<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period from January 1, 1996 to March 31, 1996
Commission file number 1-5406
------------------------
HOUGHTON MIFFLIN COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant 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 02116 - 3754
- ------------------------------------- -----------------
(Address of principal (Zip Code)
executive offices)
617-351-5000
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
Not applicable
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
X
Yes ---------------- No ----------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1996.
<TABLE>
<CAPTION>
Class Outstanding at April 30, 1996
----- ------------------------------
<S> <C>
Common Stock, $1 par value 14,546,455
Preferred Stock Purchase Rights 14,546,455
</TABLE>
1 of 16
<PAGE> 2
HOUGHTON MIFFLIN COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Consolidated Condensed Balance Sheets
March 31, 1996 and 1995 and December 31, 1995 3 - 4
Consolidated Condensed Statement of Operations
and Retained Earnings -- Three Months Ended
March 31, 1996 and 1995 5
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 6
Notes to Unaudited Consolidated Condensed
Financial Statements 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
Part II. Other Information
Item 4. Submission of Matter to a Vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
2
<PAGE> 3
HOUGHTON MIFFLIN COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 1996 and 1995 and DECEMBER 31, 1995
(In thousands of dollars, except share amounts)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31 March 31 December 31
1996 1995 1995
---------- ---------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,790 $ 11,533 $ 16,701
Marketable securities, available-for-sale,
at fair value 604 604 604
Accounts receivable 120,010 83,818 204,542
Less allowance for book returns 13,052 8,522 21,698
---------- ---------- ----------
106,958 75,296 182,844
Inventories:
Finished goods 137,919 70,311 120,120
Work-in-process 18,819 3,694 8,733
Raw materials 10,597 3,946 11,074
---------- ---------- ----------
167,335 77,951 139,927
Deferred income taxes
and prepaid expenses 55,870 28,920 31,124
---------- ---------- ----------
Total current assets 333,557 194,304 371,200
Property, plant and equipment and
book plates net of accumulated
depreciation and amortization of
$129,343 at March 31, 1996,
$101,482 at March 31, 1995 and
$ 123,891 at December 31, 1995 131,902 70,705 123,100
Intangible assets, net 466,707 122,525 474,751
Other assets, net 78,077 59,920 77,747
---------- ---------- ----------
$1,010,243 $ 447,454 $1,046,798
========== ========== ==========
</TABLE>
<PAGE> 4
See accompanying notes to unaudited consolidated condensed financial statements.
3
<PAGE> 5
HOUGHTON MIFFLIN COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 1996 and 1995 and DECEMBER 31, 1995
(In thousands of dollars, except share amounts)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current liabilities:
Accounts payable $ 72,171 $ 33,620 $ 94,556
Commercial paper 79,090 -- 144,612
Royalties 27,062 28,451 40,140
Salaries, wages and commissions 947 974 18,751
Other 26,562 12,975 44,324
----------- ----------- -----------
Total current liabilities 205,832 76,020 342,383
Long-term debt 550,936 99,460 426,148
Accrued royalties 2,427 3,035 2,497
Other liabilities 15,705 13,132 15,192
Accrued postretirement benefits 27,146 25,218 26,884
Stock repurchase commitment -- 7,600 --
Stockholders' equity:
Preferred stock, $1 par value: 500,000
shares authorized: none issued -- -- --
Common stock, $1 par value 70,000,000
shares authorized 14,758,726 shares issued 14,759 14,759 14,759
Capital in excess of par value 30,102 23,595 29,973
Retained earnings 203,071 227,185 228,528
----------- ----------- -----------
247,932 265,539 273,260
Less:
Notes receivable from purchase agreements (6,254) (5,923) (5,821)
Benefits trust assets, at market (28,837) (30,373) (27,950)
Common shares held in treasury, at cost
(218,963 shares at March 31, 1996, 308,403
shares at March 31, 1995 and 273,681
shares at December 31, 1995) (4,644) (6,254) (5,795)
----------- ----------- -----------
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Total stockholders' equity 208,197 222,989 233,694
----------- ----------- -----------
$ 1,010,243 $ 447,454 $ 1,046,798
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
4
<PAGE> 7
HOUGHTON MIFFLIN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1996, and 1995
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net sales by industry segment:
Educational publishing $ 43,285 $ 33,029
General publishing 19,550 17,476
--------- ---------
62,835 50,505
Costs and expenses:
Cost of sales 50,095 39,881
Selling and administrative 56,829 40,094
--------- ---------
106,924 79,975
--------- ---------
Operating loss (44,089) (29,470)
Other income (expense):
Gain on sale of INSO common stock 14,243 --
Equity in earnings of INSO Corporation 1,299 621
Net interest expense (9,608) (1,531)
--------- ---------
5,934 (910)
Loss before taxes (38,155) (30,380)
Income tax benefit 16,025 11,848
--------- ---------
Net income (22,130) (18,532)
Retained earnings at beginning of period 228,528 248,828
Valuation allowance on noncurrent marketable equity securities -- (7)
Dividends declared (3,327) (3,104)
--------- ---------
Retained earnings at end of period $ 203,071 $ 227,185
========= =========
Net loss per common share $ (1.60) $ (1.34)
========= =========
Average number of common shares 13,866 13,805
========= =========
Cash dividends paid per common share $ 0.24 $ 0.225
========= =========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
5
<PAGE> 8
HOUGHTON MIFFLIN COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss $ (22,130) $ (18,532)
Adjustments to reconcile net loss to net cash used in operating
activities:
Equity in earnings of INSO (1,299) (621)
Depreciation and amortization 13,168 7,236
Changes in operating assets and liabilities:
Accounts receivable 75,886 55,467
Inventories (27,408) (16,290)
Royalties (11,612) (8,403)
Accounts payable (22,385) (11,043)
Deferred and income taxes payable (16,243) (13,176)
Salaries, wages and commissions (17,804) (12,660)
Other assets and liabilities (17,346) (6,699)
--------- ---------
Net cash used in operating activities (47,173) (24,721)
--------- ---------
Cash flows provided by (used in) investing activities:
Book plate expenditures (14,433) (5,338)
Acquisition of publishing assets (7,500) --
Property, plant, and equipment expenditures (1,176) (1,844)
Marketable securities -- 16,217
--------- ---------
Net cash used in investing activities (23,109) 9,035
--------- ---------
Cash flows provided by (used in) financing activities:
Dividends on common stock (3,327) (3,104)
Repayment of commercial paper (65,522) --
Issuance of long-term debt 124,788 --
Purchase of common stock -- (957)
Exercise of stock options 432 908
--------- ---------
Net cash provided by (used in) financing activities 56,371 (3,153)
--------- ---------
Net decrease in cash and cash equivalents (13,911) (18,839)
Cash and cash equivalents beginning of period 16,701 30,372
--------- ---------
Cash and cash equivalents at end of period $ 2,790 $ 11,533
========= =========
Supplementary disclosure of cash flow information:
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
Income taxes paid $ 233 $ 1,357
Interest paid $ 9,005 $ 531
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
6
<PAGE> 10
HOUGHTON MIFFLIN COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) The accompanying unaudited consolidated financial statements of Houghton
Mifflin Company and its subsidiaries have been prepared in accordance with
generally accepted accounting principles for interim financial information. All
adjustments (consisting of normal recurring accruals) that, in the opinion of
management, are necessary for the fair presentation of this interim financial
information have been included.
Results of interim periods are not necessarily indicative of results
to be expected for the year as a whole. The effect of seasonal business
fluctuations and the occurrence of many costs and expenses in annual cycles
require certain estimations in the determination of interim results.
The information contained in the interim financial statements should
be read in conjunction with the Company's latest Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
Certain reclassifications have been made to prior period financial
statements in order to conform to the presentation used in the 1996 interim
financial statements.
(2) On October 31, 1995, the Company acquired D.C. Heath and Company
("Heath") from Raytheon Company (Raytheon) , for net cash consideration of
$452.9 million. The acquisition has been accounted for as a purchase and,
accordingly, the net assets and results of operations are included in the
Company's consolidated financial statements from the date of acquisition. The
acquisition was financed through a combination of existing cash balances and
indebtedness. Heath is a leading publisher of textbooks in areas including
modern language, language arts, science, social studies, and mathematics for the
elementary, secondary, and college markets.
The cost of the acquisition has been allocated on the basis of the estimated
fair market value of the assets acquired and the liabilities assumed. The excess
of the net assets acquired, or goodwill, is being amortized on a straight-line
basis over a period of twenty years.
7
<PAGE> 11
HOUGHTON MIFFLIN COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- -- Continued--
The following unaudited summary, presented on a pro forma basis, combines the
consolidated results of operations as if Heath had been acquired as of January
1, 1995.
<TABLE>
<CAPTION>
(In millions, except Three Months Ended
per share amounts) March 31, 1995
--------------------- --------------------
<S> <C>
Net sales $ 62.5
Net loss $(39.6)
Net loss per share $(2.87)
</TABLE>
The pro forma financial information is presented for informational purposes only
and is not necessarily indicative of the operating results that would have
occurred had the Heath acquisition been consummated as of the assumed date, nor
are they necessarily indicative of future results of operations.
In a separate closing the Company intends to take possession of the outstanding
shares of D.C. Heath, Canada, Limited ("Heath Canada"). It is expected that this
closing will take place in the second quarter of 1996. The pro forma financial
information above presents the results of operations as if the Heath Canada
acquisition had been made as of January 1, 1995. The Company intends to enter
into a series of agreements with ITP Nelson. Under these agreements ITP Nelson
will acquire the assets of Heath Canada and become the Company's exclusive
Canadian representative in the school and college markets.
In addition, the Company is obligated to make certain additional payments to
Raytheon for final settlement of the purchase price. These payments will result
in the recording of additional intangibles with regard to the acquisition of
Heath.
8
<PAGE> 12
HOUGHTON MIFFLIN COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- -- Continued--
(3) In March 1994, the Company spun-off its former Software Division in an
initial public offering. The equity interest in INSO Corporation ("INSO") , the
successor company, after the offering was approximately 40%.The Company's
recognition of earnings from its investment in INSO is based upon the equity
method of accounting.
In the first quarter of 1996, the Company received $16.1 million in proceeds
from the sale of 343,000 shares of INSO common stock. As a result of the INSO
common stock sale the Company recorded a gain of $14.2 million ($8.2 million
after-tax or $.60 per share). The proceeds from this sale were used to pay down
debt. The Company's equity ownership in INSO after the sale of common stock has
been reduced to approximately 33%. The remaining non-pledged INSO shares may be
sold by the Company, subject to certain restrictions, as market conditions and
events warrant.
9
<PAGE> 13
HOUGHTON MIFFLIN COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL INFORMATION
- -- Continued--
(4) Intangible assets consist of the following:
<TABLE>
<CAPTION>
As of March 31, December 31,
In thousands 1996 1995 1995
------------------------------------------
<S> <C> <C> <C>
Goodwill $ 472,290 $ 113,268 $ 473,786
Publishing rights 18,523 15,530 18,523
Other 4,000 5,731 5,891
Less: accumulated
amortization (28,106) (12,004) (23,449)
------------------------------------------
Total $ 466,707 $ 122,525 $ 474,751
=================================================================
</TABLE>
The carrying value of goodwill is periodically reviewed to determine
recoverability based upon projected undiscounted net cash flows over the
remaining life of the related business unit. If the analysis indicates that
impairment has occurred, the Company writes down the book value of the
intangible asset to the undiscounted net cash flow amount.
(5) The Board of Directors, at its April 24, 1996, meeting, declared a quarterly
dividend of $.24 per share, payable on May 22, 1996, to shareholders of record
on May 8, 1996.
10
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On October 31, 1995, the Company acquired D.C. Heath and Company ("Heath") for
net cash consideration of $452.9 million. The acquisition has been accounted for
as a purchase and, accordingly, the operating results of Heath are included in
the Company's consolidated financial statements from the date of acquisition.
First Quarter 1996 versus First Quarter 1995
Net sales for the quarter ended March 31, 1996 were $62.8 million, an increase
of 24% from the $50.5 million reported in the first quarter of 1995. The
consolidated net loss was $22.1 million, or $1.60 per share, for the quarter
ended March 31, 1996, compared to $18.5 million, or $1.34 per share, for the
same period in 1995. The Company recorded a gain of approximately $14.2 million
($8.2 million after-tax), or $.60 per share, in the first quarter of 1996
representing the gain realized on the sale of 343,000 shares of INSO common
stock. The net loss for the first quarter of 1996 was $2.20 excluding the gain
on the sale of these shares.
Net sales from the educational publishing segment increased $10.3 million, or
31%, from last year's first quarter net sales of $33.0 million. The increase in
the educational publishing segment revenues was primarily due to the addition of
the Heath titles.
11
<PAGE> 15
Net sales from the general publishing segment increased $2.1 million, or 12%,
from last year's first quarter net sales of $17.5 million. Almanac and juvenile
sales accounted for most of the increase, in addition to approximately $.5
million in sales from Houghton Mifflin Interactive, which recorded no sales in
the first quarter of 1995.
The operating loss for the first quarter of 1996 increased $14.6 million to
$44.1 million, a 49% increase over the same period in 1995. Higher revenues from
Heath were more than offset by higher editorial, selling, distribution, and
administrative expenses and $4.5 million in additional goodwill amortization.
The higher editorial expense reflects, in part, the additional plate
amortization from 1995 development efforts on, among other programs, Invitations
to Literacy and the additional expenditures associated with program development
in preparation for significant adoption opportunities in 1997 and beyond.
Revenues contributed by educational publishing operations in the first quarter
of the year are historically less than 10% of annual revenues, so the addition
of operating expenses related to these businesses significantly increases the
seasonal loss. Selling, distribution and administrative expenses also increased,
reflecting, in part, the addition of about 400 employees as a result of the
Heath acquisition.
12
<PAGE> 16
Net interest expense for the first quarter of 1996 increased $8.1 million to
$9.6 million from the same period in 1995. The increased interest expense is
primarily a result of the $345 million of financing associated with the
acquisition of Heath and the issuance, in August 1995, of $126 million of 6%
Exchangeable Notes (Stock Appreciation Income Linked Securities or "SAILS").
The Company's effective tax rate for the quarter ended March 31, 1996 was
approximately 42% compared to approximately 39% for the comparable period from
the prior year. The effective tax rate for the 1995 fiscal year was 37%.
LIQUIDITY AND CAPITAL RESOURCES
The seasonality of revenues affects the Company's operating cash flow. A net
cash deficit from operating and investing activities, normally incurred through
the middle of the third quarter, is funded through the draw-down of cash and
marketable securities and accessing existing short-term credit facilities.
During the first quarter of 1996, the Company used $13.9 million of cash on hand
at year end 1995, proceeds from the INSO stock sale as well as $59 million of
commercial paper to cover its seasonal operating loss and working capital needs
and to fund publishing and capital investments.
13
<PAGE> 17
At March 31, 1996, total debt was $630.0 million. The $452.9 million Heath
acquisition was initially financed with the draw down of $345 million in credit
facilities and cash on hand from the SAILS issuance. These borrowings were
refinanced in the fourth quarter of 1995 with $200 million in proceeds from a
five year credit facility and the issuance of $145 million in commercial paper.
In March 1996, the Company completed the refinancing of the debt incurred in
conjunction with the Heath acquisition with the issuance of $125 million of
long-term debt and $100 million of medium-term notes. Proceeds from these
issuances were used to repay $125 million of the commercial paper and $100
million of the five year credit facility drawn upon in conjunction with the
Heath acquisition.
The Company expects that cash flows from operations for the full year 1996 will
be sufficient to provide adequate financing resources to support operational
needs and to fund capital expenditures, and dividend payments.
"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
Statements in this report that are not historical facts may be forward-looking
statements that are subject to a variety of risks and uncertainties. There are a
number of important factors that could cause actual results to differ materially
from those expressed in any forward-looking statements made by the Company.
These factors include, but are not limited to, (I) the highly seasonal and
cyclical nature of the Company's educational sales; (ii) variable funding in
school systems throughout the nation, resulting in both cancellation of planned
purchases of educational materials and shifts in timing of purchases; (iii)
changes in purchasing patterns in elementary, secondary, and college markets;
(iv) regulatory changes which would affect the purchase of educational materials
and services; (v) severe increases in paper prices; and (vi) other factors
detailed from time to time in the Company's filings with the Securities and
Exchange Commission.
14
<PAGE> 18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. 10 (iii) (A) Severence Agreement between the
Company and Mr. Stack
Exhibit 27, Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed one report on Form 8-K (A) dated January
16, 1996, which included the pro forma financial
statements of the Company and the audited financial
statements of D.C. Heath and Company in conjunction
with the Company's acquisition of Heath.
Registrant filed one report on Form 8-K dated February 6,
1996 reporting on the election of Gail Deegan as Chief
Financial Officer of the Company.
Registrant filed one report on Form 8-K dated March 7, 1996
reporting on the issuance of $100 million of
medium-term notes.
15
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOUGHTON MIFFLIN COMPANY
------------------------
Registrant
Dated: May 13, 1996 /s/ Gail Deegan
------------------------
Gail Deegan
Executive Vice President,
Chief Financial Officer, and Treasurer
Dated: May 13, 1996 /s/ Michael J. Lindgren
------------------------
Michael J. Lindgren
Vice President, Controller
16
<PAGE> 20
Houghton Mifflin Company
Index To Exhibits
Item 6(a)
<TABLE>
<CAPTION>
Exhibit No. Descrition of Document Page Number in This Report
- ----------- ---------------------- --------------------------
<S> <C> <C>
10(iii)(A) Severance Agreement between
the Company and Mr. Stack
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10(iii)A
AGREEMENT AND GENERAL RELEASE
Houghton Mifflin Company (the "Company") and James Stack (the "Employee")
agree that the following sets out their complete agreement and understanding
regarding the separation of the Employee from the Company's employ:
1. The Company and the Employee agree that the Employee's employment with the
Company shall terminate effective February 8, 1996.
2. The status of the Employee's benefits at separation from employment,
including severance pay, are set forth in the attached statement from
Margaret M. Doherty dated February 8, 1996 and the letter from Nader F.
Darehshori dated February 8, 1996 attached thereto.
3. The consideration from the Company set forth in Paragraph 2 above
constitutes full settlement of any and all claims that the Employee may
have against the Company, its successors, assigns, affiliates, or any of
its officers, directors, shareholders, employees, agents, or
representatives, for compensation or otherwise.
4. In consideration for the promises made by the Company in this Agreement,
the Employee, on behalf of himself, his agents, assignees, attorneys,
heirs, executors, and administrators, fully releases the Company, and its
successors, assigns, parents, subsidiaries, divisions, affiliates,
officers, directors, shareholders, employees, agents and representatives,
from any and all liability, claims, demands, actions, causes of action,
suits, grievances, debts, sums of money, controversies, agreements,
promises, damages, back and front pay, costs, expenses, attorneys' fees,
and remedies of any type, by reason of any matter, cause act or omission
arising out of or in connection with his employment or separation from
employment with the Company, including without limiting the generality of
the foregoing, claims, demands or actions under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act of 1967 as
amended, the Rehabilitation Act of 1973, the Civil Rights Act of 1866, the
Massachusetts Fair Employment Practices Act, any other federal, state, or
local statute or regulation regarding employment, discrimination in
employment, or the termination of employment, and the common law of any
state relating to employment contracts, wrongful discharge, or any other
matter.
5. All of the parties hereto agree that they and their attorneys will maintain
the confidentiality of this settlement and the specific and general terms
thereof as set forth in this agreement. No information concerning this
settlement will be disclosed to any party, except that the Employee, or his
attorney, may disclose the terms of this settlement to any public agency
entitled to receive such information according to the rules and regulations
or applicable statutes. No other disclosure of the terms of this agreement
may be made by any party or their attorneys.
6. The existence and execution of this Agreement and General Release shall not
be considered, and shall not be admissible in any proceeding, as an
admission by the Company, or its agents or employees, of any liability,
error, violation or omission.
<PAGE> 2
7. This Agreement and General Release shall be binding upon and shall be for
the benefit of the Company and the Employee, as well as their respective
heirs, personal representatives, successors and assigns.
8. The provisions of this Agreement and General Release shall be severable,
and the invalidity of any provision shall not affect the validity of the
other provisions.
9. The Employee also acknowledges that during the course of his employment
with the Company, he has acquired confidential information about the
Company, including but not limited to information about its business and
publishing plans, authors, customers, suppliers, and operations. The
Employee agrees not to disclose any such information to anyone without the
written consent of the Company.
10. The Employee acknowledges that the Company advised him in writing to
consult with an attorney before executing this Agreement, that he was given
a period of 21 days within which to consider the consideration for this
Agreement, that he had an adequate opportunity to review the Agreement with
an attorney, that he fully understands its terms, that he was not coerced
into signing it, and that he has signed it knowingly and voluntarily.
11. This Agreement and General Release shall take effect seven days after
the Employee executes it. The Employee has the right to revoke this
Agreement during a period of seven days following his execution of this
Agreement. In order to revoke the Agreement, he must notify Gary L. Smith,
Senior Vice President, Administration, of the Company, in writing of his
decision to revoke, and said notice must be received by Mr. Smith no later
than seven days following the execution of this Agreement. If he revokes
this Agreement, he shall promptly repay to the Company all consideration
paid under this Agreement to which he is not otherwise entitled.
12. The salary continuance period as stipulated in the Benefits at Separation
memorandum referenced in clause 2 will continue even if the Employee
accepts employment with a company other than Houghton Mifflin Company or
any of its subsidiaries prior to the expiration of this Agreement.
HOUGHTON MIFFLIN COMPANY Name:
BY /s/ Gary L. Smith /s/ J. F. Stack 2-19-96
_________________ ____________________________________________
DATED: ____________________________________
Subscribed and sworn to before me this
___________ day of ___________________, 1995.
_____________________________________________
Notary Public
<PAGE> 3
MEMORANDUM
- --------------------------------------------------------------------------------
TO: James Stack
FROM: Margaret M. Doherty
Senior Vice President, Human Resources
DATE: February 9, 1996
SUBJECT: Employee Benefits at Separation from Houghton Mifflin Company
You will be separating from service on February 9, 1996.
You will receive salary continuance through February 8, 1998, even if other
employment is secured before that date, at the rate of $12,500 per month, less
applicable taxes and insurance.
You will also receive the other benefits in the attached letter dated February
8, 1996 from Nader F. Darehshori.
HEALTH, DENTAL, AND VISION INSURANCE
Your family Hancock medical, dental, and VSP vision coverage will continue
through March 11, 1998. You will then be eligible for 12 months of COBRA
coverage at 100% of the actual cost and an additional 6 months of COBRA coverage
at 102% of the actual cost. The Benefits Office will provide you with additional
information at a later date.
ACCIDENT INSURANCE (AD&D)
You have elected $250,000 of individual AD&D coverage. Coverage is extended an
additional 31 days beyond your separation date through March 11, 1996, unless
you are similarly covered elsewhere, in which case coverage will cease on your
separation date. Under the AD&D contract there are no provisions for conversion.
LONG-TERM DISABILITY INSURANCE
In accordance with the Long-Term Disability (LTD) insurance plan provisions,
your coverage ends on your last day worked. Under the LTD contract there are no
provisions for conversion.
<PAGE> 4
RETIREMENT SAVINGS PLAN
If you participate in the Retirement Savings Plan, your contributions will cease
as of your last regular paycheck. If you would like a distribution from the
Plan, please contact Fidelity directly at 1(800)835-5087. In the interim, your
balances will continue to be invested as described in the Retirement Savings
Plan literature sent to you.
PENSION PLAN
You are not vested in the Houghton Mifflin Pension Plan.
RELEASE
The foregoing benefits are contingent upon receipt by Houghton Mifflin Company
of a release in the form attached to this memorandum.
cc: COBRA
Benefit File
Employment File
<PAGE> 5
Houghton Mifflin Company
- -------------------------------------------------------------------------------
222 Berkeley Street, Boston, Massachusetts 02116-3764 Nader F. Darehshori
(617) 351-5101 Chairman, President and
Chief Executive Officer
February 8, 1996
Mr. James F. Stack
96 Boylston Street
Unit 2
Chestnut Hill, MA 02167
Dear Jim:
This will outline our discussions concerning your benefits when you leave
the Company.
- Your will receive on year's pay ($300,000) in 24 monthly installments
with the first payment on February 12, 1996.
- You will receive relocation expenses of $20,000.
- You may keep your computer.
- Your health insurance will continue for two years.
- The restrictions on the 5,000 shares of restricted stock you received
will be removed and you will receive these shares and a gross-up
payment.
In exchange, you will give us a release. Gary Smith will work with you on
the details of these and any other benefits issues.
I want to thank you very much for all your hard work, good advice and
cooperation in the transition. I wish you all the best.
Sincerely,
/s/ Nader F. Darehshori
Nader F. Darehshori
NFD/lm
Enclosure
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