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As filed with the Securities and Exchange Commission on January 15, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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 Number)
77 West Wacker Drive
Chicago, Illinois 60601
Telephone: (312) 326-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Monica M. Fohrman, Secretary
77 West Wacker Drive
Chicago, Illinois 60601
Telephone: (312) 326-8000
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)
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Copy to:
Jim L. Kaput
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Approximate date of commencement of proposed sale to the public: From
time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_] ____________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_] ________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Shares To Be Amount Maximum Maximum Amount of
Registered To Be Aggregate Aggregate Registration Fee
Registered (1) Price Offering Price (2)
Per Unit (2)
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<S> <C> <C> <C> <C>
Common Stock, par 4,400,000 $35.875 $163,803,156 $48,322
value $1.25
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Preferred Stock 4,400,000 (3) N/A N/A N/A (3)
Purchase Rights
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</TABLE>
(1) Also registered hereby are such additional and indeterminate number of
shares of Common Stock and Preferred Stock Purchase Rights ("Rights") as
may become issuable because of the provisions of the R.R. Donnelley & Sons
Company 1995 Stock Incentive Plan, the R.R. Donnelley & Sons Company 1991
Stock Incentive Plan or the R.R. Donnelley & Sons Company 1986 Stock
Incentive Plan relating to adjustments for changes resulting from stock
dividends, stock splits and similar changes.
(2) Estimated solely for the purpose of calculating the Registration Fee and,
pursuant to Rule 457(h) under the Securities Act of 1933, based upon the
exercise price for shares subject to outstanding options ($76.96 being the
highest exercise price for outstanding options) and the average of the high
and low sale prices of Common Stock of the Registrant on The New York Stock
Exchange on January 12, 1998 ($35.875) for all other shares.
(3) Rights are initially carried and traded with the Common Stock of the
Company. Value attributable to such Rights, if any, is reflected in the
market price of the Common Stock.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED JANUARY 15, 1998
PROSPECTUS
4,400,000 Shares
R.R. DONNELLEY & SONS COMPANY
Common Stock
__________________
This Prospectus relates to up to 4,400,000 shares of Common Stock, par
value $1.25 per share, including the associated Preferred Stock Purchase Rights
("Common Stock"), of R.R. Donnelley & Sons Company, a Delaware corporation (the
"Company" or "Donnelley"), which may be offered and sold to permitted
transferees of participants ("Participants") in the R.R. Donnelley & Sons
Company 1995 Stock Incentive Plan (the "1995 Plan"), the R.R. Donnelley & Sons
Company 1991 Stock Incentive Plan (the "1991 Plan") or the R.R. Donnelley & Sons
Company 1986 Stock Incentive Plan (the "1986 Plan") pursuant to non-qualified
stock options ("Stock Options") granted to such Participants thereunder. The
1995 Plan, the 1991 Plan and the 1986 Plan are each referred to herein as a
"Plan," and are collectively referred to herein as the "Plans." Upon the
approval of the Vice President, Compensation and Benefits or a member of the
Human Resources Committee of the Board of Directors of Donnelley (the
"Committee"), a Participant's Stock Option may be transferred in whole or in
part by such Participant, provided that such transfer is made without
consideration and is made to immediate family members of such Participant or to
a trust or partnership for the exclusive benefit of such Participant and/or
immediate family members. Each transfer must be made in accordance with the
applicable Plan and the grant documents specifying the terms and conditions of
such Stock Option. This Prospectus also relates to the offer and sale of Common
Stock pursuant to such Stock Option to the beneficiaries of such permitted
transferees, or the executors or administrators of their estates, or other
persons duly authorized by law to administer the estate or assets of such
persons.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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As of the date of this Prospectus, all Stock Options granted under the Plans
have had an exercise price equal to or greater than 100% of the fair market
value of a share of Common Stock on the date of grant. Upon transfer, a Stock
Option continues to be governed by and subject to the terms and limitations of
the applicable Plan and the relevant grant, including provisions relating to
exercise price.
The date of this Prospectus is ____________, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
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TABLE OF CONTENTS
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Page
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The Company..................................................... 2
Use of Proceeds................................................. 2
Description of the Plans and the Non-Qualified Stock Options.... 2
Certain Federal Income Tax Consequences......................... 5
Description of Capital Stock.................................... 6
Description of Preferred Stock Purchase Rights.................. 8
Legal Matters................................................... 10
Experts......................................................... 10
Available Information........................................... 10
Incorporation of Certain Documents By Reference................. 11
</TABLE>
THE COMPANY
R.R. Donnelley & Sons Company, incorporated in the state of Delaware
in 1956 as the successor to a business founded in 1864, 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 in North America. It is
a major supplier in the United Kingdom and also provides services in Latin
America, other locations in Europe and in Asia. Services provided to customers
include presswork and binding, including on-demand customized publications;
conventional and digital preproduction operations, including desktop publishing
and filmless color imaging necessary to create a printed image; design and
related creative services; electronic communication networks for simultaneous
worldwide product releases; digital services to publishers; and the planning for
and fulfillment of truck, rail, mail and air distribution for products of the
Company and its customers, as well as third parties.
The Company's executive offices are located at 77 West Wacker Drive,
Chicago, Illinois 60601, and its telephone number is (312) 326-8000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the
Common Stock for general corporate purposes.
DESCRIPTION OF THE PLANS AND THE NON-QUALIFIED STOCK OPTIONS
General
The purpose of each Plan is to provide incentives to management
through rewards based upon the ownership or performance of the Common Stock and
non-employee directors, through the grant of options to purchase Common Stock.
Under the 1995 Plan, the Company may grant options to purchase Common Stock of
the Company, including "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), stock
appreciation rights, restricted stock, stock units and cash awards. Each grant
or award is evidenced by a written agreement containing such provisions not
inconsistent with the applicable Plan as approved by the Committee. Such
agreement sets forth certain terms and conditions of the grant or award. Upon
approval of the 1995 Plan, no further stock option grants could be made under
the 1991 Plan or the 1986 Plan.
The Plans are administered by the Committee which, subject to the
express provisions of the 1995 Plan, has the authority to select eligible
officers and other key management employees of the Company, its subsidiaries and
any other entity
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designated by the Board of Directors or the Committee in which the Company has a
direct or indirect equity interest for participation in the 1995 Plan and
determine all of the terms and conditions of each grant or award. The Committee
also has the authority to establish rules and regulations for administering the
Plans and to decide questions of interpretation of any provision of the Plans.
The Committee may delegate certain of its powers and authority under the Plans
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate.
The 1995 Plan became effective as of January 1, 1995 and will
terminate on December 31, 1999 unless terminated prior to such date by the Board
of Directors. Each of the 1991 Plan and the 1986 Plan has been terminated.
Termination of any of the Plans does not affect the rights of any Participant
under any grants or awards made prior to termination.
The Stock Options
The number of shares of Common Stock subject to a non-qualified Stock
Option, the period for the exercise of a non-qualified Stock Option and the
option exercise price are determined by the Committee; provided that the option
exercise price may not be less than the fair market value of a share of Common
Stock on the date of grant and the period of exercise may not exceed ten years.
The Committee determines whether a Stock Option will become exercisable in
cumulative or noncumulative installments and in part or in full at any time. In
general, Stock Options have had expiration dates ten years from the date of
grant, an exercise price equal to the fair market value of a share of Common
Stock on the date of grant, and become exercisable in annual installments over a
four-year period.
Transferability
The Plans provide that Stock Options are generally not transferable by
a Participant except by will, the laws of descent and distribution or pursuant
to beneficiary designation procedures approved by the Company and are
exercisable during the Participant's lifetime only by the Participant.
Notwithstanding the foregoing, the Committee may grant a Stock Option that is
(or amend an outstanding Stock Option to provide that such Stock Option is) also
transferable in whole or in part to one or more transferees, provided that: (i)
any such transfer must be without consideration and (ii) each transferee must be
an Immediate Family Member (as defined below), a trust established for the
exclusive benefit of the Participant and/or Immediate Family Members or a
partnership in which the Participant and/or Immediate Family Members are the
only equity owners. Any proposed transfer of a Stock Option must be approved by
the Vice President, Compensation and Benefits or a member of the Committee. The
term "Immediate Family Member" means the Participant's spouse, child, stepchild
or grandchild, and includes adoptive relationships. Any such permitted
transferee of a Participant's Stock Options shall be referred to herein as a
"Stock Option Transferee" and such Participant shall be referred to herein as a
"Participant Transferor."
This Prospectus relates to up to 4,400,000 shares of Common Stock
which may be offered and sold to Stock Option Transferees pursuant to Stock
Options that may be transferred as described in the immediately preceding
paragraph. This Prospectus also relates to the offer and sale of Common Stock
pursuant to such Stock Options to the beneficiaries of such Stock Option
Transferees or the executors or administrators of their estates, or other
persons duly authorized by law to administer the estates or assets of such
persons. Upon transfer to a Stock Option Transferee, a Stock Option is governed
by and subject to the terms and limitations of the applicable Plan and the
relevant grant, as such grant may be amended by the Committee in consenting to a
transfer of the Stock Option, and, subject to any such amendment, the Stock
Option Transferee is entitled to the same rights as the Participant Transferor
thereunder, as if no transfer had taken place. Accordingly, the rights of the
Stock Option Transferee are subject to the terms and conditions of the original
grant to the Participant Transferor, as amended, including provisions relating
to the expiration date, exercisability, exercise price and forfeiture. For
information regarding the Plans and the terms of a particular Stock Option
grant, Stock Option Transferees may contact the Vice President, Compensation and
Benefits, at (312) 326-8000. Once a Stock Option has been transferred to a Stock
Option Transferee, it may not be subsequently transferred by the Stock Option
Transferee except with the consent of the Committee or by will, the laws of
descent and distribution or pursuant to beneficiary designation procedures
approved by the Company.
Exercise of Options by Stock Option Transferees
A Stock Option may be exercised by a Stock Option Transferee at any
time from the date established in the applicable Plan or the original grant to
the Participant Transferor until the close of business on the expiration date of
the Stock Option as established in the applicable Plan or the original grant to
the Participant Transferor, or the earlier date on which the Stock Option
terminates due to the Participant Transferor's termination of employment or
service as director, as discussed below.
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A Stock Option may be exercised by giving written notice to the Company
specifying the number of whole shares of Common Stock to be purchased. The
notice of exercise must be accompanied by payment for the shares of Common Stock
being purchased and payment of any tax withholding obligations. The agreement
evidencing a Stock Option will set forth whether payment of the exercise price
may be made (i) in cash, (ii) in previously owned whole shares of Common Stock
(which the Stock Option Transferee has held for at least six months prior to
delivery of such shares or which the Stock Option Transferee purchased on the
open market and for which the Stock Option Transferee has good title free and
clear of all liens and encumbrances) having a fair market value, determined as
of the date of exercise, equal to the purchase price of the shares being
purchased, or (iii) in a combination of cash and previously owned shares. The
Committee has sole discretion to disapprove of an election pursuant to any of
clauses (ii) or (iii). No certificate representing Common Stock shall be
delivered until the full purchase price therefor and any tax withholding
obligations have been paid.
Under existing regulations of the Federal Reserve Board, a Stock
Option Transferee may not make the payment of the exercise price in cash by or
through a broker-assisted exercise of a Stock Option. At the time of exercise,
however, a Stock Option Transferee may inquire of the Vice President,
Compensation and Benefits, as to the availability of such payment procedure
under the then prevailing regulations. If permitted by law, the Company may, in
its sole discretion, permit payment of the exercise price in cash by or through
a broker acceptable to the Company to whom the Stock Option Transferee has
submitted an irrevocable notice of exercise.
Any required tax withholding must be satisfied by the party required
to recognize income in connection with the exercise of the Stock Option under
the rules discussed below under the heading "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." Accordingly, the receipt of the certificate representing Common
Stock after the exercise of a Stock Option by a Stock Option Transferee is not
entirely within his or her control when the Stock Option Transferee is not the
party required to recognize income in connection with the exercise of the Stock
Option. Once the exercise, payment of the purchase price and payment of any tax
withholding obligations are completed as described above, a stock certificate
for the appropriate number of shares will be delivered to the Stock Option
Transferee or his or her estate or beneficiaries, or such shares shall otherwise
be delivered in such manner as the person(s) entitled thereto may direct.
Effect of Termination of Employment or Service on the Board of Directors
Because Stock Options transferred to Stock Option Transferees continue
to be governed by the terms of the applicable Plan and the original grant, their
exercisability continues to be affected by the Participant Transferor's
employment or service status. In the event of termination of employment or
service on the Board of Directors of the Participant Transferor by reason of
retirement or total and permanent disability, each Stock Option is exercisable
for a period of no more than five years after the date of such termination of
employment or service on the Board of Directors but only to the extent otherwise
exercisable on such date and in no event after the expiration of such Stock
Option. In the event of termination of employment or service on the Board of
Directors of the Participant Transferor by any reason other than retirement or
total and permanent disability, each Stock Option is exercisable, unless
otherwise provided in the agreement evidencing such Stock Option, for a period
of no more than 90 days after the date of such termination of employment or
service on the Board of Directors, but only to the extent otherwise exercisable
on such date and in no event after the expiration of such Stock Option. In the
event of the death of the Participant Transferor within five years after the
Participant Transferor's termination of employment or service on the Board of
Directors by reason of retirement or total and permanent disability, or 90 days
after the Participant Transferor's termination of employment or service on the
Board of Directors by any other reason, each Stock Option is exercisable for a
period of 90 days after the date of death, but only to the extent otherwise
exercisable on such date and in no event after the expiration of such Stock
Option. The Company has no obligation to notify any Stock Option Transferee of
the termination of employment or service on the Board of Directors of the
Participant Transferor.
Change in Control
In the event (i) a person (subject to certain exceptions) becomes the
beneficial owner of 50% or more of the voting power of the Company's outstanding
securities, (ii) during any period of two consecutive years beginning on or
after January 1, 1995, individuals who at the beginning of such period
constitute the Board of Directors and any new director whose election was
approved by at least two-thirds of the directors still in office who either were
directors at the beginning of the period or whose election was previously so
approved, cease to constitute a majority of the Board of Directors or (iii) the
stockholders approve a merger or consolidation with any other corporation
(unless the Company's stockholders and any employee benefit plan of the Company
receive 50% or more of the voting stock of the surviving company or unless the
merger or consolidation implements a recapitalization in which no person
acquires more than 50% of the combined voting power of the Company's
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outstanding securities) or (iv) the stockholders approve a complete liquidation
of the Company or sale of all or substantially all of the Company's assets, all
Stock Options will be fully and immediately exercisable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the federal income tax consequences of
a transfer of a Stock Option and of the exercise of such Stock Option. The
summary is not a complete description of tax consequences applicable to a
Participant Transferor and Stock Option Transferee. Accordingly, prior to
transferring a Stock Option, a Participant should consult with his or her
personal tax advisor concerning the possible federal, state and local income,
gift, estate, inheritance, generation skipping and other tax consequences of
such a transfer, and a Stock Option Transferee should consult with his or her
personal tax advisor concerning the possible federal, state and local income and
other tax consequences of the exercise of a Stock Option.
Income Tax Consequences for Participant Transferor
The Company has been advised by its tax counsel that a Participant who
transfers a Stock Option by gift to a Stock Option Transferee will not recognize
income at the time of the transfer. Instead, if the Stock Option is exercised
while the Participant Transferor is living, the Participant Transferor will
recognize ordinary income at the time the Stock Option Transferee exercises the
Stock Option in an amount equal to the excess, if any, of the fair market value
of the shares purchased on the date of exercise (which will not necessarily be
equal to the price at which such shares are sold, even if sold on the same day
as exercise) over the exercise price.
Any income recognized by the Participant Transferor will be subject to
required tax withholding by the Company. Payment of the withholding obligation
by the Participant Transferor may be made (i) in cash, (ii) in previously owned
whole shares of Common Stock (which the Stock Option Transferee has held for at
least six months prior to delivery of such shares or which the Stock Option
Transferee purchased on the open market and for which the Stock Option
Transferee has good title free and clear of all liens and encumbrances) having a
fair market value, determined as of the date of exercise, equal to the exercise
price of the shares being purchased, or (iii) in a combination of cash and
previously owned shares. The Committee has sole discretion to disapprove of an
election pursuant to any of clauses (ii) or (iii). Subject to certain
limitations, the Company will generally be entitled to claim a federal income
tax deduction at such time and in the same amount that the Participant
Transferor recognizes ordinary income.
Income Tax Consequences for Stock Option Transferee
The Company also has been advised that a Stock Option Transferee will
not recognize income at the time of the transfer of a Stock Option by gift. As
described in the preceding two paragraphs, the Participant Transferor and not
the Stock Option Transferee will recognize ordinary compensation income at the
time the Stock Option Transferee exercises the Stock Option. A Stock Option
Transferee who chooses to exercise a Stock Option in whole or in part by
delivery of previously owned shares of Common Stock should consult with his or
her personal tax advisor concerning the tax consequences of such a transaction.
Income Tax Consequences upon the Subsequent Sale of Common Stock
If shares acquired upon exercise of a Stock Option are later sold or
exchanged, then the difference between the sales price and the Stock Option
Transferee's tax basis for the shares will generally be taxable as long-term or
short-term capital gain or loss (if the stock is a capital asset of the
taxpayer), depending upon whether the stock has been held for more than 18
months after the exercise date. If the Stock Option is exercised by the Stock
Option Transferee for cash, the tax basis for the shares in the hands of the
Stock Option Transferee would be the exercise price for the Stock Option plus
the amount of the income recognized by either the Stock Option Transferee or the
Participant Transferor at the time of exercise. Different basis rules will apply
if the Stock Option Transferee delivered previously owned shares of Common Stock
in payment of all or a portion of the exercise price of the Stock Option.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Donnelley consists of: (i) 500,000,000
shares of Common Stock, of which 150,889,050 shares and Stock Options to
purchase 9,712,350 shares of Common Stock were outstanding at December 31, 1997
and (ii) 2,000,000 shares of Preferred Stock, $1.00 par value ("Preferred
Stock"), none of which is outstanding, but 500,000 shares of which have been
designated as Series A Junior Participating Preferred Stock. See "Description of
Preferred Stock Purchase Rights." The following summary description of the
capital stock of the Company is qualified in its entirety by reference to the
Restated Certificate of Incorporation and the By-Laws of the Company and to the
Delaware General Corporation Law (the "DGCL").
Preferred Stock
The Board of Directors is authorized to provide for the issuance from
time to time of shares of the Preferred Stock in series and to fix the
designation, dividend rate, voting rights, redemption price or prices, voluntary
and involuntary liquidation prices, sinking fund provisions, if any, and
conversion provisions, if any, applicable to the shares of such series and any
other rights and preferences. In the event shares of Preferred Stock are issued
which have been designated to receive cumulative dividends or which include
sinking fund requirements, conversion or redemption provisions, such issuance
could have an adverse effect on the availability of earnings for distribution to
the holders of Common Stock.
Dividends
Subject to the prior dividend rights as may be fixed by the Board of
Directors in creating a new series of Preferred Stock, holders of Common Stock
are entitled to receive, from funds legally available therefor, dividends when
and as declared by the Board of Directors.
Voting Rights
The holders of shares of Common Stock are entitled to one vote for
each share held, without the right to cumulate votes for the election of
directors. Under Donnelley's Restated Certificate of Incorporation and By-Laws:
(a) the Board of Directors is divided into three classes, and each director is
elected to serve for a three-year term; (b) the number of directors which
constitutes the full Board of Directors of Donnelley shall be not less than nine
nor more than 12; and (c) the affirmative vote of the holders of at least
66 2/3% of the voting power of the outstanding shares of capital stock of
Donnelley entitled to vote generally in the election of directors is required to
amend or repeal the foregoing provisions.
Donnelley 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% of the outstanding shares of each class of the
stock is owned by Donnelley, unless authorized by the affirmative vote of the
holders of not less than 66 2/3% of the outstanding shares of stock of each
class having voting power with respect to the proposed transaction and the
affirmative vote of the holders of not less than 66 2/3% of the outstanding
shares of stock of each class having voting power is required to amend or repeal
the foregoing provision.
Liquidation
Upon any liquidation, dissolution or winding up of Donnelley, the
holders of Common Stock will be entitled to receive, pro rata, after the
creditors of Donnelley have been paid and the holders of any then outstanding
series of Preferred Stock shall have received their liquidation preferences, all
the remaining assets of Donnelley in proportion to their share holdings.
Pre-emptive Rights
Holders of Common Stock do not have pre-emptive rights to acquire any
securities of Donnelley.
General
The outstanding shares of Common Stock are fully paid and
nonassessable. The outstanding shares of Common Stock are listed on the New
York, Chicago and Pacific Stock Exchanges. The Transfer Agent and Registrar for
the Common Stock is First Chicago Trust Company of New York.
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Certain Charter and By-law Provisions
Certain provisions of Donnelley's Restated Certificate of
Incorporation and By-laws, summarized in the following paragraphs, may be
considered to have an anti-takeover effect and may delay, deter or prevent a
tender offer, proxy contest or other takeover attempt that a stockholder might
consider to be in such stockholder's best interest, including such an attempt as
might result in payment of a premium over the market price for shares held by
stockholders.
Classified Board of Directors
Donnelley's Restated Certificate of Incorporation provides for the
Board of Directors to be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the Board of
Directors will be elected each year. Classification of the Board of Directors
expands the time required to change the composition of a majority of directors
and may tend to discourage a proxy contest or other takeover bid for Donnelley.
Moreover, under the DGCL, in the case of a corporation having a classified board
of directors, the stockholders may remove a director only for cause. These
provisions, when coupled with provisions of Donnelley's Restated Certificate of
Incorporation authorizing only the Board of Directors to fill vacant
directorships, will preclude stockholders of Donnelley from removing incumbent
directors without cause and simultaneously gaining control of the Board of
Directors by filling the vacancies with their own nominees.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Donnelley's By-laws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at a meeting of stockholders, must provide timely notice
thereof in writing. To be timely, a stockholder's notice must be delivered to,
or mailed and received at, the principal executive office of Donnelley not less
than 60 days nor more than 90 days prior to the scheduled meeting (or, if less
than 75 days notice or prior public disclosure of the date of such meeting is
given, not later than the close of business on the tenth day following the
earlier of (i) the day on which such notice of the date of the meeting was
mailed, or (ii) the day on which public disclosure of the date of the special
meeting was made). Donnelley's By-laws also specify certain requirements
pertaining to the form and substance of a stockholder's notice. These provisions
may preclude some stockholders from making nominations for directors at an
annual or special meeting or from bringing other matters before the stockholders
at a meeting.
No Action by Written Consent of the Stockholders
Donnelley's Restated Certificate of Incorporation does not allow the
stockholders of Donnelley to take action by written consent.
Delaware Takeover Statute
Section 203 of the DGCL ("Section 203") prohibits a public Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which such person became an interested stockholder unless: (i) prior to such
date, the board of directors approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; or (ii) upon becoming an interested stockholder, the stockholder
then owned at least 85% of the voting stock, as defined in Section 203; or (iii)
subsequent to such date, the business combination is approved by both the board
of directors and by holders of at least 66 2/3% of the corporation's outstanding
voting stock, excluding shares owned by the interested stockholder. For these
purposes, the term "business combination" includes mergers, asset sales and
other similar transactions with an "interested stockholder." An "interested
stockholder" is a person who, together with affiliates and associates, owns (or,
within the prior three years, did own) 15% or more of the corporation's voting
stock.
Limitations of Liability
Donnelley's Restated Certificate of Incorporation contains a provision
that is designed to limit the directors' liability to the extent permitted by
the DGCL and any amendments thereto. Specifically, directors will not be held
personally liable to Donnelley or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability: (i) for a breach
of the duty of loyalty to Donnelley or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) payment of an improper dividend or improper repurchase
of
-7-
<PAGE>
Donnelley's stock under Section 174 of the DGCL, or (iv) for any transaction
from which the director derived an improper personal benefit. The principal
effect of the limitation of liability provision is that a stockholder is unable
to prosecute an action for monetary damages against a director of Donnelley
unless the stockholder can demonstrate one of the specified bases for liability.
This provision, however, does not eliminate or limit director liability arising
in connection with causes of action brought under the federal securities laws.
While Donnelley's Restated Certificate of Incorporation limits the personal
liability of directors, it does not eliminate the directors' duty of care. The
inclusion of the limitation of liability provision in Donnelley's Restated
Certificate of Incorporation may, however, discourage or deter stockholders or
management from bringing a lawsuit against directors for a breach of their
fiduciary duties, even though such an action, if successful, might otherwise
have benefited Donnelley and its stockholders. This provision should not affect
the availability of equitable remedies such as injunction or rescission based
upon a director's breach of the duty of care.
Indemnification
Donnelley's By-laws also provide that Donnelley will indemnify its
directors and officers to the fullest extent permitted by Delaware law.
Donnelley is generally required to indemnify its directors and officers for all
judgments, fines, settlements, legal fees and other expenses incurred in
connection with pending or threatened legal proceedings because of the
director's or officer's position with Donnelley or another entity for which the
director or officer serves at Donnelley's request, subject to certain
conditions, and to advance funds to its directors and officers to enable them to
defend against such proceedings. To receive indemnification, the director or
officer must have been successful in the legal proceedings or acted in good
faith and in what was reasonably believed to be a lawful manner in Donnelley's
best interest.
DESCRIPTION OF PREFERRED STOCK PURCHASE RIGHTS
On April 25, 1996, the Board of Directors of the Company declared a
dividend distribution of one right (a "Right") for each outstanding share of the
Common Stock to stockholders of record at the close of business on August 8,
1996 (the "Record Date"). The Board of Directors of the Company also authorized
the issuance of one Right for each share of Common Stock issued after the Record
Date and prior to the earliest of the Distribution Date (as defined below), the
redemption of the Rights and the expiration of the Rights and, in certain
circumstances, after the Distribution Date. Except as set forth below and
subject to adjustment as provided in the Rights Agreement (defined below), each
Right entitles the registered holder to purchase from the Company one one-
thousandth of a share of Preferred Stock at a purchase price of $140 per Right
(the "Purchase Price"). The description and terms of the Rights are set forth
in a Rights Agreement, dated as of April 25, 1996 (the "Rights Agreement"),
between the Company and First Chicago Trust Company of New York, as Rights
Agent.
The Rights are attached to the shares of Common Stock and no separate
Rights Certificates (as defined below) will be distributed prior to the
Distribution Date (as defined below). The Rights will separate from the Common
Stock upon the earliest of (i) 10 days following a public announcement that a
person or group (an "Acquiring Person"), together with persons affiliated or
associated with it, has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), (ii) 10 business days (or such later date as the Board of
Directors of the Company shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 15% or more of such outstanding shares of Common Stock, or (iii) 10
business days following a determination by the Board of Directors of the Company
that a person (an "Adverse Person"), alone or together with its affiliates and
associates, has become the beneficial owner of more than 10% of the outstanding
Common Stock and that (a) such beneficial ownership is intended to cause the
Company to repurchase the common stock beneficially owned by such person or to
cause pressure on the Company to take action or enter into transactions intended
to provide such person with short-term financial gain under the circumstances
where the Board of Directors of the Company determines that the best long-term
interests of the Company would not be served by taking such action or entering
into such transactions at the time or (b) such beneficial ownership is causing
or reasonably likely to cause a material adverse impact on the business or
prospects of the Company (the earliest of such dates being called the
"Distribution Date").
Until the Distribution Date (or earlier redemption or expiration of
the Rights), (i) the Rights will be transferred with and only with the Common
Stock (except in connection with redemption of the Rights), (ii) new Common
Stock certificates issued after the Record Date upon transfer, replacement or
new issuance of Common Stock will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
-8-
<PAGE>
The Rights will become first exercisable on the Distribution Date and
will expire at the close of business on August 8, 2006 (the "Expiration Date"),
unless earlier redeemed by the Company as described below. Notwithstanding the
foregoing, the Rights will not be exercisable after the occurrence of a
Triggering Event (defined below) until the Registrant's right of redemption has
expired.
As soon as practicable after the Distribution Date, separate
certificates evidencing the Rights (the "Rights Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, such separate Rights Certificates alone will
evidence the Rights. Except for shares of Common Stock issued or sold after the
Distribution Date pursuant to the exercise of stock options or under any
employee benefit plan or arrangement granted or awarded prior to the
Distribution Date, or the exercise, conversion or exchange of securities issued
by the Company, and except as otherwise determined by the Board of Directors,
only shares of Common Stock issued prior to the Distribution Date will be issued
with Rights.
In the event that any person shall become (a) an Acquiring Person
(except (i) pursuant to an offer for all outstanding shares of Common Stock
which the independent directors determine to be fair to and otherwise in the
best interest of the Company and its stockholders after receiving advice from
one or more investment banking firms (a "Qualifying Offer") and (ii) for certain
persons who report their ownership on Schedule 13G under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or on Schedule 13D under the
Exchange Act, provided that they do not state any intention to, or reserve the
right to, control or influence the Company and such persons certify that they
became an Acquiring Person inadvertently and they agree that they will not
acquire any additional shares of Common Stock) or (b) an Adverse Person (either
such event is referred to herein as a "Triggering Event"), then the Rights will
"flip-in" and entitle each holder of a Right, except as provided below, to
purchase, upon exercise at the then current Purchase Price, that number of
shares of Common Stock having a market value of two times such Purchase Price.
Any Rights beneficially owned at any time on or after the earlier of
the Distribution Date and the Stock Acquisition Date by an Acquiring Person, an
Adverse Person or an affiliate or associate of an Acquiring Person or an Adverse
Person (whether or not such ownership is subsequently transferred) will become
null and void upon the occurrence of a Triggering Event, and any holder of such
Rights will have no right to exercise such Rights.
In the event that, following a Stock Acquisition Date, the Company is
acquired in a merger or other business combination in which the Common Stock
does not remain outstanding or is changed (other than a merger consummated
pursuant to a Qualifying Offer) or 50% of the assets or earning power of the
Company and its subsidiaries (taken as a whole) is sold or otherwise transferred
to any person (other than the Company or any subsidiary of the Company) in one
transaction or a series of related transactions, the Rights will "flip-over" and
entitle each holder of a Right, except as provided in the preceding paragraph,
to purchase, upon the exercise of the Right at the then current Purchase Price,
that number of shares of common stock of the acquiring company which at the time
of such transaction would have a market value of two times such Purchase Price.
The Purchase Price is subject to adjustment from time to time to
prevent dilution upon the (i) declaration of a dividend on the Preferred Stock
payable in shares of Preferred Stock, (ii) subdivision of the outstanding
Preferred Stock, (iii) combination of the outstanding Preferred Stock into a
smaller number of shares, (iv) issuance of any shares of the Registrant's
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), (v) grant to holders of the
Preferred Stock of certain rights, options, or warrants to subscribe for
Preferred Stock or securities convertible into Preferred Stock at less than the
current market price of the Preferred Stock, or (vi) distribution to holders of
the Preferred Stock of other evidences of indebtedness, cash (other than a
regular quarterly cash dividend payable out of the earnings or retained earnings
of the Company), subscription rights, warrants, or assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred Stock).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% of
the Purchase Price.
At any time until the earlier of (i) ten days following the Stock
Acquisition Date and (ii) the Expiration Date, the Company may redeem the Rights
in whole, but not in part, at a price of $.01 per Right, subject to adjustments.
The Company may, at its option, pay the redemption price in cash, shares of
Common Stock (based on the current market price of the Common Stock at the time
of redemption) or any other form of consideration deemed appropriate by the
Board of Directors of the Company. Immediately upon the action of the
Registrant's Board of Directors ordering redemption of the Rights, the right to
-9-
<PAGE>
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the applicable redemption price. In addition, after a
Triggering Event, at the election of the Board of Directors of the Company the
outstanding Rights (other than those beneficially owned by an Acquiring Person,
Adverse Person or an affiliate or associate of an Acquiring Person or Adverse
Person) may be exchanged, in whole or in part, for shares of Common Stock, or
shares of preferred stock of the Company having essentially the same value or
economic rights as such shares of Common Stock. 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 such Rights will only entitle
holders to receive the shares issuable upon such exchange.
Until a Right is exercised, the holder thereof, as such will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
At any time prior to the Distribution Date, the Company may, without
the approval of any holder of the Rights, supplement or amend any provision of
the Rights Agreement. Thereafter, the Rights Agreement may be amended only (i)
to cure ambiguities, (ii) to correct inconsistent provisions, (iii) to shorten
or lengthen any time period thereunder or (iv) in ways that do not adversely
affect the Rights holders (other than an Acquiring Person or Adverse Person).
From and after the Distribution Date, the Rights Agreement may not be amended to
lengthen (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).
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors of the Company since the Board of Directors may, at its option, at any
time until ten days following the Stock Acquisition Date, redeem all, but no
less than all, of the then outstanding Rights at the applicable redemption
price.
LEGAL MATTERS
The legality of the Securities offered hereby will be passed upon for
the Company by Sidley & Austin.
EXPERTS
The consolidated financial statements and schedules of the Company
included in its Annual Report on Form 10-K for the year ended December 31, 1996
and incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). The Company has filed with the Commission a registration
statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the shares of Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all information set forth in the
Registration Statement and reference is hereby made to the Registration
Statement and the exhibits thereto for further information with respect to the
Company and the shares of Common Stock offered hereby. Such reports, proxy
statements, Registration Statement and exhibits and other information omitted
from this Prospectus can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at its Northeast Regional Office located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Midwest Regional Office
located at Citicorp Center,
-10-
<PAGE>
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission at http://www.sec.gov. Such reports, proxy and information
statements and other information concerning the Company can also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois
60605, and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104, on which the Common Stock is listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the
Company under the Exchange Act are incorporated herein by reference:
(a) the Annual Report of the Company on Form 10-K for the year ended
December 31, 1996;
(b) the Quarterly Reports of the Company on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997;
(c) the Current Report of the Company on Form 8-K dated December 15,
1997;
(d) the description of the Rights contained in the Company's
Registration Statement on Form 8-A filed under the Exchange Act, including any
amendment or report filed for the purpose of updating such description; and
(e) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed under the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock contemplated hereby
shall be deemed to be incorporated by reference into this Prospectus and to be
made a part hereof from the respective dates of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
Copies of the above documents (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference into such
documents) may be obtained upon written or oral request without charge from the
Company, Requests by telephone for such copies should be directed to (312) 326-
8282.
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<PAGE>
[Alternate Sections for "Description of the Plans and the Non-qualified Stock
Options--Effect of Termination of Employment" and "--Change in Control"]
Effect of Termination of Employment
Because Stock Options transferred to Stock Option Transferees continue
to be governed by the terms of the applicable Plan and the original grant, their
exercisability continues to be affected by the Participant Transferor's
employment status. In the event of termination of employment of the Participant
Transferor by reason of death or Disability (as defined below), by the Company
without Cause (as defined below), by the Participant Transferor for Good Reason
(as defined below), by retirement on or after age 65 or by retirement on or
after age 55 with the Company's consent, each Stock Option shall immediately
become exercisable in full and shall continue to be exercisable for the full
term of the Stock Option. In the event of termination of employment of the
Participant Transferor for any other reason, each Stock Option shall be
exercisable, except in the event of a change in control of the Company as
described below, for a period of no more than 90 days after the date of such
termination of employment, but only to the extent otherwise exercisable on such
date and in no event after the expiration of such Stock Option. The Company has
no obligation to notify any Stock Option Transferee of the termination of
employment of the Participant Transferor.
For the purpose of the Stock Options, and as more fully described in
the Participant Transferor's employment agreement (the "Employment Agreement"),
the terms "Disability," "Cause" and "Good Reason" are defined as follows.
"Disability" means the Participant Transferor's inability to substantially
perform such person's duties and responsibilities for a period of 180
consecutive days, as determined by an approved medical doctor. "Cause" means
that (i) the Participant Transferor has engaged in conduct that constitutes
willful gross neglect or willful gross misconduct resulting, in either case, in
material economic harm to the Company or substantial damage to the Company's
reputation, unless the Participant Transferor believed in good faith that such
act or nonact was in or not contrary to the best interests of the Company; or
(ii) the Participant Transferor is convicted of a felony involving moral
turpitude, fraud or embezzlement. A termination for "Good Reason" means a
termination of the employment initiated by the Participant Transferor following
the occurrence, without the Participant Transferor's written consent, of: (i) a
reduction in the Participant Transferor's then current salary, a reduction in
the target award opportunity under any long term incentive plan, a termination
or material reduction of any employee benefit or perquisite (other than as part
of an across-the-board reduction in any employee benefit or perquisite
applicable to all executive officers of the Company), or a failure by the
Company to pay the Participant Transferor any amount of salary, incentive
compensation or other compensation or any material benefit amount due within
seven (7) days of the date such amount is due; (ii) the failure to elect or
reelect the Participant Transferor to, or the removal of the Participant
Transferor from, any of the positions specified in the Employment Agreement;
(iii) a material diminution in the Participant Transferor's duties as set forth
in the Employment Agreement, or the assignment to the Participant Transferor of
duties or responsibilities that are materially inconsistent with such duties or
which materially impair the Participant Transferor's ability to function
thereunder; (iv) the failure to continue the Participant Transferor's
participation in any incentive compensation plan unless a plan providing a
substantially similar opportunity is substituted; (v) the relocation of the
Company's principal office or the Participant Transferor's own office to a
location more than 25 miles from Chicago, Illinois; or (vi) the failure of the
Company to obtain the assumption in writing of its obligation to perform the
Employment Agreement by any successor to all or substantially all of the assets
of the Company within 15 days after a merger, consolidation, sale or similar
transaction.
Change in Control
In the event (i) a person (subject to certain exceptions) becomes the
beneficial owner of 50% or more of the voting power of the Company's outstanding
securities, (ii) during any period of two consecutive years beginning on or
after March 18, 1997, individuals who at the beginning of such period constitute
the Board of Directors and any new director whose election was approved by at
least two-thirds of the directors still in office who either were directors at
the beginning of the period or whose election was previously so approved, cease
to constitute a majority of the Board of Directors, (iii) the stockholders
approve a merger or consolidation with any other corporation (unless the
Company's stockholders and any employee benefit plan of the Company receive 50%
or more of the voting stock of the surviving company or unless the merger or
consolidation implements a recapitalization in which no person acquires more
than 50% of the combined voting power of the Company's outstanding securities)
or (iv) the stockholders approve a complete liquidation of the Company or sale
of all or substantially all of the Company's assets, all Stock Options will be
fully and immediately exercisable.
-12-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated,
except the SEC registration fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................ $48,322
Legal fees and expenses..................... 15,000
Fees of accountants......................... 2,000
$65,322
=======
</TABLE>
Item 15. Indemnification of Directors and Officers.
Reference is made to Section 145 of the Delaware General Corporation
Law which provides for indemnification of directors and officers in certain
circumstances.
Article Twelfth of the Company's Restated Certificate of
Incorporation, which Certificate was filed as an exhibit to the Company's Form
10-Q for the quarter ended March 31, 1996, is incorporated herein by reference.
The Company has purchased liability insurance covering its directors
and officers to provide protection in certain circumstances where the Company
cannot indemnify a director or director, in addition to protection to the
Company in certain circumstances where a director or an officer may be
indemnified by the Company under the provisions of Delaware law.
Item 16. Exhibits.
A list of exhibits included as part of this Registration Statements is
set forth in the Exhibit Index appearing elsewhere herein and is incorporated
herein by reference.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
S-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on this 15th day of
January, 1998.
R.R. DONNELLEY & SONS COMPANY
By: /s/ Monica M. Fohrman
---------------------------------
Monica M. Fohrman
Secretary
POWER OF ATTORNEY
KNOW ALL PEOPLE BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Monica M. Fohrman and Cheryl A. Francis,
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
Name Title Date
---- ----- ----
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ William L. Davis Chairman and Chief January 15, 1998
- ------------------------- Executive Officer (Principal
William L. Davis Executive Officer)
/s/ Cheryl A. Francis Executive Vice President January 15, 1998
- ------------------------- and Chief Financial Officer
Cheryl A. Francis (Principal Financial Officer)
/s/ Peter F. Murphy Vice President and January 5, 1998
- ------------------------- Controller (Principal
Peter F. Murphy Accounting Officer)
/s/ Martha Layne Collins Director December 29, 1997
- -------------------------
Martha Layne Collins
/s/ James R. Donnelley Director January 15, 1998
- --------------------------
James R. Donnelley
/s/ Charles C. Haffner III Director January 15, 1998
- --------------------------
Charles C. Haffner III
/s/ Judith H. Hamilton Director January 15, 1998
- --------------------------
Judith H. Hamilton
</TABLE>
S-3
<PAGE>
/s/ Thomas S. Johnson Director January 15, 1998
- ----------------------------
Thomas S. Johnson
/s/ George A. Lorch Director December 23, 1997
- -----------------------------
George A. Lorch
/s/ M. Bernard Puckett Director January 15, 1998
- ----------------------------
M. Bernard Puckett
/s/ William D. Sanders Director January 15, 1998
- -----------------------------
William D. Sanders
/s/ Oliver R. Sockwell Director December 24, 1997
- ------------------------------
Oliver R. Sockwell
/s/ Bide L. Thomas Director December 27, 1997
- ------------------------------
Bide L. Thomas
/s/ Stephen M. Wolf Director December 23, 1997
- ------------------------------
Stephen M. Wolf
S-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number
------
4.1 Restated Certificate of Incorporation (1)
4.2 By-Laws (2)
4.3 Amendment to By-Laws adopted November 22, 1997 (2)
4.4 Rights Agreement, dated as of April 25, 1996 between R.R. Donnelley &
Sons Company and First Chicago Trust Company of New York (3)
*5 Opinion of Sidley & Austin
*8 Opinion of Sidley & Austin
*23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Sidley & Austin (included in Exhibits 5 and 8)
*24 Powers of Attorney (included elsewhere herein)
99.1 1995 Stock Incentive Plan, as amended (4)
99.2 1991 Stock Incentive Plan, as amended (5)
99.3 1986 Stock Incentive Plan, as amended (5)
*99.4 Forms of Stock Option Agreement
______
*Filed herewith
(1) Exhibit 3.I to Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1996 (Commission File No. 1-4694).
(2) Exhibits 3(ii)(a) and 3(ii)(b), respectively, to Current Report on Form
8-K dated December 15, 1997 (Commission File No. 1-4694).
(3) Filed on June 5, 1996 as Exhibit 4 to Form 8-A (Commission File No.
1-4694).
(4) Exhibit 10(a) to Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1997 (Commission File No. 1-4694).
(5) Exhibits 10(b) and 10(a), respectively, to Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1996 (Commission File No.
1-4694).
<PAGE>
EXHIBIT 5
[LETTERHEAD OF SIDLEY & AUSTIN]
January 15, 1998
R.R. Donnelley & Sons Company
77 West Wacker Drive
Chicago, Illinois 60601
Re: R.R. Donnelley & Sons Company -- 4,400,000 Shares
of Common Stock, $1.25 par value per share
------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to R.R. Donnelley & Sons Company, a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), of the Company's Registration
Statement on Form S-3 (the "Registration Statement"), relating to the
registration of 4,400,000 shares of Common Stock, $1.25 par value per share (the
"Shares"), of the Company to be issued to permitted transferees of participants
in the R.R. Donnelley & Sons 1995 Stock Incentive Plan, the R.R. Donnelley &
Sons 1991 Stock Incentive Plan or the R.R. Donnelley & Sons 1986 Stock Incentive
Plan (each a "Plan" and collectively, the "Plans").
For the purpose of rendering the opinions expressed below, we have
reviewed each of the Plans, the Registration Statement and the Exhibits to the
Registration Statement. We have also examined the originals, or copies of
originals certified or otherwise identified to our satisfaction, of the
corporate records of the Company and of such other agreements, documents,
instruments and certificates of public officials, officers and representatives
of the Company and other persons, have examined such questions of law and have
satisfied ourselves as to such matters of fact as we have deemed relevant and
necessary as a basis for the opinions expressed herein. We have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, the legal capacity of all natural persons and the conformity
with the original documents of any copies thereof submitted us for our
examination.
Based on the foregoing, we are of the opinion that:
<PAGE>
1. The Company is duly incorporated and validly existing under the
laws of the State of Delaware.
2. The Shares will, when certificates representing the Shares shall
have been duly executed, countersigned and registered and delivered against
receipt by the Company of the consideration provided in the applicable
Plan, be legally issued, fully paid and nonassessable.
The foregoing opinions are limited to the Delaware General Corporation
Law. We express no opinion as to the application of the securities or blue sky
laws of the various states to the issuance or sale of the Shares. We assume no
obligation to update or supplement this opinion letter to reflect any facts or
circumstances which may hereafter come to our attention with respect to the
opinions expressed above, including any change in applicable law.
We hereby consent to the filing of this opinion letter as an exhibit
to the Registration Statement and to all references to us included in or made
part of the Registration Statement.
Very truly yours,
Sidley & Austin
<PAGE>
Exhibit 8
[LETTERHEAD OF SIDLEY & AUSTIN]
January 15, 1998
R.R. Donnelley & Sons Company
77 West Wacker Drive
Chicago, Illinois 60601
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement"), including the prospectus (the "Prospectus") contained therein,
filed by R.R. Donnelley & Sons Company, a Delaware corporation (the "Company"),
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the registration of 4,400,000 shares
of Common Stock, par value $1.25 per share, of the Company which may be offered
and sold to permitted transferees of participants in the R.R. Donnelley & Sons
Company 1995 Stock Incentive Plan, the R.R. Donnelley & Sons Company 1991 Stock
Incentive Plan or the R.R. Donnelley & Sons Company 1986 Stock Incentive Plan.
For purposes of this opinion we have assumed, with your consent, the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, the legal capacity of all natural persons and the conformity
with original documents of all copies submitted to us for our examination.
In rendering the opinion expressed below, we have considered the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
regulations promulgated thereunder by the United States Treasury Department (the
"Regulations"), pertinent judicial decisions, rulings of the Internal Revenue
Service and such other authorities as we have considered relevant. It should be
noted that the Code, the Regulations and such judicial decisions, administrative
interpretations and other authorities are subject to change at any time and, in
some circumstances, with retroactive effect, and any such change could affect
the opinions stated herein.
Based upon and subject to the foregoing, it is our opinion that the
statements under the caption "Certain Federal Income Tax Consequences" in the
Prospectus, to the extent that they constitute matters of law or legal
conclusions, are correct in all material respects.
<PAGE>
R. R. Donnelley & Sons Company
January 15, 1998
Page 2
We assume no obligation to update or supplement this letter to reflect any
facts or circumstances which may hereafter come to our attention with respect to
the opinions expressed above, including any changes in applicable law which may
hereafter occur.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to all references to our Firm included in or made a
part of the Registration Statement.
Very truly yours,
Sidley & Austin
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement (Registration No. 333-______) of our
report dated January 23, 1997 included in R.R. Donnelley & Sons Company's Form
10-K for the year ended December 31, 1996 and to all references to our Firm
included in this registration statement.
Arthur Andersen LLP
Chicago, Illinois
January 15, 1998
<PAGE>
Exhibit 99.2
As Amended
December 1, 1997
R.R. DONNELLEY & SONS COMPANY
STOCK OPTION AGREEMENT
----------------------
(premium options)
R.R. DONNELLEY & SONS COMPANY, a Delaware corporation (herein called the
"Company"), acting pursuant to the provisions of its 1995 Stock Incentive Plan,
which was approved by stockholders on March 23, 1995 (herein called the "Plan"),
hereby grants to _______ (herein called "Optionee"), as of ___________ (herein
called the "option date"), an option to purchase from the Company (i) ______
shares of common stock of the Company, par value $1.25 per share (herein called
"common stock"), at a price of ______ per share (herein called the "First
Premium Option"), (ii) ____ shares of common stock at a price of $_____ per
share (herein called the "Second Premium Option") and (iii) _____ shares of
common stock at a price of $______ per share (herein called the "Third Premium
Option" and the First Premium Option, the Second Premium Option and the Third
Premium Option are collectively referred to herein as the "option") to be
exercisable during the term commencing on ___________ and ending ___________
(herein called the "option term"), but only upon the following terms and
conditions:
1. The option may be exercised by Optionee, in whole or in part, from time
to time, during the option term only in accordance with the following conditions
and limitations:
(a) Except as provided in Sections 5 and 7 hereof, Optionee must, at any time
the option becomes exercisable and at any time the option is exercised,
have been continuously in the employment of the Company since the date
hereof. Leave of absence for periods and purposes conforming to the
personnel policies of the Company and approved by the Committee
administering the Plan shall not be deemed terminations of employment or
interruptions of continuous service.
(b) Unless a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), is in effect as to the shares purchasable
under the option, no shares of common stock may be purchased under the
option unless, prior to the purchase thereof, the Company shall have
received an opinion of counsel to the effect that the sale of such shares
by the Company to Optionee will not constitute a violation of the
Securities Act. Optionee hereby agrees that as a condition of exercise,
Optionee will, if requested by the
-1-
<PAGE>
Company, submit a written statement, in form satisfactory to counsel for
the Company, to the effect that any shares of common stock purchased upon
exercise of the option will be purchased for investment and not with a view
to the distribution thereof within the meaning of the Securities Act, and
the Company shall have the right, in its discretion, to cause the
certificates representing shares of common stock purchased under the option
to be appropriately legended to refer to such undertaking or to any legal
restrictions imposed upon the transferability thereof by reason of such
undertaking.
(c) Subject to Sections 5 and 7 hereof, the option shall become exercisable as
follows:
(1) In the event Total Stockholder Return (as hereinafter defined) for the
four-year period commencing ___________and ending on ___________(the "First
Performance Period") exceeds the S&P Industrial Index Total Return (as
hereinafter defined) for the First Performance Period, the option shall
become exercisable on ___________with respect to all of the shares of
common stock subject to the option and the following subsections (2)-(8)
shall not apply. In the event Total Stockholder Return for the First
Performance Period equals or is less than the S&P Industrial Index Total
Return for the First Performance Period, the option may become exercisable
as set forth below.
(2) In the event Total Stockholder Return for the four-year period
___________and ending on ___________(the "Second Performance Period")
exceeds the S&P Industrial Index Total Return for the Second Performance
Period, the option shall become exercisable on ___________with respect to
all of the shares of common stock subject to the option and the following
subsections (3)-(8) shall not apply. In the event Total Stockholder Return
for the Second Performance Period equals or is less than the S&P Industrial
Index Total Return for the Second Performance Period, the option may become
exercisable as set forth below.
(3) In the event Total Stockholder Return for the four-year period
___________and ending on ___________(the "Third Performance Period")
exceeds the S&P Industrial Index Total Return for the Third Performance
Period, the option shall become exercisable on ___________with respect to
all of the shares of common stock subject to the option and the following
subsections (4)-(8) shall not apply. In the event Total Stockholder Return
for the Third Performance Period equals or is less than the S&P Industrial
Index Total Return for the Third Performance Period, the option may become
exercisable as set forth below.
(4) In the event Total Stockholder Return for the four-year period
commencing ___________and ending on ___________(the "Fourth Performance
Period") exceeds the S&P Industrial Index Total Return for the Fourth
Performance Period, the option shall become exercisable on ___________with
respect to all of the shares of common stock subject to the option and the
following subsections (5)-(8) shall not apply. In the event Total
Stockholder Return for the Fourth Performance Period equals or is less
than the S&P Industrial Index Total Return for the Fourth Performance
Period, the option may become exercisable as set forth below.
<PAGE>
(5) In the event Total Stockholder Return for the four-year period
___________and ending on ___________(the "Fifth Performance Period")
exceeds the S&P Industrial Index Total Return for the Fifth Performance
Period, the option shall become exercisable on ___________with respect to
all of the shares of common stock subject to the option and the following
subsections (6)-(8) shall not apply. In the event Total Stockholder Return
for the Fifth Performance Period equals or is less than the S&P Industrial
Index Total Return for the Fifth Performance Period, the option may become
exercisable as set forth below.
(6) In the event Total Stockholder Return for the four-year period
___________and ending on ___________(the "Sixth Performance Period")
exceeds the S&P Industrial Index Total Return for the Sixth Performance
Period, the option shall become exercisable on ___________with respect to
all of the shares of common stock subject to the option and the following
subsection (7) shall not apply. In the event Total Stockholder Return for
the Sixth Performance Period equals or is less than the S&P Industrial
Index Total Return for the Sixth Performance Period, the option shall
become exercisable as set forth below.
(7) Notwithstanding the foregoing subsections (1)-(6), but subject to
Sections 5 and 7 hereof, the option shall become exercisable on
___________with respect to all of the shares of common stock subject to the
option and the following subsection (8) shall not apply.
(8) If while any portion of the option is outstanding and unexercisable, a
Change in Control (as defined in the Plan) occurs, then from and after the
Acceleration Date (as defined in the Plan), the option shall be exercisable
with respect to all of the shares of common stock subject to such portion
of the option.
No fractional shares may be purchased at any time.
"Total Stockholder Return" means, with respect to any four-year
Performance Period, the fair market value (as defined in Section 2) on the last
day of such Performance Period of the number of shares of common stock (rounded
to the nearest thousandth) which is deemed to be purchased by investing $100 as
of the day immediately preceding the first day of such Performance Period. All
dividends on common stock shall be assumed to be reinvested in common stock as
of each "ex dividend" trading date of the common stock occurring during such
Performance Period. For purposes of calculating the number of shares of common
stock which are purchased on the day immediately preceding the first day of a
Performance Period, the purchase price per share of common stock shall be the
fair market value of the common stock on such day.
<PAGE>
"S&P Industrial Index Total Return" means, with respect to any four-
year Performance Period, the cumulative total return during such Performance
Period of the Standard & Poor's Industrial Index stock index, computed on the
same basis as Total Stockholder Return. If the Standard & Poor's Industrial
Index is not published or otherwise available for the duration of a Performance
Period, "S&P Industrial Index Return" shall mean, with respect to such
Performance Period, the cumulative total return during such Performance Period
of any stock index determined by the Committee, computed on the same basis as
Total Stockholder Return.
2. Subject to the limitations herein set forth, the option may be
exercised by delivery of written notice to the Company specifying the number of
shares of common stock to be purchased and accompanied by payment in full of the
option price (or arrangement made for such payment to the Company's
satisfaction) for the number of shares so purchased. No shares of common stock
may be purchased under the option unless Optionee, or in the event of Optionee's
death the executor, administrator, or personal representative of such deceased
Optionee, shall pay to the Company such amount as the Company is advised it is
required under applicable local, state and federal tax laws to withhold and pay
over to governmental taxing authorities by reason of the purchase of shares of
common stock pursuant to the option.
The option price and any federal, state, local and other taxes
required to be withheld in connection with such exercise may be paid (i) in
cash, (ii) by delivering previously owned whole shares of common stock (which
Optionee has held for at least six months prior to the delivery of such shares
or which Optionee purchased on the open market and for which Optionee has good
title, free and clear of all liens and encumbrances) having a fair market value
equal to the option price and such amount of tax, (iii) with respect to taxes
only, by authorizing the Company to withhold whole shares of common stock which
would otherwise be delivered having a fair market value equal to such amount of
tax, or (iv) in a combination thereof. Payment
<PAGE>
of the option price and such tax, or any part thereof, in previously owned
shares of common stock shall not be effective unless Optionee delivers one or
more stock certificates (or otherwise delivers shares of common stock to the
satisfaction of the Company) representing shares having a fair market value on
the date of exercise equal to or in excess of the option price and such tax, or
applicable portion thereof, accompanied by such endorsements, signature
guarantees or other documents or assurances as may reasonably be required to
effect the transfer to the Company of such number of shares. If Optionee
delivers a certificate or certificates (or otherwise delivers shares of common
stock to the satisfaction of the Company) representing shares in excess of the
number required to cover the option price and such tax, a certificate (or other
evidence of ownership) representing such excess number of shares will be issued
and redelivered to Optionee. For purposes of this Agreement, the fair market
value of the common stock on a specified date shall be determined by reference
to the average of the high and low transaction prices in trading of the common
stock on such date as reported in the New York Stock Exchange-Composite
Transactions, or, if no such trading in the common stock occurred on such date,
then on the next preceding date when such trading occurred; provided, that if
the Committee administering the Plan shall determine that such New York Stock
Exchange-Composite Transactions prices are not representative of the fair market
value, such Committee shall determine such fair market value by such other
appropriate means as it shall determine.
3. Upon exercise of the option in whole or in part pursuant to
Section 2 hereof, the Company shall deliver certificates representing the number
of shares specified against payment therefor and shall pay all original issue or
transfer taxes and all other fees and expenses incident to such delivery.
4. Optionee shall be entitled to the privileges of ownership with
respect to shares subject to the option only as to shares purchased and
delivered to Optionee upon exercise of all or part of the option.
<PAGE>
5. (a) If Optionee ceases to be employed by the Company by reason of
death prior to ___________, then the option shall be exercisable by the
executor, administrator, personal representative or beneficiary of Optionee
during the 90-day period commencing on the date of Optionee's death, but only
during the option term, with respect to all of the shares of common stock
subject to the option if, on or prior to the date of Optionee's death, the
option had become exercisable with respect to all of the shares of common stock
subject to the option pursuant to any of subsections 1(c)(1)-(6) or (8). If
Optionee ceases to be employed by the Company by reason of death prior to
___________and the option had not become exercisable on or prior to the date of
Optionee's death pursuant to any of subsections 1(c)(1)-(6) or (8), then the
option shall become exercisable as of the time of such death by the executor,
administrator, personal representative or beneficiary of Optionee for the 90-day
period commencing on the date of Optionee's death, but only during the option
term, as to the number of shares of common stock determined by multiplying the
number of shares of common stock subject to the First Premium Option, the Second
Premium Option and the Third Premium Option, respectively, by a fraction, the
numerator of which is the number of calendar months which have elapsed since and
including ___________through the date of such death (rounded up to the nearest
whole number) and the denominator of which is 114. The portion of the option
which does not become exercisable pursuant to the preceding sentence shall be
cancelled as of the date of Optionee's death. If Optionee ceases to be employed
by the Company by reason of death on or after ___________, then the option shall
be exercisable by the executor, administrator, personal representative or
beneficiary of Optionee during the 90-day period commencing on the date of
Optionee's death, but only during the option term, with respect to all of the
shares of common stock subject to the option.
(b) If Optionee ceases to be employed by the Company prior ___________
for any reason other than death, the option shall be cancelled as of the
effective date of such cessation of
<PAGE>
employment. If Optionee ceases to be employed by the Company on or after
___________by reason of retirement on or after age 65, retirement on or after
age 55 with the consent of the Company or total and permanent disability, then
the option shall be exercisable by Optionee during the five-year period
commencing on the effective date of such cessation of employment, but only
during the option term, with respect to all of the shares of common stock
subject to the option if, on or prior to the effective date of such cessation of
employment, the option had become exercisable with respect to all of the shares
of common stock subject to the option pursuant to any of subsections 1(c)(1)-
(8). If Optionee ceases to be employed by the Company on or after ___________by
reason of retirement on or after age 65, retirement on or after 55 with the
consent of the Company or total and permanent disability and the option had not
become exercisable on or prior to the effective date of such cessation of
employment pursuant to any of subsections 1(c)(1)-(8), then the option shall
become exercisable by Optionee, during the five-year period commencing on the
effective date of such cessation of employment, but only during the option term,
and only in accordance with subsections 1(c)(2)-(8); provided, however, that the
option may (in the case of subsections 1(c)(2)-(6)) or shall (in the case of
subsections 1(c)(7)-(8)) become exercisable during such five-year period only as
to the number of shares of common stock determined by multiplying the number of
shares of common stock subject to the First Premium Option, the Second Premium
Option and the Third Premium Option, respectively, by a fraction, the numerator
of which is the number of calendar months which have elapsed since and including
___________through the effective date of such cessation of employment (rounded
up to the nearest whole number) and the denominator of which is 114. The portion
of the option which may not become exercisable pursuant to the preceding
sentence shall be cancelled as of the effective date of such cessation of
employment.
(c) If Optionee ceases to be employed by the Company for any reason other
than death, retirement on or after age 65, retirement on or after age 55 with
the consent of the Company or total and permanent disability, then the option
shall be exercisable by Optionee
-7-
<PAGE>
during the 90-day period commencing on the effective date of such cessation of
employment, but only during the option term, to the extent Optionee was entitled
under Section 1(c) hereof to exercise the option on the effective date of such
cessation of employment. The portion of the option which may not become
exercisable pursuant to the preceding sentence shall be cancelled as of the
effective date of Optionee's cessation of employment.
6. The option may not be transferred by Optionee other than:
(a) by will, the laws of descent and distribution or pursuant to the
beneficiary designation procedures approved by the Company;
(b) in whole or in part to one or more transferees; provided that (i) any such
transfer must be without consideration, (ii) each transferee must be a
member of Optionee's "immediate family," a trust established for the
exclusive benefit of Optionee and/or one or more members of Optionee's
immediate family or a partnership whose sole equity owners are Optionee
and/or members of Optionee's immediate family, and (iii) such transfer is
specifically approved by the Vice President, Compensation and Benefits or
the Committee administering the Plan following the receipt of a completed
Assignment of Option to Purchase Common Stock attached hereto as Exhibit A;
or
(c) as otherwise set forth in an amendment to this Agreement.
Optionee hereby acknowledges that Optionee will recognize income upon exercise
of a transferred option and Optionee hereby agrees to pay to the Company such
amount as the Company is advised it is required under applicable federal, state,
local or other tax laws to withhold and pay over to governmental taxing
authorities by reason of the purchase of shares of common stock pursuant to the
option.
In the event the option is transferred as contemplated in this Section 6, such
transfer shall become effective when approved by the Vice President,
Compensation and Benefits or a member of the Committee administering the Plan
(as evidenced by counterexecution of the Assignment of Option to Purchase Common
Stock on behalf of the Company), and such option may not be subsequently
transferred by the transferee other than by will or the laws of descent and
distribution. Any transferred option shall continue to be governed by and
subject to the terms and conditions of the Plan and the transferee shall be
entitled to the same rights as Optionee as if no transfer had taken place.
During Optionee's lifetime the option is exercisable only by Optionee or
Optionee's guardian, personal representative or similar person or by a
transferee permitted under paragraph (b) or (c) above. Except as permitted by
the foregoing, the option may not 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. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of the option, the option and all rights hereunder shall
immediately become null and void. As used in this Section,
-8-
<PAGE>
"immediate family" shall mean, with respect to any person, any spouse, child,
stepchild or grandchild, and shall include relationships arising from legal
adoption.
7. In the event of the death of Optionee (a) during the five-year period
commencing on the effective date of Optionee's cessation of employment by reason
of retirement on or after age 65, retirement on or after age 55 with the consent
of the Company or total and permanent disability or (b) during the 90-day period
commencing on the effective date of Optionee's cessation of employment for any
other reason, the option may be exercised by the executor, administrator,
personal representative or beneficiary of Optionee during the 90-day period
commencing on the date of Optionee's death, but only during the option term, to
the extent Optionee was entitled to exercise the option on the date of
Optionee's death.
8. Notwithstanding anything in the Plan to the contrary, in the event
Optionee ceases to be employed by the Company for any reason other than death,
retirement on or after age 65, retirement on or after age 55 with the consent of
the Company or total and permanent disability (i) the Committee administering
the Plan may, in its sole discretion, cancel this option, in whole or in part,
whether or not vested or deferred and (ii) Optionee shall repay to the Company,
within five business days after receipt by Optionee of a written demand
therefor, an amount in cash determined by multiplying (i) the number of shares
of common stock purchased by Optionee pursuant to the exercise of any option
(including this option) during the six month period ending on the effective date
of such cessation of employment by (ii) the difference between (A) the fair
market value of a share of common stock on such date of exercise (based upon the
average of the high and low prices of the common stock on the New York Stock
Exchange on the date of exercise) and (B) the purchase price per share of common
stock set forth in the first paragraph of this Agreement. Such cancellation or
repayment obligation shall be effective as of the date specified by the
Committee. Any repayment obligation may be satisfied in common stock or cash or
a combination thereof (based upon the closing price of the common stock on the
New York Stock Exchange on the day prior to the date of payment), and the
Company may provide
-9-
<PAGE>
for any offset to any future payments owed by the Company or any subsidiary to
Optionee if necessary to satisfy the payment obligation. This Section 8 shall
have no application following a Change in Control.
9. Upon the occurrence of any of the following events subsequent to the
option date, the option shall be adjusted as follows:
(a) Appropriate adjustments shall be made by the Committee administering
the Plan in the number of shares purchasable under the option to give
effect to any stock splits, stock dividends and other relevant changes
in capitalization.
(b) In case the Company shall effect a merger, consolidation or other
reorganization pursuant to which the outstanding shares of common
stock of the Company shall be exchanged for other shares, securities
or consideration of the Company or of another corporation or entity a
party to such merger, consolidation or other reorganization, Optionee
shall have the right to purchase, at the aggregate option price
provided for in this Agreement and on the same terms and conditions,
the kind and number of other shares, securities or consideration of
the Company or such other corporation or entity which would have been
issuable or payable to Optionee in respect of the number of shares of
common stock of the Company which were subject to the option
immediately prior to the effective date of such merger, consolidation
or other reorganization had such shares then been owned by Optionee.
The Company agrees that it will make appropriate provisions for the
preservation of Optionee's option rights in any agreement or plan
which it enters into or adopts to effect any such merger,
consolidation or other reorganization.
Any adjustment required as a result of the foregoing provisions of this
Section 9 shall be effected in such manner that the difference between the
aggregate fair market value of the other shares, securities or consideration
subject to the option immediately after giving effect to
-10-
<PAGE>
such adjustment and the aggregate option price of such other shares, securities
or consideration shall be substantially equal to (but shall not be more than)
the difference between the aggregate fair market value of the shares subject to
the option immediately prior to such adjustment and the aggregate option price
of such shares. Any adjustments made under this Section shall be determined by
the Committee administering the Plan.
10. For purposes of this Agreement, employment by the Company shall be
deemed to include employment by a corporation which is a "parent corporation" or
a "subsidiary corporation" of the Company (as defined in Section 425 of the
Internal Revenue Code of 1986 (hereinafter called the "Code")), employment by
any corporation which succeeds to the obligations of the Company hereunder
pursuant to Section 9(b) hereof, and employment by a corporation which is a
"parent corporation" or a "subsidiary corporation" of any such corporation (as
defined in the above-mentioned section of the Code).
11. The option is subject to the condition that if the listing,
registration or qualification of the shares subject to the option on any
securities exchange or under any state or federal law, or if the assent or
approval of any regulatory body shall be necessary as a condition of, or in
connection with, the granting of the option or the delivery or purchase of
shares thereunder, the option may not be exercised in whole or in part unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained. The Company agrees to use its best efforts to
obtain any such requisite listing, registration, qualification, consent or
approval.
12. The Committee administering the Plan, as from time to time
constituted, shall have the right to determine any questions which arise in
connection with this Agreement or the option. This Agreement and the option are
subject to the provisions of the Plan and shall be interpreted in accordance
therewith.
-11-
<PAGE>
13. This Agreement shall not be construed as an employment contract and
does not give the Optionee any right to continued employment by the Company, and
the fact that the termination of Optionee's employment occurs during the option
term shall in no way be construed as giving the Optionee the right to continue
in the Company's employ.
14. The option shall not be treated as an incentive stock option within
the meaning of Section 422 of the Code.
15. This Agreement shall be binding upon and shall inure to the benefit of
any successor or successors of the Company and any person or persons who shall,
upon the death of the Optionee, acquire any rights in the option.
16. Any notice, including a notice of exercise of the option, required to
be given hereunder to the Company shall be addressed to the Company at its
office at 77 West Wacker Drive, Chicago, Illinois 60601-1696, attention of the
Vice President, Compensation and Benefits, and any notice required to be given
hereunder to Optionee shall be addressed to Optionee at Optionee's residence
address as shown in the Company's records, subject to the right of either party
hereafter to designate in writing to the other some other address. Any such
notice shall be deemed to have been duly given on the day that such notice is
received by the Vice President, Compensation and Benefits. Any such notice shall
be (i) delivered to the Vice President, Compensation and Benefits by personal
delivery, facsimile, United States mail or by express courier service and (ii)
deemed to be received upon personal delivery, upon confirmation of receipt of
facsimile transmission or upon receipt by the Vice President, Compensation and
Benefits if by United States mail or express courier service; provided, however,
that if any notice is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
-12-
<PAGE>
IN WITNESS WHEREOF, R. R. DONNELLEY & SONS COMPANY has caused this
instrument to be executed as of the day and year first above written.
R. R. DONNELLEY & SONS COMPANY
By____________________________
Name:
Title:
The terms and conditions of the
foregoing Stock Option Agreement
are hereby accepted by the
undersigned this _____ day of
__________________, 199_
_________________________________
Optionee
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<PAGE>
R. R. DONNELLEY & SONS COMPANY
STOCK OPTION AGREEMENT
----------------------
(for participants in Senior Officer Incentive Compensation Plan only)
R. R. DONNELLEY & SONS COMPANY, a Delaware corporation (herein called
the "Company"), acting pursuant to the provisions of its 1995 Stock Incentive
Plan, which was approved by the stockholders on March 23, 1995 (herein called
the "Plan"), hereby grants to _______ (herein called "Optionee"), as of
________________ (herein called the "option date"), an option to purchase from
the Company ______ shares of common stock of the Company, par value $1.25 per
share (herein called "common stock"), at a price of ______ per share (herein
called the "option") to be exercisable during the term commencing on the first
anniversary of the option date and ending on the first business day preceding
the tenth anniversary of the option date (herein called the "option term"), but
only upon the following terms and conditions:
1. The option may be exercised by Optionee, in whole or in part, from
time to time, during the option term only in accordance with the following
conditions and limitations:
(a) Except as provided in Sections 5 and 7 hereof, Optionee must, at any time
the option becomes exercisable and at any time the option is exercised,
have been continuously in the employment of the Company since the date
hereof. Leave of absence for periods and purposes conforming to the
personnel policies of the Company and approved by the Committee
administering the Plan shall not be deemed terminations of employment or
interruptions of continuous service.
(b) Unless a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), is in effect as to the shares purchasable
under the option, no shares of common stock may be purchased under the
option unless, prior to the purchase thereof, the Company shall have
received an opinion of counsel to the effect that the sale of such shares
by the Company to Optionee will not constitute a violation of the
Securities Act. Optionee hereby agrees that as a condition of exercise,
Optionee will, if requested by the Company, submit a written statement, in
form satisfactory to counsel for the Company, to the effect that any shares
of common stock purchased upon exercise of the option will be purchased for
investment and not with a view to the distribution thereof within the
meaning of the Securities Act, and the Company shall have the right, in its
discretion, to cause the certificates (or other evidence of ownership)
representing shares of common stock purchased under the option to be
appropriately legended to refer to such undertaking or to any legal
restrictions imposed upon the transferability thereof by reason of such
undertaking.
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<PAGE>
(c) (1) Subject to Sections 5 and 7 hereof and subsection (2) below, at
any time on and after the dates indicated in column (1), Optionee may
purchase such whole number of shares of common stock which, when added to
all shares theretofore purchased under the option, does not exceed the
total number of shares subject to the option multiplied by the percentage
indicated in column (2) opposite such respective date, as follows:
(1) (2)
Date Percentage of Total
-------------------------------------------
_______________, 1996 20%
______, 1997 40%
______, 1998 60%
______, 1999 100%
(2) Notwithstanding the foregoing subsection (1), if while any portion of
the option is outstanding and unexercisable, a Change in Control (as
defined in the Plan) occurs, then from and after the Acceleration Date (as
defined in the Plan), the option shall be exercisable with respect to all
of the shares of common stock subject to such portion of the option.
(d) No fractional shares may be purchased at any time.
2. Subject to the limitations herein set forth, the option may be
exercised by delivery of written notice to the Company specifying the number of
shares of common stock to be purchased and accompanied by payment in full of the
option price (or arrangement made for such payment to the Company's
satisfaction) for the number of shares so purchased. No shares of common stock
may be purchased under the option unless Optionee (or in the event of Optionee's
death, Optionee's executor, administrator or personal representative or
Optionee's beneficiary designated pursuant to the Beneficiary Designation Form
attached hereto as Exhibit A (herein called a "Beneficiary")) shall pay to the
Company such amount as the Company is advised it is required under applicable
federal, state, local or other tax laws to withhold and pay over to governmental
taxing authorities by reason of the purchase of shares of common stock pursuant
to the option.
-2-
<PAGE>
The option price and any federal, state, local and other taxes
required to be withheld in connection with such exercise may be paid (i) in
cash, (ii) by delivering previously owned whole shares of common stock (which
Optionee has held for at least six months prior to the delivery of such shares
or which Optionee purchased on the open market and for which Optionee has good
title, free and clear of all liens and encumbrances) having a fair market value
equal to the option price and such amount of tax, (iii) with respect to taxes
only, by authorizing the Company to withhold whole shares of common stock which
would otherwise be delivered having a fair market value equal to such amount of
tax, or (iv) in a combination thereof. Payment of the option price and such
tax, or any part thereof, in previously owned shares of common stock shall not
be effective unless Optionee delivers one or more stock certificates (or
otherwise delivers shares of common stock to the satisfaction of the Company)
representing shares having a fair market value on the date of exercise equal to
or in excess of the option price and such tax, or applicable portion thereof,
accompanied by such endorsements, signature guarantees or other documents or
assurances as may reasonably be required to effect the transfer to the Company
of such number of shares. If Optionee delivers a certificate or certificates
(or otherwise delivers shares of common stock to the satisfaction of the
Company) representing shares in excess of the number required to cover the
option price and such tax, a certificate (or other evidence of ownership)
representing such excess number of shares will be issued and redelivered to
Optionee. For purposes of this Agreement, the fair market value of the common
stock on a specified date shall be determined by reference to the average of the
high and low transaction prices in trading of the common stock on such date as
reported in the New York Stock Exchange-Composite Transactions, or, if no such
trading in the common stock occurred on such date, then on the next preceding
date when such trading occurred; provided, that if the Committee administering
the Plan shall determine that such New York Stock Exchange-Composite
Transactions prices are not representative of the fair market value, such
Committee shall determine such fair market value by such other appropriate means
as it shall determine.
3. Upon exercise of the option in whole or in part pursuant to
Section 2 hereof, the Company shall deliver or cause to be delivered a
certificate (or other evidence of ownership) representing the number of shares
specified against payment therefor and shall pay all original issue or transfer
taxes and all other fees and expenses incident to such delivery.
4. Optionee shall be entitled to the privileges of ownership with
respect to shares subject to the option only with respect to shares purchased
upon exercise of all or part of the option and as to which Optionee becomes a
stockholder of record.
5. (a) If Optionee ceases to be employed by the Company by reason of
death at any time prior to the first anniversary of the Option Date, then from
and after the date of death the option shall be exercisable only to the extent
it is exercisable on the date of death by the executor, administrator, personal
representative or Beneficiary of Optionee during the 90-day period commencing on
the date of Optionee's death, but only during the option term. If Optionee
ceases to be employed by the Company by reason of death at any time on or after
the first anniversary of the option date, then from and after the date of death
the option shall be exercisable by the executor, administrator, personal
representative or Beneficiary of Optionee during the 90-day period commencing on
the date of Optionee's death, but only during the option term, with respect to
all of the shares of common stock subject to the option.
-3-
<PAGE>
(b) If Optionee ceases to be employed by the Company by reason of
retirement on or after age 65, retirement on or after age 55 with the consent of
the Company or total and permanent disability at any time prior to the first
anniversary of the Option Date, then from and after the effective date of such
cessation of employment the option shall be exercisable only to the extent it is
exercisable on the effective date of such cessation of employment by Optionee
during the five-year period commencing on the effective date of such cessation
of employment, but only during the option term. If Optionee ceases to be
employed by the Company by reason of retirement on or after age 65, retirement
on or after age 55 with the consent of the Company or total and permanent
disability at any time on or after the first anniversary of the option date,
then from and after the effective date of such cessation of employment the
option shall be exercisable by Optionee during the five-year period commencing
on the effective date of such cessation of employment, but only during the
option term, with respect to all of the shares of common stock subject to the
option.
(c) If Optionee ceases to be employed by the Company for any reason
other than death, retirement on or after age 65, retirement on or after age 55
with the consent of the Company or total and permanent disability, then from and
after the effective date of such cessation of employment the option shall be
exercisable by Optionee during the 90-day period commencing on the effective
date of such cessation of employment, but only during the option term, to the
extent Optionee was entitled under Section 1(c) hereof to exercise the option on
the effective date of such cessation of employment. The portion of the option
which may not become exercisable pursuant to the preceding sentence shall be
cancelled as of the effective date of Optionee's cessation of employment.
6. The option may not be transferred by Optionee other than:
(a) by will, the laws of descent and distribution or pursuant to the
beneficiary designation procedures approved by the Company;
(b) in whole or in part to one or more transferees; provided that (i) any such
transfer must be without consideration, (ii) each transferee must be a
member of Optionee's "immediate family," a trust established for the
exclusive benefit of Optionee and/or one or more members of Optionee's
immediate family or a partnership whose sole equity owners are Optionee
and/or members of Optionee's immediate family, and (iii) such transfer is
specifically approved by the Vice President, Compensation and Benefits or
the Committee administering the Plan following the receipt of a completed
Assignment of Option to Purchase Common Stock attached hereto as Exhibit A;
or
(c) as otherwise set forth in an amendment to this Agreement.
Optionee hereby acknowledges that Optionee will recognize income upon exercise
of a transferred option and Optionee hereby agrees to pay to the Company such
amount as the Company is advised it is required under applicable federal, state,
local or other tax laws to withhold and pay over to governmental taxing
authorities by reason of the purchase of shares of common stock pursuant to the
option.
In the event the option is transferred as contemplated in this Section 6, such
transfer shall become effective when approved by the Vice President,
Compensation and Benefits or a member of the Committee administering the
-4-
<PAGE>
Plan (as evidenced by counterexecution of the Assignment of Option to Purchase
Common Stock on behalf of the Company), and such option may not be subsequently
transferred by the transferee other than by will or the laws of descent and
distribution. Any transferred option shall continue to be governed by and
subject to the terms and conditions of the Plan and the transferee shall be
entitled to the same rights as Optionee as if no transfer had taken place.
During Optionee's lifetime the option is exercisable only by Optionee or
Optionee's guardian, personal representative or similar person or by a
transferee permitted under paragraph (b) or (c) above. Except as permitted by
the foregoing, the option may not 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. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of the option, the option and all rights hereunder shall
immediately become null and void. As used in this Section, "immediate family"
shall mean, with respect to any person, any spouse, child, stepchild or
grandchild, and shall include relationships arising from legal adoption.
7. In the event of the death of Optionee (a) during the five-year
period commencing on the effective date of Optionee's cessation of employment by
reason of retirement on or after age 65, retirement on or after age 55 with the
consent of the Company or total and permanent disability or (b) during the 90-
day period commencing on the effective date of Optionee's cessation of
employment for any other reason, the option may be exercised by the executor,
administrator, personal representative or Beneficiary of Optionee during the 90-
day period commencing on the date of Optionee's death, but only during the
option term, to the extent Optionee was entitled to exercise the option on the
date of Optionee's death.
8. Notwithstanding anything in the Plan to the contrary, in the event
Optionee ceases to be employed by the Company for any reason other than death,
retirement on or after age 65, retirement on or after age 55 with the consent of
the Company or total and permanent disability (i) the Committee administering
the Plan may, in its sole discretion, cancel this option, in whole or in part,
whether or not vested or deferred and (ii) Optionee shall repay to the Company,
within five business days after receipt by Optionee of a written demand
therefor, an amount in cash determined by multiplying (i) the number of shares
of common stock purchased by Optionee pursuant to the exercise of any option
(including this option) during the six month period ending on the effective date
of such cessation of employment by (ii) the difference between (A) the fair
market value of a share of common stock on such date of exercise (based upon the
average of the high and low prices of the common stock on the New York Stock
Exchange on the date of exercise) and (B) the purchase price per share of common
stock set forth in the first paragraph of this Agreement. Such cancellation or
repayment obligation shall be effective as of the date specified by the
Committee. Any repayment obligation may be satisfied in common stock or cash or
a combination thereof (based upon the closing price of the common stock on the
New York Stock Exchange on the day prior to the date of payment), and the
Company may provide for any offset to any future payments owed by the Company or
any subsidiary to Optionee if necessary to satisfy the payment obligation. This
Section 8 shall have no application following a Change in Control.
9. In the event of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization or event, or any
distribution to holders of common stock other than a regular cash dividend,
-5-
<PAGE>
the number and class of securities subject to the option and the purchase price
per security shall be appropriately adjusted by the Committee without an
increase in the aggregate purchase price, other than an increase resulting from
rounding. If any adjustment would result in a fractional security being subject
to the Option, the Company shall pay the Optionee, in connection with the first
exercise of the Option, in whole or in part, occurring after such adjustment, an
amount in cash determined by multiplying (i) the fraction of such security
(rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the fair
market value of the common stock on the exercise date over (B) the exercise
price of the option. The decision of the Committee regarding the amount and
timing of any adjustment pursuant to this Section 9 shall be final, binding and
conclusive.
10. For purposes of this Agreement, employment by the Company shall
be deemed to include employment by a corporation which is a majority-owned
subsidiary of the Company, employment by an entity (for example, a partnership)
which is, directly or indirectly, wholly-owned by the Company and employment by
any corporation which succeeds to the obligations of the Company hereunder
pursuant to Section 9 hereof.
11. The option is subject to the condition that if the listing,
registration or qualification of the shares subject to the option on any
securities exchange or under any state or federal law, or if the assent or
approval of any regulatory body shall be necessary as a condition of, or in
connection with, the granting of the option or the delivery or purchase of
shares thereunder, the option may not be exercised in whole or in part unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained. The Company agrees to use its best efforts to
obtain any such requisite listing, registration, qualification, consent or
approval.
12. The Committee administering the Plan, as from time to time
constituted, shall have the right to determine any questions which arise in
connection with this Agreement or the option. This Agreement and the option are
subject to the provisions of the Plan and shall be interpreted in accordance
therewith.
13. This Agreement shall not be construed as an employment contract
and does not give the Optionee any right to continued employment by the Company
or any affiliate of the Company, and the fact that the termination of Optionee's
employment occurs during the option term shall in no way be construed as giving
the Optionee the right to continue in the Company's or any such affiliate's
employ.
14. The option shall not be treated as an incentive stock option
within the meaning of Section 422 of the Code.
15. This Agreement shall be binding upon and shall inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights in the option.
16. Any notice, including a Beneficiary Designation Form and a notice
of exercise of the option, required to be given hereunder to the Company shall
be addressed to the Company at its office at 77 West Wacker Drive, Chicago,
Illinois 60601-1696, attention of the Vice President, Compensation and Benefits,
and any notice required to be given hereunder to Optionee shall
-6-
<PAGE>
be addressed to Optionee at Optionee's residence address as shown in the
Company's records, subject to the right of either party hereafter to designate
in writing to the other some other address. Any such notice shall be deemed to
have been duly given on the day that such notice is received by the Vice
President, Compensation and Benefits. Any such notice shall be (i) delivered to
the Vice President, Compensation and Benefits by personal delivery, facsimile,
United States mail or by express courier service and (ii) deemed to be received
upon personal delivery, upon confirmation of receipt of facsimile transmission
or upon receipt by the Vice President, Compensation and Benefits if by United
States mail or express courier service; provided, however, that if any notice is
not received during regular business hours, it shall be deemed to be received on
the next succeeding business day of the Company.
17. The option, this Agreement, and all determinations made and
actions taken pursuant hereto and thereto, to the extent not governed by the
laws of the United States, shall be governed by the laws of the State of
Delaware and construed in accordance therewith without giving effect to
principles of conflicts of laws.
-7-
<PAGE>
IN WITNESS WHEREOF, R. R. DONNELLEY & SONS COMPANY has caused this
instrument to be executed as of the day and year first above written.
R. R. DONNELLEY & SONS COMPANY
By____________________________
Name:
Title:
The terms and conditions of the
foregoing Stock Option Agreement
are hereby accepted by the
undersigned this _____ day of
__________________, 199_
____________________________
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<PAGE>
R. R. DONNELLEY & SONS COMPANY
STOCK OPTION AGREEMENT
----------------------
(For Non-Employee Directors)
R. R. DONNELLEY & SONS COMPANY, a Delaware corporation (herein called
the "Company"), acting pursuant to the provisions of its 1995 Stock Incentive
Plan, which was approved by the stockholders on March 23, 1995 (herein called
the "Plan"), hereby grants to ______________ (herein called "Optionee"), as of
____________ (herein called the "option date"), an option to purchase from the
Company ______ shares of common stock of the Company, par value $1.25 per share
(herein called "common stock"), at a price of $________ per share (herein called
the "option") to be exercisable during the term (i) commencing on the earlier to
occur of (A) the date which is the first anniversary of the option date or (B)
the day immediately preceding the date of the first annual meeting of
stockholders of the Company following the option date and (ii) ending on the
first business day preceding the tenth anniversary of the option date (herein
called the "option term"), but only upon the following terms and conditions:
1. The option may be exercised by Optionee, in whole or in part, from
time to time, during the option term only in accordance with the following
conditions and limitations:
(a) Except as provided in Sections 5 and 7 hereof, Optionee must, at any time
the option becomes exercisable and at any time the option is exercised,
have been continuously a non-employee director of the Company since the
date hereof.
(b) Unless a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), is in effect as to the shares purchasable
under the option, no shares of common stock may be purchased under the
option unless, prior to the purchase thereof, the Company shall have
received an opinion of counsel to the effect that the sale of such shares
by the Company to Optionee will not constitute a violation of the
Securities Act. Optionee hereby agrees that as a condition of exercise,
Optionee will, if requested by the Company, submit a written statement, in
form satisfactory to counsel for the Company, to the effect that any shares
of common stock purchased upon exercise of the option will be purchased for
investment and not with a view to the distribution thereof within the
meaning of the Securities Act, and the Company shall have the right, in its
discretion, to cause the certificates (or other evidence of ownership)
representing shares of common stock purchased under the option to be
appropriately legended to refer to such
-1-
<PAGE>
undertaking or to any legal restrictions imposed upon the transferability
thereof by reason of such undertaking.
(c) (1) Subject to Sections 5 and 7 hereof, at any time on and after the
earlier to occur of (i) the date which is first anniversary of the option
date or (ii) the day immediately preceding the date of the first annual
meeting of stockholders of the Company following the option date (provided
that the date of such annual meeting is at least three hundred fifty-five
(355) days after the option date), Optionee may purchase all of the shares
of common stock subject to the option.
(2) Notwithstanding the foregoing subsection (1), if while any portion of
the option is outstanding and unexercisable, a Change in Control (as
defined in the Plan) occurs, then from and after the Acceleration Date (as
defined in the Plan), the option shall be exercisable with respect to all
of the shares of common stock subject to such portion of the option.
(d) No fractional shares may be purchased at any time.
2. Subject to the limitations herein set forth, the option may be
exercised by delivery of written notice to the Company specifying the number of
shares of common stock to be purchased and accompanied by payment in full of the
option price (or arrangement made for such payment to the Company's
satisfaction) for the number of shares so purchased.
The option price may be paid (i) in cash, (ii) by delivering
previously owned whole shares of common stock (which Optionee has held for at
least six months prior to the delivery of such shares or which Optionee
purchased on the open market and for which Optionee has good title, free and
clear of all liens and encumbrances) having a fair market value equal to the
option price, or (iii) in a combination thereof. Payment of the option price, or
any part thereof, in previously owned shares of common stock shall not be
effective unless Optionee delivers one or more stock certificates (or otherwise
delivers shares of common stock to the satisfaction of the Company) representing
shares having a fair market value on the date of exercise equal to or in excess
of the option price, or applicable portion thereof, accompanied by such
endorsements, signature guarantees or other documents or assurances as may
reasonably be required to effect the transfer to the Company of such number of
shares. If Optionee delivers a certificate or certificates (or otherwise
delivers shares of common stock to the satisfaction of the Company)
-2-
<PAGE>
representing shares in excess of the number required to cover the option price,
a certificate (or other evidence of ownership) representing such excess number
of shares will be issued and redelivered to Optionee. For purposes of this
Agreement, the fair market value of the common stock on a specified date shall
be determined by reference to the average of the high and low transaction prices
in trading of the common stock on such date as reported in the New York Stock
Exchange-Composite Transactions, or, if no such trading in the common stock
occurred on such date, then on the next preceding date when such trading
occurred; provided, that if the Committee administering the Plan shall determine
that such New York Stock Exchange-Composite Transactions prices are not
representative of the fair market value, such Committee shall determine such
fair market value by such other appropriate means as it shall determine.
3. Upon exercise of the option in whole or in part pursuant to
Section 2 hereof, the Company shall deliver or cause to be delivered a
certificate (or other evidence of ownership) representing the number of shares
specified against payment therefor and shall pay all original issue or transfer
taxes and all other fees and expenses incident to such delivery.
4. Optionee shall be entitled to the privileges of ownership with
respect to shares subject to the option only with respect to shares purchased
upon exercise of all or part of the option and as to which Optionee becomes a
stockholder of record.
5. (a) If Optionee ceases to serve as a non-employee director of the
Company by reason of death, then from and after the date of death the option
shall be exercisable by the executor, administrator, personal representative or
Optionee's beneficiary designated pursuant to the Beneficiary Designation Form
attached hereto as Exhibit A (herein called a "Beneficiary") during the 90-day
period commencing on the date of Optionee's death, but only during the option
term, to the extent Optionee was entitled under Section 1(c) hereof to exercise
the option on the date of Optionee's death. The portion of the option which may
not become exercisable pursuant to the preceding sentence shall be cancelled as
of the date of Optionee's death.
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<PAGE>
(b) If Optionee ceases to serve as a non-employee director of the
Company by reason of retirement or total and permanent disability, then from and
after the effective date of such cessation of service the option shall be
exercisable by Optionee during the five-year period commencing on the effective
date of such cessation of service, but only during the option term, to the
extent Optionee was entitled under Section 1(c) hereof to exercise the option on
the effective date of such cessation of service. The portion of the option which
may not become exercisable pursuant to the preceding sentence shall be cancelled
as of the effective date of Optionee's cessation of service.
(c) If Optionee ceases to serve as a non-employee director of the
Company for any reason other than death, retirement or total and permanent
disability, then from and after the effective date of such cessation of service
the option shall be exercisable by Optionee during the 90-day period commencing
on the effective date of such cessation of service, but only during the option
term, to the extent Optionee was entitled under Section 1(c) hereof to exercise
the option on the effective date of such cessation of service. The portion of
the option which may not become exercisable pursuant to the preceding sentence
shall be cancelled as of the effective date of Optionee's cessation of service.
6. The option may not be transferred by Optionee other than:
(a) by will, the laws of descent and distribution or pursuant to the
beneficiary designation procedures approved by the Company;
(b) in whole or in part to one or more transferees; provided that (i) any such
transfer must be without consideration, (ii) each transferee must be a
member of Optionee's "immediate family," a trust established for the
exclusive benefit of one or more members of Optionee's immediate family or
a partnership whose sole equity owners are members of Optionee's immediate
family, and (iii) such transfer is specifically approved by the Vice
President, Compensation and Benefits or the Committee administering the
Plan following the receipt of a completed Assignment of Option to Purchase
Common Stock attached hereto as Exhibit A; or
(c) as otherwise set forth in an amendment to this Agreement.
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<PAGE>
Optionee hereby acknowledges that Optionee will recognize income upon exercise
of a transferred option and Optionee hereby agrees to pay to the Company such
amount as the Company is advised it is required under applicable federal, state,
local or other tax laws to withhold and pay over to governmental taxing
authorities by reason of the purchase of shares of common stock pursuant to the
option.
In the event the option is transferred as contemplated in this Section 6, such
transfer shall become effective when approved by the Vice President,
Compensation and Benefits or a member of the Committee administering the Plan
(as evidenced by counterexecution of the Assignment of Option to Purchase Common
Stock on behalf of the Company), and such option may not be subsequently
transferred by the transferee other than by will or the laws of descent and
distribution. Any transferred option shall continue to be governed by and
subject to the terms and conditions of the Plan and the transferee shall be
entitled to the same rights as Optionee as if no transfer had taken place.
During Optionee's lifetime the option is exercisable only by Optionee or
Optionee's guardian, personal representative or similar person or by a
transferee permitted under paragraph (b) or (c) above. Except as permitted by
the foregoing, the option may not 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. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of the option, the option and all rights hereunder shall
immediately become null and void. As used in this Section, "immediate family"
shall mean, with respect to any person, any spouse, child, stepchild or
grandchild, and shall include relationships arising from legal adoption.
7. In the event of the death of Optionee (a) during the five-year period
commencing on the effective date of Optionee's cessation of service as a non-
employee director by reason of retirement or total and permanent disability or
(b) during the 90-day period commencing on the effective date of Optionee's
cessation of service as a non-employee director for any other reason, the option
may be exercised by the executor, administrator, personal representative or
Beneficiary of Optionee during the 90-day period commencing on the date of
Optionee's death, but only during the option term, to the extent Optionee was
entitled to exercise the option on the date of Optionee's death.
8. In the event of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization or event, or any
distribution to holders of common stock other than a regular cash dividend, the
number and class of securities subject to the option and the purchase price per
security shall be appropriately adjusted by the Committee without an increase in
the aggregate purchase price, other than an increase resulting from rounding. If
any adjustment
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<PAGE>
would result in a fractional security being subject to the Option, the Company
shall pay the Optionee, in connection with the first exercise of the Option, in
whole or in part, occurring after such adjustment, an amount in cash determined
by multiplying (i) the fraction of such security (rounded to the nearest
hundredth) by (ii) the excess, if any, of (A) the fair market value of the
common stock on the exercise date over (B) the exercise price of the option. The
decision of the Committee regarding the amount and timing of any adjustment
pursuant to this Section 8 shall be final, binding and conclusive.
9. The option is subject to the condition that if the listing,
registration or qualification of the shares subject to the option on any
securities exchange or under any state or federal law, or if the assent or
approval of any regulatory body shall be necessary as a condition of, or in
connection with, the granting of the option or the delivery or purchase of
shares thereunder, the option may not be exercised in whole or in part unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained. The Company agrees to use its best efforts to
obtain any such requisite listing, registration, qualification, consent or
approval.
10. The Committee administering the Plan, as from time to time
constituted, shall have the right to determine any questions which arise in
connection with this Agreement or the option. This Agreement and the option are
subject to the provisions of the Plan and shall be interpreted in accordance
therewith.
11. The option shall not be treated as an incentive stock option within
the meaning of Section 422 of the Code.
12. This Agreement shall be binding upon and shall inure to the benefit of
any successor or successors of the Company and any person or persons who shall,
upon the death of the Optionee, acquire any rights in the option.
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<PAGE>
13. Any notice, including a Beneficiary Designation Form and a notice of
exercise of the option, required to be given hereunder to the Company shall be
addressed to the Company at its office at 77 West Wacker Drive, Chicago,
Illinois 60601-1696, attention of the Vice President, Compensation and Benefits,
and any notice required to be given hereunder to Optionee shall be addressed to
Optionee at Optionee's residence address as shown in the Company's records,
subject to the right of either party hereafter to designate in writing to the
other some other address. Any such notice shall be deemed to have been duly
given on the day that such notice is received by the Vice President,
Compensation and Benefits. Any such notice shall be (i) delivered to the Vice
President, Compensation and Benefits by personal delivery, facsimile, United
States mail or by express courier service and (ii) deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transmission or
upon receipt by the Vice President, Compensation and Benefits if by United
States mail or express courier service; provided, however, that if any notice is
not received during regular business hours, it shall be deemed to be received on
the next succeeding business day of the Company.
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<PAGE>
14. The option, this Agreement, and all determinations made and actions
taken pursuant hereto and thereto, to the extent not governed by the laws of the
United States, shall be governed by the laws of the State of Delaware and
construed in accordance therewith without giving effect to principles of
conflicts of laws.
IN WITNESS WHEREOF, R.R. DONNELLEY & SONS COMPANY has caused this
instrument to be executed as of the day and year first above written.
R.R. DONNELLEY & SONS COMPANY
By____________________________
Name:
Title:
The terms and conditions of the
foregoing Stock Option Agreement
are hereby accepted by the
undersigned this ____ day of
___________
____________________________
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<PAGE>
Exhibit A
R.R. DONNELLEY & SONS COMPANY
1995 STOCK INCENTIVE PLAN
BENEFICIARY DESIGNATION FORM
----------------------------
Stock Option Agreement (the "Option") dated: ________________
(fill in option date)
You may designate a primary beneficiary and a secondary beneficiary.
You may name more than one person as a primary or secondary beneficiary. For
example, you may wish to name your spouse as primary beneficiary and your
children as secondary beneficiaries. Your secondary beneficiary(ies) will
receive nothing if any of your primary beneficiaries survive you. All primary
beneficiaries will share equally unless you indicate otherwise. The same rule
applies for secondary beneficiaries.
Designate Your Beneficiary(ies):
Primary Beneficiary(ies) (give name, address and
relationship to you):
___________________________________________________
___________________________________________________
___________________________________________________
Secondary Beneficiary(ies) (give name, address and
relationship to you):
___________________________________________________
___________________________________________________
___________________________________________________
I certify that my designation of beneficiary set forth
above is my free act and deed.
If you are married and are not naming your spouse as the sole primary
beneficiary, please print the name, address and social security number of your
spouse in the following space:
______________________________________________________________________________
______________________________________________________________________________
_________________________ _______________________________
Name (Please Print) Signature
______________________________
Date
This Beneficiary Designation Form shall be effective on the day it is
received by the Vice President, Compensation and Benefits of the Company at 77
West Wacker Drive, Chicago, Illinois 60601-1696. This Form shall be (i)
delivered to the Vice President, Compensation and Benefits by personal delivery,
facsimile, United States mail or by express courier service and (ii) deemed to
be received upon personal delivery, upon confirmation of receipt of facsimile
transmission or upon receipt by the Vice President, Compensation and Benefits if
by United States mail or express courier service; provided, however, that if
this Form is not received during regular business hours, it shall be deemed to
be received on the next succeeding business day of the Company.
NOTICE: The signature on this Beneficiary Designation Form shall correspond to
the name in which the Option is registered in the books and records of the
Company; provided, however, that if the person executing this Form is not such
registered owner, proof of such person's right to execute this Form is being
delivered with this Form. The Company shall have sole and final authority to
determine whether such proof is satisfactory.
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