EXHIBIT 10.3
R.H. Donnelley Corporation
2009 Long-Term Incentive Program
For Executive Officers
I. Introduction
1.1 Purposes. The purposes of this 2009 Long-Term Incentive Program for
Executive Officers, as established by R.H. Donnelley Corporation, a Delaware
corporation (the “Company”), are (i) to provide incentive compensation to
Executive Officers (as defined below) and certain other employees of the Company
and its subsidiaries and affiliates based on the achievement of performance
goals designated by the Compensation and Benefits Committee of the Company’s
Board of Directors (the “Committee”) pursuant to the Company’s 2005 Stock Award
and Incentive Plan, (ii) to advance the interests of the Company and its
stockholders by attracting and retaining highly competent Executive Officers and
employees and (iii) to motivate such persons to act in the long-term best
interests of the Company and its stockholders.
1.2 Certain Definitions. For purposes of the Program, the following capitalized
terms shall have the respective meanings set forth below. Capitalized terms not
defined herein shall have the respective meanings specified in the Plan. For
purposes of the Program, references to employment by the Company shall also mean
employment by a subsidiary or an affiliate of the Company.
     (a) “Annual Base Salary” means the annual base salary of a Participant for
the 2009 Fiscal Year.
     (b) “Award Notice” means a written notice from the Company to the recipient
of a Long-Term Incentive Award hereunder setting forth the terms and conditions
of such Long-Term Incentive Award.
     (c) “Beneficiary” means the legal representatives of the Participant’s
estate entitled by will or the laws of descent and distribution to receive the
benefits under a Participant’s Long-Term Incentive Award upon a Participant’s
death, provided that, if and to the extent authorized by the Committee, a
Participant may be permitted to designate a Beneficiary, in which case the
“Beneficiary” instead will be the person, persons, trust or trusts (if any are
then surviving) which have been designated by the Participant in his or her most
recent written and duly filed beneficiary designation to receive the benefits
specified under the Participant’s Long-Term Incentive Award upon such
Participant’s death. Unless otherwise determined by the Committee, any
designation of a Beneficiary other than a Participant’s spouse shall be subject
to the written consent of such spouse.
     (d) “Board” means the Company’s Board of Directors.
     (e) “Cause” shall have the meaning defined in any employment agreement or
severance agreement between the Participant and the Company, then in effect or,
if no such agreement is then in effect, “Cause” shall mean (i) the Participant’s
willful and continued failure substantially to perform the duties of his or her
position with the Company after notice and opportunity to cure; (ii) any willful
act or omission by the Participant constituting dishonesty, fraud or other
malfeasance, which in any such case is demonstrably injurious to the financial

 

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condition or business reputation of the Company or its subsidiaries or
affiliates; (iii) an act that constitutes misconduct resulting in a restatement
of the Company’s financial statements due to material non-compliance with any
financial reporting requirement within the meaning of Section 304 of The
Sarbanes-Oxley Act of 2002, as amended; or (iv) a felony conviction in a court
of law under the laws of the United States or any state thereof or any other
jurisdiction in which the Company its subsidiaries or affiliates conduct
business which materially impairs the value of the Participant’s service to the
Company; provided, however, that for purposes of this definition, no act or
failure to act shall be deemed “willful” unless effected by the Participant not
in good faith and without a reasonable belief that such action or failure to act
was in or not opposed to the Company’s best interests, and no act or failure to
act shall be deemed “willful” if it results from any incapacity of the
Participant due to physical or mental illness.
     (f) “Cumulative Free Cash Flow” means the sum of the Free Cash Flow for the
Company’s 2009, 2010 and 2011 Fiscal Years.
     (g) “Disability” shall have the meaning defined for such term in the
long-term disability plan of the Company, as in effect from time to time.
     (h) “Executive Officer” means an officer of the Company who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended.
     (i) “Fiscal Year” means each consecutive twelve-month period beginning
January 1 and ending December 31.
     (j) “Free Cash Flow” means cash flow from operations minus (i) capital
expenditures and (ii) fees and other expenses directly related to the cost of
restructuring, as determined by the Committee and, to the extent applicable, as
reported in the Company’s audited financial statements.
     (k) “Good Reason” shall have the meaning defined in any employment
agreement or severance agreement between the Participant and the Company, then
in effect or, if no such agreement is then in effect, “Good Reason” shall mean
(i) any material diminution in the Participant’s annual base salary with the
Company; (ii) any material diminution in the Participant’s authority, duties or
responsibilities with the Company; or (iii) any material change in the
geographic location at which the Participant must perform services for the
Company; provided, however, that the Participant must notify the Company of his
or her intention to terminate the Participant’s employment by written notice to
the Company within ninety (90) days of the initial existence of such event and
the Company shall have thirty (30) days to cure such event after receipt of such
notice.
     (l) “Long-Term Incentive Award” means an award conferring a right,
contingent upon the attainment of specified Performance Measures within the
Performance Period, to receive cash, as determined by the Committee or as
evidenced in the Award Notice relating to such Long-Term Incentive Award.
     (m) “Participant” means a person holding an outstanding Long-Term Incentive
Award granted under the Program.

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     (n) “Payment Date” means the date the Participant or the Participant’s
Beneficiary, as the case may be, receives payment, if any, with respect to all
or a portion of such Participant’s Long-Term Incentive Award in accordance with
Section 2.2(d).
     (o) “Performance Measures” means the performance measures designated by the
Committee pursuant to the terms of the Plan as a condition to the earning of a
Long-Term Incentive Award granted hereunder.
     (p) “Performance Period” means the Company’s 2009, 2010 and 2011 Fiscal
Years with respect to which the Performance Measures applicable to a Long-Term
Incentive Award shall be measured.
     (q) “Plan” means the R.H. Donnelley Corporation 2005 Stock Award and
Incentive Plan, as amended from time to time.
     (r) “Program” means this R.H. Donnelley Corporation 2009 Long-Term
Incentive Program for Executive Officers, as amended from time to time.
     (s) “Successful Restructuring” means any restructuring, reorganization
and/or recapitalization of all or a significant portion of the Company’s
outstanding indebtedness (including bank debt, inclusive of letters of credit,
bond debt, and other on and off balance sheet indebtedness, trade claims, leases
(both on and off balance sheet) and other litigation-related claims and
obligations, unfunded pension and retiree medical liabilities, or other
liabilities (collectively, the “Existing Obligations”) that is achieved, without
limitation, through (i) a solicitation of waivers and consents from the holders
of all or a significant portion of the Existing Obligations; (ii) rescheduling
of the maturities of all or a significant portion of the Existing Obligations;
(iii) a change in interest rates; (iv) repurchase, settlement or forgiveness of
all or a significant portion of the Existing Obligations; (v) conversion of all
or a significant portion of the Existing Obligations into equity; (vi) an
exchange offer involving the issuance of new securities in exchange for all or a
significant portion of the Existing Obligations; (vii) the issuance of new
securities; (viii) the sale or disposition of existing securities or assets;
and/or (ix) other similar transaction or series of transactions; provided,
however, that in the event the restructuring, reorganization and/or
recapitalization of all or a significant portion of the Existing Obligations is
to be accomplished through a filing by the Company pursuant to Chapter 11 of the
United States Bankruptcy Code, a Successful Restructuring shall be deemed to
occur only upon, prior to any such filing, (A) the receipt of votes sufficient
to confirm a plan of reorganization pursuant to the United States Bankruptcy
Code providing for the restructuring, reorganization and/or recapitalization; or
(B) the entry by the Company into a lockup or similar agreement or agreements
providing for votes sufficient to confirm a plan of reorganization pursuant to
the United States Bankruptcy Code providing for the restructuring,
reorganization and/or recapitalization.
     (t) “Target Long-Term Incentive” means the dollar amount which is equal to
a percentage of the Participant’s Annual Base Salary as set forth in the
Participant’s Award Notice.
1.3 Administration. The Program shall be administered by the Committee. The
Committee shall, in its sole and absolute discretion and subject only to the
terms of the Program and the Plan, have the full power and authority to
interpret the Program and the application thereof,

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establish (and rescind) any rules and regulations it may deem necessary,
appropriate or desirable for the administration of the Program, make adjustments
to applicable Performance Measures, subject to the terms of the Plan, to reflect
extraordinary events, and impose, incidental to the grant of a Long-Term
Incentive Award, conditions with respect to the Long-Term Incentive Award. All
interpretations, rules, regulations, conditions and other acts of the Committee
shall be final, binding and conclusive on all parties.
     The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate; provided, however, that with respect to any person
who is a “covered employee” within the meaning of Section 162(m) of the Code or
who, in the Committee’s judgment, is likely to be a covered employee at any time
during the Performance Period, only the Committee shall be permitted to
(i) designate such person to participate in the Plan for the Performance Period,
(ii) establish performance goals and individual incentive levels for such
person, and (iii) certify the achievement of such performance goals. The
Committee may also delegate ministerial administrative functions, such as
receipt of notices, implementation of Program payments and mathematical
calculations, to one or more employees or consultants as the Committee may deem
necessary or desirable.
     No member of the Board or Committee, and neither the Chief Executive
Officer nor any other person to whom the Committee delegates any of its power
and authority hereunder, shall be liable for any act, omission, interpretation,
construction or determination made in connection with this Program in good
faith, and each such person shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including attorneys’ fees) arising therefrom to the full extent permitted by
law (except as otherwise may be provided in the Company’s Certificate of
Incorporation and/or By-Laws) and under any directors’ and officers’ liability
insurance that may be in effect from time to time.
II. Terms Of Long-Term Incentive Awards
2.1 Eligibility. Participants in the Program shall consist of (i) such Executive
Officers as the Committee in its sole discretion may select from time to time
and (ii) such other employees of the Company and its subsidiaries and affiliates
as the Chief Executive Officer in his sole discretion may select from time to
time, based on a determination that such employees are critical to a Successful
Restructuring. A grant of a Long-Term Incentive Award to any person shall not
entitle such person to an additional grant of Long-Term Incentive Awards at any
subsequent time.
2.2 Terms of Long-Term Incentive Awards. (a) In General. Long-Term Incentive
Awards granted under this Program shall be subject to the terms and conditions
set forth in this Section 2.2, and shall contain such additional terms and
conditions, not inconsistent with the terms of the Program and the Plan, as the
Committee shall deem advisable. Except as provided in Section 2.2(c) below, no
Participant shall receive any payment with respect to a Long-Term Incentive
Award unless the Participant remains continuously employed by the Company
through the applicable Payment Date.

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     (b) Amount of Long-Term Incentive Award and Performance Measures. The
amount of each Participant’s Long-Term Incentive Award shall be determined based
on the following Performance Measures.
          (i) Cumulative Free Cash Flow. Subject to Section 2.2(a) and
Section 2.2(c), a Participant shall receive an amount equal to the percentage of
the Participant’s Target Long-Term Incentive stated in the table below, based on
the Company’s Cumulative Free Cash Flow during the Performance Period.

          Cumulative Free Cash Flow   Percentage of Target Long-Term Incentive
Less than $0
    0 %
$75 million
    50 %
$150 million
    100 %
$225 million
    150 %
$300 million or more
    200 %

If the Cumulative Free Cash Flow is $0 or more and less than $300 million, and
is not set forth above, the applicable percentage of the Target Long-Term
Incentive shall be determined by prorating the amounts set forth above. The
Committee shall adjust the Company’s Cumulative Free Cash Flow as it determines
to be appropriate to reflect purchase accounting impacts related to acquisitions
and other extraordinary, non-recurring or unusual events or accounting
treatments. Notwithstanding the foregoing, the amount payable to a Participant,
if any, pursuant to this Section 2.2(b)(i) shall be reduced dollar-for-dollar by
any amount paid to the Participant pursuant to Section 2.2(b)(ii) below;
provided, however, that in no event shall any such reduction require any
Participant to repay to the Company an amount received pursuant to
Section 2.2(b)(ii) below.
          (ii) Successful Restructuring. Subject to Section 2.2(a) and
Section 2.2(c), in the event of the Company’s Successful Restructuring during
the Performance Period, each Participant shall receive an amount equal to one
hundred percent (100%) of the Participant’s Target Long-Term Incentive.
     (c) Special Termination Rules and Forfeiture.
     (i) Termination by the Participant for Good Reason, by the Company without
Cause or as a Result of the Participant’s Death or Disability. If the
Participant’s employment is terminated by the Participant with Good Reason, by
the Company without Cause or as a result of the Participant’s death or
Disability, then the Long-Term Incentive Award shall be paid, to the extent
earned, to the Participant or the Participant’s Beneficiary, as the case may be,
as if the Participant had remained employed with the Company through the
applicable Payment Date.

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     (ii) Any Other Termination. If the Participant’s employment with the
Company is terminated under circumstances other than as described in
Section 2.2(c)(i) above, then the Participant shall not be entitled to any
payments with respect to any Long-Term Incentive Award following such
termination of employment, and such portion of the Long-Term Incentive Award
shall be immediately forfeited.
     (d) Payment. Not later than (i) the March 15th occurring immediately after
the year in which the Performance Period ends, for purposes of
Section 2.2(b)(i), or (ii) thirty (30) days following the date on which the
Successful Restructuring occurs, for purposes of Section 2.2(b)(ii), the
Participant or the Participant’s Beneficiary, as the case may be, shall receive
a lump sum cash payment from the Company in an amount equal, as determined by
the Committee in accordance with Section 2.2(b), to the amount of the Long-Term
Incentive Award earned by such Participant or Beneficiary, if any, subject to
the deduction of taxes and other amounts pursuant to Section 3.4 of the Program.
2.3 Section 409A. All payments under this Program are intended to be exempt from
Section 409A of the Code as “short-term deferrals,” within the meaning of the
Treasury Regulations promulgated under Section 409A of the Code.
III. General
3.1 Effective Date and Term of Program. The Program shall be effective as of
January 1, 2009, and shall continue until all Long-Term Incentive Awards have
been paid or forfeited pursuant to the terms of the Program.
3.2 Amendments. The Board may amend the Program and any Award Notice as it shall
deem advisable in the exercise of its sole and absolute discretion; provided,
however that no such amendment may adversely affect the rights granted to a
Participant with respect to an outstanding Long-Term Incentive Award pursuant to
its related Award Notice without the consent of such Participant.
3.3 Non-Transferability. No Long-Term Incentive Award or any rights thereunder
shall be transferable other than by will or the laws of descent and distribution
or pursuant to any Beneficiary designation procedures as may approved by the
Committee for such purpose. Except as permitted by the preceding sentence, no
Long-Term Incentive Award hereunder shall 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.
Upon any attempt by the holder of a Long-Term Incentive Award to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of such
Long-Term Incentive Award, such Long-Term Incentive Award and all rights
thereunder shall immediately become null and void.
3.4 Tax and Other Withholding. The Company shall have the right to deduct from
any amounts paid pursuant to the Program (or from other compensation payable by
the Company to the Participant) all Federal, state, local and other taxes and
any other amounts which may be required under law or elected by the Participant
to be withheld or paid in connection with the settlement of a Long-Term
Incentive Award.

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3.5 No Right of Participation or Employment. No person shall have any right to
participate in the Program or to be granted Long-Term Incentive Awards under the
Program. Neither the Program nor any Award Notice relating to a Long-Term
Incentive Award granted hereunder shall confer upon any person any right to be
employed, reemployed or continue employment by the Company or affect in any
manner the right of the Company to terminate the employment of any person with
or without notice at any time for any reason without liability hereunder.
Nothing herein shall confer any right or benefit or any entitlement to any
benefit on any Participant unless and until a benefit is actually paid pursuant
to the Program. The adoption and maintenance of the Program shall not be deemed
to constitute a contract of employment or otherwise between the Company and any
Participant, or to be a consideration for or an inducement or condition of any
employment. Neither the provisions of the Program nor any action taken by the
Company or the Board or the Committee pursuant to the provisions of the Program
shall be deemed to create any trust, express or implied, or any fiduciary
relationship between or among the Company, the Board or Committee, any member of
the Board or Committee, or any employee, former employee or beneficiary thereof.
3.6 Unfunded Arrangement. The Program shall at all times be entirely unfunded
and no provision shall at any time be made with respect to segregating assets of
the Company for payment of any benefit hereunder. No holder of a Long-Term
Incentive Award shall have any interest in any particular assets of the Company
or any of its Affiliates by reason of the right to receive a benefit under the
Program and any such holder shall have only the rights of an unsecured creditor
of the Company with respect to any rights under the Program.
3.7 Severability; Entire Agreement. If any of the provisions of this Program or
any Award Notice is finally held to be invalid, illegal or unenforceable
(whether in whole or in part), such provision shall be deemed modified to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability, and the remaining provisions shall not be affected thereby;
provided, that, if any of such provisions is finally held to be invalid,
illegal, or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision shall be
deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder. The Plan, the Program and
any Award Notice contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements, promises, covenants,
arrangements, communications, representations and warranties between them,
whether written or oral with respect to the subject matter thereof.
3.8 Governing Law. This Program, each Long-Term Incentive Award granted
hereunder and its related Award Notice, and all determinations made and actions
taken pursuant thereto, to the extent not otherwise governed by 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
conflicts of laws.

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