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Exhibit (10)(iii)(A)
Form of Key Managers' Severance Agreement
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
AGREEMENT made effective as of the [____] day of [____________], 2000,
between Houghton Mifflin Company, a Massachusetts corporation (the "Company"),
and [__________________] (the "Executive") (the "Agreement"), which amends and
restates the prior agreement between the Company and the Executive made
[------------, -----].
WHEREAS the Company considers it essential to the best interests of its
stockholders to xxxxxx the continuous employment of its key management
personnel; and
WHEREAS the Board of Directors of the Company (the "Board") recognizes that
the uncertainty engendered by any potential change in control may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders;
NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement (if not provided where a capitalized term initially appears) are
provided in the last Section hereof.
2. TERM OF AGREEMENT. The term of this Agreement (the "Term") will
commence on the date hereof and end on December 31, [2003], unless further
extended as hereinafter provided. Commencing on January 1, [2002] and each
January 1 thereafter, the Term shall automatically be extended for one
additional year unless, not later than September 30 of the preceding year, the
Company (upon authorization by the Board) or the Executive shall have given
notice not to extend this Agreement; provided, however, if a Change in Control
shall have occurred during the Term, this Agreement shall continue in effect
(and the Term
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shall be extended) until at least the end of the Change-in-Control Protective
Period.
3. COMPANY'S COVENANTS SUMMARIZED. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the pro rata bonus described
in Section 5(c) hereof if a Change in Control occurs during the Term (and the
Executive remains in the employ of the Company immediately prior to the Change
in Control) and to pay the Executive the "Severance Payments" described in
Section 7(a) hereof and the other payments and benefits described herein if
there is a qualifying termination of the Executive's employment with the Company
following a Change in Control and during the Term. Except as provided in Section
5(c) hereof, no amount or benefit shall be payable under this Agreement unless
there shall have been (or, under the terms hereof, there shall be deemed to have
been) a termination of the Executive's employment with the Company following a
Change in Control. This Agreement shall not be construed as creating an express
or implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right to
be retained in the employ of the Company.
4. THE EXECUTIVE'S COVENANTS. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), by
reason of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. PRE-TERMINATION COMPENSATION.
(a) Following a Change in Control and during the Term, during any period
that the Executive fails to perform the Executive's full-time duties with the
Company as a result of
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incapacity due to physical or mental illness, the Company shall pay the
Executive's full salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period, until the
Executive's employment is terminated by the Company for Disability; provided,
however, that such salary payments shall be reduced by the sum of the amounts,
if any, payable to the Executive at or prior to the time of any such salary
payment under disability benefit plans of the Company or under the Social
Security disability insurance program, which amounts were not previously applied
to reduce any such salary payment.
(b) If the Executive's employment shall be terminated for any reason
(other than Disability) following a Change in Control and during the Term, the
Company shall pay the Executive's full salary (to the Executive or in accordance
with Section 10(b) hereof if the Executive's employment is terminated by the
Executive's death) through the Date of Termination at the higher of the rate in
effect at the time the Notice of Termination is given or the rate in effect
immediately prior to the Change in Control, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Company during such period.
(c) If a Change in Control occurs during the Term and the Executive
remains in the employ of the Company immediately prior to the Change in Control,
then, notwithstanding any other provision herein or in the Incentive
Compensation Plan in which the Executive is participating immediately prior to
the Change in Control, as soon as practicable after the occurrence of such
Change in Control and in lieu of any other annual bonus payment under such
Incentive Compensation Plan with respect to the Company's fiscal year in which
the Change in Control occurs, the Company shall pay the Executive a pro rata
bonus determined by multiplying (i) the Executive's target bonus for such fiscal
year by (ii) a fraction, the numerator of which shall be the number of days in
the then-current fiscal year up to and including the day the Change in Control
occurred and the denominator of which shall be three hundred-and-sixty-five
(365).
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6. NORMAL POST-TERMINATION PAYMENTS UPON TERMINATION OF EMPLOYMENT. If
the Executive's employment shall be terminated for any reason following a Change
in Control and during the Term, the Company shall pay the Executive's normal
post-termination compensation and benefits to the Executive as such payments
become due. Subject to Section 7(a) hereof, such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements (other than this Agreement).
7. SEVERANCE PAYMENTS.
(a) Subject to Section 7(b) hereof, the Company shall pay the Executive
the payments described in this Section 7(a) (the "Severance Payments") upon the
termination of the Executive's employment following a Change in Control and
prior to the end of the Term, in addition to any required payments and benefits
described in Sections 5 and 6 hereof, unless such termination is (i) by the
Company for Cause, (ii) by reason of death, Disability or Retirement, or (iii)
by the Executive without Good Reason. For purposes of the immediately preceding
sentence, if a termination of the Executive's employment occurs prior to a
Change in Control, but following a Potential Change in Control in which a Person
has entered into an agreement with the Company the consummation of which will
constitute a Change in Control, such termination shall be deemed to have
followed a Change in Control and to have been (i) by the Company without Cause,
if the Executive's employment is terminated without Cause with the encouragement
of, or at the direction of, such Person, or (ii) by the Executive with Good
Reason, if the Executive terminates the Executive's employment with Good Reason
and the act (or failure to act) which constitutes Good Reason occurs following
such Potential Change in Control and with the encouragement of, or at the
direction of, such Person.
i) In lieu of any further salary payments to the Executive for
period subsequent to the Date of Termination and in lieu of any other
severance benefits to which the Executive might otherwise be entitled, the
Company shall pay to the Executive a lump sum severance payment, in cash,
equal to two (2) times the sum of
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(X) the higher of the Executive's annual base salary in effect
immediately prior to the occurrence of the event or circumstance upon
which the Notice of Termination is based or the Executive's annual
base salary in effect immediately prior to the Change in Control, and
(Y) the higher of (I) the sum of the amounts (if any) which were paid
to the Executive pursuant to the Incentive Compensation Plan (whether
in cash or in restricted shares) in the Company's fiscal year
immediately preceding that in which the Date of Termination occurs and
which would have been so paid in such year but for the Executive's
prior deferral election, and (II) the average amounts so paid or
deferred in the Company's three fiscal years immediately preceding
that in which the Change in Control occurs; provided, however, that,
if, as the result of the Executive's having only recently been
employed by the Company, the amount determined under this clause (Y)
would be zero, there shall be substituted an amount equal to the
Executive's annual target bonus for the Company's fiscal year in which
the Change in Control occurred (or, if none, the annual target bonus
which would have been established for the Executive, given the
Executive's position in the Company, if the Executive had been
employed by the Company at the beginning of such fiscal year).
ii) Notwithstanding any provision of the Incentive Compensation
Plan, the Company shall pay to the Executive a lump sum amount, in cash,
equal to the sum of any incentive compensation which has been allocated or
awarded to the Executive for any completed fiscal year preceding the Date
of Termination under the Incentive Compensation Plan but has not yet been
either paid or deferred pursuant to an agreement with the Company;
iii) In addition to all other amounts payable to the Executive
under this Section 7(a), the Executive shall be entitled to receive from
the Company not later than the fifth day following the Date of Termination,
an amount in cash equal to, with respect to the Executive's interest in the
Excess Retirement Benefits Plan, the excess
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of the amount described in the following clause (X) over the amount
described in the following clause (Y):
(X) the lump sum amount which would have accrued to the Executive
under the terms of the Excess Retirement Benefits Plan (without taking
into account any offset required for the Pension Plan benefits),
calculated as if the Executive were fully vested thereunder and had
accumulated (after the Date of Termination) two additional years of
basic and supplemental earnings credits and interest credits
thereunder (but in no event shall the Executive be deemed to have
accumulated additional credits after the Executive's sixty-fifth
birthday). Such calculation shall be made without regard to any
amendment to any such plan made subsequent to a Change in Control and
on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder; and
(Y) the lump sum amount which had then accrued to the Executive
pursuant to the provisions of the Pension Plan and which will be paid
pursuant to the provisions thereof.
For purposes of calculating the two additional years of basic and
supplemental earnings credits under clause (X), compensation shall be
determined under the assumption that base pay increases on each April 1 by
the annual increase in pay assumed for funding purposes in the most recent
actuarial report prepared by the Pension Plan's actuary with respect to
such plan prior to the Change in Control and that 100% of target bonus will
be payable in each February during that two-year period. Upon the making
of, and to the extent of, such cash payment, the Company's obligations to
the Executive under the Excess Retirement Benefits Plan shall be cancelled.
iv) For the two-year period immediately following the Date of
Termination, the Company shall arrange to provide the Executive with life,
disability, accident and health insurance benefits substantially similar to
those which the Executive is receiving immediately prior to the Notice of
Termination (without
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giving effect to any reduction in such benefits subsequent to a Change in
Control if such reduction constitutes Good Reason). Benefits otherwise
receivable by the Executive pursuant to this Section 7(a)(iv) shall be
reduced to the extent comparable benefits are actually received by or made
available to the Executive without cost during the two-year period
following the Executive's termination of employment (and any such benefits
actually received by the Executive shall be reported to the Company by the
Executive). If the benefits provided to the Executive under this Section
7(a)(iv) shall result in a decrease, pursuant to Section 7(b), in the
Severance Payments and these Section 7(a)(iv) benefits are thereafter
reduced pursuant to the immediately preceding sentence because of the
receipt of comparable benefits, the Company shall, at the time of such
reduction, pay to the Executive the lesser of (a) the amount of the
decrease made in the Severance Payments pursuant to Section 7(b), or (b)
the maximum amount which can be paid to the Executive without being, or
causing any other payment to be, nondeductible by reason of section 280G of
the Code.
(b) Notwithstanding any other provisions of this Agreement, in the event
that any payment or benefit received or to be received by the Executive in
connection with a Change in Control or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such Person) (all
such payments and benefits, including the Severance Payments, being hereinafter
called "Total Payments") would not be deductible (in whole or part), by the
Company, an affiliate or Person making such payment or providing such benefit as
a result of section 280G of the Code, then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking into account any
reduction in the Total Payments provided by reason of section 280G of the Code
in such other plan, arrangement or agreement), (A) the cash Severance Payments
shall first be reduced (if necessary, to zero), and (B) all other non-cash
Severance Payments shall next be reduced (if necessary, to zero). For purposes
of this limitation (i) no portion of the Total Payments the receipt or enjoyment
of which the Executive shall have effectively waived in writing prior to the
Date of Termination shall be taken into account, (ii) no portion of the
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Total Payments shall be taken into account which in the opinion of tax counsel
selected by the Company's independent auditors and reasonably acceptable to the
Executive does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of
the Code, (iii) the Severance Payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(i) or (ii)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4)(B) of the Code or are
otherwise not subject to disallowance as deductions under section 280G of the
Code, in the opinion of the tax counsel referred to in clause (ii); and (iv) the
value of any non-cash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Section 7(b), the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate provided in section
1274(b)(2)(B) of the Code from the date of the Executive's receipt of such
excess until the date of such payment.
(c) The payments provided for in Section 7(a) hereof (other than Section
7(a)(iv)) shall be made not later than the fifth (5th) day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments to which
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the Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Company shall
provide the Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations, including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
(d) The Company also shall pay to the Executive all legal fees and
expenses incurred, in good faith, by the Executive as a result of a termination
(including all such fees and expenses, if any, incurred in disputing any such
termination or in seeking to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder). Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
8. TERMINATION PROCEDURES.
(a) NOTICE OF TERMINATION. Following any Change in Control and during the
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 11 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice
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of Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was called and
held for the purpose of considering such termination (after reasonable notice to
the Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
(b) DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment following a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated by the Executive's death, the date of the Executive's death, (ii) if
the Executive's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties during such
thirty (30) day period), and (iii) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of Termination (which, in
the case of a termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
(c) DISPUTE CONCERNING TERMINATION. If within fifteen (15) days after any
Notice of Termination is given, or, if later, prior to the Date of Termination
(as determined without regard to this Section 8(c)), the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which the dispute
is finally resolved, either by mutual written agreement of the parties or by a
final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good
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faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
(d) COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 8(c) hereof, the Company shall continue to
pay the Executive the full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with Section 8(c)
hereof. Amounts paid under this Section 8(d) are in addition to all other
amounts due under this Agreement (other than those due under Section 5(b)
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
9. NO MITIGATION. The Company agrees that, if the Executive's employment
by the Company is terminated following a Change in Control and during the Term,
the Executive is not required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the Company hereunder.
Further, the amount of any payment or benefit provided for hereunder (other than
pursuant to Section 7(a)(iv) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.
10. SUCCESSORS; BINDING AGREEMENT.
(a) In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
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the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
11. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or on the fifth business day after
the day on which mailed, if mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
To the Company:
Houghton Mifflin Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Corporate Secretary
To the Executive:
[Name ]
[Address ]
[City, State, Zip Code]
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12. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. This Agreement
sets forth the entire agreement of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject matter
contained herein is hereby terminated and cancelled. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts, without regard to its
conflicts of law principles. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. There shall be withheld from any payments provided for hereunder any
amounts required to be withheld under federal, state or local law and any
additional withholding amounts to which the Executive has agreed. The
obligations under this Agreement of either the Company or the Executive which by
their nature and terms require satisfaction after the end of the Term shall
survive such event and shall remain binding upon such party.
13. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
14. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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15. SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the Executive for
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that the Executive's claim has been denied.
To the extent permitted by applicable law, any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
16. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the meanings indicated below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" for termination by the Company of the Executive's employment,
for purposes of this Agreement, shall mean (i) the willful and continued failure
by the Executive to substantially perform the Executive's duties with the
Company (other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination for Good Reason by the Executive
pursuant to Section 8(a)) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties, (ii) the willful engaging by the Executive in
conduct which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise, or (iii) material breach by the Executive
of any of the material terms or conditions of this Agreement coupled with
failure to correct such breach within thirty (30) days after notice from the
Company specifying the breach. For purposes of clauses (i) and
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(ii) of this definition, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
(c) A "Change in Control" of the Company shall be deemed to have occurred
if any of the following occurs:
i) any "Person" (as defined in this Section) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
ii) during any period of no more than two consecutive years
beginning after the date hereof individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of
the Company) whose election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or whose
nomination for election was previously so approved or recommended, cease
for any reason to constitute at least a majority thereof;
iii) there occurs a merger or consolidation of the Company or a
subsidiary thereof with or into any other entity, other than (x) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) more than 75% of the combined
voting power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation or (y) a merger or consolidation effected to implement a
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recapitalization of the Company (or similar transaction) in which no Person
acquires 25% or more of the combined voting power of the Company's then
outstanding securities; or
iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
(d) "Change-in-Control Protective Period" shall mean the period from the
occurrence of a Change in Control until the second anniversary of such Change in
Control.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Company" shall mean Houghton Mifflin Company and any successor to its
business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under Section 16(c)
hereof, whether or not any Change in Control of the Company has occurred in
connection with such succession).
(g) "Date of Termination" shall have the meaning stated in Section 8(b)
hereof.
(h) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
on a full-time basis for the entire period of one-hundred-eighty (180)
consecutive days or for an aggregate period of two-hundred-ten (210) days during
a consecutive period of two-hundred-seventy (270) days, the Company shall have
given the Executive a Notice of Termination for Disability, and the Executive
shall not have returned to the full-time performance of the Executive's duties
within thirty (30) days after such Notice of Termination is given.
(i) "Executive" shall mean the individual named in the first paragraph of
this Agreement.
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(j) "Excess Retirement Benefits Plan" shall mean the Houghton Mifflin
Excess Retirement Benefits Plan, as amended from time to time, and any successor
plan.
(k) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or after any Potential Change in Control
under the circumstances described in the second sentence of Section 7(a) hereof
(treating all references in paragraphs (I) through (VII) below to a "Change in
Control" as references to a "Potential Change in Control"), of any one of the
following acts by the Company, or failures by the Company to act, unless, in the
case of any act or failure to act described in paragraph (I), (III), (V) or (VI)
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as an executive officer of the Company or any
substantial diminution, without the Executive's consent, in the Executive's
reporting responsibilities, powers, titles or offices as in effect
immediately prior to the Change in Control of the Company (other than any
such diminution primarily attributable to the fact that the Company may no
longer be a public company);
(II) any reduction in Base Salary, except for across-the-board
salary reductions similarly affecting all executives of the Company and all
executives of any person in control of the Company,
(III) any substantial reduction in the additional compensation
and benefits received by the Executive unless any such reduction shall be
generally applicable to executive personnel and all executives of any
person in control of the Company,
(IV) any requirement by the Company or of any person in control
of the Company that the Executive be based at a location outside the
metropolitan area in which the Executive was located immediately prior to
the Change in Control,
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(V) any requirement by the Company or of any person in control
of the Company that the Executive travel with an overnight stay in excess
of 30% of the work days in any calendar year, or
(VI) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 8(a) hereof (and, if applicable, the requirements
of Section 16(b)); for purposes of the Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(l) "Incentive Compensation Plan" shall mean the Houghton Mifflin Company
annual bonus or incentive compensation plan in which the Executive is
participating in the relevant year, or any successor annual bonus or incentive
compensation plan.
(m) "Notice of Termination" shall have the meaning stated in Section 8(a)
hereof.
(n) "Pension Plan" shall mean the Houghton Mifflin Retirement Plan, as
amended from time to time, or any successor plan.
(o) "Person" has the meaning given such term in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) of the Exchange
Act, but excludes (a) the Company or any of its subsidiaries, (b) any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
(or of any subsidiary of the Company), (c) any corporation owned, directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company and (d) an underwriter
tempo-
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rarily holding securities pursuant to an offering of such securities.
(p) "Potential Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied during the Term:
(I) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would constitute
a Change in Control;
(III) any Person (x) is or becomes the Beneficial Owner, directly
or indirectly, (y) discloses directly or indirectly to the Company (or
publicly) a plan or intention to become the Beneficial Owner, directly or
indirectly, or (z) makes a filing under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, with respect to securities to become
the Beneficial Owner, directly or indirectly, of securities of the Company
representing 9.9% or more of the combined voting power of the Company's
then outstanding securities; or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(q) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated (i) with the Executive's prior written consent, as a result of which
the Executive is immediately eligible for retirement benefits under the Pension
Plan or (ii) in accordance with any retirement arrangement established with the
Executive's prior written consent with respect to the Executive.
(r) "Severance Payments" shall mean those payments described in Section
7(a) hereof.
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(s) "Term" shall have the meaning stated in Section 2 hereof.
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(t) "Total Payments" shall mean those payments so described in Section
7(b) hereof.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and
seals on the day and year first above written.
HOUGHTON MIFFLIN COMPANY
By
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Name: Xxxxx X. Xxxxxxxxxx
Title: President and
Chief Executive Officer
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[Name of Executive]
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