Statement.
Very truly yours,
GOODWIN, PROCTER & HOAR
<PAGE> 1
EXHIBIT 12
HOUGHTON MIFFLIN COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------
1995 1994(B) 1993(A) 1992 1991 1990
------------- ------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Earnings before fixed charges:
Income from continuing operations......... $37.4 $52.4 $31.4 $19.0 $25.1 $18.0
Provision for income taxes................ 23.9 32.7 17.7 9.4 15.3 13.2
----- ----- ----- ----- ----- -----
Income from continuing operations before
taxes, extraordinary item and cumulative
effective of accounting changes.............. 61.3 85.1 49.1 28.4 40.4 31.2
Interest expense*......................... 9.7 6.5 3.6 4.4 6.1 5.9
Interest portion of rental
expense**............................... 3.6 3.4 3.3 3.7 3.7 3.6
----- ----- ----- ----- ----- -----
Earnings before fixed charges.................. $74.6 $95.0 $56.0 $36.5 $50.2 $40.7
===== ===== ===== ===== ===== =====
Fixed charges:
Interest expense*......................... $ 9.7 $ 6.5 $ 3.6 $ 4.4 $ 6.1 $ 5.9
Interest portion of rental
expense**............................... 3.6 3.4 3.3 3.7 3.7 3.6
----- ----- ----- ----- ----- -----
Total fixed charges............................ $13.3 $ 9.9 $ 6.9 $ 8.1 $ 9.8 $ 9.5
===== ===== ===== ===== ===== =====
Ratio of earnings to fixed charges............. 5.6 9.6 8.1 4.5 5.1 4.3
===== ===== ===== ===== ===== =====
</TABLE>
- -------------------
(A) On June 4, 1993, the Company completed an early redemption of $25 million in
senior notes due December 15, 1994. The Company recognized an extraordinary
loss of $1.0 million, net of a tax benefit of $0.6 million. The
extraordinary loss is excluded from earnings before fixed charges and
interest expense in calculating the ratio of earnings to fixed charges.
(B) On March 30, 1994, the Company completed an early redemption of $25 million
in senior notes due March 30, 1997. The company recognized an extraordinary
loss of $1.2 million, net of a tax benefit of $0.8 million. This
extraordinary loss is excluded from earnings before fixed charges and
interest expense in calculating the ratio of earnings to fixed charges.
* Includes: interest amortization of debt issuance costs in 1991 and 1992 of
approximately $55,000 annually and in 1993 of approximately $100,000
annually, and interest costs on capital lease obligations of $480,000 in
1990; $430,000 in 1991; $260,000 in 1992; and $155,000 in 1993.
** Includes the portion of rent expense for each period presented that is
deemed by management to be the interest component of such rentals.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Houghton Mifflin
Company for the registration of $300 million of debt securities and to the
incorporation by reference therein of our report dated January 18, 1995, with
respect to the consolidated financial statements and schedule of Houghton
Mifflin Company included in its Annual Report (Form 10-K) for the year ended
December 31, 1994, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Boston, Massachusetts
December 8, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Nader F.
Darehshori, James F. Stack and Paul D. Weaver, and each of them acting singly,
with full power of substitution, to execute in the name and on behalf of such
person the Registration Statement on Form S-3 to be filed with the Securities
and Exchange Commission for the purpose of registering up to $300 million of
debt securities of Houghton Mifflin Company (such registration statement
hereinafter referred to as the "Registration Statement"), and any and all
amendments (including any post-effective amendments) to the Registration
Statement to file the same, with exhibits thereto, and other documents in
connection therewith, making such changes in the Registration Statement as the
person(s) so acting deems appropriate, and appoints each of such persons, each
with full power of substitution, attorney-in-fact to sign any and all amendments
(including any post-effective amendments) to the Registration Statement and to
file the same, with exhibits thereto, and other documents in connection
therewith.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Nader F. Darehshori Chairman of the Board, President, December 6, 1995
- ------------------------- Chief Executive Officer and Director
Nader F. Darehshori (principal executive officer)
/s/ James F. Stack Executive Vice President, Chief December 6, 1995
- ------------------------- Financial Officer and Treasurer
James F. Stack (principal financial officer)
/s/ Michael J. Lindgren Vice President and December 6, 1995
- ------------------------- Corporate Controller
Michael J. Lindgren (principal accounting officer)
/s/ Joseph A. Baute Director December 6, 1995
- -------------------------
Joseph A. Baute
/s/ Gail Deegan Director December 6, 1995
- -------------------------
Gail Deegan
/s/ James O. Freedman Director December 6, 1995
- -------------------------
James O. Freedman
/s/ Mary H. Lindsay Director December 6, 1995
- -------------------------
Mary H. Lindsay
/s/ Charles R. Longsworth Director December 6, 1995
- -------------------------
Charles R. Longsworth
/s/ John F. Magee Director December 6, 1995
- -------------------------
John F. Magee
/s/ Claudine B. Malone Director December 6, 1995
- -------------------------
Claudine B. Malone
/s/ Alfred L. McDougal Director December 6, 1995
- -------------------------
Alfred L. McDougal
/s/ George Putnam Director December 6, 1995
- -------------------------
George Putnam
/s/ Ralph Z. Sorenson Director December 6, 1995
- -------------------------
Ralph Z. Sorenson
Director December , 1995
- -------------------------
DeRoy C. Thomas
</TABLE>
<PAGE> 1
EXHIBIT 25
Securities Act of 1933 File No.
---------------------
(If application to determine eligibility of trustee for
delayed offering pursuant to Section 305(b) (2))
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT
TO SECTION 305(b)(2)
----------
STATE STREET BANK AND TRUST COMPANY
-----------------------------------
(Exact name of trustee as specified in its charter)
MASSACHUSETTS 04-1867445
------------- ----------
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
- --------------------- -----
(Address of principal (Zip code)
executive offices)
HOUGHTON MIFFLIN COMPANY
------------------------
(Exact name of obligor as specified in its charter)
MASSACHUSETTS 04-1456030
------------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
222 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
- --------------------- -----
(Address of principal (Zip Code)
executive offices)
Debt Securities
---------------
(Title of the indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
FEDERAL RESERVE BANK OF BOSTON
BOSTON, MASSACHUSETTS
BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM, WASHINGTON, D.C.
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
COMMISSIONER OF BANKS OF MASSACHUSETTS
BOSTON, MASSACHUSETTS
(b) Whether it is authorized to exercise corporate trust
powers.
YES.
Item 2. Affiliations with Obligor and Underwriters.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
NONE.
Item 3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B
------ ------
Title of Class Amount Outstanding
-------------- ------------------
<S> <C>
</TABLE>
NOT APPLICABLE.
<PAGE> 3
Item 4. Trusteeships under Other Indentures.
If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such
other indenture. NOT APPLICABLE.
(b) A brief statement of facts relied upon as a basis for
the claim that no conflicting interest within the
meaning of Section 310(b)(1) of the Act arises as a
result of the trusteeship under any such other
indenture, including a statement as to how the
indenture securities will rank as compared with the
securities issued under such other indenture.
NOT APPLICABLE.
Item 5. Interlocking Directorates and Similar Relationships with the
Obligor or Underwriters.
If the trustee or any of the directors or executive officers of
the trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor, identify
each such person having any such connection and state the nature of each such
connection.
Nader F. Darehshori, the Chairman of the Board, President, and
Chief Executive Officer, and a director of the obligor, and Joseph A. Baute, a
director of the obligor, serve as directors of the Trustee.
Item 6. Voting Securities of the Trustee Owned by the Obligor or its
Officials.
Furnish the following information as to the voting securities of
the trustee owned beneficially by the obligor and each director, partner and
executive officer of the obligor:
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
Percentage
of voting
securities
Amount represented
Title of owned by amount
Name of owner Class beneficially given in Col. C
------------- -------- ------------ ---------------
<S> <C> <C> <C>
</TABLE>
NOT APPLICABLE.
<PAGE> 4
Item 7. Voting Securities of the Trustee Owned by Underwriters or their
Officials.
Furnish the following information as to the voting securities of
the trustee owned beneficially by each underwriter for the obligor and each
director, partner and executive officer of each such underwriter:
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
Percentage of
Amount class represented
Title of owned by amount
Name of owner Class beneficially given in Col. C
------------- ----- ------------ ---------------
<S> <C> <C> <C>
</TABLE>
NOT APPLICABLE.
Item 8. Securities of the Obligor Owned or Held by the Trustee.
Furnish the following information as to securities of the
obligor owned beneficially or held as collateral security for obligations in
default by the trustee:
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
Amount owned
beneficially
Whether the or held as
securities collateral Percentage of
are voting security for class represented
Title of or non-voting obligations by amount given
class securities in default in Col. C
----- ---------- ---------- ---------
<S> <C> <C> <C>
</TABLE>
NOT APPLICABLE.
Item 9. Securities of Underwriters Owned or Held by the Trustee.
If the trustee owns beneficially or holds as collateral security
for obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter any of which are so owned or held by the trustee:
<PAGE> 5
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
Amount owned
beneficially
or held as colla-
Name of teral security Percentage of
issuer and for obligations class represented
Title of Amount in default by amount given
class outstanding by trustee in Col. C
------- ----------- ----------------- -------------------
<S> <C> <C> <C>
</TABLE>
NOT APPLICABLE.
Item 10. Ownership or Holdings by the Trustee of Voting Securities of
Certain Affiliates or Security Holders of the Obligor.
If the trustee owns beneficially or holds as collateral security
for obligations in default voting securities of a person who, to the knowledge
of the trustee (1) owns 10 percent or more of the voting securities of the
obligor or (2) is an affiliate, other than a subsidiary, of the obligor, furnish
the following information as to the voting securities of such person:
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
Amount owned
beneficially
or held as colla-
Name of teral security Percentage of
issuer and for obligations class represented
Title of Amount in default by amount given
class outstanding by trustee in Col. C
--------- ----------- ----------------- ---------------
<S> <C> <C> <C>
</TABLE>
NOT APPLICABLE.
Item 11. Ownership or Holdings by the Trustee of any Securities of a
Person Owning 50 Percent or More of the Voting Securities of the
Obligor.
If the trustee owns beneficially or holds as collateral security
for obligations in default any securities of a person who, to the knowledge of
the trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such person
any of which are so owned or held by the trustee:
<PAGE> 6
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
Amount owned
beneficially
or held as colla-
Name of teral security Percentage of
issuer and for obligations class represented
Title of Amount in default by amount given
class outstanding by trustee in Col. C
---------- ----------- ----------------- ---------------
<S> <C> <C> <C>
</TABLE>
NOT APPLICABLE.
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted
to the trustee, furnish the following information:
As of December 8, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C
------ ------ ------
Nature of Indebtedness Amount Outstanding Date due
<S> <C> <C>
</TABLE>
NOT APPLICABLE.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with
respect to the securities under this indenture.
Explain the nature of any such default.
NONE.
(b) If the trustee is a trustee under another indenture
under which any other securities, or certificates of
interest or participation in any other securities, of
the obligor are outstanding, or is trustee for more
than one outstanding series of securities under the
indenture, state whether there has been a default under
any such indenture or series, identify the indenture or
series affected, and explain the nature of any such
default.
NONE.
<PAGE> 7
Item 14. Affiliations with the Underwriters.
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
NOT APPLICABLE.
Item 15. Foreign Trustee.
Identify the order or rule pursuant to which the foreign trustee
is authorized to act as sole trustee under indentures
qualified or to be qualified under the Act.
NOT APPLICABLE.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this Statement of
Eligibility.
T-1.1. A copy of the Articles of Association of the trustee as
now in effect.
A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE, AS NOW IN
EFFECT, IS ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AS
EXHIBIT 1 TO AMENDMENT NO. 1 TO THE STATEMENT OF ELIGIBILITY AND
QUALIFICATION OF TRUSTEE (FORM T-l) FILED WITH REGISTRATION
STATEMENT OF MORSE SHOE, INC. (FILE NO. 22-17940) AND IS
INCORPORATED HEREIN BY REFERENCE THERETO.
T-l.2. A copy of the certificate of authority of the trustee to
commence business, if not contained in the articles of association.
A COPY OF A STATEMENT FROM THE COMMISSIONER OF BANKS OF
MASSACHUSETTS THAT NO CERTIFICATE OF AUTHORITY FOR THE TRUSTEE TO
COMMENCE BUSINESS WAS NECESSARY OR ISSUED IS ON FILE WITH THE
SECURITIES AND EXCHANGE COMMISSION AS EXHIBIT 2 TO AMENDMENT NO. 1
TO THE STATEMENT OF ELIGIBILITY AND QUALIFICATION OF TRUSTEE (FORM
T-l) FILED WITH REGISTRATION STATEMENT OF MORSE SHOE, INC. (FILE
NO. 22-17940) AND IS INCORPORATED HEREIN BY REFERENCE
THERETO.
T-1.3. A copy of the authorization of the trustee to exercise
corporate trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2) above.
A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS IS ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION
AS EXHIBIT 3 TO AMENDMENT NO. 1 TO THE STATEMENT OF ELIGIBILITY AND
QUALIFICATION OF TRUSTEE (FORM T-l) FILED WITH REGISTRATION
STATEMENT OF MORSE SHOE, INC. (FILE NO. 22-17940) AND IS
INCORPORATED HEREIN BY
<PAGE> 8
REFERENCE THERETO.
T-1.4. A copy of the existing by-laws of the trustee.
A COPY OF THE BY-LAWS OF THE TRUSTEE, NOW IN EFFECT, IS ON FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION AS EXHIBIT 4 TO THE
STATEMENT OF ELIGIBILITY AND QUALIFICATION OF TRUSTEE (FORM T-l)
FILED WITH REGISTRATION STATEMENT OF EASTERN EDISON COMPANY
(FILE NO. 33-37823) AND IS INCORPORATED HEREIN BY REFERENCE
THERETO.
T-1.5. A copy of each Indenture referred to in Item 4. NOT
APPLICABLE.
T-1.6. Consent of the Trustee required by Section 321(b) of
the Act.
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT
IS ANNEXED HERETO AS EXHIBIT T-1.6 AND MADE A PART HEREOF.
T-1.7. A copy of the latest report of condition of the trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING
OR EXAMINING AUTHORITY IS ANNEXED HERETO AS EXHIBIT T-1.7 AND
MADE A PART HEREOF.
T-1.8. A copy of any order pursuant to which the foreign trustee
is authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
NOT APPLICABLE.
T-1.9. Foreign trustees are required to furnish a consent to
service of process.
NOT APPLICABLE.
<PAGE> 9
NOTE
Inasmuch as this Form T-l is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13, the
answers to said Items are based upon incomplete information. Items 2 and 13
may, however, be considered correct unless amended by an amendment to this Form
T-1.
In answering any items in this Statement of Eligibility which relate to
matters peculiarly within the knowledge of the obligor, or its directors or
officers, or an underwriter for the obligor, the trustee is relying upon
information furnished to it by the obligor and such underwriter and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
<PAGE> 10
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, State Street Bank and Trust Company, a Massachusetts trust company
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston, and
Commonwealth of Massachusetts, on the 8th day of December, 1995.
STATE STREET BANK AND TRUST
COMPANY
By /s/ Arthur J. MacDonald
--------------------------------
Name: Arthur J. MacDonald
Title: Assistant Vice President
<PAGE> 11
EXHIBIT T-1.6
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(B)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as trustee under the Indenture dated as of March 15,
1994, entered into by Houghton Mifflin Company, and State Street Bank and Trust
Company, as successor trustee to the First National Bank of Boston, does hereby
consent that, pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, reports of examinations with respect to the undersigned, by Federal,
State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST
COMPANY
By /s/ Arthur J. MacDonald
-------------------------------
Name: Arthur J. MacDonald
Title: Assistant Vice President
Dated: December 8, 1995
<PAGE> 12
EXHIBIT T-1.7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this commonwealth
and a member of the Federal Reserve System, at the close of business December
31, 1994, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act and in
accordance with a call made by the Commissioner of Banks under General Laws,
Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
Thousands of
dollars
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.................... 942,661
Interest-bearing balances............................................. 4,843,628
Securities............................................................... 8,410,339
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and of its Edge subsidiary................................ 2,240,374
Loans and lease financing receivables:
Loans and leases, net of unearned income......... 3,257,795
Allowance for loan and lease losses.............. 58,184
Loans and leases, net of unearned income and allowance................ 3,199,611
Assets held in trading accounts.......................................... 825,549
Premises and fixed assets................................................ 375,086
Other real estate owned.................................................. 4,359
Investments in unconsolidated subsidiaries............................... 25,051
Customers' liability to this bank on acceptances outstanding............. 55,358
Intangible assets........................................................ 34,862
Other assets............................................................. 653,750
----------
Total assets............................................................. 21,610,628
==========
LIABILITIES
Deposits:
In domestic offices................................................... 5,946,262
Noninterest-bearing........................... 4,175,167
Interest-bearing.............................. 1,771,095
In foreign offices and Edge subsidiary................................ 8,147,182
Noninterest-bearing........................... 44,817
Interest-bearing.............................. 8,102,365
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary.................................... 4,912,704
Demand notes issued to the U.S. Treasury and Trading Liabilities......... 423,324
Other borrowed money..................................................... 386,049
Bank's liability on acceptances executed and outstanding................. 55,621
Other liabilities........................................................ 530,536
----------
Total liabilities........................................................ 20,401,673
----------
EQUITY CAPITAL
Common Stock............................................................. 28,043
Surplus.................................................................. 177,736
Undivided profits........................................................ 1,003,171
----------
Total equity capital..................................................... 1,208,950
----------
Total liabilities and equity capital..................................... 21,610,628
==========
</TABLE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spine
Marshall N. Carter
Charles F. Kaye
