<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Houghton Mifflin Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[Houghton Mifflin Logo]
March 27, 2000
Dear Stockholder:
I am delighted to invite you to attend the 2000 Annual Meeting of
Stockholders of Houghton Mifflin Company on Wednesday, April 26, 2000, at 10:00
A.M. at the Dorothy Quincy Suite, John Hancock Hall, 180 Berkeley Street,
Boston, Massachusetts.
This booklet includes the Notice of Annual Meeting and the Proxy Statement.
The Proxy Statement describes the business that we will conduct at the meeting
and provides information about the Company. After the formal business of the
meeting, we will report to you on Houghton Mifflin's 1999 performance and
outlook for the future.
It is important that your shares be represented whether or not you are able
to be there in person. I URGE YOU TO VOTE NOW BY COMPLETING, SIGNING, AND
RETURNING THE ENCLOSED PROXY CARD PROMPTLY. If you attend the meeting and prefer
to vote in person, you may do so even if you have returned your proxy card.
Sincerely,
/s/ Nader F. Darehshori
Nader F. Darehshori
Chairman, President, and
Chief Executive Officer
<PAGE> 3
2000 NOTICE OF ANNUAL MEETING
Boston, Massachusetts
March 27, 2000
To the Stockholders of Houghton Mifflin Company:
The Annual Meeting of Stockholders of Houghton Mifflin Company will be held
at the Dorothy Quincy Suite, John Hancock Hall, 180 Berkeley Street, Boston,
Massachusetts, on Wednesday, April 26, 2000, at 10:00 A.M. At the meeting, we
will ask you to:
1. Elect three directors, each for a three-year term;
2. Ratify the selection of Ernst & Young LLP as independent auditors of
the Company for 2000; and
3. Consider any other matters that may properly come before the meeting
and any adjournments.
By Order of the Board of Directors,
Paul D. Weaver, Clerk
WHETHER OR NOT YOU ATTEND IN PERSON, PLEASE FILL IN AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE
MEETING, YOU MAY VOTE YOUR SHARES EVEN THOUGH YOU HAVE SENT IN YOUR PROXY CARD.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION......................................... 1
VOTING...................................................... 1
Who Can Vote........................................... 1
How to Vote............................................ 1
Quorum and Vote Necessary for Action................... 2
BOARD OF DIRECTORS.......................................... 2
Board Structure........................................ 2
Committees of the Board................................ 3
Directors' Compensation................................ 5
PROPOSAL 1 -- ELECTION OF CLASS II DIRECTORS................ 6
Nominees for Class II Directors -- Term Expires in
2003.................................................. 6
Class I Directors Continuing in Office -- Term Expires
in 2002............................................... 7
Class III Directors Continuing in Office -- Term
Expires in 2001....................................... 8
RELATED PARTY TRANSACTIONS WITH DIRECTORS................... 9
STOCK OWNERSHIP............................................. 10
Directors and Officers................................. 10
Principal Stockholders................................. 12
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 12
COMPENSATION & NOMINATING COMMITTEE'S REPORT TO
STOCKHOLDERS.............................................. 13
Introduction........................................... 13
Determining How to Compensate Executives............... 13
Salary................................................. 13
Incentive Compensation................................. 13
Company Stock.......................................... 14
IRS Limits on Tax Deductibility of Compensation........ 14
STOCK PERFORMANCE GRAPH..................................... 15
EXECUTIVE COMPENSATION...................................... 16
STOCK COMPENSATION PLAN..................................... 17
Stock Options.......................................... 17
RETIREMENT PLAN............................................. 18
CHANGE-IN-CONTROL ARRANGEMENTS.............................. 19
Severance Agreements................................... 19
Stock Compensation and Other Plans..................... 20
PROPOSAL 2 -- SELECTION OF INDEPENDENT AUDITORS............. 20
OTHER INFORMATION........................................... 21
Stockholder Proposals.................................. 21
Expenses of Soliciting Proxies......................... 21
</TABLE>
i
<PAGE> 5
HOUGHTON MIFFLIN COMPANY
222 Berkeley Street
Boston, Massachusetts 02116
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 2000
GENERAL INFORMATION
The Board of Directors of Houghton Mifflin Company is soliciting proxies to
be used at the 2000 Annual Meeting. On March 27, 2000, we will begin sending
this Proxy Statement, the attached Notice of Annual Meeting, and the enclosed
proxy card to all stockholders entitled to vote. We are also sending, along with
this Proxy Statement, the Houghton Mifflin 1999 Annual Report, which includes
our financial statements.
VOTING
Who Can Vote
Stockholders who owned Houghton Mifflin common stock at the close of
business on March 3, 2000 are entitled to vote. On this record date, there were
30,363,871 shares of Houghton Mifflin common stock outstanding. Common stock is
our only class of voting stock. Each share of Houghton Mifflin common stock that
you own entitles you to one vote. The proxy card shows the number of shares that
you own, including shares employees own through participation in the Company's
401(k) Savings Plan.
How to Vote
You can vote on matters that come before the meeting in two ways:
- You can vote by signing and returning the enclosed proxy card; or
- You can come to the Annual Meeting and vote there.
If you sign and return the proxy card, the individuals named on the card as
proxies will vote your shares following your directions. If you don't make
specific choices, we will vote your shares "for" the election of all nominees
for director and "for" ratification of the selection of independent auditors for
2000. If any other matters are presented for action at the meeting, we will vote
your shares according to our best judgment. At the time this Proxy Statement was
printed, we knew of no matters to be voted on at the Annual Meeting other than
those discussed in this Proxy Statement.
If you received more than one proxy card, it means that your shares are
registered differently and are in more than one account. You must sign and
return all proxy cards to be sure that all your shares are voted. To provide
better stockholder service and prevent mailing duplicate materials, we encourage
you to have all accounts registered in the same name and address. You may do
this by contacting our transfer agent, Boston EquiServe, at (800)730-4001.
<PAGE> 6
You may revoke your proxy after you have signed and returned it at any time
before the proxy is voted at the meeting. There are three ways to revoke your
proxy:
- You may send in another proxy card with a later date;
- You may notify the Company's Clerk in writing before the Annual
Meeting that you have revoked your proxy; or
- You may vote in person at the Annual Meeting.
Whether or not you plan to attend the meeting in person, please fill in and
sign the enclosed proxy card and return it promptly. If you do attend the
meeting, you may vote your shares even though you have sent in your proxy card.
However, simply attending the meeting will not revoke your proxy if you do not
vote at the meeting.
Quorum and Vote Necessary for Action
A quorum of stockholders is necessary to hold a valid meeting. A majority
of the outstanding shares, present in person or represented by proxy,
constitutes a quorum. If you have returned a properly signed proxy card, you
will be considered present at the meeting and part of the quorum. Abstentions
are counted as shares present at the meeting in determining whether a quorum
exists, and have the effect of a "no" vote on matters other than director
elections.
Under the rules of the New York Stock Exchange, if your broker holds your
shares in its name (or "street" name) the broker may vote on the election of
directors and ratification of auditors even if it does not receive your
instructions. Under Massachusetts law and the Company's By-laws, proxies
submitted by brokers that do not indicate a vote for some or all of the
proposals because they do not have discretionary voting authority and haven't
received instructions on how to vote on those proposals (so-called "broker
non-votes") are not considered present at the meeting and will not affect the
outcome of votes taken at the meeting. However, because these shares do not
count as "shares present," they reduce the number of affirmative votes needed
for approval of a proposal that does not require approval by a specific
percentage of all outstanding shares. Broker non-votes will have the effect of a
"no" vote on proposals that require approval by a majority of all outstanding
shares.
Directors are elected by a plurality vote of shares present at the meeting,
meaning that the nominee with the most affirmative votes for a particular seat
is elected for that slot. If you do not vote for a particular nominee, or if you
indicate "withhold authority to vote" for a particular nominee on your proxy
card, your vote will not count either "for" or "against" the nominee. A broker
non-vote will also have no effect on the outcome of an uncontested election of
directors because only a plurality of votes actually cast is required to elect a
director.
The affirmative vote of a majority of the shares present at the meeting is
required to ratify the selection of the independent auditor. If you abstain from
voting, it has the same effect as a vote against this proposal.
BOARD OF DIRECTORS
Board Structure
The Board of Directors oversees the Company's business and affairs and
monitors the performance of management, but is not involved with day-to-day
operations. The directors meet
2
<PAGE> 7
regularly with the Chairman, other key senior executives, and our independent
auditors; read reports and other materials that we send them; and participate in
Board and committee meetings.
The Board currently consists of ten members, divided into three classes
with one class elected each year at the Annual Meeting for a term of three
years. The terms of office for the Class II directors expire at this meeting.
Under the Company's retirement policy, Mr. Baute will be retiring from the Board
at the Annual Meeting.
The Board has voted to fix the number of directors for 2000 at nine. At
this Annual Meeting, three nominees in Class II are up for election. These
nominees are James O. Freedman, Charles R. Longsworth, and Alfred L. McDougal.
Each of the nominees is now a member of the Board of Directors.
The Board met nine times during 1999. All directors attended at least 75%
of the combined number of meetings of both the Board and of committees on which
they served.
Committees of the Board
The Board of Directors has appointed five standing committees elected from
its own members. Except for the Executive Committee, which Mr. Darehshori
chairs, all committees are composed of independent, non-employee directors.
Actions taken by any standing committee are reported to the Board, usually at
its next meeting. Current membership of each committee is as follows:
Audit
Mr. Baute, Chair
Mr. Freedman
Mr. Goldstein
Ms. Malone
Mr. McDougal
Compensation &
Nominating
Dr. Sorenson, Chair
Mr. Baute
Mr. Goldstein
Ms. Klapper
Mr. Longsworth
Mr. Tarr
Employment Practices &
Diversity
Mr. Longsworth, Chair
Mr. Freedman
Ms. Klapper
Mr. McDougal
Mr. Tarr
Executive
Mr. Darehshori, Chair
Mr. Baute
Mr. Longsworth
Ms. Malone
Dr. Sorenson
Finance
Ms. Malone, Chair
Mr. Goldstein
Mr. McDougal
Dr. Sorenson
Mr. Tarr
3
<PAGE> 8
Audit Committee 5 meetings in 1999
- Serves as an independent and objective party to monitor the Company's
financial processes and internal control systems;
- Reviews the integrity of the Company's financial statements;
- Has direct contact with the Company's internal auditors and its
independent public auditors, and meets separately with each on a regular
basis;
- Reviews the Company's information, reporting, and internal control
systems with the goal of assuring that these systems are designed to
provide timely and accurate information to senior management and to the
Board and to foster compliance with applicable laws, regulations, and
ethics policies;
- Annually considers the qualifications of the independent public auditors
for the Company and makes recommendations to the Board as to their
selection, fee, and the scope of their audit and other services; and
- Conducts any necessary investigations into any matters concerning the
integrity of reported facts and figures, ethical conduct, and appropriate
disclosure.
Compensation & Nominating Committee 3 meetings in 1999
- Reviews and recommends compensation plans for the Company's senior
management;
- Considers and administers stock option grants, other stock award plans,
and incentive compensation for senior management;
- Evaluates performance of the Chief Executive Officer and makes
compensation recommendations to the Board;
- Evaluates the appropriateness of compensation policy for non-employee
directors and makes recommendations to the Board;
- Reviews and evaluates the annual performance of the Board and its
members;
- Evaluates the Company's needs and the qualifications of candidates for
director; submits to the Board names of persons it believes should be
considered for election as directors of the Company; and
- Considers timely recommendations for nominations to the Board submitted
by stockholders.
Employment Practices & Diversity Committee 1 meeting in 1999
- Reviews and monitors the Company's policies and practices that promote
the Company's goals that its employees and suppliers represent the
diversity of America's population; that the Company maintain a workplace
characterized by progressive employment practices and by mutual respect
and courtesy; and that the Company's overall employment policies are as
up-to-date and effective as possible.
Executive Committee 1 meeting in 1999
- Acts for the Board as necessary when the Board is not in session; and
4
<PAGE> 9
- Supervises and reviews the Company's policies and procedures relating to
corporate governance and legal compliance.
Finance Committee 2 meetings in 1999
- Reviews and makes recommendations relating to offerings of debt and
equity securities, major borrowing commitments, dividend policy, investor
relations activities, risk management policy, and other significant
financial matters.
Directors' Compensation
We compensate directors who are not employees of the Company as follows:
<TABLE>
<S> <C>
Annual Retainer: $10,000
Attendance Fees: $700 for each Board meeting
$500 for each committee meeting
Executive Committee Retainer: $4,000 annually instead of meeting fees
Committee Chair Retainer: $2,500 annually
Stock Compensation: 1,000 shares annually
Options for 2,000 shares annually
</TABLE>
Shares of Company stock are prorated for less than full-year service on the
Board. Directors who are employees receive no compensation for attendance at
Board or committee meetings.
We provide non-employee directors or their beneficiaries with a retirement
benefit of one-and-one-half times the directors' annual cash retainer in effect
at the time of retirement, for a period equal to the time of service as a
director.
As part of our support of charitable giving, we have established a planned
gift program for directors. Upon the retirement of a director, we will donate
$500,000, in 20 annual installments, to one or more qualifying charitable
organizations recommended by the individual director. Individual directors
derive no financial benefit from this program.
5
<PAGE> 10
PROPOSAL 1 -- ELECTION OF CLASS II DIRECTORS
The shares represented by your proxy card will be voted "for" the election
of the Class II nominees named below, unless you withhold authority to vote. If
any of the nominees should become unavailable, your shares will be voted for
another nominee proposed by the Board.
Except as noted, each of the nominees and directors has held his or her
principal position for at least five years.
NOMINEES FOR CLASS II DIRECTORS--TERM EXPIRES IN 2003
[PICTURE OF
JAMES O.
FREEDMAN]
JAMES O. FREEDMAN Age: 64 Director Since: 1991
Principal Occupation or Employment: Mr. Freedman is President
Emeritus and Professor of Law and the Liberal Arts at
Dartmouth College. He was President of Dartmouth College from
1987 to 1998.
Other Business Affiliations: Past President of the University
of Iowa and past Dean of the University of Pennsylvania Law
School; member of the American Law Institute, the Board of
Directors of the Salzburg Seminar, and the Friends of the
Library of the Supreme Court of Israel; life member of Clare
Hall, Cambridge University; Fellow of the American Academy of
Arts and Sciences; author of Crisis and Legitimacy: The
Administrative Process and American Government, published by
Cambridge University Press in 1978, and Idealism and Liberal
Education, published by the University of Michigan Press in
1996; recipient of nine honorary degrees, of the William O.
Douglas First Amendment Freedom Award from the Anti-Defamation
League of B'nai B'rith in 1991, and of the Frederic W. Ness
Book Award of the Association of American Colleges and
Universities in 1997.
Committees: Audit and Employment Practices & Diversity.
[Picture of
Charles R.
Longsworth]
CHARLES R. LONGSWORTH Age: 70 Director Since: 1985
Principal Occupation or Employment: Mr. Longsworth is
Chairman Emeritus of the Colonial Williamsburg Foundation in
Williamsburg, Virginia.
Other Business Affiliations: Director of Saul Centers, Inc.
and The Center for Public Resources; Chairman Emeritus of the
Board of Trustees of Amherst College and President Emeritus of
Hampshire College; Trustee, Historic Deerfield.
Committees: Employment Practices & Diversity (Chair),
Compensation & Nominating, and Executive.
6
<PAGE> 11
[Picture of Alfred L. McDougal]
ALFRED L. MCDOUGAL Age: 69 Director Since: 1994
Principal Occupation or Employment: Mr. McDougal is President
of ALM Corporation, a business management services company.
Mr. McDougal was Chairman and Chief Executive Officer of
McDougal, Littell & Company until its acquisition by the
Company in March 1994.
Other Business Affiliations: Past Chairman of the Northern
Illinois Business Association and of the School Division of
the Association of American Publishers, and a former director
of the Association of American Publishers; governor of Yale
University Press; director of Hubbard Street Dance Company and
Opportunity International.
Committees: Audit, Employment Practices & Diversity, and
Finance.
CLASS I DIRECTORS CONTINUING IN OFFICE--TERM EXPIRES IN 2002
[PICTURE OF JOSEPH A. BAUTE]
JOSEPH A. BAUTE Age: 72 Director Since: 1982
Principal Occupation or Employment: Mr. Baute is a principal
in Baute & Baute, a consulting firm for family businesses. He
retired in 1993 as Chairman and Chief Executive Officer of
Markem Corporation, which provides systems, supplies, and
services to mark customers' products.
Other Business Affiliations: Director of Markem Corporation,
Dead River Group, Spectra, Inc., INSO Corporation, and Metrika
Corporation, and past Chairman of the Board of the Federal
Reserve Bank of Boston.
Committees: Audit (Chair), Compensation & Nominating, and
Executive. Mr. Baute will retire as a director after the
Annual Meeting.
[Picture of Nader F. Darehshori]
NADER F. DAREHSHORI Age: 63 Director Since: 1989
Principal Occupation or Employment: Mr. Darehshori has been
Chairman of the Board and Chief Executive Officer of the
Company since 1990 and was named President in October 1991.
Other Business Affiliations: Director of CGU Insurance Group,
State Street Bank and Trust Company, State Street Boston
Corporation, the Boston Public Library Foundation, and the
Association of American Publishers; chairman of the
Massachusetts Business Roundtable; trustee of Wellesley
College, the WGBH Educational Foundation, and the Dana-Farber
Cancer Institute.
Committees: Executive (Chair).
7
<PAGE> 12
[Picture of Michael Goldstein]
MICHAEL GOLDSTEIN Age: 58 Director Since: 1998
Principal Occupation or Employment: Mr. Goldstein has been
Chairman of the Board of Toys "R" Us, Inc., since 1998; he was
Chief Executive Officer and Vice Chairman of the Board from
1994 to 1999, and served as acting Chief Executive Officer
from August 1999 to January 14, 2000.
Other Business Affiliations: Director of Finlay Enterprises,
Inc., United Retail Group Inc., Baby Press Conference.com, the
National Retail Federation, the 92nd Street Y, The Special
Contributions Fund of the NAACP, The Council on Economic
Priorities, the Northside Center for Child Development, the
Queens College Foundation, and the State University of New
York at Stony Brook Foundation; Member of the Advisory Board
of The For All Kids Foundation.
Committees: Audit, Compensation & Nominating, and
Finance.
CLASS III DIRECTORS CONTINUING IN OFFICE--TERM EXPIRES IN 2001
[PICTURE OF GAIL KLAPPER]
GAIL H. KLAPPER Age: 56 Director Since: 1998
Principal Occupation or Employment: Ms. Klapper is the founder
and managing principal of The Klapper Firm, a law and
consulting organization focusing on general corporate, real
estate, regulatory, and administrative law, and the director
and member of The Colorado Forum, a group composed of chief
executive officers focusing on public policy issues.
Other Business Affiliations: Director of Orchard Trust
Company, a subsidiary of Great West Life and Annuity Insurance
Company, and Gold. Inc.; past Chairman of the Boards of
Wellesley College and the Denver Metro Chamber of Commerce.
Committees: Compensation & Nominating and Employment Practices
& Diversity.
[Picture of Claudine B. Malone]
CLAUDINE B. MALONE Age: 63 Director Since: 1982
Principal Occupation or Employment: Ms. Malone is President of
Financial & Management Consulting, Inc.
Other Business Affiliations: Director of The Union Pacific
Resources Corp., The Limited, Inc., Lowe's Companies, Dell
Computer Corporation, SAIC, Mallinckrodt Group Inc., Lafarge
Corporation, and Hannaford Brothers, Inc.; trustee of the
Massachusetts Institute of Technology; and past Chairman of
the Board of the Federal Reserve Bank of Richmond.
Committees: Finance (Chair), Audit, and Executive.
8
<PAGE> 13
[Picture of Ralph Z.
Sorenson]
RALPH Z. SORENSON Age: 66 Director Since: 1976
Principal Occupation or Employment: Dr. Sorenson is Professor
Emeritus at the College of Business and Administration at the
University of Colorado, Boulder, where he served as Dean from
1992 to 1993. Since 1997 he has also served as Managing
General Partner of the Sorenson Limited Partnership, an
investment and management firm.
Other Business Affiliations: Past Chairman and Chief
Executive Officer of Barry Wright Corporation and President
Emeritus of Babson College, Wellesley, Massachusetts; director
of Eaton Vance Corporation, Polaroid Corporation, Exabyte
Corporation, and Whole Foods Market, Inc.; member and former
chairman of the Board of Trustees of the Boston Museum of
Science; overseer emeritus of The Boston Symphony Orchestra;
and a member of the corporation of Babson College.
Committees: Compensation & Nominating (Chair), Executive, and
Finance.
[Picture of Robert
J. Tarr, Jr.]
ROBERT J. TARR, JR. Age: 56 Director Since: 1998
Principal Occupation or Employment: Mr. Tarr is Chairman and
Chief Executive Officer of Homeruns.com, Inc., an on-line home
grocery business. He was President, Chief Executive Officer,
and Chief Operating Officer of Harcourt General, Inc. and The
Neiman Marcus Group from 1991 through January 1997.
Other Business Affiliations: Director of John Hancock Mutual
Life Insurance Co., Hannaford Brothers, Inc., WESCO
International, Inc., Sterling Autobody Centers, Inc., and
Barney's, Inc.
Committees: Compensation & Nominating, Employment Practices &
Diversity, and Finance.
RELATED PARTY TRANSACTIONS WITH DIRECTORS
Mr. Darehshori is a director of State Street Boston Corporation and its
principal subsidiary, State Street Bank and Trust Company. State Street Bank and
Trust Company has a $30 million participation in a $300 million five-year
revolving credit facility maturing October 31, 2000, extended to the Company by
a group of banks, on standard commercial terms. State Street Bank and Trust
Company is also the Trustee of the Company's Retirement Trust, Employees'
Medical Benefits Trust, and Benefits Trust, and is Trustee under the Company's
Indenture relating to the issuance of debt securities.
9
<PAGE> 14
STOCK OWNERSHIP
Directors and Officers
The following table shows how much Company stock each director, nominee,
executive named in the Summary Compensation Table, and all directors and
executive officers as a group, owned as of January 31, 2000. The term
"beneficial ownership" includes shares held both directly and indirectly (such
as through a trust), shares which a director or officer may vote or transfer
(even if these powers are shared), options which are exercisable currently or
within 60 days, and, under some circumstances, shares held by family members. We
expect directors and executive officers to establish and maintain a meaningful
stock ownership position in the Company that reflects the common interest they
share with stockholders in the Company's performance.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2)(3) OF CLASS
------------------------ ------------------ --------
<S> <C> <C>
Joseph A. Baute............................................. 24,730(4) *
Albert Bursma, Jr. ......................................... 47,550 *
Nader F. Darehshori......................................... 260,917(5) *
Gail Deegan................................................. 76,446 *
James O. Freedman........................................... 11,601 *
Michael Goldstein........................................... 7,084 *
Gail H. Klapper............................................. 3,084 *
George A. Logue............................................. 54,521 *
Charles R. Longsworth....................................... 21,001(6) *
Claudine B. Malone.......................................... 20,460(7) *
Alfred L. McDougal.......................................... 14,833(8) *
June Smith.................................................. 54,233 *
Ralph Z. Sorenson........................................... 23,201 *
Robert J. Tarr, Jr. ........................................ 18,584(9) *
All directors and executive officers as a group (26
persons).................................................. 1,099,201 3.66%
</TABLE>
- ---------------
* Less than one percent
(1) Except as described in this note, the holder has sole voting and investment
power over the shares listed. The following list shows the officers holding
restricted shares; the holder has only sole voting power over the listed
shares, but does not have investment power.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Mr. Darehshori.............................................. 18,227
Ms. Deegan.................................................. 6,798
Ms. Smith................................................... 6,785
Mr. Bursma.................................................. 5,533
Mr. Logue................................................... 9,030
</TABLE>
In addition to the restricted shares, Mr. Darehshori also holds 28,828
Restricted Share Units, which do not have voting rights and may not be
transferred. After Mr. Darehshori's retirement, these Restricted Share
Units will automatically convert into an equal number of shares of common
stock.
Three members of the group composed of all directors and executive officers
share with others voting and investment power over 25,420 of the shares
listed, and the holders have sole voting power only over 97,097 of the
shares listed.
10
<PAGE> 15
(2) Includes shares that may be acquired upon exercise of stock options that
were exercisable on January 31, 2000, or that will become exercisable within
60 days after January 31, 2000. The following list shows the number of these
shares.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Mr. Baute................................................... 6,001
Mr. Bursma.................................................. 30,000
Mr. Darehshori.............................................. 80,000
Ms. Deegan.................................................. 30,000
Mr. Freedman................................................ 6,001
Mr. Goldstein............................................... 2,001
Ms. Klapper................................................. 2,001
Mr. Logue................................................... 20,000
Mr. Longsworth.............................................. 6,001
Ms. Malone.................................................. 6,001
Mr. McDougal................................................ 6,001
Ms. Smith................................................... 24,000
Dr. Sorenson................................................ 6,001
Mr. Tarr.................................................... 2,668
All directors and executive officers as a group (26
persons).................................................. 363,610
</TABLE>
In calculating the "percent of class," the shares subject to these options
have been treated as if they were issued and outstanding.
(3) Includes shares held as a participant in the 401(k) Savings Plan as of
December 31, 1999, the most recent date for which such information is
available.
(4) Includes 600 shares owned by Mr. Baute's wife.
(5) Includes 1,653 shares owned by Mr. Darehshori's wife and 2,550 shares held
by Mr. Darehshori's wife as custodian for a minor child.
(6) Mr. Longsworth has reported and disclaimed beneficial ownership of 1,300
shares owned by his wife.
(7) All shares are owned by a corporation of which Ms. Malone is sole
stockholder.
(8) Includes 5,832 shares owned by a trust of which Mr. McDougal is trustee.
(9) Mr. Tarr has reported and disclaimed beneficial ownership of 1,500 shares
owned by a charitable trust of which Mr. Tarr is trustee.
We created the 1994 Executive and Non-Employee Director Stock Purchase
Plans in August 1994 and the 2000 Senior Management and Director Stock Purchase
Plan in February 2000 to encourage our directors and executive officers to
increase their ownership of the Company's common stock. Under the 1994 Plans,
nine directors and twelve executive officers purchased a total of 116,122
shares. Under the 2000 Plan, seven directors and fifty-six officers and senior
managers (including fifteen executive officers) purchased a total of 287,430
shares. The plans provide generally that shares may not be sold for one year
from date of purchase.
In connection with these plans, we entered into loan agreements with some
participants. All loans, which must be repaid on sale of the shares, are
interest-bearing and have full recourse against the borrower. Loans to
employee-participants under the 1994 Executive Stock Purchase Plan and all loans
under the 2000 Plan are secured by the shares. The promissory notes of
11
<PAGE> 16
employee-participants under the 1994 Executive Stock Purchase Plan provide for
an effective interest rate of 6.25% and mature on June 30, 2003. The promissory
notes of director-participants under the 1994 Non-Employee Director Stock
Purchase Plan were amended in 1999; they now provide for an effective interest
rate of 6.25% and mature on the earlier of October 30 of the year of normal
retirement for the director-participant, or six months after the
director-participant has ceased, for any reason, to serve as a Director of the
Company. The promissory notes under the 2000 Plan provide for an effective
interest rate of 8% and mature on February 28, 2005. The following list shows
the highest amounts outstanding under any of these loans that exceeds $60,000
since January 1, 1999, which is the same as the amount currently outstanding.
Directors: Mr. Baute, $271,473; Mr. Goldstein, $159,250; Mr. Longsworth,
$271,473; Mr. McDougal, $135,737; Dr. Sorenson, $271,473. Director and executive
officer: Mr. Darehshori, $3,076,371. Executive officers: Mr. Bursma, $599,974;
Ms. Deegan, $189,906; Mr. Gershon, $302,575; Ms. Hacking, $701,410; Mr. Laramy,
$343,125; Mr. Logue, $394,844; Ms. McGee, $828,250; Mr. Mooney, $359,905; Mr.
Oswald, $1,076,442; Mr. Smith, $684,359; Ms. Smith, $542,659; Mr. Weaver,
$476,296.
Principal Stockholders
The following table shows, as of December 31, 1999, all persons we know to
be beneficial owners of more than 5% of the Company's common stock. This
information is based on Schedule 13G reports filed with the Securities and
Exchange Commission ("SEC") by each of the firms listed in the table. These
reports have additional information about the beneficial ownership by these
firms; you may obtain copies from the SEC.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER PERCENT OF CLASS BENEFICIAL OWNERSHIP
------------------- ---------------- --------------------
<S> <C> <C>
Bluewater Investment 5.63% 1,747,030 shares -- sole voting power
Management, Inc. and dispositive power
150 Ring Street, Suite 1502
Toronto A6
Canada
Morgan Stanley Dean 6.61% 1,620,719 shares -- shared voting power
Witter & Co. 2,054,694 shares -- shared dispositive
1585 Broadway power
New York, N.Y. 10036
State Street Bank and Trust 5.23% 1,405,904 shares -- sole voting power
Company, Trustee 214,521 shares -- shared voting power
3 Pinehill Drive 194,221 shares -- sole dispositive power
Batterymarch III 1,431,304 shares -- shared dispositive
Quincy, MA 02169 power
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors and greater-than-10% stockholders to file reports of
their beneficial ownership of the Company's common stock, and to provide us with
copies of all reports they file. The rules of the SEC require us to disclose in
this Proxy Statement any late filings of these reports. Based on our review of
these reports and certifications given to us, we believe that there were no late
filings in 1999 other than a Form 4 filed late on behalf of Mr. Tarr as a result
of electronic filing problems and an amended Form 3 filed late by Mr. Logue.
12
<PAGE> 17
COMPENSATION & NOMINATING COMMITTEE'S REPORT TO STOCKHOLDERS
Introduction
The Compensation & Nominating Committee of the Board of Directors
administers compensation plans for Mr. Darehshori and fifteen other executives.
The members of the Committee all are directors who are not Company employees.
The Committee believes that:
- The level of cash and stock compensation that executives receive
should be closely linked to the financial performance of the Company
and organizational units;
- In order to attract, motivate, retain, and reward highly qualified
executives, it is necessary to offer financial opportunities
comparable to those provided by the Company's competitors and industry
in general; and
- Executives should own stock in the Company so that their financial
interests are aligned with stockholders' interests.
Determining How to Compensate Executives
Compensation for executives includes salary, annual incentives, and
long-term incentives, principally in the form of stock. In determining the
amount of each compensation element, the Committee considers how the Company's
competitors and comparably sized companies in general industry compensate
executives with comparable responsibilities. The Committee met three times in
1999 and reported its actions and deliberations to the Board of Directors. For
1999 compensation, the Committee's independent compensation consultant presented
an extensive comparison of the Company's compensation practices in light of its
performance with respect to other publishing companies and general industry and
concluded that the Company's compensation levels were within competitive ranges.
The surveyed companies include those entities in the publishing peer group, a
comparator group for purposes of the Stock Performance Graph on page 15.
Salary
Salaries for executives are based on a combination of external market and
internal factors, including the responsibilities and strategic value of the
position, and on the employee's experience and performance. Each year the
Committee reviews the salaries of Mr. Darehshori and the other executive
officers. The Committee considers the Company's financial performance, the
financial performance of the business unit for which each executive is
responsible, and Mr. Darehshori's evaluation of each executive's performance as
well as his recommendations for salary increases. The Committee also considers
information presented by its independent compensation consultant with respect to
salaries for executives with comparable responsibilities at other publishing
companies and in general industry. Salary increases are usually effective April
1.
The Committee considers comparable factors when reviewing Mr. Darehshori's
salary. In determining Mr. Darehshori's salary for 1999, the Committee reviewed
the Company's financial and operating performance for 1998. After considering
these and other factors, the Committee increased Mr. Darehshori's salary from
$600,000 to $640,000.
Incentive Compensation
Each year the Committee approves an annual incentive plan early in the
year. The 1999 plan was similar to the plans which have been in effect for
several years. The target incentive for
13
<PAGE> 18
Mr. Darehshori was increased in 1999 to be more in line with competitive
practice at other publishing companies and in general industry. All executives
are provided an opportunity to earn an incentive as a percent of their salary
based on achievement of Company financial objectives as designated in the plan,
and for executives who lead a Company division, partly on achievement of
financial objectives established for the applicable division. The plan also
provides that executives could earn a portion of their incentive if they met
operating objectives set early in the year. The maximum cash payment under the
plan was 100% of the executive's target incentive. Amounts earned in excess of
the target incentive are paid in restricted Company stock, which cannot be sold
or transferred for three years. Mr. Darehshori's 1999 incentive award was
$333,347.
Company Stock
The Committee believes that it is important for Company stock to be a
significant element in executive compensation so that the Company's executives
have a financial interest in the long-term success of the Company and better
identify with the interests of stockholders. The Committee also believes that
the best ways to provide executives with stock ownership opportunities are stock
options and restricted stock, as well as performance shares, which depend on
achievement of specified financial goals.
Late in 1998, the Committee provided a financial incentive in the form of
stock options for Mr. Darehshori and the other senior executives related to the
extent to which the Company achieves its ambitious financial goals through the
end of 2000. In general, the options become exercisable over three years
beginning in the year 2002. However, if the Company achieves its year 2000
financial goals, the options become exercisable on February 15, 2001.
IRS Limits on Tax Deductibility of Compensation
The Securities and Exchange Commission requires that this report comment
upon the Company's policy with respect to Section 162(m) of the Internal Revenue
Code of 1986, under which the Company may not deduct certain forms of
compensation in excess of $1 million paid to an executive officer listed in the
Summary Compensation Table unless certain requirements are met. The Committee's
policy is to balance the deductibility of compensation with the need to provide
appropriate and competitive financial rewards to Company executives.
This report is submitted by the Company's Compensation & Nominating
Committee, the members of which are Dr. Sorenson (Chairman), Mr. Baute, Mr.
Goldstein, Ms. Klapper, Mr. Longsworth, and Mr. Tarr.
14
<PAGE> 19
STOCK PERFORMANCE GRAPH
SEC rules require proxy statements to contain a performance graph
comparing, over a five-year period, the performance of the Company's common
stock with a broad market index and either a published industry or
line-of-business index or a group of peer companies. We have compared the
Company's performance with the Standard & Poor's MidCap 400 Index and a peer
group composed of the publicly traded common stocks of six companies with
significant publishing activities. The companies in the peer group are Golden
Books Family Entertainment, Inc.; Harcourt General Inc.; McGraw-Hill, Inc.;
Scholastic Corporation; Thomas Nelson, Inc.; and John Wiley & Sons, Inc. The
returns of each stock in the peer group have been weighted to reflect relative
stock market capitalization. The graph below shows the five years from December
31, 1994, to December 31, 1999, and assumes an initial investment of $100 and
quarterly reinvestment of dividends. The price of the Company's common stock was
$22.6875 on December 31, 1994, and $42.1875 on December 31, 1999. The
information in the graph reflects the Company's two-for-one stock split
effective in July 1997.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
HOUGHTON MIFFLIN COMPANY, S&P MIDCAP 400 INDEX, AND PUBLISHING PEER GROUP
<TABLE>
<CAPTION>
HOUGHTON MIFFLIN CO. S&P MIDCAP 400 INDEX PEER GROUP
-------------------- -------------------- ----------
<S> <C> <C> <C>
Base Period Dec94 100.00 100.00 100.00
Dec95 96.72 130.94 129.31
Dec96 129.95 156.08 138.55
Dec97 178.86 206.43 188.08
Dec98 223.47 245.87 239.94
Dec99 201.91 282.06 262.67
</TABLE>
Total return data provided by S&P's Compustat Services, Inc.
15
<PAGE> 20
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid the Chairman,
President, and Chief Executive Officer and the four other most highly
compensated executive officers during the last three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ----------------------------------
AWARDS
----------------------- PAYOUTS
OTHER RESTRICTED SECURITIES --------
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2) ($)(3)
------------------ ---- -------- -------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nader F. Darehshori......... 1999 $630,000 $333,347 $0 $ 0 0 $ 0 $178,313
Chairman, President, 1998 590,000 300,036 0 202,288 160,000 0 190,411
and Chief Executive Officer 1997 551,250 280,000 0 1,454,977 0 300,645 184,383
Gail Deegan................. 1999 333,000 109,174 0 0 0 0 48,507
Executive Vice President 1998 313,500 127,230 0 65,201 30,000 0 49,653
and Chief Financial Officer 1997 297,500 120,000 0 578,893 0 93,952 49,579
June Smith.................. 1999 297,750 120,800 0 21,419 0 0 36,734
Executive Vice President 1998 279,000 114,013 0 32,187 30,000 0 37,728
1997 254,500 104,400 0 584,085 0 150,323 37,427
Albert Bursma, Jr........... 1999 295,750 120,000 0 13,766 0 0 90,477
Executive Vice President 1998 280,500 113,206 0 34,055 30,000 0 96,347
1997 269,750 67,568 0 552,500 0 112,742 91,880
George A. Logue............. 1999 288,750 118,000 0 3,826 0 0 36,300
Executive Vice President 1998 265,000 108,037 0 27,496 30,000 0 37,095
1997 225,833 117,580 0 540,937 0 75,161 35,839
</TABLE>
- ---------------
(1) The restricted shares awarded for 1997 include both shares awarded on
January 27, 1998 as part of the 1997 bonus and grants under the 1997-1998
Performance Restricted Share Plan. The restricted shares awarded for 1998
were awarded on January 26, 1999 as part of the 1998 bonus. The restricted
shares awarded for 1999 were awarded on January 25, 2000 as part of the 1999
bonus. Restrictions on shares awarded as part of the 1997, 1998, and 1999
bonuses will lapse three years from the date of award provided the recipient
remains employed by the Company. Restrictions on a portion of the restricted
shares awarded in 1997 under the Performance Restricted Share Plan lapsed in
January 1999, based on the Company's having achieved specified levels of
financial performance. Restrictions on the remaining shares will lapse at
the end of 2001 if the recipient is still employed by the Company. Dividends
are paid on all restricted shares at the same rate paid to all shareholders.
The value shown is the fair market value at date of grant. The following
list shows the total number of shares of restricted stock held by or to be
awarded to the officers listed in the table as of December 31, 1999, as well
as the market value of these shares, determined by the closing price of the
Company's common stock on the New York Stock Exchange on December 31, 1999:
Mr. Darehshori, 47,055 shares, with a year-end market value of $1,985,133;
Ms. Deegan, 6,798 shares, with a year-end market value of $286,791; Ms.
Smith, 7,661 shares, with a year-end market value of $323,198; Mr. Bursma,
5,533 shares, with a year-end market value of $233,423; Mr. Logue, 8,933
shares, with a year-end market value of $376,861. Mr. Darehshori's shares
include 28,828 Restricted Share Units, which do not have voting rights and
may not be transferred. After Mr. Darehshori's retirement, these Restricted
Share Units will automatically convert into an equal number of shares of
common stock.
(2) The award was paid half in cash and half in shares of the Company's stock.
16
<PAGE> 21
(3) These amounts are the Company's matching contributions under the 401(k)
Savings Plan, contributions under the defined contribution component of the
Supplemental Benefits Plan, and premiums paid for split-dollar life
insurance policies. Under the Supplemental Benefits Plan, we provide
benefits substantially equal to benefits that could not be provided under
the 401(k) Savings Plan because of limitations under the Internal Revenue
Code. The split-dollar life insurance premiums have two components, for the
term and non-term portions of the insurance. The ownership of these policies
is structured so that the Company will be reimbursed for the cumulative
total of all premiums paid on the earlier of the death or retirement of the
executive. The result is that over the life of the program there is minimal
cost to the Company. We retain the right to borrow against our investment in
the policies at any time. The table below shows the amounts we paid for each
of these categories during 1999 for the officers listed in the table.
<TABLE>
<CAPTION>
CONTRIBUTIONS TERM NON-TERM
CONTRIBUTIONS TO PORTION- PORTION-
TO 401(K) SUPPLEMENTAL SPLIT-DOLLAR SPLIT-DOLLAR
NAME SAVINGS PLAN BENEFITS PLAN INSURANCE INSURANCE
---- ------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Mr. Darehshori................... $7,200 $2,400 $29,547 $139,166
Ms. Deegan....................... 7,200 2,400 7,765 31,142
Ms. Smith........................ 7,200 2,400 7,448 19,686
Mr. Bursma....................... 6,864 2,736 15,435 65,442
Mr. Logue........................ 6,591 3,409 3,163 23,137
</TABLE>
STOCK COMPENSATION PLAN
We believe that our officers and employees should have the same interest in
the Company's success as its stockholders. We encourage officers and employees
to become stockholders by a variety of grants under the 1998 Stock Compensation
Plan. These grants include options to buy the Company's stock, restricted or
bonus stock, and performance awards, where the amount of cash and/or stock
received depends on achieving specified performance goals.
Stock Options
No options were granted in 1999 to the officers named in the Summary
Compensation Table. The following table shows option exercises during 1999 by
those officers. It also shows the number of options they still hold, both those
currently exercisable and those that will be exercisable in the future, along
with the value of these options at year-end. Because these options have not been
exercised, the values shown have not been realized. The options will have value
only if they are exercised, and that value will depend entirely on the share
price on the exercise date.
17
<PAGE> 22
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END(#) FY-END($)
ACQUIRED VALUE -------------- ----------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(1)
- ---- ----------- -------- -------------- ----------------
<S> <C> <C> <C> <C>
Nader F. Darehshori................ 40,000 $852,500 80,000/120,000 $832,500/$0
Gail Deegan........................ 0 0 30,000/30,000 $616,875/$0
June Smith......................... 24,000 573,000 24,000/30,000 $499,500/$0
Albert Bursma, Jr.................. 0 0 30,000/30,000 $641,250/$0
George A. Logue.................... 8,000 191,000 20,000/38,000 $240,000/$0
</TABLE>
- ---------------
(1) Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
RETIREMENT PLAN
Under the Company's tax-qualified, defined benefit Retirement Plan, an
account is established for each employee. Every year, we credit each employee's
account with an amount that varies depending on the employee's length of service
and earnings, and with interest on the accumulated balance. For calculating our
contribution to the Retirement Plan, compensation consists primarily of salary,
wages, commissions, and annual incentive compensation. When an employee leaves
the Company, he or she has the option to:
- convert this account to an annuity benefit,
- leave the account in the Retirement Plan where it will continue to
earn interest, or
- take the account balance as a lump sum payment.
An employee who leaves with fewer than five years of service receives no benefit
under the Retirement Plan.
The Internal Revenue Code limits the annual amount of compensation that can
be taken into consideration for determining benefits and the annual benefit
accruals under a tax-qualified retirement plan. As permitted by the Internal
Revenue Code, the Company's Supplemental Benefits Plan provides retirement
benefits in excess of these limits. We calculate these supplemental benefits for
the officers named in the Summary Compensation Table and nine other executive
officers based on a formula which uses a multiple of the employee's years of
service and average annual earnings for the five highest-paid consecutive years
of service in the last fifteen years before retirement, less a portion of
estimated annual Social Security benefits. The following table shows the range
of the estimated annual retirement benefits under the Retirement Plan and the
Supplemental Benefits Plan at the normal retirement age of 65 (calculated as of
January 1, 2000) to those officers. The benefits shown in the table reflect a
single life annuity benefit, after offsetting the officer's primary Social
Security benefit.
18
<PAGE> 23
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT FUNDED BY THE COMPANY
AVERAGE ANNUAL FOR YEARS OF PARTICIPATION INDICATED
COMPENSATION (SINGLE LIFE ANNUITY AFTER SOCIAL SECURITY OFFSET)
FOR FIVE HIGHEST ---------------------------------------------------------------
CONSECUTIVE YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
250$,000...... $ 58,200 $ 77,600 $ 97,000 $116,400 $122,700 $128,900
300,000...... 70,700 94,300 117,900 141,400 148,900 156,400
350,000...... 83,200 111,000 138,700 166,400 175,200 183,900
400,000...... 95,700 127,600 159,500 191,400 201,400 211,400
450,000...... 108,200 144,300 180,400 216,400 227,700 238,900
500,000...... 120,700 161,000 201,200 241,500 254,000 266,500
550,000...... 133,200 177,600 222,000 266,500 280,200 294,000
600,000...... 145,700 194,300 242,900 291,500 306,500 321,500
650,000...... 158,200 211,000 263,700 316,500 332,700 349,000
700,000...... 170,700 227,600 284,600 341,500 359,000 376,500
750,000...... 183,200 244,300 305,400 366,500 385,200 404,000
800,000...... 195,700 261,000 326,200 391,500 411,500 431,500
850,000...... 208,200 277,700 347,100 416,500 437,700 459,000
900,000...... 220,700 294,300 367,900 441,500 464,000 486,500
1,000,000.... 245,800 327,700 409,600 491,500 516,500 541,500
1,100,000.... 270,800 361,000 451,300 541,500 569,000 596,500
1,150,000.... 283,300 377,700 472,100 566,500 595,300 624,000
</TABLE>
As of December 31, 1999, the years of credited service and the compensation
that will be taken into account for pension calculations for 1999 for the
officers named in the Summary Compensation Table are: Mr. Darehshori, 34 years
and $930,036; Ms. Deegan, 14 years and $460,230; Ms. Smith, 7 years and
$411,753; Mr. Bursma, 28 years and $409,706; and Mr. Logue, 14 years and
$396,787. Differences between the amount of compensation shown above and in the
Summary Compensation Table on page reflect differences in
accounting for incentive compensation payments, which are included in the year
paid when calculating pension benefits.
CHANGE-IN-CONTROL ARRANGEMENTS
Severance Agreements
Seventeen executive officers, including those named in the Summary
Compensation Table, have severance agreements with the Company. The senior
executives' severance agreements expire on December 31, 2000, and are
automatically extended on an annual basis for an additional twelve-month period
unless we give the executive at least eighteen months' notice that the agreement
will not be extended. Sixteen executive officers have agreements of this kind.
We also have severance agreements with some of our key managers. One executive
officer is a party to a key managers' severance agreement.
Severance benefits under both types of agreements are payable if, within
two years after a "change in control" of the Company, either the employee
terminates his or her employment for "good reason," as defined in the agreement,
or the Company terminates the employee's employment other than for reasons
specifically permitted by the agreement. Under the terms of the agreement
between Mr. Darehshori and the Company, severance benefits are payable under the
same conditions as for the senior executives, or if Mr. Darehshori leaves
voluntarily within the six-month period beginning three months after a change in
control.
A change in control will generally be deemed to have occurred on (a) a
third party's acquisition of 25% or more of the Company's stock; (b) a change,
over a two-year period, in the majority of the
19
<PAGE> 24
members of the Company's Board of Directors; (c) a merger, consolidation, or
liquidation of the Company; or (d) the sale of all or substantially all of the
Company's assets.
In general, the severance agreements entitle the employee to:
- a lump sum payment of either three times (for senior executives) or two
times (for key managers) their annual salary and the greater of either
any incentive compensation paid in the preceding year or the average
incentive compensation paid in the past three years;
- all incentive compensation earned but previously deferred and not yet
distributed;
- the aggregate present value of benefits under the Company's Supplemental
Benefits Plan; and
- the present value of additional retirement benefits which would have been
earned by the employee under existing retirement plans had he or she
remained in the Company's employ for either an additional 36 months (for
senior executives) or 24 months (for key managers).
In addition, we will maintain medical, life insurance, and disability
coverage benefits for the employee for a period of either 36 months (for senior
executives) or 24 months (for key managers) following termination of employment.
We will also reimburse senior executives and key managers for legal fees
incurred in enforcing the terms of the agreements and certain tax liabilities
resulting from payments under the agreements. Severance payments made under the
key managers' severance agreements may not exceed the amount that we are
permitted to deduct for federal income tax purposes.
Stock Compensation and Other Plans
In general, on a change in control, all options become immediately
exercisable, all restricted shares become immediately vested, and all
performance-based awards are paid out, pro rata depending on how much of the
performance period has been completed as of the date of the change in control.
We have established a Supplemental Benefit Trust in connection with the
Supplemental Benefits Plan, non-employee directors' retirement benefits, and
deferred compensation agreements with employees and directors, to preserve those
benefits in the event of a change in control. The Board may decide to have other
employee plans covered by the Supplemental Benefit Trust as well. On any
"potential change in control," which is defined in the Supplemental Benefit
Trust as a third party acquiring 15% or more of the Company's stock, we will
contribute enough additional cash and property to the Supplemental Benefit Trust
to pay, in accordance with the terms of the covered plans, the authorized
benefits. However, the assets in the Supplemental Benefit Trust will become
available to the Company's creditors if the Company becomes insolvent or
bankrupt. If the funds in the Supplemental Benefit Trust are insufficient to pay
amounts due under the covered plans, we remain obligated to pay any deficiency.
PROPOSAL 2 -- SELECTION OF INDEPENDENT AUDITORS
Based on the Audit Committee's recommendation, the Board has selected Ernst
& Young LLP as the Company's independent auditors for 2000. We are asking you to
ratify the Board's selection. Ernst & Young has audited the Company's books for
many years and is very familiar with the Company's business. Partners and
employees of the firm engaged in audits are periodically rotated, providing us
with new expertise. Representatives of Ernst & Young have direct access to the
Audit
20
<PAGE> 25
Committee and regularly attend its meetings. During 1999 Ernst & Young's
services included auditing the Company's consolidated statements; consulting in
connection with unaudited quarterly financial information and strategic Year
2000 and project planning related to information technology; and advising us on
various accounting, tax, and regulatory matters. Representatives of Ernst &
Young will be present at the meeting with the opportunity to make a statement
and answer appropriate questions.
Ratification requires the affirmative vote of a majority of the shares
present in person or by proxy. The Board will reconsider its selection of Ernst
& Young if the stockholders vote against ratification.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL TWO.
OTHER INFORMATION
Stockholder Proposals
Stockholders who want to have a proposal included in next year's Proxy
Statement for the 2001 Annual Meeting must send the proposal to the Company's
Clerk at our executive offices in Boston so that the Clerk receives the proposal
no later than November 29, 2000. To be eligible to submit a proposal, a
stockholder must have been a registered or beneficial owner of either at least
one percent of the Company's outstanding stock or stock with a market value of
$1,000 for at least one year before submitting the proposal, must continue to
own stock at this level through the meeting date, and must comply with other SEC
requirements.
Stockholders who want to present business for action at the meeting, other
than proposals included in the Proxy Statement, must follow the procedures
described in the Company's By-laws. The By-laws provide that stockholder
proposals or nominations for director may be made only by a stockholder of
record who has given the Company advance notice of the proposed business or
nomination. For the 2001 Annual Meeting, we must receive the stockholder's
notice between December 28, 2000, and February 11, 2001. If there is a special
meeting, or if the Annual Meeting is called for a date prior to February 11,
2001, we must receive the stockholder's notice not later than the close of
business 20 days after the day we mailed the notice of the meeting or publicly
announced the meeting date. The stockholder's notice must contain specific
background and stock ownership information about the stockholder making the
proposal or nomination, and, if a director nominee is proposed, background and
stock ownership information about the nominee. Please see the By-laws for
additional details.
Expenses of Soliciting Proxies
The Company will pay all costs of soliciting these proxies. In addition to
mailing proxy soliciting material, our officers and employees may also solicit
proxies in person, by telephone, or by other electronic means of communication.
We will ask banks, brokers, and other institutions, nominees, and fiduciaries to
forward the proxy material to their principals and to obtain authority to
execute the proxies. We will then reimburse them for expenses. We have also
retained The Altman Group, Inc. to assist us in soliciting proxies, and have
agreed to pay them a fee of approximately $5,500 plus out-of-pocket expenses.
21
<PAGE> 26
953-PS-00
<PAGE> 27
HOU72B DETACH HERE
PROXY
HOUGHTON MIFFLIN COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Nader F. Darehshori and Gail Deegan, and
each of them, Proxies with power of substitution to vote for and on behalf of
the undersigned at the Annual Meeting of Stockholders of Houghton Mifflin
Company to be held at the Dorothy Quincy Suite, John Hancock Hall, 180 Berkeley
Street, Boston, Massachusetts, on Wednesday, April 26, 2000, at 10:00 a.m. and
at any adjournment thereof, hereby granting full power and authority to act on
behalf of the undersigned at said meeting or any adjournment thereof.
The undersigned hereby revokes any Proxy previously given, and acknowledges
receipt of notice of said meeting, the related Proxy Statement, and a copy of
the 1999 Annual Report.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
----------- UNLESS OTHERWISE INSTRUCTED THIS PROXY WILL BE -----------
SEE REVERSE VOTED IN FAVOR OF THE PROPOSALS SET FORTH ON THE SEE REVERSE
SIDE REVERSE SIDE. IF ANY OTHER MATTERS ARE PROPERLY SIDE
----------- PRESENTED TO THE MEETING, THE PROXIES WILL VOTE -----------
ACCORDINGLY TO THEIR BEST JUDGEMENT.
<PAGE> 28
To our stockholders:
This Proxy card consolidates all your registered shares, whether those shares
were accumulated through purchase, through the Houghton Mifflin Company 401(k)
Savings Plan (formerly known as the Retirement Savings Plan or the Employee
Savings and Thrift Plan), or through the Employee Stock Ownership Plan (ESOP)
which was in effect during the years 1981 through 1983 under the 401(k)
Savings Plan. Shares which you have purchased through a broker and are held in
street name are not included in this proxy; your broker will solicit your vote
on those shares directly.
Is it important that your shares be represented whether or not you attend the
Company's Annual Meeting on April 26, 2000. Therefore, we urge you to register
your vote now by completing, signing, and returning the enclosed proxy card
promptly.
The following legend describes the codes used below to identify the source of
your shares. If you have questions concerning the codes or the share ownership
shown below, please contact the transfer agent, EquiServe, at (800) 730-4001.
CODE DESCRIPTION
- ---- -----------
COM COMMON STOCK
HM1 401(k) SAVINGS PLAN STOCK; EMPLOYEE'S CONTRIBUTION
HM2 401(k) SAVINGS PLAN STOCK; EMPLOYER'S CONTRIBUTION
HM3 401(k) SAVINGS PLAN STOCK; ACQUIRED THROUGH ESOP
HOU72A DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
1. Election of Class II Directors for a three-year term. FOR AGAINST ABSTAIN
NOMINEES: (01) James O. Freedman, (02) Charles R. 2. Ratify Ernst & Young LLP as [ ] [ ] [ ]
Longsworth, (03) Alfred L. McDougal independent auditors for 2000.
FOR WITHHELD
[ ] [ ]
[ ]
-----------------------------------------------
For all nominees except as noted above
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE SIGN IN THE SAME FORM AS NAME APPEARS
HEREON. FIDUCIARIES AND CORPORATE OFFICERS
SHOULD INDICATE THEIR TITLES.
Signature: Date: Signature: Date:
------------------------------- --------------- ------------------------------- ---------------
</TABLE>
