Document:

Executive Salary Continuation Agreement for Mark H. Towe

 EXHIBIT 10.4 
  
 EXECUTIVE SALARY CONTINUATION AGREEMENT 
  
 THIS AGREEMENT, made and entered into this 27th day of June, 2005, by and between Surrey Bank & Trust, a bank
organized and existing under the laws of the State of North Carolina (hereinafter referred to as the “Bank”), and Mark H. Towe, an Executive of the Bank (hereinafter referred to as the “Executive”). 
  
 W I T N E S S E T H: 
  
 WHEREAS, the Executive has been and continues to be a valued Executive
of the Bank, and is now serving the Bank; 
  
 WHEREAS, it
is the consensus of the Board of Directors (hereinafter referred to as the “Board”) that the Executive’s employment with the Bank in the past has been of exceptional merit and has constituted an invaluable contribution to the general
welfare of the Bank in bringing the Bank to its present status of operating efficiency and present position in its field of activity; 
  
 WHEREAS, the Executive’s experience, knowledge of the affairs of the Bank, reputation, and contacts in the industry are so valuable that
assurance of the Executive’s continued employment is essential for the future growth and profits of the Bank and it is in the best interests of the Bank to arrange terms of continued employment for the Executive so as to reasonably assure the
Executive remains in the Bank’s employ during the Executive’s lifetime or until the age of retirement; 
  
 WHEREAS, it is the desire of the Bank that the Executive’s employment be retained as herein provided; 
  
 WHEREAS, the Executive is willing to continue in the employ of the
Bank provided the Bank agrees to pay the Executive or the Executive’s beneficiary(ies), certain benefits in accordance with the terms and conditions hereinafter set forth; 
  

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 ACCORDINGLY, it is the desire of the Bank and the Executive to enter into this Agreement under
which the Bank will agree to make certain payments to the Executive at retirement or the Executive’s beneficiary(ies) in the event of the Executive’s death pursuant to this Agreement; 
  
 FURTHERMORE, it is the intent of the parties hereto that this
Executive Plan be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Executive, and be considered a non-qualified benefit plan for purposes of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”). The Executive is fully advised of the Bank’s financial status and has had substantial input in the design and operation of this benefit plan; and 
  
 THEREFORE, in consideration of past employment performance and
employment to be performed in the future as well as the mutual promises and covenants herein contained it is agreed as follows: 
  
 XXX. EFFECTIVE DATE 
  
 The Effective Date of this Agreement shall be February 17, 2005. 
  

XXXI. EMPLOYMENT 
  
 The Bank agrees to employ the Executive in such capacity as the Bank may from time to time determine. The Executive will continue in the employ of the
Bank in such capacity and with such duties and responsibilities as may be assigned to him, and with such compensation as may be determined from time to time by the Board of Directors of the Bank. 
  
 XXXII. FRINGE BENEFITS 
  
 The salary continuation benefits provided by this Agreement are granted by the Bank as a fringe benefit to the Executive and
are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. The Executive has no option to take any current payment or bonus in lieu of these salary continuation benefits except as set forth hereinafter.

  
 XXXIII. DEFINITIONS 
  

	 	A.	Retirement Date: 

  
 If the Executive remains in the continuous employ of the Bank, the Executive shall retire from active employment with the Bank on the Executive’s
sixty-fifth (65th) birthday, unless by action of the Board of Directors this period of active employment shall be
shortened or extended. 
  

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	 	B.	Normal Retirement Age: 

  
 Normal Retirement Age shall mean the date on which the Executive attains age sixty-five (65). 
  

	 	C.	Plan Year: 

  
 Any reference to “Plan Year” shall mean a calendar year from January 1 to December 31. In the year of implementation, the term “Plan
Year” shall mean the period from the effective date to December 31 of the year of the effective date. 
  

	 	D.	Termination of Employment: 

  
 Termination of Employment shall mean voluntary resignation of employment by the Executive or the Bank’s discharge of the Executive without cause
(“cause” defined in Subparagraph IV [E] hereinafter), prior to the Normal Retirement Age (defined in Subparagraph IV [B]). 
  

	 	K.	Discharge for Cause: 

  
 The term “for cause” shall mean any of the following that result in an adverse effect on the Bank: (i) gross negligence or gross neglect; (ii)
the commission of a felony or gross misdemeanor involving fraud or dishonesty; (iii) the willful violation of any law, rule, or regulation (other than a traffic violation or similar offense); (iv) an intentional failure to perform stated duties; or
(v) a breach of fiduciary duty involving personal profit. If a dispute arises as to discharge “for cause”, such dispute shall be resolved by arbitration as set forth in this Executive Plan. 
  

	 	L.	Change of Control: 

  
 Change of Control shall be defined as follows: 
  

	 	a.	the acquisition of more than fifty percent (50%) of the value or voting power of the Bank’s stock by a person or group; 

  

	 	b.	the acquisition in a period of twelve months or less of at least thirty-five percent (35%) of the Bank’s stock by a person or group; 

  

	 	c.	the replacement of a majority of the Bank’s board in a period of twelve months or less by Directors who were not endorsed by a majority of the current board members; or

  

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	 	d.	the acquisition in a period of twelve months or less of forty percent (40%) or more of the Bank’s assets by an unrelated entity. 

  
 For the purposes of this Agreement, transfers made on account of deaths or
gifts, transfers between family members or transfers to a qualified retirement plan maintained by the Bank shall not be considered in determining whether there has been a Change in Control. 
  
 XXXIV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT 
  
 The Bank, commencing with the first day of the month following the
Retirement Date (Subparagraph IV [A]), shall pay the Executive an annual benefit equal to Fifty Thousand Eight Hundred Twenty Seven and 00/100th Dollars ($50,827.00). Said benefit shall be paid in equal monthly installments (1/12 of the annual benefit) until the death of the Executive. Upon the death of the Executive, if there is a balance in
the accrued liability retirement account, such balance shall be paid in a lump sum to the individual or individuals the Executive may have designated in writing and filed with the Bank. In the absence of any effective beneficiary designation, any
such amount becoming due and payable upon the death of the Executive shall be payable to the duly qualified executor or administrator of the Executive’s estate. Said payment due hereunder shall be made the first day of the second month
following the decease of the Executive. 
  
 If the Executive is a
key employee (as defined by the Internal Revenue Service) of a publicly traded bank at the time of retirement, any such benefit payment shall be withheld for six (6) months, from such retirement. 
  
 XXXV. DEATH BENEFIT PRIOR TO RETIREMENT 
  
 In the event the Executive should die while actively employed by the Bank at
any time after the date of this Agreement but prior to the Executive attaining the age of sixty-five (65) years (or such later date as may be agreed upon), the Bank will pay the accrued balance, on the date of death, of the Executive’s accrued
liability retirement account in one (1) lump sum to such individual or individuals as the Executive may have designated in writing and filed with the Bank, at which time this Agreement shall terminate. In the absence of any effective beneficiary
designation, any such amount becoming due and payable upon the death of the Executive shall be payable to the duly qualified executor or administrator of the Executive’s estate. Said payment due hereunder shall be made by the first day of the
second month following the decease of the Executive. 
  

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 XXXVI. BENEFIT ACCOUNTING/ACCRUED LIABILITY RETIREMENT ACCOUNT 
  
 The Bank shall account for this benefit using the regulatory accounting
principles of the Bank’s primary federal regulator. The Bank shall establish an accrued liability retirement account for the Executive into which appropriate reserves shall be accrued. 
  
 XXXVII. VESTING 
  
 Executive shall be one hundred percent (100%) vested in the accrued liability retirement account from the Effective Date of
this Agreement. 
  
 IX. DISABILITY 
  
 In the event that there is a finding of any qualified period of disability
for the Executive, the Bank will deposit into the Contingent Disability Trust for Executive (hereafter “Trust”) an amount equal to the accrued liability retirement account established on the Executive’s behalf pursuant to this
Agreement. No other benefits will be owed to the Executive under this Agreement during the Period of Disability. 
  
 An Executive is considered disabled if he or she is: [1] unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or [2] by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the
Executive of the Bank. If there is a dispute regarding whether the Executive is disabled, such dispute shall be resolved by a physician mutually selected by the Bank and the Executive and such resolution shall be binding upon all parties to this
Agreement. 
  
 If the Executive is under a Period of Disability
on the date the Executive reaches Normal Retirement Age, this agreement shall automatically terminate and the Executive shall not be entitled to any further benefits under this Agreement. 
  
 If the Period of Disability ends prior to Normal Retirement Age and the
Executive returns to active employment with the Bank, the Bank will pay the Executive a reduced retirement benefit amount. The retirement benefit amount shall be reduced by the thirteen (13) year annual annuity that would be payable from the Trust
assuming the trust assets earned on a net of four percent (4%) annually starting from the date of the existence of said Trust. 
  
 XXXVIII. TERMINATION OF EMPLOYMENT 
  
 Subject to Subparagraph IV (E), in the event that the employment of the Executive shall terminate prior to Normal Retirement Age, as provided in
Subparagraph IV (B), by the Executive’s voluntary action, or by the Executive’s discharge by the Bank without cause, then this Agreement shall terminate upon the date of such termination of employment and the Bank shall pay to the
Executive an amount of money equal to balance of the Executive’s accrued liability retirement account on the date of said termination. This compensation shall be paid in a lump sum thirty (30) days following Normal Retirement Age. Such balance
shall accrue interest on a monthly basis equal to the average prior years’ tax equivalent yield for the Bank’s cumulative Bank owned Life Insurance policies until said payment is made. 
  

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 If the Executive is a key employee (as defined by the Internal Revenue Service) of a publicly traded bank
at the time of termination, any such benefit payment shall be withheld for six (6) months, from such termination. 
  
 In the event the Executive’s death should occur after such termination but prior to the payment provided for in this Paragraph X, the lump sum shall
be paid to such individual or individuals as the Executive may have designated in writing and filed with the Bank. In the absence of any effective beneficiary designation, any such amount shall be payable to the duly qualified executor or
administrator of the Executive’s estate. Said payment due hereunder shall be made the first day of the second month following the decease of the Executive. 
  
 In the event the Executive shall be discharged for cause at any time in accordance with Subparagraph IV (E), this Agreement
shall terminate and all benefits provided herein shall be forfeited. 
  
 XXXIX.
CHANGE OF CONTROL 
  
 If the Executive subsequently suffers a
Termination of Employment (voluntarily or involuntarily), except for cause, six (6) months prior to or anytime subsequent to a Change of Control as defined in Subparagraph IV (F), then the Executive shall receive the benefits in Paragraph V herein
upon attaining Normal Retirement Age (Subparagraph IV [B]), as if the Executive had been continuously employed by the Bank until the Executive’s Normal Retirement Age. 
  
 XL. RESTRICTIONS ON FUNDING 
  
 The Bank shall have no obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Executive Plan. The
Executive, their beneficiary(ies), or any successor in interest shall be and remain simply a general creditor of the Bank in the same manner as any other creditor having a general claim for matured and unpaid compensation. 
  
 The Bank reserves the absolute right, at its sole discretion, to either fund
the obligations undertaken by this Executive Plan or to refrain from funding the same and to determine the extent, nature and method of such funding. Should the Bank elect to fund this Executive Plan, in whole or in part, through the purchase of
life insurance, mutual funds, disability policies or annuities, the Bank reserves the absolute right, in its sole discretion, to terminate such funding at any time, in whole or in part. At no time shall any Executive be deemed to have any lien,
right, title or interest in any specific funding investment or assets of the Bank. 
  
 If the Bank elects to invest in a life insurance, disability or annuity policy on the life of the Executive, then the Executive shall assist the Bank by freely submitting to a physical exam and supplying such
additional information necessary to obtain such insurance or annuities. 
  

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 XLI. MISCELLANEOUS 
  

	 	A.	Alienability and Assignment Prohibition: 

  
 Neither the Executive, nor the Executive’s surviving spouse, nor any other beneficiary(ies) under this Executive Plan shall have any power or right
to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or otherwise encumber in advance any of the benefits payable hereunder nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony or
separate maintenance owed by the Executive or the Executive’s beneficiary(ies), nor be transferable by operation of law in the event of bankruptcy, insolvency or otherwise. In the event the Executive or any beneficiary attempts assignment,
commutation, hypothecation, transfer or disposal of the benefits hereunder, the Bank’s liabilities shall forthwith cease and terminate. 
  

	 	B.	Binding Obligation of the Bank and any Successor in Interest: 

  
 The Bank shall not merge or consolidate into or with another bank or sell substantially all of its assets to another bank, firm or person until such bank,
firm or person expressly agree, in writing, to assume and discharge the duties and obligations of the Bank under this Executive Plan. This Executive Plan shall be binding upon the parties hereto, their successors, beneficiaries, heirs and personal
representatives. 
  

	 	C.	Amendment or Revocation: 

  
 Subject to Paragraph XIV, it is agreed by and between the parties hereto that, during the lifetime of the Executive, this Executive Plan may be amended or
revoked at any time or times, in whole or in part, by the mutual written consent of the Executive and the Bank. 
  

	 	D.	Gender: 

  
 Whenever in this Executive Plan words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter
gender, whenever they should so apply. 
  

	 	E.	Effect on Other Bank Benefit Plans: 

  
 Nothing contained in this Executive Plan shall affect the right of the Executive to participate in or be covered by any qualified or non-qualified
pension, profit-sharing, group, bonus or other supplemental compensation or fringe benefit plan constituting a part of the Bank’s existing or future compensation structure. 
  

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	 	F.	Headings: 

  
 Headings and subheadings in this Executive Plan are inserted for reference and convenience only and shall not be deemed a part of this Executive Plan.

  

	 	G.	Applicable Law: 

  
 The laws of the State of North Carolina shall govern the validity and interpretation of this Agreement. 
  

	 	H.	Partial Invalidity: 

  
 If any term, provision, covenant, or condition of this Executive Plan is determined by an arbitrator or a court, as the case may be, to be invalid, void,
or unenforceable, such determination shall not render any other term, provision, covenant, or condition invalid, void, or unenforceable, and the Executive Plan shall remain in full force and effect notwithstanding such partial invalidity.

  

	 	I.	Not a Contract of Employment: 

  
 This Agreement shall not be deemed to constitute a contract of employment between the parties hereto, nor shall any provision hereof restrict the right of
the Bank to discharge the Executive, or restrict the right of the Executive to terminate employment. 
  
 XLII. ADMINISTRATIVE AND CLAIMS PROVISION 
  

	 	A.	Named Fiduciary and Plan Administrator: 

  
 The “Named Fiduciary and Plan Administrator” of this Executive Plan shall be Surrey Bank & Trust. As Named Fiduciary and Plan Administrator,
the Bank shall be responsible for the management, control and administration of the Executive Plan. The Named Fiduciary may delegate to others certain aspects of the management and operation responsibilities of the Executive Plan including the
employment of advisors and the delegation of ministerial duties to qualified individuals. 
  

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	 	B.	Claims Procedure: 

  
 In the event a dispute arises over benefits under this Executive Plan and benefits are not paid to the Executive (or to the Executive’s
beneficiary(ies) in the case of the Executive’s death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Named Fiduciary and Plan Administrator named above within forty-five (45) days
from the date payments are refused. The Named Fiduciary and Plan Administrator shall review the written claim and if the claim is denied, in whole or in part, they shall provide in writing within forty-five (45) days of receipt of such claim the
specific reasons for such denial, reference to the provisions of this Executive Plan upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional
steps to be taken by claimants if a further review of the claim denial is desired. A claim shall be deemed denied if the Named Fiduciary and Plan Administrator fail to take any action within the aforesaid forty-five (45) day period. 
  
 If claimants desire a second review they shall notify the Named Fiduciary
and Plan Administrator in writing within forty-five (45) days of the first claim denial. Claimants may review this Executive Plan or any documents relating thereto and submit any written issues and comments it may feel appropriate. In their sole
discretion, the Named Fiduciary and Plan Administrator shall then review the second claim and provide a written decision within forty-five (45) days of receipt of such claim. This decision shall likewise state the specific reasons for the decision
and shall include reference to specific provisions of the Plan Agreement upon which the decision is based. 
  

	 	F.	Arbitration: 

  
 If claimants continue to dispute the benefit denial based upon completed performance of this Executive Plan or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to an Arbitrator for final arbitration. The Arbitrator shall be selected by mutual agreement of the Bank and the claimants. The Arbitrator shall operate under any generally recognized set of
arbitration rules. The parties hereto agree that they and their heirs, personal representatives, successors and assigns shall be bound by the decision of such Arbitrator with respect to any controversy properly submitted to it for determination.

  
 Where a dispute arises as to the Bank’s discharge of the
Executive “for cause,” such dispute shall likewise be submitted to arbitration as above described and the parties hereto agree to be bound by the decision thereunder. 
  

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 In any event of litigation or arbitration, should the Executive be successful, the Bank will cover any
and all legal fees. 
  
 XLIII. TERMINATION OR MODIFICATION OF AGREEMENT BY
REASON OF CHANGES IN THE LAW, RULES OR REGULATIONS 
  
 The
Bank is entering into this Agreement upon the assumption that certain existing tax laws, rules and regulations will continue in effect in their current form. If any said assumptions should change and said change has a detrimental effect on this
Executive Plan, then the Bank reserves the right to terminate or modify this Agreement accordingly. Upon a Change of Control (Subparagraph IV [F]), this paragraph shall become null and void effective immediately upon said Change of Control.

  
 IN WITNESS WHEREOF, the parties hereto acknowledge that
each has carefully read this Agreement and executed the original thereof on the first day set forth hereinabove, and that, upon execution, each has received a conforming copy. 
  

					
	 	 	SURREY BANK & TRUST
	 	 	Mount Airy, North Carolina
			
	 /s/ Brenda J. Harding

	 	By:	 	 /s/ Edward C. Ashby,
III                    Pres

	Witness	 	 	 	(Bank Officer other than Insured)    Title
		
	 /s/ Pedro A. Pequeno, II

	 	 /s/ Mark H. Towe

	Witness	 	Mark H. Towe

  

 59SEPARATION AGREEMENT

 Exhibit 10.1 
  
 Name: Sylvia Metayer 
  
 SEPARATION AGREEMENT 
  
 The purpose of this Separation Agreement including Exhibit A and Exhibit B, referred to as the “Agreement”) is to set forth the terms of your
separation from Houghton Mifflin Company (the “Company”). Payment of the Severance Benefits described below is contingent on your agreement to and compliance with the terms of this Agreement, as set forth below. 
  
 1. Separation of Employment. Your employment with the Company
will end on July 31, 2005 (the “Separation Date”), which shall be treated as the termination of your employment for all purposes (including without limitation all benefit plans and agreements and all employment references) unless otherwise
stipulated in this Separation Agreement. Your responsibilities for the Assessment Group prior to this Agreement have been reassigned. From the date of this Agreement through July 31, 2005, you will continue to provide Executive services to the
Company as discussed, including representing the Company as a member of the board of directors of the SIIA and the MTF. You acknowledge that from and after July 31, 2005, you shall have no authority to, and shall not, represent yourself as an
employee or agent of the Company or incur any expenses on the Company’s behalf without the Company’s express, prior approval. 
  
 2. Severance Benefits. In exchange for the promises and obligations set forth in this Agreement, and beginning as soon as practicable
following your timely execution of this Agreement and the expiration of the rescission period described in Section 6 without your revocation, the Company will provide you with the following Severance Benefits: 
  
 (i) You are a participant in employee benefit plans and policies of general
application. As of the Separation Date, you are entitled to receive the benefits of these plans and policies in accordance with their terms, as set forth in the statement, attached as Exhibit A, from James Kennedy, Vice President, Benefits.

  
 (ii) The following individual agreements between you and the
Company –- Employment letter dated September 19, 2002 (“Employment Agreement”), letter dated September 15, 2003, amending the Employment Agreement (“Compensation Agreement”), and letter agreement dated September 17, 2003,
pertaining to enhanced severance terms and post employment restrictions (“Enhancement Agreement”) (collectively the “Three Agreements”)—shall continue in effect in accordance with their terms, except that the following terms
supersede any inconsistent provisions of the Three Agreements: 
  

	 	(a)	The duration of severance pay to which you are entitled under section 3.(d) of the Enhancement Agreement will be reduced from 24 months to 21 months, commencing August 1, 2005, and
further described in section 1 of Exhibit A. 

	 	(b)	The Enhancement Agreement is amended as follows: 

  
 The terms “Company” and “Affiliates” refer only to Houghton Mifflin Company (“Houghton Mifflin”), its operational divisions
and subsidiaries. The term “employee” refers to any person in the employ of Houghton Mifflin, its operational divisions and subsidiaries. 
  
 The covenants in Paragraph 1(d)(i) shall only apply in the United States, and shall only apply to basal educational publishing in the K-12 market.
However, during the Non-Competition Period, you will seek prior written approval to work for a direct competitor of any division or subsidiary of Houghton Mifflin not operating in basal educational publishing in the K-12 market in the United States,
which approval shall not be unreasonably withheld. 
  
 During
the Non-Competition Period, you will seek prior written approval to hire any Person who is or was employed by Houghton Mifflin, its operational divisions and its subsidiaries, at any time within the preceding six months, provided however that in the
case of former employees who were involuntarily separated, such approval shall not be unreasonably withheld, and in the specific case of Jerome Lalin and Iwan Streichenberger, no post-employment restrictions shall apply. 
  
 (iii) You shall be entitled to receive a cash bonus payment of $120,000 in
Q1 of 2006, in lieu of participation in the Company’s 2005 Management Incentive Plan as further described in section 1 of Exhibit A. 
  
 (iv) The options you hold under the Company’s 2003 Stock Option Plan, reflected in your Class A Option Certificate dated December 19, 2003, are
hereby amended and restated as set forth in a new Class A Option Certificate approved by the Board of Directors of the Company on April 6, 2005, in the form attached as Exhibit B. 
  
 (v) You may retain your laptop computer. 
  
 3. Confidentiality. You expressly acknowledge and agree to the following: 
  
 (i) The confidentiality obligations you have pledged to the Company as set
forth in section 1 of the Enhanced Agreement and as may additionally appear in the Three Agreements, are incorporated herein and shall survive the signing of this Agreement, and you hereby reaffirm your obligation to fully abide by said provisions.
 
  
 (ii) All information relating in any way to
this Agreement, including the terms and amount of financial consideration provided for in this Agreement, shall be held confidential by you and shall not be publicized or disclosed to any person (other than an immediate family member, legal counsel
or financial advisor, provided that any such individual to whom disclosure is made agrees to be bound by these 

  

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confidentiality obligations), business entity or government agency except as required by law, except that nothing in this paragraph shall prohibit you from
participating in an investigation with a state or federal agency. 
  
 4. Future Cooperation. You agree that you will make yourself available to the Company either by telephone or, if the Company believes necessary, in person upon reasonable notice, to assist the Company in connection with any
matter relating to services performed by you on behalf of the Company prior to the Separation Date. You further agree that you will cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or which may
be brought or threatened in the future against or on behalf of the Company, its directors, shareholders, officers, or employees. The Company shall reimburse you for reasonable documented travel expenses incurred should your presence be required in
person. Your cooperation in connection with such claims or actions shall include, without limitation, your being available to meet with the Company to prepare for any proceeding (including depositions), to provide affidavits, to assist with any
audit, inspection, proceeding or other inquiry, and to act as a witness in connection with any litigation or other legal proceeding affecting the Company. You further agree that for two years from the date you sign this Agreement, should you be
contacted by any individual, or by any person representing such individual, who notifies you that he or she is in litigation adverse to Houghton Mifflin or is considering bringing a claim adverse to Houghton Mifflin, you will not discuss such
litigation or such claim with that individual or his or her representative nor voluntarily assist such individual in bringing a claim against Houghton Mifflin. You will use your best efforts to notify Houghton Mifflin of such contact within five
business days. This provision does not prevent you from having contact not related to assisting in the development of a claim against the Company. 
  
 5. Release of Claims. 
  
 (i) By signing this Agreement, you, on behalf of yourself, your agents, heirs, survivors, successors and assigns (“Executive’s Released
Parties”), and Houghton Mifflin Company and its subsidiaries, divisions, affiliates, officers, directors, employees, agents, representatives, predecessors, successors and assigns (“Company’s Released Parties”), hereby mutually
waive their respective rights to assert any and all forms of legal Claims of any kind whatsoever, whether known or unknown, arising from the beginning of time through the date of execution of this Separation Agreement (“Execution Date”),
against the other. With the sole and limited exceptions set forth below, for purposes of this Release of Claims (“Release”) the words “Claim” and “Claims” are intended to be as broad as the law allows and mean any and
all charges, complaints and other forms of action against the Company, seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages, or any other form of
monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys fees and any other costs) against the Company’s Released Parties or the
Executive’s Released Parties, including, without limitation: 
  

	 	(a)	Claims under any state or federal discrimination fair employment practices or other employment related statute, regulation or executive order (as they may have been amended through
the Separation Date), including the Age Discrimination in Employment Act; 

  

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	 	(b)	Claims under any other state or federal employment related statute, regulation or executive order (as they may have been amended through the Separation Date);

  

	 	(c)	Claims under any state or federal common law theory; and 

  

	 	(d)	any other Claims arising under any other state or federal law. 

  
 (ii) You expressly acknowledge that, but for your agreement to this mutual Release, you would not be receiving the Severance Benefits being provided to
you under the terms of this Agreement.  
  
 (iii)
Notwithstanding the foregoing, excluded from the scope of this release of claims, are (a) any right to defense and/or indemnification that you have under the by-laws of Houghton Mifflin or the charter or by-laws of Houghton Mifflin Holdings, Inc.,
or under any existing written agreement with them or any of their Affiliates, or any policy of directors and officers liability insurance providing indemnification for you against third party claims, (b) any vested rights under any benefit plan of
Houghton Mifflin (including without limitation the Houghton Mifflin Holdings, Inc. 2003 Deferred Compensation Plan) in which you were participating on the Separation Date, and (c) any rights to interpret or enforce this Agreement, and any rights
related to payments to be made under the terms of this Agreement. 
  
 (iv) Supplemental Affirmation of Release. On or within five days following the Separation Date, in exchange for the Severance Benefits set forth above, you agree to execute the Supplemental Affirmation of Release attached hereto as
Exhibit C. 
  
 6. ADEA Waiver Information/Rescission
Period. It is the Company’s intent to make certain that you fully understand the provisions and effects of this Agreement, including the Release of Claims. To that end, you have been encouraged and given the opportunity to consult with
legal counsel for the purpose of reviewing the terms of this Agreement. Also, because you are over the age of 40, and consistent with the provisions of the ADEA, the Company is providing you with twenty-one (21) days in which to consider and accept
the terms of this Agreement by signing below and returning it to The General Counsel at Houghton Mifflin Company. In addition, you may rescind your assent to this Agreement if, within seven (7) days after you sign this Agreement, you notify the
General Counsel in writing of your decision to rescind. 
  

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 7. No Compensation Owing. You agree that, with the exception of your wages through July 31,
2005, which shall be paid to you in accordance with Company policy and applicable law; deferred compensation, if payable, under the terms of the Houghton Mifflin Holdings, Inc. 2003 Deferred Compensation Plan; and reimbursement for approved business
expenses incurred on behalf of the Company prior to July 31, 2005, which shall be paid to you in accordance with Company policy; you are not owed any compensation from the Company whatsoever, including but not limited to wages, commissions, holiday
pay, vacation pay, severance pay, stock options, stock or bonuses (except as expressly set forth in Exhibit A and plans and agreements referred to therein). 
  
 8. Entire Agreement/Waiver/Choice of Law/Jury Waiver. 
  
 (i) You acknowledge and agree that this Agreement supersedes any and all
prior or contemporaneous oral and/or written agreements between you and the Company, and sets forth the entire agreement between you and the Company, except as set forth herein. No variations or modifications of this Agreement shall be deemed valid
unless reduced to writing and signed by you and the Company.  
  
 (ii) The failure of you or the Company to seek enforcement of any provision of this Agreement in any instance or for any period of time shall not be construed as a waiver of such provision or of your or the Company’s right to seek
enforcement of such provision in the future.  
  
 (iii)
This Agreement shall be deemed to have been made in Massachusetts, shall take effect as an instrument under seal within Massachusetts, and shall be governed by and construed in accordance with the laws of Massachusetts, without giving effect to
conflict of law principles.  
  
 (iv) Both parties hereby
agree that any action, demand, claim or counterclaim relating to the terms and provisions of this Agreement, or to its breach, shall be commenced in Massachusetts in a court of competent jurisdiction, or by mutual agreement by arbitration in
accordance with the national employment rules, and under the administration of the American Arbitration Association, and both parties further acknowledge that venue for such actions shall lie exclusively in Massachusetts.  
  
 (v) The provisions of this Agreement are severable, and if for any reason
any part hereof shall be found to be unenforceable, the remaining provisions shall be enforced in full. 
  
 9. Voluntary Agreement. By executing this Agreement, you are acknowledging that you have been afforded sufficient time to understand
the terms and effects of this Agreement, that your agreements and obligations hereunder are made voluntarily, knowingly and without duress, and that neither the Company nor its agents or representatives have made any representations inconsistent
with the provisions of this Agreement. 
  

 5 

 To accept the terms of this Agreement, please sign, date and return the enclosed copy of this Agreement
to your Human Resources Representative at Houghton Mifflin Company within twenty-one (21) days. 
  

									
	 Houghton Mifflin Company
	 	 	 	 	 	 Confirmed, Agreed and Acknowledged:

					
	By:	 	 /s/ Paul D. Weaver
	 	 	 	 	 	 Sylvia Metayer

	 	 	 	 	 	 	 	 	 Printed Name

				
	 Dated: May 17, 2005
	 	 	 	 	 	 
					
	 	 	 	 	 	 	 	 	 /s/ Sylvia Metayer

	 	 	 	 	 	 	 	 	 Signature

					
	 	 	 	 	 	 	 	 	 Dated: May 17, 2006

  

 6 

 SEPARATION AGREEMENT 
 EXHIBIT A 
 MEMORANDUM 
  

			
	TO:	  	Sylvia Metayer
	FROM:	  	James F. Kennedy, Corporate Vice President
	DATE:	  	April 8, 2005
	SUBJECT:	  	Payments and Benefits at Separation from Houghton Mifflin Company

  
 You will separate from service on, and
receive your regular salary through, July 31, 2005. You are also eligible to receive the following payments and benefits. 
  
 1. With the Execution of a Release 
  
 Salary Continuation 
  
 In accordance with Section 3.(d) of your Enhancement Agreement, as amended, you will receive twenty-one months of salary continuation, from August 1, 2005 through April
30, 2007, at your current salary of $400,000 per year. These payments (totaling $699,999.93 in the aggregate) will be made by the Payroll Department on the normal salary payment dates; payments are currently made monthly on the 12th day of each
month (or, if that date falls on a weekend, on the preceding business day), but the Company intends to convert all employees to a bi-weekly payment schedule on or about September 2005. Taxes will be withheld from these payments in accordance with,
and to the extent required by, applicable tax laws; the net payments after taxes will be deposited directly to your United States bank account. With respect to these amounts, no acceleration or change in the time or form of payment shall be
permitted, and the Company shall not set aside outside of the United States any assets to fund the payments or otherwise fund them. 
  
 Management Incentive Payment for 2005 
  
 You will receive a payment of $120,000 representing (i) your Target bonus under the 2005 Management Incentive Plan, (ii) prorated to reflect a six-month period of
employment in 2005. This payment will be paid at the same time in 2006 that payments are made to other employees covered under the Plan, which we expect to be in March 2006; applicable taxes will be withheld. 
  
 Medical, Dental, and Vision Insurance 
  
 You are enrolled in the Blue Care Elect PPO medical plan, the Aetna PPO dental plan, and the
Vision Service Plan vision plan, and you have elected Family coverage. Your coverages will continue through July 31, 2005, the end of the month of your separation from service. If you elect COBRA continuation, your coverages will continue through
April 30, 2007 at the active employee contribution rates. You will receive COBRA election information from CobraServ at a later date. 

 You must elect COBRA continuation to continue your medical, dental and vision coverage; the premiums will not be taken
from your separation payment. Furthermore, your election of coverage will not be communicated to the health plans until we have been notified by CobraServ of receipt of your first premium payment. 
  
 Relocation Costs 
  
 You will be eligible for the normal benefits provided under the Company’s Executive
Relocation Policy as it would apply for your move back to France, provided such move occurs no later than December 31, 2005. Provided that all required documentation of the costs of such move is submitted to the Company no later than December 31,
2005, all benefits to which you are so entitled shall be paid no later than March 1, 2006. 
  
 Tax Advice and Tax Return Preparation Costs 
  
 The Company will reimburse you for up to $10,000 of the costs that you incur for tax advice and tax return preparation for 2004 and 2005. Provided that all required documentation of such costs is submitted to the
Company no later than December 31, 2005, all reimbursements to which you are so entitled shall be paid no later than March 1, 2006. 
  
 2. Without a Release 
  
 Medical, Dental, and Vision Insurance 
  
 Your medical, dental and vision coverages will automatically continue through July 31, 2005. If you elect COBRA continuation, your coverages will continue through April
30, 2007 at 102% of the full cost. 
  
 With or Without a Release

  
 Deferred Compensation Plan Distribution 
  
 Effective July 31, 2005, you shall be deemed to be a terminated participant in the Houghton
Mifflin Holdings, Inc. 2003 Deferred Compensation Plan. As soon as administratively practicable following your separation date, but in no event later than September 30, 2005, you will receive a distribution of Common Shares based on the Stock Units
credited to your Stock Subaccount under the Plan at July 31, 2005, and at that time you will cease to be a participant in the Plan. You will also receive an explanation of the distribution, its tax implications, and the applicable tax withholdings.

 Life Insurance 
  
 You are covered under an Executive Life Insurance policy issued in your name, and the Company will continue to pay the premiums on that policy through July 31, 2005. You
may elect to continue the policy beyond that date by paying the premiums to Pacific Life Insurance Company yourself. 
  
 Retirement Plan 
  
 You have been a participant in the Retirement Plan. The Company’s contributions to your Retirement Plan account will continue through July 31, 2005. You are fully vested in the Retirement Plan, and you will
receive information from the Retirement Service Center on the options available to you for the distribution of your account balance. 
  
 Supplemental Executive Retirement Plan 
  
 You have been a participant in the Supplemental Executive Retirement Plan. Your benefits under the Plan reflect your prior service with Vivendi Universal Publishing, and
you will continue to accrue benefits under the Plan through July 31, 2005. Effective July 31, 2005, you shall be deemed to be a terminated participant in the Plan. You are fully vested in the Plan, and you will receive information from the
Retirement Service Center on the procedures to follow to obtain the distribution of your benefits; provided that you complete and return the required materials to the Service Center by July 31, 2005, the full distribution of your benefits will be
made by September 30, 2005, and at that time you will cease to be a participant in the Plan. 

 SEPARATION AGREEMENT 
 EXHIBIT B 
 CLASS A OPTION CERTIFICATE 
  
 Optionee: Sylvia Metayer 
  
 This Option and any securities issued upon exercise of this Option are
subject to restrictions on voting and transfer and requirements of sale and other provisions as set forth in the Stockholders Agreement among Houghton Mifflin Holdings, Inc., Houghton Mifflin Company, and certain other investors, dated as of
December 30, 2002, as amended from time to time (the “Stockholders Agreement”) (this Option and any securities issued upon exercise of this Option constitute Management Shares as defined therein). 
  
 HOUGHTON MIFFLIN HOLDINGS, INC. 
  
 STOCK OPTION 
  
 CLASS A OPTION CERTIFICATE 
  
 This stock option (the “Agreement”) is granted by Houghton Mifflin Holdings, Inc., a Delaware corporation (“Holdings”), to the
Optionee, pursuant to Holdings’ 2003 Stock Option Plan, as amended from time to time (the “Plan”). 
  
 Whereas, the Optionee will be ending her employment with Holdings and its subsidiaries as of July 31, 2005; and 
  
 Whereas, this Agreement amends and restates in its entirety the option
certificate and agreement previously issued by Holdings to the Optionee in connection with the option granted on July 1, 2003 (the “Grant Date”); and 
  

Whereas, the option certificate previously issued to the Optionee is superseded in all respects by this Agreement. 
  
 1. Grant of Option. This certificate evidences the grant by
Holdings on the Grant Date to the Optionee of an option to purchase (the “Option”), in whole or in part, on the terms provided herein and in the Plan, the following shares of Class A-10 Common Stock of Holdings as set forth below in the
following prices per share. 
  
 (a) 1,174 shares of Class A-10 Common Stock of
Holdings, par value $.001 per share, at $100.00 per share (the “Tranche 1 Options”); 
  
 (b) 1,174 shares of Class A-10 Common Stock of Holdings, par value $.001 per share, at $100.00 per share (the “Tranche 2 Options”); and 
  
 (c) 1,174 shares of Class A-10 Common Stock of Holdings, par value $.001 per share, at $100.00 per share (the “Tranche 3 Options”
and together with the Tranche 1 Options and Tranche 2 Options, the “Options”). 
  
 The Option evidenced by this certificate is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code (the “Code”). 

 2. Vesting. 
  
 (a) The Tranche 1 Options are fully vested and exercisable as of the date hereof. 
  

(b) The Tranche 2 Options are eligible to vest as of the date hereof and shall vest and become exercisable upon the earlier of (i) a Tranche 2 Vesting Event or (ii)
the seventh anniversary of the Grant Date. 
  
 (c) The Tranche 3 Options are
eligible to vest as of the date hereof and shall vest and become exercisable upon the earlier of (i) a Tranche 3 Vesting Event or (ii) the seventh anniversary of the Grant Date. 
  
 3. Exercise of Option. Each election to exercise this Option shall be subject to the terms and conditions of the Plan and
shall be in writing, signed by the Optionee or by his or her executor or administrator or by the person or persons to whom this Option is transferred by will or the applicable laws of descent and distribution (the “Legal Representative”),
and made pursuant to and in accordance with the terms and conditions set forth in the Plan. The latest date on which this Option may be exercised (the “Final Exercise Date”) is the date which is the tenth (10th) anniversary of the Grant
Date, subject to earlier termination in accordance with the terms and provisions of the Plan and this Agreement. Notwithstanding Section 8(b)(1) of the Plan, in the event that the Optionee’s employment is terminated for any reason other than by
the Company for Cause, vested options (determined in accordance with Section 2) shall remain exercisable until July 1, 2006, at which time, any unexercised Options shall be forfeited automatically. 
  
 4. Forfeiture. Notwithstanding Sections 8(a) and 8(b)(2) of the Plan, the
Tranche 2 Options or Tranche 3 Options which are eligible to vest (the “Eligible Options”) as of the date on which the Optionee’s employment with the Company or its Subsidiaries is terminated for any reason other than by the Company
for Cause shall not be forfeited upon such termination, and shall continue to be eligible to vest upon the occurrence of a Tranche 2 Vesting Event or Tranche 3 Vesting Event, as applicable, until July 1, 2006. All Eligible Options that have not
vested prior to such date by virtue of the occurrence of a Tranche 2 Vesting Event or a Tranche 3 Vesting Event, as applicable, and all vested options which are not yet exercised prior to such date will terminate automatically 
  
 5. Representations and Warranties of Optionee. 
  
 Optionee represents and warrants that: 
  
 (a) Authorization. Optionee has full legal capacity, power, and authority to execute
and deliver this Agreement and to perform Optionee's obligations hereunder. This Agreement has been duly executed and delivered by Optionee and is the legal, valid, and binding obligation of Optionee enforceable against Optionee in accordance with
the terms hereof. 

 (b) No Conflicts. The execution, delivery, and performance by Optionee of this Agreement and the consummation by
Optionee of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which Optionee is subject, (ii) violate any order, judgment or
decree applicable to Optionee, or (iii) conflict with, or result in a breach of default under, any term or condition of any agreement or other instrument to which Optionee is a party or by which Optionee is bound. 
  
 (c) No Other Agreements. Except as provided by this Agreement, the Stockholders
Agreement and the Plan, Optionee is not a party to or subject to any agreement or arrangement with respect to the voting or transfer of this Option or the shares of common stock issued upon exercise hereof. 
  
 (d) Thorough Review, etc. Optionee has thoroughly reviewed the Plan and this Agreement
in their entirety. Optionee has had an opportunity to obtain the advice of counsel (other than counsel to Holdings, Houghton Mifflin Company or their Affiliates) prior to executing this Agreement, and fully understands all provisions of the Plan and
this Agreement. 
  
 6. Other Agreements. Optionee acknowledges and
agrees that the shares received upon exercise of this Option shall be subject to the Stockholders Agreement and the transfer and other restrictions, rights, and obligations set forth therein, and Optionee further acknowledges that, as a condition to
receiving this Option, Optionee must execute, join and become party to the Stockholders Agreement as a Manager (as such term is defined in the Stockholders Agreement). 
  
 7. Legends. Certificates evidencing any shares issued upon exercise of the Option granted hereby may bear the following
legends, in addition to any legends which may be required by the Stockholders Agreement: 
  
 “The securities represented by this certificate were issued in a private placement, without registration under the Securities Act of 1933, as amended (the “Act”), and may not be sold, assigned, pledged,
or otherwise transferred in the absence of an effective registration under the Act covering the transfer or an opinion of counsel, satisfactory to the issuer, that registration under the Act is not required.” 
  
 8. Withholding. No shares will be transferred pursuant to the exercise of this
Option unless and until the person exercising this Option shall have remitted to Holdings an amount sufficient to satisfy any federal, state, or local withholding tax requirements, or shall have made other arrangements satisfactory to Holdings with
respect to such taxes. 
  
 9. Nontransferability of Option. This
Option is not transferable by the Optionee other than by will or the applicable laws of descent and distribution, and is exercisable during the Optionee's lifetime only by the Optionee. 

 10. Status Change. Upon the termination of the Optionee's employment with, or other service to, Holdings or
its Subsidiaries, this Option shall continue or terminate, as and to the extent provided in the Plan, excerpt as provided in Sections 3 and 4 above. 
  
 11. Effect on Employment. Neither the grant of this Option, nor the issuance of shares upon exercise of this Option, shall give the Optionee any right to be
retained in the employ of Holdings, Houghton Mifflin Company or their Affiliates, affect the right of Holdings, Houghton Mifflin Company or their Affiliates to discharge or discipline such Optionee at any time, or affect any right of such Optionee
to terminate his or her employment at any time. 
  
 12. Indemnity.
Optionee hereby indemnifies and agrees to hold Holdings harmless from and against all losses, damages, liabilities and expenses (including without limitation reasonable attorneys fees and charges) resulting from any breach of any representation,
warranty, or agreement of Optionee in this Agreement or any misrepresentation of Optionee in this Agreement. 
  
 13. Provisions of the Plan. This Option is subject in its entirety to the provisions of the Plan, which are incorporated herein by reference. A copy of the Plan as in effect on the date of the grant of
this Stock Option has been furnished to the Optionee. By exercising all or any part of this Stock Option, the Optionee agrees to be bound by the terms of the Plan and this Option. In the event of any conflict between the terms of this Option and the
Plan, the terms of this Option shall control. 
  
 14. Definitions.
The initially capitalized terms Optionee and Grant Date shall have the meanings set forth on the first page of this Agreement; initially capitalized terms not otherwise defined herein shall have the meaning provided in the Plan and the Stockholders
Agreement, and, as used herein, the following terms shall have the meanings set forth below: 
  
 “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under
common control with such Person. 
  
 “Cash
Value” shall mean in the case of cash the actual amount of such cash, and in the case of Publicly Traded Securities, the closing price of such Publicly Traded Securities on the day of the closing of the Sale Transaction, or if such day is a
weekend or holiday, the closing price of the Publicly Traded Security on the most recent full trading day on the exchange or market on which the Publicly Traded Securities are traded or quoted. The closing price of a Publicly Traded Security for any
day shall be the last reported sale price or, in case no such reported sale takes place on such day, the average of the closing bid and asked prices for such day, in each case (i) on the principal national securities exchange on which the Publicly
Traded Securities are listed or to which the Publicly Traded Securities are admitted to trading, or (ii) if the Publicly Traded Securities are not listed or admitted to trading on a national securities exchange, on the Nasdaq National Market or any
comparable system, as applicable. 

 “Consideration” shall mean cash and/or Publicly Traded Securities. 

 
 “Equity Purchase Price” shall mean
$619,837,151. 
  
 “Initial Public
Offering” shall mean the occurrence of each of (i) the effectiveness of a registration statement under the Securities Act of 1933, as amended, covering the common stock of Holdings, and (ii) the completion of a sale of such common stock
thereunder, which sale results in (x) Holdings becoming a reporting company under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and (y) such Common Stock being traded on the New York Stock Exchange (“NYSE”) or
the American Stock Exchange, or being quoted on the Nasdaq Stock Market or being traded or quoted on any other national stock exchange or securities system. 
  
 “Market Value” shall mean with respect to any security publicly traded on a national exchange or the Nasdaq National Market or
any comparable system, the number of shares of such securities multiplied by the average of the daily closing prices for 20 consecutive trading days ending on the last full trading day on the exchange or market on which Holdings’ Capital Stock
is traded or quoted. The closing price for any day shall be the last reported sale price or, in case no such reported sale takes place on such day, the average of the closing bid and asked prices for such day, in each case (i) on the principal
national securities exchange on which the shares of Common Stock are listed or to which such shares are admitted to trading, or (ii) if the Common Stock is not listed or admitted to trading on a national securities exchange, on the Nasdaq National
Market or any comparable system, as applicable. 
  
 “Option Shares” shall mean, from time to time, the aggregate number of (i) shares of Class A-10 Common Stock that are then the subject of vested Options under the Plan and (ii) shares of Class A–10 Common Stock that are then
outstanding as the result of the exercise of Options under the Plan (equitably adjusted to take account of any stock dividend or other similar distribution (whether in the form of stock or other securities or other property), stock split or
combination of shares, recapitalization, conversion, reorganization, consolidation, split-up, spin-off, combination, repurchase, merger, exchange of stock or other transaction or event that affects Holdings’ capital stock occurring after the
date of issuance). 
  
 “Original Investor
Shares” shall mean the Investor Shares originally issued to Financière Versailles S.a.r.l., a Luxembourg corporation (“Luxco”), at the Closing and distributed by Luxco to the Investors (equitably adjusted to take account
of any stock dividend or other similar distribution (whether in the form of stock or other securities or other property), stock split or combination of shares, recapitalization, conversion, reorganization, consolidation, split-up, spin-off, 

 
combination, repurchase, merger, exchange of stock or other transaction or event that affects Holdings’ capital stock occurring after the date of
issuance). 
  
 “Person” shall mean any
individual, partnership, corporation, association, trust, joint venture, unincorporated organization or other entity. 
  
 “Publicly Traded Securities” shall mean any security that is traded on the New York Stock Exchange, American Stock Exchange or
the Nasdaq National Market. 
  
 “Sale
Transaction” shall mean: (i) any change in the ownership of the capital stock of the Company (whether by way of sale of stock, merger, or otherwise) if, immediately after giving effect thereto, any Person (or group of Persons acting in concert)
other than the Investors and their Affiliates will have the direct or indirect power to elect a majority of the members of the Board, or (ii) a sale or transfer of all or substantially all of the Company’s assets. 
  
 “Tranche 2 Vesting Event” shall mean (i) a Sale
Transaction in which the Cash Value of the net Consideration from such Sale Transaction with respect to Original Investor Shares and Option Shares plus all other net Consideration paid with respect to the Original Investor Shares and Option Shares
pursuant to any previous transaction(s) and/or cash dividend(s) of Holdings equals or exceeds two times (2x) the Equity Purchase Price, (ii) an Initial Public Offering in which the sum of (x) the product of initial public offering price multiplied
by the number of Original Investor Shares and Option Shares plus (y) the aggregate amount of any net Consideration paid with respect to the Original Investor Shares and Option Shares pursuant to any previous transaction(s) and/or Holdings cash
dividend(s), equals or exceeds two times (2x) the Equity Purchase Price, or (iii) the first day after the Initial Public Offering on which the sum of (x) the Market Value of the Original Investor Shares and the Option Shares plus (y) the aggregate
amount of any net Consideration paid with respect to the Original Investor Shares and Option Shares pursuant to any previous transaction(s) and/or Holdings cash dividend(s), equals or exceeds two times (2x) the Equity Purchase Price. For the
purposes of this definition references to any “cash dividend(s)” shall include, without limitation, the dividend paid by Holdings on or about October 3, 2003 to the holders of its Class L Common Stock. 
  
 “Tranche 3 Vesting Event” shall mean (i) a Sale
Transaction in which the Cash Value of the net Consideration from such Sale Transaction with respect to Original Investor Shares and Option Shares plus all other net Consideration paid with respect to the Original Investor Shares and Option Shares
pursuant to any previous transaction(s) and/or cash dividend(s) of Holdings equals or exceeds three times (3x) the Equity Purchase Price, (ii) an Initial Public Offering in which the sum of (x) the product of initial public offering price multiplied
by the number of Original Investor Shares and Option Shares plus (y) the aggregate amount of any net Consideration paid with respect to the Original Investor Shares and Option Shares pursuant to any previous transaction(s) and/or Holdings cash
dividend(s), equals or exceeds three times (3x) the Equity Purchase Price, or (iii) the first day after the Initial Public Offering on which the sum of (x) the Market Value of the Original Investor Shares and the Option Shares plus (y) the aggregate
amount of any net Consideration paid with respect to the Original Investor Shares 

 
and Option Shares pursuant to any previous transaction(s) and/or Holdings cash dividend(s), equals or exceeds three times (3x) the Equity Purchase Price. For
the purposes of this definition references to any “cash dividend(s)” shall include, without limitation, the dividend paid by Holdings on or about October 3, 2003 to the holders of its Class L Common Stock. 
  
 15. General. For purposes of this Option and any determinations to be made by
the Board of Directors of Holdings hereunder, the determinations by the Board of Directors of Holdings shall be binding upon the Optionee and any transferee. 
  
 IN WITNESS WHEREOF, Holdings has caused this Option to be executed under its corporate seal by its duly authorized officer. This Option shall take effect
as a sealed instrument. 
  

					
	 HOUGHTON MIFFLIN HOLDINGS, INC.

		
	By:	 	 
	 	 	 Name:
	 	 
	 	 	 Title:
	 	 

  

	
	Dated: May     , 2005
	
	 Acknowledged and Agreed

	
	  
	 Sylvia Metayer

 SEPARATION AGREEMENT 
 EXHIBIT C 
 AFFIRMATION OF RELEASE 
  
 I hereby affirm the Release of Claims covenant previously signed by me as part of a Separation Agreement, and acknowledge the validity and
enforceability of that Release of Claims as if it were signed on this date. I specifically acknowledge that the Separation Agreement I previously signed constitutes a valid Release of Claims up through the execution date of that Separation Agreement
and that Release of Claims remains valid whether or not I sign this Affirmation, but acknowledge that my receipt of the Severance Benefits provided for in Section 2 of the Agreement is contingent upon my signing this Affirmation. 
  
 Confirmed, Agreed and Acknowledged: 
  

			
	 Name:
	 	 Sylvia Metayer

		
	 Signature:
	 	 
		
	 Dated:

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