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SECURITIES XXX XXXXXXXX XXXXXXXXXX
XXXXXXXXXX, X.X. 00000
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------
HOUGHTON MIFFLIN COMPANY
(Name of Subject Company)
HOUGHTON MIFFLIN COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
441560109
(CUSIP Number of Class of Securities)
------------------------
XXXX X. XXXXXX
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
HOUGHTON MIFFLIN COMPANY
000 XXXXXXXX XXXXXX
XXXXXX, XXXXXXXXXXXXX 00000-0000
(000) 000-0000
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
WITH COPIES TO:
XXXXX X. XXXXXXX XXXXXX X. BLOCK
SKADDEN, ARPS, SLATE, XXXXXXX & XXXX LLP CADWALADER, XXXXXXXXXX & XXXX
ONE BEACON STREET 000 XXXXXX XXXX
XXXXXX, XXXXXXXXXXXXX 00000 XXX XXXX, XXX XXXX 00000
(000) 000-0000 (000) 000-0000
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[LOGO]
June 8, 2001
Dear Stockholder:
I am very pleased to tell you that Houghton Mifflin's Board of Directors has
unanimously approved a definitive agreement to combine our company with Vivendi
Universal, a well-known and greatly respected global media and publishing
company. Houghton Mifflin will become part of Vivendi Universal's worldwide
operations and the spearhead of its U.S. publishing operations. Vivendi
Universal plans to preserve the Houghton Mifflin name and leave the Company
largely intact, so we can expect that almost all the people working at Houghton
Mifflin now will be working for Houghton Mifflin in the future.
On June 1, 2001, Houghton Mifflin entered into an Agreement and Plan of
Merger with Vivendi Universal, a SOCIETE ANONYME organized under the laws of
France, and Soraya Merger Inc., a Massachusetts corporation and a wholly owned
subsidiary of Vivendi which was formed in connection with the merger agreement.
Pursuant to the merger agreement, Soraya today commenced a tender offer to
purchase all the outstanding shares of common stock of Houghton Mifflin at
$60.00 per share in cash. Under the merger agreement, the tender offer will be
followed by a merger of Soraya with and into Houghton Mifflin, and all shares of
common stock not purchased in the tender offer will be acquired by Vivendi,
through Soraya, at the same price.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT THE
OFFER AND THE MERGER ARE ADVISABLE AND FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU TENDER YOUR SHARES IN THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, including, among other things, the opinion
of X.X. Xxxxxx Securities Inc., Houghton Mifflin's financial advisor, that, as
of the date of the opinion, the $60.00 per share is fair, from a financial point
of view, to the stockholders. The full text of the opinion is attached as an
exhibit to the Schedule 14D-9. We urge you to read the opinion carefully and in
its entirety.
The prospect of maintaining the working relationships that underlie our
success and extending our publishing efforts into electronic distribution and
other channels makes this an excellent transaction. I am confident that joining
Vivendi Universal is an outstanding opportunity to preserve all that is best at
Houghton Mifflin--the publications, the authors, the people, and our good
name--and infuse them with the financial strength and business heft to become a
global power in publishing.
We have attached a copy of the Schedule 14D-9 filed by Houghton Mifflin with
the Securities and Exchange Commission. The Schedule 14D-9 describes the reasons
for the Board of Directors' recommendation and contains other important
information relating to the tender offer. We have also enclosed the Offer to
Purchase, dated June 8, 2001, of Soraya, together with related materials,
including Letters of Transmittal to be used for tendering your shares. These
documents set forth the terms and conditions of the tender offer and the merger
and provide instructions on how to tender your shares. We urge you to read the
Schedule 14D-9 and the enclosed materials carefully.
Sincerely,
/s/ Xxxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxxxxxxx
Chairman, President and
Chief Executive Officer
ITEM 1. SUBJECT COMPANY INFORMATION.
(a) The name of the subject company is Houghton Mifflin Company, a
Massachusetts corporation (the "Company"), and the address of the principal
executive offices of the Company is 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000. The phone number for its principal executive offices is (000) 000-0000.
(b) The title of the class of equity security to which this Statement
relates is Common Stock, par value $1.00 per share, including the rights to
purchase Series A Junior Participating Preferred Stock (the "Rights") issued
pursuant to the Rights Agreement, as amended (the "Rights Agreement"), dated as
of July 30, 1997 by and between the Company and BankBoston, N.A., as Rights
Agent (together, the "Common Stock"). As of April 30, 2001, 28,877,784 shares of
Common Stock were issued and outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) NAME AND ADDRESS OF PERSON FILING THIS STATEMENT. The name, business
address and business telephone number of the Company, which is the person filing
this Statement, are set forth in Item 1(a) above, which information is
incorporated herein by reference. The Company's website address is xxx.xxxx.xxx.
The information on the Company's website should not be considered a part of this
Statement.
(b) TENDER OFFER OF THE PURCHASER.
This Statement relates to the tender offer by a Massachusetts corporation,
Soraya Merger Inc. (the "Purchaser") disclosed in a Tender Offer Statement on
Schedule TO dated June 8, 2001 (the "Schedule TO"), to purchase all of the
outstanding Common Stock at a price of $60.00 per share (the "Offer Price"), net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated June 8, 2001 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as may be amended from time to time,
together constitute the "Offer").
Purchaser was formed in connection with the Offer and is wholly owned by
Vivendi Universal, a SOCIETE ANONYME organized under the laws of France
("Parent").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of June 1, 2001 (the "Merger Agreement"), by and among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, for the making of
the Offer by the Purchaser and further provides that, upon the terms and subject
to the conditions contained in the Merger Agreement, the Purchaser will merge
with and into the Company (the "Merger") as soon as practicable after the
consummation of the Offer. Following consummation of the Merger, the Company
will continue as the surviving corporation. In the Merger, the Common Stock
issued and outstanding immediately prior to the consummation of the Merger
(other than Common Stock owned by any subsidiary of the Company or Parent or any
subsidiary of Parent or held in the treasury of the Company, all of which will
be cancelled, and other than Common Stock, where applicable, held by
stockholders who perfect appraisal rights under Massachusetts law) will be
converted into the right to receive $60.00 in cash (the "Merger Consideration").
A copy of the Merger Agreement is attached hereto as Exhibit (e)(2) and is
incorporated herein by reference.
The Offer to Purchase states that the principal executive offices of the
Purchaser is located care of Vivendi Universal Holding I Corp. at 000 Xxxxx
Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. The telephone number of the
Purchaser at such location is (000) 000-0000.
2
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as amended, and
Rule 14f-1 thereunder (the "Information Statement") that is attached as Annex B
to this Statement and is incorporated herein by reference. Except as set forth
in the response to this Item 3, Item 4 below or in Annex B attached hereto or as
incorporated by reference herein, to the knowledge of the Company, there are no
material agreements, arrangements or understandings and no actual or potential
conflicts of interest between the Company or its affiliates and (i) the
Company's executive officers, directors or affiliates or (ii) Parent or the
Purchaser or their respective executive officers, directors or affiliates.
In connection with the transactions contemplated by the Merger, the
following agreements were entered into: the Merger Agreement and a
Confidentiality Agreement dated January 17, 2001 between the Company, Parent and
an affiliate of Parent, Havas (the "Confidentiality Agreement") and an informal
arrangement. A copy of the Confidentiality Agreement is filed as Exhibit (e)(4)
hereto and is incorporated herein by reference.
THE MERGER AGREEMENT. The summary of the material terms of the Merger
Agreement set forth under the caption "12. Purpose of the Offer; the Merger
Agreement; Plans for the Company--THE MERGER AGREEMENT" in the Offer to Purchase
is incorporated by reference herein. The summary of the Merger Agreement
contained in the Offer to Purchase is qualified in its entirety by reference to
the Merger Agreement, a copy of which is filed as Exhibit (e)(2) hereto and is
incorporated herein by reference.
CONFIDENTIALITY AGREEMENT. The following summary is qualified in its
entirety by reference to the complete text of the Confidentiality Agreement
which is filed as Exhibit (e)(4) hereto and incorporated herein by reference.
As a condition to being furnished certain information concerning the Company
(the "Confidential Information"), Parent has agreed, among other things, that it
will keep such Confidential Information confidential and will use it solely for
assisting it in pursuing discussions with regard to entering into the Offer and
the Merger. "Confidential Information" does not include (i) information which is
or becomes generally available to the public other than as a result of a
disclosure by Parent or its (or its affiliates') directors, officers, employees
or representatives, (ii) information which was already known to Parent on a
nonconfidential basis prior to being furnished to Parent by the Company or
(iii) information which becomes available to Parent on a nonconfidential basis
from a source other than the Company if such source was not known to Parent to
be subject to any prohibition against transmitting the information to Parent.
In addition, shortly after April 25, 2001, in response to a request from
representatives of Parent, the Company advised Parent that it would not
negotiate with other parties relating to the sale of the Company until May 13,
2001. Thereafter, this date was extended through May 31, 2001.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) SOLICITATION/RECOMMENDATION
The Board of Directors of the Company has unanimously approved and adopted
the Merger Agreement and the transactions contemplated thereby and determined
that the Offer and the Merger are advisable and fair to and in the best
interests of the Company and its stockholders.
ACCORDINGLY, THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT THE HOLDERS OF THE COMMON STOCK TENDER THEIR SHARES IN THE OFFER.
3
(b) BACKGROUND OF THE TRANSACTION
In the fall of 2000, senior management of the Company and the Board of
Directors recognized that, in view of the changes occurring in the publishing
industry, a full exploration of strategic alternatives to enhance stockholder
value should be undertaken.
Beginning in the late fall of 2000 and continuing through the first quarter
of 2001, Xx. Xxxxx X. Xxxxxxxxxx, Chairman, President and Chief Executive
Officer of the Company, met with various participants in the publishing
industry, including Parent, to explore, on a very preliminary and general basis,
a broad range of strategic alternatives.
Xx. Xxxxxxxxxx had a luncheon meeting with representatives of Parent on
January 9, 2001, at which there was a general discussion relating to the
publishing industry and an overview of the business strategy of Parent and the
Company. At the end of January, Parent and the Company entered into a
non-disclosure agreement dated January 17, 2001, a copy of which is filed as
Exhibit (e)(4) hereto. Thereafter, the Company provided Parent with certain
non-public financial information. Xx. Xxxxxxxxxx met with representatives of
Parent on February 1, 2001. The Parent representatives indicated that Parent was
interested in pursuing a business combination with the Company. Xx. Xxxxxxxxxx
advised them that the Company was still in the process of considering various
strategic alternatives.
In February 2001, the Company retained The Parthenon Group, which had
expertise in the publishing industry, to analyze its strategic plan and business
opportunities for the Company.
At a meeting of the Board of Directors on March 28, 2001, Xx. Xxxxxxxxxx
summarized a number of strategic initiatives which he had been exploring, and
The Parthenon Group discussed strategic issues and alternatives in the Company's
business as they relate to the future financial performance of the Company.
In the latter part of March 2001, a representative of Parent called
Xx. Xxxxxxxxxx to indicate Parent's continuing interest in pursuing a business
combination transaction with the Company, and a meeting was scheduled for
April 4, 2001. At this meeting, attended by Xx. Xxxxxxxxxx, Mr. Xxxx Licoys,
Co-Chief Operating Officer of Parent, Xx. Xxxxx Xxxxxxxx, Vice Chairman and
Chief Executive Officer of Vivendi Universal Publishing, and Xx. Xxxx-Xxxxxxx
Xxxxx, Director of Mergers and Acquisition of Parent, Parent indicated an
interest in exploring the possible business combination. Thereafter, on
April 17, 2001, a meeting was held between representatives of JPMorgan,
financial advisor to the Company, and Lazard Freres & Co., financial advisors to
Parent, to discuss valuation issues.
On April 23, 2001, the Company received a letter from Mr. Xxxx-Xxxxx
Xxxxxxx, Chairman and Chief Executive Officer of Parent, which set forth
Parent's preliminary non-binding expression of interest for a business
combination, which preliminary expression of interest stated that Parent's
formulation of an actual offer would be contingent upon its due diligence
investigation and its assessment of various financial parameters and synergies
and was subject to board approval on Parent's part, and stated that the price
range that Parent was considering was up to US$62 per common share payable in
cash.
The Company held a regularly scheduled Board of Directors meeting on
April 25, 2001, at which Parent's indication of interest in a business
combination was discussed. Representatives of The Parthenon Group analyzed for
the Board of Directors the potential revenue and income scenarios for the
Company based on business unit opportunities and risks over the next three
years. Representatives of JPMorgan made a presentation relating to a limited
number of potential strategic acquirers of the Company and a preliminary
indication of a range of values that the Company might receive in a transaction
involving the sale of all of the Common Stock.
There was then discussion of the April 23, 2001 letter received from Parent.
At the conclusion of the discussion, the Board of Directors appointed a Special
Committee composed of outside directors to
4
analyze, consider and negotiate a potential business combination with Parent and
to make recommendations to the Board of Directors relating thereto.
Immediately following the Board of Directors meeting, the Special Committee,
whose members are Xx. Xxxxxxxx Xxxxxx, Xx. Xxxxxxx Xxxxxxxxxx and Mr. Xxxxxxx
Xxxxxxxxx, met and elected Xx. Xxxxxxxxx as Chairman. The Committee retained
Cadwalader, Xxxxxxxxxx & Xxxx as its legal counsel and JPMorgan, the Company's
investment banker, as its investment banker to assist in negotiating,
structuring and evaluating the potential business transaction. It also
authorized management to provide Parent with information and documents
pertaining to the Company which were reasonably requested by Parent.
During the weeks of April 30 and May 7, 2001 the Company provided
representatives of Parent with documents pertaining to its business and made
presentations to senior officers of Parent concerning the operation of each of
the Company's business units. This due diligence process continued until the
Agreement and Plan of Merger was signed.
During the period from May 4th to May 28th, 2001, representatives of Parent
and the Company engaged in discussions concerning valuation, but no formal offer
was made by Parent.
A meeting of the Board of Directors was held on May 17, 2001.
Representatives of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, counsel to the
Company, Cadwalader, Xxxxxxxxxx & Xxxx and JPMorgan were present at the meeting.
The Special Committee reported to the Board that representatives of Parent had
suggested a valuation of $58.00 per share of Common Stock and the Special
Committee recommended that if Parent were to make an offer at $58.00 per share
of Common Stock, JPMorgan should advise Parent's financial advisor that it would
be unacceptable.
A brief meeting of the Special Committee followed the meeting of the Board
of Directors. It was decided to allow Parent to continue due diligence only
after an acknowledgement by a representative from Parent that no deal would be
done at $58.00 per share of Common Stock and any formal offer by Parent would
need to be at a higher valuation to even be considered by the Company.
Thereafter, representatives of JPMorgan advised representatives of Lazard
that a valuation of $58.00 per share of Common Stock was not acceptable to the
Company. During the next week there were various discussions relating to the
value of the Company between representatives of JPMorgan and Lazard Freres.
During that period, the Company's management continued to respond to numerous
questions and document requests from Parent. Representatives of the Special
Committee, JPMorgan and Cadwalader, Xxxxxxxxxx & Xxxx regularly met in person or
by conference call to address issues related to the negotiations with Parent.
A meeting of the Company's Board of Directors, attended by the Company's
financial advisors, Cadwalader, Xxxxxxxxxx & Xxxx and Skadden, Arps, Slate
Xxxxxxx & Xxxx LLP was held on May 23, 2001. The substance of the discussions
between JPMorgan and Parent's financial advisors was reviewed with the Board of
Directors. The Special Committee recommended, and the Board of Directors
concurred, that a meeting between Messrs. Darehshori and Xxxxxxxxx and
appropriate officers of Parent would be appropriate.
On May 28, 2001, Messrs. Darehshori and Xxxxxxxxx met with Mr. Licoys and
Xx. Xxxxxxxx. Representatives of Cadwalader, Xxxxxxxxxx & Taft, Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP and JPMorgan were available to assist
Messrs. Xxxxxxxxx and Darehshori as necessary. Mr. Licoys stated that, while any
formal offer would be subject to approval of Parent's board of directors (a
regular meeting of which was scheduled for May 29, 2001), he believed Parent
would be prepared to offer $58.00 or perhaps $58.50 per share of Common Stock.
Messrs. Darehshori and Xxxxxxxxx stated that $58.00 per share of Common Stock
was unacceptable. Xx. Xxxxxxxxx indicated that he believed that a price of
$62.00 per share of Common Stock was appropriate. There was then a general
discussion relating to valuation, but Mr. Licoys did not increase the valuation
range, and the meeting adjourned.
5
After consulting with JPMorgan and Cadwalader, Xxxxxxxxxx & Xxxx, Xx. Xxxxxxxxx
apprised the Board of Directors of the status of the negotiations.
On the afternoon of May 29, 2001, after a meeting of the Board of Directors
of Parent, Mr. Licoys talked with Messrs. Darehshori and Xxxxxxxxx and stated
that Parent was willing to pay $60.00 per share of Common Stock for all of the
Company's common stock. He stated that this was its full and final offer.
Messrs. Darehshori and Xxxxxxxxx replied that they would communicate the offer
to the Special Committee and the Board of Directors.
The Special Committee convened later that afternoon, along with JPMorgan and
Cadwalader, Xxxxxxxxxx & Xxxx, and, after extensive discussions, concluded that
$60.00 per share of Common Stock was fair and that it would recommend accepting
the proposal to the Board of Directors.
The Board of Directors of the Company met in the evening of May 29, 2001,
along with its legal and financial advisors. After extended discussion, the
Special Committee recommended and the Board of Directors concurred that $60.00
per share of Common Stock would be acceptable if a satisfactory purchase
agreement could be developed.
On May 30, 2001, Messrs. Darehshori and Xxxxxxxxx talked by telephone with
Mr. Licoys. They indicated that the Special Committee would be prepared to
recommend acceptance of a price of $60.00 per share of Common Stock, contingent
on a favorable purchase agreement being entered into. Thereafter,
Messrs. Darehshori and Xxxxxxxxx and representatives from Cadwalader,
Xxxxxxxxxx & Taft, Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP and JPMorgan and
Parent continued to negotiate an agreement. By early evening on May 31, 2001,
agreement had been reached on the major elements of an Agreement and Plan of
Merger.
A meeting of the Company's Board of Directors was held in the evening of
May 31, 2001. Representatives of JPMorgan presented a summary of its analyses of
the financial aspects of the proposed transaction, including an analysis of the
fairness, from a financial point of view, of the price of $60.00 per share of
Common Stock. Representatives of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP and
Cadwalader, Xxxxxxxxxx & Xxxx outlined terms of the proposed offer and merger
and the directors' legal duties and responsibilities. Members of the Special
Committee stated their recommendation in favor of the offer and principal terms
of the proposed agreement. Thereafter, the full Board of Directors unanimously
approved the principal terms of the proposed Agreement and Plan of Merger and
authorized management to finalize the details of the agreement.
In the early morning of June 1, 2001, the remaining details of the Agreement
and Plan of Merger were finalized and the agreement was signed. On June 1, 2001,
prior to the commencement of trading, Parent and the Company issued a joint
press release announcing the transaction.
(c) REASONS FOR THE RECOMMENDATION
In reaching its conclusions and recommendations described above, the
Company's Board of Directors consulted with the Company's senior officers and
financial advisors and took into account numerous factors, including but not
limited to the following:
(i) the terms and conditions of the Offer and the Merger Agreement;
(ii) the current and historical financial condition, results of operations,
business and prospects of the Company;
(iii) the recent evaluations by the Board of Directors of the Company's
strategic plan, the consolidations occurring in the publishing industry
and the resources necessary to convert content to electronic format,
globalize the distribution of products and to otherwise remain fully
competitive in the publishing industry;
6
(iv) consideration of the analyses of The Parthenon Group regarding possible
strategic alternatives and business opportunities for the Company,
including an analysis of the Company if it were to remain independent
and continue to do business in the publishing industry, taking into
account the risks inherent in remaining independent, and the prospects
of the Company going forward as an independent entity in that market;
(v) the presentation of X.X. Xxxxxx Securities Inc. ("XX Xxxxxx") as to
various financial matters and the written opinion of XX Xxxxxx, the
Company's financial advisor in connection with the Offer and the Merger,
dated May 31, 2001, to the effect that, as of the date of the opinion,
the consideration to be received by holders of Common Stock pursuant to
the Offer and the Merger is fair from a financial point of view to such
stockholders (other than Parent or its affiliates). The full text of
JPMorgan's written opinion which sets forth the procedures followed, the
factors considered and the assumptions made by JPMorgan in arriving at
its opinion is attached hereto and filed as Annex A hereto and
incorporated herein by reference. STOCKHOLDERS ARE URGED TO READ THE
OPINION OF JPMORGAN CAREFULLY AND IN ITS ENTIRETY;
(vi) the recommendation of the Special Committee of the Board of Directors;
(vii) the fact that the Merger Agreement, while prohibiting the Company from
soliciting any competitive proposal, does permit the Company to respond
to unsolicited proposals by furnishing information to, and
participating in discussions or negotiations with, any third party
making such proposal, provided that a majority of the Company's Board
of Directors determines in good faith that such third party's Takeover
Proposal (as that term is defined in the Merger Agreement) is or is
reasonably likely to result in a Superior Proposal (as that term is
defined in the Merger Agreement) and the Company's Board of Directors
determines (after consultation with counsel) that the failure to so act
would likely breach the fiduciary duties of the Board of Directors. If
a majority of the Board of Directors determines that the failure to
take action with respect to such Superior Proposal would likely breach
the fiduciary duties of the Board of Directors, the Board of Directors
may terminate the Merger Agreement and accept such Superior Proposal.
If the Board of Directors were to decide to accept such Superior
Proposal, the Board of Directors would be obligated to first give
Parent three business days notice to negotiate with the Company
concerning any new proposals made by Parent and pay a termination fee;
(viii) the relationship of the Offer Price and the Merger Consideration to the
historical trading prices of the Common Stock. The Board of Directors
also considered the form of consideration to be paid to holders of
Common Stock in the Offer and the Merger and the certainty of value of
such cash consideration compared to stock consideration. The Board of
Directors was aware that the consideration to be received by the
holders of Common Stock in the Offer and the Merger would be taxable to
such holders for federal income tax purposes;
(ix) the anticipated timing of consummation of the transactions contemplated
by the Merger Agreement, and the structure of the transaction as a
tender offer for all Common Stock, which should allow stockholders to
receive the transaction consideration in a relatively short timeframe,
followed by the Merger in which stockholders will receive the same
consideration as received by stockholders who tender their shares in
the Offer; and
(x) the representation of Parent that it has, or will have, sufficient cash
or access to cash to satisfy all of its obligations under the Merger
Agreement and the fact that the Offer is not subject to a financing
condition.
In making its recommendation, the Special Committee of the Board of
Directors and the Board of Directors was aware of and took into consideration
the interests of certain Company executives, including the Chief Executive
Officer, who is a member of the Board of Directors, in the Offer and the
7
Merger as a result of the agreements referred to in Item 3 of this Statement and
their holding of Common Stock and options to purchase Common Stock as referenced
in Item 3 of this Statement.
The Company's Board of Directors did not assign relative weights to the
foregoing factors or determine that any factor was of particular importance.
Rather, the Company's Board of Directors viewed their position and
recommendations as being based on the totality of the information presented to
and considered by them. Individual members of the Board of Directors may have
given different weight to different factors.
The Company's Board of Directors recognized that, while the consummation of
the Offer gives the stockholders the opportunity to realize a premium over the
prices at which the Common Stock was traded prior to the public announcement of
the Merger and Offer, tendering in the Offer would eliminate the opportunity for
stockholders to participate in the future growth and profits of the Company.
It is expected that, if the Common Stock were not to be purchased by the
Purchaser in accordance with the terms of the Offer or if the Merger were not to
be consummated, the Company's current management, under the general direction of
the Company's Board of Directors, would continue to manage the Company as an
ongoing business in accordance with the Company's current long-term strategic
plan.
(d) INTENT TO TENDER
To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer and
director of the Company currently intends to tender all shares of Common Stock
over which he or she has sole dispositive power to the Purchaser.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The Company has retained JPMorgan as its financial advisor in connection
with the Offer and the Merger (or any other transaction resulting in the sale of
a majority of the Common Stock or all or substantially all of its assets).
Pursuant to the Engagement Letter between JPMorgan and the Company dated
May 31, 2001 (the "Engagement Letter"), the Company has agreed to pay JPMorgan
as follows: (i) an opinion fee of $1,000,000, which became due upon delivery of
the fairness opinion to the Special Committee of the Company's Board of
Directors and the Board of Directors; and (ii) an advisory fee of $9,500,000,
payable upon the closing of the Offer and the Merger (or any other transaction
resulting in the sale of a majority of the Common Stock or all or substantially
all of the Company's assets).
The Company has also agreed in the Engagement Letter to reimburse JPMorgan
for all reasonable out-of-pocket expenses (not to exceed $150,000 without the
prior approval of the Company), including, without limitation, travel costs,
document production and other similar expenses, and reasonable fees of counsel
and other professional advisors, and to indemnify JPMorgan and certain related
persons against certain liabilities, including certain liabilities under the
federal securities laws, relating to or arising out of its engagement.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to stockholders of the Company concerning the
Offer or the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
There have been no transactions in the Common Stock effected during the past
60 days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
8
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) a
tender offer for or other acquisition of the Company's securities by the
Company, any subsidiary of the Company or any other person; (ii) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (iii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; or (iv) any material change in the present dividend rate or policy,
or indebtedness or capitalization.
Except as set forth above, there are no transactions, resolutions of the
Board of Directors, agreements in principle or signed contracts in response to
the Offer that relate to one or more of the events referred to in the preceding
paragraph.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Appraisal Rights
No appraisal rights are available to holders of Common Stock in connection
with the Offer. However, if the Merger is consummated, holders of Common Stock
may have certain rights under Sections 86 through 98 of the Massachusetts
Business Corporations Law (the "MBCL") to dissent and demand appraisal of, and
payment in cash for the fair value of, their Common Stock. Such rights, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value (excluding any element of value arising from expectation or
accomplishment of the Merger) required to be paid in cash to such dissenting
holders for their Common Stock. Any such judicial determination of the fair
value of Common Stock could be based upon considerations other than or in
addition to the Offer Price and the market value of the Offer Securities,
including asset values and the investment value of the Common Stock. The value
so determined could be more or less than the Offer Price or the Merger
Consideration.
If any holder of Common Stock who demands appraisal under Sections 86
through 98 of the MBCL fails to perfect, or effectively withdraws or loses his
or her right to appraisal, as provided in the MBCL, the Common Stock of such
holder will be converted into the Merger Consideration in accordance with the
Merger Agreement. A stockholder may withdraw his or her demand for appraisal by
delivery to Parent of a written withdrawal of his or her demand for appraisal
and acceptance of the Merger.
Failure to follow the steps required by Sections 86 through 98 of the MBCL
for perfecting appraisal rights may result in the loss of such rights.
(b) Directors Designations by Parent
The Information Statement attached hereto as Annex B is being furnished to
the Company's stockholders in connection with the possible designation by
Parent, pursuant to the Merger Agreement, of certain persons to be appointed by
the Company's Board of Directors other than at a meeting of the Company's
stockholders, and such information is incorporated herein by reference.
(c) Antitrust--U.S.
Under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
acquisition of the Common Stock by the Purchaser pursuant to the Offer is
subject to such requirements.
9
Pursuant to the requirements of the HSR Act, Parent and the Company are
preparing to file the required Notification and Report Forms (the "Forms") with
the Antitrust Division and the FTC. The statutory waiting period applicable to
the purchase of Common Stock pursuant to the Offer is to expire at 11:59 P.M.,
New York City time, on the fifteenth day after both parties have filed their
Forms. However, prior to such date, the Antitrust Division or the FTC may extend
the waiting periods by requesting additional information or documentary material
relevant to the acquisition. If such a request is made, the waiting period will
be extended until 11:59 P.M., New York City time, on the tenth day after both
parties have substantially complied with such request. Thereafter, such waiting
periods can be extended only by court order. A request is being made pursuant to
the HSR Act for early termination of the applicable waiting period. There can be
no assurance, however, that the waiting period will be terminated early.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Common Stock pursuant to the Offer
or seeking divestiture of the Common Stock so acquired or divestiture of
substantial assets of the Purchaser or the Company. Private parties may also
bring legal actions under the antitrust laws. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or if such a
challenge is made, what the result will be.
(d) Antitrust--General
It is possible that any of the governmental entities with which filings are
made may seek, as conditions for granting approval of the Merger, various
regulatory concessions. There can be no assurance that:
- Parent or the Company will be able to satisfy or comply with such
conditions; or
- the required regulatory approvals will be obtained within the time frame
contemplated by Parent and the Company and referred to herein or on terms
that will be satisfactory to Parent and the Company.
Additional filings may be necessary in countries outside the U.S.
10
ITEM 9. EXHIBITS.
EXHIBIT NO.
-----------
Exhibit (a)(1) Offer to Purchase dated June 8, 2001*
Exhibit (a)(2) Letter of Transmittal dated June 8, 2001*
Exhibit (a)(3) Joint Press Release issued by Parent and the Company dated
June 1, 2001
Exhibit (a)(4) Summary Advertisement published in The Wall Street Journal
dated
June 8, 2001
Exhibit (a)(5) Letter to Stockholders of the Company dated June 8, 2001*
Exhibit (e)(1) Opinion of JPMorgan dated May 31, 2001 (included as Annex A
to the Statement)*
Exhibit (e)(2) Agreement and Plan of Merger dated as of June 1, 2001, among
Parent, the Purchaser and the Company (incorporated by
reference to Exhibit (d)(1) to the Schedule TO of Purchaser
filed June 8, 2001)
Exhibit (e)(3) The Information Statement of the Company dated as of June 8,
2001 (included as Annex B to the Statement)
Exhibit (e)(4) Confidentiality Agreement between Parent, Havas and the
Company dated January 17, 2001
------------------------
* Included with Schedule 14D-9 mailed to stockholders.
11
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
HOUGHTON MIFFLIN COMPANY
By /s/ XXXX X. XXXXXX
-----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President and
General Counsel
Dated: June 8, 2001
ANNEX A
[LOGO]
May 31, 2001
The Special Committee and the Board of Directors
Houghton Mifflin Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Members of the Special Committee and the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $1.00 per share (together with
the associated rights to purchase shares of Series A Junior Participating
Preferred Stock, the "Company Common Stock"), of Houghton Mifflin Company (the
"Company") of the consideration to be received by such holders in the proposed
tender offer (the "Offer") by Target Merger Inc. (the "Sub"), a Massachusetts
corporation and a wholly-owned subsidiary of Vivendi Universal (the "Merger
Partner") and subsequent merger (the "Merger") of the Company with the Sub (the
"Transaction"). Pursuant to the Agreement and Plan of Merger (the "Agreement"),
among the Company, the Merger Partner and the Sub, the Sub will offer to acquire
all shares of the Company Common Stock for $60.00 per share in cash, the Company
will become a wholly-owned subsidiary of the Merger Partner, and each
outstanding share of Company Common Stock, other than shares of Company Common
Stock held in treasury or owned by the Merger Partner and its affiliates, will
be converted into the right to receive $60.00 per share in cash.
In arriving at our opinion, we have (i) reviewed a draft of the Agreement dated
May 30, 2001; (ii) reviewed certain publicly available business and financial
information concerning the Company and the industries in which it operates;
(iii) compared the proposed financial terms of the Transaction with the publicly
available financial terms of certain transactions involving companies we deemed
relevant and the consideration received for such companies; (iv) compared the
financial and operating performance of the Company with publicly available
information concerning certain other companies we deemed relevant and reviewed
the current and historical market prices of the Company Common Stock and certain
publicly traded securities of such other companies; (v) reviewed certain
internal financial analyses and forecasts prepared by the management of the
Company relating to its respective businesses; and (vi) performed such other
financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of
the Company with respect to certain aspects of the Transaction, and the past and
current business operations of the Company, the financial condition and future
prospects and operations of the Company, and certain other matters we believed
necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company or otherwise reviewed by us, and
we have not assumed any responsibility or liability therefor. We have not
conducted any valuation or appraisal of any assets or liabilities, nor have any
such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of the Company to which such analyses or
forecasts relate. We have also assumed that the Transaction will be consummated
as described in the Agreement. We have relied as to all legal matters relevant
to rendering our opinion upon the advice of counsel. We have also assumed that
the definitive Agreement will not differ in any material respects from the draft
thereof furnished to us.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
Our opinion is limited to the fairness, from a financial point of view, of the
consideration to be received by the holders of the Company Common Stock in the
proposed Transaction and we express no opinion as to the underlying decision by
the Company to engage in the Transaction.
We note that we were not authorized to and did not solicit any expressions of
interest from any other parties with respect to the sale of all or any part of
the Company or any other alternative transaction. Consequently, no opinion is
expressed whether any alternative transaction might produce consideration for
the Company's shareholders in an amount in excess of that contemplated in the
Transaction.
We have acted as financial advisor to the Special Committee, the Board of
Directors and Company with respect to the proposed Transaction and will receive
a fee from the Company for our services. We will also receive an additional fee
if the proposed Transaction is consummated. In the ordinary course of our
businesses, we and our affiliates may actively trade the debt and equity
securities of the Company or the Merger Partner for our own account or for the
accounts of customers and, accordingly, we may at any time hold long or short
positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the consideration to be received by the holders of the Company
Common Stock in the proposed Transaction is fair, from a financial point of
view, to such holders (other than the Merger Partner and its affiliates).
This letter is provided to the Special Committee and the Board of Directors of
the Company in connection with and for the purposes of its evaluation of the
Transaction. This opinion does not constitute a recommendation to any
shareholder of the Company as to whether any such shareholder should tender any
of its shares in the Offer or as to how such shareholder should vote with
respect to the Merger or any other matter. This opinion may not be disclosed,
referred to, or communicated (in whole or in part) to any third party for any
purpose whatsoever except with our prior written approval. This opinion may be
reproduced in full in any offer to purchase or proxy or information statement
mailed to shareholders of the Company but may not otherwise be disclosed
publicly in any manner without our prior written approval.
Very truly yours,
X.X. XXXXXX SECURITIES INC.
ANNEX B
HOUGHTON MIFFLIN COMPANY
000 XXXXXXXX XXXXXX
XXXXXX, XX 00000
(000) 000-0000
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE SECURITY HOLDERS IS REQUIRED
IN CONNECTION WITH THIS INFORMATION STATEMENT.
This Information Statement is being mailed on or about June 8, 2001 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the common stock, par value $1.00 per share, of
Houghton Mifflin Company, a Massachusetts corporation (the "Company"), together
with the associated rights to purchase Series A Junior Participating Preferred
Stock (the "Rights") issued pursuant to the Rights Agreement, as amended (the
"Rights Agreement"), dated as of July 30, 1997 by and between the Company and
BankBoston, N.A., as Rights Agent (together, the "Common Stock"). As of
April 30, 2001, there were 1,824,322 shares of Common Stock outstanding. Each
share of Common Stock is entitled to one vote.
The Schedule 14D-9 relates to the tender offer by a Massachusetts
corporation, Soraya Merger Inc. (the "Purchaser) disclosed in a Tender Offer
Statement on Schedule TO dated June 8, 2001, to purchase all of the outstanding
Common Stock at a price of $60.00 per share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
June 8, 2001 and the related Letter of Transmittal (which, as may be amended
from time to time, together constitute the "Offer"). Purchaser was formed in
connection with the Offer and is wholly owned by Vivendi Universal, a SOCIETE
ANONYME organized under the laws of France (the "Parent"). You are receiving
this Information Statement in connection with the possible designation by
Purchaser of persons to serve in at least one-half of the seats on the Board of
Directors of the Company (the "Board").
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. Please read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein have the meaning set forth in the Schedule 14D-9.
Parent provided the information in this Information Statement concerning
Parent and Purchaser, and the Company assumes no responsibility for the
accuracy, completeness or fairness of this information.
BACKGROUND INFORMATION
On June 1, 2001, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Parent and Purchaser. The Merger Agreement
provides, among other things, for the making of the Offer by the Purchaser and
further provides that, upon the terms and subject to the conditions contained in
the Merger Agreement, the Purchaser will merge with and into the Company (the
"Merger," and together with the Offer, the "Transaction") as soon as practicable
after the consummation of the Offer. Following consummation of the Merger (the
"Effective Time"), the Company will continue as the surviving corporation. In
the Merger, the Common Stock issued and outstanding immediately prior to the
Effective Time (other than Common Stock owned by any subsidiary of the Company
or any subsidiary of Parent or held in the treasury of the Company, all of which
will be cancelled, and other than Common Stock, where applicable, held by
stockholders who
B-1
perfect appraisal rights under Massachusetts law) will be converted into the
right to receive $60.00 in cash. As a result of the Transaction, the Company
will become a wholly owned subsidiary of Parent.
RIGHT TO DESIGNATE DIRECTORS
The Merger Agreement provides that, upon the purchase of Common Stock
pursuant to the Offer and from time to time thereafter, subject to compliance
with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder,
Parent shall be entitled to designate such number of directors of the Company,
rounded down to the next whole number, as is equal to the product of the total
number of directors on the Board (giving effect to the directors designated by
Parent pursuant to this sentence) multiplied by the Board Fraction (the
"Designees"). "Board Fraction" shall mean a fraction, the numerator of which
shall be the number of shares of Target Common Stock that Parent and its
subsidiaries beneficially own at the time of calculation of the Board Fraction,
and the denominator of which shall be the total number of shares of Common Stock
then outstanding. The Company shall promptly take such actions as are necessary
to enable such designees of Parent to be elected or appointed to the Board,
including increasing the number of directors on the Board and obtaining the
resignations of a number of its incumbent directors, or both. The Company shall
use its best efforts to cause the vacancies created by such increase in the
number of directors or the resignation of incumbent directors to be filled by
the designees of Parent. Notwithstanding the foregoing, the Merger Agreement
requires that, until the Effective Time, the Board shall have at least two
directors of the Company who are directors on the date that the Merger Agreement
was executed and who are not affiliates of Parent or Purchaser.
INFORMATION WITH RESPECT TO DESIGNEES
The following table contains information with respect to the Designees
(including age as of the date hereof, business address, current principal
occupation or employment and five-year employment history). Unless otherwise
noted, the business address of each designee is x/x Xxxxxxx Xxxxxxxxx, 00,
Xxxxxx xx Xxxxxxxxx, 00000 Xxxxx Xxxxx 00, Xxxxxx, except that the business
address of Xxxxx Xxxxxxxx, Xx. is 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
NAME OF PRINCIPAL OCCUPATION
DESIGNEE AND CITIZENSHIP AGE DURING PAST FIVEYEARS
------------------------ -------- ---------------------------------------------------
Xxxx-Xxxxx Xxxxxxx 44 Chairman and Chief Executive Officer of Parent
French since 1994.
Xxxxx Xxxxxxxx, Xx. 46 Executive Vice Chairman of Parent. President and
American Chief Executive Officer of Seagram from 1994 to
2000. Also a director of USA Networks, Inc.
Xxxx Licoys 62 Co-Chief Operating Officer of Parent. Chairman and
French Chief Executive Officer of Vivendi Universal
Publishing since 1998. Advisor to Parent's Chairman
from 1997 to 1999. Chairman of Lazard Freres & Cie
from 1996 to 1997.
Xxxx-Xxxxxxx Xxxxx 37 Senior Vice President, Mergers & Acquisitions and
French Financial Analysis of Vivendi Universal since
February 2001. Director, Business Development of
Havas from 1995 to 2000. He is also a member of the
Board of Directors of Canal+, Havas Advertising and
Havas Images.
B-2
NAME OF PRINCIPAL OCCUPATION
DESIGNEE AND CITIZENSHIP AGE DURING PAST FIVEYEARS
------------------------ -------- ---------------------------------------------------
Xxxx-Xxxxxxxx Xxxxx 55 Executive Vice President and General Counsel of
French Vivendi Universal. General Counsel, Company and
Board Secretary of Vivendi since 1994. Chairman and
CEO of Carrousel du Louvre SA from June 1993 to
November 1999. He is also a member of the Board of
Directors of Fomento de Construcciones y Contractes
SA.
Xxxxx Xxxxxxxx 46 Vice Chairman and CEO of Vivendi Universal
French Publishing. Executive Vice President of Havas from
January 1999 to October 2000. Chairman and CEO of
Havas Interactive SA from September 1995 to January
1999. She is also a member of the Executive
Committee of Vivendi Universal.
Guillaume Hannezo 40 Senior Executive Vice President and Chief Financial
French Officer of Vivendi Universal. Chief Financial
Officer of Vivendi since January 1997. Chief
Financial Officer of AGF from October 1994 to
January 1997. He is also a member of the Board of
Directors of UGC, Vivendi Universal Net, Vivendi
Universal Publishing and Connex.
Parent has informed the Company that, to its knowledge, none of the
Designees beneficially owns any equity securities, or rights to acquire any
equity securities of the Company, has a familiar relationship with any director
or executive officer of the Company or has been involved in any transactions
with the Company or any of its directors, executive officers or affiliates that
are required to be disclosed pursuant to the rules of the SEC. Parent has
informed the Company that each of the individuals listed above has consented to
act as a director, if so designated.
BOARD OF DIRECTORS AND COMMITTEES
BOARD STRUCTURE
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 Board met ten times during 2000. All directors attended at least 75% of
the combined number of meetings of both the Board and of committees on which
they served.
B-3
DIRECTORS
The following table shows information with respect to the current directors
of the Company as of June 8, 2001. Each director is a citizen of the United
States. Unless otherwise noted, the business address of each director is c/o
Houghton Mifflin Company, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000. Except as
noted, each of the directors has held his or her principal occupation for at
least five years.
DIRECTOR
NAME OF DIRECTOR OF THE
AND POSITIONS PRINCIPAL OCCUPATIONS COMPANY
WITH THE COMPANY AGE DURING PAST FIVE YEARS SINCE
------------------------------- -------- --------------------------------------------------- --------
CLASS III DIRECTORS -- TERM EXPIRES 2004
Xxxx X. Xxxxxxx 58 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxxxxx is 1998
the founder and managing principal of The Xxxxxxx
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.; member
and past Chairman of the Boards of Wellesley
College, the Denver Metro Chamber of Commerce, and
The Downtown Denver Partnership; founder, Public
Education & Business Coalition; trustee of the
Denver Museum of Nature & Science.
COMMITTEES: Audit and Employment Practices &
Diversity.
Xxxxxxxx X. Xxxxxx 65 PRINCIPAL OCCUPATION OR EMPLOYMENT:Xx. Xxxxxx is 1982
President of Financial & Management Consulting,
Inc.
OTHER BUSINESS AFFILIATIONS: Director of Xxxx'x
Companies, SAIC, Hasbro Inc., and Lafarge
Corporation; trustee of the Massachusetts Institute
of Technology; and past Chairman of the Board of
the Federal Reserve Bank of Richmond.
COMMITTEES: Audit (Chair), Executive, and Finance.
Xxxxx X. Xxxxxxxx 67 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxxxxxx is 1976
Professor Emeritus at the College of Business and
Administration at the University of Colorado,
Boulder, where he served as Xxxx from 1992 to 1993.
Since 1997 he has also served as Managing General
Partner of the Xxxxxxxx Limited Partnership, an
investment and management firm.
B-4
DIRECTOR
NAME OF DIRECTOR OF THE
AND POSITIONS PRINCIPAL OCCUPATIONS COMPANY
WITH THE COMPANY AGE DURING PAST FIVE YEARS SINCE
------------------------------- -------- --------------------------------------------------- --------
OTHER BUSINESS AFFILIATIONS: Past Chairman and
Chief Executive Officer of Xxxxx Xxxxxx Corporation
and President Emeritus of Babson College,
Wellesley, Massachusetts; director of Xxxxx Xxxxx
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 and Finance.
Xxxxxx X. Xxxx, Xx. 57 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxx is
Chairman and Chief Executive Officer of
XxxxXxxx.xxx, Inc., an online 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 1997.
OTHER BUSINESS AFFILIATIONS: Director of Xxxx
Xxxxxxx Mutual Life Insurance Co., WESCO
International, Inc., Sterling Autobody Centers,
Inc., and Barney's New York, Inc. Committees:
Finance (Chair), Compensation & Nominating, and
Executive. 1998
CLASS II DIRECTORS -- TERM EXPIRES 2003
Xxxxx X. Xxxxxxxx 65 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxxxxxx is 1991
President Emeritus and Professor of Law and the
Liberal Arts at Dartmouth College. He was President
of Dartmouth College from 1987 to 1998. He is the
President of the American Academy of Arts and
Sciences.
OTHER BUSINESS AFFILIATIONS: Past President of the
University of Iowa and past Xxxx 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 Xxxxx
Xxxx, 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 eleven honorary degrees, of the
Xxxxxxx X. Xxxxxxx First Amendment Freedom Award
from the Anti-Defamation League of B'nai B'rith in
1991, and of the Xxxxxxxx X. Xxxx Book Award of the
Association of American Colleges and Universities
in 1997.
B-5
DIRECTOR
NAME OF DIRECTOR OF THE
AND POSITIONS PRINCIPAL OCCUPATIONS COMPANY
WITH THE COMPANY AGE DURING PAST FIVE YEARS SINCE
------------------------------- -------- --------------------------------------------------- --------
COMMITTEES: Compensation & Nominating and
Employment Practices & Diversity.
Xxxxxxx X. Xxxxxxxxxx 71 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxxxxxxxx 1985
is Chairman Emeritus of the Colonial Williamsburg
Foundation in Williamsburg, Virginia.
OTHER BUSINESS AFFILIATIONS: Director of Xxxx
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), Executive, and Finance.
Xxxxxx X. XxXxxxxx 70 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. XxXxxxxx is 1994
President of ALM Corporation, a business management
services company. Xx. XxXxxxxx was Chairman and
Chief Executive Officer of XxXxxxxx, Xxxxxxx &
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 Xxxxxxx Street
Dance Company and Opportunity International.
Committees: Audit and Employment Practices &
Diversity.
CLASS I DIRECTORS -- TERM EXPIRES 2002
Xxxxx X. Xxxxxxxxxx 64 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxxxxxxxx 1989
Chairman of the has been Chairman of the Board and Chief Executive
Board, CEO and Officer of the Company since 1990 and was named
President President in October 1991.
OTHER BUSINESS AFFILIATIONS: Director of CGU
Insurance Group, State Street Bank and Trust
Company, State Street Boston Corporation, the
Massachusetts Business Roundtable, and the
Association of American Publishers; chairman of the
Boston Public Library Foundation; trustee of
Wellesley College, the WGBH Educational Foundation,
and the Xxxx-Xxxxxx Cancer Institute.
COMMITTEES: Executive (Chair).
B-6
DIRECTOR
NAME OF DIRECTOR OF THE
AND POSITIONS PRINCIPAL OCCUPATIONS COMPANY
WITH THE COMPANY AGE DURING PAST FIVE YEARS SINCE
------------------------------- -------- --------------------------------------------------- --------
Xxxxxxx Xxxxxxxxx 59 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxxxxxxx 1998
is a member of the Board of Directors of Toys "R"
Us, Inc. He was Chairman of the Board of Toys "R"
Us, Inc., from 1998 to June 2001; 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 2000.
OTHER BUSINESS AFFILIATIONS: Director of Finlay
Enterprises, Inc., United Retail Group Inc., Baby
Press Xxxxxxxxxx.xxx, 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 and the New York Restoration
Project and Chairman of the Board of Directors of
the Toys "R" Us Children's Fund.
COMMITTEES: Compensation & Nominating (Chair),
Audit, and Executive.
Xxxxx Xxxx 53 PRINCIPAL OCCUPATION OR EMPLOYMENT: Xx. Xxxx is
Vice President of Alexander & Associates, Inc., a
management consulting firm.
OTHER BUSINESS AFFILIATIONS: Director of Nextel
Communications, Inc., Wendy's International, Inc.,
Progressive Insurance Company, Xxxx Foods, Inc.,
and First Union Bank of Virginia, Maryland, and the
District of Columbia; member of the Board of
Visitors of the Xxxxx School of Business at Duke
University and of the Board of Advisors of the Xxxx
Leadership Program at the Xxxxxxx Institute of
Public Policy at Duke University; trustee of
Wellesley College. Former Special Assistant to the
Secretary of the Army at the Department of Defense.
COMMITTEES: Compensation & Nominating 2000
B-7
COMMITTEES OF THE BOARD
The Board has appointed five standing committees elected from its own
members. Except for the Executive Committee, which Xx. Xxxxxxxxxx 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:
COMPENSATION & EMPLOYMENT PRACTICES &
AUDIT NOMINATING DIVERSITY
----------------- --------------------- ------------------------
Xx. Xxxxxx, Chair Xx. Xxxxxxxxx, Chair Xx. Xxxxxxxxxx, Chair
Xx. Xxxxxxxxx Xx. Xxxxxxxx Xx. Xxxxxxxx
Xx. Xxxxxxx Xx. Xxxx Xx. Xxxxxxx
Xx. XxXxxxxx Xx. Xxxxxxxx Xx. XxXxxxxx
Xx. Xxxx
EXECUTIVE FINANCE
--------------------- --------------
Xx. Xxxxxxxxxx, Chair Xx. Xxxx, Chair
Xx. Xxxxxxxxx Xx. Xxxxxxxxxx
Xx. Xxxxxxxxxx Xx. Xxxxxx
Xx. Xxxxxx Xx. Xxxxxxxx
Xx. Xxxx
AUDIT COMMITTEE 5 meetings in 2000
- 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 xxxxxx 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
- Oversees 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 2000
- 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;
B-8
- 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 2 meetings in 2000
- 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 2000
- Acts for the Board as necessary when the Board is not in session; and
- Supervises and reviews the Company's policies and procedures relating to
corporate governance and legal compliance.
FINANCE COMMITTEE 3 meetings in 2000
- 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.
AUDIT COMMITTEE REPORT
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUTE SOLICITING
MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY
OTHER COMPANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY
SPECIFICALLY INCORPORATES THIS REPORT BY REFERENCE THEREIN.
The Audit Committee of the Board of Directors is comprised of four
directors. The Board has determined that each Committee member is independent
under the New York Stock Exchange's listing standards.
The Committee operates under a written charter, which was included as an
appendix to the Company's proxy statement for its 2001 Annual Meeting of
Stockholders. Under the charter, management is responsible for the Company's
financial statements, the financial reporting process, and the system of
internal controls. The independent auditors are responsible for performing an
independent audit of the Company's financial statements and issuing an opinion
that the financial statements conform with generally accepted accounting
principles. The Committee's responsibility is to monitor and oversee these
processes.
In fulfilling its oversight responsibilities, the Committee discusses with
the Company's internal and independent auditors the overall scope and plans for
their respective audits. The Committee meets with the internal and independent
auditors, with and without management present, to discuss the results of their
examinations, the evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
B-9
The Committee has reviewed and discussed with both management and the
independent auditors the audited financial statements for the year ended
December 31, 2000, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
The Committee has also reviewed with the independent auditors the other
matters required to be discussed by Statement on Accounting Standards No. 61
(Communications with Audit Committees). In addition, the Committee discussed
with the independent auditors their independence from management and considered
the compatibility of nonaudit services with the auditors' independence. The
Company has received from the auditors the written disclosures and letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees).
Based on its review and discussions with management and the independent
auditors, the Committee recommended to the Board (and the directors have
approved) the inclusion of the audited financial statements for the year ended
December 31, 2000 in the Company's Annual Report on Form 10-K for filing with
the SEC. The Committee has recommended and the Board has approved the selection
of Ernst & Young LLP as the independent auditors for 2001.
This report is submitted by the Company's Audit Committee, the members of
which are Xx. Xxxxxx (Chair), Xx. Xxxxxxxxx, Xx. Xxxxxxx, and Xx. XxXxxxxx.
DIRECTOR COMPENSATION
The Company compensates directors who are not employees of the Company as
follows:
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 to
purchase 2,000 shares annually
In connection with the Transaction, the Board appointed Xx. Xxxxxxxxx,
Xx. Xxxxxxxxxx and Xx. Xxxxxx as the Special Committee. Xx. Xxxxxxxxx received
$2,500 as chair and the attendance fee is $1,000 for each meeting.
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. The program provides that 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. The
Merger Agreement provides that upon consummation of the Merger, this obligation
will be accelerated and promptly paid to the designated charities. Individual
directors derive no financial benefit from this program.
B-10
EXECUTIVE OFFICERS OF THE COMPANY
The following table shows information with respect to the current executive
officers who are not also directors of the Company as of June 8, 2001. Each of
the executive officers is a citizen of the United States.
OFFICE
NAME AGE OFFICE HELD SINCE
---- -------- ------ ----------
Xxxxxx X. Xxxxxx, Xx................. 50 Vice President, Human Resources 1998
Xxxxxx Xxxxxx, Xx.................... 64 Executive Vice President; President, Great 1995
Source Education Group, Inc.
Xxxxx X. Xxxxx....................... 40 Vice President, Controller 1997
Xxxx Xxxxxx.......................... 54 Executive Vice President and Chief Financial 1996
Officer
Xxxxxxxxx X. Hacking................. 59 Senior Vice President, Strategic Development 1993
Xxxxxxx Xxxxxxx...................... 59 Vice President, Managing Director, 1999
International Division
Xxxx X. Xxxxxx....................... 56 Senior Vice President; President, The 1999
Riverside Publishing Company
Xxxxxx X. Xxxxx...................... 50 Executive Vice President, School Division 1997
Xxxx X. Xxxxxx....................... 49 Senior Vice President, Chief Technology 1997
Officer
Xxxx X. Xxxxxx....................... 51 Executive Vice President; President, Computer 1999
Adaptive Technologies, Inc.
Xxxxxx X. Xxxx....................... 43 Executive Vice President; President, Sunburst 2000
Technology Corporation
Xxxx X. Xxxxxxxx..................... 47 Senior Vice President, XxXxxxxx Xxxxxxx Inc. 2000
Xxxx X. Xxxxx........................ 56 Senior Vice President, Administration 1991
Xxxx Xxxxx........................... 58 Executive Vice President, College Division 1994
Xxxxx X. Xxxxxxxxx................... 50 Executive Vice President, Trade & Reference 1996
Division
Xxxx X. Xxxxxx....................... 58 Senior Vice President, Clerk, Secretary, and 1989
General Counsel
The following information provides a brief description of the business
experience of each executive officer during the past five years. Each executive
officer, other than Mr. Battle, Xx. Xxxxxxx and Xx. Xxxxxx has been employed by
Houghton Mifflin for more than five years.
Xxxxxx X. Xxxxxx, Xx.
1998--Vice President, Human Resources
1995--Divisional Vice President, Human Resources, Corning, Inc.
Xxxxxx Xxxxxx, Xx.
1995--Executive Vice President; President, Great Source Education
Group, Inc.*
Xxxxx X. Xxxxx
1997--Vice President, Controller
1996--Assistant Controller
B-11
Xxxx Xxxxxx
1998--Executive Vice President and Chief Financial Officer
1996--Executive Vice President, Chief Financial Officer, and Treasurer
Xxxxxxxxx X. Hacking
1993--Senior Vice President, Strategic Development
Xxxxxxx Xxxxxxx
1999--Vice President, Managing Director, International Division
1996-- President, Latin America/Iberia Division, Simon & Xxxxxxxx, a publisher
unrelated to the Company
Xxxx X. Xxxxxx
1999--Senior Vice President; President, The Riverside Publishing Company*
1994--Vice President, Director of Sales, The Riverside Publishing Company*
Xxxxxx X. Xxxxx
1998--Executive Vice President, School Division
1997--Senior Vice President, School Division
1994--Vice President, Sales and Marketing, School Division
Xxxx X. Xxxxxx
1997--Senior Vice President, Chief Technology Officer
1996--Vice President, Director of Information Technology, The Bureau of
National Affairs
Xxxx X. Xxxxxx
1999--Executive Vice President; President, Computer Adaptive
Technologies, Inc.*
1993--Executive Vice President; President, The Riverside Publishing Company*
Xxxxxx X. Xxxx
2000--Executive Vice President; President, Sunburst Technology Corporation*
1999--Senior Vice President; President, Sunburst Technology Corporation*
1997--Senior Vice President; President, Houghton Mifflin Interactive
Corporation*
1996--President, Houghton Mifflin Interactive Corporation*
Xxxx X. Xxxxxxxx
2000--Senior Vice President, XxXxxxxx Xxxxxxx Inc.*
1994--Vice President, National Sales Manager, XxXxxxxx Xxxxxxx Inc.*
Xxxx X. Xxxxx
1991--Senior Vice President, Administration
Xxxx Xxxxx
1994--Executive Vice President, College Division
Xxxxx X. Xxxxxxxxx
1996--Executive Vice President, Trade & Reference Division
Xxxx X. Xxxxxx
1989--Senior Vice President, Clerk, Secretary, and General Counsel
------------------------
* A subsidiary of Houghton Mifflin
B-12
SECURITY OWNERSHIP OF NAMED EXECUTIVE OFFICERS,
DIRECTORS AND PRINCIPAL STOCKHOLDERS
The following table shows how much Common Stock each director, nominee,
executive named in the Summary Compensation Table, and all directors and
executive officers as a group, owned as of May 31, 2001. 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 that are exercisable currently or within 60 days,
and, under some circumstances, shares held by family members. Except otherwise
noted, the business address of each executive officer, director and principal
stockholder is c/o Houghton Mifflin Company, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX
00000.
AMOUNT AND
NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) CLASS
------------------------ --------------- ----------
Xxxxxx Xxxxxx, Xx........................................... 38,433 *
Xxxxx X. Xxxxxxxxxx......................................... 281,643(3) *
Xxxx Xxxxxx................................................. 82,936 *
Xxxxx X. Xxxxxxxx........................................... 14,601 *
Xxxxxxx Xxxxxxxxx........................................... 15,084 *
Xxxxx Xxxx.................................................. 983 *
Xxxx X. Xxxxxxx............................................. 10,084 *
Xxxx X. Xxxxxx.............................................. 24,879 *
Xxxxxx X. Xxxxx............................................. 62,411 *
Xxxxxxx X. Xxxxxxxxxx....................................... 28,001(4) *
Xxxxxxxx X. Xxxxxx.......................................... 27,656(5) *
Xxxxxx X. XxXxxxxx.......................................... 19,833(6) *
Xxxxx X. Xxxxxxxx........................................... 30,201 *
Xxxxx X. Xxxxxxxxx.......................................... 16,775 *
Xxxxxx X. Xxxx, Xx.......................................... 22,917(7) *
All directors and executive officers as a group (26
persons).................................................. 1,050,610 3.64%
------------------------
* 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.
NAME NUMBER OF SHARES
---- ----------------
Xx. Xxxxxxxxxx.............................................. 15,657
Xx. Xxxxxx.................................................. 5,533
Xx. Xxxxxxxxx............................................... 4,968
Xx. Xxxxxx.................................................. 5,878
Xx. Xxxxxx.................................................. 4,082
If shares of Common Stock are purchased in the Offer, there will be a change
in control of the Company, the restrictions on the restricted shares will
expire and the holder will have investment power over the shares.
In addition to the restricted shares, Xx. Xxxxxxxxxx also holds 28,828
Restricted Share Units, which do not have voting rights and may not be
transferred. After Xx. Xxxxxxxxxx'x retirement, these Restricted Share Units
will automatically convert into an equal number of shares of common
B-13
stock. If shares of Common Stock are purchased in the Offer, the units will
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 55,965 of the shares
listed, and the holders have sole voting power only over 76,455 of the
shares listed.
(2) Includes shares that may be acquired upon exercise of stock options that
were exercisable on May 31, 2001, or that as of the date hereof will become
exercisable within 60 days after May 31, 2001. The following list shows the
number of these shares.
NAME NUMBER OF SHARES
---- ----------------
Xx. Xxxxxx.................................................. 0
Xx. Xxxxxxxxxx.............................................. 60,000
Xx. Xxxxxx.................................................. 0
Xx. Xxxxxxxx................................................ 8,001
Xx. Xxxxxxxxx............................................... 4,001
Xx. Xxxx.................................................... 400
Xx. Xxxxxxx................................................. 4,001
Xx. Xxxxxx.................................................. 6,667
Xx. Xxxxxxxxxx.............................................. 8,001
Xx. Xxxxxx.................................................. 8,001
Xx. XxXxxxxx................................................ 8,001
Xx. Xxxxxxxx................................................ 8,001
Xx. Xxxxxxxxx............................................... 0
Xx. Xxxx.................................................... 6,001
All directors and executive officers as a group (26
persons).................................................. 158,675
In calculating the "percent of class," the shares subject to these options
have been treated as if they were issued and outstanding.
If shares of Common Stock are purchased in the Offer, the options covering
the shares held as listed below will also vest.
NAME NUMBER OF SHARES
---- ----------------
Xx. Xxxxxx.................................................. 30,000
Xx. Xxxxxxxxxx.............................................. 100,000
Xx. Xxxxxx.................................................. 30,000
Xx. Xxxxxxxx................................................ 1,999
Xx. Xxxxxxxxx............................................... 1,999
Xx. Xxxx.................................................... 1,600
Xx. Xxxxxxx................................................. 1,999
Xx. Xxxxxx.................................................. 7,333
Xx. Xxxxxxxxxx.............................................. 1,999
Xx. Xxxxxx.................................................. 1,999
Xx. XxXxxxxx................................................ 1,999
Xx. Xxxxxxxx................................................ 1,999
Xx. Xxxxxxxxx............................................... 30,000
Xx. Xxxx.................................................... 1,999
All directors and executive officers as a group (26
persons).................................................. 459,325
(3) Includes 1,674 shares owned by Xx. Xxxxxxxxxx'x wife and 2,585 shares held
by Xx. Xxxxxxxxxx'x wife as custodian for minor children.
B-14
(4) Xx. Xxxxxxxxxx has reported and disclaimed beneficial ownership of 1,300
shares owned by his wife.
(5) Includes 14,655 shares owned by a corporation of which Xx. Xxxxxx is sole
stockholder.
(6) Includes 5,832 shares owned by a trust of which Xx. XxXxxxxx is trustee.
(7) Xx. Xxxx has reported and disclaimed beneficial ownership of 1,500 shares
owned by a charitable trust of which Xx. Xxxx is trustee.
The Company 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 its 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, the Company 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 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 2000; 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, 2001, which is the same as the amount currently outstanding.
Directors: Xx. Xxxxxxxxx, $173,404; Xx. Xxxxxxx, $86,720; Xx. Xxxxxxxxxx,
$292,808; Xx. XxXxxxxx, $146,404; Xx. Xxxxxxxx, $293,807. Director and executive
officer: Xx. Xxxxxxxxxx, $3,312,356. Executive officers: Mr. Battle, $50,287;
Xx. Xxxxxx, $653,299; Xx. Xxxxx, $65,026; Ms. Hacking, $755,029; Xx. Xxxxxx,
$372,635; Xx. Xxxxx, $423,795; Xx. Xxxxxx, $391,893; Xx. Xxxxxx, $1,159,304;
Xx. Xxxxx, $738,647; Xx. Xxxxx, $589,248; Xx. Xxxxxx, $511,665.
PRINCIPAL STOCKHOLDERS
The following table shows, as of December 31, 2000, the only person we know
to be beneficial owner of more than 5% of the Company's common stock. This
information is based on the Schedule 13G report filed with the SEC by the person
listed in the table. This report has additional information about the filer's
beneficial ownership; you may obtain copies from the SEC.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER PERCENT OF CLASS BENEFICIAL OWNERSHIP
------------------- ---------------- -----------------------------------------
State Street Bank and Trust 5.5% 311,925 shares--sole voting power
Company, Trustee 1,417,004 shares--shared voting power
0 Xxxxxxxx Xxxxx 316,325 shares--sole dispositive power
Batterymarch III 1,432,004 shares--shared dispositive
Xxxxxx, XX 00000 power
B-15
EXECUTIVE COMPENSATION
The following table summarizes the compensation the Company paid the
Chairman, President, and Chief Executive Officer and the four other most highly
compensated executive officers during the last three years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
---------------------------------- --------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2)
--------------------------- -------- -------- -------- ------------ ---------- ---------- ------------
Xxxxx X. Xxxxxxxxxx........ 2000 $677,500 $127,598 $0 $ 0 40,180 $132,210
Chairman, President, 1999 630,000 333,347 0 0 0 178,313
and Chief Executive 1998 590,000 300,036 0 202,288 160,000 190,411
Officer
Xxxxxx Xxxxxx, Xx. ........ 2000 313,500 114,893 0 0 15,070 83,279
Executive Vice President 1999 295,750 120,000 0 13,766 0 90,477
1998 280,500 113,206 0 34,055 30,000 96,347
Xxxxx Xxxxxxxxx ........... 2000 281,005 113,600 0 8,055 0 13,335
Executive Vice President 1999 267,753 108,800 0 14,950 0 33,051
1998 247,500 101,655 0 32,360 30,000 33,642
Xxxx Xxxxxx ............... 2000 347,750 48,385 0 0 4,770 20,082
Executive Vice President 1999 333,000 109,174 0 0 48,507 0
and Chief Financial 1998 313,500 127,230 0 65,201 49,653 30,000
Officer
Xxxx Xxxxxx ............... 2000 278,750 112,000 0 3,495 7,640 10,500
Executive Vice President 1999(3) 180,080 74,250 0 194,000 10,000 10,000
------------------------
(1) 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. The restricted shares awarded
for 2000 were awarded on January 30, 2001 as part of the 2000 bonus.
Restrictions on shares awarded as part of the 1998, 1999, and 2000 bonuses
will lapse three years from the date of award provided the recipient remains
employed by the Company. Dividends are paid on all restricted shares at the
same rate paid to all stockholders. 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, 2000, 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 29, 2000: Xx. Xxxxxxxxxx, 47,055 shares,
with a year-end market value of $2,182,176; Xx. Xxxxxx, 5,533 shares, with a
year-end market value of $256,593; Xx. Xxxxxxxxx, 6,096 shares, with a
year-end market value of $282,702; Xx. Xxxxxx, 6,798 shares, with a year-end
market value of $315,257; Xx. Xxxxxx, 4,082 shares, with a year-end market
value of $189,303. Xx. Xxxxxxxxxx'x shares include 28,828 Restricted Share
Units which are detailed above.
(2) 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, the Company
provides 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.
B-16
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. As of January 1,
2001, the split-dollar policies for executives other than Xx. Xxxxxxxxxx and
Xx. Xxxxxx were converted to employee-owned whole life policies. The table
below shows the amounts we paid for each of these categories during 2000 for
the officers listed in the table.
NON-TERM
CONTRIBUTIONS TO CONTRIBUTIONS TO PORTION--
401(K) SUPPLEMENTAL TERM PORTION-- SPLIT-DOLLAR
NAME SAVINGS PLAN BENEFITS PLAN SPLIT-DOLLAR INSURANCE INSURANCE
---- ---------------- ---------------- ---------------------- ------------
Xx. Xxxxxxxxxx......... $7,650 $2,550 $22,503 $99,507
Xx. Xxxxxx............. 7,293 2,907 12,631 60,448
Xx. Xxxxxxxxx.......... 6,832 3,668 2,843 0
Xx. Xxxxxx............. 7,650 2,550 9,882 0
Xx. Xxxxxx............. 6,785 3,715 0 0
(3) Xx. Xxxxxx became an executive officer in 1999.
STOCK COMPENSATION PLAN
The Company believes that its officers and employees should have the same
interest in the Company's success as its stockholders. It encourages officers
and employees to become stockholders by a variety of grants under the 1998 Stock
Compensation Plan. These grants include options to buy the Company's stock,
restricted or bonus stock, and performance awards, where the amount of cash
and/or stock received depends on achieving specified performance goals.
STOCK OPTIONS
The following table shows stock option grants in 2000 to the officers named
in the Summary Compensation Table. The amounts shown as potentially realizable
values are based on the assumed appreciation rates required by the SEC, but the
real value of these options will depend entirely on the actual future share
price.
B-17
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR(1) ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ---------- ---------- ----------
Xxxxx X. Xxxxxxxxxx................ 40,180 6.63% $39.8125 2/29/2000 $441,958 $976,612
Xxxxxx Xxxxxx, Xx.................. 15,070 2.49 39.8125 2/29/2000 165,762 366,290
Xxxxx X. Xxxxxxxxx................. 0 0 -- -- -- --
Xxxx Xxxxxx........................ 4,770 0.79 39.8125 2/29/2000 52,467 115,939
Xxxx X. Xxxxxx..................... 7,640 1.26 39.8125 2/29/2000 84,036 185,697
------------------------
(1) Represents options granted under the 2000 Senior Management and Director
Stock Purchase Plan. Options were exercisable only on the date of grant.
The following table shows option exercises during 2000 by those officers. It
also shows the number of options they held as of May 31, 2001, both those
currently exercisable and those that will be exercisable in the future, along
with the value of these options at year-end. Because these options have not been
exercised, the values shown have not been realized. The options will have value
only if they are exercised, and that value will depend entirely on the share
price on the exercise date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
-------------- ----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(1)
--------------- -------------- -------------- ----------------
Xxxxx X. Xxxxxxxxxx................. 80,180 $750,000 60,000/100,000 $0/$0
Xxxxxx Xxxxxx, Xx................... 45,070 566,250 0/30,000 $0/$0
Xxxxx X. Xxxxxxxxx.................. 10,000 179,400 0/30,000 $0/$0
Xxxx Xxxxxx......................... 4,770 0 0/30,000 $0/$0
Xxxx X. Xxxxxx...................... 15,640 149,000 6,667/7,333 $0/$0
------------------------
(1) Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
B-18
RETIREMENT PLAN
The Company maintains a tax-qualified, defined benefit Retirement Plan, and
establishes an account for each eligible employee. Every year, the Company
credits 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 its 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 maintains a Supplemental Executive Retirement Plan
that provides retirement benefits in excess of these limits. The Company
calculates these supplemental benefits for the officers named in the Summary
Compensation Table and twelve other executive officers based on a formula which
uses a multiple of the employee's years of service and average annual earnings
for the three highest-paid consecutive years of service in the last ten years
before retirement. The following table shows the range of the estimated annual
retirement benefits under the Retirement Plan and the Supplemental Executive
Retirement Plan at the normal retirement age of 65 (calculated as of January 1,
2001) to those officers. The benefits shown in the table reflect a single life
annuity benefit.
As of December 31, 2000, the years of credited service and the compensation
that will be taken into account for pension calculations for 2000 for the
officers named in the Summary Compensation Table are: Xx. Xxxxxxxxxx, 35 years
and $1,010,847; Xx. Xxxxxx, 29 years and $433,534; Xx. Xxxxxxxxx, 5 years and
$389,810; Xx. Xxxxxx, 15 years and $456,924; and Xx. Xxxxxx, 7 years and
$353,000. Differences between the amount of compensation shown above and in the
Summary Compensation Table reflect differences in accounting for incentive
compensation payments, which are included in the year paid when calculating
pension benefits.
B-19
PENSION PLAN TABLE
AVERAGE ANNUAL
COMPENSATION
FOR THREE ESTIMATED ANNUAL BENEFIT FUNDED BY THE COMPANY
HIGHEST FOR YEARS OF PARTICIPATION INDICATED (1)
CONSECUTIVE ----------------------------------------------------------------
YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
--------------------- -------- -------- -------- -------- -------- ---------
$ 250,000 $84,375 $112,500 $140,625 $168,750 $196,875 $ 225,000
300,000 101,250 135,000 168,750 202,500 236,250 270,000
350,000 118,125 157,500 196,875 236,250 275,625 315,000
400,000 135,000 180,000 225,000 270,000 315,000 360,000
450,000 151,875 202,500 253,125 303,750 354,375 405,000
500,000 168,750 225,000 281,250 337,500 393,750 450,000
550,000 185,625 247,500 309,375 371,250 433,125 495,000
600,000 202,500 270,000 337,500 405,000 472,500 540,000
650,000 219,375 292,500 365,625 438,750 511,875 585,000
700,000 236,250 315,000 393,750 472,500 551,250 630,000
750,000 253,125 337,500 421,875 506,250 590,625 630,000
800,000 270,000 360,000 450,000 540,000 630,000 720,000
850,000 286,875 382,500 478,125 573,750 669,375 765,000
900,000 303,750 405,000 506,250 607,500 708,750 810,000
950,000 320,625 427,500 534,375 641,250 748,125 855,000
1,000,000 337,500 450,000 562,500 675,000 787,500 900,000
1,050,000 354,375 472,500 590,625 708,750 826,875 945,000
1,100,000 371,250 495,000 618,750 742,500 866,250 990,000
1,200,000 405,000 540,000 675,000 810,000 945,000 1,080,000
1,250,000 421,875 562,500 703,125 843,750 984,375 1,125,000
------------------------
(1) For Xx. Xxxxxxxxxx and Xx. Xxxxxx, the amounts shown approximate the value
of their retirement benefits and split-dollar life insurance policies.
As of December 31, 2000, the years of credited service and the compensation
that will be taken into account for pension calculations for 2000 for the
officers named in the Summary Compensation Table are: Xx. Xxxxxxxxxx, 35 years
and $1,010,847; Xx. Xxxxxx, 29 years and $433,534; Xx. Xxxxxxxxx, 5 years and
$389,810; Xx. Xxxxxx, 15 years and $456,924; and Xx. Xxxxxx, 7 years and
$353,000. Differences between the amount of compensation shown above and in the
Summary Compensation Table reflect differences in accounting for incentive
compensation payments, which are included in the year paid when calculating
pension benefits.
B-20
CHANGE-IN-CONTROL ARRANGEMENTS
SEVERANCE AGREEMENTS
Sixteen executive officers, including those named in the Summary
Compensation Table, have severance agreements with the Company. These agreements
have been entered into in the ordinary course of business and were in place
before negotiations began with Parent regarding the Offer and the Merger. The
senior executives' severance agreements expire on December 31, 2003, and are
automatically extended on an annual basis for an additional twelve-month period
unless the Company gives the executive at least eighteen months' notice that the
agreement will not be extended. Fifteen executive officers have agreements of
this kind. It also has severance agreements with some of its 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
Xx. Xxxxxxxxxx and the Company, severance benefits are payable under the same
conditions as for the senior executives, or if Xx. Xxxxxxxxxx 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 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 awarded in the preceding year or the average
incentive compensation awarded in the past three years;
- all incentive compensation earned but previously deferred and not yet
distributed;
- a pro-rata bonus for the part of the year which precedes a change in
control;
- 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.
B-21
The Company has 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, as defined in the Supplemental Benefit
Trust, includes a third party acquiring 15% or more of the Company's stock, the
Company 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, the Company remains obligated to pay any
deficiency.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Board or Compensation
Committee and the board of directors or compensation committee of any other
entity, nor has any such interlocking relationship existed in the past.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and greater-than-10% stockholders to file
reports of their beneficial ownership of Common Stock, and to provide the
Company with copies of all reports they file. The rules of the SEC require the
Company to disclose in this Information 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 2000.
CERTAIN TRANSACTIONS
Xx. Xxxxxxxxxx is a director of State Street Boston Corporation and its
principal subsidiary, State Street Bank and Trust Company. State Street Bank and
Trust Company is the Trustee of the Company's Retirement Trust, Employees'
Medical Benefits Trust, and Benefits Trust, and is also Trustee under the
Company's Indenture relating to the issuance of debt securities.
B-22
INDEX TO EXHIBITS
EXHIBIT NO.
-----------
Exhibit (a)(1) Offer to Purchase dated June 8, 2001*
Exhibit (a)(2) Letter of Transmittal dated June 8, 2001*
Exhibit (a)(3) Joint Press Release issued by Parent and the Company
dated June 1, 2001
Exhibit (a)(4) Summary Advertisement published in The Wall Street
Journal dated June 8, 2001
Exhibit (a)(5) Letter to Stockholders of the Company dated June 8,
2001*
Exhibit (e)(1) Opinion of JPMorgan dated May 31, 2001 (included as
Annex A to the Statement)*
Exhibit (e)(2) Agreement and Plan of Merger dated as of June 1, 2001,
among Parent, the Purchaser and the Company
(incorporated by reference to Exhibit (d)(1) to the
Schedule TO of Purchaser filed June 8, 2001)
Exhibit (e)(3) The Information Statement of the Company dated as of
June 8, 2001 (included as Annex B to the Statement)
Exhibit (e)(4) Confidentiality Agreement between Parent, Havas and the
Company dated January 17, 2001
------------------------
* Included with Schedule 14D-9 mailed to stockholders.
