exv4w10



 






Exhibit 4.10




REED ELSEVIER GROUP PLC












RULES OF THE REED ELSEVIER GROUP PLC

RETENTION SHARE PLAN




(Adopted by the directors on 16 February 2004)





 









 








1. Definitions




1.1      In this Plan, unless the context otherwise requires, the following words and expressions shall
have the following meanings, namely:


Adoption Date means 16 February 2004;



Award means a right granted under the Plan to acquire automatically Shares without payment
subject to satisfaction of performance conditions;



the Board means the Board of Directors of the Company;



the Committee means the remuneration committee of the Board or other duly authorised committee
thereof or any person acting under duty powers delegated by any such committee;



Capital Reorganisation means any variation in the share capital or reserves of a Qualifying
Company (including, without limitation, by way of capitalisation issue, rights issue, sub-division,
consolidation, or reduction);



the Company means Reed Elsevier Group plc;



Control has the meaning given to that word by section 840 of the Taxes Act;



Date of Grant means the date on which an Award is granted;



Dutch Share means an ordinary share in the capital of RE NV or shares representing those
shares following any Capital Reorganisation of RE NV;



Executive means any employee or executive director of any member of the Group (excluding any
executive director of the Company or any Qualifying Company) whose terms of service require him to
devote substantially the whole of his working time to the affairs of the Group;



Grant Period means the period of 42 days commencing on any of the following:





	(a)	 	the day immediately following the day on which the Qualifying Companies make an announcement
of their results for the last preceding financial year, half year or other period; or
	 
	(b)	 	any day on which the Board resolves that exceptional circumstances exist which justify the
grant of an Award;



the Group means the Company and every company which is under the Control of the Company and
member of the Group shall be construed accordingly;



Participant means any individual who holds a subsisting Award (including, where the context
permits, the legal personal representatives of a deceased Participant);



Performance Period means the period of three financial years commencing in the financial year
in which the Date of Grant falls;


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Qualifying Company means each of RE PLC and RE NV;



RE NV means Reed Elsevier NV;



RE PLC means Reed Elsevier PLC;



UK Share means an ordinary share in the capital of RE PLC or shares representing those shares
following any Capital Reorganisation of RE PLC;



the Plan means this Reed Elsevier Group plc Retention Share Plan as amended from time to time;



Shares means a UK Share and/or a Dutch Share and Shareholder shall be construed accordingly;



Taxes Act means the Income and Corporation Taxes Act 1988; and



Vesting Date means (unless the Committee specifies otherwise at its Date of Grant), the third
anniversary of the Date of Grant of the Award (or, if later, the date of publication of the final
set of accounts of the Company which are relevant to the determination of the applicable
performance condition).




1.2      Where the context permits the singular shall include the plural and vice versa and the
masculine shall include the feminine. Headings shall be ignored in construing the Plan.



1.3      References to any Act of Parliament shall include any statutory modification, amendment or
re-enactment thereof.



2. Grant of Awards




2.1      The Committee may grant Awards to Executives selected by the Committee in its absolute
discretion during a Grant Period. For the avoidance of doubt, no Executive shall have the right or
expectation to participate in the Plan in any Grant Period.



2.2      Save as otherwise permitted in these rules, objective conditions must be satisfied prior to the
vesting of Awards. Such conditions shall consist of the conditions set out in the Schedule to this
Plan or such other conditions as the Committee may adopt from time to time. There will be no
retesting of such conditions. For the avoidance of doubt the condition may relate to remaining an
employee of a member of the Group until the Vesting Date, subject to the rules of the Plan.



2.3      The grant of an Award and/or the delivery of Shares upon vesting thereof shall be conditional
on the Executive agreeing to comply with any arrangements specified by the Company for the payment
of taxation and social security contributions (including without limitation the right to sell on
the Executive’s behalf sufficient Shares to satisfy any taxation or social security contributions
liability on the Executive’s part for which any member of the Group may be liable) in respect of an



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Award and entering into any election specified by the Company under Chapter 2 of Part 7 of the
Income Tax (Earnings & Pensions) Act 2003 in respect of shares to which he is or may become
entitled under the Plan. For Executives resident outside the UK, the Committee shall have power to
vary the grant/delivery mechanics in such manner as it thinks fit to take account of local tax and
securities laws considerations.



2.4      As soon as practicable after the Date of Grant the Company shall procure the issue to such
Executive of certificates in respect of an Award. Such certificates shall be issued under the seal
of the Company or otherwise to take effect as a deed, or may refer to another document evidencing
the legal enforceability of the Award.



2.5      No Award shall be granted under the Plan later than the tenth anniversary of the Adoption Date.



2.6      Every Award granted hereunder shall be personal to the Participant and, except to the extent
necessary to enable a personal representative to exercise the Award following the death of a
Participant, neither the Award nor the benefit thereof may be transferred, assigned, charged or
otherwise alienated. Any transfer of an Award otherwise than as permitted under this rule 2.6
shall cause the Award to lapse.



2.7      The Company shall procure that Shares are available for transfer in satisfaction of Awards. For
the avoidance of doubt Shares shall not be issued to satisfy Awards.



3. Individual Limits



No Executive shall be granted an Award which would, at the proposed Date of Grant, cause the
aggregate market value of Awards under the Plan granted to the Executive in the three year period
up to and including the Date of Grant to exceed three times such Executive’s basic salary from the
Group at the Date of Grant unless in exceptional circumstances the Committee at its discretion
determines otherwise.




4. Specific Provisions Relating to Awards



The number of Shares that vest under an Award shall be determined by reference to whether the
performance condition imposed under rule 2.2 has been fulfilled in accordance with these rules by
the Vesting Date.




5. Lapse of Awards — Cessation of Employment




5.1      Save as otherwise provided in these rules, in the event that the Participant ceases or will
cease to be an employee of a member of the Group:




	(a)	 	by reason of resignation, the Award shall lapse automatically on the date on which the
Participant gives notice of the termination of his employment; and
	 
	(b)	 	for any reason where (a) does not apply, the Award shall lapse automatically on the date of
the cessation of employment.




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5.2      Save as otherwise provided in these rules, where a Participant ceases to be an employee of a
member of the Group by reason of:




	(a)	 	death;
	 
	(b)	 	long term disability;
	 
	(c)	 	retirement due to ill-health
	 
	(d)	 	retirement at the normal retirement date or such other retirement date as the Company may
determine in its absolute discretion; or
	 
	(e)	 	any other reason if the Company so decides in its absolute discretion



then an Award may vest either (at the Company’s absolute discretion):





	(i)	 	within such period after the leaving date as the Company may at its discretion specify, in
respect of that number of Shares which the Company may at its discretion specify having regard
to the Company’s determination of the Award’s likely vesting level if the Award had continued
until the maturity date; or
	 
	(ii)	 	at the Vesting Date, subject to such reduction as the Company shall determine to take account
of the fact that the Participant was not in service for the full period between the Date of
Grant and the Vesting Date.




5.3      For the purposes of rules 5.1 and 5.2 a female Participant shall not be treated as ceasing to
be an employee of a member of the Group if absent from work wholly or partly because of pregnancy
or confinement until she ceases to be entitled to exercise any statutory or contractual right to
return to work.



5.4      For the purposes of rules 5.1, 5.2, and 5.3 following an Award rollover pursuant to rule 9, a
Participant shall not be treated as ceasing to be employed by a member of the Group until he ceases
to be employed by a company which is either (i) the Acquiring Company (as defined in rule 9) or
(ii) a subsidiary of the Acquiring Company (within the meaning of section 736 of the Companies Act
1985).



5.5      If a Participant:




	(a)	 	is dismissed from employment with a member of the Group in circumstances justifying summary
termination under his contract of employment, or resigns from employment with a member of the
Group; and
	 
	(b)	 	within twelve months of the date of termination of his employment (the Termination Date),
becomes an employee of a Competitor Company and his employment with that company results in
his material involvement in one or more businesses that compete with any business carried on
by a member of the Group in which he had been involved in the twelve months prior to the
Termination Date,



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	 	 	he must pay to the Company, within seven days of written demand from the Company, the Relevant
Amount. The Relevant Amount is an amount equal to A minus B where:



A is an amount equal to the pre-tax gain realised by the Participant on the exercise of an Award in
the period of six months prior to the Termination Date. For these purposes, the gain shall be the
market value of the Shares acquired by the Participant on the vesting of the Award and such gain
shall be determined irrespective of whether the Participant has sold or retained the Shares so
acquired; and



B is an amount equal to the tax and social security liabilities incurred by the Participant on the
vesting of the Award.



A Competitor Company shall mean any of those companies notified to the Participant from time to
time.



By accepting an Award, a Participant shall be bound by this rule 5.5 notwithstanding that (i) it
shall only be applicable after the release of Shares under rule 11, and (ii) whether or not the
essential terms of this rule 5.5 shall have been separately notified in writing by the Company to
each Participant.




6. General Offer




6.1      If any person (either alone or together with any person acting in concert with him) obtains
Control of a Qualifying Company as a result of a general offer to acquire the whole of the share
capital of that Qualifying Company (other than those shares which are already owned by him and/or
any person acting in concert with him), in respect of Shares in that Qualifying Company which are
under the Award (but not in respect of Shares in the other Qualifying Company which are or may be
under the Award), a Participant’s Award will vest on the date of change of Control if and to the
extent that the performance conditions imposed under rule 2.2 are met over the foreshortened period
ending on the date of change of Control (subject to modification if the Committee considers that
the performance conditions would be met to a greater or lesser extent at the end of the Performance
Period).



6.2      Following a change of Control pursuant to rule 6.1, any Award which has not vested in respect
of Shares in the Qualifying Company which undergoes the change of Control shall, without prejudice
either to the operation of rule 9 or to the continuance of the Award in respect of Shares in the
other Qualifying Company, lapse automatically on the earlier of the following dates:




	(a)	 	two months after the date on which the offer becomes unconditional in all respects; and
	 
	(b)	 	in the event that any person becomes entitled under sections 428 to 430 of the Companies Act
1985 to acquire UK Shares (or there occurs in relation to RE NV an event entitling the offeror
to acquire compulsorily Shares held by minority shareholders) one month after the date on
which such person becomes so bound or entitled.



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6.3      The provisions of rules 6.1 and 6.2 shall not apply in the event that either:




	(a)	 	the person obtaining Control of a Qualifying Company is the other Qualifying Company or a
company under the Control of the other Qualifying Company; or
	 
	(b)	 	the Qualifying Company remains under the ultimate control of the Shareholders of RE PLC or RE
NV immediately prior to the relevant transaction affecting the Qualifying Company.




6.4      The provisions of rules 6.1 and 6.2 shall apply mutatis mutandis in the event that any person
(either alone or together with any person acting in concert with him) obtains Control of the
Company provided that Awards shall not vest under this rule 6.4 in the event that either:




	(a)	 	the person obtaining Control of the Company is RE PLC or RE NV or a company under the control
of one or both of them; or
	 
	(b)	 	the Company remains under the ultimate control of the Shareholders of RE PLC or RE NV
immediately prior to the relevant transaction affecting the Company.



In the event Awards vest under this rule 6.4, Awards over Shares in both Qualifying Companies shall
be transferred to the Participant.




7. Scheme of Arrangement




7.1      If a court shall direct that a meeting of the holders of UK Shares be convened pursuant to
section 425 of the Companies Act 1985 for the purposes of considering a scheme of arrangement
involving the reconstruction of RE PLC or its amalgamation with any other company or companies then
(unless rule 9 applies), a Participant’s Award will vest the day immediately prior to sanction by
the court or such later date as is determined by the Committee in its absolute discretion, in
respect of UK Shares under his Award (without prejudice to the continuance of the Award in respect
of Dutch Shares). The Award will only vest if and to the extent that the performance conditions
imposed under rule 2.2 are met over the foreshortened period ending the day immediately prior
vesting (subject to modification if the Committee considers that the performance conditions would
be met to a greater or lesser extent at the end of the Performance Period).



7.2      Without prejudice to the operation of rule 9, Awards in respect of UK Shares shall not without
the consent of the Committee vest under the foregoing provisions if the purpose and effect of the
scheme of arrangement is to create a new holding company for the Company or RE PLC, such company
having substantially the same shareholders and proportionate shareholdings as those of the Company
or RE PLC (as the case may be) immediately prior to the scheme of arrangement.



7.3      The provisions of rules 7.1 and 7.2 shall apply mutatis mutandis to Awards in respect of Dutch
Shares in the event that RE NV is subject to a legal process under



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Dutch law which is considered by the Committee to be broadly equivalent to section 425 of the
Companies Act 1985.



8. Voluntary Winding-up




The provisions of rules 6.1, 6.2, and 6.4 shall apply mutatis mutandis in the event that notice is
duly given of a resolution for a voluntary winding-up of a Qualifying Company provided
that, for the purposes of this rule 8, all references in rule 6 to a change of Control or to
an offer becoming unconditional in all respects shall be treated as references to the date on which
notice is given for the voluntary winding-up of a Qualifying Company.



9. Award Rollover




9.1      If any company (the Acquiring Company) obtains Control of a Qualifying Company or of the
Company as a result of an event referred to in rules 5.5 or 7, each Participant, may at any time
within one month of the change of Control, with the agreement of the Acquiring Company, release any
Award in respect of Shares in that Qualifying Company which has not lapsed (the Old Right) in
consideration of the grant to him of a new right (the New Right) which in the opinion of the
Committee and the Acquiring Company is equivalent to the Old Right but relates to shares in a
different company (whether the Acquiring Company itself or another company in its group). The
operation of this rule 9 on a change of Control of one Qualifying Company shall not affect the
continuance of the Award in respect of Shares in the other Qualifying Company which are or may be
subject to the Award.



9.2      Subject to rule 9.3, any performance condition imposed under rule 2.2 in relation to the Old
Right shall not apply to the New Right unless the Committee and the Acquiring Company consider that
it should so apply (subject to such modifications as they see fit).



9.3      In the event that either:




	(a)	 	the person obtaining Control of the Company or Qualifying Company is RE PLC or RE NV or a
company under the control of one or both of them; or
	 
	(b)	 	the Company or Qualifying Company remains under the ultimate control of the Shareholders of
RE PLC or RE NV immediately prior to the relevant transaction affecting the Company or
Qualifying Company,



Awards shall automatically be exchanged for New Rights as set out in rule 9.1 and the performance
conditions imposed under rule 2.2 shall continue to apply (subject to such modifications as the
Committee sees fit).




10. Adjustment of Awards




10.1      In the event of:




	 	(i)	 	any Capital Reorganisation; or



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	 	(ii)	 	the implementation by a Qualifying Company of a demerger or the
payment by a Qualifying Company of a super-dividend which would otherwise
materially affect the value of an Award



the definition of Shares and the number of Shares comprised in an Award in relation to the Shares
in that Qualifying Company may be adjusted in such manner as the Committee may determine:
provided that:





	(a)	 	no adjustment shall take effect without the prior approval of the person holding the Shares
to which the Award relates (such approval not to be unreasonably withheld); and
	 
	(b)	 	no adjustment shall be made pursuant to this rule (other than on a capitalisation issue)
unless and until the auditors for the time being of the Company (acting as experts not
arbitrators) shall have confirmed in writing to the Committee that such adjustment is in their
opinion fair and reasonable.




11. Transfer of Shares Pursuant To Awards




11.1      Subject to any necessary consents, and to compliance by the Participant with the terms of the
Plan, not later than 14 days after the Vesting Date, a Qualifying Company shall procure the
transfer of Shares to the Participant (or to his nominee). The Qualifying Company shall as soon as
practicable deliver to the Participant (or his nominee) a definitive share certificate or other
evidence of title in respect of such Shares. Where the Shares are transferred to a nominee of the
Participant, the Participant shall remain the beneficial owner of the Shares.



12. Rights Attaching to Shares Transferred Pursuant to Awards




12.1      All Shares transferred upon the vesting of an Award shall rank pari passu in all respects with
the Shares in issue at the Vesting Date save as regards any rights attaching to such Shares by
reference to a record date prior to the date of vesting.



12.2      Any Shares acquired shall be subject to the articles of association of the relevant Qualifying
Company from time to time.



13. Administration and Amendment 




13.1      The decision of the Committee or of the Company (as the case may be) shall be final and
binding in all matters relating to the Plan and the Committee may at any time discontinue the grant
of further Awards or amend any of the provisions of the Plan in any way it thinks fit provided
that:




	(a)	 	the Committee shall not make any amendment that would materially prejudice the interests of
Participants in relation to subsisting Awards except with their prior written consent; and
	 
	(b)	 	without prejudice to any provision of the Plan which provides for the lapse of an Award, the
Committee may not cancel an Award unless the Participant agrees in writing to such
cancellation.



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14. General




14.1      Any member of the Group may provide money to the trustees of any trust or any other person to
enable them or him to acquire Shares to be held for the purposes of the Plan, or enter into any
guarantee or indemnity for those purposes, to the extent not prohibited by section 151 of the
Companies Act 1985.



14.2      The rights and obligations of a Participant under the terms and conditions of his office or
employment shall not be affected by his participation in the Plan or any right he may have to
participate in the Plan. An individual who participates in the Plan waives all and any rights to
compensation or damages in consequence of the termination of his office or employment with any
company for any reason whatsoever insofar as those rights arise, or may arise, from his ceasing to
have rights under or be entitled to exercise any Award under the Plan as a result of such
termination or from the loss or diminution in value of such rights or entitlements. If necessary,
the Participant’s terms of employment shall be varied accordingly.



14.3      The existence of any Award shall not affect in any way the right or power of the Company or
its shareholders to make or authorise any or all adjustments, recapitalisations, reorganisations or
other changes in the Company’s capital structure, or any merger or consolidation of the Company, or
any issue of shares, bonds, debentures, preferred or prior preference stocks ahead of or
convertible into, or otherwise affecting the Shares or the rights thereof, or the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar character or otherwise.



14.4      Any notice or other document required to be given under or in connection with the Plan may be
delivered to a Participant or sent by post to him at his home address according to the records of
his employing company or such other address as may appear to the Company to be appropriate.
Notices sent by post by the Company shall be deemed to have been given on the day following the
date of posting. Any notice or other document required to be given to the Company under or in
connection with the Plan may be delivered or sent by post to it at its registered office (or such
other place or places as the Company may from time to time determine and notify to Participants)
and shall not be deemed to have been received by the Company until the day on which the Company
actually receives such notice or other document.



14.5      Benefits under the Plan shall not be pensionable.



14.6      The Company, or where the Committee so directs any member of the Group, shall pay the
appropriate stamp duty on behalf of Participants in respect of any transfer of Shares.



14.7      These rules shall be governed by, and construed in accordance with, the laws of England and
Wales.



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SCHEDULE 1 




INITIAL PERFORMANCE CONDITIONS



This Schedule sets out the initial performance conditions for the purposes of rule 2.2.




1. In this Schedule, unless the context otherwise requires, the definitions in the rules of the
Plan shall apply, and the following words and expressions shall have the following meanings:


Accounts means the consolidated accounts of each Qualifying Company for a Financial Year;



Accounts Date means the date on which the Accounts are published;



Auditors means the auditors for the time being of each Qualifying Company (acting as experts
not arbitrators);



Base Year means, in relation to each Qualifying Company, the Financial Year ending immediately
before the start of the Test Period;



Earnings per Share means, for any Financial Year of the relevant Qualifying Company, the
earnings per ordinary share of a Qualifying Company (before amortisation of goodwill and intangible
assets, exceptional items, and related tax effects) calculated in accordance with Financial
Reporting Standard No. 3 issued by the Accounting Standards Board Limited or any modification
thereto provided that to ensure comparability of Financial Years of the Qualifying Company within a
Test Period and for the Base Year the Committee may:





	(a)	 	adjust the figure for earnings per share as calculated in accordance with the relevant
accounting standard to arrive at a figure which reflects the underlying business performance
of the Group (and may, without limitation, adjust by excluding any or all extraordinary or
exceptional items from the earnings per share calculation);
	 
	(b)	 	adjust the figure to ensure that the rates of conversion of any currency are applied on a
consistent basis in respect of years falling within the Test Period and for the Base Year; and
	 
	(c)	 	adjust the figure to ensure that the relevant accounting standards are applied on a
consistent basis in respect of years falling within the Test Period and for the Base Year,



provided that the Committee shall have discretion to adjust this definition of EPS to take
account of any change in recognised accounting standards or practice, fiscal regime or capital
structure, to ensure consistent measurement and accountability;



Financial Year means an accounting reference period as defined in accordance with section 224
of the Companies Act 1985; and


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Test Period means in relation to any Award the period of three consecutive Financial Years
commencing with the Financial Year starting immediately before the Date of Grant of the relevant
Award.




2. Awards under the Plan shall only vest if and to the extent that the conditions set out below are
satisfied.



EPS Condition




3. The EPS condition relating to the Awards under the Plan shall be applied over the Test Period.
For the purposes of this condition, the arithmetic mean of the growth in Earnings per Share
achieved by each Qualifying Company shall be used.



4. The Awards shall vest in full if the EPS growth over the Test Period is 8% or more. There will
be no opportunity for retesting if the EPS condition is not met over the Test Period. For the
avoidance of doubt Awards will not partially vest except as provided for in rules 5.2, 6.1 and 7.1.



5. The Committee will have the discretion to increase the EPS growth performance hurdle stated at
paragraph 5 above in order to take into account any movement in the rate of inflation.



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APPENDIX 1 




PLAN APPLICABLE TO ELSEVIER REED FINANCE BV



If the Board wishes to grant Awards to employees of Elsevier Reed Finance BV (ERF) or of companies
under the Control of ERF, it may grant Awards pursuant to this Appendix, and the following
provisions shall apply:





	(A)	 	The Rules of the Plan shall apply to the grant of Awards under this Appendix subject to the
modifications contained in the following paragraphs.
	 
	(B)	 	The definition of Group shall be construed as including ERF and every company which is under
the Control of ERF; and
	 
	(C)	 	Awards shall not be granted under this Appendix without the agreement of the supervisory
board of ERF.





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