Exhibit 10.27

 

RR DONNELLEY   

Corporate Headquarters

111 South Wacker Drive

Chicago, Illinois 60606

February 5, 2007

Miles McHugh

4059 Howard Ave

Western Springs, IL 60558

Dear Miles:

In recognition of your importance to R.R. Donnelley & Sons Company, its
officers, directors, subsidiaries, affiliates, and successors, including but not
limited to Moore Wallace North America, Inc. (“Donnelley” or “Company”) and to
further the Company’s interests, we are pleased to offer you a new employment
letter (“Agreement”). All prior agreements, are hereby superseded by this
Agreement and are of no further force and effect. The terms of this Agreement
are as follows:

You will continue to be employed by the Company as its SVP, Controller, and
Chief Accounting Officer. We and you hereby acknowledge that your employment
with the Company constitutes “at-will” employment and that either party may
terminate your employment at any time upon written notice of termination within
a reasonable period of time before the effective date of the termination. You
will have the customary duties, responsibilities and authorities of such
position. You will also receive such office, staffing and other assistance as is
commensurate with that received by other executives at your level in the
Company.

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 U.S.
$350,000 per year. This Base Salary will be paid in accordance with the normal
payroll practices of the Company.

(ii) In respect of each calendar year of the Company, you will be eligible to
receive an annual bonus (the “Annual Bonus”) in accordance with the Company’s
annual incentive compensation plan (“Plan”) with a target bonus opportunity of
75% of Base Salary. The performance objectives for your Annual Bonus with
respect to each calendar year will be determined as provided for in the Plan.

(iii) You will be eligible for all benefits available generally to executives at
your level.

(iv) You will be eligible for three weeks vacation annually.

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II. Severance

If the Company terminates your employment without Cause, the Company will pay
you an amount equal to one times your Annualized Total Compensation (as defined
below), subject to the execution by you of a customary release, which amount
shall be payable in equal installments over the 12-month period (“Severance
Period”) following the date your employment with the Company is terminated
(“Termination Date”). Medical, dental and vision insurance programs which are
available to you as of your Termination Date shall be available under COBRA for
a period of 18 months following your Termination Date in accordance with the
terms of the relevant benefit plans, as they may change from time to time. Your
COBRA coverage, once elected, will be subsidized to the rate of an active
employee for the length of your Severance Period, but in no event will exceed 18
months. Your short-term and long-term disability, group life insurance and
accidental death and dismemberment insurance end on your Termination Date.

“Annualized Total Compensation” means Base Salary plus Annual Bonus (at the
target level) for one year at the rate in effect immediately before the
Termination Date.

“Cause” means (i) your willful and continued failure to perform substantially
your duties with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness or any such failure subsequent to
your being delivered a notice of termination without Cause) after a written
demand for substantial performance is delivered to you by the Group President,
the Chief Executive Officer, or the Board that identifies the manner in which
you have not performed your duties, (ii) your willful engaging in conduct which
is demonstrably and materially injurious (monetarily or otherwise) to the
business, reputation, character or community standing of the Company,
(iii) conviction of or the pleading of nolo contendere with regard to a felony
or any crime involving fraud, dishonesty or moral turpitude, or (iv) a refusal
or failure to attempt in good faith to follow the written direction of the Group
President, the Chief Executive Officer, or the Board (provided that such written
direction is consistent with your duty and station) promptly upon receipt of
such written direction. For the purposes of this definition, no act or failure
to act by you shall be considered “willful” unless done or omitted to be done by
you in bad faith and without reasonable belief that your action or omission was
in the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of the Company’s principal outside counsel shall be conclusively
presumed to be done, or omitted to be done, by you in good faith and in the best
interests of the Company. Notwithstanding the foregoing, the Company shall
provide you with a reasonable amount of time, after a notice and demand for
substantial performance is delivered to you, to cure any such failure to
perform, and if such failure is so cured within a reasonable time thereafter,
such failure shall not be deemed to have occurred.

In the event of any termination of your employment, you agree to resign from
such offices and directorships, if any, of the Company that you may hold from
time to time. Your rights of indemnification under the Company’s 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 of the Company shall survive any termination of your
employment.

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Notwithstanding anything to the contrary in this Section II, if any installment
payment or continuation of benefit constitutes a deferral of compensation under
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and
you are a “specified employee” within the meaning of Section 409A(a)(2)(B)(1) of
the Code, then no such payment or continuation of benefit shall be made or occur
until the earliest of: (i) six months and one day after your Termination Date,
(ii) the occurrence of a “change in control” within the meaning of Section 409A
of the Code, (iii) your death, (iv) the occurrence of your disability within the
meaning of Section 409A of the Code, (iv) any other date permitted under
Section 409A(a)(2) and (a)(3) of the Code, and (vi) any other date permitted by
the Internal Revenue Service or U.S. Department of Treasury in its
interpretation of Section 409A of the Code.

III. Restrictive Covenants

You and Donnelley recognize that due to the nature of your employment and
relationship with Donnelley, you will have access to and develop confidential
business information, proprietary information, and trade secrets relating to the
business and operations of Donnelley and its affiliates. You acknowledge that
such information is valuable to the business of Donnelley and its affiliates,
and that disclosure to, or use for the benefit of, any person or entity other
than Donnelley or its affiliates, would cause substantial damage to Donnelley.
You further acknowledge that your duties for Donnelley include the opportunity
to develop and maintain relationships with Donnelley customers, employees,
representatives and agents on behalf of Donnelley; and that access to and
development of those close relationships with Donnelley customers render your
services special, unique and extraordinary. In recognition that the good will
and relationships described herein are assets and extremely valuable to
Donnelley, and that loss of or damage to those relationships would destroy or
diminish the value of Donnelley, you agree as follows:

In consideration of the covenants and agreements of the Company herein
contained, the payments to be made by the Company pursuant to this Agreement,
the positions of trust and confidence you occupy and have occupied with the
Company and the information of a highly sensitive and confidential nature
obtained as a result of such positions, you agree that, from the date of your
separation for any reason, including termination by Donnelley with or without
Cause, and for 12 months thereafter, you will not, directly or indirectly,
either as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director or in any other individual or
representative capacity, worldwide, engage in any business which is competitive
with the business of Donnelley.

You also recognize that Donnelley’s relationship with the customer or customers
you serve, and with other employees, is special and unique, based upon the
development and maintenance of good will resulting from the customers’ and other
employees’ contacts with Donnelley and its employees, including you. As a result
of your position and customer contacts, you recognize that you will gain
valuable information about (i) Donnelley’s relationship with its customers,
their buying habits, special needs, purchasing policies, (ii) the skills,
capabilities and other employment-related information about Donnelley employees,
and (iii) other matters which

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you would not otherwise know and which is not otherwise readily available. Such
knowledge is essential to the business of Donnelley and you recognize that if
your employment terminates, Donnelley will be required to rebuild that customer
relationship to retain the customer’s business. You recognize that during a
period following termination of your employment, Donnelley is entitled to
protection from your using the information and customer and employee
relationships with which you have been entrusted by Donnelley during your
employment.

You shall not, while employed by Donnelley and for a period of 12 months from
the date of termination of your employment with Donnelley for any reason,
including termination by Donnelley with or without Cause, directly or
indirectly, either on your own behalf or on behalf of any other person, firm or
entity, solicit or provide services which are the same as or similar to the
services Donnelley provided or offered while you were employed by Donnelley to
any customer or prospective customer of Donnelley (i) with whom you had direct
contact in the course of your employment with Donnelley or about whom you
learned confidential information as a result of your employment with Donnelley
or (ii) with whom any person over whom you had supervisory authority at any time
had direct contact during the course of his or her employment with Donnelley or
about whom such person learned confidential information as a result of his or
her employment with Donnelley.

You shall not while employed by Donnelley and for a period of two years from the
date of termination of my employment with Donnelley for any reason, including
termination by Donnelley with or without Cause, either directly or indirectly
solicit, induce or encourage any Donnelley employee(s) to terminate their
employment with Donnelley or to accept employment outside of Donnelley, nor
shall you cooperate with any others in doing or attempting to do so. As used
herein, the term “solicit, induce or encourage” includes, but is not limited to,
(a) initiating communications with a Donnelley employee relating to possible
employment, (b) offering bonuses or additional compensation to encourage
Donnelley employees to terminate their employment with Donnelley and accept
employment outside of Donnelley, or (c) referring Donnelley employees to outside
agents or recruiters.

You are prohibited from, at any time during your employment with the Company or
thereafter, disclosing or using any Confidential Information for your benefit or
any other person or entity, unless directed or authorized in writing by the
Company to do so, until such time as the information becomes generally known to
the public without your fault. “Confidential Information” means information
(i) disclosed to or known by you as a consequence of your employment with the
Company, (ii) not generally known to others outside the Company, and (iii) that
relates to the Company’s marketing, sales, finances, operations, processes,
methods, techniques, devices, software programs, projections, strategies and
plans, personnel information, industry contacts made during your employment, and
customer information, including customer needs, contacts, particular projects,
and pricing. These restrictions are in addition to any confidentiality
restrictions in any other agreement you may have signed with the Company.

If you accept employment with any future employer during the time period that
equals the greater of one year following the date of termination and the
Severance Period (regardless of whether you actually receive severance benefits
during that period), you will deliver a copy of this Agreement to such employer
and advise such employer concerning the existence of your obligations under this
Agreement.

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By execution of this Agreement, you acknowledge and agree that the Company would
be damaged irreparably if any provision under this Section III were breached by
you and money damages would be an inadequate remedy for any such nonperformance
or breach. Accordingly, the Company and its successors or permitted assigns in
order to protect its interests, shall pursue, in addition to other rights and
remedies existing in its favor, an injunction or injunctions to prevent any
breach or threatened breach of any of such provisions and to enforce such
provisions specifically (without posting a bond or other security). With respect
to such enforcement, the Company shall be entitled to recover from you any and
all attorneys’ fees, costs and expenses incurred by or on behalf of the Company
in enforcing or attempting to enforce any provision under this Section III or
any of the Company’s other rights under this Agreement.

IV. General

You acknowledge and agree that the provisions of this Agreement, including
Section III, are reasonable and valid in geographic, temporal and subject matter
scope and in all other respects, and do not impose limitations greater than are
necessary to protect the goodwill, Confidential Information and other business
interests of the Company. If any court subsequently determines that any part of
this Agreement, including Section III, is invalid or unenforceable, the
remainder of the Agreement shall not be affected and shall be given full effect
without regard to the invalid portions. Further, any court invalidating any
provision of this Agreement shall have the power to revise the invalidated
provisions such that the provision is enforceable to the maximum extent
permitted by applicable law.

If you breach this Agreement or any other agreement you have signed with the
Company, the Company may, in its complete discretion, stop making any of the
payments provided for in this Agreement.

The Company will provide you with the same indemnification provisions and
Directors and Officers insurance as that which is provided to other executives
at your level.

You shall not be eligible for the severance benefits set forth in Section II
above if you are or become covered under a different individually negotiated
arrangement providing for severance benefits. If, upon ultimate termination of
employment, the separation pay for which you would be eligible under the R.R.
Donnelley & Sons Company Separation Pay Plan applicable to employees generally,
if any, would be greater than the separation pay payable under to this
Agreement, then your separation pay shall be increased to correspond to the pay
you would have been eligible for under such Plan. To avoid duplicate payments,
if you are eligible to receive severance under this Agreement, you hereby waive
any payments under the R.R. Donnelley & Sons Company Separation Pay Plan.

Any controversy arising out of or relating to this Agreement or the breach of
this Agreement that cannot be resolved by you and the Company, including any
dispute as to the calculation of any payments hereunder, and the terms of this
Agreement, shall be

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determined by a single arbitrator in New York, New York, in accordance with the
rules of JAMS; provided, however, that either party may seek preliminary
injunctive relief to maintain or restore the status quo pending a decision of
the arbitrator, and the parties consent to the exclusive jurisdiction of the
courts of the State of Delaware or the Federal courts of the United States of
America located in the District of Delaware in connection therewith. The
decision of the arbitrator shall be final and binding and may be entered in any
court of competent jurisdiction. The arbitrator may award the party he
determines has prevailed in the arbitration any legal fees and other fees and
expenses that may be incurred in respect of enforcing its respective rights.

This Agreement shall at all times be governed by and construed in accordance
with the internal laws (as opposed to the conflict of law provisions) and
decisions of the State of Delaware as applied to agreements executed in and to
be fully performed within that State. This Agreement may be executed in
counterparts. Any notice or request required or permitted to be given hereunder
shall be sufficient if in writing and deemed to have been given if delivered
personally or sent by certified mail, return receipt requested, to you at the
address above, and to the Company at its Corporate Headquarters (Attn: Corporate
Secretary). This Agreement shall constitute the entire agreement between the
parties with respect to the subject matter contained herein. This Agreement may
not be changed or amended orally, but only in writing signed by both parties.
The failure of either party hereto to enforce at any time any provision of this
Agreement shall not be construed as a waiver of such provision nor in any way to
affect the validity of this Agreement or any part hereof or the right of such
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.

If the foregoing terms and conditions are acceptable and agreed to by you,
please sign on the line provided below to signify such acceptance and agreement
and return the executed copy to Lorien Gallo, Group EVP, Human Resources.

 

Very truly yours, R.R. Donnelley & Sons Company

By:

 

/s/    Thomas J. Quinlan

  Thomas J. Quinlan III  

Group President, RR Donnelley

Global Services and CFO

 

Agreed to this 7th day of February, 2007:

/s/    Miles McHugh

Miles McHugh