Exhibit 10.7


 


QUAD/GRAPHICS, INC.


 


DIVIDEND/DISCOUNT
DEFERRED


 


COMPENSATION
PLAN


 


AS
AMENDED AND RESTATED EFFECTIVE DECEMBER 31, 2008


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Purpose:

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Definitions:

  	
  1

  
	
  2.1

  	
   

  	
  “Account”

  	
  1

  
	
  2.2

  	
   

  	
  “Board”

  	
  1

  
	
  2.3

  	
   

  	
  “Code”

  	
  1

  
	
  2.4

  	
   

  	
  “Company”

  	
  1

  
	
  2.5

  	
   

  	
  “2005 Amendment”

  	
  2

  
	
  2.6

  	
   

  	
  “Participant”

  	
  2

  
	
  2.7

  	
   

  	
  “Plan”

  	
  2

  
	
  2.8

  	
   

  	
  “Non-Tax Dividend”

  	
  2

  
	
  2.9

  	
   

  	
  “Termination of Employment”

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Account:

  	
  2

  
	
  3.1

  	
   

  	
  Account

  	
  2

  
	
  3.2

  	
   

  	
  Additions

  	
  3

  
	
  3.3

  	
   

  	
  Subtractions

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Vesting:

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Distribution:

  	
  4

  
	
  5.1

  	
   

  	
  Options Exercised Prior to January 1, 2009

  	
  4

  
	
  5.2

  	
   

  	
  Options Exercised After December 31, 2008

  	
  4

  
	
  5.3

  	
   

  	
  Expired Options and Other Forfeitures

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
  Amendment and
  Termination of Plan:

  	
  4

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Claims
  Procedure:

  	
  4

  
	
  7.1

  	
   

  	
  Initial claim for benefits

  	
  5

  
	
  7.2

  	
   

  	
  Appeals

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Miscellaneous
  Provisions:

  	
  6

  
	
  8.1

  	
   

  	
  Administration

  	
  6

  
	
  8.2

  	
   

  	
  Set off

  	
  6

  
	
  8.3

  	
   

  	
  Continuation of employment

  	
  6

  
	
  8.4

  	
   

  	
  Contractual Liability

  	
  6

  
	
  8.5

  	
   

  	
  Benefits not assignable

  	
  7

  
	
  8.6

  	
   

  	
  Payments to minors and others

  	
  7

  
	
  8.7

  	
   

  	
  Code Section 409A

  	
  7

  
	
  8.8

  	
   

  	
  Construction

  	
  7

  



 


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QUAD/GRAPHICS, INC.

DIVIDEND/DISCOUNT
DEFERRED COMPENSATION PLAN


 


Section 1.   Purpose:


 


Prior to 2005, the Company issued discounted stock options to a select
group of management or highly compensated employees.  As a result of the initial interpretation by
the Internal Revenue Service concerning the application of Code Section 409A,
the Company desired to split the benefits provided through the discounted
options into two separate arrangements: 
fair market value options and this Plan. 
As a result, the Company adopted the Plan to provide a means by which
the dividend and discount features which would otherwise have been provided under
the stock option program could be provided to eligible employees.  The final regulations for Code Section 409A
require aggregation of the Plan with the fair market value options for purposes
of compliance with Code Section 409A, necessitating the substantive
revisions in this restatement.  The Plan
is intended to be a nonqualified deferred compensation plan under Code Section 409A.  The Plan is intended to be an unfunded plan
maintained primarily for the purpose of providing deferred compensation
benefits for a select group of management or highly compensated employees under
Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974.


 


Section 2.   Definitions:


 


As used in the Plan, unless otherwise indicated by the context:


 


2.1          “Account”
shall mean, with respect to each Participant, each separate account to be kept
for each Participant as described in Section 3.


 


2.2          “Board” shall mean the Board of Directors of the
Company.


 


2.3          “Code” shall mean the Internal Revenue Code of
1986, as amended.


 


2.4          “Company” shall mean Quad/Graphics, Inc.


 


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2.5          “2005
Amendment” shall
mean the amendment to stock option agreements adopted by the Board on December 16,
2005 which became effective for a Participant upon the Participant’s written
consent filed with the Company no later than December 31, 2005.


 


2.6          “Participant” shall mean an employee or director of
the Company or any affiliate thereof who (i) on December 31, 2005 had
a pre-2005 stock option agreement from the Company for which the 2005 Amendment
was effective, or (ii) on or after December 16, 2005 but prior to January 1,
2008 was granted options by the Company.


 


2.7          “Plan” shall mean the Quad/Graphics, Inc.
Dividend/Discount Deferred Compensation Plan as herein set out or as duly
amended.


 


2.8          “Non-Tax
Dividend” shall
mean a dividend paid by the Company to its shareholders other than a “tax
distribution dividend” which is required to be paid by the Company to shareholders
pursuant to the terms of the applicable shareholders’ agreement related to
taxes passed through to shareholders as a result of the Company’s S corporation
election under Code Section 1362.


 


2.9          “Termination
of Employment”
shall mean a “separation from service” as defined under the default rules of
the applicable regulations for Code Section 409A.


 


Section 3.   Account:


 


3.1          Account: 
The Company shall establish one or more book reserve Accounts on behalf
of each Participant.  A separate Account
shall be established for each separate grant of options to the Participant
prior to January 1, 2008.  Such
Accounts shall be adjusted pursuant to the provisions of Sections 4.2 and
4.3 with respect to the options attributable to the grant reflected in such Account.  The Plan shall not apply to any options
granted on or after January 1, 2008.


 


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3.2          Additions: 
Each Account for a Participant shall be credited as follows:


 


3.2.1        For each Account
attributable to a pre-2005 stock option grant from the Company for which the
2005 Amendment is effective, as of December 31, 2005, the Account shall be
credited with the sum of a dividend equivalent and a discount replacement.  The dividend equivalent shall be equal to $2.00
(to reflect the $2 per share dividend paid on January 3, 2005) times the
number of shares underlying the outstanding options on December 31,
2005.  The discount replacement shall be
equal to the aggregate amount by which the exercise price for the outstanding
options on December 31, 2005 increased due to the 2005 Amendment.


 


3.2.2        As any Non-Tax
Dividends are paid, the Account shall be credited with a dividend equivalent
equal to the dollar amount of the per share Non-Tax Dividend times the number
of shares underlying options outstanding on the dividend record date for the
Non-Tax Dividend.


 


3.2.3        In the event all or a
portion of the options are exercised prior to 2009, from such date until the earlier
of the date of distribution in Section 5 or December 31, 2008, the
portion of the Account attributable to such exercised options shall be credited
with an interest equivalent based on the rate earned in the stable asset
account of the Quad/Graphics Personal Enrichment Plan.


 


3.2.4        An Account shall be
credited with the amount designated by the Board from time to time.


 


3.3          Subtractions: 
Each Account for a Participant shall be debited by the amount of any
distributions and forfeitures in Section 5.


 


Section 4.   Vesting:


 


As of any date, the vested percentage of an Account is based on the
percentage of the exercisable options attributable to the grant reflected in
such Account.  For this purpose, the
percentage of exercisable options is a fraction, the numerator of which is the
sum of exercisable options on the applicable date and any options from the same
grant which were previously exercised after December 31, 2005, and the
denominator of which is the number of options in the grant on the later of the
original grant date or December 31, 2005. 
For an Account from which no distribution has previously been made, the
vested portion of the Account is the vested percentage of the Account
value.  For an Account from which a
previous distribution has been


 


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made under Section 5, the vested portion of the
Account is an amount (“X”) determined by the formula X = P(AB + D) – D, where P
is the vested percentage, AB is the Account value, and D is the amount of the
previous distributions from the Account.


 


Section 5.   Distribution:


 


5.1          Options
Exercised Prior to January 1, 2009:  With respect
to options that were exercised prior to January 1, 2009, the vested
portion of a Participant’s Accounts attributable to such options shall be paid to
the Participant in a cash lump sum amount in January 2009.


 


5.2          Options
Exercised After December 31, 2008:  With respect
to options that are exercised after December 31, 2008, the vested portion
of a Participant’s Accounts attributable to such an option shall be paid to the
Participant in a cash lump sum amount on the date of exercise of the option.


 


5.3          Expired
Options and Other Forfeitures:  With respect
to any options that expire without being exercised, the portion of a
Participant’s Accounts attributable to such options shall be forfeited, whether
otherwise vested or nonvested.


 


Section 6.   Amendment and Termination of Plan:


 


The Board may amend any provision of the Plan or terminate the Plan at
any time; provided, that in no event shall such amendment or termination reduce
any Participant’s Accounts as of the date of such amendment or termination, nor
shall any such amendment affect the terms of the Plan relating to the payment
of such Accounts in such a manner as to cause of violation of Code Section 409A.


 


Section 7.   Claims Procedure:


 


The following claims procedure shall apply with respect to the Plan:


 


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7.1          Initial
claim for benefits:  Any Participant who believes he/she is
entitled to benefits or a distribution under the Plan in an amount greater than
being provided may file a claim under this Section 8.  Any such claim shall be filed in writing
stating the nature of the claim, the facts supporting the claim, the amount
claimed, and the name and address of the claimant.  Each claim shall be answered by the Company
in writing stating whether the claim is granted or denied.  Such response shall be provided within ninety
(90) days of the claim’s receipt by the Company unless an extension of time is
needed to process the claim, in which case the Company shall notify the
claimant of the need for a time extension which shall not exceed an additional
ninety (90) days.  If the claim is wholly
or partially denied, the reasons for denial and the pertinent Plan provisions
shall be set forth in the written notice to the claimant, together with an
explanation of the claimant’s appeal rights.


 


7.2          Appeals: 
Within ninety (90) days after notice that a claim is denied, the
claimant may file a written appeal to the Company, including any comments, statements,
or documents the claimant may desire to provide.  The Company shall consider the claim and
render a written decision within sixty (60) days after the appeal is timely
filed; provided, however, that, if an extension of time is needed to process
the appeal, the claimant shall be given notice of such extension which shall
not go beyond an additional sixty days (60) days.  In the event the claim is denied upon appeal,
the Company shall set forth the reasons for denial and the pertinent Plan
provisions in its written decision.  The
Company shall comply with any reasonable request from a claimant prior to
his/her filing an appeal for documents or information relevant to the claimant’s
claim.  The Company shall have
discretionary authority to determine eligibility for benefits and to construe
and apply the terms of the Plan; and any such determination or


 


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construction and application shall be final and binding on all parties
unless arbitrary and capricious.


 


Section 8.   Miscellaneous Provisions:


 


8.1          Administration: 
The Company shall be responsible for the general administration and
interpretation of the Plan and for carrying out its provisions, except to the
extent all or any of such obligations are specifically imposed on the Board.


 


8.2          Set
off:  Notwithstanding any other provision of this
Plan, the Company may reduce the amount of any payment otherwise payable to or
on behalf of a Participant hereunder by the amount of any loan, cash advance,
extension of credit or other obligation of the Participant to the Company that
is then due and payable, and the Participant shall be deemed to have consented
to such reduction.


 


8.3          Continuation
of employment:  The establishment of the Plan shall not be
construed as conferring any legal or other rights upon any Participant for
continuation of employment, nor shall it interfere with the right of the
Company to discharge any Participant or to deal with him without regard to the
effect thereof under the Plan.


 


8.4          Contractual
Liability:  The obligation of the Company to make
payments hereunder shall constitute a contractual liability of the Company to
the Participant.  Such payments shall be
made from the general funds of the Company, and the Company shall not be
required to establish or maintain any special or separate fund, or otherwise to
segregate assets to assure that such payments shall be made, and the
Participant shall not have any interest in any particular assets of the Company
by reason of its obligations hereunder. 
To the extent that any person acquires a right to receive payment from
the Company, such right shall be no greater than the right of an unsecured
creditor of the Company.


 


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8.5          Benefits
not assignable:  No portion of any benefit credited or paid
under the Plan with respect to any Participant shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt so to anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void, nor shall any portion of
such benefit be in any manner payable to any assignee, receiver or any one
trustee, or be liable for his debts, contracts, liabilities, engagements or torts.


 


8.6          Payments
to minors and others:  If any individual entitled to receive a
payment under the Plan shall be physically, mentally or legally incapable of
receiving or acknowledging receipt of such payment, the Company, upon the
receipt of satisfactory evidence of his/her incapacity and satisfactory
evidence that another person or institution is maintaining him/her and that no
guardian or committee has been appointed for him/her, may cause any payment
otherwise payable to him/her to be made to such person or institution so
maintaining him/her.  Payment to such
person or institution shall be in full satisfaction of all claims by or through
the Participant to the extent of the amount thereof.


 


8.7          Code
Section 409A:  Although the Plan is intended to comply with
Code Section 409A, no guarantee is given to any Participant of the tax
treatment of any benefits under the Plan.


 


8.8          Construction: 
The provisions of the Plan shall be construed and enforced according to
the laws of the State of Wisconsin, except to the extent that such laws are
superseded by the Employee Retirement Income Security Act of 1974.


 


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