MERRILL CORPORATION 1999 STOCK OPTION PLAN

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Exhibit 10.1

MERRILL CORPORATION
1999 STOCK OPTION PLAN

1.     Purpose of Plan.     

        The purpose of the Merrill Corporation 1999 Stock Option Plan (the " Plan ") is to advance the interests of Merrill Corporation (the " Company ") and its shareholders by enabling the Company and its Subsidiaries to attract and retain persons of ability to perform services for the Company and its Subsidiaries by providing an incentive to such individuals through equity participation in the Company and rewarding such individuals who contribute to the achievement by the Company of its economic objectives.

2.     Definitions.     

        In addition to the capitalized terms otherwise defined herein, the following additional capitalized terms will have the meanings set forth below, unless the context clearly otherwise requires:

        2.1    " Adverse Action " means the actions described in Section 10.5(b) of the Plan.

        2.2    " Board " means the Board of Directors of the Company.

        2.3    " Broker Exercise Notice " means a written notice pursuant to which a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer.

        2.4    " Cause " means (i) dishonesty, fraud, misrepresentation, embezzlement or other act of dishonesty with respect to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the Participant's overall duties, (iv) any material breach of any employment, service, confidentiality or non-compete agreement entered into with the Company or any Subsidiary, or (v) an Adverse Action.

        2.5    " Code " means the Internal Revenue Code of 1986, as amended.

        2.6    " Committee " means the group of individuals administering the Plan, as provided in Section 3 of the Plan.

        2.7    " Common Stock " means the voting class B common stock of the Company, $0.01 par value per share, or the number and kind of shares of stock or other securities into which such common stock may be changed in accordance with Section 4.3 of the Plan.

        2.8    " Disability " means the disability of the Participant such as would entitle the Participant to receive disability income benefits pursuant to the long-term disability plan of the Company or Subsidiary then covering the Participant or, if no such plan exists or is applicable to the Participant, the permanent and total disability of the Participant within the meaning of Section 22(e)(3) of the Code.

        2.9    " DLJMB " means DLJ Merchant Banking Partners II, L.P. and all its affiliated entities as described in the Investors' Agreement.

        2.10    " DLJMB Liquidation Event " means, except for transfers to Permitted Transferees (as defined in the Investors' Agreement), (i) a sale or other transfer by DLJMB of 90% or more of its shares of common equity in the Company (including all common equity originally purchased by DLJMB and any additional common equity purchased by DLJMB thereafter, whether voting, Class B or any other class of common equity created by the Company) to one or more persons or entities (in one transaction or in a series of related transactions) other than in connection with a public offering of the Company's common equity, (ii) the sale, lease, exchange or other transfer, directly or indirectly, of substantially all

of the assets of the Company (in one transaction or in a series of related transactions) to a person or entity that is not controlled by the Company, or (iii) a merger or consolidation to which the Company is a party if the shareholders of the Company immediately prior to the effective date of such merger or consolidation do not have "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) immediately following the effective date of such merger or consolidation of more than 50% of the combined voting power of the surviving corporation's outstanding securities ordinarily having the right to vote at elections of directors.

        2.11    " Enterprise Value " means a value equal to six times the Pro-Forma EBITDA as shown on the Company's consolidated statement of operations for its most recent fiscal year end.

        2.12    " Eligible Recipients " means all employees of the Company or any Subsidiary and any non-employee directors, consultants and independent contractors of the Company or any Subsidiary.

        2.13    " Exchange Act " means the Securities Exchange Act of 1934, as amended.

        2.14    " Fair Market Value " means, with respect to the Common Stock, as of the Valuation Date (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote) (a) the mean between the reported high and low sale prices of the Common Stock if the Common Stock is listed, admitted to unlisted trading privileges or reported on any foreign or national securities exchange or on the NASDAQ National Market or an equivalent foreign market on which sale prices are reported; (b) if the Common Stock is not so listed, admitted to unlisted trading privileges or reported, the closing bid price as reported by the NASDAQ SmallCap Market, OTC Bulletin Board or the National Quotation Bureau, Inc. or other comparable service; or (c) if the Common Stock is not so listed or reported, such price shall be the Formula Value, or such other price as the Committee shall determine is appropriate in its sole discretion. The Committee's determination as to the Fair Market Value of the Common Stock shall be final, conclusive and binding for all purposes and on all persons, including, without limitation, the Company, shareholders of the Company, the Participants and their respective successors-in-interest. No member of the Board or the Committee shall be liable for any determination regarding current values of the Common Stock that is made in good faith.

        2.15    " Formula Value " means the price determined on a Valuation Date by subtracting (i) Total Debt and (ii) Total Preferred Stock from the Enterprise Value, adding Total Cash to this difference and dividing such sum by the aggregate of the number of shares of capital stock of the Company outstanding on such Valuation Date (including all vested and unvested Shares) and all shares of common equity of the Company which may be issuable upon the exercise of options and warrants of the Company outstanding on such Valuation Date (whether or not then exercisable); provided, however, that any option which is not subject to a specific vesting schedule and only becomes fully exercisable upon a DLJMB Liquidation Event which realizes an internal rate of return in excess of fifty percent shall not be included in the outstanding option number on such Valuation Date.

        2.16    " Incentive Stock Option " means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that qualifies as an "incentive stock option" within the meaning of Section 422 of the Code.

        2.17    " Investors' Agreement " means the Investors' Agreement, dated November 23, 1999, by and among the Company and its shareholders, as amended from time to time.

        2.18    " Non-Statutory Stock Option " means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that does not qualify as an Incentive Stock Option.

        2.19    " Option " means an Incentive Stock Option or a Non-Statutory Stock Option.

        2.20    " Partial Termination " means a change in the Participant's employment or other service with the Company and all its Subsidiaries such that the number of hours worked by such Participant is

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substantially reduced for any reason as the Committee in its sole discretion may determine from the number of hours such Participant is required to work for the Company or Subsidiary and such reduction is expected to extend for an indefinite period of time.

        2.21    " Participant " means an Eligible Recipient who receives one or more Options under the Plan, and to the extent such Participant transfers any Option granted under this Plan to a Permitted Transferee (as defined in the Investors' Agreement) in accordance with the terms of the Investors' Agreement such term shall mean the Participant and such Permitted Transferee of such Participant.

        2.22    " Previously Acquired Shares " means shares of Common Stock that are already owned by the Participant or, with respect to any Option, that are to be issued upon the exercise of such Option.

        2.23    " Pro-Forma EBITDA " means earnings before interest, taxes, depreciation, amortization and non-cash compensation expenses as computed using generally accepted accounting principles on a pro-forma basis as allowed by Regulation S-X of the Securities Act.

        2.24    " Repurchase Date " means the date set forth in Section 7.7 of the Plan.

        2.25    " Repurchase Right " means the Company's irrevocable and exclusive right to repurchase from the Participant all shares of Common Stock previously acquired upon exercise of an Option, at a price equal to the exercise price paid by the Participant to acquire such shares of Common Stock, in the event a Participant's employment or other service with the Company and all its Subsidiaries is terminated by the Company or any Subsidiary for Cause.

        2.26    " Retirement " means termination of employment or service pursuant to and in accordance with the regular (or, if approved by the Committee for purposes of the Plan, early) retirement/pension plan or practice of the Company or Subsidiary then covering the Participant, provided that if the Participant is not covered by any such plan or practice, the Participant will be deemed to be covered by the Company's plan or practice for purposes of this determination.

        2.27    " Securities Act " means the Securities Act of 1933, as amended.

        2.28    " Subsidiary " means any entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant equity interest, as determined by the Committee.

        2.29    " Tax Date " means the date any withholding tax obligation arises under the Code or other applicable tax statute for a Participant with respect to an Option.

        2.30    " Total Cash " means the total amount of cash and cash equivalents shown on the Company's consolidated balance sheet as of its most recent fiscal year end.

        2.31    " Total Debt " means any indebtedness of the Company in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances, except any such balance that constitutes an accrued expense, trade payable or customer contract advance, if and to the extent that any of the foregoing (other than letters of credit) would appear as a liability on the Company's consolidated balance sheet as of its most recent fiscal year end.

        2.32    " Total Preferred Stock " means the total amount of the liquidation preference on all of the Company's issued and outstanding preferred stock as of its most recent fiscal year end.

        2.33    " Valuation Date " means a date on which the Committee shall determine the Fair Market Value of the Common Stock, which date shall be no more than ninety (90) days following the Company's fiscal year end.

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3.     Plan Administration.     

        3.1     The Committee.     The Plan will be administered by the Board or by a committee of the Board. So long as the Company has a class of its equity securities registered under Section 12 of the Exchange Act, any committee administering the Plan will consist solely of two or more members of the Board who are "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act and, if the Board determines in its sole discretion, who are "outside directors" within the meaning of Section 162(m) of the Code. As used in the Plan, "Committee" will refer to the Board or to such a committee, if established. The committee, if established, will act by majority approval of the members (but may also take action with the written consent of a majority of the members of such committee), and a majority of the members of such a committee will constitute a quorum. To the extent consistent with corporate law, the Committee may delegate to any officers of the Company the duties, power and authority of the Committee under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that only the Committee may exercise such duties, power and authority with respect to Eligible Recipients who are subject to Section 16 of the Exchange Act. The Committee may exercise its duties, power and authority under the Plan in its sole and absolute discretion without the consent of any Participant or other party, unless the Plan specifically provides otherwise. Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be final, conclusive and binding for all purposes and on all persons, including, without limitation, the Company, the shareholders of the Company, the Participants and their respective successors-in-interest. No member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Option granted under the Plan.

        3.2     Authority of the Committee.     

        (a)   In accordance with and subject to the provisions of the Plan, the Committee will have the authority to determine all provisions of Options as the Committee may deem necessary or desirable and as consistent with the terms of the Plan, including, without limitation, the following: (i) the Eligible Recipients to be selected as Participants; (ii) the nature and extent of the Options to be granted to each Participant (including the number of shares of Common Stock to be subject to each Option, the exercise price and the manner in which Options will become exercisable) and the form of written agreement, if any, evidencing such Option; (iii) the time or times when Options will be granted; (iv) the duration of each Option; and (v) the restrictions and other conditions to which the Options, or vesting of Options, may be subject. In addition, the Committee will have the authority under the Plan in its sole discretion to pay the economic value of any Option in the form of cash, Common Stock or any combination of both.

        (b)   The Committee will have the authority under the Plan to amend or modify the terms of any outstanding Option in any manner, including, without limitation, the authority to modify the number of shares or other terms and conditions of an Option, extend the term of an Option, accelerate the exercisability or otherwise terminate any restrictions or vesting relating to an Option, accept the surrender of any outstanding Option or, to the extent not previously exercised or vested, authorize the grant of new Options in substitution for surrendered Options; provided, however that the amended or modified terms are permitted by the Plan as then in effect and that any Participant adversely affected by such amended or modified terms has consented to such amendment or modification. No amendment or modification to an Option, however, whether pursuant to this Section 3.2 or any other provisions of the Plan, will be deemed to be a re-grant of such Option for purposes of this Plan.

        (c)   In the event of (i) any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, extraordinary dividend or divestiture (including a spin-off) or any other change in corporate structure or shares, (ii) any purchase, acquisition, sale or disposition of a significant amount of assets or a significant

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business, (iii) any change in accounting principles or practices, or (iv) any other similar change, in each case with respect to the Company or any other entity whose performance is relevant to the grant or vesting of an Option, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) may, without the consent of any affected Participant, amend or modify the conditions to the exercisability of any outstanding Option that is based in whole or in part on the financial performance of the Company (or any Subsidiary or division thereof) or such other entity so as equitably to reflect such event, with the desired result that the criteria for evaluating such financial performance of the Company or such other entity will be substantially the same (in the sole discretion of the Committee or the board of directors of the surviving corporation) following such event as prior to such event; provided, however, that the amended or modified terms are permitted by the Plan as then in effect.

4.     Shares Available for Issuance.     

        4.1     Maximum Number of Shares Available.     Subject to adjustment as provided in Section 4.3 of the Plan, the maximum number of shares of Common Stock that will be available for issuance under the Plan will be 825,000 shares of Common Stock.

        4.2     Accounting for Options.     Shares of Common Stock that are issued under the Plan or that are subject to outstanding Options will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Option that lapses, expires, is forfeited or for any reason is terminated unexercised and any shares of Common Stock that are subject to an Option that is settled or paid in cash or any form other than shares of Common Stock will automatically again become available for issuance under the Plan. In addition, in the event that any shares of Common Stock that are issued under the Plan are reacquired by the Company pursuant to any forfeiture provision, right of repurchase or right of first refusal, such shares will automatically again become available for issuance under the Plan, except that any such shares so reacquired will not be available for issuance in connection with the exercise of Incentive Stock Options unless permitted by Section 422 of Code and the rules and regulations thereunder.

        4.3     Adjustments to Shares and Options.     

        (a)     General.     In the event that the Committee determines that any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other similar change in the corporate structure or shares of the Company, affects the Options such that an adjustment is determined by the Committee, in its sole discretion, to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) shall, in such manner as it deems equitable, adjust any or all of (i) the number of shares of Common Stock of the Company (or number and kind of other securities or property) available for issuance or payment under the Plan, (ii) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or property) subject to outstanding Options, and (iii) the grant or exercise price with respect to any Options, or, if deemed appropriate, make provisions for a cash payment to the holder of an outstanding Option.

        (b)     Mergers and Consolidations.     Without limiting the authority of the Committee to take any actions deemed appropriate under Section 4.3(a) of the Plan, in the event that the Company is a party to a merger or consolidation, outstanding Options under the Plan will be subject to the

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agreement of merger or consolidation, and such agreement, without the Participants' consent, may provide for the following:

          (i)  If the Company is the surviving corporation in connection with such merger or consolidation, the continuation of outstanding Options by the Company.

         (ii)  If the Company is not the surviving corporation in connection with such merger or consolidation, the assumption of the Plan and the outstanding Options by the surviving corporation or its parent or the substitution by the surviving corporation or its parent of options with substantially similar terms for such outstanding Options.

5.     Participation.     

        Participants in the Plan will be those Eligible Recipients who, in the judgment of the Committee, have contributed, are contributing or are expected to contribute to the achievement of economic objectives of the Company or its Subsidiaries. Eligible Recipients may be granted from time to time one or more Options as may be determined by the Committee in its sole discretion. Options will be deemed to be granted as of the date specified in the grant resolution of the Committee, which date will be the date of any related agreement with the Participant.

6.     Options.     

        6.1     Grant.     An Eligible Recipient may be granted one or more Options under the Plan, and such Options will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may designate whether an Option is to be considered an Incentive Stock Option or a Non-Statutory Stock Option. To the extent that any Incentive Stock Option granted under the Plan ceases for any reason to qualify as an "incentive stock option" for purposes of Section 422