Document:

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 25EX-4.11

 

Exhibit 4.11

REED ELSEVIER GROUP

RULES OF THE REED ELSEVIER GROUP PLC

LONG TERM INCENTIVE SHARE OPTION SCHEME

(Restated rules for the purposes of Awards granted on or after 19 April 2006 — not applicable to

earlier Awards)

(Restated rules approved by the shareholders of Reed Elsevier PLC in general meeting on 18 April 2006)

(Restated rules approved by the shareholders of Reed Elsevier NV in general meeting on 19 April 2006)

 

 

THE REED ELSEVIER GROUP PLC

LONG TERM INCENTIVE SHARE OPTION SCHEME

(Restated rules for the purposes of Awards granted on or after 19 April 2006)

1. Definitions

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

Adoption Date means 8 April 2003;

Award means a conditional right to acquire Shares without payment under the rules of this Plan and
for these purposes:

	(a)	 	Award — Initial Number means the number of Shares under an Award prior to the application of
the performance condition in the Schedule; and
	 
	(b)	 	Award — Maximum Number means the maximum number of Shares which could vest under an Award
upon application of the performance condition in the Schedule;

Board means the Board of Directors of the Company;

the Committee means the remuneration committee of the Board or other duly authorised committee
thereof;

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;

Employment means employment with any member of the Group;

Executive means any employee or executive director of any member of the Group or of RE PLC or RE NV
whose terms of service require him to devote substantially the whole of his working time to the
affairs of the Group;

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)	 	the day on which the Committee resolves that exceptional circumstances exist which justify
the grant of Awards;

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;

the London Stock Exchange means London Stock Exchange plc or any successor body to it;

Market Value means:

	(a)	 	in the case of a UK Share, the closing middle market quotation for a UK Share as derived from
the Daily Official List of the London Stock Exchange on the Date of Grant; and
	 
	(b)	 	in the case of a Dutch Share, the closing price for a Dutch Share on the Amsterdam Stock
Exchange on the Date of Grant;

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 of the Company commencing with the
Financial Year in which the Date of Grant of an Award falls;

Qualifying Company means each of RE PLC and RE NV;

RE NV means Reed Elsevier NV;

RE PLC means Reed Elsevier PLC;

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);

the Scheme means this Reed Elsevier Group plc Long Term Incentive Share Option Scheme as amended
from time to time (including, for Awards granted after 19 April 2006, the restated rules in this
form, as amended from time to time);

Share Option Scheme means any employee share option scheme established by the Company or RE PLC,
which relates to UK Shares;

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;

Treasury Shares means UK Shares held in accordance with Section 162A-G of the Companies Act 1985;

the Trustees means the trustees for the time being of any appropriate employee benefit trust
established by the Company or any member of the Group from time to time for the benefit of (among
others) employees of the Group;

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;

Vesting Date means the date on which an Award vests under rule 4.2, or such earlier date on which
an Award vests in accordance with these rules; and

Vesting Shares means the number of Shares under an Award that actually vest upon application of the
performance condition imposed under rule 2.3.

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 Scheme.

1.3 References to any act of Parliament are to UK legislation and 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 Scheme in any Grant Period.

 

 

2.2 On granting Awards, the Company shall enter into a deed poll or take such other steps as are
necessary to evidence their legal enforceability.

2.3 Save as otherwise permitted in these rules, objective conditions must be satisfied prior to the
exercise of Awards. Subject to the Committee’s power to impose different conditions on the grant
of an Award from time to time, such conditions shall, for Awards granted in 2006 and thereafter,
consist of the conditions set out in the Schedule to this Scheme. There will be no retesting of
such conditions.

2.4 The grant of an Award and/or the delivery of Shares upon vesting thereof shall be conditional
on the Executive:

	(a)	 	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 his or
her behalf sufficient Shares to satisfy any taxation or social security contributions
liability on his or; her part for which any member of the Group may be liable) in respect of
an Award; and
	 
	(b)	 	in relation to Participants resident in the UK, entering into any election under Chapter 2 of
Part 7 of the Income Tax (Earnings and Pensions) Act 2003 specified by the Company in respect
of Shares to which he is or may become entitled under the Plan (and, for other Participants,
such other equivalent election as the Company may reasonably request).

2.5 As soon as practicable after the Date of Grant the Committee shall procure the issue to each
Executive of a letter in respect of the Award together with access to website information, or such
other information as the Committee shall make available, summarising the key terms of the Award.

2.6 Each Participant shall be required to acknowledge the right of the Committee to reduce or
cancel Awards pursuant to its powers set out in the Schedule to this Scheme.

2.7 Any Executive to whom an Award is granted may, by notice in writing to the Company given within
30 days after the Date of Grant, renounce in whole or in part his or her rights under the Award.
In such a case, the Award shall, to the extent renounced, be treated as never having been granted
and (if already issued) the relevant certificate(s) shall be returned to the Company for
cancellation or amendment. No consideration shall be payable by the Company for any such
renunciation.

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

2.9 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 2.9
shall cause the Award to lapse.

 

 

3. Scheme and Individual Limits

3.1 No Award, or part of an Award, under which UK Shares may be issued shall be granted to the
extent that the result of that grant would be that the aggregate number of UK Shares that could be
issued on the exercise of that Award and any other Awards (in each case, calculated by reference to
the Award — Maximum Number) granted at the same time, when added to the number of UK Shares that:

	(a)	 	could be issued on the exercise of any other subsisting share options granted during the
preceding ten years under the Scheme or any other Share Option Scheme; and
	 
	(b)	 	have been issued on the exercise of any share options granted during the preceding ten years
under the Scheme or any other Share Option Scheme; and
	 
	(c)	 	could be issued on the exercise of any other subsisting rights granted during the preceding
ten years under any profit sharing or other employee share incentive scheme (not being a Share
Option Scheme); and
	 
	(d)	 	have been issued during the preceding ten years under any profit sharing or other employee
share incentive scheme (not being a Share Option Scheme),

would unless the Committee determines otherwise exceed 10 per cent. of the ordinary share capital
of RE PLC for the time being in issue,

PROVIDED THAT Shares which may be issued on exercise of options under the Reed Elsevier plc Senior
Executive Long Term Incentive Scheme (approved by the shareholders of RE NV in general meeting on
26 April 2000 and by the shareholders of RE PLC in general meeting on 27 April 2000) shall not
count against the equity dilution limit in this Rule 3.1 (as provided in rule 3.1 of the rules of
that scheme).

3.2 Notwithstanding the rules of any other Share Option Scheme, Shares which may be issued on
exercise of Awards under the Scheme shall count only against the equivalent limit to that in rule
3.1 above, and not against any other equity dilution limit. The rules of any such other Share
Option Scheme shall be deemed to be amended accordingly.

3.3 The number of Dutch Shares which may be issued pursuant to Awards granted under the Scheme from
time to time shall be agreed between the Committee and RE NV before such Awards are granted
PROVIDED THAT the percentage referred to in Rule 3.1 above in relation to RE PLC shall apply in
relation to RE NV.

3.4 Reference in this rule 3. to the issue of Shares shall, for the avoidance of doubt, mean the
issue and allotment (but not transfer) of Shares and shall include Treasury Shares so issued.

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

 

 

4. Specific Provisions relating to Awards

4.1 An Award consists of a right to receive a number of Shares (not exceeding the Award — Maximum
Number) following the Vesting Date.

4.2 The number of Shares that vest under an Award (that is, the Vesting Shares) shall be determined
by the Committee based on the extent to which the performance conditions imposed under rule 2.3
have been fulfilled or waived in accordance with these rules. Such determination shall be made
within 30 days of the preliminary announcement of results for the last Financial Year in the
Performance Period, or such earlier date as is required under these rules (such date being the
Vesting Date). The 30 day period shall be extended by such period as the Committee determines in
the event that the Company’s share dealing code (or the Model Code) would otherwise prohibit a
release of Shares.

4.3 Subject to rule 12.1, the Committee shall make arrangements to transfer Vesting Shares to
Participants in satisfaction of their entitlements under Awards as soon as practicable following
the Vesting Date, subject to any sale of Shares in accordance with rule 2.4.

5. Entitlement to Notional Dividends

5.1 In addition to any Vesting Shares to which a Participant becomes entitled in relation to an
Award in accordance with the rules of this Scheme, the Participant shall also be entitled to a cash
payment equal to the dividends (excluding any associated UK tax credit thereon) which would have
been paid on the Vesting Shares during the Performance Period.

5.2 The cash payment to which the Participant becomes entitled under rule 5.1:

	(a)	 	shall be calculated (in such manner as the Committee thinks fit) by reference to the currency
of payment of the underlying dividend (and paid in such currency as the Committee thinks fit);
	 
	(b)	 	shall be calculated without any entitlement to interest (or other type of investment return)
in the period between the dividend payment date and the Vesting Date; and
	 
	(c)	 	shall be paid (subject to such deductions as are required by law) within one month of the
Vesting Date.

5.3 For the avoidance of doubt, the payment referred to in rule 5.1 does not represent an
entitlement to actual dividends on the underlying Shares, by reason of the Participant not being
beneficial owner of the Vesting Shares at that time.

6. Vesting and Lapse of Awards — Cessation of Employment

6.1 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.

6.2 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)	 	injury;
	 
	(d)	 	Retirement; or
	 
	(e)	 	any other reason if the Committee so decides in its absolute discretion

then an Award shall continue and shall vest following maturity of the Award (when the vesting level
of the Award will have been determined). The number of Shares in respect of which the Award vests
shall be multiplied by A/36 where A is the number of complete months from the commencement of the
Performance Period 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
scaled down in part only (the extent of scaling down being determined by the Committee in its
absolute discretion) and PROVIDED FURTHER THAT if the reason for cessation is the Participant’s
death the Committee shall, and for all other reasons for cessation the Committee may, release
Shares equal to the Award — Initial Number, but subject to scaling down and the exercise by the
Committee of its discretion as aforesaid.

6.3 For the purposes of rules 6.1 and 6.2 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.

6.4 For the purposes of rules 6.1, 6.2 and 6.3 following an Award rollover pursuant to rule 10, 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 10) or
(ii) a subsidiary of the Acquiring Company (within the meaning of section 736 of the Companies Act
1985).

6.5 If a Participant:

	(a)	 	resigns from employment with a member of the Group, or is dismissed from employment with a
member of the Group in circumstances justifying summary termination under his contract of
employment, and

 

 

	(b)	 	within twelve months of the date of termination of his employment (the Termination Date),
becomes an employee of a Competitor Company (as defined in this rule 6.5) 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 on the Vesting Date 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 6.5 notwithstanding that (i) it
shall only be applicable after the release of Shares under rule 12, and (ii) whether or not the
essential terms of this rule 6.5 shall have been separately notified in writing by the Company to
each Participant.

7. General Offer

7.1 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), Awards shall vest if and to the extent that the performance conditions imposed
under rule 2.3 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).

7.2 Any Shares which vest pursuant to rule 7.1 shall be released within 14 days of the change of
Control. Such vesting shall be without prejudice either to the operation of rule 10 or to the
continuance of the Award in respect of Shares in the other Qualifying Company which are or may be
under the Award.

7.3 The provisions of rules 7.1 and 7.2 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.

7.4 The provisions of rules 7.1 and 7.2 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 7.4 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 7.4, Awards over Shares in both Qualifying Companies shall
vest.

8. Scheme of Arrangement

8.1 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 of RE
PLC then a Participant’s Awards in respect of UK Shares (without prejudice to the continuance of
the Award in respect of Dutch Shares) shall vest if and to the extent that the performance
conditions imposed under rule 2.3 are met over the foreshortened period ending on the date on which
the scheme of arrangement is sanctioned by the court (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).

8.2 Without prejudice to the operation of rule 10, 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.

8.3 The provisions of rules 8.1 and 8.2 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.

 

 

9. Voluntary Winding up

9.1 The provisions of rules 7.1, 7.2 and 7.4 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 9, all references in rule 7 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.

10. Award Rollover

10.1 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 7 or 8, 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 10 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.

10.2 Subject to rule 10.3, any performance condition imposed under rule 2.3 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).

10.3 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 10.1 and the performance
conditions imposed under rule 2.3 shall continue to apply (subject to such modifications as the
Committee sees fit).

11. Adjustment of Awards

11.1 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:

	(a)	 	no adjustment shall take effect without the prior approval of, in respect of an Award under
which Shares are to be transferred, the person holding the Shares to which the Award relates,
(such approval not to be unreasonably withheld);
	 
	(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.

12. Allotment or Transfer of Shares on Exercise of Awards

12.1 Subject to any necessary consents and to compliance by the Participant with the terms of the
Scheme, not later than 30 days after the Vesting Date, each Qualifying Company shall either allot
and issue, or procure the transfer of, Shares to the Participant (or to his nominee). Treasury
Shares may be used to satisfy Awards. The Qualifying Company shall (unless the Shares are to be
issued in uncertificated form) 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 issued or transferred to a nominee of the Participant, the Participant shall remain the
beneficial owner of the Shares.

12.2 Subject to rule 16.1 below, the Company may provide funds to the Trustees to enable the
Trustees to purchase existing UK Shares or subscribe for new UK Shares for the purpose of the
Scheme, provided that no funds may be provided to enable the Trustees to acquire UK Shares if such
an acquisition would result in the Trustees holding more than 5% of the ordinary share capital of
the Company in issue at that time.

13. Rights Attaching to Shares Allotted or Transferred Pursuant to Awards

13.1 All Shares allotted or 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 Vesting Date.

13.2 Any Shares acquired on vesting of Awards shall be subject to the articles of association of
the relevant Qualifying Company from time to time.

14. Availability of Shares

14.1 A Qualifying Company shall at all times keep available for issue sufficient authorised but
unissued Shares to satisfy all Awards under which Shares may be allotted or shall otherwise procure
that Shares are available for transfer in satisfaction of Awards.

 

 

14.2 If and so long as the UK Shares are listed on the Official List of The London Stock Exchange,
RE PLC will, at its expense, make application to The London Stock Exchange for admission to the
Official List of UK Shares allotted in satisfaction of any Award.

14.3 If and so long as Dutch Shares are listed on the Amsterdam Stock Exchange, RE NV will, at its
expense, make application to the Amsterdam Stock Exchange for admission of Dutch Shares allotted on
satisfaction of any Award.

15. Administration and Amendment 

15.1 The decision of the Committee shall be final and binding in all matters relating to the Scheme
and the Board may at any time discontinue the grant of further Awards or amend any of the
provisions of the Scheme in any way it thinks fit: PROVIDED THAT:

	(a)	 	the Committee shall not make any amendment that would materially prejudice the interests of
existing Participants except with their prior written consent; and
	 
	(b)	 	no amendment to the advantage of Executives or Participants may be made to:

	 	(i)	 	the definition of Executive;
	 
	 	(ii)	 	the limitations on the numbers of Shares subject to the Scheme;
	 
	 	(iii)	 	the adjustment provisions of rule 11 of the Scheme;

	 	 	without the prior approval of RE PLC in general meeting (and, if appropriate the prior
approval of RE NV in general meeting), except in the case of minor amendments to benefit
the administration of the Scheme, to take account of a change in legislation or to obtain
or maintain favourable tax, exchange control or regulatory treatment for Executives and
Participants or any member of the Group; and
	 
	(c)	 	without prejudice to any provision of the Scheme which provides for the lapse of an Award,
the Committee may not cancel an Award unless the Participant agrees in writing to such
cancellation.

16. General

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

16.2 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 Scheme or any right he may have to
participate in the Scheme. An individual who participates in the Scheme 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 Scheme 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.

16.3 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.

16.4 Any notice or other document required to be given under or in connection with the Scheme 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 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
Scheme may be delivered or sent by post to it at its registered office (or such other place or
places as the Committee may from time to time determine and notify to Participants).

16.5 Benefits under the Scheme shall not be pensionable.

16.6 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 on the
exercise of Awards.

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

 

 

SCHEDULE

Performance conditions attaching to awards granted 

after 19 April 2006

Subject to the additional conditions set out herein, the performance conditions applicable to
Awards are that:

	(a)	 	at the Accounts Date of each Qualifying Company following the expiry of the Performance
Period relating to an Award the EPS Growth over the Performance Period is at a level to cause
Shares to vest in accordance with this Schedule (the EPS Performance Target); and
	 
	(b)	 	the number of Shares which vest (if any) in accordance with (a) above will be adjusted by
reference to the level of attainment of the TSR target set out in this Schedule (the TSR
Performance Target).

The combined effect of (a) and (b) is shown in paragraph 0.

The following provisions apply for the purpose of determining (i) whether the conditions set out in
this Schedule have been satisfied, and accordingly (ii) the number of Vested Shares as a
percentage of the Award — Initial Number.

1. Definitions

1.1 In this Schedule, terms shall have the same meaning as in Rule 1 of the Rules and, unless the
context otherwise requires, the following additional terms shall have the following meanings,
namely:

Accounts means the consolidated accounts of each Qualifying Company for a Financial Year drawn up
in accordance with International Financial Reporting Standards (applied consistently);

Accounts Date means the date on which Accounts are published or, if the Committee so determines,
the date of the preliminary announcement of final results for a Financial Year;

Annualised EPS means EPS adjusted proportionately upwards or downwards in a case where the relevant
Financial Year is less than one calendar year;

Auditors means the auditors for the time being of each Qualifying Company;

Average Market Value means, in relation to a Share or an ordinary share in a company in the
Comparator Group on any date, the average of the Market Values of such a share for the Dealing Days
in the period of six months immediately preceding that date. For these purposes, the Market Value
of:

	(a)	 	a Share shall be determined in accordance with the definition in the rules of the Scheme; and

 

 

	(b)	 	of an ordinary share in a company in the Comparator Group shall be calculated in the currency
of the primary listing of the relevant company;

Basis Year means, in relation to each Qualifying Company, the Financial Year ending immediately
before the start of the Performance Period relating to an Award;

Comparator Group means the Thomson Corporation, McGraw Hill, Reuters Group, Pearson, VNU, Wolters
Kluwer, Choice Point, EMAP, Informa, United Business Media, Fair Isaac, John Wiley & Sons, DMGT,
Dow Jones, Lagardere, Dun & Bradstreet, WPP and Taylor Nelson (subject to such additions, deletions
and substitutions as the Committee may make in accordance with this Schedule or otherwise think
fit);

Dealing Day means a date on which the London Stock Exchange (or, where the primary listing of a
company in the Comparator Group is outside the UK, the exchange on which such shares are listed) is
open for the transaction of business;

EPS means, for any Financial Year of the relevant Qualifying Company, the adjusted earnings per
ordinary share of a Qualifying Company (excluding the amortisation of acquired intangible assets,
acquisition integration costs, gains on disposals and investments, related tax effects, and
movements on deferred tax balances not expected to crystallise in the near future) calculated in
accordance with International Accounting Standard No. 33 or any modification to that standard
PROVIDED THAT to ensure comparability of Financial Years of the Qualifying Company within the
Performance Period and for the Basis Year, the Committee may:

	(a)	 	adjust the figure to ensure that the relevant accounting standard is applied on a consistent
basis in respect of years falling within the Performance Period and the Basis Year; and
	 
	(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 Performance Period and for the Basis
Year

AND PROVIDED FURTHER THAT the Committee shall have the 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;

EPS Growth means the percentage compound growth in the Annualised EPS of the Qualifying Companies
over the Performance Period (averaged as between the two Qualifying Companies);

Final Year means, in relation each Qualifying Company, the last Financial Year in the Performance
Period;

Total Shareholder Return or TSR means in relation to a Share or an ordinary share in a company in
the Comparator Group over the Performance Period, the percentage increase above (or decrease below)
the Average Market Value of such a share on the last date of the Basis Year, of the aggregate of:

 

 

	(a)	 	the increase (or decrease) in the Average Market Value of such a share by the end of the
Performance Period; and;
	 
	(b)	 	the aggregate value of dividends becoming payable during the Performance Period (excluding
any tax credit) (each such dividend being deemed to be reinvested in the shares of each
relevant company from the ex dividend date of the dividend), the value of such reinvested
dividends being determined at the end of the Performance Period,

in each case together with such other adjustments as the Committee may deem appropriate and as
determined pursuant to a formula commissioned by the Committee; and

TSR Ranking means, as at the end of the Performance Period, the ranking of the Total Shareholder
Return of the Qualifying Companies and the companies in the Comparator Group over the Performance
Period where the company with the highest Total Shareholder Return is ranked first.

2. Shareholding Condition

2.1 An Award shall not vest unless:

	(a)	 	at the Vesting Date the Participant holds Shares in the Qualifying Companies with an
aggregate share price equal to 2 times the Participant’s basic salary from the Group as at the
Date of Grant (in the case of a Participant who is a director of the Company or a Qualifying
Company), 3 times the Participant’s basic salary from the Group as at the Date of Grant (in
the case of the Chief Executive), and such number of Shares or salary multiple as may be
determined by the Committee (in the case of all other Participants), and
	 
	(b)	 	the Committee is satisfied that the Participant complies with the Company’s shareholding
guidelines for directors and senior executives as at the Vesting Date.

2.2 For the purposes of the condition in paragraph 2.1 the Committee shall have discretion to
determine all matters relating to the satisfaction of the said condition, including the share price
to be taken into account for these purposes.

3. Determining Satisfaction Of Targets At End Of Performance Period

3.1 At each Accounts Date of the Company following the expiry of a Performance Period, the
Committee shall:

	(a)	 	calculate and verify with the Auditors the EPS Growth over the Performance Period; and
	 
	(b)	 	arrange for a reputable provider of such information to calculate and report to the Committee
on the TSR Ranking of the Company (calculated as set out above) and of each company in the
Comparator Group over the relevant

 

 

	 	 	Performance Period. Such calculation shall be verified by the Auditors. If at the end of
the Performance Period, any of the companies in the Comparator Group has undergone a change
in circumstances (such as the cessation of trading or merger with another company) the
Committee may determine appropriate treatment of that company for the purpose of
determining its TSR Ranking.

3.2 The number of Shares that shall vest shall be determined in accordance with the following
table. For these purposes:

	(a)	 	any level of EPS Growth (as shown in each row in the table) shall correspond with a
particular TSR Ranking shown in each relevant column of the table. Such EPS Growth and TSR
Ranking shall give rise to a percentage as shown in the table;
	 
	(b)	 	the number of Vested Shares shall be determined by multiplying the percentage shown in the
table by the Award — Initial Number;
	 
	(c)	 	where EPS Growth is between 8% p.a. and 12% p.a., and/or TSR Ranking is between Median and
Upper Quartile, the percentage of the Award — Initial Number which vests will be determined
(in both cases) by reference to straight line interpolation between the relevant percentages
indicated in the table.

	 	 	 	 	 	 	 	 	 
	 	 	TSR Ranking
	 	 	Below	 	 	 	62.5	 	Upper quartile
	EPS Growth	 	Median	Median	percentile	 	& above
	Below 8% p.a.
	 	0%	 	0%	 	0%	 	0%
	8% p.a.
	 	28%	 	35%	 	42%	 	49%
	10% p.a.
	 	80%	 	100%	 	120%	 	140%
	12% p.a.& over
	 	108%	 	135%	 	162%	 	189%

4. Specific Provisions Applicable to the TSR Performance Target

4.1 As indicated in the definition of Average Market Value, all share prices will be calculated in
the currency of the primary listing of each relevant company.

4.2 The TSR of the Company will be deemed to be the simple average of the returns of RE PLC and RE
NV (in their local currency) over the Performance Period.

 

 

5. Adjustments

5.1 The Committee may make such adjustments to the performance conditions in this Schedule as it
considers appropriate to take account of any factors which are relevant in the opinion of the
Committee.

5.2 Without prejudice to paragraph 5.1, the Committee may, in consultation with the Auditors, make
the following adjustments in relation to the calculations to be carried out in accordance with this
Schedule:

	(a)	 	any adjustments it considers appropriate if an event occurs giving rise to an adjustment of
Awards under Rule 11 of the Plan; and

	(b)	 	any adjustments it considers appropriate if there is any modification in the calculation of
TSR or in relation to the relevant accounting standard used to calculate EPS.

6. Overriding Power

6.1 The Committee may in its absolute discretion at any time reduce or cancel Awards previously
granted to Participants based on the Committee’s assessment of (a) whether the EPS Performance
Target and the TSR Performance Target are a fair reflection of the progress of the Group’s business
having regard to underlying revenue growth, cash generation, return on capital and any significant
changes in currency and inflation, and (b) individual performance of a Participant. This power
shall apply even if the EPS Performance Target and the TSR Performance Target have been or are
expected to be met.

 

 

APPENDIX 1

SCHEME 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 Scheme 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;
	 
	(C)	 	The definition of Share Option Scheme shall be amended as follows:
	 
	 	 	“Share Option Scheme means any employee share option scheme established by the Company or
RE PLC or ERF, which relates to UK Shares;” and
	 
	(D)	 	Awards shall not be granted under this Appendix without the agreement of the supervisory
board of ERF.

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