MOORE WALLACE INCORPORATED
2003 LONG TERM INCENTIVE PLAN
PURPOSE.
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The purpose of the 2003 Long Term Incentive Plan of Moore Wallace Incorporated
(the "Plan") is to promote the long term financial interests of Moore Wallace
Incorporated (the "Company"), including its growth and performance, by
encouraging directors and key employees of the Company and its subsidiaries to
participate in the ownership of the Company, enhancing the ability of the
Company and its subsidiaries to attract and retain employees of outstanding
ability, and providing directors and employees with an interest in the Company
parallel to that of the Company's shareholders.
DEFINITIONS.
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The following definitions are applicable to the Plan:
"Award" shall mean an award determined in accordance with the terms of the Plan.
"Board of Directors" and "Board" shall mean the Board of Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Board of Directors and, to the extent permitted by
applicable law and the Company's articles, the Compensation Committee to the
extent the Board of Directors has delegated to the Compensation Committee all or
any powers conferred on the Board of Directors under the Plan.
"Compensation Committee" shall mean the Compensation Committee of the Board of
Directors. The Compensation Committee shall be composed of not less than three
directors of the Company. No officer or employee of the Company or of any
subsidiary shall be a member of the Compensation Committee. The Compensation
Committee shall at all times be comprised solely of "outside directors" within
the meaning of Section 162(m) of the Code and members who satisfy the
"non-employee" director standard contained in Rule 16b-3 promulgated under the
Exchange Act.
"Common Shares" shall mean the common shares of the Company.
"Covered Employee" shall mean, at the time of an Award (or such other time as
required by Section 162(m) of the Internal Revenue Code) (i) the Company's Chief
Executive Officer (or an individual acting in such capacity), (ii) any employee
of the Company or its subsidiaries who, in the discretion of the Committee for
purposes of determining those employees who are "covered employees" under
Section 162(m) of the Code, is likely to be among the four other highest
compensated officers of the Company for the year in which an Award is made or
payable, and (iii) any other employee of the Company or its subsidiaries
designated by the Committee in its discretion.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean, per Common Shares, the closing price of the
Common Shares on the New York Stock Exchange, or, if there are no sales of
Common Shares on such securities exchange on such date, then the closing price
of the Common Shares on the last previous day on which a sale on such securities
exchange is reported.
"Insider" shall have the meaning ascribed thereto in the TSX Policy.
"Merger" shall mean the merger with Wallace Computer Services, Inc. following
which the Company shall be known as Moore Wallace Incorporated.
"Participant" shall mean each director and employee of the Company or any
subsidiary who, in the case of an employee, is selected by the Committee to
participate in the Plan.
"TSX Policy" shall mean the Policy of The Toronto Stock Exchange on Employee
Stock Option and Stock Purchase Plans, Options for Services and Related Matters
as set forth in sections 626 to and through 637 of the Company Manual of The
Toronto Stock Exchange, as amended or replaced from time to time.
SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 16 of this Plan, in the event the
Merger is not consummated, the number of Common Shares which may be issued
pursuant to Awards under the Plan shall not exceed 6,000,000. If the Merger is
consummated, the number of Common Shares which may be issued pursuant to Awards
under the Plan shall not exceed 10,000,000. The aggregate number of Common
Shares reserved for issuance which may be issued to any one Insider or such
Insider's associates under the Plan together with any Common Shares reserved for
issuance to such Insider or such Insider's associates under any other stock
option plan, options for services, inducement options or stock purchase plans
shall not exceed 5% of the outstanding Common Shares of the Corporation (within
the meaning of the TSX Policy). The aggregate number of Common Shares reserved
for issuance which may be issued within a one-year period to Insiders under the
Plan, together with Common Shares reserved for issuance to Insiders under any
other stock options plan, options for services, inducement options or stock
purchase plans, shall not exceed 10% of the outstanding Common Shares of the
Corporation (within the meaning of the TSX Policy). The aggregate number of
Common Shares that may be issued to non-employee directors as a whole shall not
exceed 15% of the aggregate Common Shares reserved for issuance under the Plan.
A Common Share subject to an Award under the Plan that, in whole or in part,
expires unexercised or that is forfeited, terminated or canceled or is paid in
cash in lieu of Common Shares, Common Shares surrendered or withheld from any
Award under the Plan to satisfy a Participant's income tax withholding
obligation and Common Shares owned by the Participant that are tendered to pay
for the exercise of a stock option under the Plan shall thereafter again be
available for grant under the Plan.
ADMINISTRATION.
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The Plan shall be administered by the Board of Directors. The Board's
determinations and actions within its authority under this Plan are final and
conclusive and binding on the Company and all other persons. To the extent
permitted by applicable law and the Company's articles, the Board of Directors
may, from time to time, delegate to the Compensation Committee all or any of the
powers conferred on the Board of Directors under the Plan; provided that with
respect to any grants of Awards to any Non-Employee Director, the Plan shall be
administered by the Board. In connection with such delegation, the Compensation
Committee will exercise the powers delegated to it by the Board in the manner
and on the terms authorized by the Board. Any decision made or action taken by
the Compensation Committee arising out of or in connection with the
administration or interpretation of this Plan in this context is final and
conclusive and binding on all other persons. A majority of the Compensation
Committee shall constitute a quorum, and the acts of a majority shall be the
acts of the Compensation Committee. Any determination of the Committee may be
made, without a meeting, by a writing or writings signed by all of the members
of the Committee. The Committee may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee and the Committee may delegate to one or more employees, agents or
officers of the Company, or to one or more third party consultants, accountants,
lawyers or other advisors, such ministerial duties related to the operation of
the Plan as it may deem appropriate.
The Committee (or its delegate, within limits established by the Committee, and,
to the extent permitted by applicable law, with respect to non-Covered Employees
and employees who are not subject to Section 16 of the Exchange Act) shall (i)
select the Participants, determine the type, size and terms of Awards to be made
to Participants, determine the shares or share units subject to Awards, the
restrictions, conditions and contingencies to be applicable to Awards, and the
time or times at which Awards shall be exercisable or at which restrictions,
conditions and contingencies shall lapse, and (ii) have the authority to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any agreements
entered into hereunder, and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in any
Award in the manner and to the extent it shall deem desirable to carry it into
effect. The determinations of the Committee in the administration of the Plan,
as described herein, shall be final and conclusive. No member of the Committee
shall be liable for any such action or determination made in good faith.
ELIGIBILITY.
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All directors of the Company and all employees of the Company and its
subsidiaries who have demonstrated significant management potential or who have
the capacity for contributing in a substantial measure to the successful
performance of the Company, as determined by the Committee in its sole
discretion, are eligible to be Participants in the Plan. The granting of any
Award to a Participant shall not entitle that Participant to, nor disqualify
that Participant from, any other grant of an Award.
AWARDS.
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Awards under the Plan may consist of restricted stock grants. Awards of
restricted stock may provide the Participant with dividends and voting rights
prior to vesting. The Plan also covers 85,000 options to purchase Common Shares
granted to Thomas W. Oliva ("options") entitling him to purchase Common Shares
at a per share price of Cdn$14.12. These options are exercisable for a period of
10 years from the date of grant and vest 25% per year with the first 25% vesting
in January 2004. These options were granted by the Corporation under an
amendment to the 2001 Long Term Incentive Plan that increased the number of
shares issuable under that plan by 85,000 shares. In addition, the terms of the
option grant provided that in the event that the Corporation subsequently
adopted a new long term incentive plan, such options would be deemed to be
issued under that new plan. This option grant was conditioned upon approval of
the amendment of the 2001 Long Term Incentive Plan or the adoption of the Plan
by the Corporation's shareholders.
RESTRICTED STOCK.
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Restricted stock will be granted in the form of actual Common Shares. In the
event that a stock certificate is issued in respect of restricted stock, such
certificate shall be registered in the name of the Participant but shall be held
by the Company until the end of the restricted period. The employment conditions
and the length of the period for vesting of restricted stock shall be
established by the Committee at time of grant.
AWARDS TO CANADIAN PARTICIPANTS.
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In the case of an employee who is resident and employed in Canada (a "Canadian
Participant"), and subject to the provisions of the Plan relating to a Change in
Control, the award agreement shall provide that the Common Shares will be issued
to the Canadian Participant only at the end of the applicable vesting period and
only if the employment conditions have been satisfied as determined by the
Committee in its sole discretion.
AWARD AGREEMENTS.
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Each Award under the Plan shall be evidenced by an agreement setting forth the
terms and conditions, as determined by the Committee, which shall apply to such
Award, in addition to the terms and conditions specified in the Plan.
CHANGE IN CONTROL.
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In the event of a Change in Control, as hereinafter defined, (i) the
restrictions applicable to all shares of restricted stock shall lapse and such
shares shall be deemed fully vested, (ii) all Awards of restricted shares shall
be deemed to be fully vested and (iii) all options shall be deemed to be fully
vested. The Committee may, in its discretion, include such
further provisions and limitations in any agreement documenting such Awards as
it may deem equitable and in the best interests of the Company.
A "Change in Control" means the occurrence of any one of the following events:
(i) individuals who, on the date the Plan is adopted,
constitute the Board (the "Incumbent Directors") cease for any reason
to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date of the Plan, whose
election or nomination for election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director; provided,
however, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election
contest with respect to directors or as a result of any other actual or
threatened solicitation of proxies or consents by or on behalf of any
person other than the Board shall be deemed to be an Incumbent
Director;
(ii) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that the
event described in this paragraph (ii) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (A) by the Company or
any subsidiary, (B) by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary, (C) by any underwriter temporarily
holding securities pursuant to an offering of such securities, or (D) pursuant
to a Non-Qualifying Transaction (as defined in paragraph (iii));
(iii) the consummation of an arrangement, amalgamation, merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company or any of its subsidiaries that requires the approval of the Company's
shareholders, whether for such transaction or the issuance of securities in the
transaction (a "Business Combination"), unless immediately following such
Business Combination: (A) more than 50% of the total voting power of (x) the
corporation resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Company Voting Securities that were outstanding
immediately prior to such Business Combination (or, if applicable, is
represented by shares into which such Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of such
Company Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person
(other than any employee benefit plan (or related trust) sponsored or maintained
by the Surviving Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 35% or more of the total voting
power of the outstanding voting securities eligible to elect directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) other than persons set forth in (A) through (D) of paragraph (ii)
and (C) at least a majority of the members of the Board of Directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were
Incumbent Directors at the time of the Board's approval of the execution of the
initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B) and (C)
above shall be deemed to be a "Non-Qualifying Transaction");
(iv) the closing of a sale of all or substantially all of the Company's
assets, other than to an entity or in a manner where the voting securities
immediately prior to such sale represent directly or indirectly after such sale
at least 50% of the voting securities of the entity acquiring such assets in
approximately the same proportion as prior to such sale; or
(v) the shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 35% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.
WITHHOLDING.
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The Company shall have the right to deduct from any payment to be made pursuant
to the Plan the amount of any taxes required by law to be withheld therefrom, or
to require a Participant to pay to the Company such amount required to be
withheld prior to the issuance or delivery of any Common Shares or the payment
of cash under the Plan. The Committee may, in its discretion, permit a
Participant to elect to satisfy such withholding obligation by having the
Company retain the number of Common Shares whose Fair Market Value equals the
amount required to be withheld. Any fraction of a Common Share required to
satisfy such obligation shall be disregarded and the amount due shall instead be
paid in cash to the Participant.
NONTRANSFERABILITY.
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No Award shall be assignable or transferable, and no right or interest of any
Participant shall be subject to any lien, obligation or liability of the
Participant, except by will or the laws of descent and distribution.
NO RIGHT TO EMPLOYMENT.
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No person shall have any claim or right to be granted an Award, and the grant of
an Award shall not be construed as giving a Participant the right to be retained
in the employ of the Company or any subsidiary. Further, the Company and its
subsidiaries expressly reserve the right at any time to dismiss a Participant
free from any liability, or any claim under the Plan, except as provided herein
or in any agreement entered into hereunder. Any obligation of the Company under
the Plan to make any payment at any future date merely constitutes the unsecured
promise of the Company to make such payment from its general assets in
accordance with the Plan, and no Participant shall have any interest in, or lien
or prior claim upon, any property of the Company or any subsidiary by reason of
that obligation.
ADJUSTMENT OF AND CHANGES IN COMMON SHARES.
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In the event of any change in the outstanding Common Shares by reason of any
stock dividend or split, recapitalization, amalgamation, arrangement, merger,
consolidation, spinoff, combination or exchange of shares or other corporate
change, or any distributions to common shareholders other than regular cash
dividends, the Committee may make such substitution or adjustment, if any, as it
deems to be equitable, as to the number or kind of shares of Common Shares or
other securities issued or reserved for issuance pursuant to the Plan and
outstanding Awards (including adjustments to the option and exercise prices of
outstanding Awards). Except pursuant to the previous sentence, the option or
exercise price of outstanding Awards may not be reduced.
AMENDMENT.
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The Plan or any portion thereof may be amended, suspended or terminated by the
Board of Directors at any time, provided that, no amendment shall be made
without shareholder approval if such approval is necessary for the Plan to
continue to comply with Rule 16b-3 under the Exchange Act or as required by the
applicable rules and listing standards of The Toronto Stock Exchange and the New
York Stock Exchange.
EFFECTIVE DATE AND TERMINATION.
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The Plan shall be effective as of January 1, 2003, subject to its approval by
shareholders of the Company. Subject to earlier termination by the action of the
Board of Directors, the Plan shall remain in effect until December 31, 2012.
PURCHASE FOR INVESTMENT.
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Each person acquiring Common Shares pursuant to any Award may be required by the
Company to furnish a representation that he or she is acquiring the Common
Shares so acquired as an investment and not with a view to distribution thereof
if the Company, in its sole discretion, determines that such representation is
required to ensure that a resale or other disposition of the Common Shares would
not involve a violation of the Securities Act of 1933, as amended, or of
applicable blue sky laws. Any investment representation so furnished shall no
longer be applicable at any time such representation is no longer necessary for
such purposes.
AWARDS IN SUBSTITUTION FOR AWARDS GRANTED BY OTHER COMPANIES.
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Awards may be granted under the Plan in substitution for awards held by
employees of a company who become employees of the Company or any subsidiary as
a result of the merger or consolidation of the employer company with the Company
or any subsidiary, or the acquisition by the Company or any subsidiary of the
assets of the employer company, or the acquisition by the Company or any
subsidiary of stock of the employer company as a result of which it becomes a
subsidiary. The terms, provisions, and benefits of the substitute Awards so
granted may vary from the terms, provisions, and benefits set forth in or
authorized by the Plan to such extent as the Committee at the time of the grant
may deem appropriate to conform, in whole or in part, to the terms, provisions,
and benefits of the awards in substitution for which they are granted.
GOVERNING LAW.
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The provisions of the Plan shall be governed and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein,
without references to principles of conflicts of law.