<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
-----------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-4694
R. R. DONNELLEY & SONS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-1004130
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
77 WEST WACKER DRIVE, CHICAGO,
ILLINOIS 60601
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER (312) 326-8000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
X
Yes------- No -------
NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING
AS OF APRIL 30, 1996 153,988,019
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
INDEX NUMBER(S)
----- ---------
<S> <C>
Condensed Consolidated Statements of Income (Unaudited) for
the three months ended March 31, 1996 and 1995............... 3
Condensed Consolidated Balance Sheets as of March 31, 1996
(Unaudited) and December 31, 1995............................ 4-5
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the three months ended March 31, 1996 and 1995........... 6
Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................. 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison of First Quarter 1996 to First Quarter 1995........ 9-11
Changes in Financial Condition................................ 11
Outlook....................................................... 12
</TABLE>
2
<PAGE>
R. R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
----------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net sales............................................. $ 1,546,995 $ 1,318,089
Cost of sales......................................... 1,306,173 1,088,274
----------- -----------
Gross profit.......................................... 240,822 229,815
Selling and administrative expenses................... 178,479 135,355
Restructuring charge.................................. 512,548 --
----------- -----------
Earnings (loss) from operations....................... (450,205) 94,460
Interest expense...................................... 25,083 22,584
Other (income) expense--net........................... (26,576) 2,991
----------- -----------
Earnings (loss) before income taxes................... (448,712) 68,885
Provision (benefit) for income taxes.................. (71,794) 22,043
----------- -----------
Net income (loss)..................................... $ (376,918) $ 46,842
=========== ===========
Per common share:
Net income (loss)................................... $ (2.45) $ 0.31
=========== ===========
Cash dividends...................................... $ 0.18 $ 0.16
=========== ===========
Average shares outstanding............................ 154,017,000 153,123,000
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
R. R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 1996 AND DECEMBER 31, 1995
(THOUSANDS OF DOLLARS)
<TABLE>
<S> <C> <C> <C>
ASSETS
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C> <C>
Cash and equivalents............................... $ 41,748 $ 33,122
Receivables, less allowance for doubtful accounts
of $25,631 and $25,311 at March 31, 1996 and
December 31, 1995, respectively................... 1,195,026 1,466,159
Inventories........................................ 416,677 380,078
Prepaid expenses................................... 44,566 28,600
---------- ----------
Total current assets............................. 1,698,017 1,907,959
---------- ----------
Property, plant and equipment, at cost............. 4,205,551 4,120,449
Accumulated depreciation........................... 2,244,760 2,111,461
---------- ----------
Net property, plant and equipment................ 1,960,791 2,008,988
Goodwill and other intangibles--net................ 821,203 1,024,954
Other noncurrent assets............................ 417,244 442,909
---------- ----------
Total assets..................................... $4,897,255 $5,384,810
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
R. R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 1996 AND DECEMBER 31, 1995
(THOUSANDS OF DOLLARS)
<TABLE>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Accounts payable....................................... $ 503,936 $ 601,814
Accrued compensation................................... 94,266 126,483
Short-term debt........................................ 50,000 50,000
Current and deferred income taxes...................... 70,729 86,737
Other accrued liabilities.............................. 399,198 265,340
---------- ----------
Total current liabilities............................ 1,118,129 1,130,374
---------- ----------
Long-term debt......................................... 1,540,424 1,560,960
Deferred income taxes.................................. 234,364 300,840
Other noncurrent liabilities........................... 241,640 219,466
Shareholders' equity:
Common stock, at stated value........................ 330,612 330,612
Retained earnings, net of cumulative translation
adjustments of $36,867 and $29,031 at March 31, 1996
and December 31, 1995, respectively................. 1,580,134 1,994,098
Unearned compensation................................ (8,832) (9,297)
Reacquired common stock, at cost..................... (139,216) (142,243)
---------- ----------
Total shareholders' equity....................... 1,762,698 2,173,170
---------- ----------
Total liabilities and shareholders' equity....... $4,897,255 $5,384,810
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
R. R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income............................................. $(376,918) $ 46,842
Restructuring charge................................... 512,548 --
Depreciation........................................... 91,556 79,212
Amortization........................................... 17,521 12,966
Net change in operating working capital................ 55,402 (95,432)
Net change in other assets and liabilities............. (84,240) (11,936)
Other.................................................. 892 (706)
--------- ---------
Net cash provided by operating activities................ 216,761 30,946
--------- ---------
Cash flows used for investing activities:
Capital expenditures................................... (143,862) (107,683)
Other investments including acquisitions, net of cash
acquired.............................................. (19,037) (21,184)
--------- ---------
Net cash used for investing activities................... (162,899) (128,867)
--------- ---------
Cash flows from (used for) financing activities:
Net increase (decrease) in borrowings.................. (21,767) 115,178
Disposition of reacquired common stock................. 6,544 20,836
Acquisition of common stock............................ (4,537) (13,233)
Cash dividends on common stock......................... (27,724) (24,476)
--------- ---------
Net cash from (used for) financing activities............ (47,484) 98,305
--------- ---------
Effect of exchange rate changes on cash and equivalents.. 2,248 (6,442)
--------- ---------
Net increase (decrease) in cash and equivalents.......... 8,626 (6,058)
Cash and equivalents at beginning of period.............. 33,122 20,569
--------- ---------
Cash and equivalents at end of period.................... $ 41,748 $ 14,511
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
R. R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. The condensed consolidated financial statements included herein are
unaudited (although the balance sheet at December 31, 1995 is condensed from
the audited balance sheet at that date) and have been prepared by the company
to conform with the requirements applicable to this quarterly report on Form
10-Q. Certain information and disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been omitted as permitted by such requirements. However, the
company believes that the disclosures made are adequate to make the
information presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the related notes included in the company's 1995 annual report
on Form 10-K.
The condensed consolidated financial statements included herein reflect, in
the opinion of the company, all adjustments (which include only normal,
recurring adjustments) necessary to present fairly the financial information
for such periods.
Note 2. Components of the company's inventories at March 31, 1996 and
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
-----------------------
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Raw materials and manufacturing supplies................ $242,603 $230,694
Work in process......................................... 232,224 213,741
Finished goods.......................................... 29,533 34,041
Progress billings....................................... (34,134) (47,549)
LIFO reserve............................................ (53,549) (50,849)
-------- --------
Total inventories................................... $416,677 $380,078
======== ========
Note 3. The following provides supplemental cash flow information:
<CAPTION>
(THOUSANDS OF DOLLARS)
-----------------------
THREE MONTHS ENDED
MARCH 31
-----------------------
1996 1995
--------- ------------
<S> <C> <C>
Interest paid, net of capitalized interest.............. $ 11,494 $ 12,314
Income taxes paid....................................... $ 10,724 $ 5,496
</TABLE>
7
<PAGE>
Note 4. In the first quarter of 1996, the company provided for the
restructuring and realignment of its gravure printing operations in North
America, the repositioning of other businesses, the write-down of certain
equipment, and the impairment of intangible assets and investments in non-core
businesses. These actions resulted in a one-time pre-tax charge of $512
million, or $2.67 per share after tax. Approximately $195 million of the
charge is related to the gravure platform realignment. Approximately $189
million is related to other manufacturing restructuring, including $92 million
to reposition Stream International's worldwide operations. Pre-tax cash
outlays associated with the restructuring and realignment charge are expected
to total approximately $147 million and will be incurred in 1996 and 1997. In
addition, the company is recognizing the impairment of approximately $128
million in equipment, intangibles and investments in non-core businesses. The
impairment loss was calculated based on the excess of the carrying amount of
the assets over the assets' fair values. The fair value of an asset is
generally determined as the discounted estimates of future cash flows
generated by the asset.
The composition of the company's restructuring reserves is as follows:
<TABLE>
<CAPTION>
WRITEDOWN OF
PROPERTY AND
ORIGINAL INVESTMENTS RESTRUCTURING
RESTRUCTURING TO FAIR CASH RESERVES AS OF
RESERVE VALUE PAYMENTS MARCH 31, 1996
------------- ------------ -------- --------------
<S> <C> <C> <C> <C>
Restructuring loss on
writedown of property,
plant and equipment, and
other assets.............. $236,848 $(236,848) -- $ --
Restructuring expenditures
to reposition operations
and close facilities...... 147,619 -- -- 147,619
Impairment loss on
intangible assets and
investments............... 128,081 (128,081) -- --
-------- --------- --- --------
Total restructuring
reserves.................. $512,548 $(364,929) -- $147,619
======== ========= === ========
</TABLE>
8
<PAGE>
ABOUT THE COMPANY
R.R. Donnelley & Sons Company is a world leader in distributing, managing
and reproducing print and digital information for the publishing, retailing,
merchandising and information technology markets worldwide. The company is the
largest commercial printer headquartered in North America, with approximately
41,000 employees in 26 countries on five continents.
The company is organized into the following business sectors, which
accounted for the following sales results during the first quarter of 1996:
Commercial Print Sector, which includes consumer and trade magazines ($302
million, or 20% of 1996 first quarter consolidated net sales), and catalogs,
retail advertising circulars, direct mail products ($275 million, or 18% of
1996 first quarter consolidated net sales).
Global Commercial Print Sector, which includes the company's commercial
print operations outside the United States--in Europe, Latin America and Asia
($83 million, or 5% of 1996 first quarter consolidated net sales).
Information Management Sector, which includes Book Publishing Services ($159
million, or 10% of 1996 first quarter consolidated net sales),
Telecommunications ($150 million, or 10% of 1996 first quarter consolidated
net sales), and Financial Services ($88 million, or 6% of 1996 first quarter
consolidated net sales), as well as the Metromail subsidiary ($56 million, or
4% of 1996 first quarter consolidated net sales), the company's Digital
Division, the 77 Capital venture-capital fund, creative design and
communication services and a variety of information services ($40 million, or
2% of 1996 first quarter consolidated net sales).
Stream International, the world's largest software manufacturer, marketer
and technical-support and services provider, approximately 80% owned by the
company, formed in April 1995 from the merger of the company's Global Software
Services business with Corporate Software Inc. ($394 million, or 25% of 1996
first quarter consolidated net sales).
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
COMPARISON OF FIRST QUARTER 1996 TO FIRST QUARTER 1995
RESULTS OF OPERATIONS
The company reported a first quarter 1996 net loss of $377 million, or
($2.45) per share, reflecting the company's previously announced $512 million
pre-tax restructuring charge ($411 million after taxes and a minority interest
benefit) recorded during the period. Excluding the one-time charge, net income
declined by 27% from last year's first quarter to $34 million and earnings per
share decreased 29% to $0.22. First quarter sales of $1.5 billion were up 17
percent from the year-earlier quarter.
The company's 1996 first-quarter earnings performance declined primarily due
to the drop in by-product paper prices ($11.3 million), higher paper and
postage prices in 1995 which depressed demand for catalogs and magazines in
the quarter, a sluggish trade book sales environment due to the weak 1995
holiday sales season, and a number of developments that affected the
performance of Stream International, notably the slower-than-expected
corporate demand for new systems and software, as well as software price
competition.
9
<PAGE>
NET SALES
Net sales increased $229 million, or 17%, to $1.5 billion, reflecting
acquisitions and mergers, higher materials sales (primarily paper) and
continued growth in foreign operations. Approximately $190 million of the net
sales increase was due to acquisitions and mergers (primarily Stream
International), while higher paper prices accounted for approximately $103
million of the gain. These increases were partially offset by lower net sales
in the book, catalog and magazine business units due to soft market
conditions.
Net sales from foreign operations represented approximately $269 million, or
17% of total net sales in the 1996 quarter, up 54% from $175 million, or 13%
of total net sales in the first quarter of 1995. The growth in foreign sales
reflected acquisitions (primarily Stream International) and volume increases
from established operations in Latin America, Europe and Asia.
PERCENTAGE OF NET SALES BY BUSINESS UNIT
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31, 1996 1995 1994
----------------------------- ---- ---- ----
<S> <C> <C> <C>
Stream International....................................... 25% 15% 13%
Consumer & Trade Magazines................................. 20 23 24
Catalogs, Retail, Direct-Mail.............................. 18 21 24
Book Publishing............................................ 10 13 13
Telecommunications......................................... 10 10 9
Financial Services......................................... 6 6 7
Global Commercial Print.................................... 5 5 3
Other...................................................... 6 7 7
</TABLE>
EXPENSES
Gross profit increased 5%, to $241 million, due to higher volume in
Telecommunications, Financial Services, Information Services and Direct Mail,
as well as additional volume created by acquisitions and mergers (primarily
Stream International). This increase was lower than the sales growth rate
primarily due to the impact of the change in revenue mix associated with the
Stream International merger and the decline in by-product paper prices.
Selling and administrative expenses increased 32%, to $178 million,
primarily reflecting higher expenses associated with Corporate Software Inc.
The ratio of selling and administrative expenses to net sales, at 12% in the
quarter, increased from the 1995 ratio of 10%, reflecting the impact of Stream
International. Interest expense increased $2 million, reflecting both higher
average interest rates and higher average debt balances associated with
capital spending, acquisitions and increased working capital needs driven by
higher paper quantities and prices. Other income increased $30 million
primarily due to $14 million in gains on the sales of investments in the
company's venture capital portfolio and a $12 million minority interest
benefit arising from Stream International's portion of the restructuring
charge.
SUMMARY OF EXPENSE TRENDS
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31, % INCREASE
THOUSANDS OF DOLLARS 1996 % INCREASE 1995 (DECREASE) 1994
- ----------------------------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Cost of manufacturing......... $447,899 8% $413,124 14% $363,712
Cost of materials............. 749,197 29% 582,972 33% 437,188
Depreciation.................. 91,556 16% 79,212 24% 63,944
Amortization.................. 17,521 35% 12,966 6% 12,180
Selling and administrative.... 178,480 32% 135,355 18% 115,150
Net interest expense.......... 25,083 11% 22,584 93% 11,728
</TABLE>
10
<PAGE>
CHANGES IN FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
For the quarter, excluding the one-time charge, operating cash flow (net
income plus depreciation and amortization) was $143 million, up 3% from the
first quarter of 1995. In addition, operating working capital (defined as
inventories, accounts receivable and prepaid expenses, minus accounts payable,
accrued compensation and other accrued liabilities, excluding the
restructuring reserve), decreased $55 million during the first quarter of
1996, primarily due to a decrease in accounts receivable, compared to a $95
million increase during the first quarter of 1995. Management believes that
the company's cash flow and borrowing capacity are sufficient to fund current
operations and growth. Capital expenditures in the quarter totaled $144
million, including purchases of equipment to meet the growing needs of
customers and purchases related to improving manufacturing productivity and
efficiency. Full year capital spending is expected to be between $500 million
and $550 million.
At March 31, 1996, the company had an available credit facility of $550
million with a number of banks. This credit facility provides support for the
issuance of commercial paper and other credit needs. In addition, certain
subsidiaries of the company had credit facilities with unused borrowing
capacities totaling approximately $100 million at March 31, 1996.
OTHER INFORMATION
Metromail--On March 7, 1996, the company announced that a registration
statement had been filed with the Securities and Exchange Commission for a
proposed initial public offering of common shares of Metromail. Upon
consummation of the offering, the company will retain a significant minority
interest in Metromail. Proceeds from the completed offering will be used by
Metromail to retire certain indebtedness owed to the company. The company in
turn will use the payment from Metromail to pay down debt and for general
corporate purposes. The planned offering will be made only by means of a
prospectus.
Corporate Restructuring--On March 28, 1996, the company announced a $512
million pre-tax charge to first quarter earnings ($411 million or $2.67 per
share after tax) to restructure and realign its gravure printing operations in
North America, reposition other businesses, and write down certain equipment,
investments in non-core businesses and intangible assets. Approximately $195
million of the charge is related to the gravure platform realignment.
Approximately $189 million is related to other manufacturing restructuring,
including approximately $92 million to reposition Stream International's
worldwide operations. Additionally, the company has written down approximately
$128 million in equipment, intangibles and investments in non-core businesses.
Pre-tax cash outlays associated with the restructuring charge are expected
to total approximately $147 million and will be incurred in 1996 and 1997. The
remaining $365 million relates to non-cash items, primarily the write-down of
fixed assets and goodwill. Because of this write-down, 1996 depreciation and
amortization expenses will be approximately $11 million (before taxes) less
than they would have been had the charge not been incurred.
11
<PAGE>
OUTLOOK
The commercial printing business in North America (the company's primary
geographic market) is highly competitive in most product categories and
geographic regions. Industry analysts consider most commercial print markets
to have excess capacity. Competition is largely based on price, quality and
servicing the special needs of customers.
Management believes the company's prospects in 1996 will be challenging. The
company's primary printing markets have been relatively weak in the first
quarter. However, the company has substantial capacity committed under long-
term contracts and the outlook for advertising seems positive, since 1996 is a
major election year and the United States is hosting the 1996 Olympics. These
events tend to increase advertising, resulting in higher demand for printed
materials. Additionally, volume increases are likely across the book, catalog
and magazine businesses in the second half of 1996, driven in part by postal
rate relief as the new United States Postal classification system takes
effect. Despite slower than expected corporate demand for software and
software price discounting in early 1996, the company believes Stream
International should see improved sales and profits for the year.
The company is a large consumer of paper, acquired for and by customers. As
in 1995, the cost and supply of certain paper grades consumed in the
manufacturing process will continue to affect the company's financial results.
In 1995, rising prices and tight supply caused revenues to increase as costs
of paper were recovered, but at low margins. Management believes that the
industry will experience declining paper prices and balanced supplies in 1996,
as signs of price discounting have surfaced in the first quarter of the year.
In addition to paper consumed in the manufacturing process, the company is
also affected by the price of by-product paper which it sells. Financial
results in 1996 will continue to be negatively impacted by decreased by-
product prices, although the company anticipates no material further decline
in prices during the remainder of the year.
Additionally, there is currently proposed legislation before the United
States Congress proposing to initially reduce and eventually eliminate the
deduction for interest on loans borrowed against corporate-owned life
insurance (COLI). The company has used this deduction for several years and is
carefully watching any changes in legislation that may reduce or eliminate it
going forward.
In summary, the company's competitive strengths of worldwide geographic
coverage, strategic raw materials purchasing (primarily paper and ink),
comprehensive service offerings, technology advantage and economies of scale
should result in strong sales and earnings growth in 1996.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The company held its Annual Meeting of Stockholders on March 28, 1996.
(b) The following matters were voted upon at the Annual Meeting of
Stockholders:
1. The election of the nominees for Directors of the Second Class who
will serve for a term to expire at the Annual Meeting of Stockholders to be
held in 1999 was voted on by the stockholders. The nominees, all of whom
were elected, were: James R. Donnelley, Judith H. Hamilton, John M.
Richman, William D. Sanders, and Bide L. Thomas. The Inspectors of Election
certified the following vote tabulations:
<TABLE>
<CAPTION>
FOR WITHHELD NON-VOTES
----------- --------- ---------
<S> <C> <C> <C>
James R. Donnelley........................ 133,279,759 1,484,443 0
Judith H. Hamilton........................ 133,235,770 1,528,432 0
John M. Richman........................... 133,179,165 1,585,037 0
William D. Sanders........................ 133,274,540 1,489,662 0
Bide L. Thomas............................ 133,240,362 1,523,840 0
</TABLE>
2. A stockholder proposal regarding the company's maquiladora operations
was rejected by the stockholders. The Inspectors of Election certified the
following vote tabulations:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- ----------- ---------- ---------
<S> <C> <C> <C>
4,925,021 107,811,496 13,793,853 8,233,832
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<S> <C>
3(i) Restated Certificate of Incorporation, as filed and effective on March 28,
1996.
4 Form of Rights Agreement, dated as of April 25, 1996, between R.R.
Donnelley & Sons Company and First Chicago Trust Company of New York.
10 Donnelley Shares Stock Option Plan, as amended on January 25, 1996, and
including Donnelley Shares Stock Option Plan for UK Employees.
27 Financial Data Schedule
</TABLE>
(b) A current Report on Form 8-K was filed during the first quarter of 1996.
The Report was dated March 28, 1996 and included Item 5, "Other Events," and
Item 7, "Financial Statements, Pro Forma Financial Information and Exhibits".
13
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
R. R. Donnelley & Sons Company
/s/ Peter F. Murphy
By __________________________________
Peter F. Murphy
Controller
(Authorized Officer and
Chief Accounting Officer)
May 3, 1996
Date __________________________
14
<PAGE>
R. R. DONNELLEY & SONS COMPANY
(A Delaware Corporation)
Restated Certificate of Incorporation
R. R. Donnelley & Sons Company, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is R. R. Donnelley & Sons Company. The name
under which it was originally incorporated is "Donnelley, Inc.", pursuant to an
original Certificate of Incorporation filed with the Secretary of State on May
7, 1956.
2. This Restated Certificate of Incorporation only restates and integrates and
does not further amend the provisions of the Certificate of Incorporation of
this corporation as heretofore amended or supplemented and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby restated to read as herein set forth in full:
FIRST: The name of the corporation is:
R. R. DONNELLEY & SONS COMPANY
SECOND. Its principal office in the State of Delaware is located at Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name and address of its resident agent is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801.
THIRD. The nature of the business, or objects or purposes to be transacted,
promoted or carried on are:
To carry on a printing business in all its phases.
To furnish services of every kind or description in or related to the graphic
arts.
To manufacture, process, purchase, otherwise acquire, prepare for market,
publish, merchandise, sell, otherwise dispose of, at wholesale or retail or
both, or otherwise deal in all kinds of printing, printed goods, printing
machinery, paper, and other materials on or in which printing may be
incorporated and by-products thereof and all other kinds of goods, wares,
merchandise, commodities or other property of any class whatsoever in any part
of the world; and to carry on, and engage in any phase of, a general business of
manufacturing, merchandising and trading.
<PAGE>
To engage in, carry on or otherwise conduct, directly or through employees or
others, research or investigation for general purposes or for the development of
new or improved products, by-products, equipment or processes, or uses therefor,
or for improving the ease or efficiency of the operations of the corporation or
for other purposes.
To produce, process, otherwise acquire, own, modify, sell, transport, dispose of
or deal in any and all kinds of raw materials, semi-finished or finished
materials, goods, products and any tangible or intangible interests or property.
To purchase, erect, construct, build, rebuild, rent, otherwise acquire, own,
hold, use, operate, maintain, alter, manage, deal in, sell, exchange, transfer,
mortgage, pledge, encumber, lease, remove, otherwise dispose of or deal with
land, buildings, structures, laboratories, equipment, machinery, facilities or
any other improvements or real property or personal property whatsoever, either
tangible or intangible, or any interest therein.
To purchase, otherwise acquire, own, hold, invest in, deal in, sell, exchange,
assign, transfer, mortgage, pledge, encumber, otherwise dispose of, or deal
with, as principal or agent, stock of, or evidences of indebtedness created or
assumed by, this corporation or any other corporation or corporations of the
State of Delaware, any other state, the District of Columbia, or any country or
any political subdivision, territory, colony, or possession thereof, or created
by any other person or persons including, without limiting the generality of the
foregoing, securities, shares, bonds, debentures, notes, open accounts and other
evidences of indebtedness, or other interest in, or obligations of,
corporations, foreign or domestic, associations, trusts, partnerships,
individuals, governmental bodies or authorities, or any other person; and to
exercise all the rights, powers and privileges with respect thereto which
natural persons might, could or would exercise, including, except in the case of
stock or any other securities issued by this corporation having voting rights,
the right to vote thereon.
To borrow money and to make or issue evidences of indebtedness of this
corporation of all kinds, including bonds, debentures, notes or other evidences
of indebtedness whether or not convertible into stock or other securities of the
corporation of any class and whether or not secured by mortgage or pledge of the
whole or any part of the corporation's property or otherwise.
To purchase or otherwise acquire the good will, rights, and other property of
all kinds, and to undertake and assume the whole or any part of the liabilities,
of any corporation, foreign or domestic, association, trust, partnership,
individual or other person; and to pay for the same in cash or other property of
the corporation, or
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with stock, bonds, debentures, notes, other evidences of indebtedness issued or
created by the corporation, or otherwise.
To promote, finance, invest in, aid or assist, financially or otherwise, any
corporation, foreign or domestic, association, trust, partnership, individual or
any other person in which or in whom the corporation has any interest of
whatever nature or with which or with whom it has business dealings, and in
connection therewith to guarantee or become surety for the performance or
payment of any undertaking or obligation whatsoever; and to aid in any manner
any such person and generally to do any acts or things designed to protect,
preserve, improve or enhance the value of any such interest.
To apply for, obtain, register, purchase, license, otherwise acquire, own, hold,
use, operate, deal in, introduce, sell, assign, exchange, lease, license,
otherwise dispose of or deal with, in whole or in part, any trade names, trade-
marks, distinctive marks, copyrights, patents, inventions, formulas, secret
processes, licenses, concessions, improvements, processes or the like used in
connection with, or secured under, letters patent of the United States of
America, or the laws of any other jurisdiction, or otherwise; and to issue,
exercise, develop, grant licenses in respect thereof or otherwise turn them to
account.
To perform services, or act as agent or broker, for others for any purpose for
which it might itself act.
To make and enter into contracts of every kind and description with any
corporation, foreign or domestic, association, trust, partnership, individual,
governmental body or authority, or any other person; to do and transact all
acts, business and things incident to or relating to or convenient in connection
with any business, objects or purpose of the corporation as principal or agent
or otherwise, and by or through agents, and either alone or in conjunction with
others; and to remunerate any corporation, partnership, individual, or other
person for services rendered or to be rendered, including, without limitation,
the placing or assisting to place or guaranteeing the placing of any stocks,
bonds, debentures, or other securities of the corporation or of any other
corporation.
To carry on all or any of its operations and business without restriction or
limitation as to amount; to have one or more offices in any state, territory or
possession of the United States of America, or the District of Columbia, and in
any foreign country, or any political subdivision, territory, colony or
possession subject to the laws thereof.
In general, to carry on any business or to perform any service in connection
with the foregoing, and to have and exercise all the powers conferred by the
laws of the
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State of Delaware upon corporations formed under the general corporation law of
such state, and to do any or all of the things hereinbefore set forth to the
same extent as natural persons might, could or would do.
The foregoing clauses shall be liberally construed, both as objects and powers;
and the objects and purposes specified therein shall, except where otherwise
expressed, be in nowise limited or restricted by reference to, or inference
from, the terms of any other clause in this Certificate of Incorporation.
FOURTH. The total number of shares of all classes of capital stock which the
corporation shall have the authority to issue is 502,000,000 shares which shall
be divided into two classes as follows:
2,000,000 shares of Preferred Stock (Preferred Stock) of the par value of
$1.00 per share, and
500,000,000 shares of Common Stock (Common Stock) of the par value of $1.25
per share.
The designations, voting powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the above classes of stock shall be as follows:
I.
PREFERRED STOCK
1. Shares of Preferred Stock may be issued in one or more series at such time
or times, and for such consideration or considerations, as the Board of
Directors may determine.
2. The Board of Directors is expressly authorized at any time, and from time
to time, to provide for the issuance of shares of Preferred Stock in one or
more series with such designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof adopted by the
Board of Directors, and as are not stated and expressed in this Certificate
of Incorporation or any amendment thereto including, but not limited to,
determination of any of the following:
(a) the distinctive serial designation and the number of shares
constituting a series;
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(b) the dividend rate or rates, whether dividends shall be cumulative and,
if so, from what date, the payment date or dates for dividends, and
the participating or other special rights, if any, with respect to
dividends;
(c) the voting powers, full or limited, if any, of the shares of such
series;
(d) whether the shares shall be redeemable and, if so, the price or prices
at which, and the terms and conditions on which, the shares may be
redeemed;
(e) the amount or amounts payable upon the shares in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation prior to any payment or distribution of the assets of the
corporation to any class or classes of stock of the corporation
ranking junior to the Preferred Stock;
(f) whether the shares shall be entitled to the benefit of a sinking or
retirement fund to be applied to the purchase or redemption of shares
of a series and, if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which the
shares may be redeemed or purchased through the application of such
fund;
(g) whether the shares shall be convertible into, or exchangeable for,
shares of any other class or classes or of any other series of the
same or any other class or classes of stock of the corporation or any
other corporation, and if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange; and
(h) any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors
may deem advisable and as shall not be inconsistent with the
provisions of this Certification of Incorporation.
3. Shares of Preferred Stock which have been issued and reacquired in any
manner by the corporation (excluding, until the corporation elects to
retire them, shares which are held as treasury shares but including shares
redeemed, shares purchased and retired and shares which have been converted
into shares of Common Stock) shall have the status of authorized but
unissued shares of Preferred Stock and may be reissued.
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4. Attached as Exhibit A to this Restated Certificate of Incorporation is the
Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock of the corporation as filed with the
Secretary of State of Delaware on July 29, 1986.
II.
COMMON STOCK
1. Subject to the preferential rights of the Preferred Stock, the holders of
the Common Stock shall be entitled to receive, to the extent permitted by
law, such dividends as may be declared from time to time by the Board of
Directors.
2. Except as may be otherwise required by law or this Certificate of
Incorporation, each holder of Common Stock shall have one vote in respect
of each share of stock held by him of record on the books of the
corporation on all matters voted upon by the stockholders.
III.
OTHER PROVISIONS
1. Subject to the protective conditions and restrictions of any outstanding
Preferred Stock, any amendment to this Certificate of Incorporation which
shall increase or decrease the authorized capital stock of any class or
classes may be adopted by the affirmative vote of the holders of a majority
of the outstanding shares of the voting stock of the corporation.
2. No holder of Preferred or Common Stock shall have any right as such holder
to purchase or subscribe for any security of the corporation now or
hereafter authorized or issued. All such securities may be issued and
disposed of by the Board of Directors to such persons, firms, corporations
and associations for such lawful considerations, and on such terms, as the
Board of Directors in its discretion may determine, without first offering
the same, or any part thereof, to the holders of Preferred or Common Stock.
3. Any action required or permitted to be taken by the stockholders of the
corporation must be effected at an annual or special meeting of
stockholders of the corporation and may not be effected by any consent in
writing by such stockholders.
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FIFTH. The minimum amount of capital with which the corporation will commence
business is one thousand dollars ($l,000).
SIXTH. [Intentionally omitted]
SEVENTH. l. The number of Directors which shall constitute the whole Board
shall be determined by the By-Laws of the corporation except that their number
shall be not less than nine (9) nor more than fifteen (15). The Directors shall
be divided into three classes of as nearly equal size as possible (i.e. a
variation of not more than one between the number in each class) with respect to
the time for which they shall severally hold office. Directors of the First
Class first chosen shall hold office for one year or until the first annual
election; Directors of the Second Class first chosen shall hold office until the
second annual election; and Directors of the Third Class shall hold office until
the third annual election. In each annual election or adjournment thereof, the
successors to the class of Directors whose terms shall expire at that time shall
be elected to hold office for terms of three years so that the term of office of
one class of Directors shall expire in each year. Each Director elected shall
hold office until his successor shall be elected and shall qualify or until his
earlier resignation or removal.
2. [Intentionally omitted]
3. This Article shall not be amended, altered, changed or repealed unless
authorized by the affirmative vote of the holders of two-thirds (2/3) of all of
the outstanding shares of stock of each class having voting power.
EIGHTH. The corporation may not sell, lease or exchange all or substantially
all of its property and assets, nor may it merge or consolidate, except with a
corporation of which at least 90 percent of the outstanding shares of each class
of the stock is owned by this corporation, unless authorized by the affirmative
vote of the holders of two-thirds (2/3) of all the outstanding shares of stock
of each class having voting power with respect to the proposed transaction.
This Article shall not be amended, altered, changed or repealed unless
authorized by the affirmative vote of the holders of two-thirds (2/3) of all of
the outstanding shares of stock of each class having voting power.
NINTH. The corporation is to have perpetual existence.
TENTH. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
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ELEVENTH. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
To make, alter, amend or repeal the by-laws of the corporation.
From time to time, (a) to issue, sell and dispose of shares of the authorized
and previously unissued Common Stock of the corporation and shares of its
outstanding Common Stock held in its treasury; (b) to issue, sell and dispose of
the bonds, debentures, notes and other obligations or evidences of indebtedness
of the corporation, including bonds, debentures, notes and other obligations or
evidences of indebtedness of the corporation convertible into stock of the
corporation of any class; and (c) to authorize and cause to be executed
mortgages and liens upon the real and personal property of the corporation.
To declare and pay dividends on the capital stock as permitted by law.
To set apart out of any of the funds of the corporation available for dividends
a reserve or reserves for any proper purpose and to abolish any such reserve in
the manner in which it was created.
By resolution passed by a majority of the whole board, to designate one or more
committees, each committee to consist of two or more of the directors of the
corporation, which, to the extent provided in the resolution or in the by-laws
of the corporation, shall have and may exercise the powers of the board of
directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may
be stated in the by-laws of the corporation or as may be determined from time to
time by resolution adopted by the board of directors.
The Corporation may in its by-laws confer powers upon its board of directors in
addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon such board by statute.
The corporation may enter into contracts or transact business with one or more
of its directors, or with any firm of which one or more of its directors are
members or with any trust, firm, corporation or association in which any one or
more of its directors is a stockholder, director or officer or otherwise
interested, and any such contract or transaction shall not be invalidated in the
absence of fraud because such director or directors have or may have interests
therein which are or might be adverse to the interest of the corporation, even
though the presence and/or vote of the director or directors having such adverse
interest shall have been necessary to constitute a quorum and/or to obligate the
corporation upon such contract or
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transaction; and in the absence of fraud no director having such adverse
interest shall be liable to this corporation or to any stockholder or creditor
thereof, or to any other person, for any loss incurred by it under or by reason
of any such contract or transaction, nor shall any such director or directors be
accountable for any gains or profits realized thereon.
TWELFTH. (1) A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this provision to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification.
(2) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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(3) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(4) Any indemnification under paragraphs (2) and (3) of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in said paragraphs (2) and (3). Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable
and a quorum of disinterested directors so directs, by independent legal counsel
(compensated by the corporation) in a written opinion, or (iii) by the
stockholders.
(5) The Board of Directors of the corporation shall have the power, in its
discretion, to cause the corporation to indemnify any person who was or is a
party to any action, suit or proceeding referred to in paragraphs (2) and (3) of
this Article by reason of the fact that he is or was an employee or agent
(although not a director or officer) of the corporation, or is or was serving at
the request of the corporation as an employee or agent (although not a director
or officer) of another corporation, partnership, joint venture, trust or other
enterprise, to the extent that any such person would have been entitled to be
indemnified under the preceding paragraphs of this Article had he been a
director or officer of the corporation or serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise and been a party to such action, suit or
proceeding by reason of being such director or officer.
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(6) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (2), (3), or (5) of this
Article, or in defense of any claim, issue or matter therein, he shall be
indemnified by the corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection herewith.
(7) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article.
(8) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other paragraphs of this Article shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled as a matter of law.
(9) The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article or of the General Corporation Law of Delaware.
(10) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent, and shall inure to the benefit of the heirs, executors and
administrators of such person.
THIRTEENTH. Meetings of stockholders may be held outside the State of Delaware,
if the by-laws so provide. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the board of directors
or in the by-laws of this corporation. Elections of directors need not be by
ballot unless the by-laws of the corporation shall so provide.
FOURTEENTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner
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now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation, provided that in
the case of any Article which, by its express terms, requires the authorization
of a higher percentage of stockholders than that required by statute for its
amendment, alteration, change or repeal, such Article shall be amended, altered,
changed or repealed only in accordance with its express terms.
4. This Restated Certificate of Incorporation was duly adopted by the Board of
Directors in accordance with Section 245 of the General Corporation Law of the
State of Delaware.
5. This Restated Certificate of Incorporation shall be effective on March 28,
1996.
IN WITNESS WHEREOF, R. R. Donnelley & Sons Company has caused this certificate
to be signed by Deborah M. Regan, its Vice President and Corporate Secretary,
this 28th day of March, 1996.
By /s/ Deborah M. Regan
-----------------------------------------------
Vice President and Corporate Secretary
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Exhibit A to
Restated Certificate of Incorporation of
R. R. Donnelley & Sons Company
Filed 1:45 p.m.
July 29, 1986
State of Delaware
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
R. R. DONNELLEY & SONS COMPANY
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
We, John B. Schwemm, Chairman of the Board and President, and Richard M. Sawdey,
Secretary, of R. R. Donnelley & Sons Company, a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, as amended, the said Board
of Directors on July 24, 1986, adopted the following resolution creating a
series of 1,000,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
this Corporation in accordance with the provisions of its Certificate of
Incorporation, as amended, a series of Preferred Stock of the Corporation be and
it hereby is created, and that the designation and amount thereof and the
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be designated
as "Series A Junior Participating Preferred Stock" and the number of shares
constituting such series shall be 1,000,000.
<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of
Series A Junior Participating Preferred Stock with respect to dividends,
the holders of shares of Series A Junior Participating Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Junior Participating Preferred Stock in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $32 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non cash dividends or
other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, par value
$1.25 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Junior Participating Preferred
Stock. In the event the Corporation shall at any time after July 24, 1986
(the "Rights Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A
Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$32 per share on the Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
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(C) Dividends shall begin to accrue and be cumulative on outstanding shares of
Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Junior Participating Preferred Stock, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Junior Participating Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares
of Series A Junior Participating Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date
shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share
of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the shareholders
of the Corporation. In the event the Corporation shall at any time after
the Rights Dividend Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the number of votes per share to
which holders of shares of Series A Junior Participating Preferred Stock
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of shareholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the
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occurrence of such contingency shall mark the beginning of a period
(herein called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all
shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred Stock
including holders of the Series A Junior Participating Preferred
Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of
series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of Series
A Junior Participating Preferred Stock may be exercised initially at
a special meeting called pursuant to subparagraph (iii) of this
Section 3(C) or at any annual meeting of shareholders, and thereafter
at annual meetings of shareholders, provided that neither such voting
right nor the right of the holders of any other series of Preferred
Stock, if any, to increase, in certain cases, the authorized number
of Directors shall be exercised unless the holders of ten percent
(10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders
of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the
holders of Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right, voting
as a class, to elect Directors to fill such vacancies, if any, in the
Board of Directors as may then exist up to two (2) Directors or, if
such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the
number of Directors as shall be necessary to permit the election by
them of the required number. After the holders of the Preferred Stock
shall have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari passu with
the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareholder or
shareholders owning in the aggregate not less than ten percent (10%)
of the total number of shares of Preferred Stock outstanding,
irrespective of series, may request, the calling of a special meeting
of the holders of Preferred Stock, which meeting shall thereupon be
called by the President, a Vice-President or the Secretary of the
Corporation. Notice of
Page 4
<PAGE>
such meeting and of any annual meeting at which holders of Preferred
Stock are entitled to vote pursuant to this paragraph (C)(iii) shall
be given to each holder of record of Preferred Stock by mailing a
copy of such notice to him at his last address as the same appears on
the books of the Corporation. Such meeting shall be called for a time
not earlier than 10 days and not later than 50 days after such order
or request or in default of the calling of such meeting within 50
days after such order or request, such meeting may be called on
similar notice by any shareholder or shareholders owning in the
aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding. Notwithstanding the provisions
of this paragraph (C)(iii), no such special meeting shall be called
during the period within 50 days immediately preceding the date fixed
for the next annual meeting of the shareholders.
(iv) In any default period, the holders of Common Stock, and other classes
of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2)
Directors voting as a class, after the exercise of which right (x)
the Directors so elected by the holders of Preferred Stock shall
continue in office until their successors shall have been elected by
such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in
paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining Directors theretofore elected by the holders of the
class of stock which elected the Director whose office shall have
become vacant. References in this paragraph (c) to Directors elected
by the holders of a particular class of stock shall include Directors
elected by such Directors to fill vacancies as provided in clause (y)
of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall
cease, (v) the term of any Directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of
Directors shall be such number as may be provided for in the
certificate of incorporation or by-laws irrespective of any increase
made pursuant to the provisions of paragraph (C)(ii) of this Section
3 (such number being subject, however, to change thereafter in any
manner provided by law or in the certificate of incorporation or
by-laws). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate
action.
Page 5
<PAGE>
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable on
the Series A Junior Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating
Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon
liquidation dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Junior Participating
Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of Series
A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
Page 6
<PAGE>
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of
the Corporation, no distribution shall be made to the holders of shares of
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A
Liquidation Preference"). Following the payment of the full amount of the
Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by
(ii) 100 (as appropriately adjusted as set forth in subparagraph C below
to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in respect of
all outstanding shares of Series A Junior Participating Preferred Stock and
Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to 1 with respect to such Preferred
Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to
Page 7
<PAGE>
permit payment in full of the Common Adjustment, then such remaining assets
shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights Declaration
Date (1) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series A
Junior Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (1) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating Preferred
Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the Corporation shall
not be further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Junior Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
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<PAGE>
Section 11. Fractional Shares. Series A Junior Participating Preferred Stock may
be issued in fractions of a share which shall entitle the holder, in proportion
to such holders fractional shares, to receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 28th day of
July, 1986.
/s/ John B. Schwemm
-----------------------
Chairman of the Board
Attest:
/s/ Richard M. Sawdey
- --------------------------
Secretary
Page 9
<PAGE>
Exhibit 4
EXECUTION COPY
- ------------------------------------------------------------------------------
R.R. DONNELLEY & SONS COMPANY
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Rights Agent
---------------------
Rights Agreement
Dated as of April 25, 1996
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
-----------------
Section Page
- ------- ----
<S> <C>
1. Certain Definitions........................................ 1
2. Appointment of Rights Agent................................ 6
3. Issue of Rights Certificates............................... 6
4. Form of Rights Certificates................................ 8
5. Countersignature and Registration.......................... 10
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates....................................... 11
7. Exercise of Rights; Purchase Price; Expiration Date
of Rights................................................. 12
8. Cancellation and Destruction of Rights Certificates........ 15
9. Reservation and Availability of Capital Stock.............. 15
10. Preferred Stock Record Date................................ 17
11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights....................................... 18
12. Certificate of Adjusted Purchase Price or Number of Shares. 32
13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power............................................. 32
14. Fractional Rights and Fractional Shares.................... 36
15. Rights of Action........................................... 38
16. Agreement of Rights Holders................................ 38
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
17. Rights Certificate Holder Not Deemed a Stockholder......... 39
18. Concerning the Rights Agent................................ 40
19. Merger or Consolidation or Change of Name of Rights Agent.. 40
20. Duties of Rights Agent..................................... 41
21. Change of Rights Agent..................................... 44
22. Issuance of New Rights Certificates........................ 45
23. Redemption and Termination................................. 46
24. Exchange................................................... 47
25. Notice of Certain Events................................... 49
26. Notices.................................................... 50
27. Supplements and Amendments................................. 51
28. Successors................................................. 52
29. Determinations and Actions by the Board of Directors, etc.. 52
30. Benefits of This Agreement................................. 52
31. Severability............................................... 53
32. Governing Law.............................................. 53
33. Counterparts............................................... 53
34. Descriptive Headings....................................... 54
Exhibit A -- Certificate of Designation, Preferences and Rights
Exhibit B -- Form of Rights Certificate
</TABLE>
ii
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of April 25, 1996 (the "Agreement"),
between R.R. Donnelley & Sons Company, a Delaware corporation (the "Company"),
and First Chicago Trust Company of New York, a Delaware corporation (the "Rights
Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, on April 25, 1996 (the "Rights Dividend Declaration Date")
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, par value $1.25 per
share, of the Company (the "Common Stock") outstanding at the close of business
on August 8, 1996 (the "Record Date"), and has authorized the issuance of one
Right (as such number may hereinafter be adjusted pursuant to the provisions of
Section 11(p) hereof) for each share of Common Stock of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date, each Right initially representing
the right to purchase one one-thousandth (1/1000th) of a share of Series A
Junior Participating Preferred Stock (the "Preferred Stock") of the Company
having the rights, powers and preferences set forth in the form of Certificate
of Designation, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company,
<PAGE>
(iv) any Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan or (v) any such Person who has
reported or is required to report such ownership (but less than 25%) on Schedule
13G under the Exchange Act (or any comparable or successor report) or on
Schedule 13D under the Exchange Act (or any comparable or successor report)
which Schedule 13D does not state any intention to or reserve the right to
control or influence the management or policies of the Company or engage in any
of the actions specified in Item 4 of such Schedule (other than the disposition
of the Common Stock) and, within 10 Business Days of being requested by the
Company to advise it regarding the same, certifies to the Company that such
Person acquired shares of Common Stock representing in excess of 14.9% of the
outstanding Common Stock inadvertently or without knowledge of the terms of the
Rights and who, together with all Affiliates and Associates, thereafter does not
acquire additional shares of Common Stock while the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding; provided, however, that if
the Person requested to so certify fails to do so within 10 Business Days, then
such Person shall become an Acquiring Person immediately after such 10 Business
Day Period. Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" solely as the result of an acquisition of Common Stock by the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by a Person to 15% or more of the Common
Stock of the Company then outstanding as determined above; provided, however,
that if a Person becomes the Beneficial Owner of 15% or more of the Common Stock
of the Company then outstanding (as determined above) solely by reason of
purchases of Common Stock by the Company and shall, after such purchases by the
Company, become the Beneficial Owner of any additional shares of Common Stock by
any means whatsoever, then such Person shall be deemed to be an "Acquiring
Person."
(b) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board of Directors upon determination that the criteria
set forth in Section 11(a)(ii)(B) apply to such Person; provided, however, that
the Board of Directors shall not declare any Person who is the Beneficial Owner
of 10% or more of the outstanding Common Stock of the Company to be an Adverse
Person if such Person has reported or is required
2
<PAGE>
to report such ownership on Schedule 13G under the Exchange Act (or any
comparable or successor report) or on Schedule 13D under the Exchange Act (or
any comparable or successor report) which Schedule 13D does not state any
intention to or reserve the right to control or influence the management or
policies of the Company or engage in any of the actions specified in Item 4 of
such Schedule (other than the disposition of the Common Stock) so long as such
Person neither reports nor is required to report such ownership other than as
described in this clause (ii).
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(i) hereof in connection with
an adjustment made with respect to any Original Rights;
3
<PAGE>
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this paragraph
(c)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (c) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities acquired through such
person's participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
4
<PAGE>
(f) "Close of business" on any given date shall mean 5:00 P.M.,
New York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(g) "Common Stock" shall mean the common stock, par value $1.25
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(i) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $1.00 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock of the Company designated for
such purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.
(j) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(k) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
(l) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(m) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially
5
<PAGE>
owned, directly or indirectly, by such Person, or other wise controlled by such
Person.
(n) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), (ii) the close of business on the tenth business day (or such
later date as the Board shall determine) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding or (iii) the close of business on the tenth Business Day after the
Board of Directors determines, pursuant to the criteria set forth in Section
11(a)(ii)(B) hereof, that a Person is an Adverse Person (the earliest of (i),
(ii) and (iii) being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for the Common Stock registered in the names of
the holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates, and
(y) the Rights will be transferable only in connection with the
6
<PAGE>
transfer of the underlying shares of Common Stock (including a transfer to the
Company). As soon as practicable after the Distribution Date, the Rights Agent
will send by first-class, insured, postage prepaid mail, to each record holder
of the Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more right
certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates representing such shares of
Common Stock shall also be deemed to be certificates for Rights, and shall bear
the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set
7
<PAGE>
forth in the Rights Agreement between R.R. Donnelley & Sons Company (the
"Company") and First Chicago Trust Company of New York (the "Rights
Agent"), dated as of April 25, 1996, as amended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of the
Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights is sued to, or held by, any Person who is, was or becomes an
Acquiring Person or an Adverse Per son or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder,
may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be
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required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-thousandths
(1/1000ths) of a share of Preferred Stock as shall be set forth therein at the
price set forth therein (such exercise price per one one-thousandth (1/1000th)
of a share, the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or Adverse Person or any Associate or Affiliate of an Acquiring Person or
Adverse Person, (ii) a transferee of an Acquiring Person or Adverse Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person or Adverse Person becomes such, or (iii) a transferee of an Acquiring
Person or Adverse Person (or of any such Associate or Affiliate) who be comes a
transferee prior to or concurrently with the Acquiring Person or Adverse Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or Adverse Person
to holders of equity interests in such Acquiring Person or Adverse Person or to
any Person with whom such Acquiring Person or Adverse Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of the Company has deter mined is part
of a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person
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who was or became an Acquiring Person or Adverse Person or an Affiliate or
Associate of an Acquiring Person or Adverse Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate and
the Rights represented hereby may become null and void in the circumstances
specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have af fixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be counter signed by the Rights Agent,
either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced
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on its face by each of the Rights Certificates and the date of each of the
Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a)
Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights Certificate or
Certificates (other than Rights Certificates representing Rights that have been
exchanged pursuant to Section 24 hereof) may be transferred, split up, combined
or exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-thousandths (1/1000ths)
of a share of Preferred Stock (or, following a Triggering Event, Common Stock,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or former
holder in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
14 and Section 24 hereof, countersign and deliver to the Person entitled thereto
a Rights Certificate or Rights Certificates, as the case may be, as so
requested. The Company may re quire payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
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(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-thousandths (1/1000ths) of a share (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
close of business on August 8, 2006 (the "Final Expiration Date"), (ii) the time
at which the Rights are redeemed as provided in Section 23 hereof or (iii) the
time at which such Rights are exchanged pursuant to Section 24 hereof (the
earliest of (i), (ii) and (iii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-thousandth (1/1000th) of
a share of Preferred Stock pursuant to the exercise of a Right shall initially
be $140.00, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below.
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(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-thousandth (1/1000th) of a share of Preferred
Stock (or other shares, securities, cash or other assets, as the case may be) to
be purchased as set forth below and an amount equal to any applicable transfer
tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-thousandths (1/1000ths) of a share
of Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one one-
thousandths (1/1000ths) of a share of Preferred Stock as are to be purchased (in
which case certificates for the shares of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
(as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be
made in cash or by certified bank check or bank draft payable to the order of
the Company. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate. The
Company
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reserves the right to require prior to the occurrence of a Triggering Event
that, upon any exercise of Rights, a number of Rights be exercised so that only
whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or Adverse Person or an Associate
or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an
Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person or Adverse Person becomes such,
or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom the Acquiring
Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring
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Person or Adverse Person or any of their respective Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities)
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that, as provided in this Agreement including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Securities Act of
1933 (the "Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights
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until such time as a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law or a registration statement shall not have
been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-thousandths (1/1000ths) of
a share of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-thousandths
(1/1000ths) of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights Certificates to a Person other
than, or the issuance or delivery of a number of one one-thousandths (1/1000ths)
of a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) in respect of a name other than that of, the registered holder of
the Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for a number of one one-thousandths (1/1000ths) of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) in a name other than that of the registered holder upon the exercise of
any Rights until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
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Section 10. Preferred Stock Record Date. Each person in whose name
any certificate for a number of one one-thousandths (1/1000ths) of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such fractional shares of Preferred Stock (or
Common Stock and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number and kind of shares covered
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock
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(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof,
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares of Preferred Stock
or capital stock, as the case may be, which, if such Right had been
exercised immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, he or she would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would re quire an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event that:
(A) any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan), alone or together with its Affiliates and
Associates, shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, unless the event causing the Person
to become an Acquiring Person is (1) a transaction set forth in
Section 13(a) hereof or (2) an acquisition of shares of Common Stock
pursuant to a tender offer or an
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exchange offer for all outstanding shares of Common Stock at a price
and on terms determined by at least a majority of the members of the
Board of Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an Acquiring
Person, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders (taking into
account all factors which such members of the Board deem relevant
including, without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (a "Qualifying Offer")
or
(B) The Board of Directors of the Company shall declare any
Person to be an Adverse Person, upon a determination that such Person,
alone or together with its Affiliates and Associates, has, at any time
after this Agreement has been filed with the Securities and Exchange
Commission as an exhibit to a filing under the Exchange Act, become
the Beneficial Owner of a number of shares of Common Stock which the
Board of Directors of the Company determines to be substantial (which
number of shares shall in no event represent less than 10% of the
outstanding shares of Common Stock) and a determination by the Board
of Directors of the Company, after reasonable inquiry and
investigation, including consultation with such persons as such
directors shall deem appropriate and consideration of such factors as
are permitted by applicable law, that (a) such Beneficial Ownership by
such Person is intended to cause the Company to repurchase the shares
of Common Stock beneficially owned by such Person or to cause pressure
on the Company to take action or enter into a transaction or series of
transactions intended to provide such Person with short-term financial
gain under circumstances where the Board of Directors determines that
the best long-term interests of the Company would not be served by
taking such
20
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action or entering into such transaction or series of transactions at
the time or (b) such Beneficial Ownership is causing or reasonably
likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers or impairment of the
Company's ability to maintain its competitive position) on the
business or prospects of the Company;
then, promptly following the occurrence of any event described in Section
11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement,
in lieu of a number of one one-thousandths (1/1000ths) of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-thousandths (1/1000ths) of a
share of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and for
all purposes of this Agreement) by 50% of the current market price
(determined pursuant to Section 11(d) hereof) per share of Common Stock on
the date of such first occurrence (such number of shares, the "Adjustment
Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall (A) determine the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), and (B) with
respect to each Right (subject to Section 7(e) hereof), make adequate
provision
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to substitute for the Adjustment Shares, upon the exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred
stock, such as the Preferred Stock, which the Board has deemed to have
essentially the same value or economic rights as shares of Common Stock
(such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the
Board; provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30)
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant
to Section 23(a) expires (the later of (x) and (y) being referred to herein
as the "Section 11(a)-(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the excess of (i) the
Current Value over (ii) the Purchase Price. If the Board determines in good
faith that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights, the
thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek shareholder approval for
the authorization
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of such additional shares (such thirty (30) day period, as it may be
extended, is herein called the "Substitution Period"). To the extent that
action is to be taken pursuant to the first and/or third sentences of this
Section 11(a) (iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights,
and (2) may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek such shareholder approval for
such authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension, the
Company ny shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of each Adjustment Share
shall be the Current Market Price per share of the Common Stock on the
Section 11(a)(ii) Trigger Date and the per share or per unit value of any
Common Stock Equivalent shall be deemed to equal the Current Market Price
per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase (for a period
expiring within forty-five (45) calendar days after such record date) Preferred
Stock (or shares having the same rights, privileges and preferences as the
shares of Preferred Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred stock at a price per
share of Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the current market price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
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record date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of shares of
Preferred Stock which the aggregate offering price of the total number of shares
of Preferred Stock and/or equivalent preferred stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record
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<PAGE>
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such current market price (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the
25
<PAGE>
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the shares
of Common Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board shall be used. The
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the Current Market Price per share of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in clause (i) of this Section 11(d), the Current Market Price per share of
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Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as
such number may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current Market
Price per share of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded, Current Market Price
per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the Current Market Price of a Unit
shall be equal to the Current Market Price of one share of Preferred Stock
divided by 1,000.
(e) Anything herein to the contrary not withstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share of
Common Stock or other share or one-millionth of a share of Preferred Stock, as
the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
27
<PAGE>
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths
(1/1000ths) of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths (1/1000ths) of a share of Preferred Stock (calculated to the
nearest one-millionth) obtained by (i) multiplying (x) the number of one one-
thousandths (1/1000ths) of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one one-thousandths (1/1000ths) of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-thousandths (1/1000ths) of a share of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date
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for the adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been
issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be en titled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and counter signed in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be registered in
the names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths (1/1000ths) of a share of Preferred
Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
one one-thousandths (1/1000ths) of a share and the number of one one-thousandths
(1/1000ths) of a share which were expressed in the initial Rights Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one one-thousandths (1/1000ths) of a share of Preferred Stock issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable
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such number of one one-thousandths (1/1000ths) of a share of Preferred Stock at
such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-thousandths (1/1000ths) of a share of Preferred Stock and
other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of one one-thousandths (1/1000ths) of a share
of Preferred Stock and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
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(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at anytime after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock pay able in shares of Common Stock, (ii)
subdivide the out standing shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding im-
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mediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
(q) The failure of the Board of Directors to declare a Person to
be an Adverse Person following such Person becoming the Beneficial Owner of
shares of Common Stock representing 10% or more of the outstanding shares of
Common Stock shall not imply that such Person is not an Adverse Person or limit
the Board of Directors' right at any time in the future to declare such Person
to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail
a brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment
therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) here of), and the Company shall
not be the continuing or surviving corporation of such consolidation or merger,
(y) any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be
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changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (z) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case (except as may
be contemplated by Section 13(d) hereof), proper provision shall be made so
that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-thousandths
(1/1000ths) of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such one one-thousandths (1/1000ths) of a
share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product (which,
following the first occurrence of a Section 13 Event, shall be referred to as
the "Purchase Price" for each Right and for all purposes of this Agreement) by
(2) 50% of the current market price (determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal
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Party following the first occurrence of a Section 13 Event; (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
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(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares
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of Common Stock pursuant to a Qualifying Offer (or a wholly owned subsidiary of
any such Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then
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<PAGE>
in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-thousandth (1/1000th) of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth (1/1000th) of a share of Preferred Stock). In lieu of fractional
shares of Preferred Stock that are not integral multiples of one one-thousandth
(1/1000th) of a share of Preferred Stock, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one one-thousandth (1/1000th) of a share of Preferred Stock. For
purposes of this Section 14(b), the current market value of one one-thousandth
(1/1000th) of a share of Preferred Stock shall be one one-thousandth (1/1000th)
of the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to
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the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this
Section 14.
Section 15. Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, his or her right to exercise the Rights evidenced by such Rights Certificate
in the manner provided in such Rights Certificate and in this Agreement.
Without limiting the fore going or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations hereunder and injunctive
relief against actual or threatened violations of the obligations hereunder of
any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper
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instrument of transfer and with the appropriate forms and certificates fully
executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
thousandths (1/1000ths) of a share of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
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receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or
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shareholder services business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
counter signed but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been counter signed, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
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(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person or
Adverse Person and the determination of "current market price") be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the Chairman of the Board, the Chief Executive
Officer, the President, the Treasurer, the Secretary or any Assistant Secretary
of the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11, Section 13 or Section 24 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by
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any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President, the
Secretary, any Assistant Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection
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and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and
to each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any
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successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of New York (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the State of New York), in good standing, which is authorized
under such laws to exercise corporate trust powers and is subject to supervision
or examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$100,000,000. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded as of
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the Distribution Date, or upon the exercise, conversion or exchange of
securities hereinafter issued by the Company, and (b) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"). The
Board of Directors may not redeem any Rights following a determination pursuant
to Section 11(a)(ii)(B) that any Person is an Adverse Person. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the "current market price", as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed
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with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person or is determined to be an
Adverse Person pursuant to Section 11(a)(ii)(B), exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Stock for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of fifty percent (50%) or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the
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only right thereafter of a holder of such Rights shall be to receive that number
of shares of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute shares of Preferred Stock (or equivalent preferred
stock, as such term is defined in paragraph (b) of Section 11 hereof) for shares
of Common Stock exchangeable for Rights, at the initial rate of one one-
thousandth (1/1000th) of a share of Preferred Stock (or equivalent preferred
stock) for each share of Common Stock, as appropriately adjusted to reflect
adjustments in the voting rights of the Preferred Stock pursuant to the terms
thereof, so that the fraction of a share of Preferred Stock delivered in lieu
of each share of Common Stock shall have the same voting rights as one share of
Common Stock.
(d) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of
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Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Right Certificates with regard to which
such fractional share of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings
or retained earnings of the Company), or (ii) to offer to the holders of
Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which
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such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock whichever
shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
R.R. Donnelley & Sons Company
77 West Wacker Drive
Chicago, Illinois 60601-1696
Attention: Corporation Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
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First Chicago Trust Company of New York
P.O Box 2507
Suite 4660
Jersey City, New Jersey 07303-2507
Attention: Tenders and Exchanges
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 27, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or Adverse
Person or an Affiliate or Associate of an Acquiring Person or Adverse Person);
provided this Agreement may not be supplemented or amended to lengthen, pursuant
to clause (iii) of this sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then redeemable, or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights (other than an Acquiring Person or Adverse Person and its Affiliates and
Associates). Upon the delivery of a certificate from an
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appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. The Board of Directors of the Company
shall have the exclusive power and authority to administer this Agreement and
to exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board to any liability to
the holders of the Rights.
Section 30. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior
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to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Without limiting the foregoing, if any provision requiring a majority of the
members of the Board of Directors who are not officers of the Company and who
are not representatives, nominees, Affiliates or Associates of an Acquiring
Person to act is held by any court of competent jurisdiction or other authority
to be invalid, void or unenforceable, such determination shall be made by the
Board of Directors of the Company in accordance with applicable law and the
Company's Certificate of Incorporation and bylaws.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of
53
<PAGE>
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: R.R. DONNELLEY & SONS COMPANY
By By
---------------------- ----------------------------
Name: Deborah M. Regan Name: Cheryl A. Francis
Title: Vice President Title: Executive Vice
and Corporate President and
Secretary Chief Financial
Officer
Attest: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By By
---------------------- ----------------------------
Name: Name: Peter F. Sablich
Title: Title: Vice President
55
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
of
R.R. DONNELLEY & SONS COMPANY
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officers of R.R. Donnelley & Sons Company, a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation, as amended, of the said Corporation, the
said Board of Directors on April 25, 1996 adopted the following resolution
creating a series of 500,000 shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:
BE IT FURTHER RESOLVED, that pursuant to the authority vested in the
Board of Directors of this Corporation in accordance with the provisions of its
Restated Certificate of Incorporation, as amended, a series of Preferred Stock
of the Corporation be and it is hereby created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series A Junior Participating Preferred Stock" and the number
of shares constituting such series shall be 500,000.
A-1
<PAGE>
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the last day of [March, June, September and December] in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $0.01 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $1.25 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after April 25, 1996 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in Paragraph (A) above
im-
A-2
<PAGE>
mediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares
of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle the
holder
A-3
<PAGE>
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period") which
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock (including
holders of the Series A Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right
to elect two (2) Directors.
(ii) During any default period, such voting right of the holders
of Series A Junior Participating Preferred Stock may be exercised
A-4
<PAGE>
initially at a special meeting called pursuant to subparagraph (iii) of
this Section 3(C) or at any annual meeting of stockholders, and thereafter
at annual meetings of stockholders, provided that such voting right shall
not be exercised unless the holders of ten percent (10%) in number of
shares of Preferred Stock outstanding shall be present in person or by
proxy. The absence of a quorum of the holders of Common Stock shall not
affect the exercise by the holders of Preferred Stock of such voting
right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect Directors to fill
such vacancies, if any, in the Board of Directors as may then exist up to
two (2) Directors or, if such right is exercised at an annual meeting, to
elect two (2) Directors. If the number which may be so elected at any
special meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the number of
Directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period and during
the continuance of such period, the number of Directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series A Junior Participating Preferred
Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the President,
a Vice-President or the Secretary of the Corporation. Notice of such
meeting and of any
A-5
<PAGE>
annual meeting at which holders of Preferred Stock are entitled to vote
pursuant to this Paragraph (C)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to him or her at
his or her last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 10
days and not later than 50 days after such order or request or in default
of the calling of such meeting within 50 days after such order or request,
such meeting may be called on similar notice by any stockholder or
stockholders own ing in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this Paragraph (C)(iii), no such special
meeting shall be called during the period within 50 days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to
be entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in Paragraph (C)(ii) of this Section 3)
be filled by vote of a majority of the remaining Directors theretofore
elected by the holders of the class of stock which elected the Director
whose office shall have become vacant. References in this Paragraph (C) to
Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the hold-
A-6
<PAGE>
ers of Preferred Stock as a class to elect Directors shall cease, (y) the
term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as
may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of Paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of
incorporation or by-laws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Junior Participating Preferred Stock, except dividends paid
A-7
<PAGE>
ratably on the Series A Junior Participating Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Junior Participating Preferred Stock, provided that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares
A-8
<PAGE>
of Preferred Stock and may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount equal to 1,000 times the Exercise Price,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as
set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquida-
A-9
<PAGE>
tion preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-10
<PAGE>
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Amendment. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special
rights of the Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority or more of
the outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
Section 10. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holders fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred Stock.
A-11
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this ______
day of ___________, 1996.
R.R. DONNELLEY & SONS
COMPANY
--------------------------------
Name:
Title:
Attest:
- ---------------------------
Secretary
A-12
<PAGE>
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER AUGUST 8, 2006 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ADVERSE
PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.]/1/
Rights Certificate
R.R. DONNELLEY & SONS COMPANY
This certifies that , or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of April 25, 1996 (the "Rights Agreement"),
between R.R. Donnelley & Sons Company, a Delaware corporation (the "Company"),
and First Chicago Trust Company of New York, a Delaware corporation (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (New York
City time) on August 8, 2006 at the office or offices of the
- ---------------------------------
/1/ The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
<PAGE>
Rights Agent designated for such purpose, or its successors as Rights Agent,
one one-thousandth (1/1000th) of a fully paid, non-assessable share of Series A
Junior Participating Preferred Stock (the "Preferred Stock") of the Company, at
a purchase price of $140.00 per one one-thousandth (1/1000th) of a share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate duly executed.
The number of Rights evidenced by this Rights Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number and Purchase Price as
of , based on the Preferred Stock as constituted at such date. The
Company reserves the right to require prior to the occurrence of a Triggering
Event (as such term is defined in the Rights Agreement) that a number of Rights
be exercised so that only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person or Adverse Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person or Adverse Person,
or an Affiliate or Associate of an Acquiring Person or Adverse Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof
B-2
<PAGE>
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the above-
mentioned office of the Rights Agent and are also available upon written request
to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths (1/1000ths) of a share
of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.01 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. In addition, the Rights may be exchanged, in whole or in
part, for shares of the Common Stock, or shares of preferred stock of the
Company having essentially the same value or economic rights as such shares.
Immediately upon the action of the Board of Directors of the Company authorizing
any such exchange, and without any further action or any notice, the Rights
(other than Rights which are not subject to such exchange) will terminate and
the Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples
B-3
<PAGE>
of one one-thousandth (1/1000th) of a share of Preferred Stock, which may, at
the election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-4
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ________ ___, ____
ATTEST: R.R. DONNELLEY & SONS
COMPANY
By
- ------------------------- --------------------------
Secretary Title:
Countersigned:
FIRST CHICAGO TRUST
COMPANY OF NEW YORK
By
-----------------------
Authorized Signature
B-5
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ___________________________________________________________
hereby sells, assigns and transfer unto ______________________________________
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:_____________, ________-
-------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or
Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse
Person.
Dated: _____________, _____ -------------------------
Signature
Signature Guaranteed:
B-6
<PAGE>
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-7
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: R.R. DONNELLEY & SONS COMPANY
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: ______________, _____ ----------------------
Signature
Signature Guaranteed:
B-8
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or Adverse Person or an Affiliate or Associate of any such Acquiring
Person or Adverse Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or Adverse Person or
an Affiliate or Associate of an Acquiring Person or Adverse Person.
Dated: __________, _____ ------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
B-9
<PAGE>
Exhibit 10
DONNELLEY SHARES STOCK OPTION PLAN
(as amended on July 18, 1994, January 25, 1996)
1. Plan. The purpose of this Donnelley Shares Stock Option Plan (the "Plan")
is to provide incentives to employees through rewards based upon the ownership
and performance of the common stock of R. R. Donnelley & Sons Company (the
"Company"). The Committee hereinafter designated shall grant options to
purchase shares of common stock, par value $1.25 per share, of the Company (the
"Common Stock") to eligible employees on the terms and subject to the conditions
stated in the Plan.
2. Eligibility. All employees (other than officers) of the Company and all of
its direct or indirect wholly-owned subsidiaries (the "Employers") shall be
eligible, upon selection by the Committee, to receive options under the Plan;
provided, however, that an otherwise eligible employee whose terms and
conditions of employment are covered by a collective bargaining agreement shall
be eligible to receive options under the Plan only if expressly provided for in
the collective bargaining agreement or supplemental letter of understanding
signed by such employee's Employer and the recognized representative of the
collective bargaining unit in which the employee is a member; provided further,
that the preceding proviso shall not apply to employees who are not subject to
the United States labor laws. An employee granted an option pursuant to the
Plan shall be referred to herein from time to time as an "Optionee".
3. Limitation on Shares Available. Subject to adjustment as provided in
Section 5 of the Plan, the maximum number of shares of Common Stock available
for all grants made under the Plan shall be 6,000,000. Shares of Common Stock
subject to grants made hereunder which, by reason of the expiration,
cancellation, forfeiture or other termination of such grants prior to purchase,
are not purchased shall again be available for future grants.
Shares of Common Stock to be delivered may be authorized and unissued
shares of stock, treasury stock or a combination thereof. The Company reserves
the right to purchase shares of Common Stock for the Plan in the open market.
4. Administration of the Plan. The Plan shall be administered by a committee
(the "Committee") designated by the Board of Directors of the Company (the
"Board"). Except as otherwise set forth in the Plan, the Committee shall,
subject to the terms of the Plan, select groups of eligible employees for
participation in the Plan and, with respect to such groups of eligible
employees, shall determine the number of shares of Common Stock subject to each
option granted hereunder, the terms and conditions of exercise of such option
and all other terms and conditions of such option. The Committee shall, subject
to the terms of the Plan, have the authority to interpret the
<PAGE>
Plan, establish rules and regulations for the administration of the Plan and
impose, incidental to the grant of an option, conditions with respect to the
grant. All such rules, regulations and interpretations adopted by the Committee
shall be conclusive and binding on all parties. The Committee may delegate its
authority to interpret all or part of the Plan to designated officers of the
Company.
5. Adjustments for Changes in Capitalization. The Committee shall make
appropriate adjustments to the number of shares available under the Plan, the
option exercise price and the number of shares subject to any option granted
hereunder in order to give effect to any stock split, stock dividend, merger,
consolidation, reorganization, spin-off, liquidation or other similar change in
capitalization or event that occurs after the effective date of the Plan, such
adjustments to be made in the case of outstanding options without a change in
the aggregate purchase price. If any adjustment would result in a fractional
security being available under the Plan or subject to a grant under the Plan,
such fractional security shall be disregarded.
6. Effective Date and Term of Plan. The Plan shall become effective on January
27, 1994 (the "Effective Date"). The Plan shall terminate five (5) years after
the Effective Date 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 Optionee under any grants made prior to
termination.
7. Amendments. The Plan may be amended or terminated by the Board in any
respect and at any time, provided that such action shall not adversely affect
any rights or obligations with respect to any outstanding grants under the Plan.
8. Grants. (a) Options to purchase 100 shares of Common Stock shall be granted
on March 24, 1994 to eligible employees employed on such date who had completed
at least two (2) years of continuous service with any one or more of the
Employers as of December 31, 1993; provided, however, that employees who, as of
March 24, 1994, are members of a collective bargaining unit shall be deemed
eligible employees for purposes of this paragraph 8(a) only if a collective
bargaining agreement or supplemental letter of understanding providing for the
receipt of such options by such employees was fully executed by such employee's
Employer and the recognized representative of the collective bargaining unit
prior to March 1, 1994; and provided further, that eligible employees who are
not employed in the United States of America as of March 24, 1994 shall not
receive such options. All options granted on March 24, 1994 shall become
exercisable in full on December 31, 1996.
(b) Additional options may be granted, in the sole and absolute discretion
of the Committee, to groups of eligible employees at any time.
(c) The option price per share of Common Stock purchasable upon the
exercise of any option granted pursuant to the Plan shall be the fair market
value of a share of Common Stock on the date of grant of such option. For
purposes of the Plan, the fair market value shall be
-2-
<PAGE>
determined by reference to the average of the high and low transaction prices in
trading of the Common Stock as reported in the New York Stock Exchange-Composite
Transactions on the date of grant.
(d) All options granted hereunder shall be evidenced by a certificate
substantially in the form of Exhibit A hereto. Each certificate shall be dated
and signed by an officer of the Company as of the date of the grant.
9. Terms of Options. (a) No option shall be exercisable earlier than one (1)
year, nor more than ten (10) years, after the date of grant. Each option
granted hereunder shall become exercisable in full on the third anniversary of
the date of the grant, unless otherwise determined by the Committee and except
as otherwise set forth in Section 8(a). Notwithstanding the foregoing, if an
Optionee is no longer employed by at least one of the Employers for any reason
(including due to death or long-term disability but excluding due to termination
of employment upon retirement at normal retirement age or early retirement at or
after age 55 with the consent of the Company), each option held by such Optionee
which is not exercisable on the date of termination of employment shall
terminate automatically on such date. Options held by an Optionee who retires
at normal retirement age or who takes early retirement at or after age 55 with
the consent of the Company, regardless of whether or not such options are
exercisable at the date of retirement, shall not terminate as a result of such
retirement but shall continue to remain outstanding and subject to the terms and
conditions of the Plan; provided, however, that in the event that such an
Optionee dies, each option held by such Optionee which is not exercisable on the
date of death of such Optionee shall terminate automatically upon the death of
such Optionee. Additionally, after an option held by an Optionee has become
exercisable, if such Optionee is no longer employed by at least one of the
Employers for any reason (other than retirement at normal retirement age or
early retirement at or after age 55 with the consent of the Company or for any
of the reasons specified in Section 9(c)) and/or such Optionee dies, then such
Optionee (or in the case of death, such Optionee's executor, administrator,
personal representative, beneficiary or similar person) may exercise such
exercisable option until ninety (90) days from the date of such termination of
employment and/or the date of death, as the case may be, or until the expiration
of the term of such option, whichever is earlier.
(b) No option hereunder shall be transferable other than by will, the laws
of descent and distribution or pursuant to the beneficiary designation
procedures approved by the Committee. Each option shall be exercisable during
the Optionee's lifetime only by the Optionee or the Optionee's guardian, legal
representative or similar person, provided that evidence of such person's
identity and rights with respect to such exercise are acceptable to the
Committee. Except as permitted by the first sentence of Section 9(b) of the
Plan, no option hereunder shall be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Any
such attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any option hereunder shall be null and void and no person
shall be entitled to any rights hereunder by virtue of any attempted execution,
attachment or similar process. In the event of the death of
-3-
<PAGE>
an Optionee, any unexercised portion of an option that, but for the death of the
Optionee, would have been exercisable on the date of such Optionee's death by
such Optionee may be exercised by the executor, administrator, personal
representative, beneficiary or similar person of such deceased Optionee within
ninety (90) days of the death of such Optionee, but not after the expiration of
the term of the option; provided that evidence of such person's identity and
rights with respect to such exercise are acceptable to the Committee.
(c) Notwithstanding anything contained herein to the contrary, in the
event the Committee shall determine that an Optionee's employment was terminated
by the Optionee's Employer on account of (i) an unauthorized disclosure of
confidential information or trade secrets of any Employer, (ii) unlawful trading
in the securities of the Company or any customers of any of the Employers, or
(iii) fraud, theft or embezzlement with respect to any of the Employers or any
breach of the Optionee's duties to the Optionee's Employer or any of the other
Employers, then such Optionee shall forfeit all rights to the unexercised
portion of any option held by the Optionee under the Plan, and all such options
shall automatically terminate.
(d) Options must be exercised in full. No partial exercise is permitted.
No shares of Common Stock may be purchased under any option granted under the
Plan unless prior to or simultaneously with the purchase, the Optionee shall
have delivered by such means as have been identified by the Committee notice to
the Company, accompanied by payment therefor in full of the option price, any
brokerage fees associated with the exercise of the options (the "Brokerage
Fees"), and any local, state, federal or other taxes required to be withheld and
paid over to governmental taxing authorities by the Company due to such exercise
("Taxes") (or arrangement made for such payment to the satisfaction of the
Company). Upon exercise, the option price, the Brokerage Fees and the Taxes may
be paid according to procedures established by the Committee as follows: (i) in
cash or (ii) by electing to sell, through an agent or broker designated by the
Company, whole shares of Common Stock issuable upon exercise of the option
having a fair market value determined on the date of exercise as close as is
practicable to the sum of (A) the option price for shares of Common Stock
subject to such exercise, (B) the Brokerage Fees associated with such exercise
and (C) the Taxes associated with such exercise, provided that the number of
whole shares sold shall be sufficient to pay in full the option price, the
Brokerage Fees and the Taxes. No option may be exercised by an Optionee through
any agent or broker other than an agent or broker designated by the Company.
Notwithstanding the foregoing, in the event that an Optionee has notified the
Company through the Company's electronic system that such Optionee is exercising
an option and is paying cash for the option price and the Taxes and such cash is
not received within 30 calendar days following such notice, then the Company may
automatically order the sale, through the designated agent or broker, of whole
shares of Common Stock to pay in full the option price, the Brokerage Fees and
the Taxes and deliver any whole shares of Common Stock not so applied to the
Optionee, plus any cash owed in lieu of fractional shares. The Committee shall
have sole discretion to disapprove of an election pursuant to clause (ii). No
shares of Common Stock shall be delivered to the Optionee until the full option
price, the Brokerage Fees and the Taxes have been paid. Optionees shall be
required to receive all shares acquired under an option in the form of stock
certificates; cash shall not be paid to an Optionee in
-4-
<PAGE>
lieu of the delivery of stock certificates upon the exercise of any option,
except to the extent necessary to compensate for fractional shares.
(e) Optionees shall be entitled to the privilege of ownership with respect
to shares of Common Stock subject to options granted hereunder only as to shares
of Common Stock purchased and delivered to an Optionee upon exercise of an
option.
10. Miscellaneous.
(a) Effect of Leaves of Absence. Leaves of absence for periods and
purposes conforming to the personnel policies of the Company and approved by the
Employer shall not be deemed terminations of employment or interruptions of
continuous service.
(b) Restrictions on Shares. Notwithstanding any provision of the Plan to
the contrary, unless a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), is in effect as to the shares purchasable
under any option granted under the Plan, no shares of Common Stock may be
purchased under such option. In addition, notwithstanding any provision of this
Plan to the contrary, any option granted under the Plan is subject to the
condition that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, the consent or approval of
any regulatory body, or the taking of any other actions necessary or desirable
as a condition of, or in connection with, the delivery of the shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company.
(c) No Right to Employment. Neither the Plan nor the grant of options
hereunder shall be construed as giving any employee any right to be retained in
the employ of any Employer.
(d) Governing Law. The Plan shall be governed by and interpreted in
accordance with the laws of the State of Delaware.
(e) Nature of Option. The options granted under the Plan shall not be
treated as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
11. Acceleration of Options Upon a Change in Control. If while any option
remains unexercised and outstanding under the Plan:
(a) any "person", as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (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
-5-
<PAGE>
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
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"), all such outstanding and unexercised options, whether or
not then exercisable, shall be fully and immediately exercisable.
-6-
<PAGE>
Exhibit A
Donnelley Shares
STOCK OPTION PLAN
This is to certify that
(OPTIONEE NAME)
was granted on (DATE), an option to purchase
(NUMBER)
SHARES
of R. R. Donnelley & Sons Company common stock at a fixed
option price of (PRICE) per share. This option is subject to the
terms and conditions of the Donnelley Shares
Stock Option Plan.
[logo] RR Donnelley This certificate has been
& Sons Company
executed as of (DATE),
on behalf of R. R. Donnelley
& Sons Company by
(FACSIMILE SIGNATURE)
John R. Walter
Chairman and
Chief Executive Officer
-7-
<PAGE>
DONNELLEY SHARES STOCK OPTION PLAN
----------------------------------
FOR UK EMPLOYEES
----------------
1. Introduction. R. R. Donnelley & Sons Company ("the Company") has
established its Donnelley Shares Stock Option Plan ("the US Plan") for the
benefit of employees of it and its subsidiaries under which it may grant stock
options to such employees. The Company intends to grant Options to employees in
the United Kingdom under a UK sub-plan of the US Plan to be known as the
Donnelley Shares Stock Option Plan for UK Employees ("the UK Plan"). The UK
Plan shall be governed by these Rules ("the Rules"). The UK Plan is intended to
qualify as an approved share option plan under Schedule 9 to the Income and
Corporation Taxes Act 1988.
2. The Appendix. The US Plan attached as an Appendix to these Rules shall
apply to the UK Plan subject to the additional restrictions and amendments
specified below. References to Schedule 9 are to Schedule 9 to the Income and
Corporation Taxes Act 1988.
3. Exclusion. Section 8(a) of the US Plan relating to Option Grants on 24
March 1994 will not apply to the UK Plan.
4. Subsidiaries. The direct and indirect wholly-owned subsidiaries of the
Company referred to in Section 2 of the US Plan shall include, for purposes of
the UK Plan, only those companies of which the Company has control within the
meaning of Section 840 of the Income and Corporation Taxes Act 1988.
5. Shares. The shares of common stock of the Company in respect of which
Options may be granted under the UK Plan must satisfy the conditions specified
in paragraphs 10 to 14 inclusive of Schedule 9.
6. Eligibility.
6.1. For the avoidance of doubt, it is hereby clarified that directors of the
Company and its subsidiaries are not eligible to receive Options under the UK or
US Plans. The description of eligible employees in Section 2 of the US Plan
shall also be subject to the additional requirement that an employee must, in
order to be eligible to receive Options, be an employee of the Company or a
subsidiary of the Company who is required to devote to his duties not less than
20 hours per week excluding meal breaks and who is not precluded by paragraph 8
of Schedule 9 from participating in the UK Plan.
6.2. The proviso in Section 2 of the US Plan relating to eligible employees
covered by collective bargaining agreements will not apply to the UK Plan.
6.3. Persons who are not eligible employees, as described in Section 2 of the
US Plan and qualified by Rules 6.1 and 6.2 above, shall not be eligible to
receive Options under the UK Plan.
-8-
<PAGE>
6.4. Any Option granted to an eligible employee shall be limited and take
effect so that the aggregate Fair Market Value of Common Stock subject to that
Option, when aggregated with the Fair Market Value of Common Stock subject to
subsisting Options, shall not exceed the greater of :
6.4.1. (Pounds)100,000; and
6.4.2. four times the amount of the individual's Relevant Emoluments 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 restriction:
(i) "Options" includes all Options granted under the UK Plan and all
options under any other plan approved under Schedule 9 (not being a
savings-related share option scheme) and established by the Company or
any associated company thereof (within the meaning of Section 416 of the
Income and Corporation Taxes Act 1988);
(ii) "Relevant Emoluments" means such of the emoluments of the office or
employment by virtue of which an individual is eligible to receive
Options under the UK Plan as are liable to be paid in that year under
deduction of tax pursuant to Section 203 of the Income and Corporation
Taxes Act 1988 ("Pay As You Earn") after deducting therefrom amounts
included by virtue of Chapter II of Part V of the Income and Corporation
Taxes Act 1988 (benefits derived by directors and others from their
employment);
(iii) "Year of Assessment" means a year beginning on any 6 April and
ending on the following 5 April; and (iv) The "Fair Market Value" of the
Common Stock shall be calculated in accordance with Section 8(c) of the
US Plan as at the dates when the Options in relation to the Common Stock
were granted or such earlier time as may have been agreed in writing
with the Board of Inland Revenue.
7. Exercise of Options.
7.1 The provisions of Section 9(a) to (d) of the US Plan relating to the
exercise of Options shall be subject to the additional restriction that no
Option may be exercised by an Optionee at any time when he is precluded by
paragraph 8 of Schedule 9 from participating in the UK Plan.
7.2 No cash payments may be made to Optionees pursuant to the final sentence of
Section 9(d) of the US Plan.
7.3 Shares must be allotted within 30 days after the date of exercise.
-9-
<PAGE>
8. Conditions. No conditions may be imposed by the Committee pursuant to the
third sentence in Section 4 of the US Plan to the extent that they affect the UK
Plan without the prior approval of the Board of Inland Revenue. If such
conditions involve the satisfaction of performance criteria, those criteria must
be of an objective nature.
9. Adjustments Upon Changes in Capitalisation. The provisions of Section 5 of
the US Plan concerning the adjustment of Options shall be subject to the
requirement that all such adjustments must be certified in writing by the
Auditors as being fair and reasonable and that no adjustment in respect of
subsisting Options and of Options to be granted under the UK Plan shall take
effect without the prior approval of the Board of Inland Revenue. Also, no
adjustment may be made under the UK Plan in relation to a spin-off.
For the purposes of this restriction, "Auditors" means the auditors for the time
being of the Company (acting as experts and not as arbitrators).
10. Amendment of the Plan. Any amendment of the US or UK Plans which is made
under the provisions of Section 7 of the US Plan and which affects the UK Plan
shall only take effect in respect of the UK Plan with the prior approval of the
Board of Inland Revenue.
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 41,748
<SECURITIES> 0
<RECEIVABLES> 1,220,657
<ALLOWANCES> 25,631
<INVENTORY> 416,677
<CURRENT-ASSETS> 1,698,017
<PP&E> 4,205,551
<DEPRECIATION> 2,244,760
<TOTAL-ASSETS> 4,897,255
<CURRENT-LIABILITIES> 1,118,129
<BONDS> 1,540,424
<COMMON> 330,612
0
0
<OTHER-SE> 1,432,086
<TOTAL-LIABILITY-AND-EQUITY> 4,897,255
<SALES> 1,546,995
<TOTAL-REVENUES> 1,546,995
<CGS> 1,306,173
<TOTAL-COSTS> 1,306,173
<OTHER-EXPENSES> 691,027
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,083
<INCOME-PRETAX> (448,712)
<INCOME-TAX> (71,794)
<INCOME-CONTINUING> (376,918)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (376,918)
<EPS-PRIMARY> (2.45)
<EPS-DILUTED> 0
</TABLE>
