Exhibit 10.3

Execution Copy

SECOND AMENDMENT

TO THE AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT

SECOND AMENDMENT, dated as of November 22, 2005 (this “Amendment”), to the
Amended and Restated Credit and Guaranty Agreement, dated as of March 5, 2003
(as amended by the First Amendment, dated October 3, 2003, and as further
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Houghton Mifflin Company (“HM”), Houghton Mifflin Holdings,
Inc. (“Holding”), each lender from time to time party to the Credit Agreement
(the “Lenders”), CIBC World Markets Corp. and Goldman Sachs Credit Partners L.P.
(“GSCP”), as Joint Lead Arrangers and Joint Bookrunners, GSCP and Deutsche Bank
Securities Inc., as Co-Syndication Agents, Canadian Imperial Bank of Commerce,
as Administrative Agent and Collateral Trustee, Fleet Securities Inc. and Bank
One, N.A., as Co-Documentation Agents, and General Electric Capital Corporation,
as Senior Managing Agent.

W I T N E S S E T H:

WHEREAS, HM and Holding have requested certain amendments to the Credit
Agreement;

WHEREAS, HM has delivered notice to the Administrative Agent in accordance with
Section 2.13 of the Credit Agreement terminating $75,000,000 of the Revolving
Commitments, so that the aggregate amount of the Revolving Commitments at the
Second Amendment Effective Date is $250,000,000.

NOW THEREFORE, in consideration of the premises herein contained and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:

1. Defined Terms. Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.

2. Amendment to Section 1.1.

(a) Section 1.1 of the Credit Agreement is hereby amended by inserting in such
Section the following definitions in their appropriate alphabetical order:

“New Term Loan” as defined in Section 6.1(y).

“New Term Loan Commitments” as defined in Section 6.1(y).

“New Term Loan Documentation” as defined in Section 6.1(y).

“New Term Loan Intercreditor Agreement” means the intercreditor agreement
executed by the Administrative Agent and the administrative agent for the New
Term Loans in order to effectuate the intention of the parties thereto that any
New Term Loans be secured on an equal and ratable basis with the Indebtedness
incurred under this Credit Agreement.

 

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“Second Amendment” means the amendment to this Agreement dated as of
November 22, 2005.

“Second Amendment Effective Date” means the date on which the conditions set out
in Section 11 of the Second Amendment are waived or satisfied.

“Series” as defined in Section 6.1(y).

(b) The first sentence of the definition of “Permitted Business Acquisition
Amount” in Section 1.1 of the Credit Agreement is hereby amended by deleting the
text up to and including the word “further” in the first six lines of such
definition and inserting in lieu thereof the following:

“Permitted Business Acquisition Amount” shall mean each of $150,000,000 for any
individual acquisition and $300,000,000 in the aggregate from the Second
Amendment Effective Date until the date of determination;

(c) The definition of “Related Agreement” in Section 1.1 of the Credit Agreement
is hereby amended by deleting the period at the end of such definition and
inserting in lieu thereof the following:

and the New Term Loan Documentation.

(d) Provision (b) of the definition of “Excess Cash Flow” in Section 1.1 of the
Credit Agreement is hereby deleted and replaced with the following:

(b) any permanent voluntary reductions to the Revolving Commitments to the
extent that an equal amount of the Revolving Loans simultaneously is repaid, so
long as such amounts are not already reflected in Debt Service and any permanent
voluntary prepayments of the New Term Loans in accordance with the New Term Loan
Intercreditor Agreement,

3. Amendment to Section 2.14. Section 2.14(a) of the Credit Agreement is hereby
deleted.

4. Amendment to Section 2.15. Section 2.15(b) of the Credit Agreement is hereby
deleted and replaced with the following:

(b) Application of Mandatory Prepayments by Type of Loans. Any amount required
to be paid pursuant to Section 2.14(b) shall be applied as follows:

first, to repay any outstanding New Term Loans, if any, to the full extent
thereof;

 

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second, to repay outstanding Swing Line Loans to the full extent thereof;

third, to prepay the Revolving Loans to the full extent thereof and to further
permanently reduce the Revolving Commitments by the amount of such prepayment;
and

fourth, to cash collateralize Letters of Credit and to further permanently
reduce the Revolving Commitments by the amount of such cash collateralization.

5. Amendments to Section 5.1. Sections 5.1(b), (c), (d) and (e) of the Credit
Agreement are hereby amended by deeming all references therein to “Holding and
its Subsidiaries” as referring instead to “HM Publishing Corp. and its
Subsidiaries”.

6. Amendment to Section 6.1. Section 6.1 of the Credit Agreement is hereby
amended by inserting after Section 6.1(x) the following new Section 6.1(y):

; and (y) Indebtedness evidencing the establishment of one or more new term loan
commitments (the “New Term Loan Commitments”), by an amount not in excess of
$250,000,000 in the aggregate and not less than $75,000,000 initially and
thereafter in increments of not less than $20,000,000 (any such loan, a “New
Term Loan”), the proceeds of which shall be used for acquisitions; provided that
(1) the documentation with respect to such New Term Loan Commitments and New
Term Loans (the “New Term Loan Documentation”) shall, except to the extent
expressly set forth on Schedule A to the Second Amendment, be substantially
identical to the terms of the Credit Agreement and, without limiting the
generality of the foregoing, shall not have any representations, warranties,
covenants, events of default or any mandatory prepayment provisions which are
more onerous to any Credit Party than those contained in the Credit Agreement
(unless in each case the corresponding provisions in the Credit Agreement are
revised by the Administrative Agent pursuant to its authority conveyed
thereunder by Section 17 of the Second Amendment to conform to those relevant
provisions in the New Term Loan Documentation) and shall not confer on any
holder of the New Term Loan Commitments or New Term Loans more rights than those
conferred on the holders of the Indebtedness evidenced by the Credit Agreement
and shall otherwise be reasonably acceptable to the Administrative Agent;
(2) there shall be no obligor in respect of the New Term Loan Commitments or the
New Term Loans which is not an obligor under the Credit Agreement; (3) the
Administrative Agent shall have the option in its sole discretion to act as
administrative agent with respect to each Series of New Term Loans; (4) no
Default or Event of Default under any of the Credit Documents shall exist before
or

 

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after giving effect to any such Series of New Term Loan Commitments; (5) both
before and after giving effect to the making of any Series of New Term Loans,
the conditions set forth in Section 3.2(c) and (e) of the Credit Agreement shall
be satisfied; (6) Company and its Subsidiaries shall be in pro forma compliance
with each of the covenants set forth in Section 6.7 of the Credit Agreement as
of the last day of the most recently ended Fiscal Quarter after giving effect to
any such Series of New Term Loan Commitments; and (7) Company shall deliver or
cause to be delivered any legal opinions or other documents, in each case as
reasonably requested by Administrative Agent, in connection with any such
transaction; and provided further that any such Indebtedness incurred pursuant
to this Section 6.1(y) shall not be otherwise prohibited by the terms of any
Contractual Obligation of Holdings, HM or any of its Subsidiaries. Any New Term
Loans made pursuant to this Section 6.1(y) shall be designated a separate series
(a “Series”) of New Term Loans for all purposes of this Agreement.

7. Amendment to Section 6.2. Section 6.2 of the Credit Agreement is hereby
amended by inserting after Section 6.2(v) the following new Section 6.2(w):

; and (w) Liens securing Indebtedness permitted to be incurred pursuant to
Section 6.1(y) and subject to the New Term Loan Intercreditor Agreement.

8. Amendment to Section 6.4. Section 6.4 of the Credit Agreement is hereby
amended by deleting the period at the end of such Section and inserting in lieu
thereof the following:

; and (m) Company or Holdings may redeem, repurchase, retire or defease
(including in-substance or legal defeasance) the Senior Notes, the Intermediate
Holding Notes, any Permitted Refinancing Indebtedness with respect thereto, or
Subordinated Indebtedness; provided that (i) the amount of such redemption,
repurchase, retirement or defeasance shall not exceed $100,000,000 in the
aggregate and (ii) the Total Leverage Ratio as of the date of determination
shall be 0.25 basis points less than the correlative ratio indicated for the
relevant period in Section 6.7(b) of the Credit Agreement.

9. Amendments to Section 6.7. Each of Sections 6.7(b), (c) and (d) of the Credit
Agreement is hereby amended in its entirety by substituting the following in its
place:

(b) Total Leverage Ratio. Holding and Company shall not permit the Total
Leverage Ratio as of the last day of any Fiscal Quarter specified below to
exceed the correlative ratio indicated:

 

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Fiscal Quarters Ending

   Total
Leverage Ratio

March 31, 2003 through December 31, 2003

   5.15:1.00

March 31, 2004 through June 30, 2005

   5.10:1.00

September 30, 2005 through June 30, 2006

   4.75:1.00

September 30, 2006 through December 31, 2006

   4.50:1.00

March 31, 2007 through June 30, 2007

   4.25:1.00

September 30, 2007 through December 31, 2007

   4.00:1.00

March 31, 2008 through December 31, 2008

   3.75:1.00

Thereafter

   3.50:1.00

(c) Senior Leverage Ratio. Holding and Company shall not permit the Senior
Leverage Ratio as of the last day of any Fiscal Quarter specified below to
exceed the correlative ratio indicated:

 

Fiscal Quarters Ending

   Senior
Leverage Ratio

March 31, 2003 through June 30, 2006

   3.50:1.00

September 30, 2006 through December 31, 2006

   3.25:1.00

March 31, 2007 through December 31, 2007

   3.00:1.00

March 31, 2008 through December 31, 2008

   2.75:1.00

Thereafter

   2.50:1.00

(d) Maximum Consolidated Capital Expenditures. (i) Company shall not, and shall
not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures,
in any Fiscal Year specified

 

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below, in an aggregate amount in excess of the corresponding amount set forth
below opposite such Fiscal Year; provided, such amount for any Fiscal Year shall
be increased by an amount equal to 50% of the excess, if any (without giving
effect to any adjustment in accordance with this proviso) over the actual amount
of Consolidated Capital Expenditures for the previous Fiscal Year:

 

Fiscal Year

   Consolidated
Capital
Expenditures

2003

   $ 180,000,000

2004

   $ 155,000,000

2005

   $ 190,000,000

2006

   $ 190,000,000

2007

   $ 190,000,000

2008

   $ 190,000,000

2009

   $ 190,000,000

2010

   $ 190,000,000

10. Amendment to Schedule 1.1(a). Footnote (e) to Schedule 1.1(a) of the Credit
Agreement is hereby deleted and replaced with the following:

(e) Not to exceed $35.0 million, of which $25.0 million must be funded on the
Closing Date and expensed in 2003 and the remaining $10.0 million must be
expensed prior to December 31, 2004; provided that notwithstanding the
foregoing, an additional $10.0 million may be expensed in the aggregate
following the Second Amendment Effective Date and prior to December 31, 2006.

11. Effectiveness. This Amendment shall become effective as of the date (the
“Second Amendment Effective Date”) on which the following conditions are
satisfied:

(a) The Administrative Agent shall have received counterparts hereof duly
executed by HM, Holding, Intermediate Holding and the Administrative Agent;

(b) The Administrative Agent shall have received consent letters from the
Requisite Lenders authorizing the Administrative Agent to enter into this
Amendment;

(c) As of the Second Amendment Effective Date, the representations and
warranties contained herein and in the other Credit Documents made by any Credit
Party

 

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shall hereby be deemed to be repeated on and as of the Second Amendment
Effective Date and shall be true and correct in all material respects on and as
of the Second Amendment Effective Date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date;

(d) On or prior to the Second Amendment Effective Date, HM shall have
permanently reduced the Revolving Commitments by $75,000,000 by delivering
notice to the Administrative Agent as provided for by Section 2.13 of the Credit
Agreement; and

(e) As of the Second Amendment Effective Date, no Default or Event of Default
shall have occurred and be continuing or shall be caused hereby.

12. New Term Loan Intercreditor. Each Lender executing this Second Amendment
hereby authorizes and instructs the Administrative Agent to enter into
amendments and restatements or such other modifications of any Collateral
Document as the Administrative Agent reasonably determines necessary in
connection with and prior to the incurrence of the Indebtedness permitted
pursuant to Section 6.1(y) in order to secure the New Term Loans on an equal and
ratable basis with the Obligations, including without limitation by the
amendment of the definition of “Majority Secured Parties” to include the holders
of the New Term Loans on the same ratable basis as the existing “Secured
Parties” in respect of the existing “Secured Obligations” which terms shall be
likewise modified, or in place of such amendments, restatements or modifications
to the Collateral Documents, to enter into the New Term Loan Intercreditor
Agreement to achieve the same result in respect of any Liens granted to secure
the New Term Loans by Grantors on Collateral (which shall be the only Liens
granted in respect of the New Term Loans); provided that (i) any such
modification shall provide that the New Term Loans are not provided any more
benefits or rights than, and are subject to at least the same obligations as,
the existing Secured Parties under the Collateral Documents and (ii) any such
amended, restated or otherwise modified Collateral Document or New Term Loan
Intercreditor Agreement shall be distributed to each Lender at least five
Business Days prior to its effectiveness.

13. Continuing Effect of Credit Agreement. This Amendment shall not be construed
as a waiver of or consent to any further or future action on the part of the
Credit Parties that would require a waiver or consent by the Administrative
Agent and/or the Lenders. Except as expressly amended hereby, the Credit
Agreement shall continue to be and shall remain in full force and effect in
accordance with its terms.

14. Counterparts. This Amendment may be executed by one or more of the parties
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
Delivery of an executed signature page of this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.

15. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

16. Expenses. HM agrees to pay or reimburse the Administrative Agent for all of
its out-of-pocket costs and expenses incurred in connection with the
preparation, negotiation

 

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and execution of this Amendment, including, without limitation, the fees and
disbursements of counsel to the Administrative Agent.

17. Miscellaneous. To facilitate reference to the provisions of the Credit
Agreement, as amended by this Second Amendment, each Lender executing this
Second Amendment hereby authorizes the Administrative Agent, on its behalf, to
enter into an amendment and restatement of the Credit Agreement, at the
Administrative Agent’s option, as amended by this Second Amendment, including,
without limitation, so as to give effect to revisions to the Credit Agreement to
conform to the New Term Loan Documentation, as expressly provided for pursuant
to Section 6.1(y)(1) of the Credit Agreement; provided that any such amendment
and restatement shall be distributed to each Lender.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
and delivered by their duly authorized officers as of the date first written
above.

 

HOUGHTON MIFFLIN COMPANY By:  

/s/ Joseph P. Fargnoli

  Name: Joseph P. Fargnoli   Title: TREASURER HOUGHTON MIFFLIN HOLDINGS, INC.
By:  

/s/ Joseph P. Fargnoli

  Name: Joseph P. Fargnoli   Title: TREASURER HM PUBLISHING CORP. By:  

/s/ Joseph P. Fargnoli

  Name: Joseph P. Fargnoli   Title: TREASURER

 

S-1

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CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent By:  

/s/ Gerald Girardi

  Name: Gerald Girardi  

Title: Canadian Imperial Bank of Commerce

Authorized Signatory

 

S-2

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CIBC Inc. By:  

/s/ Gerald Girardi

  Name: Gerald Girardi  

Title: Authorized Signatory

CIBC Inc.

 

S-3

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GOLDMAN SACHS CREDIT PARTNERS L.P. (NAME OF LENDER) By:  

/s/ Elizabeth Fischer

  Name: Elizabeth Fischer   Title: Authorized Signatory

 

S-4

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JPMorgan Chase Bank By:  

/s/ D. Scott Farquhar

  Name: D. Scott Farquhar   Title: Vice President

 

S-5

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Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services
Inc. By:  

/s/ Kelli O’Connell

  Name: Kelli O’Connell   Title: Vice President

 

S-6

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General Electric Capital Corporation (NAME OF LENDER) By:  

/s/ Karl Kieffer

  Name: Karl Keiffer   Title: Duly Authorized Signatory

 

S-7

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Transamerica Business Capital Corporation (NAME OF LENDER) By:  

/s/ Karl Kieffer

  Name: Karl Keiffer   Title: Duly Authorized Signatory

 

S-8

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ALLIED IRISH BANKS PLC

By:  

/s/ Roisin O’Connell

  Name: Roisin O’ Connell   Title: Vice President By:  

/s/ Rima Terradista

  Name: Rima Terradista  

Title: Co-Head Leverage Finance

Director of Corporate Banking North America

 

S-9

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Webster Bank, National Association

By:  

/s/ Hans Jung

  Name: Hans Jung   Title: Vice President

 

S-10

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NORTH FORK BUSINESS CAPITAL CORPORATION By:  

/s/ Ron Walker

  Name: Ron Walker   Title: VP

 

S-11

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Deutsche Bank Trust Company Americas By:  

/s/ Susan L. LeFevre

  Name: Susan L. LeFevre   Title: Director By:  

/s/ Omayra Laucella

  Name: Omayra Laucella   Title: Vice President

 

S-12

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SCHEDULE A TO

SECOND AMENDMENT TO

AMENDED AND RESTATED

CREDIT AND GUARANTY AGREEMENT

NEW TERM LOANS

In all events, any New Term Loans incurred under Section 6.1(y) shall conform
with the following:

(i) the aggregate annual scheduled amortization in respect of any Series of New
Term Loans shall not exceed 5.0% of the principal amount of such Series prior to
the Revolving Loan Maturity Date;

(ii) the applicable New Term Loan Maturity Date of each Series shall be no
shorter than six months following the latest of the final maturity of the
Revolving Loans; and

(iii) the rate of interest applicable to the New Term Loans of each Series shall
be determined by Company and the applicable new Lenders and shall be set forth
in the New Term Loan Documentation; provided however that the interest rate
applicable to the New Term Loans shall not be greater than the highest interest
rate that may, under any circumstances, be payable with respect to Revolving
Loans plus 0.25% per annum unless the interest rate with respect to the
Revolving Loans are increased so as to equal the interest rate applicable to the
New Term Loans.

 

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