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Exhibit (10)(iii)(A)
HOUGHTON MIFFLIN COMPANY
BENEFITS TRUST AGREEMENT
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TRUST AGREEMENT, dated June 3, 1992, by and between Houghton Mifflin
Company, a Massachusetts corporation (the "Corporation"), and State Street Bank
and Trust Company, as trustee of the Trust created hereby (the "Trustee").
WHEREAS, the Corporation is or may become obligated in respect of its
existing and future compensation and benefit plans, agreements, programs and
arrangements (collectively referred to herein as the "Plans") to make payments
to past, present or future employees or their beneficiaries; and
WHEREAS, for purposes of providing a source of funds for the satisfaction,
in whole or in part, of such obligations, as the Board of Directors of the
Corporation may from time to time determine, the Corporation desires to
establish a trust (the "Trust"), which is a grantor trust within the meaning of
section 671 of the Internal Revenue Code of 1986, as amended (the "Code"), the
assets of which shall be subject to the claims of the Corporation's existing or
future creditors;
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NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the parties hereto agree as
follows:
ARTICLE I
PURPOSE OF THE TRUST
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SECTION 1.01 PLANS. The purpose of the Trust is to hold equity securities
of the Corporation ("HM Securities") or other property as herein provided as a
source of funds to satisfy the Corporation's obligations under the Plans. The
Corporation shall continue to be liable to make all payments required to be made
by the Corporation under the terms of the Plans to the extent such payments have
not been made pursuant to this Trust Agreement. Distributions made from the
Trust in respect of the Plans pursuant to Section 3.01 shall, to the extent of
such distributions, satisfy the Corporation's obligations under the Plans.
ARTICLE II
TRUST AND THE TRUST CORPUS
--------------------------
SECTION 2.01 DELIVERY OF FUNDS AND COMMON STOCK. (a) Concurrently with the
execution of this Trust Agreement the Corporation is selling to the Trustee from
its treasury 375,000 shares (the "Acquired Shares")
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of common stock of the Corporation, par value $1.00 per share ("Common Stock"),
such Acquired Shares to be administered and disposed of by the Trustee as
provided herein. Concurrently with the execution of this Trust Agreement the
Trustee is delivering to the Corporation, on behalf of the Trust, a Note (the
"Note") of the Trust in payment of the purchase price for the Acquired Shares,
in a principal amount equal to 375,000 multiplied by the last sale price,
regular way, as reported on the New York Stock Exchange, Inc. Composite Tape on
the last trading day immediately preceding such delivery, such Note to be in the
form set forth as Exhibit A annexed hereto.
(b) The Corporation may sell or otherwise deliver to the Trustee
additional amounts of cash or Cash Equivalents or HM Securities to be held in
trust hereunder.
SECTION 2.02 TRUST CORPUS. As used herein, the term "Trust Corpus" shall
mean any cash or Cash Equivalents or HM Securities delivered to the Trustee as
described in Section 2.01(a) hereof, together with any earnings thereon or any
proceeds from the disposition thereof, plus any cash or Cash Equivalents (as
defined below) or HM Securities sold or otherwise delivered thereafter pursuant
to Section 2.01(b) hereof, together
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with any earnings thereon or any proceeds from the disposition thereof (and less
such amounts distributed from the Trust pursuant to Sections 3.01 and 3.02
hereof or otherwise pursuant to the terms hereof). As used herein, the term
"Cash Equivalents" shall mean (i) securities issued or directly and fully
guaranteed by the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of less than one year from the date of
acquisition, (ii) Eurodollar time deposits and certificates of deposit or
bankers' acceptances of a bank whose commercial paper, or whose parent's
commercial paper, is rated at least A-1 or the equivalent thereof by Standard &
Poor's Corporation ("S&P") or at least P-1 or the equivalent thereof by Xxxxx'x
Investors Service, Inc. ("Moody's") with maturities of not more than one year
from the date of acquisition, and (iii) commercial paper rated at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's. The Trust Corpus shall at all times be limited to HM Securities and
cash or Cash Equivalents.
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ARTICLE III
RELEASE OF THE TRUST CORPUS
---------------------------
SECTION 3.01 USE OF ASSETS. {a) In accordance with the provisions hereof,
the Trustee shall apply the Trust Corpus (i) in its discretion to acquire
additional HM Securities, (ii) in its discretion to the payment of any
indebtedness (including the Note) of the Trust which is then outstanding, in
accordance with the terms thereof, or (iii) only as directed by the Corporation
or its delegate (x) on behalf of the Corporation to the satisfaction of the
Corporation's obligations under the Plans or (y) to the reimbursement of
payments made by the Corporation in satisfaction of its obligations under the
Plans; however, the Trustee shall not be required to apply the Trust Corpus to
the satisfaction of any obligation or the reimbursement of any payment made by
the Company in cash or Cash Equivalents during the period that the Company
exercises its right to prevent the Trustee from disposing of HM Securities
pursuant to Section 4.03(b), if and to the extent that, at the time the
Company's direction to so apply the Trust Corpus is received by the Trustee, the
Trust Corpus does not contain sufficient cash or Cash Equivalents to comply with
the Company's direction without disposing of HM Securities.
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(b) Except as provided in Sections 3.01(a) and 4.03(b), the
Corporation shall have no power to direct the Trustee to take or omit to take
any action with respect to the Trust Corpus.
SECTION 3.02 DELIVERIES TO CREDITORS OF THE CORPORATION. It is the intent
of the parties hereto that the Trust Corpus is and shall remain at all times
subject to the claims of the general creditors of the Corporation. Accordingly,
neither the Trustee nor the Corporation shall create a security interest in the
Trust Corpus in favor of the Plans or any creditor. If the Trustee receives the
notice provided for in Section 3.03, or if the Trust Department of the Trustee
otherwise receives actual notice that the Corporation is insolvent or bankrupt
as defined in Section 3.03, the Trustee shall make no further distributions of
the Trust Corpus as directed by the Corporation but shall deliver the entire
amount of the Trust Corpus only as a court of competent jurisdiction, or duly
appointed receiver or other person authorized to act by such a court, may
direct. The Trustee shall resume distribution of the Trust Corpus as directed by
the Corporation under the terms hereof, upon no less than 30 days' advance
notice to the Corporation, if it determines that the Corporation was not, or is
no longer,
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bankrupt or insolvent. Such determination shall be made in a timely fashion, and
shall be based upon a decision of a court of competent jurisdiction, a report of
a nationally recognized appraisal firm or a certification by the Chief Executive
Officer of the Corporation of a determination of its Board of Directors. Unless
the Trust Department of the Trustee has actual knowledge of the Corporation's
bankruptcy or insolvency, the Trustee shall have no duty to inquire whether the
Corporation is bankrupt or insolvent.
SECTION 3.03 NOTIFICATION OF BANKRUPTCY OR INSOLVENCY. The Corporation
shall advise the Trustee promptly in writing of the Corporation's bankruptcy or
insolvency. The Corporation shall be deemed to be bankrupt or insolvent upon the
occurrence of any of the following:
(i) The Corporation shall make an assignment for the benefit of
creditors, file a petition in bankruptcy, petition or apply to any
tribunal for the appointment of a custodian, receiver, liquidator,
sequestrator, or any trustee for it or a substantial part of its
assets, or shall commence any case under any bankruptcy, insolvency,
reorganiza-
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tion, arrangement, readjustment of debt, dissolution, liquidation or
similar law or statute of any jurisdiction (federal or state), whether
now or hereafter in effect; or if there shall have been filed any such
petition or application, or any such case shall have been commenced
against it, in which an order for relief is entered or which remains
undismissed for a period of 120 days; or the Corporation by any act or
omission shall indicate its consent to, approval of or acquiescence in
any such petition, application or case or order for relief or to the
appointment of a custodian, receiver or any trustee for it or any
substantial part of any of its property, or shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged
for a period of 120 days; or
(ii) The Corporation shall generally not pay its debts as such
debts become due or shall cease to pay its debts generally in the
ordinary course of business.
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ARTICLE IV
TRUSTEE
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SECTION 4.01 TRUSTEE. (a) The duties and responsibilities of the Trustee
shall be limited to those expressly set forth in this Trust Agreement, and no
implied covenants or obligations shall be read into this Trust Agreement against
the Trustee.
(b) If, under circumstances described in Section 3.03 or otherwise,
all or any part of the Trust Corpus is at any time attached, garnished, or
levied upon by any court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or enjoined by any
court order, or in case any order, judgment or decree shall be made or entered
by a court affecting such property or any part thereof, then and in any of such
events the Trustee is authorized, in its sole discretion, to rely upon and
comply with any such order, writ, judgment or decree, and it shall not be liable
to the Corporation, any Plan or any participant in any Plan by reason of such
compliance even though such order, writ, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.
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(c) The Trustee or its agent shall maintain such books, records and
accounts as may be necessary for the proper administration of the Trust Corpus,
including without limitation as provided in Section 2.01, and shall render to
the Corporation, within 30 days of the end of each calendar quarter following
the date of this Trust Agreement until the termination of the Trust (and on the
date of such termination or as promptly as practicable thereafter), an
accounting with respect to the Trust Corpus as of the end of the then most
recent calendar quarter (and as of the date of such termination).
(d) The Trustee shall not be liable for any act taken or omitted to be
taken hereunder if taken or omitted to be taken by it in good faith. The Trustee
shall also be fully protected in relying upon any notice or instruction given
hereunder which it in good faith believes to be genuine and executed and
delivered in accordance with this Trust.
(e) The Trustee may consult with legal counsel to be selected by it,
including counsel to the Corporation, and the Trustee shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel.
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(f) The Trustee shall be reimbursed by the Corporation for its
reasonable expenses incurred in connection with the performance of its duties
hereunder and shall be paid reasonable fees for the performance of such duties.
Any amounts payable to the Trustee under this paragraph (f) may be payable from
the Trust Corpus.
(g) Except for any damages, losses, claims or expenses resulting from
the Trustee's gross negligence or willful misconduct, the Corporation agrees to
indemnify and hold harmless the Trustee from and against any and all damages,
losses, claims or expenses as incurred (including reasonable expenses of
investigation and reasonable fees, charges and disbursements of counsel to the
Trustee and any taxes imposed on the Trust Corpus or income of the Trust and
including any and all liabilities relating to the Trustee being deemed an
underwriter under applicable federal securities laws) arising out of or in
connection with the performance by the Trustee of its duties hereunder. Without
limiting the generality of the foregoing, the Company, as grantor hereunder,
expressly acknowledges that the Trustee may take any action with respect to the
Trust Corpus which the Trustee deems to be in furtherance of the purposes of
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the Trust, without regard to whether such action is otherwise in the interest of
the Company.
(h) The Trustee shall have the following additional powers and
authority, in furtherance of the purposes of the Trust as described in Section
1.01, and consistent with Section 2.02, with respect to property constituting a
part or all of the Trust Corpus:
(i) To acquire and hold HM Securities and cash or Cash
Equivalents; to sell, exchange or transfer any such property at public
or private sale for cash or on credit and grant options for the
purchase or exchange thereof; however, the Trustee shall sell,
exchange or transfer or grant options for the purchase or exchange of
any HM Securities only as provided in Section 4.03;
(ii) To exercise any conversion privilege or subscription right
available in connection with any such property; to oppose or to
consent to the reorganization, consolidation, merger or readjustment
of the finances of any corporation, company or association, or to the
sale, mortgage, pledge or lease of the property of any corporation,
company or associ-
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ation, any of the securities of which may at any time be held in the
Trust and to do any act with reference thereto, including the exercise
of options, the making of agreements or subscriptions and the payment
of expenses, assessments or subscriptions, which may be deemed
necessary or advisable in connection therewith, and to hold and retain
any securities or other property which it may so acquire;
(iii) To commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to settle,
compromise or submit to arbitration, any claims, debts or damages, due
or owing to or from the Trust;
(iv) To exercise, personally or by general or limited power of
attorney, any right, including the right to vote, appurtenant to any
HM Securities or other property; to enter into any voting agreement or
voting trust, which voting agreement or voting trust shall be binding
upon any successor trustee but shall not survive as to any HM
Securities disposed of for value by the Trustee;
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(v) To engage legal counsel, including counsel to the
Corporation, or any other suitable agents, to consult with such
counsel or agents with respect to the construction of this Trust
Agreement, the duties of the Trustee hereunder, the transactions
contemplated by this Trust Agreement or any act which the Trustee
proposes to take or omit to take, to rely upon the advice of such
counsel or agents, and to pay its reasonable fees, expenses and
compensation;
(vi) To register any securities held by it in its own name or in
the name of any custodian of such property or of its nominee,
including the nominee of any system for the central handling of
securities, with or without the addition of words indicating that such
securities are held in a fiduciary capacity, to deposit or arrange for
the deposit of any such securities with such a system and to hold any
securities in bearer form;
(vii) To make, execute and deliver, as Trustee, any and all
deeds, leases, notes, bonds, guarantees, mortgages, convey-
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ances, contracts, waivers, proxies, releases or other instruments in
writing necessary or proper for the exercise of any of the foregoing
powers; and
(viii) To take any other action necessary or advisable in
furtherance of the foregoing powers and the purposes of this Trust.
SECTION 4.02 SUCCESSOR TRUSTEE. The Trustee may resign and be discharged
from its duties hereunder at any time by giving to the Corporation notice in
writing of such resignation specifying a date (not less than 30 days after the
giving of such notice) when such resignation shall take effect. Promptly after
such notice, the Corporation shall appoint a successor trustee, such trustee to
become Trustee hereunder upon the resignation date specified in such notice. The
Trustee shall continue to serve until its successor accepts the trust and
receives delivery of the Trust Corpus. The Corporation may at any time
substitute a new trustee by giving 15 days' notice thereof to the Trustee then
acting. In the event of such removal or resignation, the Trustee shall duly file
with the Corporation a written statement or statements of account as provided in
Section 4.01(c) for
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the period since the last previous annual accounting of the Trust, and if
written objection to such account is not filed within 90 days the Trustee shall
to the maximum extent permitted by applicable law be forever released and
discharged from all liability and accountability with respect to the propriety
of its acts and transactions shown in such account.
SECTION 4.03 REGISTRATION RIGHTS; LIMITATIONS ON SALES. (a) Promptly
following the consummation of the transactions contemplated by Section 2.01(a)
the Corporation shall prepare and file, at its own expense, a "shelf"
registration statement on Form S-3 or on any other appropriate form (such
registration statement as it may be amended or supplemented from time to time,
being hereinafter referred to as the "Registration Statement") in accordance
with Rule 415 under the Securities Act of 1993 as amended (the "Act"), with the
Securities and Exchange Commission (the "SEC"} with respect to Acquired Shares
and shall use its reasonable efforts to cause the Registration Statement to
become effective as soon as practicable thereafter. Once effective, except as
otherwise provided in Section 4.03(b), (the Corporation shall use its reasonable
efforts (i} to keep the Registration Statement effective until the second
anniversary
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of the date hereof and (ii) thereafter to afford the Trustee reasonable means to
dispose of HM Securities in compliance with applicable securities laws. The
Corporation will notify the Trustee of the effectiveness of the Registration
Statement and shall furnish to the Trustee such number of copies as the Trustee
may reasonably request of the Registration Statement (including any amendments,
supplements and exhibits), the prospectus contained therein (including each
preliminary prospectus and any summary prospectus), any documents incorporated
by reference in the Registration Statement and such other documents as the
Trustee may reasonably request in order to facilitate its sale of the Acquired
Shares in the manner described in the Registration Statement. The Corporation
shall use its reasonable efforts to prepare and file with the SEC from time to
time such amendments and supplements to the Registration Statement and
prospectus used in connection therewith as may be necessary to keep the
Registration Statement effective and to comply with the provisions of the Act
with respect to the disposition of all the Acquired Shares until the later of
(x) such time as all of the Acquired Shares have been disposed of in accordance
with the intended methods of disposition by the Trustee set forth in the
Registration
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Statement or (y) the date on which the Registration Statement ceases to be
effective in accordance with the terms of this Section 4.03(a). The Corporation
shall also use its reasonable efforts to register or qualify such shares of
Common Stock covered by the Registration Statement under the "blue sky" or
securities laws of such jurisdictions within the United States as the Trustee
may reasonably request; however, the Corporation need not consent to the general
service of process for all purposes in any jurisdiction where it is not then
qualified to do business.
(b) The Trustee shall not sell, exchange or transfer any HM
Securities or grant any option for the purchase or exchange of any HM Securities
(each a "Securities Transaction") unless the Trustee shall have given the
Corporation 10 business days' prior notice of such Securities Transaction. The
Trustee's notice shall state with respect to such Securities Transaction (i) the
amount of HM Securities involved, (ii) whether it will be effected through the
public markets and (iii) the date it is proposed to be entered into. If the
Corporation is advised in writing by a recognized independent investment banking
firm that such Securities Transaction would adversely affect any financing by
the Corporation that had
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been contemplated by the Corporation prior to the receipt of such notice or if
the Corporation determines in the good faith judgment of the general counsel of
the Corporation that such Securities Transaction would require the Corporation
to disclose material information which the Corporation has a bona fide business
purpose for preserving as confidential or that the Corporation is unable to
comply with SEC requirements prior to such Securities Transaction, the
Corporation may give notice to the Trustee not to effect such Securities
Transaction prior to the date specified in the Trustee's notice. Upon receipt of
such a notice from the Corporation, the Trustee shall not effect such Securities
Transaction for a period not to exceed 120 days from the date of the
Corporation's notice or such lesser period as shall be specified in the
Corporation's notice.
ARTICLE V
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 5.01 TERMINATION. The Trust shall be terminated on the twentieth
anniversary of the date hereof (the "Termination Date") unless any of the
following events sooner occur: (a) the Common Stock ceases to be registered
under the Securities Exchange Act of 1934, as amended, (b) the Corporation's
obligations under the
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Plans are terminated or (c) the Trust Corpus is exhausted. Upon termination of
the Trust, any remaining portion of the Trust Corpus shall be applied in the
following order: first, to satisfy any outstanding indebtedness of the Trust;
second, as directed by the Corporation or its delegate pursuant to Section
3.01(a); and third, to provide grants to charitable organizations qualified
under Section 501(c)(3) of the Code designated by the Corporation or its
delegate. In no event shall the Corporation receive any distribution of the
Trust Corpus except in repayment of indebtedness to the Corporation incurred by
the Trustee or in reimbursement of payments made by the Corporation in
satisfaction of its obligations under the Plans.
SECTION 5.02 AMENDMENT AND WAIVER. Prior to the termination of the Trust,
the Corporation and the Trustee may amend this Trust Agreement (including making
an amendment which terminates the Trust hereunder) by written instrument
executed and duly authorized by the Corporation and the Trustee; however, no
such amendment shall accelerate the Termination Date or permit the Corporation
to receive any distribution prohibited by the last sentence of Section 5.01.
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ARTICLE VI
GENERAL PROVISIONS
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SECTION 6.01 CERTAIN PROVISIONS RELATING TO THIS TRUST AGREEMENT. (a) This
Trust Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and legal representatives.
(b) This Trust Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to any provisions of such laws regarding choice of laws or conflict of laws.
(c) In the event that any provision of this Trust Agreement or
the application thereof to any person or circumstances shall be determined by a
court of proper jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Trust Agreement, or the application of such provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each other provision of this
Trust Agreement shall be valid and enforced to the fullest extent permitted by
law.
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(d) Any rights or obligations of the Board of Directors of the
Corporation may be exercised or performed by a committee of such Board of
Directors.
SECTION 6.02 NOTICES. Any notice, report, demand or waiver required or
permitted hereunder shall be in writing and shall be given personally, delivered
by overnight delivery service or sent by telecopier, addressed as follows:
If to the Corporation:
Houghton Mifflin Company
Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone No: (000) 000-0000
Attention: General Counsel
If to the Trustee:
State Street Bank and Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone No: (000) 000-0000
Attention: Xxxx X. Xxxxxx
Assistant Vice President
Notices shall be effective only upon receipt.
The Corporation or Trustee may change the address to which notices,
requests and other communications are to be sent to it by giving written notice
of such address change to the other parties in conformity with this Section
6.02.
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SECTION 6.03 GENDER AND NUMBER. Wherever any words are used herein in the
masculine gender, they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form, they shall be construed as though they
were also used in the plural form in all cases where they would so apply.
Likewise, wherever any words are used herein in the plural form, they shall be
construed as though they were also used in the singular form in all cases where
they would so apply.
SECTION 6.04 HEADINGS. The headings and subheadings of this Agreement have
been inserted for convenience of reference and are to be ignored in any
construction of the provisions hereof.
SECTION 6.05 NO THIRD PARTY BENEFICIARIES. Nothing in this Trust, express
or implied, is intended to or shall confer on any particular person, other than
the Corporation and the Trustee, any right, benefit or remedy of any nature
whatsoever under or by reason of this Trust, and no such person shall have any
right, title or interest in or any claim to the Trust Corpus except to the
extent expressly provided in Section 5.01 upon termination of this Trust. In
particular, it is the express
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intent of the parties that (i) this Trust shall not form part of any of the
Plans, (ii) neither any Plan nor any participant in any of the Plans (nor any
beneficiary of such participant) shall have any right, title or interest in or
any claim to the Trust Corpus, nor shall any such participant have any right to
compel, restrain or otherwise direct the exercise of the respective powers of
Trustee and the Corporation hereunder, it being understood that the rights of
each such participant (and beneficiary) shall be determined in accordance with
the provisions of the Plans, and (iii) the Trust Corpus shall not be deemed to
be held under any trust for the benefit of any such participant (or beneficiary)
or to be collateral security for the performance of the obligations of the
Corporation.
SECTION 6.06 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together constitute but one instrument, which may be sufficiently evidenced by
any counterpart.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal in their respective names by their duly authorized officers the day
and year first above written.
HOUGHTON MIFFLIN COMPANY
By: /s/ Xxxxxxx X. Jabger
------------------------------------
Name: Xxxxxxx X. Jabger
Title: Executive Vice President
STATE STREET BANK AND TRUST COMPANY,
solely in its capacity as trustee under this
Trust Agreement
BY: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
