EX-4.9



 





Exhibit 4.9




REED ELSEVIER GROUP PLC




RULES OF THE REED ELSEVIER GROUP PLC

RETENTION SHARE PLAN




(Adopted by the directors on 16 February 2004 and amended

on 12 April 2005 and 13 March 2006)




 









 




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 release of the Qualifying Companies’ interim (half-yearly) and/or final results
in any year;
	 
	(b)	 	the release by the Qualifying Companies of any trading update or (if applicable to
the Qualifying Companies at the time) their quarterly results for any year; or
	 
	(c)	 	any day on which the Committee 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);


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



Qualifying Company means each of RE PLC and RE NV;



Retirement means:





	(i)	 	in relation to a US Participant, ceasing to be an employee of a member of the Group
(other than in circumstances where the US Participant’s employer was entitled to
terminate the employment for cause) where the following three conditions are all
satisfied: (a) the US Participant has attained age 55, (b) the US Participant’s attained
age plus completed years of service with a member of the Group is at least 65, and (c)
the US Participant has given his employer at least 6 months notice of termination of
employment (or such longer period as is stipulated in the US Participant’s contract of
employment); and
	 
	(ii)	 	in relation to all other Participants, ceasing to be an employee of a member of the
Group in circumstances which the Committee regards as retirement (whether at normal
retirement age or at any other age)1;




RE NV means Reed Elsevier NV;



RE PLC means Reed Elsevier 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



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



US Participant means a Participant who is subject to United States taxation by reason of
being a United States national, or resident in the United States for United States tax
purposes2;



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	 	This definition of Retirement applies only to Awards granted after 13 March 2006.
	 
	2	 	This definition of US Participant applies only to Awards granted after 13 March 2006.




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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 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.




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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.





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)	 	Retirement3; or
	 
	(d)	 	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







 




			
	3	 	This rule 5.2(c) applies only to Awards granted after 13 March 2006.
For Awards granted prior to this date the following shall apply:






	 	“(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 .....”




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	(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,





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.



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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.





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.




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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 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



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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
	 
	 	(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:




	(b)	 	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






	(c)	 	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



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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.





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



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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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APPENDIX 2




This Appendix 2 sets out the rules applicable to Awards granted, in 2006 and thereafter,
to eligible participants of the Reed Elsevier Group Share Option Scheme who have elected
to receive all or part of the options they would otherwise have been granted under the
Reed Elsevier Group Share Option Scheme as an Award under this Appendix 2.



The provisions of this Appendix 2 are self-standing and apply only to Participants
granted Awards pursuant to this Appendix. Except as provided in this Appendix, the rules
of the Plan shall not apply to this Appendix or to Awards granted under this Appendix.
In the event of any conflict between the rules of the Plan and the provisions of this
Appendix in relation to any Award granted under this Appendix, the provisions of this
Appendix shall prevail



1. Definitions




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



Adoption Date means 16 February 2004;



Appendix means this Appendix as amended from time to time;



Award means a right granted under the Appendix to acquire automatically Shares without
payment;



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;



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;



Employment means employment with any member of the Group;



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;



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



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




	(a)	 	the release of the Qualifying Companies’ interim (half-yearly) and/or final results
in any year;
	 
	(b)	 	the release by the Qualifying Companies of any trading update or (if applicable to
the Qualifying Companies at the time) their quarterly results for any year; or
	 
	(c)	 	any day on which the Committee 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;



Issue or Reorganisation means any capitalisation issue or rights issue or any
consolidation, sub-division or reduction or other variation of capital or reserves by a
Qualifying Company;



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



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



Qualifying Company means each of RE PLC and RE NV;



Redundancy means dismissal by reason of redundancy within the meaning of the Employment
Rights Act 1996;



Retirement means:




	(i)	 	in relation to a US Participant, cessation of Employment (other than in circumstances
where the US Participant’s employer was entitled to terminate the Employment for cause)
where the following three conditions are all satisfied: (a) the US Participant has
attained age 55, (b) the US Participant’s attained age plus completed years of service
with a member of the Group is at least 65, and (c) the US Participant has given his
employer at least 6 months notice of termination of Employment (or such longer period as
is stipulated in the US Participant’s contract of employment); and
	 
	(ii)	 	in relation to all other Participants, cessation of Employment in circumstances
which the Committee regards as retirement (whether at normal retirement age or at any
other age);





RE NV means Reed Elsevier NV;



RE PLC means Reed Elsevier PLC;



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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;



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



US Participant means a Participant who is subject to United States taxation by reason of
being a United States national, or resident in the United States for United States tax
purposes; 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.



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 this
Appendix.



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 this Appendix in any Grant Period.



2.2 Save as otherwise permitted in these rules, the Participant must remain an employee
of a member of the Group until the Vesting Date. No other objective conditions must be
satisfied prior to the vesting of Awards.



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 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.



Page 17









 





2.5 No Award shall be granted under this Appendix 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




Any limit on the number of Shares granted under Awards to any Executive under this
Appendix shall be set by the Committee from time to time.



4.
Lapse of Awards - Cessation of Employment




4.1 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.





4.2 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)	 	injury
	 
	(c)	 	disability;
	 
	(d)	 	Redundancy;
	 
	(e)	 	Retirement; or
	 
	(f)	 	any other reason if the Company (acting fairly and reasonably) so decides in its
absolute discretion




then an Award shall vest on the date of cessation of Employment. The number of Shares
over which an Award vests shall determined by multiplying the number of Shares under the
Award by A/36 where A is the number of complete months from the commencement of the
Financial Year in which the Award was granted to the date of cessation of Employment
PROVIDED THAT the Committee may in its absolute discretion determine that the
Participant’s entitlement should not be scaled down or





Page 18









 







scaled down in part only (the extent of scaling down being determined by the Committee in
its absolute discretion).




4.3 For the purposes of rules 4.1 and 4.2 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.



4.4 For the purposes of rules 4.1, 4.2, and 4.3 following an Award rollover pursuant to
rule 5.6, 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 or (ii) a subsidiary of the acquiring company (within the meaning of section 736
of the Companies Act 1985).



4.5 If a Participant:




	(a)	 	is also a Participant in the Reed Elsevier Group PLC Bonus Investment Plan, the Reed
Elsevier Group PLC Long Term Incentive Share Option Scheme or the Reed Elsevier Group PLC
Retention Share Plan (excluding, for the avoidance of doubt, participation in this
Appendix 2) or has been notified by the Company that this rule 4.5 will apply to him; and
	 
	(b)	 	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
	 
	(c)	 	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,





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 vesting of
any 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.



Page 19









 





By accepting an Award, a Participant shall be bound by this rule 4.5 notwithstanding that
(i) it shall only be applicable after the release of Shares under rule 9, and (ii)
whether or not the essential terms of this rule 4.5 shall have been separately notified
in writing by the Company to each Participant.



5. Takeover




5.1 In the event of:




	(a)	 	a general offer being made to acquire the whole of the issued ordinary share capital
of a Qualifying Company (or such part thereof as is not at the time owned by the offeror
or any company controlled by the offeror and/or persons acting in concert with the
offeror) and as a result of the general offer the offeror (and any such companies and/or
persons as aforesaid) acquires Control of the Qualifying Company, or
	 
	(b)	 	a general offer being made to acquire the whole of the issued ordinary share capital
of a Qualifying Company (or such part thereof as aforesaid) by any person who already
owns beneficially (together with any company controlled by such person and/or persons
acting in concert with him) more than fifty per cent. of the issued ordinary share
capital of the Qualifying Company,





a Participants Award over Shares in the relevant Qualifying Company will vest on, in the
case of an offer within sub-rule (a) above, the date of the acquisition therein mentioned
or, if the offer was conditional, the later date on which the offer becomes unconditional
and, in the case of an offer within sub-rule (b) above, the date on which the offer is
made or, if the offer was conditional, the later date on which the offer becomes
unconditional



5.2 Forthwith upon the said offer being posted to shareholders the relevant Qualifying
Company, shall use all reasonable endeavours to procure that if a Participant is
transferred Shares pursuant to the vesting of Awards in accordance with Rule 5.1 above
then insofar as such Shares were not the subject of the said general offer the party by
whom the general offer was made shall offer to acquire from the Participant all those
Shares upon the same terms as Shares of the same class were acquired under the general
offer.



5.3 Following a general offer pursuant to rule 5.1, any Award which has not vested in
respect of Shares in the Qualifying Company which undergoes the general offer shall,
without prejudice either to the operation of rule 7 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




Page 20









 






	 	 	minority shareholders) one month after the date on which such person becomes so
bound or entitled.





5.4 The provisions of rules 5.1 and 5.2 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.





5.5 The provisions of rules 5.1 and 5.2 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 5.4
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 5.4, Awards over Shares in both Qualifying
Companies shall be transferred to the Participant.



5.6 If any company (the “acquiring company”)





	(a)	 	obtains Control of a Qualifying Company as a result of making:-






	 	(i)	 	a general offer to acquire the whole of the issued share capital of that
Qualifying Company which is made on a condition such that if it is satisfied
the person making the offer will have Control thereof, or
	 
	 	(ii)	 	a general offer to acquire all the shares in that Qualifying Company which
are of the same class as the scheme shares, or






	(b)	 	obtains Control of a Qualifying Company in pursuance of a compromise or arrangement
sanctioned by the court under Section 425 of the Companies Act 1985 (to the extent that
such provision is, or is agreed with the Inland Revenue to be, applicable to the
Qualifying Company), or
	 
	(c)	 	becomes bound or entitled to acquire Shares under Sections 428 to 430 of the
Companies Act 1985 (to the extent that such provision is, or is agreed with the Inland
Revenue to be, applicable to the Qualifying Company),





any Participant may at any time within the appropriate period, by agreement with the
acquiring company, release his Award over Shares in that Qualifying Company (hereinafter
in this Rule 5.6 called “old rights”) in consideration of the grant to him of



Page 21









 





rights (hereinafter in this Rule 5.6 called “new rights”) which are equivalent to his
Award but relate to shares in a different company (whether the acquiring company itself
or some other company having control of that company. The new rights shall not be
regarded for the purpose of this Appendix as equivalent to the old rights unless:-




	 	(i)	 	the new rights will vest in the same manner as the old rights and subject
to the provisions of this Appendix as it had effect immediately before the
release of the old rights; and
	 
	 	(ii)	 	the total market value, immediately before the release, of the shares
which were subject to the Participant’s old rights is equal to the total market
value, immediately after the grant of the shares in respect of which the new
rights are granted to the Participant.





The new rights shall for the purposes of this Appendix be treated as having been granted
at the time when the old rights were granted. The new rights shall not lapse as a result
of the operation of Rule 5.3 following the event permitting the grant of such new rights.
In relation to any new rights, references in this Appendix to “Qualifying Company”, “RE
PLC” and “RE NV” shall (as appropriate) be construed as if references to the company
whose shares are subject to the new rights and references to “Shares”, “UK Shares” and
“Dutch Shares” shall (as appropriate) be construed as if references to the shares subject
to the new rights.



5.7 In the event that either:




	(a)	 	the person obtaining Control of the Scheme Organiser or Qualifying Company is RE PLC
or RE NV or a company under the control of one or both of them; or
	 
	(b)	 	the Scheme Organiser 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 Scheme Organiser or Qualifying Company,





Awards shall automatically be exchanged for new rights as set out in Rule 5.6.



6. Scheme of Arrangement




6.1 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 5.6 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).



6.2 Without prejudice to the operation of rule 5.6, 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



Page 22









 







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.



6.3 The provisions of rules 6.1 and 6.2 shall apply mutatis mutandis to Awards in respect
of Dutch Shares in the event that RE NV is subject to a legal process under Dutch law
which is considered by the Committee to be broadly equivalent to section 425 of the
Companies Act 1985.



7.
Voluntary Winding - up




If notice is duly given of a resolution for the voluntary winding-up of a
Qualifying Company, an Award over shares in that Qualifying Company shall vest on the
date of resolution.



8. Adjustment of Awards




8.1 In the event of:




	 	(i)	 	any Issue or Reorganisation; or
	 
	 	(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.





9.
Transfer of Shares
Pursuant  To Awards




9.1 Subject to any necessary consents, and to compliance by the Participant with
the terms of the Appendix, 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.



Page 23









 





10. Rights Attaching to Shares Transferred Pursuant to Awards



10.1 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.



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



11. Administration and Amendment




11.1 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 Appendix and the Committee may at any
time discontinue the grant of further Awards or amend any of the provisions of the
Appendix 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 Appendix which provides for the lapse of an
Award, the Committee may not cancel an Award unless the Participant agrees in writing to
such cancellation.





12. General




12.1 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
Appendix, or enter into any guarantee or indemnity for those purposes, to the extent not
prohibited by section 151 of the Companies Act 1985.



12.2 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 Appendix or any
right he may have to participate in the Appendix. An individual who participates in the
Appendix 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 Appendix 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.



12.3 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.



Page 24









 





12.4 Any notice or other document required to be given under or in connection with the
Appendix 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 Appendix 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.



12.5 Benefits under the Appendix shall not be pensionable.



12.6 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.



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



APPENDIX 2A




GRANT OF AWARDS TO EMPLOYEES OF




ELSEVIER REED FINANCE BV




If the Board wishes to grant Awards the terms of Appendix 2 to employees of Elsevier Reed
Finance BV (ERF) or of companies under the Control of ERF, it may grant Awards pursuant
to this Appendix 2A, and the following provisions shall apply:




	(B)	 	The Rules of Appendix 2 shall apply to the grant of Awards under this Appendix 2A
subject to the modifications contained in the following paragraphs.
	 
	(C)	 	The definition of Group shall be construed as including ERF and every company which
is under the Control of ERF; and
	 
	(D)	 	Awards shall not be granted under this Appendix 2A without the agreement of the
supervisory board of ERF.






Page 25