<PAGE>
PRELIMINARY COPY
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
R.H. DONNELLEY CORPORATION
--------------------------
(Name of Registrant as Specified in its Charter)
- ------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
R.H. DONNELLEY CORPORATION
One Manhattanville Road
Purchase, New York 10577
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
R.H. Donnelley Corporation to be held on April 27, 1999, at 9:00 a.m. local
time, at CT Corporation, 1209 Orange Street, Wilmington, Delaware.
The Notice of Annual Meeting and Proxy Statement accompanying this letter
describe the business to be acted upon at the meeting. The Annual Report for
the year ended December 31, 1998 is also enclosed.
Whether or not you plan to attend the meeting, it is very important that
you mark, sign, date and return the enclosed proxy card in the envelope
provided as soon as possible. If you attend the meeting, you may revoke the
proxy at that time by requesting the right to vote in person.
Sincerely,
Frank R. Noonan
Chairman of the Board and
Chief Executive Officer
<PAGE>
R.H. DONNELLEY CORPORATION
One Manhattanville Road
Purchase, New York 10577
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 1999
To the Stockholders of
R.H. Donnelley Corporation
Notice is hereby given that the Annual Meeting of Stockholders of R.H.
Donnelley Corporation (the `Company') will be held on April 27, 1999, at 9:00
a.m. local time, at CT Corporation, 1209 Orange Street, Wilmington, Delaware.
At the Meeting, you will be asked to vote upon the following matters:
1. Election of two directors, each for a term of three years;
2. An amendment to the Company's Restated Certificate of Incorporation to
remove the provision restricting the ownership by aliens or foreign
corporations of the Company's issued capital stock;
3. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for the 1999 fiscal year; and
4. Any other matters that may properly come before the meeting or any
postponements or adjournments thereof.
The Board of Directors has fixed the close of business on March 15, 1999
as the record date for the purpose of determining stockholders entitled to
notice of, and to vote at, the meeting. A list of such stockholders will be
available at the time and place of meeting and, during the ten days prior to
the meeting, at the Company's executive offices located at One Manhattanville
Road, Purchase, New York 10577.
By Order of the Board of Directors
Jane B. Clark
Vice President and
Corporate Secretary
Purchase, New York
March 22, 1999
- --------------------------------------------------------------------------------
Whether or not you plan to attend the meeting, it is very important that you
mark, sign, date and return the enclosed proxy card in the envelope provided as
soon as possible. If you attend the meeting, you may revoke the proxy at that
time by requesting the right to vote in person.
<PAGE>
TABLE OF CONTENTS
Questions and Answers .........................................................
Proposals to be Voted Upon ....................................................
Board of Directors ............................................................
Nominees .................................................................
Directors Continuing in Office ...........................................
Committees of the Board of Directors .....................................
Attendance ...............................................................
Directors and Executive Compensation ..........................................
Directors' Compensation ..................................................
Executive Compensation ...................................................
Performance Graph ........................................................
Report of the Compensation and Benefits Committee ........................
Security Ownership Of Certain Beneficial
Owners And Management .........................................................
Other Information .............................................................
Nominating Members of the Board of Directors .............................
Compliance with Section 16(A)
of the Securities Exchange Act ...........................................
Delivery of Annual Report on Form 10-K ...................................
Return of Proxy ..........................................................
Exhibit A - Proposed Certificate of Amendment
to the Restated Certificate of Incorporation,
of R.H. Donnelley Corporation .....................................
<PAGE>
QUESTIONS and ANSWERS
Q: What am I voting on?
A: 1. Election of the two Class III members of the Board of Directors of
the Company (William G. Jacobi and Frank R. Noonan);
2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to remove the provision restricting the ownership by aliens
or foreign corporations of the Company's issued capital stock; and
3. Ratification of PricewaterhouseCoopers LLP as the Company's
independent auditors for the 1999 fiscal year.
(See page __ for more details.)
Q: What does the Board of Directors recommend with respect to the matters to
be presented at the Annual Meeting?
A: The Board of Directors recommends a vote in favor (i) of the nominees for
the Class III members of the board; (ii) of the amendment to the Company's
Restated Certificate of Incorporation; and (iii) of ratification of
PricewaterhouseCoopers LLP as the Company's auditors for the 1999 fiscal
year.
Q: Who is entitled to vote?
A: Stockholders as of the close of business on March 15, 1999 (the `Record
Date') are entitled to vote at the Annual Meeting. As of the Record Date,
_________ shares of the Company's common stock were outstanding and entitled
to vote at the meeting. Each share of common stock is entitled to one vote.
Q: How do I vote by proxy?
A: Sign and date each proxy card you receive and return it in the prepaid
envelope. The proxy will be voted according to your instructions as
indicated on the proxy card. If no instructions are given, then your proxy
will be voted in favor of the three proposals. With respect to proposals
brought before the meeting not referenced in the Proxy Statement, your proxy
will be voted in the discretion of the proxies named on the proxy card.
(See page ____ for more details.)
Q: May I revoke my proxy?
A: Yes. Your proxy may be revoked at any time before it is voted by written
notice to the Secretary of the Company, by a duly executed proxy bearing a
later date, or by voting in person at the meeting.
Q: How do I vote shares that are held in savings plans?
A: If a stockholder is a participant in the Company's Profit Participation
Plan (the `PPP') or the DonTech Profit Participation Plan (the `DPPP') and
is invested in the Company's Common Stock, the proxy will serve as a voting
instruction for the trustee of the PPP and DPPP. Fractional shares held by a
participant in the PPP and DPPP are not printed on the proxy but will be
voted by the trustee as if included thereon. If a proxy covering shares in
the PPP or DPPP has not been received prior to ____________, or if it is
signed and returned without specification marked in the instruction boxes,
the trustee will vote those PPP or DPPP shares in the same proportion as the
respective PPP or DPPP shares for which it has received instructions, except
as otherwise required by law.
Q: Who will count the vote?
A: Representatives of CT Corporation tabulate the vote and act as inspector
of election.
Q: What constitutes a quorum?
A: A majority of the outstanding shares, present or represented by proxy,
constitutes a quorum for purposes of conducting business at the Annual
Meeting. Shares represented by proxies that are marked `abstain' will be
counted as shares present for purposes of determining the presence of a
quorum on all matters. Proxies relating to `street name' shares that are
voted by brokers on some but not all of the matters will be treated as
shares present for purposes of determining the presence of a quorum on all
matters.
Q: What are the voting requirements for the approval of each of the proposals?
A: 1. The directors must be elected by a plurality of the voting power
present in person or represented by proxy at the meeting and entitled to
vote;
2. The amendment of the Restated Certificate of Incorporation requires
the approval of a majority of the shares entitled to vote at the meeting;
and
3. The ratification of the appointment of PricewaterhouseCoopers LLP
requires the approval of the majority of the voting power present in
person or represented by proxy and entitled to vote.
Q: How is my proxy voted on matters not identified in the proxy statement?
A: The Board of Directors knows of no other matters to be presented for
action at the forthcoming Annual Meeting. However, the proxy confers upon
the persons named on the proxy card discretionary authority to act upon any
other matter that may properly come before the meeting.
Q: What does it mean if I get more than one proxy card?
A: It means that your shares are registered differently and, therefore, are
in more than one account. Sign and return all proxy cards to ensure that
your shares are voted. To provide better stockholder services, we encourage
you to have all accounts registered in the same name and address. You may
do this by contacting our transfer agent, First Chicago Trust Company of New
York, at (800) _______________.
Q: Who may attend the Annual Meeting?
A: All stockholders as of the Record Date (March 15, 1999) may attend, although
seating may be limited.
Q: Who is bearing the cost of this proxy solicitation and how is the
solicitation effected?
A: The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
The solicitation of proxies may be made by directors, officers and regular
employees of the Company personally or by mail, telephone or facsimile
communication. No additional compensation will be paid for such
solicitation. In addition, arrangements will be made with brokerage houses
and other custodians, nominees and fiduciaries to forward proxy soliciting
material to the beneficial owners of stock held of record by such persons,
and the Company will reimburse them for reasonable out-of-pocket expenses
incurred by them in so doing. In addition, the Company has engaged the
services of Innisfree M&A Incorporated to solicit proxies and will pay such
proxy soliciting agent $8,500 plus expenses in connection therewith.
Solicitation by such firm may be by mail, personal interview, telephone or
facsimile communication.
Q: When are proposals due for inclusion in the proxy statement for the 2000
Annual Meeting?
A: Proposals of the Company's stockholders intended to be presented at the
Company's 2000 Annual Meeting of Stockholders must be received by the
Company no later than November 23, 1999 to be included in the Company's
proxy statement and form of proxy relating to such annual meeting. Any
proposal should be addressed to Stephen B. Wiznitzer Esq., Senior Vice
President and General Counsel, R.H. Donnelley Corporation, One
Manhattanville Road, Purchase, New York 10577, and should be sent by
certified mail, return receipt requested.
<PAGE>
PROPOSALS TO BE VOTED UPON
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes. At
the 1999 Annual Meeting of Stockholders, William G. Jacobi and Frank R. Noonan,
constituting the nominees for Class III of the Board of Directors, are up for
election. (See page __ for more information regarding the nominees.) If
elected, they will each serve until the 2002 Annual Meeting of Stockholders and
until their respective successors are duly elected. Unless a proxy shall
specify that it is not to be voted for them, it is intended that the shares of
Common Stock represented by each duly executed and returned proxy will be
voted FOR their election as directors.
With respect to the election of directors, only shares that are voted in
favor of a particular nominee will be counted toward such nominee's achievement
of a plurality. Shares present at the meeting that are not voted for a
particular nominee or shares present by proxy where the stockholder properly
withholds authority to vote for such nominee or broker non-votes will not be
counted toward such nominee's achievement of a plurality. A `broker non-vote'
occurs when a broker does not have the authority to vote on a particular
proposal. This happens because brokers who hold shares in street name have the
authority to vote only on certain routine matters in the absence of instruction
from the beneficial owners.
If any nominee is not a candidate for election at the meeting, an event
which the Board of Directors does not anticipate, the proxies will be voted for
a substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES.
PROPOSAL 2:
REMOVAL OF THE FOREIGN OWNERSHIP RESTRICTION
General
The Board of Directors has determined that it would be advisable to amend
the Company's Restated Certificate of Incorporation to remove the limitations
on the ownership of the Company's common stock by aliens or foreign
corporations. A copy of the proposed amendment to the Certificate of
Incorporation (the `Amendment') is attached hereto as Exhibit A. The Amendment,
if approved, would eliminate the provisions in the Company's Restated
Certificate of Incorporation limiting the ownership by aliens or foreign
corporations of the Company's stock to not more than one fourth of its stock.
Background of and Reasons for the Removal of the Foreign Ownership Restriction
On December 17, 1997, the Board of Directors of The Dun & Bradstreet
Corporation (`Old D&B') approved in principle a plan to separate into two
publicly-traded companies - the Company and The New Dun & Bradstreet
Corporation (`New D&B'). The distribution (referred to herein as the `Spin-
Off') was the method by which Old D&B distributed to its stockholders shares of
New D&B common stock, which represent a continuing interest in the Old D&B
businesses now conducted by New D&B. On July 1, 1998, as part of the Spin-Off,
Old D&B distributed to its stockholders shares of New D&B stock. Shares of Old
D&B common stock held by stockholders represent a continuing ownership interest
in the Company. In connection with the Spin-Off, Old D&B changed its name to
R.H. Donnelley Corporation and Old D&B common stock has become the Company's
Common Stock. After the Spin-Off, the Company's only operating subsidiary is
R.H. Donnelley Inc. (`Donnelley'). In light of the form of transaction, the
Company's certificate of incorporation is the Restated Certificate of
Incorporation of Old D&B.
The Company's Restated Certificate of Incorporation limits (i) the
ownership by aliens or their representatives or by a foreign corporation or
representatives thereof or by any corporation organized under the laws of a
foreign country of the Company's issued capital stock to not more than one
fourth of such stock, and (ii) the ownership or control, direct or indirect, by
any other corporation of which any officer or more than one-fourth of the
directors are aliens or of which more than one-fourth of the capital stock is
owned of record or voted by aliens, their representatives or by a foreign
government or representative thereof, or by any corporation organized under the
laws of a foreign country. This provision was originally required in the
Company's Restated Certificate of Incorporation in order for Old D&B to \
maintain certain FCC licenses and to avoid the prohibition of Section 310(a) of
the Federal Communications Act, as amended. However, the Company no longer
possesses such licenses and, therefore, is not required to have these
limitations on foreign ownership. Accordingly, on December 22, 1998, the Board
of Directors adopted resolutions approving the Amendment and directing that the
Amendment be placed on the agenda for the consideration of the stockholders at
the Annual Meeting. Dissenting stockholders have no appraisal rights under
Delaware law or under the Company's Restated Certificate of Incorporation and
By-Laws in connection with the Amendment.
Abstentions with respect to Proposal 2 will have the same effect as votes
against such proposal. Additionally, with respect to Proposal 2, broker non-
votes will not be counted. However, such broker non-votes will have the
practical effect of reducing the number of affirmative votes required to
achieve a majority by reducing the total number of shares from which such
majority is calculated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT.
PROPOSAL 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
It is proposed that the stockholders ratify the appointment by the
Board of Directors of PricewaterhouseCoopers LLP as independent auditors for
the Company for the fiscal year ending December 31, 1999. The Company expects
representatives of PricewaterhouseCoopers LLP to be present at the Annual
Meeting and available to respond to appropriate questions submitted by
stockholders. Such representatives will also be accorded an opportunity at such
time to make such statements as they may desire.
Approval by the stockholders of the appointment of independent auditors
is not required, but the Board of Directors deems it desirable to submit this
matter to stockholders. If holders of a majority of the outstanding shares of
common stock present and voting at the meeting do not approve the appointment of
PricewaterhouseCoopers LLP, the selection of independent auditors will be
reconsidered by the Board.
With respect to Proposal 3, if a stockholder abstains from voting or
directs the stockholder's proxy to abstain from voting, the shares are
considered present at the meeting for such proposal but, since they are not
affirmative votes for the proposal, they will have the same effect as votes
against the proposal. With respect to broker non-votes on such proposal, the
shares are not considered present at the meeting for such proposal and they
are, therefore, not counted in respect of such proposal. Such broker non-votes
do have the practical effect of reducing the number of affirmative votes
required to achieve a majority for such proposal by reducing the total number of
shares from which the majority is calculated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
<PAGE>
BOARD OF DIRECTORS
NOMINEES
WILLIAM G. JACOBI Director since June 1998
Mr. Jacobi, 55, has been the non-employee chairman of Nielsen Media
Research, Inc., (formerly an affiliate of the Company) since July 1, 1998.
Prior to July 1, 1998, Mr. Jacobi was employed at Cognizant Corporation where he
served as Executive Vice President and Chairman of Nielsen Media Research from
1996. Mr. Jacobi was also Chairman of Erisco and Chairman of IMS International.
Mr. Jacobi was Executive Vice President of The Dun & Bradstreet Corporation from
1995 to 1996. Previously, he was Senior Vice President of The Dun & Bradstreet
Corporation responsible for NCH Promotional Services, Senior Vice President of
Erisco, Senior Vice President of Sales Technologies, Senior Vice President of
Dun & Bradstreet Pension Services and Plan Services, Inc., and President, Chief
Operating Officer and Executive Vice President of Nielsen Media Research.
FRANK R. NOONAN Director since April 1998
Mr. Noonan, 56, has been a director of Donnelley since February 1995,
President since August 1991, and has been Chairman and Chief Executive Officer
of the Company and Donnelley since June 30, 1998. In 1989 Mr. Noonan became
Senior Vice President Finance of Dun & Bradstreet Information Services. Prior
to joining Dun & Bradstreet, Mr. Noonan served as Senior Vice President and
Chief Financial Officer of UNUM Corporation and in various financial positions
for the General Electric Company. Mr. Noonan is Vice Chairman of the Board of
Trustees for United Hospital Medical Center in Port Chester, New York, a member
of the Board of Trustees of Manhattanville College, the Vice Chairman of the
Board of Governors for the Buick Classic, and a member of the Board of Directors
of the Yellow Pages Publishers Association.
DIRECTORS CONTINUING IN OFFICE
CLASS I-TERM EXPIRES AT THE 2000 ANNUAL MEETING
DIANE P. BAKER Director since June 1998
Ms. Baker, 44, was Senior Vice President and Chief Financial Officer of
The New York Times Company from 1995 to 1998. From 1990 through 1995, Ms. Baker
was the Group Senior Vice President and Chief Financial Officer of R.H. Macy &
Co., Inc.
ROBERT KAMERSCHEN Director since June 1998
Mr. Kamerschen, 63, has been Chairman of ADVO, Inc. since 1988. Prior to
January 1999, in addition to serving as Chairman of ADVO, Inc., Mr. Kamerschen
had also been Chief Executive Officer since 1988. Mr. Kamerschen currently
serves on the board of ADVO, Inc., IMS Health Incorporated, and Micrografx, Inc.
CLASS II-TERM EXPIRES AT THE 2001 ANNUAL MEETING
CAROL J. PARRY Director since June 1998
Ms. Parry, 57, has been Executive Vice President in charge of the
Community Development Group at The Chase Manhattan Bank (the `Bank') since
1996, its Managing Director from 1992 to 1996 and serves on the Bank's Policy
Council, the central governing body of the Bank. Ms. Parry currently serves on
the boards of directors of a number of not-for-profit organizations.
The Bank is Administrative Agent for and one of the banks which
provided the Company with its $400 Million Credit Facility, and an affiliate of
the Bank was one of the initial purchasers of Donnelley's 9 1/8% subordinated
notes in the aggregate principal amount of $150 million. In connection with
serving in such roles, the Bank and its affiliate received customary fees.
BARRY LAWSON WILLIAMS Director since June 1998
Mr. Williams, 54, has been President and Founder of Williams Pacific
Ventures, Inc. since 1988, Senior Mediator of JAMS/Endispute, Inc. since 1993,
Adjunct Professor, Entrepreneurship at Haas School of Business since 1995, and
General Partner of WDG Ventures since 1987. Mr. Williams serves on the Boards of
CompUSA, Inc., Newhall Land & Farming Company, Pacific Gas & Electric Company
and Simpson Manufacturing Company.
Committees of the Board of Directors
On July 2, 1998, the Board of Directors established an Audit & Finance
Committee, a Compensation & Benefits Committee and a Nominating Committee.
Audit and Finance Committee
The Audit & Finance Committee, among other matters: recommends independent
certified public accountants; reviews the scope of the audit examination,
including fees and staffing; reviews the independence of the auditors; reviews
and approves non-audit services provided by the auditors, if any; reviews
findings and recommendations of the auditors and management's response; and
reviews the internal audit and control function. In addition, the Audit and
Finance Committee has responsibility for reviewing existing financing
arrangements and compliance thereunder and for making recommendations to the
Board regarding financing requirements for the Company and sources for such
financing. The Audit and Finance Committee members are Barry Lawson Williams
(chairperson), Diane P. Baker and Carol J. Parry.
Compensation & Benefits Committee
The Compensation & Benefits Committee, among other matters: reviews
management compensation programs; reviews and approves compensation changes for
senior management; and administers compensation and benefit plans for
management. The Compensation and Benefits Committee members are Robert
Kamerschen (chairperson), Diane P. Baker and Barry Lawson Williams.
Nominating Committee
The Nominating Committee, among other matters: reviews potential
candidates and makes recommendations to the Board of persons to serve on the
Board and the various committees of the Board. The Nominating Committee members
are Carol J. Parry (chairperson), William G. Jacobi and Robert Kamerschen.
Stockholders' recommendations for nominees to the Board of Directors will
be considered by the Nominating Committee provided such nominations are made in
accordance with the Company's By-Laws. (See discussion on page __.)
Attendance
Five meetings of the Board of Directors were held after the Spin-Off in
1998. No director attended fewer than 75% of the aggregate of all meetings of
the Board of Directors and of the committees of the Board on which he or she
served.
<PAGE>
DIRECTOR AND EXECUTIVE COMPENSATION
Directors' Compensation
The Board of Directors has adopted a non-employee director compensation
program providing for certain cash payments and deferred stock and stock option
grants annually to each non-employee director. Pursuant to this program, each
non-employee director annually will receive a cash retainer of $20,000; 1,500
deferred shares of common stock of the Company, an option to purchase an
additional 1,500 shares; $1,000 for each board and committee meeting attended;
and $1,000 for each committee meeting of the Board of Directors chaired. In
addition, each new non-employee director will receive a grant of an additional
1,500 deferred shares under this program upon his or her appointment to the
Board of Directors. Such deferred share and option grants will vest over a
period of three years of future service, subject to acceleration in the event of
death, disability or retirement of the applicable non-employee director or
change in control of the Company. Directors may elect to receive additional
deferred shares or options in lieu of cash retainer fees.
Executive Compensation
Background
As explained above (in Proposal 2), the Company was once the entity
referred to herein as Old D&B. Accordingly prior to the Spin-Off (July 1, 1998)
the officers of the Company were the officers of Old D&B. The discussion of
executive compensation that follows focuses exclusively on the team of
executives with responsibility for the Donnelley business. As reflected below,
the cash compensation was paid by Old D&B prior to July 1, 1998 and by
Donnelley thereafter.
Compensation Information
The following tables provide information regarding the compensation of
the Chief Executive Officer and the next four most highly compensated executive
officers (the `Executive Officer Group') during the 1998 Fiscal year.
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation Awards Payouts
Annual Compensation
Secur- Long
ities Term
Other Re- Under- Incen-
Annual stric- lying tive All
Compen- ted Options/ Pay Other
sation Stock SARs outs Compen-
Name and Principal Salary Bonus(1) (2) Award(s) (3) (4) sation(5)
Position Post-Spin-Off Year ($) ($) ($) ($) ($) ($) ($)
- -------------------- ---- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C><C> <C> <C>
Frank R. Noonan RHD 1998 212,917 TBD 6,287 0 420,000 0 27,234
Chairman & Chief D&B 1998 190,000 208,315 0 0 0 83,118 0
Executive Officer ------- ------- ----- - ------- ------ ------
Total 402,917 208,315 6,287 0 420,000 83,118 27,234
D&B 1997 347,000 346,913 11,630 0 68,607 0 11,863
Philip C. Danford RHD 1998 149,250 TBD 0 0 81,000 0 9,231
Senior Vice D&B 1998 141,000 74,662 0 0 0 90,448 0
President & ------- ------ - - ------ ------ -----
Chief Financial Total 290,250 74,662 0 0 81,000 90,488 9,231
Officer
D&B 1997 265,000 238,582 0 0 56,498 0 8,787
Frederick J. Groser RHD 1998 114,468 TBD 2,807 0 63,000 0 9,184
Senior Vice D&B 1998 108,615 42,000 0 0 0 11,713 0
President ------- ------ ----- - ------ ------ -----
Total 223,083 42,000 2,807 0 63,000 11,713 9,184
D&B 1997 195,000 41,288 29 0 27,336 0 6,238
Alexander R. Marasco RHD 1998 114,438 TBD 2,045 0 63,000 0 11,712
Senior Vice D&B 1998 108,250 64,499 0 0 0 33,091 0
President ------- ------ ----- - ------ ------ ------
Total 222,688 64,499 2,045 0 63,000 33,091 11,712
D&B 1997 207,900 91,200 6,590 0 27,336 0 6,742
David C. Swanson RHD 1998 106,875 TBD 3,144 0 58,050 0 8,096
Senior Vice D&B 1998 100,000 32,000 0 0 0 11,713 0
President ------- ------ ----- - ------ ------ ------
Total 206,875 32,000 3,144 0 58,050 11,713 8,096
D&B 1997 195,000 41,927 2,162 0 27,336 0 6,238
<FN>
(1) The RHD 1998 bonus amounts shown were earned with respect to the second
half of the year and paid in February 1999. The 1998 D&B bonus amounts were
earned for the first half of the year and paid out at the time of the spin-off.
Included in the D&B 1998 bonus for Mr. Noonan is a $50,000 special spin
transition bonus. The 1997 bonus amounts shown were earned with respect to
that year and paid in 1998.
(2) Amounts shown represent reimbursement for taxes paid by the named
executive officers with respect to company-directed travel and certain other
expenses.
(3) Amounts shown represent the number of non-qualified stock options granted
in 1998. The exercise price and number of shares underlying such options have
been adjusted to give effect to a Reverse Stock Split, which was completed by
the Company on August 24, 1998.
(4) Included in the D&B 1998 amounts are two performance share grants earned
under the Key Employees Performance Unit Plan (`PUP'). The first grant
commenced in January 1997 and was paid prorata, at the time of distribution,
based on performance goals covering the period January 1997 through the
distribution date. Only Mr. Danford received a payment under the January 1997
PUP. The second grant commenced in January 1998 and was paid prorata, at the
time of distribution, based on performance goals covering the period January
1998 through the distribution date. All performance shares were paid in
unrestricted shares of the Company's common stock.
(5) Amounts shown represent aggregate annual Company contributions for the
account of each named executive officer under the Company's Profit Participation
Plan (the `PPP'), and the Profit Participation Benefit Equalization Plan (the
`PPBEP'), which plans were open to employees of the Company. The PPP is a tax-
qualified defined contribution plan and the PPBEP is a non-qualified plan that
provides benefits to participants in the PPP equal to the amount of Company's
contributions that would have been made to the participant's PPP account but
for certain Federal tax laws.
</FN>
</TABLE>
<PAGE>
Stock Option/SAR Grants in Last Fiscal Year
The following table provides information on fiscal year 1998 grants of
options to the Chief Executive Officer and the Executive Officer Group for the
fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Grant Date
Options/SARs Employees Exercise or Present
Granted in Fiscal Base Price Expiration Value (3)
(1) # Year (2) ($/Share) Date ($)
------------ ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Frank R. Noonan 420,000 20.6% $15.3125 07/14/08 $2,559,638
Philip C. Danford 81,000 4.0% $15.3125 07/14/08 $493,644
Frederick J. Groser 63,000 3.1% $15.3125 07/14/08 $383,946
Alexander R. Marasco 63,000 3.1% $15.3125 07/14/08 $383,946
David C. Swanson 58,050 2.8% $15.3125 07/14/08 $353,778
<FN>
(1) The underlying options were granted to the Chief Executive Officer and
the Executive Officer Group on July 14, 1998 and are exercisable in 25%
increments annually commencing on July 14, 2000 and on each anniversary thereof.
The exercise price and number of shares underlying such options have been
adjusted to give effect to a reverse stock split, which was completed by the
Company on August 24, 1998.
(2) Total options granted to employees from July 1, 1998 to December 31, 1998.
(3) The hypothetical grant date present values are calculated under the
modified Black-Scholes Option Price Model, which is a mathematical formula used
to value options traded on stock exchanges. This formula considers a number of
factors in hypothesizing an option's present value. Range of factors used to
value the July 14, 1998 option grants include the stock's expected volatility
rate (35.0%), risk free rate of return (5.47%), dividend yield (0%), projected
time of exercise (7 years) and projected risk and forfeiture rate for vesting
period (5% per annum).
</FN>
</TABLE>
<PAGE>
Aggregate Fiscal Year End Option Values
The following table provides information concerning the number and value of
unexercised stock options held at December 31, 1998 by the Chief Executive
Officer and the Executive Officer Group.
<TABLE>
<CAPTION>
Number of
Securities Value of Unexercised
Underlying Unexer- In-the-Money
cised Options/SAR's Options/SAR's
Shares at Fiscal at Fiscal
Acquired Year-End (2) Year-End (3)
on
Exercise Value Exercis- Unexercis- Exercis- Unexercis-
(1) Realized able able able able
--------- -------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Frank R. Noonan 0 0 308,087 517,686 1,260,408 159,863
Philip C. Danford 0 0 100,347 130,371 315,046 43,866
Frederick J. Groser 0 0 79,016 104,448 276,722 71,607
Alexander R. Marasco 0 0 110,515 104,448 441,189 71,607
David C. Swanson 0 0 59,587 99,498 99,498 71,607
<FN>
(1) No shares were acquired on exercise by the Chief Executive Officer and
the Executive Officer Group during 1998.
(2) No SAR's were outstanding at December 31, 1998.
(3) The exercise price and number of shares underlying such options have been
adjusted to give effect to the Spin-Off and the Reverse Stock Split. The values
shown equal the difference between the exercise price of the unexercised in-the-
money options and the closing market price of the Company common stock at
December 31, 1998 ($14.625). Options are in-the-money if the fair market
value of the Company common stock exceeds the exercise price of the option.
</FN>
</TABLE>
Long-Term Incentive Plan Awards in Last Fiscal Year
The following table provides information on Long-Term Incentive Plan
awards to the Chief Executive Officer and the Executive Officer Group during
the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Under Non-Stock Price-Based Plans (1)
Estimated Future Payouts
Performance ------------------------
Or Other
Period Until
Maturation Threshold($) Target ($) Maximum ($)
Name Or Payout (0%) (100%) (200%)
- ---- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Frank R. Noonan 7/1/98 - 12/31/99 $0 688,000 1,376,000
Philip C. Danford 7/1/98 - 12/31/99 0 300,000 600,000
Frederick J. Groser 7/1/98 - 12/31/99 0 230,000 460,000
Alexander R. Marasco 7/1/98 - 12/31/99 0 230,000 460,000
David C. Swanson 7/1/98 - 12/31/99 0 215,000 430,000
<FN>
(1) Upon completion of the performance period, the dollar amounts awarded are
calculated based on performance against economic profit and EPS goals. The
dollar amount is then converted into a number of performance shares (PERS) by
dividing the dollar amount by the Company's stock price (calculated as the
average of high's and low's on the last 20 trading days of the performance
period). One third of such shares will be payable after completion of the
performance period, an additional one-third will be payable one year thereafter,
and the last one-third two years thereafter.
</FN>
</TABLE>
<PAGE>
Retirement Benefits
The following table sets forth the estimated aggregate annual benefits
payable under the Company's Retirement Account Plan, Pension Benefit
Equalization Plan (`PBEP') and Supplemental Executive Benefit Plan (`SEBP') to
persons in specified average final compensation and credited service
classification upon retirement at age 65. Amounts shown in the table include
U.S. Social Security benefits and benefits payable under predecessor plans of
the Company which would be deducted in calculating benefits payable under these
plans. These aggregate annual retirement benefits do not increase as a result of
additional credited service after 20 years.
<TABLE>
<CAPTION>
Years of Participation Service
------------------------------
Average
Final
Compensation 5 Yrs 10 Yrs 15 Yrs 20 Yrs 25 Yrs 30 Yrs
- ------------ ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$ 450,000 $ 112,500 $ 225,000 $ 270,000 $ 270,000 $ 270,000 $ 270,000
500,000 125,000 250,000 300,000 300,000 300,000 300,000
550,000 137,500 275,000 330,000 330,000 330,000 330,000
700,000 175,000 350,000 420,000 420,000 420,000 420,000
850,000 212,500 425,000 510,000 510,000 510,000 510,000
1,000,000 250,000 500,000 600,000 600,000 600,000 600,000
1,300,000 325,000 650,000 780,000 780,000 780,000 780,000
1,600,000 400,000 800,000 960,000 960,000 960,000 960,000
1,900,000 475,000 950,000 1,140,000 1,140,000 1,140,000 1,140,000
</TABLE>
The number of years of credited service under the plans as of December 31,
1998 of Messrs. Noonan and Danford are 9 and 10, respectively.
Compensation, for the purpose of determining retirement benefits, consists
of salary, wages, regular cash bonuses, commissions and overtime pay. Severance
pay, contingent payments and other forms of special remuneration are excluded.
Bonuses included in the Summary Compensation Table are normally not paid until
the year following the year in which they are accrued and expensed; therefore,
compensation for purposes of determining retirement benefits varies from the
Summary Compensation Table amounts in that bonuses expensed in the previous
year, but paid in the current year, are part of retirement compensation in the
current year, and current year's bonuses accrued and included in the Summary
Compensation Table are not. For 1998, compensation for purposes of determining
retirement benefits also varies from the Summary Compensation Table in that the
amounts shown in the `Bonus' column include performance share payouts under the
PUP, which are not creditable compensation under the retirement plans.
For the reasons discussed above, compensation for determining retirement
benefits for the named executive officers differed by more than 10% from the
amounts shown in the Summary Compensation Table. 1998 compensation for purposes
of determining retirement benefits for Messrs. Noonan and Danford was $868,842
and $464,782, respectively.
Average final compensation is defined as the highest average annual
compensation during five consecutive twelve-month periods in the last ten
consecutive twelve-month periods of the member's credited service. Members vest
in their accrued retirement benefit upon completion of five years of service.
The benefits shown in the table above are calculated on a straight-life annuity
basis.
The Retirement Account Plan, together with the PBEP, provides retirement
income based on a percentage of annual compensation. The percentage of
compensation allocated annually ranges from 3% to 12.5%, based on age and
credited service. Amounts allocated also receive interest credits based on
30-year Treasury rates with a minimum interest credit rate of 3%. Messrs.
Groser, Marasco and Swanson participate only in the Retirement Account Plan and
the PBEP, but do not participate in the SEBP. The number of years of credited
service under the plans as of December 31, 1998 of Messrs. Groser, Marasco and
Swanson are 19.5, 21.5 and 12.5, respectively. Based on their current salaries
(as set forth in the Employment Agreements section that follows), the annual
projected pension at normal retirement ages for Messrs. Groser, Marasco and
Swanson are $180,000, $191,000 and $140,000, respectively.
The SEBP provides retirement benefits in addition to the benefits provided
under the Retirement Account Plan and the PBEP. The SEBP has the effect of
increasing the retirement benefits under the Retirement Account Plan and the
PBEP to the amounts depicted in the preceding table under the compensation
levels applicable to Messrs. Noonan and Danford. The SEBP provides maximum
benefits after 20 years. Executives close to or eligible for retirement, as
approved by the chairman and chief executive officer of the Company, will
receive maximum benefits after 15 years.
Employment Agreements
Each of the Chief Executive Officer and the members of the Executive
Officer Group executed an employment agreement with the Company dated as of
September 28, 1998. The base salary and bonus potential established by the
employment contracts are as follows:
<TABLE>
<CAPTION>
Name Base Salary Bonus Potential
- ---- ----------- ---------------
<S> <C> <C>
Frank R. Noonan $430,000 80%
Philip C. Danford $300,000 60%
Frederick J. Groser $230,000 60%
Alexander R. Marasco $230,000 60%
David C. Swanson $215,000 60%
</TABLE>
The bonus is measured as a percentage of base salary and is governed by
the Company's Annual Incentive Plan which mandates the establishment of criteria
for the determination of an executive's bonus. The foregoing compensation is
subject to annual review and increase.
<PAGE>
Otherwise, except where indicated below, the terms and conditions of each
of the employment agreements are substantially similar. The key terms of the
employment agreements are as follows:
<TABLE>
<CAPTION>
<S> <C>
Term The employment agreements expire on June 30, 2001,
subject to automatic one-year renewals unless notice
has been given ninety days prior to any termination
date, provided, however, a nonrenewal of the employment
agreement by the Company shall be considered a
termination without Cause*.
Additional Each executive is eligible to participate in all bonuses,
Compensation long term incentive compensation, stock options and
other equity participation arrangements made available to
other senior executives of the Company.
Benefits Each executive is eligible to participate in all
employee benefit programs (including fringe benefits,
vacation, pension and profit sharing plan participation
and life, health, accident and disability insurance) no
less favorable than prior to September 28, 1998.
Termination Chief Executive Officer: Receives a severance package
Without Cause* by equal to three times the sum of his base salary and
the Company Not target bonus. Executive Officer Group: Each receives
Arising from a a severance package equal to two times the sum of his
Change in Control* or her base salary and target bonus. Both the Chief
Executive Officer and the Executive Officer Group
receive continuation of benefits for three and two
years, respectively.
Termination arising Each executive shall receive a severance package equal
from a Change in to three times the sum of his base salary and target
Control bonus and continuation of benefits for three years.
Death/Disability Each executive shall receive salary through date of
termination and a pro rata portion of the target bonus.
Excise Tax The compensation of each executive will be grossed up
for any excise tax imposed under Section 4999 of the U.S.
Internal Revenue Code relating to any payments made on
account of a Change in Control or a termination of the
executive's employment.
<FN>
*Such terms have the meaning ascribed to such terms in the Employment
Agreements.
</FN>
</TABLE>
<PAGE>
Performance Measurement Comparison
The following graph sets forth as of December 31, 1998, the cumulative
total stockholder return on the Company's Common Stock compared with the
cumulative total return of the Russell 2000 Stock Index and a peer group of
companies with market capitalizations similar to that of the Company. The
Company selected a peer group based on business size, revenue size and market
capitalization. The peer group includes the following companies: Acxiom
Corporation, Advest Group Inc., ADVO, Inc., APAC Teleservices, Inc., Catalina
Marketing Corporation, HA-LO Industries, Inc., Hanover Direct, Inc., LCS
Industries, Inc., National Processing, Inc., Personnel Group of America, Inc.,
Precision Response Corporation, Romac International Inc., Sitel Corporation,
TMP Worldwide Inc., True North Communications, Inc., Valassis Communications,
Inc. and The Vincan Group, Inc.
The total return assumes a $100 investment on July 1, 1998 (the date of
the Spin-Off) and reinvestment of dividends in the Company's Common Stock and
in each index.
<TABLE>
<CAPTION>
- --------------------------------MONTH ENDING-----------------------------------
<S> <C> <C> <C> <C> <C>
COMPANY/INDEX/MARKET 7/01/1998 7/31/1998 8/31/1998 9/30/1998 10/30/1998
<C> <C>
11/30/1998 12/31/1998
R.H.Donnelley 100.00 88.00 85.50 80.23 90.77
98.02 95.56
PEER GROUP INDEX 100.00 95.73 75.10 83.94 85.01
88.37 102.87
RUSSELL 2OOO INDEX 100.00 91.91 74.06 79.85 83.11
87.37 92.63
</TABLE>
<PAGE>
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation and Benefits Committee
The Compensation & Benefits Committee of the Board of Directors (the
`Committee') is comprised entirely of outside and independent Directors. The
Committee is responsible for establishing, implementing, administrating and
monitoring the Company's strategy, policies and plans for executive
compensation.
Executive Compensation Objectives
The Company's executive compensation objectives are to:
- Attract and retain top-performing executives at the corporate level
and in each of the Company's business units
- Provide compensation opportunities that are fair and competitive with
those provided by comparable organizations
- Utilize compensation vehicles that are cost-effective and tax efficient
- Motivate and reward its executives based on corporate, business unit
and individual annual and long-term business performance, strategic
progress and the creation of stockholder value
Spin-Off
The Committee, which was established immediately following the Spin-Off,
renders this report to stockholders on the compensation of the Company's Chief
Executive Officer and other Executive Officers for the period commencing July 1,
1998 and ending on December 31, 1998. As shown in the Summary Compensation
Table, these individuals were compensated by Old D&B based on their
responsibilities and performance during the first half of 1998 under Old D&B's
compensation plans. Upon the Spin-Off, the Committee was charged with
implementing a comprehensive executive compensation program to aid in the
transition of the Company from a subsidiary of Old D&B to a free-standing
publicly owned entity. As a result, the Committee reviewed and amended such
plans in an effort to develop a set of compensation plans appropriate and
supportive of the objectives and policies of the Company discussed herein. The
Committee, then, where appropriate, derived performance targets for periods
commencing after the Spin-Off.
Determining Executive Officer Compensation
In accordance with its responsibilities, the Committee reviews the
Company's overall corporate mission, strategy and objectives. These form the
basis both for supporting corporate and business unit annual goals, that are
subject to Board and Committee review and approval at the beginning of each
year, and for Executive Officer performance initiatives. Based on this review,
the Committee, in its sole discretion, determines the Company's total
compensation structure for the year, including the elements and level of
compensation opportunities and the variable portion of `at risk' pay for
performance and equity participation. At year-end, results achieved and
strategic progress at the corporate, business unit and individual levels are
assessed by the Committee, relative to previously approved goals, taking into
consideration prevailing economic and business conditions and opportunities,
performance by comparable organizations, and stockholder value.
In establishing the Company's executive compensation structure and
program, the Committee also considers:
- Industry conditions
- Corporate performance relative to a selected peer group
- Current market data among comparable companies
- Current and evolving practices and trends among comparable companies
- Overall effectiveness of the program in measuring and rewarding
desired performance levels
The Committee has been assisted in this review and evaluation by an
independent consulting firm retained by the Company to serve as outside experts
in the discharge of its responsibilities. The consultants provide data to the
Committee, relative to the above-mentioned considerations, with respect to the
compensation paid to the Chief Executive Officer and other Executive Officers.
In setting competitive compensation levels, the Company compares itself with a
peer group of companies based on business line, revenue size and market
capitalization. Based on this information, the Committee evaluates the
reasonableness, fairness and competitiveness of the Company's executive
compensation program. The compensation comparison group used is essentially
the same as the performance peer group used for the Total Shareholder Return
graph.
Compensation Components
The compensation program for the Company's Chief Executive Officer and
other Executive Officers, modified by the Committee immediately subsequent to
the Spin-Off to reflect the business challenges of the new independent Company,
is comprised of three major elements:
- Base Salary
- Annual Incentive Opportunity
- Long-term Equity Incentive Opportunities
Base salaries and total compensation for target performance is generally
positioned in the mid-range of the peer group. Therefore, actual annual and
long-term incentive compensation levels, which are based on performance
relative to aggressive goals, will vary from year to year below and above those
of the peer group.
Base Salary:
Executive Officers
------------------
Salaries are established relative to the competitive marketplace at the
appropriate level and reflect the individual performance and contribution of
each Executive Officer to the business, the level of the executive's experience
and overall corporate financial circumstances. Base salaries are generally
subject to annual review for adjustment by the Committee. Recommendations are
provided by the Chief Executive Officer after an annual performance evaluation
of each executive. Once approved by the Committee, the salaries of the Chief
Executive Officer and other Executive Officers were reflected in employment
agreements which were entered into subsequent to the Company becoming an
independent, public corporation in July 1998 and are described herein under
`Employment Agreements.' The contracts provide for minimum salaries that are
subject to future review and possible upward adjustment by the Committee.
CEO
---
Pursuant to the terms of his employment agreement, Mr. Noonan's salary was
increased effective July 1998 from $380,000 to $430,000, a 13% increase. The
adjustment was in recognition of the Company becoming an independent publicly-
traded corporation, and Mr. Noonan's leadership and performance in assuming
additional responsibilities and duties.
Annual Incentive Opportunity:
Executive Officers
------------------
Executive Officers participate in the Annual Incentive Plan (`AIP') under
which annual incentive awards are generally made in cash. Each Executive
Officer is assigned performance goals and an annual incentive award opportunity
based on position responsibilities. Performance weightings vary by Executive
Officer and include corporate performance goals and/or business unit performance
goals for those Executive Officers who have business unit responsibilities.
In addition, the Committee may, in its sole discretion, adjust annual incentive
awards by 20%, based on an individual's annual accomplishments and achievements
versus pre-defined goals.
In connection with the Spin-Off, the AIP was amended to permit a six-month
performance period from July 1, 1998 to December 31, 1998. For the six-month
period, performance goals included gross advertising sales, operating income,
and earnings per share growth for all Executive Officers, and business unit
gross advertising sales and operating income for those Executive Officers who
also have business unit responsibilities. Based on performance versus goals for
this six-month period, awards to Executive Officers, including the Chief
Executive Officer, averaged ___% of target. The above target payout reflects the
Company's strong performance which included adjusted EPS growth of 11.2% and
operating income growth of over 5.3% for the year. Except for the CEO, the
target annual award opportunity for the named Executive Officers is 60% of base
salary. No individual adjustments were made by the Committee.
CEO
---
For the six-month performance period as outlined above, Mr. Noonan had
performance goals based on the Company's gross advertising sales, operating
income, and earnings per share. Based on results versus these performance
goals, Mr. Noonan received a six-month incentive award of $___________, or ___%
of his six-month incentive target. Mr. Noonan's six-month target is set at
80% of base salary. As stated above, the above target payout reflects the
Company's strong performance during the year.
Long-Term Incentive Equity Opportunities:
Executive Officers
------------------
Grants are in the form of stock options and long-term performance-based
stock awards. These Equity Opportunities are designed to align the interests of
Executive Officers and the stockholders in the Company's long-term real value
growth by increasing their equity position in the Company.
- - Stock Options
Executive Officers, including the Chief Executive Officer, were granted
their stock options under the 1991 Key Employees Stock Option Plan shortly
after the Spin-Off in recognition of the Company's new status as a free-
standing entity. Subsequent option grants to the Chief Executive Officer and
other Executive Officers are currently scheduled for the year 2000 and annually
thereafter. For purposes of motivation and retention, a one-time grant of 200
shares (post-reverse split) was also awarded at spin-off to 1,278 non-executive
employees who do not regularly participate in annual option grants.
- - Long-term performance-based stock awards
This `at risk' equity interest in the Company was granted to Executive
Officers, including the Chief Executive Officer, under the Company's Key
Employee Performance Unit Plan, with such grants in the form of performance
shares (`PERS'). Target award opportunities are determined as a percent of base
salary. To replace the two-year D&B long-term award program which commenced in
January 1998 and was terminated at mid-year, the first PERS performance period
with full award opportunity will be based on performance vs. objectives from
July 1998 to December 1999. The Committee established economic profit and
earnings per share growth objectives for this performance period.
PERS award values determined upon the completion of each performance
period are converted into shares which vest and are payable one-third upon
completion of The performance period, an additional one-third one year
thereafter and the last one-third two years thereafter.
The second performance period with a regular three-year cycle will begin
January 1, 1999, with new cycles commencing every other year thereafter.
It is the Committee's policy to make stock option grants, as well as long-
term performance related stock award opportunities granted to Executive
Officers, on a discretionary basis within a guideline range that takes into
account the position responsibilities of each individual Executive Officer and
competitive practice. Such grants reflect the relative value of the individual's
position, as well as the current performance, continuing contribution and
prospective impact of Executive Officers, including the Chief Executive Officer,
on the Company's future success and creation of long term stockholder value.
CEO
---
In connection with the Spin-Off, Mr. Noonan received an option grant on
420,000 shares (post-reverse split) and is eligible for a PERS award at target
performance of $688,000 in Company stock after completion of the long-term
performance period ending December 31, 1999.
Tax Considerations
As noted above, the Company's executive compensation objective is to be
cost-effective and tax efficient. Section 162(m) of the Code limits the tax
deduction to $1 million for compensation paid to the executive officers
identified in the proxy unless certain requirements are met. One of the
requirements is that compensation over $1 million must be based upon attainment
of performance goals approved by stockholders. The Annual Incentive Plan, the
1991 Key Employees Stock Option Plan and the Key Employees Performance Unit
Plan are designed to meet these requirements. The Committee's policy is to
preserve corporate tax deductions attributable to the compensation of certain
executives while maintaining the flexibility to approve, when appropriate,
compensation arrangements which it deems to be in the best interests of the
Company and its stockholders, but which may not always qualify for full tax
deductibility.
Going Forward
As the Company moves forward in its efforts to create stockholder value in
the years ahead, the Committee will continue to review, monitor and evaluate
the Company's program for executive compensation to assure that it is
internally effective in support of the Company's strategy, is competitive in the
marketplace to attract, retain and motivate the talent needed to succeed, and
appropriately rewards performance on behalf of the Company's stockholders.
Compensation and Benefits Committee
Robert Kamerschen, Chairperson
Diane P. Baker
Barry Lawson Williams
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned as of March 1, 1999 by (i) owners of more than
5% of the outstanding shares of the Company's Common Stock, (ii) each of the
Company's directors, (iii) each of the Company's named executive officers, and
(iv) all directors and executive officers of the Company as a group. Except as
indicated in the footnotes to the table, the Company believes that the persons
named in the table have sole voting and investment power with respect to all
shares owned beneficially by them. The mailing address for each of the Company's
directors and executive officers listed below is One Manhattanville Road,
Purchase, NY 10577.
<TABLE>
<CAPTION>
Shares of the Company
Common Stock
------------
Percentage
Amount Beneficially of
Beneficial Owners Owned(1) Class
- ----------------- ------ -----
<S> <C> <C>
Frank R. Noonan 318,441 (2) *
Philip C. Danford 106,103 (3) *
Frederick J. Groser 79,597 (4) *
Alexander R. Marasco 115,858 (5) *
David C. Swanson 61,266 (6) *
Diane P. Baker 3,045 (7) *
William G. Jacobi 4,161 (7) *
Robert Kamerschen 8,045 (7) *
Carol J. Parry 3,045 (7) *
Barry Lawson Williams 5,497 (7) *
All Directors and Executive Officers as a Group 845,483 (8) 2.40%
Harris Associates L.P., its general partner, 3,011,787 (9) 8.81%
Harris Associates, Inc. and Harris Associates
Investment Trust, series designated the
Oakmark Fund
Two North LaSalle Street,
Ste. 500
Chicago, Illinois 60602-3790
Fir Tree, Inc. d/b/a Fir Tree Partners 2,322,020 (10) 6.80%
535 Fifth Avenue
31st Floor
New York, New York 10017
Institutional Capital Corporation 3,083,164 (11) 9.00%
225 West Wacker Drive
Suite 2400
Chicago, Illinois 60606
Franklin Mutual Advisers, Inc. 2,017,332 (12) 5.90%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
<FN>
* Represents ownership of less than 1%.
(1) The amounts and percentage of the Company's common stock beneficially
owned are reported on the basis of rules and regulations of the Securities and
Exchange Commission (the `Commission') governing the determination of beneficial
ownership of securities. Under such rules and regulations, a person is deemed to
be a `beneficial owner' of a security if that person has or shares `voting
power', which includes the power to vote or to direct the voting of such
security, or `investment power', which includes the power to dispose of or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities which that person has a right to acquire
beneficial ownership of within 60 days. Under these rules and regulations, more
than one person may be deemed a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities in which he has no
economic interest.
(2) Includes 310,038 shares of the Company's common stock which may be
acquired pursuant to options exercisable as of March 1, 1999 or within 60 days
thereafter.
(3) Includes 100,347 shares of the Company's common stock which may be
acquired pursuant to options exercisable as of March 1, 1999 or within 60 days
thereafter.
(4) Includes 79,016 shares of the Company's common stock which may be
acquired pursuant to options exercisable as of March 1, 1999 or within 60 days
thereafter.
(5) Includes 110,515 shares of the Company's common stock which may be
acquired pursuant to options exercisable as of March 1, 1999 or within 60 days
thereafter.
(6) Includes 59,587 shares of the Company's common stock which may be
acquired pursuant to options exercisable as of March 1, 1999 or within 60 days
thereafter.
(7) Includes (i) options to purchase 1,500 shares of the Company's common
stock, which options will become exercisable in equal increments on the day
before each of the 1999, 2000 and 2001 annual meetings, and (ii) 1,500 deferred
shares of the Company's common stock which will vest in equal increments on the
day before each of the 1999, 2000 and 2001 annual meetings.
(8) Includes options to purchase 797,997 shares of the Company's common stock.
(9) Harris Associates L.P. (`Harris') and its sole general partner, Harris
Associates, Inc. (`Harris Inc.'), jointly filed a Schedule 13G with the
Commission on or about February 8, 1999. According to such Schedule 13G,
Harris, a registered investment adviser, had as of December 31, 1998, shared
voting power over 3,011,787 shares of the Company's common stock. Of such
shares, Harris had sole dispositive power over 840,767 shares and shared
dispositive power over 2,171,020 shares. Harris serves as investment adviser to
the Harris Associates Investment Trust (the `Trust'). Of the 2,171,020 shares
that Harris has shared dispositive power, 2,098,260 are owned by The Oakmark
Fund, a series of the Trust.
(10) Fir Tree, Inc. d/b/a Fir Tree Partners (`Fir Tree') and Mr. Jeffery
Tannenbaum, the sole shareholder, executive officer, director and principal of
Fir Tree, filed a 13D with the Commission on August 6, 1998. This Schedule 13D
reported that as of August 5, 1998, Fir Tree and Mr. Tannenbaum were the
beneficial owners of 2,322,020 shares of common stock for the account of Fir
Tree Value Fund, Fir Tree Institutional or Fir Tree LDC, as the case may be, and
that Fir Tree and Mr. Tannenbaum have sole voting and dispositive power over
the 2,322,020 shares.
(11) Institutional Capital Corporation (`ICC') and Mr. Robert H. Lyon, the
president and majority shareholder of ICC filed a 13G with the Commission on
February 16, 1999. According to such Schedule 13G, ICC, a registered
investment adviser, had as of December 31, 1998, sole voting power over
2,913,164 shares and sole dispositive power over 3,083,164 shares.
(12) Franklin Mutual Advisers, Inc. (`Franklin'), filed a 13G with the
Commission on or about January 28, 1999. According to such Schedule 13G,
Franklin, a registered investment adviser, had, as of December 31, 1998, sole
dispositive and voting power over the 2,017,332 shares.
</FN>
</TABLE>
<PAGE>
OTHER INFORMATION
NOMINATING MEMBERS OF THE BOARD OF DIRECTORS
The Company's By-Laws provide that stockholders may nominate individuals
for the Board of Directors if such nomination is made pursuant to timely notice
in writing to the Secretary of the Company. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Company not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that in the event that less than 70 days' notice of
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which
such notice of the date of the meeting or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934 (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Company's books, of such stockholder and (ii) the class and number of
shares of the Company which are beneficially owned by such stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Company that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the `SEC') and the New York Stock Exchange.
Officers, directors and greater than ten percent stockholders are required by
the SEC to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers, directors and greater
than ten percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during fiscal 1998.
DELIVERY OF ANNUAL REPORT ON FORM 10-K
The Company will provide without charge a copy of the Company's annual
report on form 10-K for the fiscal year ended December 31, 1998, to each of the
Company's stockholders of record on March 15, 1999 and each beneficial
stockholder on that date, upon receipt of a written request therefor mailed to
the Company's offices, One Manhattanville Road, Purchase, New York 10577,
Attention: Corporate Secretary. Requests from beneficial stockholders must
set forth a good faith representation as to such ownership on that date.
RETURN OF PROXY
It is important that the accompanying proxy be returned promptly.
Therefore, whether or not you plan to attend the meeting in person, you are
earnestly requested to date, sign and return your proxy in the enclosed
envelope to which no postage need be affixed if mailed in the United States.
By Order of the Board of Directors
Jane B. Clark
Vice President and
Corporate Secretary
March 22, 1999
Purchase, New York
<PAGE>
EXHIBIT A
PROPOSED CERTIFICATE OF AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION,
OF R.H. DONNELLEY CORPORATION
R.H. Donnelley Corporation (the `Corporation'), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware (the `DGCL'), does hereby amend the Restated Certificate of
Incorporation of the Corporation.
The undersigned hereby certifies that this amendment to the Restated
Certificate of Incorporation, as amended, of the Corporation has been duly
adopted in accordance with Section 242 of the DGCL.
Article FIFTH of the Restated Certificate of Incorporation of the
Corporation is hereby amended by deleting the last paragraph thereof.
THE UNDERSIGNED, being the ______________ of the Corporation, for the
purpose of amending the Restated Certificate of Incorporation, of the
Corporation pursuant to the DGCL, does make this amendment to the Restated
Certificate of Incorporation of the Corporation, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand as of this _____ day of ________,
1999.
R.H. DONNELLEY CORPORATION
By:
__________________________
Name:
Title:
ATTEST:
___________________
Name:
Title:
<PAGE>
R.H. DONNELLEY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - APRIL 27, 1999
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Frank R. Noonan, Philip C.
Danford and Stephen B. Wiznitzer, and each of them, his, her or its true and
lawful agents and proxies with full power of substitution in each, to represent
the undersigned at the Annual Meeting of Stockholders of R.H. Donnelley
Corporation (the `Company'), to be held at CT Corporation, 1209 Orange Street,
Wilmington, Delaware, on April 27, 1999 at 9:00 a.m. local time, and at any
adjournments or postponements thereof, and to vote all the shares of stock of
the Company which the undersigned may be entitled to vote on all matters coming
before said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED IN FAVOR OF ELECTION OF THE NOMINEES FOR THE CLASS
III MEMBERS OF THE BOARD OF DIRECTORS DESIGNATED BY THE BOARD OF DIRECTORS AND
FOR ITEMS 2 AND 3. PLEASE MARK THIS PROXY CARD, FILL IN THE DATE AND SIGN AND
RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
(1) Election of Class III Members of the Board of Directors
<TABLE>
<CAPTION>
WITHHOLD AUTHORITY
Nominee VOTE FOR TO VOTE FOR
<S> <C> <C>
William G. Jacobi [ ] [ ]
Frank R. Noonan [ ] [ ]
</TABLE>
(2) Amend the Company's Restated Certificate of Incorporation to remove the
foreign ownership restriction.
<TABLE>
<S> <C> <C>
FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
(3) Ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors for the 1999 fiscal year.
<TABLE>
<S> <C> <C>
FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
(4) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Dated: _________________________, 1999
--------------------------------------
NOTE: Please sign exactly as your
name or names appear hereon. Joint
owners should each sign personally.
When signing as executor,
administrator, corporation, officer,
attorney, agent, trustee or guardian,
etc., please add your full title to
your signature.
