RETIREMENT POLICY FOR DIRECTORS
(As revised, effective November 21, 1996)
1. An outside director will retire from the Board as of the first day of the
month following his or her attaining age 70. An outside director, for the
purposes of this policy, is one who has never been an employee of the
Company. For the purposes of determining the retirement date of John M.
Richman under this policy, John M. Richman is considered an outside
director and will therefore retire as of December 1, 1997.
2. Any employee director who was first elected to the Board prior to September
28, 1990 will tender his or her resignation from the Board as of the
effective date of his or her retirement from the Company and such
resignation will be accepted absent a determination by the Board that the
services of the director are unique and essential for such period as the
Board may determine. However, in the case of such a director who has served
as Chairman, President or Chief Executive Officer for a period of at least
ten years and retired under normal procedures at or after early retirement
age, the director may continue to serve until completing his or her term
after reaching age 72, and upon completing that term or upon his or her
earlier resignation, he or she will automatically become an Honorary
Director.
3. Any employee director who was first elected to the Board on or after
September 28, 1990 will retire from the Board as of the effective date of
his or her termination of employment for any reason or at the age of 65,
whichever occurs first. However, such an employee director who has served
as Chief Executive Officer will retire from the Board at the end of his or
her current term upon retirement as an employee from the Company or
immediately upon termination of employment prior to retirement. If desired
by the Board, such a retiring Chief Executive Officer may serve as a
consultant to the Board.
4. Nothing in this policy shall be construed to restrict the stockholders'
right to elect any person a director of the Company in accordance with the
Certificate of Incorporation and By-Laws.
RETIREMENT BENEFITS AND PHANTOM STOCK GRANTS FOR DIRECTORS
(As revised, effective January 1, 1997)
Retirement benefits for directors will be determined as follows:
. A director who is retired as of January 1, 1997 will receive an annual
retirement benefit equal to 10% of the annual retainer fee payable to
active directors at the time such benefit is actually paid for each year or
fraction thereof of service as a director (with a maximum of ten years).
. A director who is active as of January 1, 1997 shall elect, prior to
February 15, 1997, to:
(1) receive an annual retirement benefit equal to 10% of the annual
retainer fee payable to active directors at the time such benefit is
actually paid for each year or fraction thereof of service as a director
(with a maximum of ten years); or
(2) have an amount equal to the present value of that director's earned
annual retirement benefit at December 31, 1996 credited as of January 1,
1997 to a book-entry account of that director pursuant to a Deferred
Compensation Agreement; or
(3) convert the present value of that director's earned annual retirement
benefit at December 31, 1996 to the number of shares of phantom stock
(carried to four decimal places) determined by dividing such present value
by the fair market value of a share of common stock on the most recent
trading day of the common stock on the NYSE, which shares will be credited
as of January 1, 1997 to a book-entry phantom stock account.
. A non-employee director who is either (i) active as of January 1, 1997 with
less than ten years of service as a director and who chose alternative (2)
or (3) in the preceding paragraph or (ii) first elected to the Board on or
after January 1, 1997, will be credited as of January 1 of each year
beginning January 1, 1997 with the number of shares of phantom stock
(carried to four decimal places) determined by dividing 35% of the annual
retainer fee payable to active directors for such year by the fair market
value of a share of common stock on the most recent trading day of the
common stock; provided that a non-employee director shall be credited with
phantom shares only until the commencement of the tenth year of service as
a non-employee director.
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PAYMENT OF ANNUAL RETIREMENT BENEFITS, DEFERRED COMPENSATION AND PHANTOM STOCK
Annual Retirement Benefits
--------------------------
Annual retirement benefits will be paid quarterly in advance as follows:
. The annual retirement benefit of a director whose service on the Board
terminates at or after age 65 for any reason will begin with the first
calendar quarter following the effective date of retirement.
. The annual retirement benefit of a director whose service on the Board
terminates prior to age 65 for any reason except disability that ends the
director's active business career or employment will begin with the first
calendar quarter following the attainment of age 65.
. The annual retirement benefit of a director whose service on the Board
terminates prior to age 65 by reason of disability that ends the director's
active business career or employment will begin with the first calendar
quarter following the effective date of retirement.
. In all cases, no payment of an annual retirement benefit will occur
following the date of death.
. Former directors will receive any future increases in annual retirement
benefits from and after the time such increases are put into effect.
Deferred Compensation
---------------------
. A director who is active as of January 1, 1997 who elected to have an
amount equal to the present value of that director's earned annual
retirement benefit at December 31, 1996 credited as of January 1, 1997 to a
book-entry account pursuant to a Director Deferred Compensation Agreement
will be paid in accordance with the terms and conditions of that Agreement.
Phantom Stock
-------------
. On each dividend payment date in respect of the common stock, a director's
phantom stock account shall be credited with the number of shares of
phantom stock (carried to four decimal places) determined by dividing (i)
the product of the number of shares of phantom stock credited to that
director's phantom stock account as of the record date for such dividend
multiplied by the per share amount of the dividend by (ii) the fair market
value of a share of common stock on the dividend payment date (or if the
dividend payment date is not a trading day on the NYSE, the most recent
trading day of the common stock on the NYSE).
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. 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 phantom securities credited to a
director's account shall be appropriately adjusted by a committee
designated by the Board.
. In connection with termination of service on the Board for any reason other
than death, the director may elect as of the effective date of such
cessation of service (and if the director's cessation of service is by
reason of death, the director shall be deemed to elect as of the date of
death) to convert the value of that director's phantom stock account
(determined by multiplying the number of shares of phantom stock by the
fair market value of the common stock on the effective date of such
cessation of service) to a cash amount to be credited to a book-entry cash
account. Such cash account shall be credited quarterly (beginning on the
last day of the calendar quarter in which the retirement occurred) with an
amount of interest on the balance (including interest previously credited)
at an annual rate equal to the then current yield obtainable on United
States government bonds having a maturity date of approximately five years.
Failure to make such an election shall result in the continuation of the
director's phantom stock account.
A director's cash account or phantom stock account will be paid as follows:
. A director whose service on the Board terminates at or after age 65 for any
reason except death shall elect to receive, as of the first day of the
first calendar quarter following the effective date of such cessation of
service, either (1) an annual amount in cash for the lesser of ten years or
the number of years of service (rounded to the nearest whole number)
determined by dividing the value of the director's cash account or phantom
stock account (the value of the phantom stock is to be determined by
reference to the fair market value of the common stock on the date of such
cessation of service) as of the effective date of such cessation of service
by the number of annual payments to be made; provided that the last payment
made shall be for 100% of the value of the director's account as of the
date of the last payment, (2) an annual amount in cash for the lesser of
ten years or the number of years of service (rounded to the nearest whole
number) determined by dividing the value of the director's cash account or
phantom stock account (the value of the phantom stock is to be determined
by reference to the fair market value of the common stock on the effective
date of the distribution) as of the effective date of the distribution by
the number of annual payments remaining to be made; provided that the last
payment made shall be for 100% of the value of the director's account as of
the date of the last payment, or (3) a lump sum amount in cash equal to the
value of the director's cash account or phantom stock account (the value of
the phantom stock is to be determined by reference to the fair market value
of the common stock on the effective date of such cessation of service) as
of the effective date of such cessation of service. In the absence of an
election, a director shall be deemed to have elected option (1).
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. A director whose service on the Board terminates prior to age 65 for any
reason except death or disability that ends the director's active business
career or employment shall elect to receive, as of the first day of the
first calendar quarter following the attainment of age 65, either (1) an
annual amount in cash for the lesser of ten years or the number of years of
service (rounded to the nearest whole number) determined by dividing the
value of the director's cash account or phantom stock account (the value of
the phantom stock is to be determined by reference to the fair market value
of the common stock on the date of such cessation of service) as of the
effective date of such cessation of service by the number of annual
payments to be made; provided that the last payment made shall be for 100%
of the value of the director's account as of the date of the last payment,
(2) an annual amount in cash for the lesser of ten years or the number of
years of service (rounded to the nearest whole number) determined by
dividing the value of the director's cash account or phantom stock account
(the value of the phantom stock is to be determined by reference to the
fair market value of the common stock on the effective date of the
distribution) as of the effective date of the distribution by the number of
annual payments remaining to be made; provided that the last payment made
shall be for 100% of the value of the director's account as of the date of
the last payment, or (3) a lump sum amount in cash equal to the value of
the director's cash account or phantom stock account (the value of the
phantom stock is to be determined by reference to the fair market value of
the common stock on the effective date of such cessation of service) as of
the effective date of such cessation of service. In the absence of an
election, a director shall be deemed to have elected option (1).
. A director whose service on the Board terminates prior to age 65 by reason
of disability that ends the director's active business career or employment
shall elect to receive, as of the first day of the first calendar quarter
following the effective date of such cessation service, either (1) an
annual amount in cash for the lesser of ten years or the number of years of
service (rounded to the nearest whole number) determined by dividing the
value of the director's cash account or phantom stock account (the value of
the phantom stock is to be determined by reference to the fair market value
of the common stock on the date of such cessation of service) as of the
effective date of such cessation of service by the number of annual
payments to be made; provided that the last payment made shall be for 100%
of the value of the director's account as of the date of the last payment,
(2) an annual amount in cash for the lesser of ten years or the number of
years of service (rounded to the nearest whole number) determined by
dividing the value of the director's cash account or phantom stock account
(the value of the phantom stock is to be determined by reference to the
fair market value of the common stock on the effective date of the
distribution) as of the effective date of the distribution by the number of
annual payments remaining to be made; provided that the last payment made
shall be for 100% of the value of the director's account as of the date of
the last payment, or (3) a lump sum amount in cash equal to the value of
the director's cash account or phantom stock account (the value of the
phantom stock is to be determined by reference to the fair market value
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of the common stock on the effective date of such cessation of service) as
of the effective date of such cessation of service. In the absence of an
election, a director shall be deemed to have elected option (1).
. In all cases, if a director's cessation of service as a director is by
reason of death or if a director dies while retired and amounts remain to
be paid under the director's cash account or phantom stock account, 100% of
the value of the director's cash account or phantom stock account (the
value of the phantom stock is to be determined by reference to the fair
market value of the common stock on the date of death) as of the date of
death shall be paid as soon as practicable after the date of death to the
director's estate or any beneficiaries designated by the director.
MISCELLANEOUS
To be entitled to receive any benefits under this policy, a former director must
agree to consult with and render advice to the Company as requested at times
that do not unreasonably interfere with his personal or other business
activities. Conduct detrimental to the Company, as determined by the Board of
Directors, will result in forfeiture of all benefits under this policy.
These provisions on benefits will apply to all living, former directors
effective January 1, 1997, regardless of when they were first elected or ceased
to serve, and to all active, non-employee directors as of January 1, 1997 whose
service on the Board terminates after January 1, 1997.
. A director's rights to receive benefits shall be no greater than the rights
of any unsecured general creditor of the Company.
. A director shall not have any rights as a stockholder of the Company with
respect to any shares of phantom stock.
. This policy and all determinations made and actions taken pursuant hereto,
to the extent not governed by the Internal Revenue Code or 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
conflict of laws.
. Benefits described herein 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.
For the purposes of these provisions on retirement benefits and phantom stock
grants:
. A non-employee director is a director who is not currently an employee of
the Company and/or its subsidiaries and who never has been an employee of
the Company and/or its subsidiaries.
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. The fair market value of the common stock shall be determined by reference
to the average of the high and low trading prices as reported in the New
York Stock Exchange Composite Transactions in the Wall Street Journal for
the relevant trading day.
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Retirement Policy for Directors - Donnelley R. R. & Sons Co.
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