Exhibit 10(a)
R. R. DONNELLEY & SONS COMPANY
1986
STOCK INCENTIVE PLAN
(As amended on April 24, 1986, July 27, 1989,September 28, 1989
and October 26, 1995)
I. GENERAL
1. Plan. To provide incentives to management through rewards based
upon the ownership and performance of the common stock of R. R. Donnelley & Sons
Company (the "Company"), the Committee hereinafter designated, with the approval
of the Board of Directors, may grant stock bonus awards, stock options, stock
appreciation rights, or combinations thereof, to eligible officers and other key
management personnel, on the terms and subject to the conditions stated in this
Plan.
2. Eligibility. Officers and other key management personnel of the
Company and its subsidiaries, under selection guidelines to be established by
the Committee, shall be eligible, upon selection by the Committee, to receive
stock bonus awards, stock options or stock appreciation rights, either singly or
in combination, as the Committee, in its discretion, shall determine.
3. Limitation on Shares to be Issued. The maximum number of shares of
common stock, par value $1.25 per share, to be issued pursuant to all grants
made under the Plan shall be 3,200,000 of which no more than 1,200,000 shares
shall be issued pursuant to stock bonus awards granted under the Plan. Shares
awarded pursuant to grants which, by reason of the expiration, cancellation or
other termination of the grants prior to issuance are not issued, shall again be
available for future grants.
Shares of common stock to be issued may be authorized and unissued
shares of common stock, treasury stock or a combination thereof.
4. Administration of the Plan. The Plan shall be administered by a
Committee designated by the Board of Directors (the "Committee"). No member of
the Committee shall be eligible to participate in, or within one year prior to
appointment to the Committee have participated in, this Plan or any other stock
purchase, stock bonus, stock option, stock appreciation rights or other stock
incentive plan of the Company. The Committee shall, within the limits of the
Plan and subject to the approval of the Board of Directors, establish selection
guidelines; select eligible persons for participation; and determine the form of
grant, either as stock bonus, stock option or stock appreciation rights or
combination thereof, determine the form of stock option, the number of shares
subject to the grant, the fair market value of the common stock when necessary,
the time and conditions of vesting or exercise, and all other terms and
conditions of the grant. The Committee may establish rules and regulations for
the administration
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of the Plan, interpret the Plan, and impose, incidental to a grant, conditions
with respect to competitive employment or other activities not inconsistent with
or conflicting with the Plan. All such rules, regulations, and interpretations
relating to the Plan adopted by the Committee shall be conclusive and binding on
all parties.
5. Adjustments for Changes in Capitalization. Appropriate adjustments
shall be made by the Committee in the maximum number of shares to be issued
under the Plan, the maximum number of shares to be issued pursuant to stock
bonus awards, and in the number of shares the subject of any grant, to give
effect to any stock splits, stock dividends and other relevant changes in
capitalization occurring after the effective date of the Plan.
6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the 1986 annual meeting scheduled to
be held on March 27, 1986, and if approved shall become effective on that date.
The Plan shall terminate five years after it becomes effective unless terminated
prior thereto by action of the Board of Directors. No further grants shall be
made under the Plan after termination, but termination shall not affect the
rights of any participant under any grants made prior to termination.
7. Amendments. The Plan may be amended or terminated by the Board of
Directors in any respect except that no amendment may be made without
stockholder approval if such amendment would
(a) increase the maximum number of shares available for issuance under
the Plan or stock bonus awards;
(b) modify the class of eligible employees; or
(c) extend the period during which any option or other right may be
exercised under the Plan.
8. Prior Plans. Upon the effectiveness of this Plan, no further grants
shall be made under the Company's 1976 Stock Option Plan, as amended, and the
1981 Stock Incentive Plan, as amended, except that stock appreciation rights may
be granted with respect to options previously granted and outstanding under
these Plans. Bonuses awarded under the 1981 Stock Incentive Plan, as amended,
and options granted under the 1976 Stock Option Plan, as amended, and the 1981
Stock Incentive Plan, as amended, prior to the effectiveness of this Plan shall
continue in accordance with their terms.
9. Tax Withholding. The Company shall have the right to require, prior
to the issuance or delivery of any shares of common stock or the payment of any
cash pursuant to a grant or award hereunder, payment by the holder thereof of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. The holder may satisfy any such obligation by any
of the following means: (A) a cash payment to the Company, (B) delivery to the
Company of previously owned whole shares of common stock (which the holder has
held
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for at least six months prior to the delivery of such shares or which the holder
purchased on the open market and for which the holder has good title, free and
clear of all liens and encumbrances) having an aggregate fair market value
determined as of the date the obligation to withhold or pay taxes arises (the
"Tax Date"), (C) authorizing the Company to withhold whole shares of common
stock which would otherwise be delivered having an aggregate fair market value
determined as of the Tax Date or withhold an amount of cash which would
otherwise be payable to a holder, (D) in the case of the exercise of an option,
a cash payment by a broker-dealer acceptable to the Company to whom the optionee
has submitted an irrevocable notice of exercise or (E) any combination of (A),
(B) and (C); provided, however, that the Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E) and that in the
case of a holder who is subject to Section 16 of the Exchange Act (as defined
below), the Company may require that the method of satisfying such an obligation
be in compliance with Section 16 and the rules and regulations thereunder.
Shares of common stock to be delivered or withheld may have an aggregate fair
market value in excess of the minimum amount required to be withheld, but not in
excess of the amount determined by applying the holder's maximum marginal tax
rates. Any fraction of a share of common stock which would be required to
satisfy such an obligation shall be disregarded and the remaining amount due
shall be paid in cash by the holder.
II. STOCK BONUS AWARDS
1. Form of Award. Stock bonus awards, whether Performance Awards or
Fixed Awards, may be made to eligible officers and other key management
personnel in the form of stock units, each of which is the equivalent of a share
of common stock but for the power to vote and the entitlement to current
dividends, or in the form of shares of common stock issued to the employee but
forfeitable and with restrictions on transfer in any form as hereinafter
provided.
2. Performance Awards. Awards may be made in terms of a stated
potential maximum number of units or shares, with the actual number to be
determined by reference to the level of achievement of corporate, group,
division, individual or other specific objectives over a period of not less than
three nor more than ten years. No rights or interests of any kind shall be
vested in an individual receiving a performance award until the conclusion of
the period and the determination of the level of achievement specified in the
award, and the time of vesting thereafter shall be as specified in the award.
3. Fixed Awards. Awards may be made which are not contingent on the
performance of objectives, but are contingent on the participant's continuing in
the Company's employ for a period to be specified in the award, which period
shall be not less than five nor more than ten years from the date of award.
4. Rights with Respect to Restricted Shares. If shares of restricted
common stock are issued pursuant to an award, the participant shall have the
right to vote the shares and to receive dividends thereon from the date of
issuance, unless and until forfeited.
5. Rights with Respect to Stock Units. If stock units are credited to
a participant
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pursuant to an award, amounts equal to dividends otherwise payable on a like
number of shares of common stock after the crediting of the units shall be
credited to an account for the participant and held until the award is forfeited
or paid out. Interest shall be credited on the account annually at a rate equal
to the return on five year U.S. Treasury obligations.
6. Vesting and Resultant Events. The Committee may, in its discretion
provide for early vesting of an award in the event of the participant's death,
permanent and total disability or retirement. At the time of vesting, the award,
if in units, shall be paid to the participant either in shares of common stock
equal to the number of units, in cash equal to the fair market value of such
shares, or in such combination thereof as the Committee shall determine, and the
participant's account to which dividends and interest have been credited shall
be paid in cash. Shares of restricted common stock issued pursuant to an award
shall, at the time of vesting, be released from the restrictions.
7. Acceleration Upon Change in Control. If while any Performance Award
or Fixed Award remains outstanding under this Plan--
(a) any "person," as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act"), as modified
and used in Section 13(d) and 14(d) thereof (but not including (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company) (hereinafter a "Person") is or becomes the
beneficial owner, as defined in Rule 13d-3 of the Exchange Act,
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing 50%
or more of the combined voting power of the Company's then outstanding
securities; or
(b) during any period of two (2) consecutive years (not
including any period prior to the execution of this Amendment),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into any agreement with the Company to effect a
transaction described in Clause (a), (c) or (d) of this Section) whose
election by the Board or nomination for election by the Company's
stockholders was approved 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 nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or
(c) the stockholders of the Company approve a merger or
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consolidation of the Company with any other corporation, other than
(i) 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), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at
least 50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no Person acquires more than 50% of the combined voting power
of the Company's then outstanding securities; or
(d) 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 the Company's assets,
any of such events being hereinafter referred to as a "Change in Control") then
from and after the date on which public announcement of the acquisition of such
percentage shall have been made, or the date on which the change in the
composition of the Board set forth above shall have occurred, or the date of any
such stockholder approval of a merger, consolidation, plan of complete
liquidation or an agreement for the sale of the Company's assets as described
above occurs (the applicable date being hereinafter referred to as the
"Acceleration Date"), (i) with respect to such Performance Awards, all levels of
achievement specified in the award shall be deemed met and the award shall be
immediately and fully vested, and (ii) with respect to such Fixed Awards, the
period of continued employment specified in the award upon which the award is
contingent shall be deemed completed and the award shall be immediately and
fully vested.
III. STOCK OPTIONS
1. Grants. Options to purchase shares of common stock of the Company
may be granted to such eligible officers and other key management personnel as
may be selected by the Committee and approved by the Board of Directors. These
options may, but need not, constitute "incentive stock options" under Part II of
subchapter D of the Internal Revenue Code of 1986, as amended, or any other form
of option under the Code as hereafter amended.
2. Terms of Options. No option shall be exercisable less than one nor
more than ten years after the date of grant. The per share option price shall be
not less than 100% of the fair market value at the time the option is granted.
Upon exercise, the option price may be paid in cash, in shares of common stock
of the Company having a fair market value equal to the option price, or in a
combination thereof. Options shall not be transferable, except that in the event
of the death of an optionee during employment or within a period not in excess
of five years after termination
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of employment by reason of retirement or total and permanent disability or
within ninety days after termination of employment for any other reason,
outstanding options may be exercised by the executor, administrator or personal
representative of such deceased optionee within ninety days of the death of such
optionee. Options may be exercised during the individual's continued employment
with the Company and for a period not in excess of ninety days following
termination of employment and only within the original term of that option;
provided, however, that if employment of the optionee by the Company and its
subsidiaries shall have terminated by reason of retirement or total and
permanent disability, then the option may be exercised for a period not in
excess of five years following termination of employment but not after the
expiration of the term of the option.
3. Acceleration of Stock Options Upon a Change in Control. If while any
stock option granted pursuant to this Article III of the Plan remains
unexercised and outstanding, a Change in Control (as defined in Article II,
Section 7, above) occurs, then from and after the Acceleration Date (as defined
in Article II, Section 7, above) all such outstanding and unexercised options,
whether or not then vested, shall be fully and immediately exercisable.
IV. UK STOCK OPTION SUB-PLAN
1. GENERAL
(a) Sub-Plan. The UK Stock Option Sub-Plan ("the Sub-Plan") has been
established in order to vary the terms on which options may be given to officers
and key management personnel who are employed in the United Kingdom by the
Company or any of its subsidiaries. Stock options granted under the Sub-Plan
shall be deemed granted under this Stock Incentive Plan and shall comply in all
respects with the terms and conditions applicable to options granted under
Article III of this Stock Incentive Plan.
(b) Definitions. In the Sub-Plan the following terms shall have the
following meanings:
"the Subsidiaries" shall mean all companies which are controlled by the
Company (as defined in Section 534 of the Income and
Corporation Taxes Act 1970) and which are an affiliate
controlled by the Company directly or indirectly through
one or more intermediaries for the purposes of rule 12b -
2 of the U.S. Securities Exchange Act of 1934;
"the Group" shall mean the Company and the Subsidiaries;
"Associated Company" shall have the meaning attributed to it in section 302 of
the Income and Corporation Taxes Act 1970;
"the Committee" shall mean the committee designated to administer this
Stock Incentive Plan;
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"Full Time Employee" shall mean any director or employee of the Group who is
required to devote to his duties not less than 25 hours
(or in the case of an employee who is not a director of
any company in the Group, 20 hours) per week (excluding
meal breaks) and is not precluded by paragraph 4(1)(b) of
Schedule 10 from participating in the Sub-Plan;
"Relevant Emoluments" shall have the meaning which the term bears in sub-
paragraph (2) of paragraph 5 of Schedule 10 by virtue of
sub-paragraph 5 of that paragraph;
"Year of Assessment" shall mean a year beginning on any 6 April and ending on
the following 5 April;
"Market Value" shall mean on any day the average of high and low
transaction prices in trading in the common stock of the
Company as reported on the New York Stock Exchange -
Composite Transaction compiled by Associated Press or if
no trading occurred on such date then on the next
preceding date on which such trading occurred;
"Schedule 10" shall mean Schedule 10 of the United Kingdom Finance Act
of 1984.
"Share" or "Shares" shall mean a share or shares of common stock of par value
$1.25 which satisfy the conditions specified in
Paragraphs 7 to 11 inclusive of Schedule 10.
(c) Sub-Plan. The Committee, with the approval of the Board of
Directors of the Company, may grant stock options to officers and other key
management personnel eligible to participate in the Sub-Plan on the terms and
subject to the conditions stated in this Sub-Plan.
(d) Eligibility. Full time employees who are officers or key management
personnel employed by the Group in the United Kingdom under selection guidelines
to be established by the Committee, shall be eligible, upon selection by the
Committee, to receive stock options.
(e) Shares to be Issued. Shares to be issued shall be authorized and
unissued shares of common stock, treasury stock or a combination thereof. The
issue of shares of common stock, par value $1.25 per share shall be subject to
the maximum specified in this Stock Incentive Plan.
(f) Administration. The Sub-Plan shall be administered by the Committee
in accordance with the provisions set out in this Stock Incentive Plan.
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(g) Effective Date and Term of the Sub-Plan. The Sub-Plan shall be
submitted to the stockholders of the Company for approval at the 1986 annual
meeting scheduled to be held on March 27, 1986, and if approved shall become
effective on that date. The Sub-Plan shall terminate five years after it becomes
effective unless terminated prior thereto by action of the Board of Directors.
No further grants shall be made under the Sub-Plan after termination but
termination shall not affect the right of any participation under the grants
made prior to termination.
(h) Amendments. The Sub-Plan may be amended or terminated by the Board of
Directors subject to the conditions specified in this Stock Incentive Plan. No
amendment may be made which will put the Sub-Plan in breach of conditions for
approval set out in Schedule 10 and no amendment to the Sub-Plan or any
provision in this Stock Incentive Plan which applies to options granted under
the Sub-Plan shall be made without prior approval of the Board of UK Inland
Revenue.
2. STOCK OPTIONS
(a) Grants. Options to purchase shares of common stock of the Company may
be granted to such eligible officers and eligible key management personnel as
may be selected by the Committee and approved by the Board of Directors.
(b) Variations in Options. Variations may not be made to options granted
under the Sub-Plan pursuant to Article I clause 5 of this Stock Incentive Plan
without prior consent of the Board of UK Inland Revenue.
(c) Terms of Options. No options shall be exercisable less than one nor
more than ten years after the date of the grant. The per share option price
shall be stated at the time the option is granted and shall be not less than
100% of the Market Value of the share on the date on which the optionee is
offered options under the Sub-Plan. Upon exercise, the option price shall be
paid in cash. Options shall not be transferable except that such options may be
exercised by the personal representative of a deceased optionee within ninety
days of the death of the optionee. Options may be exercised during the
individual's continued employment with the Group and for a period not in excess
of ninety days following termination of employment. No option may be exercised
by an individual at any time when he is precluded by Paragraph 4(1)(b) of
Schedule 10 from participating in the Sub-Plan.
(d) Exercise of Option. An option may be exercised by delivery of written
notice to the Company specifying the number of shares to be purchased and
accompanied by payment in full of the option price for the number of shares so
purchased. The Company shall within 30 days post to the optionee certificates
representing the number of shares specified, and shall pay all original issue or
transfer taxes and all other fees and expenses incidental to such delivery.
(e) Limits on Options. No person shall be granted options under this
Sub-Plan which would, at the time that they are obtained, cause the aggregate
Market Value of the shares which
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he may acquire in pursuant of rights obtained under the Sub-Plan or under any
other scheme established by the Group or by any Associated Company of the
Company and approved by the Revenue under Schedule 10 (and not exercised) to
exceed or further exceed the greater of:
(1) 100,000 British Pounds Sterling or
(2) Four times the Relevant Emoluments of the optionee for the current
or preceding Year of Assessment (whichever of those years gives the
greater amount) or if there were no Relevant Emoluments for the
preceding Year of Assessment four times the amount of the Relevant
Emoluments for the period of twelve months beginning with the first
day during the current Year of Assessment in respect of which there
are Relevant Emoluments. For the purposes of this clause the Market
Value of the shares shall be converted from US Dollars to sterling
at the middle rate for the buying and selling of that amount of
sterling for US Dollars as quoted by the Barclays Bank PLC at the
opening of business on the day on which the optionee is offered
options under the Sub-Plan.
V. STOCK APPRECIATION RIGHTS
1. Grants. Rights entitling the grantee to receive cash or shares of
common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock of the Company from the date
of grant, or in the case of rights granted in tandem with or by reference to a
stock option granted prior to the grant of such rights, from the date of grant
of the related stock option to the date of exercise may be granted to such
eligible officers and other key management personnel as may be selected by the
Committee and approved by the Board of Directors.
2. Terms of Grant. Such rights may be granted in tandem with or with
reference to a related stock option, in which event the grantee may elect to
exercise either the option or the right, but not both, as to the same share of
common stock subject to the option and the right, or the right may be granted
independently of a related stock option. In either event, the right shall be
exercisable not more than ten years after the date of grant. Stock appreciation
rights shall not be transferable, except that in the event of the death of a
grantee during employment or within a period not in excess of five years after
termination of employment by reason of retirement or total and permanent
disability or within ninety days after termination of employment for any other
reason, outstanding rights may be exercised by the executor, administrator or
personal representative of such deceased grantee within ninety days of the death
of such grantee. Stock appreciation rights may be exercised during the
individual's continued employment with the Company and for a period not in
excess of ninety days following termination of employment and only within the
original term of that grant; provided, however, that if employment of the
grantee by the Company and its subsidiaries shall have terminated by reason of
retirement or total and
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permanent disability, then the grant may be exercised for a period not in excess
of five years following termination of employment but not after the expiration
of the term of the grant.
3. Payment on Exercise. Upon exercise of a right, the grantee shall be
paid the excess of the then fair market value of the number of shares to which
the right relates over the fair market value of such number of shares at the
date of grant of the right or of the related stock option, as the case may be.
Such excess shall be paid in cash or in shares of common stock having a fair
market value equal to such excess or in such combination thereof as the
Committee shall determine.
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