Exhibit 10.25
R.R. Donnelley & Sons
Company
111 South Wacker Drive
Chicago, IL 60606-4301
Amended and Restated as of
May 8, 2007
Mr. John Paloian
[address]
Dear John:
The purpose of this letter is to
amend and restate in its entirety the Employment Agreement, dated
as of March 25, 2004, between you and R.R.
Donnelley & Sons Company (the “Company”). You
are currently the Group President, RR Donnelley Global Print
Solutions of the Company and, effective as of the date hereof, you
shall serve as Chief Operating Officer of the Company in accordance
with the terms and provisions of this Agreement as well as any
employment and other policies applicable to employees of the
Company and its subsidiaries from time to time during the term of
your employment. All capitalized terms used but not defined in the
text of this letter shall have the meanings assigned to such terms
in Annex A.
We and you hereby acknowledge that
your employment with the Company constitutes “at-will”
employment and that either party may terminate this Agreement at
any time, upon written notice of termination within a reasonable
period of time before the effective date of the termination. With
respect to the terms of your employment with the Company, you will
have the customary duties, responsibilities and authorities of a
chief operating officer at a corporation of a similar size and
nature. You will report to the Chief Executive Officer of the
Company (the “CEO”). You will receive such office,
staffing and other assistance as is commensurate with that received
by other senior executive officers at your level at a corporation
of similar size and nature.
I.
Compensation
You will receive the following
compensation and benefits, from which the Company may withhold any
amounts required by applicable law:
(i) The Company will pay you a base
salary (“Base Salary”) at the rate of $700,000 per
year. This Base Salary will be paid in accordance with the normal
payroll practices of the Company.
(ii) You will be
eligible to receive an annual bonus (the “Annual
Bonus”) at a target level of 150% of Base Salary in respect
of each fiscal year of the Company in accordance with the
Company’s annual incentive compensation plan and payable if
the Company achieves the performance objectives set forth by the
Board of Directors (the “Board”) (or any designated
committee thereof) from time to time. These performance objectives
will be communicated to you no later than April 1
st
of each
year. The Annual Bonus shall be approved by the Board.
(iii) In addition, you will continue
to be eligible to participate in any nonqualified pension plans and
qualified plans in the same manner as you currently participate or
may elect to participate from time to time after the date of this
Agreement.
(iv) You shall be eligible for four
(4) weeks vacation annually.
(v) You shall be eligible for a car
allowance pursuant to policies applicable to senior officers of the
Company from time to time during the term of your
employment.
(vi) You shall be eligible for an
allowance for financial planning (including tax advice and legal
fees related thereto) pursuant to policies applicable to senior
officers of the Company from time to time during the term of your
employment.
(vii) You shall be eligible for
supplemental term life insurance benefits and supplemental
long-term disability benefits pursuant to policies applicable to
senior officers of the Company ( but no less than $2,000,000) from
time to time during the term of your employment, provided that you
are insurable in accordance with standard underwriting requirements
(including passing any physical exams and providing any information
necessary to obtain such insurance coverage).
(viii) On March 21, 2007, the
Company granted to you, under the R.R. Donnelley & Sons
Company 2004 Performance Incentive Plan, the following: 30,000
Performance Share Units (pursuant to which grant if certain
performance targets are achieved the amount payable could reach
250% of the initial award) and options to purchase 130,000 shares
of common stock of the Company. It is the Company’s current
intention that annual equity grants will be made to you in each of
2008 and 2009 that will, at a minimum, be consistent with the
levels granted in the Performance Unit Award and Stock Option
Agreement awarded March 21, 2007.
II.
Severance
(i) Termination Not Following a
Change in Control
If, prior to a Change in Control,
the Company terminates your employment as Chief Operating Officer
without Cause or if you terminate your employment for Good
Reason:
(A) the Company will pay you an
amount equal to two times your Annualized Total Compensation,
subject to the execution by you of a customary release, which
amount shall be payable in equal installments over the twenty-four
(24) months following the date your employment with the
Company is terminated (the “Termination
Date”);
(B) the Company will provide to you
a continuation of all benefits, including a car allowance and other
related benefits, if any, which you were eligible to receive
immediately prior to such termination, for the twenty-four
(24) months following the Termination Date; and
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(C) all outstanding stock options,
restricted stock or restricted stock unit awards or other equity
grants (other than performance shares or performance share units)
issued to you will vest 100% immediately as of the Termination
Date.
Upon any termination of your
employment prior to a Change in Control, any performance shares or
performance share units will vest in accordance with the applicable
award agreement. Your rights of indemnification under the
Company’s and any of its subsidiaries organizational
documents, any plan or agreement at law or otherwise and your
rights thereunder to director’s and officer’s liability
insurance coverage for, in both cases, actions as an officer and
director of the Company and its affiliates shall survive any
termination of your employment. In the event of any termination,
you agree to resign as an officer and director of the Company and
its subsidiaries and affiliates.
(ii) Termination Following a
Change in Control
If, following a Change in Control,
the Company terminates your employment as Chief Operating Officer
without Cause or if you terminate your employment for Good
Reason:
(A) the Company will pay you an
amount equal to three times your Annualized Total Compensation,
subject to the execution by you of a customary release, which
amount shall be paid to you in a lump sum as soon as is reasonably
practicable following the Termination Date;
(B) the Company will provide to you
a continuation of all benefits, including a car allowance and other
related benefits, if any, which you were eligible to receive
immediately prior to such termination, for the thirty-six
(36) months following the Termination Date;
(C) the Company will make the
additional payments provided in Annex B, if applicable;
(D) all outstanding stock options,
restricted stock or restricted stock unit awards or other equity
grants (other than performance shares or performance share units)
issued to you will vest 100% immediately as of the Termination Date
and any performance shares or performance share units will vest in
accordance with the applicable award agreement; and
(E) you shall be entitled to a pro
rata bonus under the Company’s annual bonus program in effect
for the year in which the Termination Date occurs, which pro rata
bonus shall be paid at the same time as annual bonuses for such
year are paid to the Company’s senior executives and shall be
equal to the amount, if any, which you would have received under
such plan (without regard to any executive-specific objectives), on
the basis of the Company’s actual performance for the year,
had your employment not terminated, multiplied by a fraction, the
numerator of which is the number of days in the year elapsed prior
to the Termination Date and the denominator of which is
365.
Your rights of indemnification under
the Company’s and any of its subsidiaries organizational
documents, any plan or agreement at law or otherwise and your
rights thereunder to director’s and officer’s liability
insurance coverage for, in both cases, actions as an officer and
director of the Company and its affiliates shall survive any
termination of your employment. In the event of any termination,
you agree to resign as an officer and director of the Company and
its subsidiaries and affiliates.
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Notwithstanding the foregoing, any
termination by the Company without Cause or termination by you for
Good Reason which takes place within six (6) months prior to a
Change in Control, shall be, presumptively, a termination following
a Change in Control.
III. Compliance with
Section 409A of the Internal Revenue Code.
All payments and benefits pursuant
to this letter shall be subject to the provisions of this Section
III. If you are a “Specified Employee” of the Company
for purposes of Internal Revenue Code Section 409A
(“Code Section 409A”) at the time of a payment
event set forth in this letter, then no severance or other payments
or benefits pursuant to this letter shall be made to you by the
Company until the amount of time has passed that is necessary to
avoid incurring excise taxes under Code Section 409A. Should
this Section III result in a delay of payments to you, on the first
day any such payments may be made without incurring a penalty
pursuant to Code Section 409A (the “409A Payment
Date”), the Company shall begin to make such payments as
provided for in this letter, provided that any amounts that would
have been payable earlier but for the application of this Section
III, shall be paid in lump-sum on the 409A Payment Date. For
purposes of this provision, the term Specified Employee shall have
the meaning set forth in Section 409A(2)(B)(i) of the Internal
Revenue Code of 1986, as amended or any successor provision and the
treasury regulations and rulings issued thereunder. If any
compensation or benefits provided by this letter may result in the
application of Code Section 409A, the Company shall, in
consultation with you, modify this letter in the least restrictive
manner necessary in order to exclude such compensation from the
definition of “deferred compensation” within the
meaning of such Code Section 409A or in order to comply with
the provisions of Code Section 409A of the Code and without
any diminution in the value of the payments or benefits to
you.
IV. General
You agree (i) that at all times
both during and after your employment, you will respect the
confidentiality of Company’s and its subsidiaries and
affiliates’ confidential information and will not disparage
the Company and its subsidiaries and affiliates or their officers,
directors or employees, and (ii) during your employment and
for twenty-four (24) months thereafter, you will not
(a) accept a position with, or provide material services to,
an entity that competes with a portion of the Company’s
business representing more than $25 million of the Company’s
revenues on the date of your departure, (b) solicit or hire,
or assist others in the solicitation or hiring of, the
Company’s employees or (c) interfere with the
Company’s business relationships with any material customers
or suppliers.
All notices or communications under
this Agreement must be in writing, addressed; (i) if to the
Company, to the attention of the Chief Human Resources Officer at
the Company’s address first written above and (ii) if to
you, at your address first written above (or to any other addresses
as either party may designate in a notice duly delivered as
described in this paragraph). Any notice or communication shall be
delivered by telecopy, by hand or by courier. Notices and
communications may also be sent by certified or registered mail,
return receipt requested, postage prepaid, addressed as above and
Notice shall be effective upon the actual receipt of
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notice by the recipient thereof. Any controversy
or claim arising out of or relating to this Agreement or the breach
of this Agreement that cannot be resolved by you
