Exhibit 10(f)
Options were granted to the executive officers listed below for the number of
shares and the exercise prices shown below:
PREMIUM-PRICED OPTIONS
GRANT DATE - 1/1/95
# of Options # of Options # of Options
Exercisable @ Exercisable @ Exercisable @
Name $43.275 $50.4875 $57.70
- ---- ------------- ------------- -------------
(1) John R. Walter 166,667 166,667 166,666*
(2) Jonathan P. Ward 58,334 58,333 58,333
(3) William E. Tyler 58,334 58,333 58,333
(4) Frank R. Jarc 40,000 40,000 40,000*
(5) Steven J. Baumgartner 40,000 40,000 40,000
*Cancelled without vesting
As Amended
September 1, 1996
R. R. DONNELLEY & SONS COMPANY
STOCK OPTION AGREEMENT
----------------------
(premium options)
R. R. DONNELLEY & SONS COMPANY, a Delaware corporation (herein called
the "Company"), acting pursuant to the provisions of its 1991 Stock Incentive
Plan, which was approved by stockholders on March 28, 1991 (herein called the
"Plan"), hereby grants to _______ (herein called "Optionee"), as of January 1,
1995 (herein called the "option date"), an option to purchase from the Company
(i) ______ shares of common stock of the Company, par value $1.25 per share
(herein called "common stock"), at a price of ______ per share (herein called
the "First Premium Option"), (ii) ____ shares of common stock at a price of
$_____ per share (herein called the "Second Premium Option") and (iii) _____
shares of common stock at a price of $______ per share (herein called the "Third
Premium Option" and the First Premium Option, the Second Premium Option and the
Third Premium Option are collectively referred to herein as the "option") to be
exercisable during the term commencing on January 1, 1995 and ending on December
31, 2004 (herein called the "option term"), but only upon the following terms
and conditions:
1. The option may be exercised by Optionee, in whole or in part, from
time to time, during the option term only in accordance with the following
conditions and limitations:
(a) Except as provided in Sections 5 and 7 hereof, Optionee must, at any time
the option becomes exercisable and at any time the option is exercised,
have been continuously in the employment of the Company since the date
hereof. Leave of absence for periods and purposes conforming to the
personnel policies of the Company and approved by the Committee
administering the Plan shall not be deemed terminations of employment or
interruptions of continuous service.
2
(b) Unless a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), is in effect as to the shares purchasable
under the option, no shares of common stock may be purchased under the
option unless, prior to the purchase thereof, the Company shall have
received an opinion of counsel to the effect that the sale of such shares
by the Company to Optionee will not constitute a violation of the
Securities Act. Optionee hereby agrees that as a condition of exercise,
Optionee will, if requested by the Company, submit a written statement, in
form satisfactory to counsel for the Company, to the effect that any shares
of common stock purchased upon exercise of the option will be purchased for
investment and not with a view to the distribution thereof within the
meaning of the Securities Act, and the Company shall have the right, in its
discretion, to cause the certificates representing shares of common stock
purchased under the option to be appropriately legended to refer to such
undertaking or to any legal restrictions imposed upon the transferability
thereof by reason of such undertaking.
(c) Subject to Sections 5 and 7 hereof, the option shall become exercisable as
follows:
(1) In the event Total Stockholder Return (as hereinafter defined) for the
four-year period commencing January 1, 1995 and ending on December 31, 1998
(the "First Performance Period") exceeds the S&P Industrial Index Total
Return (as hereinafter defined) for the First Performance Period, the
option shall become exercisable on December 31, 1998 with respect to all of
the shares of common stock subject to the option and the following
subsections (2)-(8) shall not apply. In the event Total Stockholder Return
for the First Performance Period equals or is less than the S&P Industrial
Index Total Return for the First Performance Period, the option may become
exercisable as set forth below.
(2) In the event Total Stockholder Return for the four-year period
commencing January 1, 1996 and ending on December 31, 1999 (the "Second
Performance Period") exceeds the S&P Industrial Index Total Return for the
Second Performance Period, the option shall become exercisable on December
31, 1999 with respect to all of the shares of common stock subject to the
option and the following subsections (3)-(8) shall not apply. In the event
Total Stockholder Return for the Second Performance Period equals or is
less than the S&P Industrial Index Total Return for the Second Performance
Period, the option may become exercisable as set forth below.
(3) In the event Total Stockholder Return for the four-year period
commencing January 1, 1997 and ending on December 31, 2000 (the "Third
Performance Period") exceeds the S&P Industrial Index Total Return for the
Third Performance Period, the option shall become exercisable on December
31, 2000 with respect to all of the shares of common stock subject to the
option and the following subsections (4)-(8) shall not apply. In the event
Total Stockholder Return for the Third Performance Period equals or is less
than the S&P Industrial Index Total Return for the Third Performance
Period, the option may become exercisable as set forth below.
-3-
(4) In the event Total Stockholder Return for the four-year period
commencing January 1, 1998 and ending on December 31, 2001 (the "Fourth
Performance Period") exceeds the S&P Industrial Index Total Return for the
Fourth Performance Period, the option shall become exercisable on December
31, 2001 with respect to all of the shares of common stock subject to the
option and the following subsections (5)-(8) shall not apply. In the event
Total Stockholder Return for the Fourth Performance Period equals or is
less than the S&P Industrial Index Total Return for the Fourth Performance
Period, the option may become exercisable as set forth below.
(5) In the event Total Stockholder Return for the four-year period
commencing January 1, 1999 and ending on December 31, 2002 (the "Fifth
Performance Period") exceeds the S&P Industrial Index Total Return for the
Fifth Performance Period, the option shall become exercisable on December
31, 2002 with respect to all of the shares of common stock subject to the
option and the following subsections (6)-(8) shall not apply. In the event
Total Stockholder Return for the Fifth Performance Period equals or is less
than the S&P Industrial Index Total Return for the Fifth Performance
Period, the option may become exercisable as set forth below.
(6) In the event Total Stockholder Return for the four-year period
commencing January 1, 2000 and ending on December 31, 2003 (the "Sixth
Performance Period") exceeds the S&P Industrial Index Total Return for the
Sixth Performance Period, the option shall become exercisable on December
31, 2003 with respect to all of the shares of common stock subject to the
option and the following subsection (7) shall not apply. In the event Total
Stockholder Return for the Sixth Performance Period equals or is less than
the S&P Industrial Index Total Return for the Sixth Performance Period, the
option shall become exercisable as set forth below.
(7) Notwithstanding the foregoing subsections (1)-(6), but subject to
Sections 5 and 7 hereof, the option shall become exercisable on June 30,
2004 with respect to all of the shares of common stock subject to the
option and the following subsection (8) shall not apply.
(8) If while any portion of the option is outstanding and unexercisable, a
Change in Control (as defined in the Plan) occurs, then from and after the
Acceleration Date (as defined in the Plan), the option shall be exercisable
with respect to all of the shares of common stock subject to such portion
of the option.
No fractional shares may be purchased at any time.
"Total Stockholder Return" means, with respect to any four-year
Performance Period, the fair market value (as defined in Section 2) on the last
day of such Performance Period of the number of shares of common stock (rounded
to the nearest thousandth) which is
-4-
deemed to be purchased by investing $100 as of the day immediately preceding the
first day of such Performance Period. All dividends on common stock shall be
assumed to be reinvested in common stock as of each "ex dividend" trading date
of the common stock occurring during such Performance Period. For purposes of
calculating the number of shares of common stock which are purchased on the day
immediately preceding the first day of a Performance Period, the purchase price
per share of common stock shall be the fair market value of the common stock on
such day.
"S&P Industrial Index Total Return" means, with respect to any four-
year Performance Period, the cumulative total return during such Performance
Period of the Standard & Poor's Industrial Index stock index, computed on the
same basis as Total Stockholder Return. If the Standard & Poor's Industrial
Index is not published or otherwise available for the duration of a Performance
Period, "S&P Industrial Index Return" shall mean, with respect to such
Performance Period, the cumulative total return during such Performance Period
of any stock index determined by the Committee, computed on the same basis as
Total Stockholder Return.
2. Subject to the limitations herein set forth, the option may be
exercised by delivery of written notice to the Company specifying the number of
shares of common stock to be purchased and accompanied by payment in full of the
option price (or arrangement made for such payment to the Company's
satisfaction) for the number of shares so purchased. No shares of common stock
may be purchased under the option unless Optionee, or in the event of
-5-
Optionee's death the executor, administrator, or personal representative of such
deceased Optionee, shall pay to the Company such amount as the Company is
advised it is required under applicable local, state and federal tax laws to
withhold and pay over to governmental taxing authorities by reason of the
purchase of shares of common stock pursuant to the option.
The option price and any federal, state, local and other taxes
required to be withheld in connection with such exercise may be paid (i) in
cash, (ii) by delivering previously owned whole shares of common stock (which
Optionee has held for at least six months prior to the delivery of such shares
or which Optionee purchased on the open market and for which Optionee has good
title, free and clear of all liens and encumbrances) having a fair market value
equal to the option price and such amount of tax, (iii) with respect to taxes
only, by authorizing the Company to withhold whole shares of common stock which
would otherwise be delivered having a fair market value equal to such amount of
tax, or (iv) in a combination thereof. Payment of the option price and such
tax, or any part thereof, in previously owned shares of common stock shall not
be effective unless Optionee delivers one or more stock certificates (or
otherwise delivers shares of common stock to the satisfaction of the Company)
representing shares having a fair market value on the date of exercise equal to
or in excess of the option price and such tax, or applicable portion thereof,
accompanied by such endorsements, signature guarantees or other documents or
assurances as may reasonably be required to effect the transfer to the Company
of such number of shares. If Optionee delivers a certificate or certificates
(or otherwise delivers shares of common stock to the satisfaction of the
Company) representing shares in excess of the number required to cover the
option price
-6-
and such tax, a certificate (or other evidence of ownership) representing such
excess number of shares will be issued and redelivered to Optionee. For
purposes of this Agreement, the fair market value of the common stock on a
specified date shall be determined by reference to the average of the high and
low transaction prices in trading of the common stock on such date as reported
in the New York Stock Exchange-Composite Transactions, or, if no such trading in
the common stock occurred on such date, then on the next preceding date when
such trading occurred; provided, that if the Committee administering the Plan
shall determine that such New York Stock Exchange-Composite Transactions prices
are not representative of the fair market value, such Committee shall determine
such fair market value by such other appropriate means as it shall determine.
3. Upon exercise of the option in whole or in part pursuant to
Section 2 hereof, the Company shall deliver certificates representing the number
of shares specified against payment therefor and shall pay all original issue or
transfer taxes and all other fees and expenses incident to such delivery.
4. Optionee shall be entitled to the privileges of ownership with
respect to shares subject to the option only as to shares purchased and
delivered to Optionee upon exercise of all or part of the option.
5. (a) If Optionee ceases to be employed by the Company by reason of
death prior to June 30, 2004, then the option shall be exercisable by the
executor, administrator,
-7-
personal representative or beneficiary of Optionee during the 90-day period
commencing on the date of Optionee's death, but only during the option term,
with respect to all of the shares of common stock subject to the option if, on
or prior to the date of Optionee's death, the option had become exercisable with
respect to all of the shares of common stock subject to the option pursuant to
any of subsections 1(c)(1)-(6) or (8). If Optionee ceases to be employed by the
Company by reason of death prior to June 30, 2004 and the option had not become
exercisable on or prior to the date of Optionee's death pursuant to any of
subsections 1(c)(1)-(6) or (8), then the option shall become exercisable as of
the time of such death by the executor, administrator, personal representative
or beneficiary of Optionee for the 90-day period commencing on the date of
Optionee's death, but only during the option term, as to the number of shares of
common stock determined by multiplying the number of shares of common stock
subject to the First Premium Option, the Second Premium Option and the Third
Premium Option, respectively, by a fraction, the numerator of which is the
number of calendar months which have elapsed since and including January, 1995
through the date of such death (rounded up to the nearest whole number) and the
denominator of which is 114. The portion of the option which does not become
exercisable pursuant to the preceding sentence shall be cancelled as of the date
of Optionee's death. If Optionee ceases to be employed by the Company by reason
of death on or after June 30, 2004, then the option shall be exercisable by the
executor, administrator, personal representative or beneficiary of Optionee
during the 90-day period commencing on the date of Optionee's death, but only
during the option term, with respect to all of the shares of common stock
subject to the option.
-8-
(b) If Optionee ceases to be employed by the Company prior to December
31, 1998 for any reason other than death, the option shall be cancelled as of
the effective date of such cessation of employment. If Optionee ceases to be
employed by the Company on or after December 31, 1998 by reason of retirement on
or after age 65, retirement on or after age 55 with the consent of the Company
or total and permanent disability, then the option shall be exercisable by
Optionee during the five-year period commencing on the effective date of such
cessation of employment, but only during the option term, with respect to all of
the shares of common stock subject to the option if, on or prior to the
effective date of such cessation of employment, the option had become
exercisable with respect to all of the shares of common stock subject to the
option pursuant to any of subsections 1(c)(1)-(8). If Optionee ceases to be
employed by the Company on or after December 31, 1998 by reason of retirement on
or after age 65, retirement on or after 55 with the consent of the Company or
total and permanent disability and the option had not become exercisable on or
prior to the effective date of such cessation of employment pursuant to any of
subsections 1(c)(1)-(8), then the option shall become exercisable by Optionee,
during the five-year period commencing on the effective date of such cessation
of employment, but only during the option term, and only in accordance with
subsections 1(c)(2)-(8); provided, however, that the option may (in the case of
subsections 1(c)(2)-(6)) or shall (in the case of subsections 1(c)(7)-(8))
become exercisable during such five-year period only as to the number of shares
of common stock determined by multiplying the number of shares of common stock
subject to the First Premium Option, the Second Premium Option and the Third
Premium Option, respectively, by a fraction, the numerator of which is the
number of calendar months which have elapsed since and including January, 1995
-9-
through the effective date of such cessation of employment (rounded up to the
nearest whole number) and the denominator of which is 114. The portion of the
option which may not become exercisable pursuant to the preceding sentence shall
be cancelled as of the effective date of such cessation of employment.
(c) If Optionee ceases to be employed by the Company for any reason
other than death, retirement on or after age 65, retirement on or after age 55
with the consent of the Company or total and permanent disability, then the
option shall be exercisable by Optionee during the 90-day period commencing on
the effective date of such cessation of employment, but only during the option
term, to the extent Optionee was entitled under Section 1(c) hereof to exercise
the option on the effective date of such cessation of employment. The portion
of the option which may not become exercisable pursuant to the preceding
sentence shall be cancelled as of the effective date of Optionee's cessation of
employment.
6. Neither the option nor any rights hereunder may be transferred
other than by will or the laws of descent and distribution. During Optionee's
lifetime the option is exercisable only by Optionee or Optionee's guardian,
personal representative or similar person. Any other transfer or any attempted
assignment, pledge or hypothecation, whether by operation of law or otherwise,
shall be void. The option is not subject to execution, attachment or other
process and no person shall be entitled to any rights hereunder by virtue of any
attempted execution, attachment or other process.
-10-
7. In the event of the death of Optionee (a) during the five-year
period commencing on the effective date of Optionee's cessation of employment by
reason of retirement on or after age 65, retirement on or after age 55 with the
consent of the Company or total and permanent disability or (b) during the 90-
day period commencing on the effective date of Optionee's cessation of
employment for any other reason, the option may be exercised by the executor,
administrator, personal representative or beneficiary of Optionee during the 90-
day period commencing on the date of Optionee's death, but only during the
option term, to the extent Optionee was entitled to exercise the option on the
date of Optionee's death.
8. Upon the occurrence of any of the following events subsequent to
the option date, the option shall be adjusted as follows:
(a) Appropriate adjustments shall be made by the Committee
administering the Plan in the number of shares purchasable under
the option to give effect to any stock splits, stock dividends and
other relevant changes in capitalization.
(b) In case the Company shall effect a merger, consolidation or other
reorganization pursuant to which the outstanding shares of common
stock of the Company shall be exchanged for other shares,
securities or consideration of the Company or of another
corporation or entity a party to such merger, consolidation or
other reorganization, Optionee shall have the right to purchase,
at the aggregate option price provided for in this Agreement and
on the same terms and conditions, the kind and number of other
shares, securities or consideration of the Company or such other
corporation or entity which would have been issuable or payable to
Optionee in respect of the number of shares of common stock of the
Company which were subject to the option immediately prior to the
effective date of such merger, consolidation or other
reorganization had such shares then been owned by Optionee. The
Company agrees that it will make appropriate provisions for the
preservation of Optionee's option rights in any agreement or plan
which it enters into or adopts to effect any such merger,
consolidation or other reorganization.
-11-
Any adjustment required as a result of the foregoing provisions of
this Section 8 shall be effected in such manner that the difference between the
aggregate fair market value of the other shares, securities or consideration
subject to the option immediately after giving effect to such adjustment and the
aggregate option price of such other shares, securities or consideration shall
be substantially equal to (but shall not be more than) the difference between
the aggregate fair market value of the shares subject to the option immediately
prior to such adjustment and the aggregate option price of such shares. Any
adjustments made under this Section shall be determined by the Committee
administering the Plan.
9. For purposes of this Agreement, employment by the Company shall be
deemed to include employment by a corporation which is a "parent corporation" or
a "subsidiary corporation" of the Company (as defined in Section 425 of the
Internal Revenue Code of 1986 (hereinafter called the "Code")), employment by
any corporation which succeeds to the obligations of the Company hereunder
pursuant to Section 8(b) hereof, and employment by a corporation which is a
"parent corporation" or a "subsidiary corporation" of any such corporation (as
defined in the above-mentioned section of the Code).
10. The option is subject to the condition that if the listing,
registration or qualification of the shares subject to the option on any
securities exchange or under any state or federal law, or if the assent or
approval of any regulatory body shall be necessary as a condition of, or in
connection with, the granting of the option or the delivery or purchase of
shares thereunder, the option may not be exercised in whole or in part unless
and until such
-12-
listing, registration, qualification, consent or approval shall have been
effected or obtained. The Company agrees to use its best efforts to obtain any
such requisite listing, registration, qualification, consent or approval.
11. The Committee administering the Plan, as from time to time
constituted, shall have the right to determine any questions which arise in
connection with this Agreement or the option. This Agreement and the option are
subject to the provisions of the Plan and shall be interpreted in accordance
therewith.
12. This Agreement shall not be construed as an employment contract
and does not give the Optionee any right to continued employment by the Company,
and the fact that the termination of Optionee's employment occurs during the
option term shall in no way be construed as giving the Optionee the right to
continue in the Company's employ.
13. The option shall not be treated as an incentive stock option
within the meaning of Section 422 of the Code.
14. This Agreement shall be binding upon and shall inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights in the option.
-13-
15. Any notice, including a notice of exercise of the option,
required to be given hereunder to the Company shall be addressed to the Company
at its office at 77 West Wacker Drive, Chicago, Illinois 60601-1696, attention
of the Vice President, Compensation and Benefits, and any notice required to be
given hereunder to Optionee shall be addressed to Optionee at Optionee's
residence address as shown in the Company's records, subject to the right of
either party hereafter to designate in writing to the other some other address.
Any such notice shall be deemed to have been duly given on the day that such
notice is received by the Vice President, Compensation and Benefits. Any such
notice shall be (i) delivered to the Vice President, Compensation and Benefits
by personal delivery, facsimile, United States mail or by express courier
service and (ii) deemed to be received upon personal delivery, upon confirmation
of receipt of facsimile transmission or upon receipt by the Vice President,
Compensation and Benefits if by United States mail or express courier service;
provided, however, that if any notice is not received during regular business
hours, it shall be deemed to be received on the next succeeding business day of
the Company.
-14-
IN WITNESS WHEREOF, R. R. DONNELLEY & SONS COMPANY has caused this
instrument to be executed as of the day and year first above written.
R. R. DONNELLEY & SONS COMPANY
By
---------------------------
Name:
Title:
The terms and conditions of the
foregoing Stock Option Agreement
are hereby accepted by the
undersigned this _____ day of
__________________, 199_
- --------------------------------
Optionee
-15-