R.R. DONNELLEY & SONS COMPANY
1991 STOCK INCENTIVE PLAN
(as amended on September 1, 1992, October 26, 1995 and January 25, 1996)
I. GENERAL
1. Plan. To provide incentives to management through rewards based upon the
ownership or performance of the common stock of R.R. Donnelley & Sons Company
(the "Company"), the Committee hereinafter designated, may grant cash or stock
bonus awards, stock options, stock appreciation rights, or combinations thereof,
to eligible officers and other key management employees, on the terms and
subject to the conditions stated in this Plan. In addition, to provide
incentives to members of the Board of Directors ("Board") who are not employees
of the Company ("non-employee directors"), such non-employee directors are
hereby granted options on the terms and subject to the conditions set forth in
this Plan.
2. Eligibility. Officers and other key management employees of the Company, its
subsidiaries, and any other entity designated by the Board or the Committee in
which the Company has a direct or indirect equity interest, shall be eligible,
upon selection by the Committee, to receive cash or bonus awards, stock options
or stock appreciation rights, either singly or in combination, as the Committee,
in its discretion, shall determine. Non-employee directors shall receive stock
options on the terms and subject to the conditions stated in the Plan. For
purposes of the Plan, references to employment by the Company also mean
employment by a majority-owned subsidiary of the Company and employment by any
other entity designated by the Board or the Committee in which the Company has a
direct or indirect equity interest.
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 3,600,000. Shares awarded pursuant to grants (other than
shares of restricted common stock) 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
consisting of two or more members of the Board of Directors designated by the
Board of Directors (the "Committee"). No member of the Committee, during the one
year prior to service on the Committee or during such service, shall have been
or be granted
or awarded shares of common stock, options to purchase shares of common stock,
or other equity securities of the Company pursuant to the Plan or any other plan
of the Company or any affiliate of the Company, except as provided in Article
III, Section 1(b) and except for a grant or award which would not result in such
member ceasing to be a "disinterested person" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall, subject to the terms of the Plan, establish selection
guidelines; select eligible officers and key management employees for
participation; determine the form of grant, either as a bonus award, or as stock
option or stock appreciation rights or combination thereof; and 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 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.
All grants and awards under this Plan shall be evidenced by written instruments
delivered by the Company to the participants, and no such grant or award shall
be valid until so evidenced.
Notwithstanding the foregoing, neither the Board nor the Committee shall
have any discretion to alter the number of shares granted to non-employee
directors pursuant to Article III, Section 1(b) or the terms or conditions under
which such shares are granted.
5. Adjustments for Changes in Capitalization. Appropriate adjustments shall be
made by the Committee in the class and maximum number of shares to be issued
under the Plan, the class and maximum number of shares to be issued pursuant to
bonus awards, and the class and number of shares the subject of any grant and
the option price therefor, if applicable, 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 1991 annual meeting scheduled to
be held on March 28, 1991, 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. 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 in any
respect, except that (i) no amendment may be made without stockholder approval
if such amendment would increase the maximum number of shares available for
issuance under the Plan or otherwise require stockholder approval, (ii) Article
III, Section 1(b) shall not be amended more than once every six months, other
than amendments to
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations thereunder, and (iii) notwithstanding the foregoing clause (ii), no
amendment may be made without stockholder approval if such amendment would
change the number of shares to be granted, pursuant to stock options, to non-
employee directors.
8. Prior Plans. Upon the effectiveness of this Plan, no further grants shall be
made under the Company's 1981 Stock Incentive Plan, as amended, and the 1986
Stock Incentive Plan, as amended, except that stock appreciation rights may be
granted with respect to options previously granted and outstanding under such
Plans. Bonuses awarded under the 1986 Stock Incentive Plan, as amended, and
options granted under the 1981 Stock Incentive Plan, as amended, and the 1986
Stock Incentive Plan, as amended, prior to the effectiveness of this Plan shall
continue in effect 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 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. BONUS AWARDS
1. Form of Award. Bonus awards, whether Performance Awards or Fixed Awards, may
be made to eligible officers and other key management employees in the form of
(i) cash, whether in an absolute amount or as a percentage of compensation, (ii)
stock units, each of which is substantially the equivalent of a share of common
stock but for the power to vote and the entitlement to current dividends, (iii)
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 or (iv) any
combination of the foregoing.
2. Performance Awards. Awards may be made in terms of a stated potential maximum
dollar amount, percentage of compensation or number of units or shares, with the
actual such amount, percentage or number to be determined by reference to the
level of achievement of corporate, group, division, individual or other specific
objectives over a performance period of not less than one nor more than ten
years, as determined by the Committee. No rights or interests of any kind shall
be vested in an individual receiving a Performance Award until the conclusion of
the performance period and the determination of the level of achievement
specified in the award, and the time of vesting, if any, 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 one nor more than ten years from the date of award.
4. Rights with Respect to the 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 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, (i) 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, (ii) the award, if a cash bonus award, shall be paid to the
participant either in cash, or in shares of common stock with a then
fair market value equal to the amount of such award, or in such combination
thereof as the Committee shall determine and (iii) shares of restricted common
stock issued pursuant to an award shall be released from the restrictions. A
Bonus Award is not transferable other than by will or the laws of descent and
distribution.
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, 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
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, the highest level 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. (a) Options for Officers and Key Management Employees. Options to
purchase shares of common stock of the Company may be granted to such eligible
officers and key management employees as may be selected by the Committee. These
options may, but need not, constitute "incentive stock options" under Section
422A of the Internal Revenue Code of 1986, as amended, or any other form of
option under the Code as hereafter amended.
(b) Options for Non-Employee Directors. An option to purchase 2,000
shares of common stock of the Company shall be granted on March 28, 1991 and,
thereafter, annually on the date of the Company's annual meeting of stockholders
to each individual who immediately following such meeting on such date is a non-
employee director.
2. Terms of Options. No option shall be exercisable earlier 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 of a share of common stock of the
Company at the time the option is granted; provided that options granted to non-
employee directors shall be 100% of the fair market value of a share of common
stock of the Company 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 may be exercised during the individual's continued employment
with the Company or service on the Board, as the case may be, and for a period
not in excess of ninety days following termination of employment or service on
the Board and only within the original term of that option; provided, however,
that if employment of the optionee by the Company and its subsidiaries or
service on the Board, as the case may be, 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 or
service on the Board, but not after the expiration of the term of the option.
Options shall not be transferable, except that in the event of the death of an
optionee (i) during employment or service on the Board, as the case may be, (ii)
within a period not in excess of five years after termination of employment or
service on the Board, as the case may be, by reason of retirement or total and
permanent disability or (iii) within ninety days after termination of employment
or service on the Board, as the case may be, 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.
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 8, above)
occurs, then from and after the Acceleration Date (as defined in Article II,
Section 8, 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 other
key management employees 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 840 of the Income
and Corporation Taxes Act 1988) and which are
affiliates 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 416(1)
of the Income and Corporation Taxes Act 1988;
"the Committee" shall mean the committee designated to administer this
Stock Incentive Plan;
"Full Time Employee" shall mean any director or employee who is employed by
the Group in the United Kingdom and 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 8 of Schedule 9 from
participating in the Sub-Plan;
"Relevant Emoluments" shall have the meaning which the term bears in sub-
paragraph (2) of paragraph 28 of Schedule 9 by virtue of
sub-paragraph (4) 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 9" shall mean Schedule 9 of the United Kingdom Income and
Corporation Taxes Act 1988.
"Share" or "Shares" shall mean a share or shares of common stock of par value
$1.25 which satisfy the conditions specified in
Paragraphs 10 to 14 inclusive of Schedule 9.
(c) Sub-Plan. The Committee may grant stock options to officers and other key
management employees 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 other key management
employees 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 and varied
by the terms of this Sub-Plan.
(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 1991 annual meeting
scheduled to be held on March 28, 1991, 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. 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 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 9 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 Full-Time Employees as may be selected by the
Committee.
(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 and only
within the original term of the option. No option may be exercised by an
individual at any time when he is precluded by Paragraph 8 of Schedule 9 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 thirty 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 he may acquire in pursuance 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 Board of U.K. Inland
Revenue under Schedule 9 (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.
(f) Withholding Tax. Article III Clause 3 of this Stock Incentive Plan shall not
apply to 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 employees as may be selected by the Committee.
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. In the case of a
participant who is an officer or director of the Company (within the meaning of
Section 16 of the Exchange Act), the election to exercise a stock appreciation
right, and the exercise of such stock appreciation right, shall be in compliance
with Rule 16b-3 under the Exchange Act. 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
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.
4. Withholding Tax. A stock appreciation right may provide that the holder
thereof may elect to deliver to the Company (or authorize the Company to retain
from any shares of common stock of the Company to be delivered in payment
thereof) whole shares of common stock of the Company to satisfy the Company's
obligation, if any, to withhold federal, state, local or other taxes required to
be withheld in respect of such award; provided, however, that in the case of a
holder who is an officer or director of the Company (within the meaning of
Section 16 of the Exchange Act), such election and the execution thereof shall
be in compliance with Rule 16b-3 under the Exchange Act.
5. Acceleration Upon Change in Control. If while any stock appreciation right
granted pursuant to this Article V of this Plan remains unexercised and
outstanding, a Change in Control (as defined in Article II, Section 8, above)
occurs, then from and after the Acceleration Date (as defined in Article II,
Section 8, above) all such outstanding and unexercised stock appreciation
rights, whether or not then vested, shall be fully and immediately exercisable.