Exhibit 10.25
R.R. Donnelley & Sons
Company
111 South Wacker Drive
Chicago, IL 60606-4301
Amended and Restated as of
November 30, 2008
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 May 8, 2007, 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 1st of each year. The Annual Bonus
shall be approved by the Board. Any Annual Bonus which you become
entitled to receive shall be paid to you no later than the 15th day
of the third month following the end of the calendar year in which
the bonus was earned, unless you timely elect to defer all or a
portion of such bonus pursuant to the Company’s deferred
compensation plan.
(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) Separation from Service Not
Following a Change in Control
If, prior to a Change in Control,
your separation from service within the meaning of Treasury
Regulation §1.409A-1(h) (a “Separation from
Service”) with the Company (and its at least 80% owned
subsidiaries and affiliates) is initiated by the Company without
Cause or if your Separation from Service is initiated by you for
Good Reason:
(A) the Company will pay you an
amount equal to two times your Annualized Total Compensation,
subject to the prompt execution by you of a customary release,
which amount shall be payable in equal installments on the 15th and
last days of each of the twenty-four (24) months following the
thirtieth (30th) day after the date of your Separation from
Service (the “Termination Date”) (if the 15th or last
day of a month is not a business day, on the closest business day
to such 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
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to your Separation from Service, for the
twenty-four (24) months following the Termination Date (the
value of a benefit available in any year that is not used in that
year may not be carried over and made available in any other year);
and
(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 your Separation from Service
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 your Separation from
Service. In the event of your Separation from Service, you agree to
resign as an officer and director of the Company and its
subsidiaries and affiliates.
(ii) Separation from Service
Following a Change in Control
If, following a Change in Control,
you have a Separation from Service initiated by the Company without
Cause or if you have a Separation from Service initiated by you for
Good Reason:
(A) the Company will pay you an
amount equal to three times your Annualized Total Compensation,
subject to the prompt 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; , but only
if the Termination Date occurs within two years of the Change in
Control; provided, however , that if the Change in Control
is not a “change in control event,” within the meaning
of section 409A of the Code, then such amount shall be payable in
equal installments over the twenty-four (24) months following
your Termination Date at the same times described in Section
II(i)(A);
(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 Separation from Service, until and
including the last day of the second calendar year following the
calendar year in which the Termination Date occurs (the value of a
benefit available in any year that is not used in that year may not
be carried over and made available in any other year);
(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;
(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
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the same time as annual bonuses for such year
are paid to the Company’s senior executives, but in no event
later than the end of the 21/2 month period occurring after the
year in which the Termination Date occurs, and such pro rata bonus
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 you not had a Separation from Service, 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; and
(F) the Company will pay you a lump
sum of $75,000, payable six months and one day following your
Separation from Service.
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 your Separation from Service. In the event of your
Separation from Service, you agree to resign as an officer and
director of the Company and its subsidiaries and
affiliates.
Notwithstanding the foregoing, your
Separation from Service initiated by the Company without Cause or
your Separation from Service initiated by you for Good Reason which
takes place within six (6) months prior to a “change in
control event,” within the meaning of section 409A of the
Code, shall be, presumptively, a Separation from Service following
a Change in Control.
III. Compliance with
Section 409A of the Internal Revenue Code.
If you are a “specified
employee” within the meaning set forth in the document
entitled “409A: Policy of R.R. Donnelley & Sons
Company and its Affiliates Regarding Specified Employees” on
your Termination Date, then any amounts payable pursuant to this
Agreement or otherwise that (i) become payable as a result of
your Separation from Service and (ii) are subject to section
409A of the Code as a result of your Separation from Service shall
not be paid until the earlier of (x) the first business day of
the sixth month occurring after the month in which the Termination
Date occurs and (y) the date of your death. Notwithstanding
the immediately preceding sentence, amounts payable to you as a
result of your Separation from Service that do not exceed two times
the lesser of (i) your annualized compensation based upon your
annual rate of Base Salary for the year prior to the year in which
the date of your Separation from Service occurs and (ii) the
maximum amount that may be taken into account under section
401(a)(17) of the Code in the year in which the date of your
Separation from Service occurs may be paid as otherwise scheduled.
If any compensation or benefits provided by this Agreement may
result in the application of section 409A of the Code, then the
Company shall, in consultation with you, modify this Agreement to
the extent permissible under section 409A of the Code in the least
restrictive manner as necessary to exclude such compensation and
benefits from the definition of “deferred compensation”
within the meaning of such section 409A of the Code or in order to
comply with the provisions of section 409A of the Code. By signing
this Agreement you acknowledge that if any amount paid or payable
to you becomes subject to section 409A of the Code, you are solely
responsible for the payment of any taxes and interest due as a
result.
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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
