10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-4694

R. R. DONNELLEY & SONS COMPANY

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	36-1004130 (I.R.S. Employer Identification No.)
77 West Wacker Drive, Chicago, Illinois (Address of principal executive offices)	60601 (Zip Code)

Registrant’s Telephone Number (312) 326-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

Yes      ü     No             

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes      ü     No             

Number of shares of common stock     outstanding as of October 31, 2003 113,621,530

PART  I

FINANCIAL  INFORMATION

Item 1.    Financial Statements

Index	Page Number(s)
Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2003 and 2002	3
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2003 and December 31, 2002	4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2003 and 2002	5
Notes to Condensed Consolidated Financial Statements (Unaudited)	6 - 19
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company Overview	20 - 22
Results of Operations—Third Quarter 2003 Compared with Third Quarter 2002	23 - 32
Results of Operations—First Nine Months of 2003 Compared with First Nine Months of 2002	32 - 39
Liquidity and Changes in Financial Condition	39 - 40
Other Information	40 - 41
Item 3.    Quantitative and Qualitative Disclosures About Market Risk	41 - 42
Item 4.    Controls and Procedures	42
PART II OTHER INFORMATION
Item 1.    Legal Proceedings	43
Item 5.    Other Information	43
Item 6.    Exhibits and Reports on Form 8-K	43

2

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per-share data)

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003			2002
Net sales	$	1,193,774		$	1,177,280		$	3,410,053		$	3,419,822
Cost of sales		970,883			935,101			2,830,461			2,815,484
Gross profit		222,891			242,179			579,592			604,338
Selling and administrative expenses		131,743			134,223			406,114			401,564
Restructuring and impairment charges		1,507			22,709			9,390			65,426
Earnings from operations		89,641			85,247			164,088			137,348
Interest expense, net		(11,909	)		(16,937	)		(36,673	)		(49,683	)
Other income (expense), net		4,957			6,391			(4,250	)		12,447
Earnings before income taxes		82,689			74,701			123,165			100,112
Provision for income taxes		28,959			26,959			44,340			5,934
Net income	$	53,730		$	47,742		$	78,825		$	94,178
Net income per share of common stock
Basic	$	0.47		$	0.42		$	0.70		$	0.83
Diluted		0.47			0.42			0.69			0.82
Weighted average number of common shares outstanding
Basic		113,266			113,143			113,170			113,039
Diluted		114,586			114,299			114,025			114,670

See accompanying Notes to Condensed Consolidated Financial Statements.

3

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, 2003 and December 31, 2002

(Thousands of dollars, except share data)

ASSETS
	2003			2002
Cash and equivalents	$	65,618		$	60,543
Receivables, less allowance for doubtful accounts of $31,162 in 2003 and $19,250 in 2002		663,049			601,184
Inventories		174,481			116,191
Prepaid expenses		67,459			88,521
Total current assets		970,607			866,439
Net property, plant and equipment, at cost, less accumulated depreciation of $3,518,914 in 2003 and $3,454,722 in 2002		1,343,900			1,411,016
Goodwill		300,955			308,174
Other intangible assets, net of accumulated amortization of $270,997 in 2003 and $259,477 in 2002		86,718			96,662
Other noncurrent assets		491,510			469,481
Total assets	$	3,193,690		$	3,151,772
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	297,509		$	267,690
Accrued compensation		146,506			157,070
Short-term debt		196,725			245,782
Current and deferred income taxes		3,108			1,397
Other accrued liabilities		320,111			282,791
Total current liabilities		963,959			954,730
Long-term debt		773,835			752,870
Deferred income taxes		227,638			214,112
Other noncurrent liabilities		337,896			315,466
Total noncurrent liabilities		1,339,369			1,282,448
Shareholders’ equity:
Common stock at stated value ($1.25 par value)
Authorized shares: 500,000,000; Issued shares: 140,889,050 in 2003 and 2002		308,462			308,462
Retained earnings		1,549,114			1,593,107
Accumulated other comprehensive loss		(109,172	)		(115,456	)
Unearned compensation		(4,506	)		(5,177	)
Reacquired common stock at cost, 27,590,536 and 27,764,983 shares at 2003 and 2002, respectively		(853,536	)		(866,342	)
Total shareholders’ equity		890,362			914,594
Total liabilities and shareholders’ equity	$	3,193,690		$	3,151,772

See accompanying Notes to Condensed Consolidated Financial Statements.

4

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Nine Months Ended September 30

(Thousands of dollars)

	2003			2002
Cash flows from operating activities:
Net income	$	78,825		$	94,178
Restructuring and impairment charges		9,390			65,426
Gain from reversal of excess tax reserves		—			(30,000	)
Depreciation		206,543			217,503
Amortization		31,301			29,139
Gain on sale of assets		(2,533	)		(13,785	)
Gain on sale of investments		(4,158	)		(6,350	)
Net change in operating working capital, net of acquisition		(78,814	)		865
Net change in other assets and liabilities, net of acquisition		(2,723	)		(112,243	)
Other		4,163			263
Net cash flows from operating activities		241,994			244,996
Cash flows from investing activities:
Capital expenditures		(141,292	)		(182,269	)
Other investments including acquisition, net of cash acquired		(16,910	)		182
Dispositions of assets		31,638			24,459
Net cash flows from investing activities		(126,564	)		(157,628	)
Cash flows from financing activities:
Repayments of long-term debt		(110,534	)		(75,083	)
Net proceeds from short-term borrowings		78,649			103,056
Disposition of reacquired common stock		8,063			13,011
Acquisition of common stock		(1,541	)		(19,356	)
Cash dividends paid		(86,295	)		(82,633	)
Net cash flows from financing activities		(111,658	)		(61,005	)
Effect of exchange rate changes on cash and equivalents		1,303			(2,830	)
Net change in cash and equivalents		5,075			23,533
Cash and equivalents at beginning of period		60,543			48,615
Cash and equivalents at end of period	$	65,618		$	72,148
Changes in operating working capital, net of acquisition:
	2003			2002
Decrease (increase) in assets:
Receivables, net	$	(59,252	)	$	33,787
Inventories, net		(58,196	)		(10,641	)
Prepaid expenses		21,416			22,488
Increase (decrease) in liabilities:
Accounts payable		27,781			(31,257	)
Accrued compensation		(10,544	)		4,669
Other accrued liabilities		(19	)		(18,181	)
Net change in operating working capital	$	(78,814	)	$	865

See accompanying Notes to Condensed Consolidated Financial Statements.

5

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. The condensed consolidated financial statements included herein are unaudited (although the balance sheet at December 31, 2002 is condensed from the audited balance sheet at that date) and have been prepared by the company to conform with the requirements applicable to this quarterly report on Form 10-Q. Certain information and disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been omitted as permitted by such requirements. However, the company believes that the disclosures made are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the company’s 2002 Annual Report on Form 10-K.

The condensed consolidated financial statements included herein reflect, in the opinion of the company, all adjustments (which include only normal, recurring adjustments) necessary to present fairly the financial information for such periods. Certain prior year amounts have been reclassified to maintain comparability with current year classifications.

NOTE 2. Components of the company’s inventories at September 30, 2003, and December 31, 2002, were as follows:

Thousands of dollars	2003			2002
Raw materials and manufacturing supplies	$	100,328		$	83,701
Work in process		170,679			108,947
Finished goods		4,533			1,824
Progress billings		(49,503	)		(28,977	)
LIFO reserve		(51,556	)		(49,304	)
Total	$	174,481		$	116,191
Progress billings represent customer prepayment for raw materials or work in progress.
NOTE 3. The following provides supplemental cash flow information:
	Nine Months Ended September 30
Thousands of dollars	2003			2002
Interest paid(1)	$	42,738		$	42,809
Income taxes paid(2)		7,559			176,700

(1) Excludes interest received of $6 million and $5 million for the nine months ended September 30, 2003 and 2002, respectively, on interest rate swap agreements (see Note 9 to the condensed consolidated financial statements).

(2) Includes taxes and interest for the nine months ended September 30, 2003 and 2002 of $7 million and $135 million, respectively, related to the company’s settlement with the Internal Revenue Service and state tax authorities for deductions related to corporate-owned life insurance (see Note 7 to the condensed consolidated financial statements).

NOTE 4. As reported in the company’s Annual Report on Form 10-K for 2002, the company has settled three previously pending cases: Adams, et al. v. R.R. Donnelley & Sons Co; Jefferson, et al. v. R.R. Donnelley & Sons Co., et al, and Gerlib, et al. v. R.R. Donnelley & Sons Co. without any admission of wrongdoing by the company. The company also settled that portion of Jones, et al. v. R.R. Donnelley & Sons Co., relating to claims arising in locations other than the Chicago catalog operations without any

6

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

admission of wrongdoing by the company. The company recorded a total pretax charge of $16 million in 2002 ($9 million in the second quarter and $7 million in the fourth quarter) relating to these settlements.

The issue remaining in the Jones case affects two classes certified by the trial court: a class consisting of African-American employees discharged in connection with the shutdown of the Chicago catalog operations, and a class consisting of African-American employees of the Chicago catalog operations after November 1992 who were other than permanent employees. On September 16, 2002, the Seventh Circuit Court of Appeals overturned a ruling by the trial court and held that a two year statute of limitations applies to the claims of these classes, which absent any other ruling would result in dismissal of the claims on the basis of timeliness. On May 19, 2003, the United States Supreme Court agreed to review the issue of the appropriate statute of limitations to apply and set the matter for argument in the 2003 term. At this time, management is unable to make a meaningful estimate of the overall loss, if any, that could result from the final determination of this matter.

From time to time, customers of the company file voluntary petitions for reorganization under the United States bankruptcy laws. In such cases, certain pre-petition payments received by the company could be considered preference items and subject to return to the bankruptcy administrator. The company believes that the final resolution of these preference items will not have a material adverse effect on the company’s consolidated financial position or results of operations.

In addition, the company is a party to certain litigation arising in the ordinary course of business which, in the opinion of management, will not have a material adverse effect on the company’s consolidated financial position or results of operations.

NOTE 5. Under Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, the company reports changes in shareholders’ equity that result from either recognized transactions or other economic events, excluding capital stock transactions, which affect shareholders’ equity. For the company, the differences between net income and comprehensive income were as follows:

	Three Months Ended September 30						Nine Months Ended September 30
Thousands of dollars	2003			2002			2003		2002
Net income	$	53,730		$	47,742		$	78,825	$	94,178
Unrealized foreign currency gain (loss)		(2,424	)		(7,202	)		6,284		(20,484	)
Comprehensive income	$	51,306		$	40,540		$	85,109	$	73,694

NOTE 6. The company operates primarily in the commercial print portion of the printing industry, with related service offerings designed to offer customers complete solutions for communicating their messages to target audiences. Beginning January 1, 2003, the company revised its segment reporting to reflect RR Donnelley Financial as a separate business segment. The company’s Financial Services operations were previously reported within the Other business segment. As a result, the company discloses three reportable segments: Donnelley Print Solutions, Logistics Services and Financial Services.

RR Donnelley Print Solutions (Donnelley Print Solutions) is comprised of the company’s businesses serving the following end markets within the commercial print industry: Magazines, Catalogs and Retail; Book Publishing Services; Telecommunications; and Premedia Technologies. Donnelley Print Solutions was created to optimize the company’s production capacity serving these end markets, and to enhance service delivery capabilities. The formation of Donnelley Print Solutions in 2002 was intended to create

7

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

a more cost-effective, integrated and flexible print platform using a single business model and operating under one management team.

RR Donnelley Logistics (Donnelley Logistics) represents the company’s logistics and distribution services operations for its print customers and other mailers. Donnelley Logistics serves its customers by consolidating and delivering printed products and packages to the U.S. Postal Service closer to the final destination, resulting in reduced postage costs and improved delivery performance. Operating results for Donnelley Logistics are included under the reportable segment “Logistics Services.”

RR Donnelley Financial (Financial Services) serves the domestic and international capital markets, and provides customized communications solutions to investment management, banking, managed care and insurance clients to help manage and produce their stakeholder communications.

The company has disclosed earnings (loss) from operations as the primary measure of segment earnings (loss). This is the measure of profitability used by the company’s chief operating decision-maker that is most consistent with the presentation of profitability reported within the consolidated financial statements. The accounting policies of the business segments reported are the same as those described in Note 1, “Summary of Significant Accounting Policies,” in the 2002 Annual Report on Form 10-K.

Industry Segment Information

Thousands of dollars	Donnelley Print Solutions		Logistics Services			Financial Services			Other (1)			Corporate			Consolidated Total
Three months ended September 30, 2003
Net sales	$	753,161	$	218,319		$	99,921		$	122,373		$	—		$	1,193,774
Restructuring and impairment charges		513		93			208			693			—			1,507
Earnings (loss) from operations		99,205		(3,489	)		(319	)		(8,755	)		2,999			89,641
Earnings (loss) before income taxes		103,393		(3,542	)		(843	)		(4,560	)		(11,759	)		82,689
Three months ended September 30, 2002
Net sales	$	771,291	$	192,896		$	93,482		$	119,611		$	—		$	1,177,280
Restructuring and impairment charges		6,562		286			2,866			222			12,773			22,709
Earnings (loss) from operations		106,890		2,159			(12,357	)		253			(11,698	)		85,247
Earnings (loss) before income taxes		110,131		2,160			(10,975	)		2,926			(29,541	)		74,701
Nine months ended September 30, 2003
Net sales	$	2,104,682	$	642,891		$	315,380		$	347,100		$	—		$	3,410,053
Restructuring and impairment charges		2,474		49			2,461			3,254			1,152			9,390
Earnings (loss) from operations		194,322		(8	)		2,714			(27,634	)		(5,306	)		164,088
Earnings (loss) before income taxes		199,204		(186	)		1,499			(27,367	)		(49,985	)		123,165
Assets		1,602,693		268,026			174,266			580,933			567,772			3,193,690
Nine months ended September 30, 2002
Net sales	$	2,202,029	$	541,565		$	340,949		$	335,279		$	—		$	3,419,822
Restructuring and impairment charges		43,716		408			3,598			3,522			14,182			65,426
Earnings (loss) from operations		178,134		7,216			(12,191	)		(24,020	)		(11,791	)		137,348
Earnings (loss) before income taxes		188,933		7,174			(10,363	)		(27,796	)		(57,836	)		100,112
Assets		1,701,900		233,646			189,952			469,399			674,445			3,269,342

(1) Represents other operating segments of the company, including RRD Direct, International and Other.

8

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Earnings (loss) from operations is reconciled to earnings (loss) before income taxes as follows:

Thousands of dollars
Three Months Ended September 30, 2003	Donnelley Print Solutions			Logistics Services			Financial Services			Other (1)			Corporate			Consolidated
Earnings (loss) from operations	$	99,205		$	(3,489	)	$	(319	)	$	(8,755	)	$	2,999		$	89,641
Interest expense, net		(194	)		(92	)		—			(1,629	)		(9,994	)		(11,909	)
Other income (expense):
Earnings (loss) from investments		—			—			—			4,183			(31	)		4,152
Gain on sale of investment		4,158			—			—			—			—			4,158
Foreign currency transaction gain (loss)		(79	)		—			(13	)		387			8			303
Affordable housing write-downs		—			—			—			—			(4,000	)		(4,000	)
Other income (expense), net		303			39			(511	)		1,254			(741	)		344
Total other income (expense)		4,382			39			(524	)		5,824			(4,764	)		4,957
Earnings (loss) before income taxes	$	103,393		$	(3,542	)	$	(843	)	$	(4,560	)	$	(11,759	)	$	82,689
Thousands of dollars
Three Months Ended September 30, 2002	Donnelley Print Solutions			Logistics Services			Financial Services			Other (1)			Corporate			Consolidated
Earnings (loss) from operations	$	106,890		$	2,159		$	(12,357	)	$	253		$	(11,698	)	$	85,247
Interest expense, net		(26	)		—			—			(2,086	)		(14,825	)		(16,937	)
Other income (expense):
Earnings from investments		3,104			—			—			3,606			—			6,710
Foreign currency transaction gain (loss)		(161	)		—			(98	)		50			(37	)		(246	)
Affordable housing write-downs		—			—			—			—			(3,000	)		(3,000	)
Other income, net		324			1			1,480			1,103			19			2,927
Total other income (expense)		3,267			1			1,382			4,759			(3,018	)		6,391
Earnings (loss) before income taxes	$	110,131		$	2,160		$	(10,975	)	$	2,926		$	(29,541	)	$	74,701

(1) Represents other operating segments of the company, including RRD Direct, International and Other.

9

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Thousands of dollars
Nine Months Ended September 30, 2003	Donnelley Print Solutions			Logistics Services			Financial Services			Other (1)			Corporate			Consolidated
Earnings (loss) from operations	$	194,322		$	(8	)	$	2,714		$	(27,634	)	$	(5,306	)	$	164,088
Interest expense, net		(426	)		(216	)		—			(5,919	)		(30,111	)		(36,672	)
Other income (expense):
Earnings (loss) from investments		107			—			—			3,183			(24	)		3,266
Gain on sale of investment		4,158			—			—			—			—			4,158
Foreign currency transaction gain (loss)		18			—			7			(485	)		(836	)		(1,296	)
Affordable housing write-downs		—			—			—			—			(13,750	)		(13,750	)
Other income (expense), net		1,025			38			(1,222	)		3,488			42			3,371
Total other income (expense)		5,308			38			(1,215	)		6,186			(14,568	)		(4,251	)
Earnings (loss) before income taxes	$	199,204		$	(186	)	$	1,499		$	(27,367	)	$	(49,985	)	$	123,165

Thousands of dollars
Nine Months Ended September 30, 2002	Donnelley Print Solutions			Logistics Services			Financial Services			Other (1)			Corporate			Consolidated
Earnings (loss) from operations	$	178,134		$	7,216		$	(12,191	)	$	(24,020	)	$	(11,791	)	$	137,348
Interest expense, net		(148	)		17			(3	)		(8,131	)		(41,418	)		(49,683	)
Other income (expense):
Earnings from investments		3,347			—			—			2,261			10			5,618
Gain on sale of investment		—			—			—			—			6,350			6,350
Foreign currency transaction loss		(276	)		—			(67	)		(1,317	)		(59	)		(1,719	)
Affordable housing write-downs		—			—			—			—			(9,000	)		(9,000	)
Corporate-owned life insurance		—			—			—			—			(5,377	)		(5,377	)
Other income (expense), net		7,876			(59	)		1,898			3,411			3,449			16,575
Total other income (expense)		10,947			(59	)		1,831			4,355			(4,627	)		12,447
Earnings (loss) before income taxes	$	188,933		$	7,174		$	(10,363	)	$	(27,796	)	$	(57,836	)	$	100,112

(1) Represents other operating segments of the company, including RRD Direct, International and Other.

10

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table shows net sales by end market:

	Net Sales
	Three months ended September 30						Nine months ended September 30
Thousands of dollars	2003		2002		% Change		2003		2002		% Change
Magazines, Catalogs and Retail	$	384,856	$	387,643	(0.7	)%	$	1,088,823	$	1,127,493	(3.4	)%
Book Publishing Services		185,670		193,882	(4.2	)%		508,409		526,349	(3.4	)%
Telecommunications		150,510		158,756	(5.2	)%		420,930		459,374	(8.4	)%
Premedia Technologies		32,125		31,010	3.6	%		86,520		88,813	(2.6	)%
Donnelley Print Solutions		753,161		771,291	(2.4	)%		2,104,682		2,202,029	(4.4	)%
Logistics Services		218,319		192,896	13.2	%		642,891		541,565	18.7	%
Financial Services		99,921		93,482	6.9	%		315,380		340,949	(7.5	)%
RRD Direct		25,768		33,828	(23.8	)%		81,246		104,752	(22.4	)%
Other(1)		96,605		85,783	12.6	%		265,854		230,527	15.3	%
Total Other		122,373		119,611	2.3	%		347,100		335,279	3.5	%
Total	$	1,193,774	$	1,177,280	1.4	%	$	3,410,053	$	3,419,822	(0.3	)%

(1) Includes International (Latin America, Europe and Asia) and Other.

NOTE 7. The company used corporate-owned life insurance (COLI) to fund employee benefits for several years. In 1996, the United States Health Care Reform Act was passed, eliminating the deduction for interest from loans borrowed against COLI programs. 1998 was the final year of the phase-out for deductions. In several recent federal court decisions involving different corporate taxpayers, the courts disallowed deductions for loans against those taxpayers’ COLI programs. In its audit of the company’s 1990 to 1992 tax returns, the Internal Revenue Service (IRS) disallowed the deductions taken by the company.

On April 1, 2002, the company reached a settlement agreement with the IRS resolving all disputes over the tax deductibility of interest on loans taken out against its COLI programs. As part of the settlement, the company agreed to the disallowance of 80% of its interest deductions on loans related to its COLI programs from 1990 through 1998. Based upon the 80% settlement, the company’s exposure for all years was approximately $217 million in taxes and interest, after-tax, of which $62 million ($55 million after-tax) was paid prior to 2002. The company has satisfied approximately $172 million ($145 million after-tax) of the remaining liability to the IRS and state tax authorities. The remaining amount owed is classified in the accompanying condensed consolidated balance sheet as current income taxes payable and other noncurrent liabilities.

As part of the settlement with the IRS, the company also agreed to surrender approximately 17,000, or 61%, of its outstanding COLI policies to the insurance carriers in April 2002. The IRS agreed to an 80% reduction of the taxable portion of the gain related to the surrender of the COLI policies. The tax at 40% on the remaining 20% gain upon surrender of the policies resulted in additional amounts owed to the IRS of $18 million. In April 2002, the company received $12 million in net cash surrender value related to the policies surrendered.

11

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

As a result of the company’s settlement agreement with the IRS, the company reduced its tax reserves related to COLI to equal the settlement amounts. Accordingly, in the first quarter of 2002, the company recorded a one-time tax benefit of $30 million to reflect the reduction in tax reserves. In addition, the company recorded a nonrecurring pretax charge of $5 million in the first quarter of 2002 related to the surrender of the above COLI policies, which was classified in other income (expense) net, in the accompanying condensed consolidated statements of income.

NOTE 8. The following summarizes share information as a basis for both the basic and diluted earnings per share computation in accordance with SFAS No. 128, Earnings per Share:

In thousands, except per-share data	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003		2002
Weighted average shares outstanding—basic		113,266		113,143		113,170		113,039
Effect of dilutive securities		1,320		1,156		855		1,631
Weighted average shares outstanding—diluted		114,586		114,299		114,025		114,670
Net income	$	53,730	$	47,742	$	78,825	$	94,178
Basic EPS	$	0.47	$	0.42	$	0.70	$	0.83
Diluted EPS		0.47		0.42		0.69		0.82

Options outstanding to purchase 10 million and 11 million shares of common stock at September 30, 2003 and 2002, respectively, were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market prices of the company’s common shares. The range of exercise prices for these options was between $25.45 and $46.88 and $25.81 and $46.88 for the three months ended September 30, 2003 and 2002, respectively, and was between $22.59 and $46.88 and $28.25 and $46.88 for the nine months ended September 30, 2003 and 2002, respectively. The number of basic common shares outstanding for both September 30, 2003 and 2002 was 113 million.

NOTE 9. The company has limited transactions that fall under the accounting rules of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, SFAS No. 138 and SFAS No. 149. From time to time, the company uses financial instruments, including interest rate swap agreements and forward exchange and option contracts, to manage exposure to movements in interest rates and exchange rates.

On November 14, 2001, the company issued $225 million in notes bearing interest at a fixed rate of 5.0% per annum and maturing on November 15, 2006. In conjunction with this issuance, the company entered into a series of pay-floating and pay-fixed interest rate swaps to take advantage of lower interest rates on floating rate debt. The pay-floating swap was executed in two transactions that mature in November 2006. To reduce its exposure to future increases in floating interest rates, the company entered into additional floating-to-fixed swap agreements, effectively fixing the interest rates for the May 15, 2002, November 15, 2002, May 15, 2003 and November 17, 2003 interest rate resets on the original swaps. Pay-floating swaps effectively convert fixed rate obligations to variable rate instruments indexed to LIBOR. Pay-fixed swaps effectively convert floating rate obligations to fixed rate instruments.

12

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table summarizes the company’s interest rate swaps at September 30, 2003:

Thousands of dollars		Notional Principal(1)			Interest Rates			Fair Values
Effective Date	Maturity Date				Receive		Pay
November 14, 2001	November 15, 2006	$	100,000	(4)	5.0	%	LIBOR + 0.863%	$	5,142	(2)
November 14, 2001	November 15, 2006		100,000	(4)	5.0	%	LIBOR + 0.863%		5,142	(2)
May 15, 2003	November 17, 2003		100,000	(5)	LIBOR		1.650%		(206	)(3)
May 15, 2003	November 17, 2003		100,000	(5)	LIBOR		1.590%		(175	)(3)
November 17, 2003	May 17, 2004		100,000	(5)	LIBOR		1.590%		(222	)(3)
November 17, 2003	May 17, 2004		100,000	(5)	LIBOR		1.538%		(193	)(3)

(1) The notional principal is the amount used for the calculation of interest payments that are exchanged over the life of the swap transaction and is equal to the amount of dollar principal exchanged at maturity, if applicable.

(2) Swap is considered a fair value hedge. Accordingly, the fair value is recorded in “Other noncurrent assets” with offsets recorded in “Long-term debt.”

(3) Swap does not qualify for hedge accounting. Accordingly, the change in the fair value of this agreement was recorded in “Interest expense” with offsets recorded in “Other accrued liabilities.”

(4) Receive fixed-pay floating interest rate swap.

(5) Receive floating-pay fixed interest rate swap.

The net effect of the various interest rate swaps was a reduction in interest expense of $1 million for both of the three-month periods ended September 30, 2003 and 2002 and $3 million for both of the nine-month periods ended September 30, 2003 and 2002, respectively.

NOTE 10. The company regularly assesses its manufacturing platforms to assure that they are efficient, flexible and aligned properly with customer needs. The company initiated various restructuring actions in 2003, 2002 and 2001, which consisted primarily of the consolidation of operations and workforce reductions.

During the third quarter of 2003, the company recognized pretax restructuring and impairment charges of $1.5 million, and reduced earnings from operations in the company’s business segments as follows: Donnelley Print Solutions: $0.5 million; Logistics Services: $0.1 million; Financial Services: $0.2 million; and Other: $0.7 million. The third quarter 2003 pretax charges consisted of workforce reductions and continued consolidations at several of the company’s facilities. The third quarter 2003 pretax charges consisted of the following:

• ($0.5) million of employee termination benefits, primarily related to the reversal of severance-related reserves of $1.3 million due to voluntary terminations or internal placements of employees, partially offset by additional termination benefits of $0.8 million. The actions approved during the third quarter will result in the termination of 47 employees, 22 of whom were terminated in the third quarter. The remaining employees are expected to be terminated in the fourth quarter of 2003 and first quarter of 2004.

• $0.3 million of relocation costs incurred for employees transferred from closed facilities, as well as equipment transfers, both of which are being expensed as incurred.

• $1.7 million for anticipated losses on the disposal of building and equipment, primarily within the Donnelley Print Solutions segment.

13

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

During the second quarter of 2003, the company recognized pretax restructuring and impairment charges of $5.3 million, and reduced earnings from operations in the company’s business segments as follows: Donnelley Print Solutions: $1.8 million; Financial Services: $1.7 million; and Other: $1.8 million. The second quarter 2003 pretax charge consisted of workforce reductions and continued consolidations at several of the company’s facilities. The second quarter 2003 pretax charge consisted of the following:

• $2.1 million of employee termination benefits, including severance and outplacement services. The actions approved during the second quarter resulted in the termination of 104 employees, 44 of whom were terminated in the second quarter. The remaining employees were terminated in the third quarter.

• $0.7 million of exit costs to maintain closed facilities until the estimated dates of sale.

• $2.0 million of relocation costs incurred for employees transferred from closed facilities, as well as equipment transfers, both of which are being expensed as incurred.

• $0.5 million for anticipated losses on the disposal of equipment, primarily in connection with plant consolidations within RRD Direct. The asset impairment loss recognized was based on the difference between the estimated selling prices of the assets to be sold and the related carrying values. Selling prices were estimated based on the company’s prior experience with comparable equipment disposals.

During the first quarter of 2003, the company recognized pretax restructuring and impairment charges of $2.6 million, and reduced earnings from operations in the company’s business segments as follows: Donnelley Print Solutions: $0.2 million; Financial Services: $0.6 million; Corporate: $1.1 million and Other: $0.7 million. The first quarter 2003 pretax charge consisted of workforce reductions and continued consolidations at several of the company’s facilities. The first quarter 2003 pretax charge consisted of the following:

• $1.2 million of employee termination benefits, including severance and outplacement services. The actions approved during the first quarter resulted in the termination of 110 employees, 57 of whom were terminated in the first quarter. The remaining employees were terminated in the second quarter.

• A $1.1 million curtailment loss related to the company’s postretirement benefit plan. This charge was recorded in the Corporate segment. The recognized curtailment loss represents an increase in the accumulated postretirement benefit obligation and the recognition of prior service costs due to workforce reductions in 2002, subsequent to the September 30, 2002 measurement date for the postretirement benefit plan.

• ($0.4) million of income related to a reduction in the reserve for exit costs for projected lease payments, resulting from the company’s ability to sublease certain leased property.

• $0.7 million of relocation costs incurred for employees transferred from closed facilities, as well as equipment transfers, both of which are being expensed as incurred.

14

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following summarizes the restructuring activities from January 1, 2003 to September 30, 2003:

Thousands of dollars	Reserve balance at January 1, 2003		First quarter 2003 charges			Second quarter 2003 charges		Third quarter 2003 charges			Cash payments			Pension and postretirement benefits plan adjustment			Non-cash items			Reserve balance at September 30, 2003
Employee termination benefits	$	14,475	$	1,167		$	2,057	$	(485	)	$	(7,676	)	$	(4,037	)	$	(163	)	$	5,338
Postretirement plan curtailment		—		1,152			—		—			—			(1,152	)		—			—
Exit costs		5,532		(350	)		749		37			(5,465	)		—			—			503
Relocation costs		—		716			1,981		287			(2,984	)		—			—			—
Asset impairment		—		(76	)		487		1,668			—			—			(2,079	)		—
Total	$	20,007	$	2,609		$	5,274	$	1,507		$	(16,125	)	$	(5,189	)	$	(2,242	)	$	5,841

In connection with the restructuring plans announced in 2002, the company has ceased print production at its Berea, Ohio facility, and all continuing customer work has been transferred to other company facilities. The Berea, Ohio facility was considered held for sale as of September 30, 2003. Additional future charges related to all 2002 announced actions are expected to be approximately $1 million, which are anticipated to be recognized by the end of 2003, and relate primarily to employee and equipment relocation. All 1,798 planned employee terminations related to the 2002 plans have been completed.

In connection with the restructuring plans announced in 2001, the company has ceased print production at its St. Petersburg and South Daytona, Florida; Des Moines, Iowa; Old Saybrook, Connecticut; and Hamburg Gráfica Editora (Brazil) facilities, and all continuing customer work has been transferred to other company facilities. Additional charges related to the 2001 plans are expected to be minimal. All 2,850 planned employee terminations related to the 2001 plans have been completed. The St. Petersburg, Florida; Des Moines, Iowa; and Old Saybrook, Connecticut facilities were considered held for sale as of September 30, 2003. The Hamburg Gráfica Editora (Brazil) facility was sold in the second quarter of 2003 for $2 million in cash. The company recorded a pretax gain on sale of $1 million. The South Daytona, Florida, facility was sold in the third quarter of 2003. No gain or loss was recognized on this sale.

As of September 30, 2003, a total of 4,884 employee terminations have been completed under the restructuring plans announced in 2001, 2002 and 2003.

The net book value of assets to be disposed of under the restructuring plans as of September 30, 2003 of $7 million relates primarily to the Donnelley Print Solutions segment. The assets are comprised primarily of land, plant facilities and related equipment. These assets have been reviewed under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and reflect the estimated fair value, less costs to sell.

15

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

NOTE 11. Goodwill associated with each of the company’s business segments and changes in those amounts during the period were as follows:

Thousands of dollars	Net Book Value at January 1, 2003		Foreign Exchange/Other		Disposition			Net Book Value at September 30, 2003
Donnelley Print Solutions	$	80,552	$	—	$	(9,732	)	$	70,820
Logistics Services		149,312		27		—			149,339
Financial Services		23,495		—		—			23,495
Other(1)		54,815		2,486		—			57,301
	$	308,174	$	2,513	$	(9,732	)	$	300,955

(1) Represents other operating segments of the company, including RRD Direct, International and Other.

Other intangible assets primarily consist of the costs of acquiring print contracts and volume guarantees that are amortized as a reduction to net sales over the periods in which benefits will be realized. Amortization expense for intangible assets subject to amortization was $5 million and $6 million for the three months ended September 30, 2003 and 2002, respectively, and $18 million and $20 million for the nine months ended September 30, 2003 and 2002, respectively.

NOTE 12. On March 6, 2003, the company acquired certain net assets of Momentum Logistics, Inc. (MLI), a Florida-based provider of package distribution services, for approximately $17 million in cash. MLI operates sortation facilities and a dedicated fleet of vehicles to provide business-to-business and business-to-consumer package distribution services. The allocation of the purchase price is preliminary pending completion of valuations of the assets acquired by independent valuation firms and final determination of the acquired liabilities.

In July 2003, the company sold its 25% equity investment in Global Directory Services Company to an unrelated third-party purchaser for $23 million in cash. In connection with this transaction, the company reduced goodwill by $10 million, which represented the remaining balance of the goodwill that arose at the time of the company’s acquisition of this equity investment. The company recorded a pretax gain on sale of $4 million ($3 million after-tax, or $0.03 per diluted share).

16

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

NOTE 13. As permitted under SFAS No. 123, Accounting for Stock-Based Compensation, the company accounts for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Stock options granted during the nine months ended September 30, 2003 and 2002 were exercisable at prices equal to the fair market value of the company’s common stock on the dates the options were granted; accordingly, no compensation expense has been recognized for the stock options granted. The following disclosure, as required under SFAS No. 148, Accounting for Stock Based Compensation—Transition and Disclosure, presents pro forma net income and basic and diluted earnings per share had compensation cost been determined using the fair value recognition provisions of SFAS No. 123 and related amendments.

	Three Months Ended September 30						Nine Months Ended September 30
Thousands of dollars, except per share data	2003			2002			2003			2002
Net income, as reported	$	53,730		$	47,742		$	78,825		$	94,178
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(2,455	)		(2,412	)		(7,586	)		(7,550	)
Pro forma net income	$	51,275		$	45,330		$	71,239		$	86,628
Earnings per share:
Basic—as reported	$	0.47		$	0.42		$	0.70		$	0.83
Basic—pro forma		0.45			0.40			0.63			0.77
Diluted—as reported		0.47			0.42			0.69			0.82
Diluted—pro forma		0.45			0.40			0.62			0.76

The fair value of each option granted in the respective period is estimated at the date of grant using the Black-Scholes option-pricing model.

NOTE 14. In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation (FIN) No. 46, “Consolidation of Variable Interest Entities, An Interpretation of APB No. 51.” FIN 46 provides guidance on the identification of entities for which control is achieved through means other than through voting rights (variable interest entities or VIE) and how to determine when and which business enterprises should consolidate the VIE. This new model for consolidation applies to entities (1) where the equity investors (if any) do not have a controlling financial interest or (2) whose equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. FIN 46 applies immediately to VIEs created after January 31, 2003 and to VIEs in which an enterprise obtains an interest after that date. In October 2003, the FASB deferred the implementation date of FIN 46 for arrangements entered into prior to January 31, 2003. The company is now required to adopt FIN 46 in the fourth quarter of 2003 for these arrangements. The company’s risk of loss related to its equity investments, including investments in affordable housing entities, is generally limited to the carrying value of these investments, which was approximately $108 million at September 30, 2003. The company is continuing to evaluate its investments to determine which, if any, will be impacted by the adoption of FIN 46.

Effective January 1, 2003, the company adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which rescinds Emerging Issues Task Force (EITF) Issue No. 94-3,

17

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

“Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred, rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by this statement include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing or other exit or disposal activity. Adoption of this statement did not have a material impact on the company’s financial position, results of operations or cash flows.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, which requires certain financial instruments that were previously presented on the consolidated balance sheets as equity to be presented as liabilities. Such instruments include mandatorily redeemable financial instruments and certain options and warrants. SFAS No. 150 is generally effective for financial instruments entered into or modified after May 31, 2003 and for the first interim period beginning after June 15, 2003. SFAS No. 150 did not have an impact on the company’s financial position, results of operations or cash flows.

Effective July 1, 2003, the company adopted EITF 00-21, Accounting For Revenue Arrangements with Multiple Deliverables, which establishes criteria for whether revenue on a deliverable can be recognized separately from other deliverables in a multiple deliverable arrangement. The criteria considers whether the delivered item has stand-alone value to the customer, whether the fair value of the delivered item can be reliably determined and the customer’s right of return for the delivered item. Adoption of EITF 00-21 did not have a material impact on the company’s financial position, results of operations or cash flows.

In November 2002, the FASB issued FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under the guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. Adoption of FIN 45 did not have a material impact on the company’s financial position, results of operations or cash flows.

As of December 31, 2002, the company adopted the disclosure requirement of SFAS No. 148. This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As of September 30, 2003, the company has elected not to change to the fair value based-method of accounting for stock-based employee compensation. The company accounts for employee stock options under APB No. 25, under which the company did not recognize any compensation cost for the three or nine months ended September 30, 2003 or 2002. See Note 13 for the related disclosures required under SFAS No. 148.

Note 15.    In October 2003, the company replaced its short-term revolving credit facility, which expired in October 2003 and provided for borrowings of up to $175 million, with a new short-term credit

18

R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

facility expiring in October 2004, which also provides for borrowings of up to $175 million. The new facility bears interest at a variable rate based on the current LIBOR rate and the company’s credit rating. The company pays an annual commitment fee on the unused portion of the facility of 0.07%. As of November 12, 2003, there have been no borrowings under this new facility.

Note 16.    On November 8, 2003, the company entered into a combination agreement with Moore Wallace Incorporated (Moore Wallace), a leading provider of print management and outsourced communications. Pursuant to the terms of the agreement, a direct, wholly owned subsidiary of the company will acquire all of the outstanding common shares of Moore Wallace whereby each share of Moore Wallace will be exchanged for 0.63 of a share of common stock of the company. The company expects that, upon closing of the transaction, it will issue approximately 100 million shares of its common stock, as well as undertake the obligation for the indebtedness of Moore Wallace which was approximately $900 million as of September 30, 2003. The transaction was approved by the Boards of Directors of both the company and Moore Wallace, but remains subject to certain closing conditions that include, among others, the receipt of required approval from both companies’ shareholders, required regulatory approvals and Ontario Superior Court of Justice approval of a plan of arrangement. The transaction is expected to close during the first quarter of 2004.

19

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Company Overview

RR Donnelley (NYSE:DNY) prepares, produces and delivers integrated communications services across multiple channels for content owners such as publishers, merchandisers and telecommunications companies, as well as capital markets and diversified financial services companies. While our print capabilities remain the foundation of the company, our recent focus on expanding our range of offerings with value-added services allows us to create additional value.

We provide solutions designed to enhance the effectiveness of our customers’ communications. Our services include:

· Content creation—to provide creative design services to maximize the impact of communications and improve response rates. In addition to in-house capabilities, alliances with best-in-class providers complement our service offerings.

· Digital asset management—to help our customers leverage their content to reach end-users through multiple marketing channels. Through our Premedia Technologies Services, we digitally capture content, convert it to the appropriate format and channel it to multiple communications media, including print and the Internet.

· Production—to drive results for our customers cost-effectively through print or the Internet. Our manufacturing operations around the world offer a full range of capabilities and are networked to quickly produce large printing jobs with identical specifications. We also are able to version printed content to reach targeted audiences.

· Distribution—to deliver our customers’ words and images efficiently and reliably through print or the Internet. RR Donnelley Logistics (Donnelley Logistics) delivers printed products and packages primarily to the U.S. Postal Service (USPS), saving our customers significant time and money. We also offer a full range of services to deliver value, maximize content effectiveness, enhance our clients’ businesses and build their customer relationships via the Internet.

Our 139-year history as a printing industry leader positions us well for the future. We expect print advertising to remain among the most cost-effective ways for our customers to deliver their messages and generate revenue as they use words and images to inform, educate, entertain and sell to their audiences.

We believe that print will remain integral to successful marketing given its unique capabilities, such as portability and high-quality graphics that cannot be duplicated by other communications methods. We also believe that the nature of print will continue to evolve. The ability of print to be targeted, timely, flexible and integrated with other communications media will become even more critical.

On November 8, 2003, we entered into a combination agreement with Moore Wallace Incorporated (Moore Wallace), a leading provider of print management and outsourced communications. Based on the terms of the agreement, a direct, wholly owned subsidiary of RR Donnelley will acquire each of the outstanding common shares of Moore Wallace for 0.63 of a share of common stock of RR Donnelley. We expect that, upon closing of the transaction, we will issue approximately 100 million shares of  RR Donnelley common stock, as well as undertake the obligation for the indebtedness of Moore Wallace which was approximately $900 million as of September 30, 2003. The transaction was approved by the Boards of Directors of both RR Donnelley and Moore Wallace, but remains subject to certain closing conditions that include, among others, the receipt of required approval from both companies’ shareholders, required regulatory approvals and Ontario Superior Court of Justice approval of a plan of arrangement. The transaction is expected to close during the first quarter of 2004.

20

The transaction is expected to be immediately accretive to earnings in the first full year of operations, excluding the impact of transaction-related charges. In addition to enhanced revenue opportunities, the combined company expects to generate cost savings of at least $100 million on an annualized basis in the first 12-24 months after the closing. These savings are anticipated to result from the elimination of duplicative administrative and infrastructure costs, reduction in procurement expenses and asset rationalization. The combined company is also expected to generate substantial cash flow in the first year of consolidated operations. The combined company expects to maintain an annual dividend rate of $1.04 per share.

End Market Descriptions

We operate primarily in the commercial print portion of the printing industry, with related service offerings designed to offer customers complete solutions for communicating their messages to targeted audiences. While our manufacturing plants, financial service centers and sales offices are located throughout the U.S. and selected international markets, the supporting technologies and knowledge base are common. Our locations have a range of production capabilities to serve our customers and end markets. We manufacture products with the operational goal of optimizing the efficiency of the common manufacturing and distribution platforms. As a result, most plants produce work for customers in two or three of our end markets.

The following describes the end markets we serve:

Magazines, Catalogs and Retail    RR Donnelley is a leader in the North American magazine, catalog and retail markets. These markets are characterized by demand for large, cost-effective print runs with opportunity for differentiation among competitors through services such as Premedia Technologies and Donnelley Logistics. Our U.S. customers include the majority of the top ten magazine titles and a majority of the largest consumer catalog companies and retailers. Contracts typically span from three to five years.

We are also a leader in providing short-run publishers, catalogers and associations with comprehensive communications solutions. We serve customers with highly targeted audiences and typical production runs from 15,000 to 200,000 copies. We offer full-service and cost-effective solutions for business-to-business and consumer magazine and catalog publishers, as well as journal, association and academic publishers.

Telecommunications    RR Donnelley is the worldwide leader in the directory market. We serve the global directory needs of telecommunications providers, including three of the four U.S. Regional Bell Operating Companies (SBC, Verizon and Qwest), independent directory publishers such as Feist, RHD, White Directories and Yell USA and leading international telecommunications providers such as Yell and Shanghai Telephone. Directory contracts typically span five to 12 years, with our current major contracts expiring between 2006 and 2015.

Book Publishing Services    RR Donnelley, the leader in the North American book market, serves the consumer, religious, educational and specialty book segments. We are a key services provider for the majority of the top ten U.S. book publishers and we typically print more than 50% of The New York Times’ adult best-seller titles. We also print approximately one-third of all textbooks used in classrooms in the U.S.

Premedia Technologies    RR Donnelley’s Premedia Technologies business partners with customers to effectively create, manage, prepare and distribute customer content. We offer services in both conventional and digital photography, creative and color services, page production, ad management, facilities management and content management. Integrating these core competencies enables us to help customers efficiently, consistently and successfully deliver their messages across multiple channels,

21

including print and the Internet. We leverage our experience in content production and workflow optimization to link customers’ creative processes with today’s technologies. Facilities located in key markets provide close customer contact with nationwide scaleup capabilities. Premedia Technologies’ services are used by leading-edge companies in the advertising, catalog, corporate, magazine, retail and telecommunications markets.

Financial Services    RR Donnelley Financial, a leader in the U.S. and international financial services markets, supports the communications needs of corporations and their investment banks and law firms, as those corporations access the global capital markets. We also are a leading provider of customized communications solutions for investment management, banking, insurance and managed care companies.

Our global service network, manufacturing platform and distribution system give us unique advantages in servicing the capital markets, particularly for large financial deals, including initial public offerings and mergers. To meet our clients’ needs for accuracy, speed, confidentiality and convenience, we have developed technology for virtual deal management and are experts in EDGAR HTML filings. In addition, in 2002, we introduced NET.Filer, an online self-service application designed to help clients meet the accelerated Form 4 filing requirements mandated by the U.S. Securities and Exchange Commission.

Our customized communications solutions business enables investment management, banking, insurance and managed care clients to manage and produce their stakeholder communications, from compliance documents to marketing materials, more efficiently. We provide an integrated suite of information management, content assembly and delivery solutions designed to give our clients closer and longer-lasting relationships with their customers.

RRD Direct    RRD Direct offers expertise in a wide range of direct marketing print and related services, to guide customers smoothly and cost-effectively through direct-marketing projects. Our full-service solutions include content creation, database management, premedia, printing, personalization, finishing and distribution. We produce highly personalized and sophisticated direct mail pieces that generate results for our customers.

International    We have extended our core competencies for high quality print and related services into non-U.S. geographic markets. These markets tend to be emerging, with favorable demographic trends such as rising education levels and increasing disposable income. Our operations in Latin America, Europe and Asia, where we produce magazines, catalogs, retail inserts, books and telephone directories, are reported as Other. Financial Services’ international revenue is included in Financial Services. Directory revenues from England are included in Telecommunications.

RR Donnelley Logistics    RR Donnelley is one of the largest users of the USPS, handling over 20 billion print and mail pieces, and over 160 million packages each year. Distribution costs are a significant component of our customers’ cost structures, and our ability to deliver mail and packages more predictably and cost-effectively than competitors is a key differentiator.

Donnelley Logistics continues to focus on growing the package delivery part of its operation, which complements its long-standing core competency of print logistics. We leverage our national network as well as the USPS infrastructure to make the final delivery to households and businesses. Through “zone skipping,” greater postal discounts are obtained, and we provide more economical, reliable and easy-to-use delivery services for our customers.

In addition to delivering packages and printed material, Donnelley Logistics also provides package returns services and expedited distribution of time-sensitive and secure material (expedited services). Together, these services help merchandisers and other businesses manage their supply chains more effectively and at a lower cost.

22

Results of Operations

The following is a discussion of the results of operations for the third quarter and first nine months of 2003 compared with the third quarter and first nine months of 2002, and a discussion of the changes in financial condition during the first nine months of 2003.

Beginning January 1, 2003, the company revised its segment reporting to reflect RR Donnelley Financial (Financial Services) as a separate business segment. The company’s Financial Services operations were previously reported within the Other business segment.

Items Affecting Comparability of the Third Quarter of 2003 with the Third Quarter of 2002

The following table summarizes significant items affecting comparability of the consolidated statements of income and segment operating results for the three months ended September 30, 2003 and 2002.

	Three Months Ended September 30
	2003									2002
	Earnings (loss) before Income Taxes			Net Income (loss)			Per Diluted Share			Earnings (loss) before Income Taxes			Net Income (loss)			Per Diluted Share
	Dollars in thousands, except per-share data
As reported	$	82,689		$	53,730		$	0.47		$	74,701		$	47,742		$	0.42
Included in earnings from operations:
Restructuring and impairment charges	$	(1,507	)	$	(904	)	$	(0.01	)	$	(22,709	)	$	(13,627	)	$	(0.12	)
By-product revenues		12,645			7,587			0.06			13,816			8,289			0.08
Gain on sale of assets		6			4			—			7,465			4,479			0.04
Provision for doubtful accounts		(6,266	)		(3,759	)		(0.03	)		(5,492	)		(3,295	)		(0.03	)
Pension and postretirement benefit income		1,260			756			0.01			5,718			3,431			0.03
		6,138			3,684			0.03			(1,202	)		(723	)		(0.00	)
Included in other income (expense):
Affordable housing write-downs		(4,000	)		(2,400	)		(0.02	)		(3,000	)		(1,800	)		(0.02	)
Gain on sale of investment		4,158			3,218			0.03			—			—			—
Total items affecting comparability	$	6,296		$	4,502		$	0.04		$	(4,202	)	$	(2,523	)	$	(0.02	)

Restructuring and impairment charges: Operating results for the third quarter of 2003 and 2002 were affected by the following restructuring and impairment items:

· 2003 included pretax restructuring and impairment charges of $2 million ($1 million after-tax, or $0.01 per diluted share). The 2003 pretax charge included costs associated with newly-announced consolidations and workforce reductions, and costs associated with defined exit activities from previously announced restructuring plans. Pretax restructuring and impairment charges for 2003 by segment were as follows: Donnelley Print Solutions: $0.5 million; Logistics Services: $0.1 million; Financial Services: $0.2 million; and Other: $0.7 million.

· 2002 included pretax restructuring and impairment charges of $23 million ($14 million after-tax, or $0.12 per diluted share). The 2002 pretax charge included costs associated with defined exit activities from previously announced restructuring plans, as well as several additional workforce reductions. Included in restructuring and impairment in the third quarter of 2002 was an $8 million non-cash

23

provision related to the curtailment loss on our postretirement benefit plans. Pretax restructuring and impairment charges for 2002 by segment were as follows: Donnelley Print Solutions: $7 million; Financial Services: $3 million and Corporate: $13 million.

By-product revenues: 2003 included pretax income of $13 million for by-product revenues compared with $14 million in 2002. By-product revenues are recorded as a reduction in our cost of materials, the majority of which relates to the Donnelley Print Solutions segment.

Gain on sale of assets: 2002 included a $7 million pretax gain from the sale of a manufacturing facility in York, England ($6 million) and miscellaneous equipment ($1 million), included in the Donnelley Print Solutions segment.

Provision for doubtful accounts: 2003 included a $6 million pretax provision for doubtful accounts compared with $5 million in 2002.

Pension and postretirement benefit income: 2003 included pretax income of $1 million compared with $6 million in 2002. The decline between years is primarily a result of changes in our assumptions for expected returns on plan assets and our discount rate.

Affordable housing write-downs: 2003 included a pretax charge of $4 million to write down the carrying value of our investments in affordable housing compared with a pretax charge of $3 million in 2002. The write-downs reflect anticipated declines in the underlying estimated fair value of our affordable housing investments and are included in the Corporate segment.

Gain on sale of investment: 2003 included a $4 million pretax gain from the sale of an equity investment, included in the Donnelley Print Solutions segment.

Consolidated Results—Third Quarter 2003 Compared with Third Quarter 2002

Net sales for the third quarter of 2003 increased $16 million, or 1.4%, to $1,194 million compared with $1,177 million in the third quarter of 2002, driven by increased net sales in our Logistics Services segment, our Financial Services segment and International, partially offset by declines in our Donnelley Print Solutions segment. Net sales of our Logistics Services segment were up $25 million, or 13.2%, between years. The acquisition of Momentum Logistics, Inc. (MLI) in March 2003 contributed an incremental $14 million in net sales for Logistics Services between years.

For our print-related businesses, value-added revenue represents net sales less the cost of materials. For some customers, we purchase paper used in the printing process and pass through this cost (referred to as “pass through material sales”) at a margin that is lower than print and related services; other customers furnish their own paper. The value of customer-furnished paper is not reflected in our financial results. For our Logistics Services segment, value-added revenue represents net sales less the cost of transportation and postage. By measuring value-added revenue, we eliminate the effects of material prices, and transportation and postage costs, as well as mix issues related to customer-furnished versus Donnelley-furnished paper. Management, therefore, views value-added revenue as a better performance measure of its own value-added products and services. Other companies may use a measure which is calculated in a similar manner, but which may not be comparable.

Consolidated value-added revenue increased $21 million, or 3.0%, to $705 million compared with $684 million in the third quarter of 2002, primarily driven by increased value-added revenue in our Logistics Services and Financial Services segments. Value-added revenue in our Logistics Services segment increased $14 million, or 30.7%, between years. The acquisition of MLI contributed an incremental $12 million in value-added revenue for Logistics Services between years.

24

Value-added revenue is also affected by the price of by-product paper we sell. Income from the sale of by-products is recorded as a reduction in cost of materials. During the third quarter of 2003, we recognized a reduction in cost of materials of $13 million from by-product revenues, compared with a reduction of $14 million a year ago.

Gross profit as a percentage of net sales was 18.7% in the third quarter of 2003 compared with 20.6% in the third quarter of 2002. The decline in gross profit margin between years reflected lower margins within the Donnelley Print Solutions and Logistics Services segments, partially offset by higher margins within the Financial Services segment. Third quarter gross profit margin for Donnelley Print Solutions declined between years, driven by lower prices and less favorable work mix, partially offset by the impact of productivity initiatives. Third quarter gross profit margin for Donnelley Print Solutions in 2002 also benefited from a non-recurring pretax gain on the sale of assets of $7 million. Logistics Services’ gross profit margin declined between years, primarily due to performance-related issues within package logistics, including the start-up of a new consolidation facility and losses generated by the acquisition of MLI, partially offset by higher margins within print logistics. Financial Services’ gross profit margin increased between years, driven by higher domestic capital markets activity and cost reductions across the segment.

Selling and administrative expenses decreased $2 million, or 1.8%, to $132 million compared with $134 million in the third quarter of 2002. Selling and administrative expenses as a percentage of net sales was 11.0% for the third quarter of 2003 and 11.4% in 2002.

Net interest expense decreased 29.7% to $12 million in the third quarter of 2003, compared with $17 million in the third quarter of 2002, primarily due to lower effective interest rates on outstanding debt. Other income, net, in the third quarter of 2003 was $5 million compared with other income, net, of $6 million in the third quarter of 2002. Third quarter 2003 other income, net, included lower earnings from investments ($3 million), higher affordable housing write-downs ($1 million), and lower miscellaneous income ($1 million), partially offset by a pretax gain in 2003 on the sale of an investment ($4 million).

Earnings before income taxes in the third quarter of 2003 were $83 million compared with $75 million in 2002. Earnings before income taxes included $2 million and $23 million in restructuring and impairment charges for the three months ended September 30, 2003 and 2002, respectively. Net income was $54 million, up $6 million from $48 million in 2002. The effective tax rate for the third quarter of 2003 was 35.0% compared with 36.1% in 2002. During the third quarter of 2003, we lowered our estimated full-year effective tax rate for 2003 from 38.0% to 36.0%. The third quarter 2003 effective tax rate of 35.0% included a benefit of $1 million, or $0.01 per diluted share, to reduce the tax rate from 38.0% for the first half of 2003 to 36.0% on a year-to-date basis for 2003. The reduction in the estimated effective tax rate for 2003 primarily reflected a lower estimated U.S. income otherwise taxed at a higher marginal rate and higher estimated foreign income taxed at lower rates. Diluted earnings per share of $0.47 increased $0.05 from $0.42 in 2002.

25

Operating Results by Business Segment—Third Quarter 2003 Compared with Third Quarter 2002

As discussed more fully in Note 6 to the condensed consolidated financial statements, we have three reportable segments: Donnelley Print Solutions, Logistics Services and Financial Services.

Operating results by business segment in the third quarter of 2003 compared with the third quarter of 2002 are as follows:

Three Months Ended September 30

	Net Sales						Value-Added Revenue
Thousands of dollars	2003		2002		% Change		2003		2002		% Change
Magazines, Catalogs and Retail	$	384,856	$	387,643	(0.7	)%	$	244,066	$	245,113	(0.4	)%
Book Publishing Services		185,670		193,882	(4.2	)%		135,337		137,003	(1.2	)%
Telecommunications		150,510		158,756	(5.2	)%		83,189		81,158	2.5	%
Premedia Technologies		32,125		31,010	3.6	%		32,125		31,016	3.6	%
Donnelley Print Solutions		753,161		771,291	(2.4	)%		494,717		494,290	0.1	%
Logistics Services		218,319		192,896	13.2	%		58,944		45,089	30.7	%
Financial Services		99,921		93,482	6.9	%		85,865		78,393	9.5	%
RRD Direct		25,768		33,828	(23.8	)%		16,323		20,586	(20.7	)%
Other(1)		96,605		85,783	12.6	%		49,097		45,983	6.8	%
Total Other		122,373		119,611	2.3	%		65,420		66,569	(1.7	)%
Total	$	1,193,774	$	1,177,280	1.4	%	$	704,946	$	684,341	3.0	%
Cost of materials and transportation		488,828		492,939
Value-added revenue	$	704,946	$	684,341

(1) Includes International (Latin America, Europe and Asia) and Other.

Donnelley Print Solutions

The following table summarizes significant items affecting comparability within the Donnelley Print Solutions segment:

	Three Months Ended September 30
	2003			2002
	Earnings before Income Taxes
Thousands of dollars
As reported	$	103,393		$	110,131
Included in earnings from operations:
Restructuring and impairment charges	$	(513	)	$	(6,562	)
By-product revenues		10,683			12,187
Gain on sale of assets		44			7,465
		10,214			13,090
Included in other income (expense):
Gain on sale of investment		4,158			—
Total items affecting comparability	$	14,372		$	13,090

Net sales for the Donnelley Print Solutions segment decreased $18 million in the third quarter of 2003, or 2.4%, from a year ago. The economic slowdown since 2000 has caused excess industry

26

capacity from reduced volume levels and higher customer bankruptcies resulting in increased competition and pricing pressures. Third quarter 2003 net sales for Magazines, Catalogs and Retail decreased 0.7% between years, which primarily reflected price deterioration and a mix shift to lower-priced per unit work, partially offset by volume increases. Pricing pressures continue to impact the industry and have resulted in lower contract prices that continue to cycle through. Book Publishing Services’ third quarter net sales decreased 4.2% between years primarily due to a less favorable work mix and lower average prices, partially offset by timing shifts in the education market from the second quarter. Third quarter 2003 net sales for Telecommunications were down 5.2% between years primarily due to lower average prices and higher customer-furnished paper, partially offset by higher volumes.

Third quarter value-added revenue for the Donnelley Print Solutions segment was relatively flat compared with the prior year, as increased value-added revenue in Telecommunications and Premedia Technologies more than offset the sales declines mentioned above. Value-added revenue for Telecommunications increased 2.5% between years primarily because of the higher volumes which more than offset the price decreases noted above. This increase occurred despite a 5.2% decline in net sales, because the decline in net sales due to more customer-furnished paper had no significant impact on value-added revenue.

Third quarter earnings from operations for the Donnelley Print Solutions segment decreased  $8 million, or 7.2%, to $99 million in 2003. Net sales continue to be negatively affected by the slowdown in the U.S. economy, particularly in Magazines, Catalogs and Retail resulting in lower net unit prices. Savings generated as a result of our productivity programs and restructuring actions have partially offset the negative effects of price erosion on net sales. Third quarter 2003 earnings from operations for the Donnelley Print Solutions segment included restructuring and impairment charges of $1 million compared with $7 million a year ago. The prior year quarter also included a non-recurring pretax gain on the sale of assets of $7 million.

Logistics Services

The following table summarizes significant items affecting comparability within the Logistics Services segment:

	Three Months Ended September 30
	2003			2002
	Earnings (loss) before Income Taxes
Thousands of dollars
As reported	$	(3,542	)	$	2,160
Included in earnings from operations:
Restructuring and impairment charges	$	(93	)	$	(286	)
Acquisition		(3,417	)		—
Total items affecting comparability	$	(3,510	)	$	(286	)

Net sales for the Logistics Services segment increased $25 million, or 13.2%, from a year ago. Third quarter net sales for the package logistics business were up 13.6% between years. The acquisition of MLI in March 2003 contributed an incremental $14 million in net sales for package logistics between years. Excluding the acquisition of MLI, net sales of package logistics rose 2.4% between years, reflecting higher volume, partially offset by a mix change toward lighter weight, lower-priced packages. Third quarter net sales for the print logistics business were up 14.2% between years, driven by increased volumes from both the Donnelley Print Solutions segment and from third parties for which we do not provide printing services.

27

Third quarter value-added revenue for the Logistics Services segment increased $14 million, or 30.7%, compared with a 13.2% increase in net sales. Value-added revenue for package logistics increased $11 million, or 42.6%, between years. The acquisition of MLI contributed an incremental $12 million in value-added revenue for package logistics between years. Excluding the acquisition of MLI, value-added revenue for package logistics declined $1 million, or 3.3%, between years. The decrease in value-added revenue for package logistics excluding the MLI acquisition was driven by higher transportation costs, including higher costs associated with the start-up of a new consolidation facility in the Northeast. Value-added revenue for print logistics was up 12.7% between years, due to the volume increases noted above.

The third quarter 2003 loss from operations for the Logistics Services segment was $3 million, compared with earnings from operations of $2 million a year ago. The decline between years was driven by start-up costs of approximately $4 million associated with a new consolidation facility in the Northeast, higher transportation costs in package logistics and a loss from MLI of $3 million.

Financial Services

The following table summarizes significant items affecting comparability within the Financial Services segment:

	Three Months Ended September 30
	2003			2002
	Earnings (loss) before Income Taxes
Thousands of dollars
As reported	$	(843	)	$	(10,975	)
Included in earnings from operations:
Restructuring and impairment charges	$	(208	)	$	(2,866	)
By-product revenues		315			304
Total items affecting comparability	$	107		$	(2,562	)

Net sales for the Financial Services segment increased $6 million, or 6.9%, from a year ago. Financial Services’ net sales are comprised primarily of capital markets and customized communications solutions. Third quarter 2003 net sales from capital markets transactions (e.g., S-filings, including initial public offerings, secondary offerings and mergers and acquisitions) increased 24.1% between years, driven by higher domestic capital markets activity, which began during the second quarter of 2003. Third quarter 2003 net sales from customized communications solutions decreased 5.1% between years, due to declines in investor communications (e.g., prospectuses, annual and semi-annual mutual funds statements), which reflected contraction in the mutual fund market.

Third quarter value-added revenue for the Financial Services segment increased $7 million, or 9.5%, between years based on the increase in net sales. The percentage increase in value-added revenue was higher than the increase in net sales due to a mix shift toward higher margin, less materials-intensive capital markets work.

Third quarter 2003 loss from operations for the Financial Services segment was $0.3 million, compared with a loss from operations of $12 million for the year ago period. Improved operating results in the third quarter of 2003 reflect the impact of cost reduction initiatives coupled with an increased level of capital markets activity, which carries a higher gross margin than customized communications solutions. Third quarter 2003 operating results were positively impacted by lower restructuring and impairment charges ($3 million) and savings from productivity initiatives, as well as prior restructuring actions which included the closing of several print facilities and service centers and related workforce reductions.

28

Other and Corporate

The following table summarizes significant items affecting comparability within the Other and Corporate segments:

	Three Months Ended September 30
	2003			2002
	Earnings (loss) before Income Taxes
Thousands of dollars
As reported	$	(16,319	)	$	(26,615	)
Included in earnings from operations:
Restructuring and impairment charges	$	(693	)	$	(12,995	)
By-product revenues		1,647			1,325
Gain on sale of assets		82			—
Provision for doubtful accounts		(6,159	)		(5,827	)
Pension and postretirement benefit income(1)		16,787			20,515
		11,664			3,018
Included in other income (expense):
Affordable housing write-downs		(4,000	)		(3,000	)
		(4,000	)		(3,000	)
Total items affecting comparability	$	7,664		$	18

(1) Excludes service costs, which is recorded primarily in Donnelley Print Solutions, Logistics Services and Financial Services.

Net sales for RRD Direct were down $8 million, or 23.8%, between years, primarily due to lower volumes. Third quarter net sales for International were up 11.5% between years, driven by volume growth and favorable foreign currency exchange in Europe, and volume growth in Asia, partially offset by a decline in Latin America.

Third quarter value-added revenue for RRD Direct decreased $4 million, or 20.7%, between years, due to the volume declines described above. Value-added revenue for International was up $3 million between years, due to increases in Asia and Europe, partially offset by a decline in Latin America.

The loss from operations for the Other business segment was $9 million for the third quarter compared with earnings from operations of $0.2 million in 2002. RRD Direct’s loss from operations was relatively flat between years. The loss from operations for International in the third quarter of 2003 was driven by declines in Latin America as well as an additional provision for bad debts ($3 million), partially offset by the improved performance in Europe.

Earnings from operations for the Corporate segment were $3 million in the third quarter of 2003 compared with a loss of $12 million in the third quarter of 2002. The $15 million improvement in operating earnings between years was driven by lower restructuring and impairment charges ($13 million), lower provision for bad debt ($3 million) and lower miscellaneous expenses ($7 million), partially offset by a higher provision for LIFO inventory ($4 million) and lower benefit plan earnings ($4 million).

29

Expense Comparison

A summary analysis of expenses is presented below:

Third Quarter Ended September 30

Thousands of dollars	2003		% of Sales		2002		% of Sales		% Change
Cost of materials	$	328,480	27.5	%	$	344,596	29.3	%	(4.7)%
Cost of transportation		160,348	13.4	%		148,343	12.6	%	8.1%
Cost of manufacturing*		415,085	34.8	%		372,891	31.7	%	11.3%
Depreciation		69,247	5.8	%		71,692	6.1	%	(3.4)%
Amortization		9,013	0.8	%		8,651	0.7	%	4.2%
Selling and administrative expenses*		129,468	10.8	%		131,740	11.2	%	(1.7)%
Restructuring and impairment charges		1,507	0.1	%		22,709	1.9	%	(93.4)%
Net interest expense		11,909	1.0	%		16,937	1.4	%	(29.7)%

*Excludes depreciation and amortization, which are shown separately.

Items Affecting Comparability of the First Nine Months of 2003 with the First Nine Months of 2002

The following table summarizes significant items affecting comparability of the consolidated statements of income and segment operating results for the first nine months of 2003 and 2002.

	Nine Months Ended September 30
	2003									2002
	Earnings (loss) before Income Taxes			Net Income (loss)			Per Diluted Share			Earnings (loss) before Income Taxes			Net Income (loss)			Per Diluted Share
	Dollars in thousands, except per-share data
As reported	$	123,165		$	78,825		$	0.69		$	100,112		$	94,178		$	0.82
Included in earnings from operations:
Restructuring and impairment charges	$	(9,390	)	$	(5,634	)	$	(0.05	)	$	(65,426	)	$	(40,111	)	$	(0.35	)
By-product revenues		34,455			20,673			0.18			32,874			19,724			0.17
Gain on sale of assets		2,470			1,525			0.01			7,465			4,479			0.04
Insurance recovery related to 9/11		2,047			1,228			0.01			—			—			—
Provision for doubtful accounts		(20,483	)		(12,290	)		(0.11	)		(12,262	)		(7,357	)		(0.06	)
Provision for litigation		—			—			—			(9,100	)		(5,460	)		(0.05	)
Pension and postretirement benefit income		3,780			2,268			0.02			17,154			10,292			0.09
		12,879			7,770			0.06			(29,295	)		(18,433	)		(0.16	)
Included in other income (expense):
Affordable housing write-downs		(13,750	)		(8,250	)		(0.07	)		(9,000	)		(5,400	)		(0.05	)
Gain on sale of investments		4,158			3,218			0.03			6,350			6,350			0.06
COLI-related expenses upon policy surrender		—			—			—			(4,883	)		(2,930	)		(0.03	)
Included in tax provision:
Tax benefit from reversal of excess COLI tax reserves		—			—			—			—			30,000			0.26
		(9,592	)		(5,032	)		(0.04	)		(7,533	)		28,020			0.24
Total items affecting comparability	$	3,287		$	2,738		$	0.02		$	(36,828	)	$	9,587		$	0.08

30

Restructuring and impairment charges: Operating results for the nine months ended September 30, 2003 and 2002 were affected by the following restructuring and impairment items:

· 2003 included pretax restructuring and impairment charges of $9 million ($6 million after-tax, or $0.05 per diluted share). The 2003 pretax charge included a $1 million curtailment loss on our postretirement benefit plans, costs associated with newly-announced consolidations and workforce reductions, and costs associated with defined exit activities from previously announced restructuring plans. Pretax restructuring and impairment charges for 2003 by segment were as follows: Donnelley Print Solutions: $3 million; Financial Services: $2 million; Corporate: $1 million and Other: $3 million.

· 2002 included pretax restructuring and impairment charges of $65 million ($40 million after-tax, or $0.35 per diluted share). The 2002 pretax charge included $15 million to close our Berea, Ohio facility as well as additional workforce reductions at several other facilities. We also recorded an $8 million non-cash charge in the third quarter of 2002 related to a curtailment loss on our postretirement benefit plans. Pretax restructuring and impairment charges for 2002 by segment were as follows: Donnelley Print Solutions: $44 million; Financial Services: $4 million; Corporate: $14 million and Other: $3 million.

By-product revenues: 2003 included pretax income of $34 million for by-product revenues compared with $33 million in 2002. By-product revenues are recorded as a reduction in our cost of materials, the majority of which relates to the Donnelley Print Solutions segment.

Gain on sale of assets: 2003 included a $2 million pretax gain from the sale of our Casa Grande, Arizona manufacturing facility, included in the Donnelley Print Solutions segment, and a $1 million gain from the sale of our Hamburg Gráfica Editora (Brazil) facility, included in the Other segment. 2002 included a $7 million pretax gain from the sale of a manufacturing facility in York, England ($6 million) and miscellaneous equipment ($1 million), included in the Donnelley Print Solutions segment.

Insurance recovery related to 9/11: 2003 included a $2 million pretax gain from the collection of insurance proceeds from claims related to September 11th, included in the Financial Services segment and recorded as a reduction in our cost of sales.

Provision for doubtful accounts: 2003 included a $20 million pretax provision for bad debt compared with a $12 million provision in 2002. The increase between years was driven by the bankruptcy filing of a major domestic catalog customer and two troubled directory publishing customers in Latin America.

Provision for litigation: 2002 included a $9 million pretax provision for the settlement of certain litigation; see Note 4 to the condensed consolidated financial statements. The 2002 charge was included in the Corporate segment.

Pension and postretirement benefit income: 2003 included pretax income of $4 million compared with $17 million in 2002. The decline between years is primarily a result of changes in our assumptions for expected returns on plan assets and our discount rate.

Affordable housing write-downs: 2003 included a pretax charge of $14 million to write down the carrying value of our investments in affordable housing compared with a pretax charge of $9 million in 2002. The write-downs reflected declines in the underlying estimated fair value of our affordable housing investments and are included in the Corporate segment.

Gain on sale of investment: 2003 includes a $4 million pretax gain from the sale of our interest in a joint venture, which is included within the Donnelley Print Solutions segment. 2002 included a $6 million pretax gain from the collection of a note receivable that had been previously reserved for in connection with the sale of our investment in Modus Media International in 1999 and which was included in the Corporate segment.

31

COLI-related expenses upon policy surrender: 2002 included a $5 million pretax charge for expenses related to the surrender of certain corporate-owned life insurance (COLI) policies in conjunction with our settlement with the Internal Revenue Service (IRS) for disputed COLI deductions; see Note 7 to the condensed consolidated financial statements.

Reversal of excess COLI tax reserves: 2002 included an after-tax benefit of $30 million from the reversal of excess tax reserves related to our settlement with the IRS for disputed COLI deductions; see Note 7 to the condensed consolidated financial statements.

Consolidated Results—Nine Months Ended September 30, 2003 Compared with Nine Months Ended September 30, 2002

Net sales for the first nine months of 2003 decreased $10 million, or 0.3%, to $3,410 million compared with $3,420 million in the first nine months of 2002, driven by the decline in net sales of our Donnelley Print Solutions segment of 4.4% and of our Financial Services segment of 7.5%, partially offset by increased net sales within Logistics Services. Net sales of our Logistics Services segment were up 18.7% between years. The acquisition of MLI contributed an incremental $33 million in net sales for Logistics Services between years.

Consolidated value-added revenue increased $3 million, or 0.2%, to $2,001 million compared with $1,998 million in the first nine months of 2002, primarily driven by increases in Logistics Services and International, partially offset by the decline in value-added revenue of Donnelley Print Solutions and Financial Services. Donnelley Print Solutions’ percentage decline in value-added revenue of 1.8% was less than the decline in net sales, primarily due to higher customer-furnished paper in 2003. Value-added revenue of our Financial Services segment declined 7.7% between years, primarily due to a first-half decline in global capital markets activity and lower volumes from customized communications solutions. Value-added revenue of our Logistics Services segment increased $40 million, or 30.4%, between years, primarily due to a $35 million, or 45.0%, increase in value-added revenue for package logistics. The acquisition of MLI contributed an incremental $29 million in value-added revenue for Logistics Services between years.

Value-added revenue is also affected by the price of by-product paper we sell. Income from the sale of by-products is recorded as a reduction in cost of materials. During the first nine months of 2003, we recognized a reduction in cost of materials of $34 million from by-product revenues, compared with a reduction of $33 million a year ago.

Gross profit as a percentage of net sales was 17.0% and 17.7% for the first nine months of 2003 and 2002, respectively. Donnelley Print Solutions’ gross profit margin was affected negatively in the first nine months of 2003 by price deterioration and unfavorable work mix, partially offset by the impact of restructuring savings and productivity initiatives. Gross profit margin for Donnelley Print Solutions for the nine months ended September 30, 2003 included a $2 million gain on the sale of assets, compared with a gain of $7 million for the year-ago period. Despite lower net sales between years, Financial Services’ gross profit margin increased for the first nine months of 2003, as a result of cost reduction initiatives, restructuring savings and a $2 million gain from an insurance settlement related to September 11th. Logistics Services’ gross profit margin decreased between years, primarily due to start-up costs of $4 million associated with a new consolidation facility in the Northeast and a product mix shift to lower weight packages, as well as the acquisition of MLI.

Selling and administrative expenses increased $5 million, or 1.1%, to $406 million compared with $402 million in the first nine months of 2002. This increase was driven by an additional $8 million provision for doubtful accounts, of which $5 million related to a 2003 bankruptcy filing by a major domestic catalog customer, and $3 million to two troubled directory publishing customers in Latin America. Selling and administrative expenses as a percentage of net sales was 11.9% in the first nine months of 2003 compared with 11.7% in the first nine months of 2002.

32

Net interest expense decreased 26.2% to $37 million in the first nine months of 2003, compared with $50 million in the first nine months of 2002, primarily due to lower effective interest rates on outstanding debt, as well as lower average borrowings. Other expense, net, in the first nine months of 2003 was $4 million compared with other income, net, of $12 million in the first nine months of 2002. First nine months 2003 other expense, net, included higher affordable housing amortization ($5 million), lower income from gain on sale of investments ($2 million), lower equity income from investments ($2 million) and lower miscellaneous income ($12 million), partially offset by lower COLI expenses ($5 million).

On April 1, 2002, we reached a settlement agreement with the IRS regarding our deductions for interest on loans borrowed against COLI programs; see Note 7 to the condensed consolidated financial statements for additional information. We had previously established reserves for the COLI-related exposure, and as the settlement was less than the established reserves, we recorded a one-time tax benefit ($30 million after-tax; $0.26 per diluted share) during the first quarter of 2002.

Earnings before income taxes for the first nine months of 2003 were $123 million compared with $100 million in 2002. Earnings before income taxes included $9 million and $65 million in restructuring and impairment charges for the nine months ended September 30, 2003 and 2002, respectively. Net income was $79 million, down $15 million from $94 million in 2002. 2002 included a one-time tax benefit ($30 million after-tax; $0.26 per diluted share) for the reversal of COLI-related tax reserves. The effective tax rate for the first nine months of 2003 was 36.0% compared with 35.9% in 2002, excluding the one-time tax benefit described above. Diluted earnings per share of $0.69 decreased $0.13 from $0.82 in 2002.

Operating Results by Business Segment—First Nine Months of 2003 Compared with First Nine Months of 2002.

Operating results by business segment for the nine months ended September 30, 2003 compared with the nine months ended September 30, 2002 are as follows:

Nine Months Ended September 30

	Net Sales						Value-Added Revenue
Thousands of dollars	2003		2002		% Change		2003		2002		% Change
Magazines, Catalogs and Retail	$	1,088,823	$	1,127,493	(3.4	)%	$	690,942	$	709,271	(2.6	)%
Book Publishing Services		508,409		526,349	(3.4	)%		369,411		377,524	(2.1	)%
Telecommunications		420,930		459,374	(8.4	)%		228,143		224,238	1.7	%
Premedia Technologies		86,520		88,813	(2.6	)%		86,520		88,819	(2.6	)%
Donnelley Print Solutions		2,104,682		2,202,029	(4.4	)%		1,375,016		1,399,852	(1.8	)%
Logistics Services		642,891		541,565	18.7	%		171,085		131,158	30.4	%
Financial Services		315,380		340,949	(7.5	)%		266,329		288,440	(7.7	)%
RRD Direct		81,246		104,752	(22.4	)%		50,547		61,321	(17.6	)%
Other(1)		265,854		230,527	15.3	%		137,554		116,730	17.8	%
Total Other		347,100		335,279	3.5	%		188,101		178,051	5.6	%
Total	$	3,410,053	$	3,419,822	(0.3	)%	$	2,000,531	$	1,997,501	0.2	%
Cost of materials and transportation		1,409,522		1,422,321
Value-added revenue	$	2,000,531	$	1,997,501

(1) Includes International (Latin America, Europe and Asia) and Other.

33

Donnelley Print Solutions

The following table summarizes significant items affecting comparability within the Donnelley Print Solutions segment:

	Nine Months Ended September 30
	2003			2002
	Earnings (loss) before Income Taxes
Thousands of dollars
As reported	$	199,204		$	188,933
Included in earnings from operations:
Restructuring and impairment charges	$	(2,474	)	$	(43,716	)
By-product revenues		29,651			28,567
Gain on sale of assets		1,854			7,465
		29,031			(7,684	)
Included in other income (expense):
Gain on sale of investment		4,158			—
Total items affecting comparability	$	33,189		$	(7,684	)

Net sales for the Donnelley Print Solutions segment decreased $97 million in the first nine months of 2003, or 4.4%, from a year ago. First nine months of 2003 net sales for Magazines, Catalogs and Retail decreased 3.4% between years, which primarily reflected price deterioration and a mix shift to lower- priced per unit work, partially offset by higher volume. Pricing pressures continue to impact the industry and have resulted in lower contract prices that continue to cycle through. The net sales decline between years in Premedia Technologies was driven by these same factors. Book Publishing Services’ first nine months net sales decreased 3.4% between years primarily due to less favorable work mix, lower average prices and lower volumes. First nine months of 2003 net sales for Telecommunications were down 8.4% between years primarily due to more customer-furnished paper and lower average prices, partially offset by higher volume.

First nine months value-added revenue for the Donnelley Print Solutions segment decreased $25 million, or 1.8%, from a year ago due to the sales declines noted above, partially offset by higher by-product revenues and improved material yield. Value-added revenue for Telecommunications increased 1.7% between years because of higher volume, as noted above, and favorable foreign exchange on U.K. directory work that more than offset price declines. This occurred despite an 8.4% decline in net sales, because the portion of the decline in net sales due to more customer-furnished paper had no significant impact on value-added revenue.

First nine months earnings from operations for the Donnelley Print Solutions segment increased $16 million, or 9.1%, to $194 million in 2003. Earnings from operations for the nine months ended September 30, 2002 included $44 million in restructuring and impairment charges compared with $2 million in 2003. Earnings from operations for the nine months ended September 30, 2003 included a $2 million gain on the sale of assets, compared with a gain of $7 million for the year-ago period. Net sales continue to be negatively affected by the slowdown in the U.S. economy, particularly in Magazines, Catalogs and Retail. The portion of the net sales decline driven by the mix shift to lower-priced per unit work did not significantly impact overall profitability due to lower manufacturing costs per unit for this mix of work. The impact of our productivity initiatives, as well as savings from actions we have taken to restructure our operations, have partially offset the effects of price erosion on earnings from operations.

34

Logistics Services

The following table summarizes significant items affecting comparability within the Logistics Services segment:

	Nine Months Ended September 30
	2003			2002
	Earnings (loss) before Income Taxes
Thousands of dollars
As reported	$	(186	)	$	7,174
Included in earnings from operations:
Restructuring and impairment charges	$	(49	)	$	(408	)
Acquisitions		(5,348	)		—
Total items affecting comparability	$	(5,397	)	$	(408	)

Net sales for the Logistics Services segment increased $101 million, or 18.7%, from a year ago. First nine months net sales for the package logistics business were up 24.0% between years. The acquisition of MLI in March 2003 contributed an incremental $33 million in net sales for package logistics between years. Excluding the acquisition of MLI, net sales of package logistics rose 14.2% between years, reflecting higher volume and postal rate increases, which were passed through to customers, partially offset by a mix change toward lighter weight, lower priced packages. First nine months net sales for the print logistics business were up 12.6% between years, driven by higher volumes from both the Donnelley Print Solutions segment and from third parties for which we do not provide printing services.

First nine months value-added revenue for the Logistics Services segment increased $40 million, or 30.4%, compared with an 18.7% increase in net sales. Value-added revenue for package logistics increased 45.0% between years. The acquisition of MLI contributed an incremental $29 million in value-added revenue for package logistics between years. Excluding the acquisition of MLI, value-added revenue for package logistics rose 7.6% between years. The change from 2002 was driven by volume increases and higher postage discounts due to deeper penetration of the postal system, which were partially offset by higher per unit transportation costs due to transportation price increases and higher fuel costs, and start-up costs associated with the new consolidation facility in the Northeast. Value-added revenue for print logistics was up 9.9% between years, due to the volume increases noted above.

Breakeven earnings from operations for the first nine months 2003 represented a decline of $7 million from 2002. The decline between years was driven by start-up costs of approximately $4 million associated with a new consolidation facility in the Northeast, a loss from MLI and higher transportation and processing costs, partially offset by higher volumes within print and package logistics.

35

Financial Services

The following table summarizes significant items affecting comparability within the Financial Services segment:

	Nine Months Ended September 30
	2003			2002
	Earnings (loss) before Income Taxes
Thousands of dollars
As reported	$	1,499		$	(10,363	)
Included in earnings from operations:
Restructuring and impairment charges	$	(2,461	)	$	(3,598	)
By-product revenues		975			1,017
Insurance recovery related to 9/11		2,047			—
Total items affecting comparability	$	561		$	(2,581	)

Net sales for the Financial Services segment decreased $26 million, or 7.5%, from a year ago. First nine months 2003 capital markets net sales decreased 8.2% between years, driven by the slowed global capital markets activity during the first half of 2003, particularly domestic capital markets. Declines in net sales from domestic capital markets transactions (e.g., S-filings, including initial public offerings, secondary offerings and mergers and acquisitions) caused by the slowed economy more than offset increased net sales from compliance filings (e.g., SEC periodic reports and annual meeting proxy statements). First nine months 2003 net sales from customized communications solutions decreased 6.5% between years, due to declines from investor communications (e.g., prospectuses, annual and semi-annual mutual funds statements), which reflected contraction in the mutual fund market and one large non-recurring deal in 2002.

First nine months value-added revenue for the Financial Services segment decreased $22 million, or 7.7%, between years consistent with the decline in net sales. The percentage decrease in value-added revenue was slightly higher than the decrease in net sales due to a mix shift toward more compliance work.

First nine months 2003 earnings from operations were $3 million, an improvement from the $12 million loss from operations for the year ago period. Included in the 2003 first nine months earnings from operations was a $2 million gain on an insurance recovery related to September 11th that reduced cost of sales, and lower restructuring and impairment charges ($1 million). Improved operating margins in the first nine months of 2003 also reflect savings from productivity initiatives, as well as prior restructuring actions which included the closing of several print facilities and service centers, and related workforce reductions. First nine months 2003 operating margins were negatively impacted by the lower level of capital markets activity between years, because capital markets work carries a higher gross margin than customized communications solutions, and higher subcontracted expense to accommodate customer scheduling during peak times.

36

Other and Corporate

The following table summarizes significant items affecting comparability within the Other and Corporate segments:

	Nine Months Ended September 30
	2003			2002
	Earnings (loss) before Income Taxes
Thousands of dollars
As reported	$	(77,352	)	$	(85,632	)
Included in earnings from operations:
Restructuring and impairment charges	$	(4,406	)	$	(17,704	)
By-product revenues		3,829			3,290
Provision for litigation		—			(9,100	)
Provision for doubtful accounts		(20,303	)		(12,969	)
Pension and postretirement benefit income(1)		50,360			63,522
		29,480			27,039
Included in other income (expense):
Affordable housing amortization		(13,750	)		(9,000	)
Gain on sale of investment		—			6,350
COLI-related expenses upon policy surrender		—			(4,883	)
		(13,750	)		(7,533	)
Total items affecting comparability	$	15,730		$	19,506

(1) Excludes service costs, which is recorded primarily in Donnelley Print Solutions, Logistics Services and Financial Services.

Net sales for RRD Direct were down $24 million, or 22.4%, between years, primarily due to lower volumes. First nine months net sales for International were up 14.9% between years, driven by volume growth in Europe, as well as favorable foreign exchange, and volume growth in Asia, partially offset by declines in Latin America.

First nine months value-added revenue for RRD Direct decreased $11 million, or 17.6%, compared with a 22.4% decline in net sales, driven by higher customer-furnished paper in 2003. Value-added revenue for International was up $22 million between years, due to increases in Asia and Europe, offset by a decline in Latin America.

The loss from operations for the Other business segment was $28 million for the first nine months of 2003, compared with a loss of $24 million for the year ago period. RRD Direct’s loss from operations was relatively flat compared to the previous year. The loss from operations for International in the first nine months of 2003 benefited from improved volumes and foreign currency in Europe, which were more than offset by increased costs related to the start up of a plant in Asia and a higher provision for doubtful accounts in Latin America ($4 million).

The loss from operations for the Corporate segment was $5 million in the first nine months of 2003 compared with $12 million in the first nine months of 2002. The $7 million improvement between years was driven by a lower provision for litigation ($9 million) (see Note 4 to the condensed consolidated financial statements) and lower restructuring and impairment charges ($13 million), partially offset by lower benefit plan earnings ($13 million) and a higher LIFO provision ($2 million).

37

Expense Comparison

A summary analysis of expenses is presented below:

Nine Months Ended September 30

Thousands of dollars	2003		% of Sales		2002		% of Sales		% Change
Cost of materials	$	935,359	27.4	%	$	1,010,031	29.5	%	(7.4	)%
Cost of transportation		474,163	13.9	%		412,290	12.1	%	15.0	%
Cost of manufacturing*		1,220,680	35.8	%		1,183,159	34.6	%	3.2	%
Depreciation		206,543	6.1	%		217,503	6.4	%	(5.0	)%
Amortization		31,301	0.9	%		29,139	0.9	%	7.4	%
Selling and administrative expenses*		399,829	11.7	%		393,641	11.5	%	1.6	%
Restructuring and impairment charges		9,390	0.3	%		65,426	1.9	%	(85.6	)%
Net interest expense		36,673	1.1	%		49,683	1.5	%	(26.2	)%

*Excludes depreciation and amortization, which are shown separately.

Restructuring and Impairment:     The following discussion should be read in conjunction with Note 4, “Restructuring and Impairment,” in the 2002 Annual Report on Form 10-K, and Note 10 to the condensed consolidated financial statements.

During the first nine months of 2003, we recorded pretax restructuring and impairment charges of $9 million ($6 million after-tax, or $0.05 per diluted share). The total 2003 pretax restructuring and impairment charges by business segment were: Donnelley Print Solutions: $3 million; Financial Services: $2 million; Other: $3 million; and Corporate: $1 million. Pretax restructuring charges include employee termination benefits, including severance, early retirement benefit costs and outplacement costs associated with planned personnel reductions and employee and asset relocation costs.

During the first nine months of 2002, we recorded pretax restructuring and impairment charges of $65 million ($40 million after-tax, or $0.35 per diluted share). The total 2002 pretax restructuring and impairment charges related to restructuring actions announced during 2002 by business segment were: Donnelley Print Solutions: $44 million; Financial Services: $4 million; Other: $3 million; and Corporate: $14 million.

We regularly assess our manufacturing platforms to assure that they are efficient, flexible and aligned properly with our customers’ needs. In March 2001, we announced a $300 million upgrade in our print platform, approximately one-third of which related to restructuring costs. This upgrade program included the purchase of seven new presses and two binding lines, each of which were placed into service prior to September 30, 2003. As of September 30, 2003, cumulative capital expenditures related to this upgrade program were $215 million, $36 million of which occurred during the first nine months of 2003. We expect to spend an additional $7 million in 2003 to complete the program.

As part of our efforts to build a more effective print platform, we continually assess each plant’s scale of operations and geographic location relative to our entire print platform. During the first quarter of 2002, we announced the closure of our Berea, Ohio manufacturing facility. We completed the closures of the Berea, Ohio plant, and the Des Moines, Iowa and Old Saybrook, Connecticut plants, which were announced in 2001, during the second quarter of 2002. All continuing customer work produced at these facilities was transferred to other company facilities once necessary expansions to accommodate the work were complete. The net book value of assets held for sale at September 2003 was $7 million, related primarily to the Donnelley Print Solutions segment.

The two largest plant closures announced in 2001 (Old Saybrook, Connecticut and Des Moines, Iowa) did not cease operations until the end of the second quarter of 2002. Accordingly, the first half of

38

2003 reflected savings as a result of these plant closures compared with the first half of 2002. Additionally, other restructuring actions announced subsequent to the first half of 2002 also impact 2003 savings from restructuring activities. During the first nine months of 2003 we realized cost savings of approximately $38 million, consisting primarily of lower salary expense and related employee benefit costs. These reductions in our cost structure in 2003 were more than offset by the impact of pricing reductions during the first nine months of 2003.

Liquidity and Changes in Financial Condition

Cash Flows From Operating Activities

Cash provided by operating activities totaled $242 million for the first nine months of 2003, compared with $245 million for the year ago period. The decline in cash provided by operations of $3 million between years was driven by lower net income excluding non-cash charges during 2003 ($37 million), a higher investment in working capital ($79 million), and other net miscellaneous of $15 million, partially offset by lower cash payments between years of approximately $128 million related to COLI. During the first nine months of 2002, we paid approximately $135 million of the liability related to the COLI settlement, compared with approximately $7 million for the year-to-date period in 2003 (see Notes 2 and 7 to the condensed consolidated financial statements).

Our cash conversion cycle (days’ sales outstanding plus days’ inventory on hand minus days’ payable outstanding) improved to 36 days as compared with 43 days a year ago. The ratio of operating working capital to sales* improved to 1.9% in 2003 from 3.0% in 2002.

* The operating working capital to sales ratio is defined as a 13-month average of net receivables, net inventories and prepaid expenses minus accounts payable, accrued compensation and other accrued liabilities, divided by 12-month rolling net sales.

Cash Flows From Investing Activities

Our principal recurring investing activities are capital expenditures to improve our operations. In the first nine months of 2003, capital expenditures and investments totaled $158 million, a $24 million decrease from a year ago. 2003 included the acquisition of a package logistics business within Donnelley Logistics for approximately $17 million in cash. We expect full year capital spending, excluding acquisitions, to be below $250 million compared with capital spending of $242 million in 2002.

Acquisitions

On March 6, 2003, we acquired certain net assets of Momentum Logistics, Inc. (MLI), a Florida-based provider of package distribution services, for approximately $17 million in cash. MLI operates sortation facilities and a dedicated fleet of vehicles to provide business-to-business and business-to-consumer package distribution services. The purchase price has been preliminarily allocated based on estimated fair values at date of acquisition, pending final determination of the acquired balances and purchase price.

We made no business acquisitions in 2002.

Cash Flows From Financing Activities

Financing activities include net borrowings, dividend payments and share repurchases. At September 30, 2003, our net borrowings decreased by $32 million from December 31, 2002, compared

39

with an increase of $28 million for the same period of 2002. The decrease in net borrowings between years ($60 million) is primarily due to the expiration of the company’s share repurchase program on January 31, 2002 and lower capital expenditures during 2003.

Liquidity

Commercial paper is our primary source of short-term financing. At September 30, 2003, we had $99 million outstanding in domestic commercial paper borrowings. In addition, at September 30, 2003, the Company had available two revolving credit facilities with a number of banks totaling $350 million. These facilities provide support for issuing commercial paper and other credit needs. The facilities consist of a short-term facility that now matures in October 2004 and provides for borrowings of up to $175 million and a long-term facility that matures in October 2007 and also provides for borrowings of up to $175 million. The company pays an annual commitment fee on the total unused portion of the credit facilities of 0.07% for the short-term facility and 0.09% for the long-term facility. The facilities bear interest at variable rates based on the current LIBOR rate and the company’s credit rating. As of November 12, 2003, there have been no borrowings under these credit facilities. Management believes that cash flow and borrowing capability are sufficient to fund operations and planned capital expenditures of the company for the forseeable future.

Other Information

Environmental Health and Safety—Our business is subject to various laws and regulations governing employee health and safety and environmental protection. Our policy is to comply with all laws and regulations, and our objective is to create an injury-free workplace. We strive to achieve the highest performance standards of environmental performance and employee health and safety within both the printing industry and the manufacturing community.

We do not anticipate that compliance with laws and regulations in these areas will have a material adverse effect on our competitive or consolidated financial position.

Litigation—As reported in the company’s Annual Report on Form 10-K for 2002, the company has settled three previously pending cases: Adams, et al. v. R.R. Donnelley & Sons Co; Jefferson, et al. v. R.R. Donnelley & Sons Co., et al, and Gerlib, et al. v. R.R. Donnelley & Sons Co. without any admission of wrongdoing by the company. The company also settled that portion of Jones, et al. v. R.R. Donnelley & Sons Co., relating to claims arising in locations other than the Chicago catalog operations without any admission of wrongdoing by the company. The company recorded a total pretax charge of $16 million in 2002 ($9 million in the second quarter and $7 million in the fourth quarter) relating to these settlements.

The issue remaining in the Jones case affects two classes certified by the trial court: a class consisting of African-American employees discharged in connection with the shutdown of the Chicago catalog operations, and a class consisting of African-American employees of the Chicago catalog operations after November 1992 who were other than permanent employees. On September 16, 2002, the Seventh Circuit Court of Appeals overturned a ruling by the trial court and held that a two year statute of limitations applies to the claims of these classes, which absent any other ruling would result in dismissal of the claims on the basis of timeliness. On May 19, 2003, the United States Supreme Court agreed to review the issue of the appropriate statute of limitations to apply and set the matter for argument in the 2003 term. At this time, management is unable to make a meaningful estimate of the overall loss, if any, that could result from the final determination of this matter.

From time to time, customers of the company file voluntary petitions for reorganization under the United States bankruptcy laws. In such cases, certain pre-petition payments received by the company

40

could be considered preference items and subject to return to the bankruptcy administrator. The company believes that the final resolution of these preference items will not have a material adverse effect on the company’s consolidated financial position or results of operations.

In addition, the company is a party to certain litigation arising in the ordinary course of business which, in the opinion of management, will not have a material adverse effect on the company’s consolidated financial position or results of operations.

Outlook—The environment is highly competitive in most of our product categories and geographic regions. Competition is based largely on price, quality and servicing the special needs of customers. Industry analysts believe that there is overcapacity in most commercial printing markets exacerbated by recent drops in market demand. Therefore, competition is intense. Our intent is to differentiate our service offerings so that we are viewed by our customers as a partner who can help them deliver effective and targeted communications in the right format to the right audience at the right time.

We are a large user of paper, supplied to us by our customers or bought by us. The cost and supply of certain paper grades used in the manufacturing process will continue to affect our financial results. However, management currently does not see any disruptive conditions affecting prices or supply of paper in 2003.

Postal costs are a significant component of our customers’ cost structures and postal rate changes can influence the number of pieces that our customers are willing to mail. Any resulting decline in print volumes could have an effect on our financial results. Postal rates increased in January 2001, July 2001 and July 2002. Postal rate increases are not expected to occur again until 2006. Postal rate increases can enhance the value of Logistics Services to our customers, as we are able to improve the cost efficiency of mail processing and distribution. This ability to deliver mail on a more precise schedule and at a lower relative cost should enhance our position in the marketplace.

The cost of energy affects operating costs in the Donnelley Print Solutions and Financial Services segments and transportation costs in the Logistics Services segment. In Logistics Services, increases in fuel costs can be offset by fuel surcharges passed on to customers. Increases in energy costs beyond those planned could affect our consolidated financial results.

Consumer confidence and economic growth are key drivers of demand for our services. Since 2000, the slowdown experienced in the U.S. and international economies has negatively affected demand across most of our businesses. While general economic conditions have recently begun to improve, our commercial print customers indicate that they anticipate flat demand throughout early 2004, but expect demand to increase for the second half of 2004. Beginning during the second quarter of 2003, capital markets activity levels as measured by overall S-filings have increased, which positively affects demand for our financial print services. Volatility, however, in the global capital markets makes it difficult to predict the level of demand beyond 2003.

In the longer term, technological changes, including the electronic distribution of information, present both risks and opportunities for us. Many of our businesses leverage our distinctive capabilities to participate in the rapid growth in electronic communications. Our goal remains to help our customers succeed by delivering effective and targeted communications in the right format to the right audience at the right time. We believe that with our competitive strengths, including our comprehensive service offerings, technology leadership, depth of management experience, customer relationships and economies of scale, we can develop the most valuable solutions for our customers, which should result in increased shareholder value.

Item 3

Quantitative and Qualitative Disclosures About Market Risk

The company is exposed to market risk from changes in interest rates and foreign currency exchange rates. As such, the company monitors the interest rate environment and modifies the

41

components of its debt portfolio as necessary to manage funding costs and interest rate risks. Generally, the company maintains at least half of its debt at fixed rates (approximately 56.2% at September 30, 2003). Excluded from the calculation of fixed rate debt at September 30, 2003 is $200 million in fixed rate debt that was swapped to floating rates to take advantage of lower interest rates on floating rate debt. The swap was executed in two transactions that mature in November 2006. To reduce its exposure to future increases in floating interest rates, the company entered into additional floating to fixed swap agreements, effectively fixing the interest rates for the May 15, 2002, November 15, 2002, May 15, 2003 and November 17, 2003 interest rate resets on the original swaps. The company’s exposure to adverse changes in foreign exchange rates is immaterial to the consolidated financial statements of the company. The company occasionally uses other financial instruments to hedge exposures to interest rate and foreign exchange rate changes. The company uses derivative financial instruments as a risk management tool, and not for trading or speculative purposes. For further discussion relating to financial instruments, see Note 9 to the condensed consolidated financial statements.

Item 4

Controls and Procedures

Under the supervision and with the participation of management, the Chairman, President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer of the company have evaluated the effectiveness of the company’s disclosure controls and procedures as of September 30, 2003. They have concluded, based on their evaluation, that the company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and include controls and procedures designed to ensure that information required to be disclosed by the company in such reports is accumulated and communicated to the company’s management, including the Chairman, President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

There has been no change in the company’s internal control over financial reporting that occurred during the company’s fiscal quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

42

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

The company previously reported the settlement of certain actions filed against it. Litigation remaining is described in Part I of this quarterly report on Form 10-Q and the company’s Annual Report on Form 10-K for 2002.

Item 5. Other Information

Certain statements in this filing, including the discussions of management expectations for 2003, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from the future results expressed or implied by those statements. Refer to Part I, Item 1 of the company’s 2002 Annual Report on Form 10-K for a description of such factors.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

4	364-Day Credit Agreement dated as of October 9, 2003 among R.R. Donnelley & Sons Company, the banks named therein and Bank One, N.A., as Administrative Agent
10(a)	R.R. Donnelley & Sons Company 2000 Stock Incentive Plan (as adopted by the Board of Directors on January 27, 2000; as amended September 25, 2003)
(b)	R.R. Donnelley & Sons Company 2000 Broad-Based Stock Incentive Plan (as adopted by the Board of Directors on January 27, 2000; as amended May 2, 2002; as further amended September 25, 2003)
12	Ratio of Earnings to Fixed Charges
31.1	Certification by William L. Davis, Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2	Certification by Gregory A. Stoklosa, Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
32.1	Certification by William L. Davis, Chief Executive Officer, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
32.2	Certification by Gregory A. Stoklosa, Chief Financial Officer, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code

(b) A current report on Form 8-K was filed on August 6, 2003 and included Item 5, “Other Events and Regulation FD Disclosure,” Item 7, “Financial Statements and Exhibits” and Item 12, “Results of Operations and Financial Condition.”

43

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

R.R. DONNELLEY & SONS COMPANY

/S/    VIRGINIA L. SEGGERMAN

By                                                                                                   

Corporate Controller

(Authorized Officer and

Chief Accounting Officer)

Date: November 12, 2003

44

EX-4

                                                                       EXHIBIT 4


                                                                  EXECUTION COPY


                            364-DAY CREDIT AGREEMENT


                           Dated as of October 9, 2003


                                      Among


                        R.R. DONNELLEY & SONS COMPANY as
                                    Borrower,


                             THE BANKS NAMED HEREIN
                                    as Banks,


                                  BANK ONE, NA
                            as Administrative Agent,


                       WACHOVIA BANK, NATIONAL ASSOCIATION
                              as Syndication Agent,


                           THE NORTHERN TRUST COMPANY
                             as Documentation Agent,


                                       and

                              JP MORGAN CHASE BANK
                                as Managing Agent


                         BANC ONE CAPITAL MARKETS, INC.
                          WACHOVIA CAPITAL MARKETS, LLC
                   as Co-Lead Arrangers and Joint Book Runners



                               TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----
                                                                         
ARTICLE I           DEFINITIONS AND ACCOUNTING TERMS ....................      1
     SECTION 1.01   Certain Defined Terms ...............................      1
     SECTION 1.02   Computation of Time Periods .........................     12
     SECTION 1.03   Accounting Terms; Modifications due to
                    Implementation of Euro ..............................     12

ARTICLE II          AMOUNTS AND TERMS OF THE ADVANCES ...................     13
     SECTION 2.01   The Committed Advances ..............................     13
     SECTION 2.02   Making the Committed Advances .......................     13
     SECTION 2.03   The Uncommitted Advances ............................     17
     SECTION 2.04   Facility Fee and Utilization Fee ....................     21
     SECTION 2.05   Reduction and Termination of the Commitments ........     22
     SECTION 2.06   Payment; Conversion and Continuation ................     22
     SECTION 2.07   Interest on Committed Advances ......................     23
     SECTION 2.08   Additional Interest on Eurocurrency Rate Advances ...     24
     SECTION 2.09   Interest Rate Determination. ........................     24
     SECTION 2.10   Prepayments .........................................     24
     SECTION 2.11   Funding Indemnification .............................     25
     SECTION 2.12   Increased Costs and Reduced Return ..................     25
     SECTION 2.13   Illegality ..........................................     26
     SECTION 2.14   Payments and Computations ...........................     27
     SECTION 2.15   Sharing of Payments, Etc ............................     28
     SECTION 2.16   Currency Equivalents ................................     29
     SECTION 2.17   Borrowing Subsidiaries ..............................     29
     SECTION 2.18   Taxes ...............................................     30
     SECTION 2.19   Defaulting Banks ....................................     32
     SECTION 2.20   Mitigation ..........................................     34
     SECTION 2.21   European Economic and Monetary Union ................     34
     SECTION 2.22   Extension of Termination Date .......................     34
     SECTION 2.23   Increase of Aggregate Commitments ...................     35

ARTICLE III         CONDITIONS PRECEDENT ................................     37
     SECTION 3.01   Conditions Precedent to Effectiveness of
                    Sections 2.01 and 2.03 ..............................     37
     SECTION 3.02   Conditions Precedent to Initial Advance to Each
                    Borrowing Subsidiary ................................     38
     SECTION 3.03   Conditions Precedent to Each Committed Borrowing ....     39
     SECTION 3.04   Conditions Precedent to Each Uncommitted Borrowing ..     39

ARTICLE IV          REPRESENTATIONS AND WARRANTIES ......................     40
     SECTION 4.01   Representations and Warranties of the Company .......     40

ARTICLE V           COVENANTS OF THE COMPANY ............................     42
     SECTION 5.01   Compliance with Laws, Etc ...........................     42
     SECTION 5.02   Interest Coverage Ratio .............................     42
     SECTION 5.03   Reporting Requirements ..............................     42
     SECTION 5.04   Use of Proceeds .....................................     43




                               TABLE OF CONTENTS
                                  (Continued)


                                                                            PAGE
                                                                            ----
                                                                         
     SECTION 5.05   Limitation on Liens, Etc ............................     44
     SECTION 5.06   Merger; Sale of Assets ..............................     45
     SECTION 5.07   Books and Records; Inspection .......................     45
     SECTION 5.08   Corporate Existence .................................     46
     SECTION 5.09   Conduct of Business .................................     46
     SECTION 5.10   Payment of Taxes ....................................     46

ARTICLE VI          EVENTS OF DEFAULT ...................................     46
     SECTION 6.01   Events of Default ...................................     46

ARTICLE VII         GUARANTEE ...........................................     48
     SECTION 7.01   Unconditional Guarantee .............................     48
     SECTION 7.02   Validity ............................................     49
     SECTION 7.03   Waivers .............................................     49
     SECTION 7.04   Subrogation .........................................     49
     SECTION 7.05   Acceleration ........................................     49
     SECTION 7.06   Reinstatement .......................................     49
     SECTION 7.07   Continuing Guaranty; Assignments ....................     50

ARTICLE VIII        ADMINISTRATIVE AGENT; SYNDICATION AGENT;
                    DOCUMENTATION AGENT; CO-AGENTS ......................     50
     SECTION 8.01   Authorization and Action ............................     50
     SECTION 8.02   Administrative Agent's Reliance, Etc ................     51
     SECTION 8.03   The Administrative Agent and Affiliates .............     51
     SECTION 8.04   Bank Credit Decision; Notice of Default .............     52
     SECTION 8.05   Indemnification .....................................     52
     SECTION 8.06   Successor Administrative Agent ......................     52
     SECTION 8.07   Syndication Agent; Documentation Agent;
                    Managing Agent ......................................     53

ARTICLE IX          BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS ...     53
     SECTION 9.01   Successors and Assigns ..............................     53
     SECTION 9.02   Participations. .....................................     54
     SECTION 9.03   Assignments. ........................................     55
     SECTION 9.04   Dissemination of Information ........................     56
     SECTION 9.05   Tax Treatment .......................................     56

ARTICLE X           MISCELLANEOUS .......................................     56
     SECTION 10.01  Amendments, Etc .....................................     56
     SECTION 10.02  Notices, Etc ........................................     57
     SECTION 10.03  No Waiver; Remedies .................................     57
     SECTION 10.04  Costs and Expenses ..................................     58
     SECTION 10.05  Right of Set-off ....................................     58
     SECTION 10.06  Binding Effect ......................................     58
     SECTION 10.07  Governing Law .......................................     59


                                       ii




                               TABLE OF CONTENTS
                                  (Continued)


                                                                            PAGE
                                                                            ----
                                                                         
     SECTION 10.08  Execution in Counterparts ...........................     59
     SECTION 10.09  Confidentiality .....................................     59
     SECTION 10.10  Non-Reliance by the Banks ...........................     59
     SECTION 10.11  No Indirect Security ................................     59
     SECTION 10.12  Indemnification .....................................     60
     SECTION 10.13  Partial Invalidity ..................................     60
     SECTION 10.14  WAIVER OF JURY TRIAL ................................     60
     SECTION 10.15  Jurisdiction, Etc ...................................     61
     SECTION 10.16  Nonliability of Banks ...............................     61
     SECTION 10.17  Governmental Regulation .............................     61
     SECTION 10.18  USA Patriot Act Notification ........................     61


                                      iii






                                    SCHEDULES

SCHEDULE I      --       Banks
SCHEDULE II     --       Pricing Schedule
SCHEDULE III    --       Litigation


                                    EXHIBITS

EXHIBIT A       --       Form of Assignment and Assumption Agreement
EXHIBIT B       --       Form of Assumption Letter
EXHIBIT C-1     --       Form of Committed Note
EXHIBIT C-2     --       Form of Uncommitted Note
EXHIBIT D-1     --       Form of Notice of Committed Borrowing
EXHIBIT D-2     --       Form of Notice of Uncommitted Borrowing
EXHIBIT E       --       Form of Notice of Continuation/Conversion
EXHIBIT F       --       Form of Commitment Increase Consent
EXHIBIT G       --       Form of Opinion of Counsel to the Company
EXHIBIT H       --       Form of Opinion of Counsel to Borrowing Subsidiary



                            364-DAY CREDIT AGREEMENT

                           Dated as of October 9, 2003

         R.R. DONNELLEY & SONS COMPANY, a Delaware corporation (the "Company"),
the banks listed on the signature pages hereof, and BANK ONE, NA, as
Administrative Agent (as hereinafter defined), agree as follows:

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

         SECTION 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

         "Acceptance Deadline" has the meaning specified in Section
2.03(a)(iii).

         "Administrative Agent" means Bank One, in its capacity as the
contractual representative for all of the Banks for purposes of this Agreement,
as designated and appointed in accordance with Article VIII, and any successor
thereto as provided herein.

         "Advance" means a Committed Advance or an Uncommitted Advance.

         "Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person.

         "Agreement" shall mean this 364-Day Credit Agreement, as the same may
be amended, modified, supplemented or restated from time to time.

         "Alternative Currency" means Sterling, Yen and any other currency
(other than Dollars) (i) which is readily available, freely transferable and
convertible into Dollars in the international currency and exchange markets,
(ii) in which deposits are customarily offered to banks in the London interbank
market and (iii) as to which an equivalent amount in Dollars may be readily
calculated, including the Euro.

         "Applicable Facility Fee Rate" means the percentage rate per annum
which is applicable with respect to the Facility Fee as set forth on the Pricing
Schedule.

         "Applicable Lending Office" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of a Base Rate Advance, and such
Bank's Eurocurrency Lending Office in the case of a Eurocurrency Rate Advance
and, in the case of an Uncommitted Advance, the office of such Bank notified by
such Bank to the Administrative Agent as its Applicable Lending Office with
respect to such Uncommitted Advance.



         "Applicable Margin" means, with respect to Committed Advances of any
Type at any time, the percentage rate per annum which is applicable at such time
with respect to Advances of such Type as set forth in the Pricing Schedule.

         "Applicable Utilization Fee Rate" means, at any particular time, the
percentage rate per annum which is applicable at such time with respect to the
Utilization Fee as set forth on the Pricing Schedule.

         "Arrangers" means Banc One Capital Markets, Inc. and Wachovia Capital
Markets, LLC.

         "Assumption Letter" means a letter of a Subsidiary of the Company
addressed to the Banks in substantially the form of Exhibit B hereto pursuant to
which such Subsidiary agrees to become a "Borrowing Subsidiary" and agrees to be
bound by the terms and conditions hereof.

         "Available Commitment" has the meaning specified in Section 2.01.

         "Bank One" means Bank One, NA, a national banking association having
its headquarters in Chicago, Illinois, in its individual capacity, and its
successors.

         "Banks" means the banks listed on Schedule I hereto and each Person
that becomes a party hereto pursuant to Section 9.03.

         "Base Rate" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the higher of:

         (a) the prime rate of interest announced by Bank One or its parent from
time to time (which is not necessarily the lowest rate of interest charged to
any customer), changing when and as said prime rate changes; and

         (b) 1/2 of 1% per annum above the Federal Funds Rate.

         "Base Rate Advance" means a Committed Advance which bears interest at a
rate based upon the Base Rate, as provided in Section 2.07(a).

         "Borrower" means the Company or any Borrowing Subsidiary.

         "Borrowing" means a Committed Borrowing or an Uncommitted Borrowing.

         "Borrowing Subsidiary" means any Subsidiary of the Company duly
designated by the Company pursuant to Section 2.17 hereof to make Borrowings
hereunder, which Subsidiary shall have delivered an Assumption Letter to the
Administrative Agent in accordance with Section 2.17.

         "Business Day" means a day of the year (other than a Saturday or
Sunday) on which banks are not required or authorized by law to close in New
York City and Chicago and, if the applicable Business Day relates to any
Eurocurrency Rate Advances, on which dealings are carried on in the London
interbank market (and, if such Eurocurrency Rate Advances are

                                       2



denominated in the Euro, a day upon which such clearing system as is determined
by the Administrative Agent to be suitable for clearing or settlement of the
Euro is open for business).

         "Commission" means the Securities and Exchange Commission or any
federal body succeeding to its functions.

         "Commitment" has the meaning specified in Section 2.01.

         "Committed Advance" means an advance by a Bank to a Borrower as part of
a Committed Borrowing and refers to a Base Rate Advance or a Eurocurrency Rate
Advance, each of which shall be a "Type" of Committed Advance.

         "Committed Borrowing" means a borrowing consisting of simultaneous
Committed Advances of the same Type made by each of the Banks to a Borrower
pursuant to Section 2.01.

         "Committed Note" means a promissory note, in substantially the form of
Exhibit C-1 hereto, duly executed by the Company or a Borrowing Subsidiary and
payable to the order of a Bank in the amount of its Commitment, including any
amendment, modification, renewal or replacement of such promissory note.

         "Consolidated EBIT" means, for any period, on a consolidated basis for
the Company and its Consolidated Subsidiaries, the sum of the amounts for such
period of (a) Consolidated Net Income (excluding non-recurring or extraordinary
gains, losses, expenses and charges but including cash charges and payments
during such period related to extraordinary or non-recurring gains, losses,
charges and expenses), plus (b) charges against income for foreign, federal,
state and local taxes, plus (c) Consolidated Interest Expense plus (or minus)
(d) pre tax income (or loss) from discontinued operations.

         "Consolidated Interest Expense" means, for any period, (a) the sum of
total interest expense of the Company and its Consolidated Subsidiaries, whether
paid or accrued, as determined in accordance with GAAP, plus (b) without double
counting, the consolidated interest, fees, yield or discount accrued during such
period on the aggregate outstanding investment or claim held by purchasers,
assignees or other transferees of (or of interests in) receivables of the
Company and its Consolidated Subsidiaries in connection with Securitization
Transactions (regardless of the accounting treatment of such Securitization
Transactions).

         "Consolidated Net Income" means, for any period, the consolidated net
earnings (or loss) after taxes of the Company and its Consolidated Subsidiaries
for such period, determined in accordance with GAAP.

         "Consolidated Subsidiary" means at any date any Subsidiary the accounts
of which would be consolidated with those of the Company in its consolidated
financial statements at such date in accordance with GAAP; provided, that for
purposes of Sections 5.02 and 5.03, "Consolidated Subsidiary" shall mean any
subsidiary the accounts of which would be consolidated with those of the Company
in its consolidated financial statements at such date in accordance with GAAP.

         "Consolidated Tangible Net Worth" means, as of any date, an amount
equal to the sum of (i) the par or stated value of the outstanding shares of all
classes of capital stock of the Company,

                                       3



(ii) paid-in capital and capital surplus of the Company and (iii) retained
earnings of the Company, as each of which would appear on a consolidated balance
sheet of the Company and its Consolidated Subsidiaries prepared as of the last
day of the most recently completed fiscal quarter in accordance with GAAP, less
the aggregate net amount of (i) all assets so appearing which in accordance with
GAAP are deemed intangible, such intangible assets to specifically include, but
not be limited to, licenses, copyrights, trademarks, tradenames, patents and
goodwill, and (ii) any write-up in the book value of assets made after December
31, 1997, other than any such write-up to an appraised fair market value in
accordance with the purchase accounting requirements of GAAP.

         "Continuation Notice" has the meaning specified in Section 2.22.

         "Continuing Bank" has the meaning specified in Section 2.22.

         "Debt" means (but without duplication of any item) (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations as lessee under leases which shall have
been or should be, in accordance with generally accepted accounting principles,
recorded as capital leases, and (iv) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clause (i),
(ii) or (iii) above.

         "Defaulted Advance" means, with respect to any Bank at any time, the
amount of any Advance required to be made by such Bank to the Borrower pursuant
to Section 2.01 or Section 2.03(a) at or prior to such time that has not been so
made as of such time; provided, however, that any Advance made by the
Administrative Agent for the account of such Bank pursuant to Section 2.02(e)
shall not be considered a Defaulted Advance even if, at such time, such Bank
shall not have reimbursed the Administrative Agent therefor as provided in
Section 2.02(e). If part of a Defaulted Advance shall be deemed made pursuant to
Section 2.19(a), the remaining part of such Defaulted Advance shall be
considered a Defaulted Advance originally required to be made pursuant to
Section 2.01 or Section 2.03(a) on the same date as the Defaulted Advance so
deemed made in part.

         "Defaulted Amount" means, with respect to any Bank at any time, any
amount required to be paid by such Bank to the Administrative Agent or any other
Bank hereunder at or prior to such time that has not been so paid as of such
time, including, without limitation, any amount required to be paid by such Bank
to (a) the Administrative Agent pursuant to Section 2.02(e) to reimburse the
Administrative Agent for the amount of any Advance made by the Administrative
Agent for the account of such Bank, (b) any other Bank pursuant to Section 2.15
to purchase any participation in Advances owing to such other Bank and (c) the
Administrative Agent pursuant to Section 8.05 to reimburse the Administrative
Agent for such Bank's ratable share of any amount required to be paid by the
Banks to the Administrative Agent as provided therein. If part of a Defaulted
Amount shall be deemed paid pursuant to Section 2.19(b), the remaining part of
such Defaulted Amount shall be considered a Defaulted Amount originally required
to be made hereunder on the same date as the Defaulted Amount so deemed paid in
part.

                                        4



         "Defaulting Bank" means, at any time, any Bank that, at such time, (a)
owes a Defaulted Advance or a Defaulted Amount or (b) shall take or be the
subject of any action or proceeding of a type described in Section 6.01(f).

         "Dollar Amount" means, for any date of determination:

         (a) with respect to any amount denominated in Dollars, such amount;

         and

         (b) with respect to an amount denominated in any Alternative Currency,
the amount of Dollars into which the Administrative Agent could, in accordance
with its practice from time to time in the London interbank foreign exchange
market, convert such amount of Alternative Currency at its spot rate of exchange
applicable to the relevant transaction at or about 11:00 a.m., London time, on
the date of such determination, for the delivery of Dollars two Business Days
thereafter. For purposes of this Agreement, the Dollar Amount of any amount
received by a Bank hereunder shall be determined as of the date of such receipt.

         "Dollars" and the sign "$" each means the lawful currency of the United
States.

         "Domestic Lending Office" means, with respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto or in the assignment agreement pursuant to which it became a
Bank, as the case may be, or such other office of such Bank as such Bank may
from time to time specify to the Company and the Administrative Agent.

         "Effective Date" has the meaning specified in Section 3.01.

         "Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of noncompliance or
violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in any way to any
Environmental Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory authority
for enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or any third party
for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.

         "Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, code, order, judgment, decree or judicial
interpretation relating to the environment, health, safety or Hazardous
Materials.

         "Environmental Permit" means any permit, approval, indemnification
number, license or other authorization required under any Environmental Law.

         "ERISA" means the Employee Retirement Income Security Act of 1974 as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.

                                       5



         "ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the Company's controlled group, or under common control
with the Company, as determined under Section 414 of the Internal Revenue Code.

         "ERISA Event" means (a) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day
notice requirement with respect to such event has been waived by the PBGC; (b)
the application for a minimum funding waiver with respect to a Plan; (c) the
provision by the administrator of any Plan of a notice of intent to terminate
such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice
with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of the Company or any of its ERISA
Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by the Company or any of its ERISA Affiliates from a Multiple
Employer Plan during a plan year for which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (f) the failure by the Company or any of
its ERISA Affiliates to make a payment to a Plan if the conditions for the
imposition of a lien under Section 302(f)(1) of ERISA are satisfied; (g) the
adoption of an amendment to a Plan requiring the provision of security to such
Plan, pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA that
could constitute grounds for the termination of, or the appointment of trustee
to administer, a Plan.

         "Euro" and/or "EUR" means the euro referred to in Council Regulation
(EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European
Union, or, if different, the then lawful currency of the member states of the
European Union that participate in the third stage of Economic and Monetary
Union.

         "Eurocurrency Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Eurocurrency Lending Office" opposite its
name on Schedule I hereto or in the assignment agreement pursuant to which it
became a Bank (or, if no such office is specified, its Domestic Lending Office),
or such other office of such Bank as such Bank may from time to time specify to
the Company and the Administrative Agent.

         "Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.

         "Eurocurrency Rate" means, with respect to any Eurocurrency Rate
Advance for any specified Interest Period or for the term of any Uncommitted
Advance with respect to which interest is calculated by reference to the
Eurocurrency Rate, the applicable British Bankers' Association LIBOR rate for
deposits in Dollars or the applicable Alternative Currency of such Eurocurrency
Rate Advance as reported by any generally recognized financial information
service as of 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, and having a maturity equal to such Interest Period,
provided that, if no such British Bankers' Association LIBOR rate is available
to the Administrative Agent, the applicable Eurocurrency Rate for the relevant
Interest Period shall instead be the rate determined by the Administrative Agent
to be the rate at which Bank One or one of its Affiliate banks offers to place
deposits in Dollars or the applicable Alternative Currency of such Eurocurrency
Rate Advance with first-class banks in the London interbank market at
approximately 11:00 a.m.

                                       6



(London time) two Business Days prior to the first day of such Interest Period,
in the approximate amount of Bank One's relevant Eurocurrency Rate Advance or,
in the case of an Uncommitted Advance, the amount of the Uncommitted Advance
requested by a Borrower, and having a maturity equal to such Interest Period.

         "Eurocurrency Rate Advance" means a Committed Advance which bears
interest at a rate based upon the Eurocurrency Rate, as provided in Section
2.07(c).

         "Eurocurrency Rate Reserve Percentage" of any Bank for any Interest
Period for a Eurocurrency Rate Advance means the reserve percentage applicable
two Business Days before the first day of such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
(or any successor), or, in the case of Committed Advances in Alternative
Currencies, any similar authority outside the United States, for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such Bank with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities (or
with respect to any other category of liabilities that includes deposits by
reference to which the interest rate on Eurocurrency Rate Advances of such
currency is determined) having a term equal to such Interest Period.

         "Eurocurrency Rate Uncommitted Borrowing" means an Uncommitted
Borrowing comprised of Uncommitted Advances denominated in Dollars, bearing
interest based upon the Eurocurrency Rate.

         "Events of Default" has the meaning specified in Section 6.01.

         "Extension Request" has the meaning specified in Section 2.22.

         "Facility Fee" has the meaning specified in Section 2.04.

         "Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the immediately preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
for such transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.

         "Fixed Rate Uncommitted Borrowing" means an Uncommitted Borrowing
consisting of Uncommitted Advances bearing interest at a fixed percentage rate
per annum (expressed in the form of a decimal to no more than four decimal
places) specified by the respective Banks making such Uncommitted Advances
pursuant to the procedure described in Section 2.03.

         "Fund" means any Person (other than a natural person) that is (or will
be) engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

         "GAAP" has the meaning specified in Section 1.03.

                                       7



         "Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials, radon gas and any other chemicals, materials or substances
designated, classified or regulated as being "hazardous" or "toxic", or words of
similar import, under any federal, state, local or foreign statute, law,
ordinance, rule, regulation, code, order, judgment, decree or judicial
interpretation.

         "Insurance Policy Debt" means Debt of the Company or any of its
Subsidiaries under policies of life insurance now or hereafter owned by the
Company or any of its Subsidiaries under which policies the sole recourse for
such borrowing is against such policies.

         "Interest Coverage Ratio" means the ratio, determined on a consolidated
basis for the Company and its Consolidated Subsidiaries in accordance with GAAP
as of the end of any fiscal quarter, of Consolidated EBIT to Consolidated
Interest Expense, in each case determined as of the last day of such fiscal
quarter for the four-quarter period then ended.

         "Interest Period" means, for each Eurocurrency Rate Advance comprising
part of the same Committed Borrowing, the period commencing on the date of such
Eurocurrency Rate Advance or the date of any conversion or continuation thereof,
and ending on the last day of the period selected by a Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be one, two,
three or six months, in each case as a Borrower may select, upon notice received
by the Administrative Agent pursuant to Section 2.02 or 2.06; provided, however,
that

                  (i) Interest Periods commencing on the same date for
         Eurocurrency Rate Advances comprising part of the same Committed
         Borrowing shall be of the same duration;

                  (ii) whenever the last day of any Interest Period would
         otherwise occur on a day other than a Business Day, the last day of
         such Interest Period shall be extended to occur on the next succeeding
         Business Day, provided that if such extension would cause the last day
         of such Interest Period to occur in the next following calendar month,
         the last day of such Interest Period shall occur on the next preceding
         Business Day;

                  (iii) whenever the first day of any Interest Period occurs on
         a day in an initial calendar month for which there is no numerically
         corresponding day in the calendar month that succeeds such initial
         calendar month by the number of months equal to the number of months in
         such Interest Period, such Interest Period shall end on the last
         Business Day of such succeeding calendar month; and

                  (iv) no Interest Period may terminate later than the
         Termination Date (or, if the Company has made the Term Loan Election,
         the Maturity Date).

         "Lien" means, with respect to any asset, any security interest,
mortgage, pledge, lien, claim, charge or encumbrance of any kind in respect of
such asset.

         "Majority Banks" means at any time Banks holding more than 50% of the
then aggregate unpaid principal amount of the Committed Advances held by the
Banks, or, if no such principal amount is then outstanding, Banks having more
than 50% of the Commitments.

                                       8



         "Margin Stock" has the meaning specified in Regulation U issued by the
Board of Governors of the Federal Reserve System.

         "Material Adverse Effect" means a material adverse effect on (i) the
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole, (ii) the legality, validity or
enforceability of this Agreement or the Notes or (iii) the ability of the
Company to perform its obligations under this Agreement and the Notes.

         "Material Subsidiary" means a Subsidiary of the Company which, at the
time of determination, (i) shall own assets comprising in excess of 10% of all
of the assets of the Company and its consolidated Subsidiaries on a consolidated
basis, or (ii) has operating income for the four fiscal quarters most recently
ended in excess of 10% of the operating income of the Company and its
consolidated Subsidiaries on a consolidated basis; provided, that solely with
respect to Article V, in no event shall an SPV be deemed to be a Material
Subsidiary.

         "Maturity Date" means the earlier of (a) the first anniversary of the
Termination Date and (b) the date on which all amounts payable hereunder have
become due and payable pursuant to Section 6.01.

         "Moody's" means Moody's Investors Service, Inc.

         "Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Company or any of its ERISA Affiliates is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions.

         "Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any of its ERISA Affiliates and at least one Person other than the
Company and its ERISA Affiliates or (b) was so maintained and in respect of
which the Company or any of its ERISA Affiliates could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.

         "National Currency Unit" means the unit of currency (other than a Euro
unit) of each member state of the European Union that participates in the third
stage of Economic and Monetary Union.

         "Non-Extending Bank" has the meaning specified in Section 2.22.

         "Note" means a Committed Note or an Uncommitted Note.

         "Notice of Committed Borrowing" has the meaning specified in Section
2.02(a).

         "Notice of Conversion or Continuation" has the meaning specified in
Section 2.06(b).

         "Notice of Uncommitted Borrowing" has the meaning specified in Section
2.03(a).

         "Participants" has the meaning specified in Section 9.02.1.

                                       9



         "PBGC" means the Pension Benefit Guaranty Corporation and its
successors and assigns.

         "Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.

         "Plan" means a Single Employer Plan or a Multiple Employer Plan.

         "Pricing Schedule" means the Schedule attached hereto as such.

         "Pro Rata Share" means, at any time with respect to any Bank, the ratio
(expressed as a percentage) that such Bank's Commitment bears to the aggregate
Commitments of all Banks at such time or, at any time after the Commitments have
been terminated, the ratio (expressed as a percentage) that such Bank's
outstanding Committed Advances bears to the aggregate outstanding Committed
Advances of all Banks at such time.

         "Public Debt Rating" means, on any date, the rating that has been most
recently announced by S&P or Moody's, as the case may be, for any class of
long-term senior non-credit-enhanced unsecured debt issued by the Company,
changing when and as the applicable rating agency publicly announces a change in
its Public Debt Rating.

         "Purchasers" has the meaning specified in Section 9.03.1.

         "Quote Deadline" has the meaning specified in Section 2.03(a)(ii).

         "Receivables" means a payment owing to a Person (whether constituting
an account, chattel paper, document, instrument or general intangible) arising
from the provision of merchandise, goods or services by such Person, including
the right to payment of any interest or finance charges and other obligations
owing to such Person with respect thereto.

         "Register" has the meaning specified in Section 9.03.4.

         "Related Security" means with respect to any Receivable: (a) all
security interests or liens and property subject thereto from time to time
securing or purporting to secure the payment of such Receivable by the Person
obligated thereon, (b) all guaranties, indemnities and warranties, insurance
policies, financing statements and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Receivable,
(c) all right, title and interest of the Company or any Material Subsidiary or
any SPV in and to any goods (including returned, repossessed or foreclosed
goods) the sale of which gave rise to such Receivable; provided, that Related
Security will not include returned goods only to the extent that all amounts
required to be paid pursuant to Securitization Transactions in respect of such
goods have been paid, (d) all collections with respect to any of the foregoing,
(e) all records with respect to any of the foregoing, and (f) all proceeds of
such Receivable or with respect to any of the foregoing.

         "Replacement Bank" has the meaning specified in Section 2.22(b).

         "Request Deadline" has the meaning specified in Section 2.03(a)(i).

                                       10



     "Responsible Officer" means the Executive Vice President and Chief
Financial Officer of the Company, the Vice President and Treasurer of the
Company, or any other officer of the Company or any other Borrower responsible
for overseeing or reviewing compliance with this Agreement or any Note.

     "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc.

     "Securitization Transactions" means one or more transactions involving the
securitization by the Company or any of its Subsidiaries of Receivables and
Related Security, including, without limitation, as a result of the sale or
granting of a Lien in such Receivables and Related Security to an SPV or another
Person and the contribution of Receivables and Related Security to an SPV;
provided, that the amount of the obligations incurred under all such
transactions by all such Persons that would be characterized as principal if
structured as a secured lending transaction rather than as a purchase does not
exceed $350,000,000 in the aggregate at any one time outstanding.

     "Single Employer Plan" means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that (a) is maintained for employees of the Company or any
of its ERISA Affiliates and no Person other than the Company and its ERISA
Affiliates or (b) was so maintained and in respect of which the Company or any
of its ERISA Affiliates could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.

     "SPV" means a Subsidiary of the Company created for the sole purpose of
purchasing Receivables from the Company or any of its Subsidiaries as part of a
Securitization Transaction.

     "Sterling" means the lawful currency of the United Kingdom.

     "Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which securities or other ownership interests having (a) ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions or (b) having the ability to direct the management of such
corporation, partnership, limited liability company, association or other
business entity, are at the time directly or indirectly owned or controlled by
such Person, by such Person and one or more of its other Subsidiaries or by one
or more of such Person's other Subsidiaries.

     "Termination Date" means the earlier of (i) October 7, 2004 (or such later
date as is established pursuant to Section 2.22(d)) or (ii) the date the
Commitments are terminated in whole pursuant to Section 2.05 or 6.01.

     "Term Loan Election" has the meaning specified in Section 2.06.

     "Transferee" has the meaning specified in Section 9.04.

     "Uncommitted Advance" means an advance by a Bank to a Borrower as part of
an Uncommitted Borrowing resulting from the auction bidding procedure described
in Section 2.03.

                                       11



     "Uncommitted Borrowing" means a borrowing consisting of simultaneous
Uncommitted Advances from each of the Banks whose offer to make one or more
Uncommitted Advances as part of such borrowing has been accepted by a Borrower
under the auction bidding procedure described in Section 2.03.

     "Uncommitted Borrowing Margin" means, with respect to any Eurocurrency Rate
specified by a Borrower in a Notice of Uncommitted Borrowing and any offer made
by a Bank in response to such Notice of Uncommitted Borrowing, the margin
(expressed as a percentage rate per annum) to be added to or subtracted from
such Eurocurrency Rate in order to determine the interest rate per annum at
which such Bank is willing to, and offers to, make an Uncommitted Advance to
such Borrower as part of a Eurocurrency Rate Uncommitted Borrowing.

     "Uncommitted Note" means a promissory note, in substantially the form of
Exhibit C-2 hereto, duly executed by the Company or a Borrowing Subsidiary and
evidencing an Uncommitted Advance made by such Bank, including any amendment,
modification, renewal or replacement of such promissory note.

     "USA Patriot Act" has the meaning specified in Section 10.18.

     "Utilization Fee" has the meaning specified in Section 2.04.

     "Withdrawal Liability" has the meaning specified in Part 1 of Subtitle E of
Title IV of ERISA.

     "Yen" means the lawful currency of Japan.

     SECTION 1.02 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding."

     SECTION 1.03 Accounting Terms; Modifications due to Implementation of Euro.
(a) All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles consistent with those
applied in the preparation of the financial statements then most recently
delivered by the Company to the Banks in accordance with Section 5.03 ("GAAP");
provided, however, that, if any changes in accounting principles from those used
in the preparation of the consolidated financial statements of the Company and
its Subsidiaries for the fiscal year of the Company ended December 31, 2002 (as
delivered to the Banks pursuant to Section 4.01(e)) occur by reason of the
promulgation of rules, regulations, pronouncements, opinions or other
requirements of the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and such changes would affect (or would result in a
change in the method of calculation of) the covenant set forth in Section 5.02,
or any of the defined terms related thereto contained in Section 1.01, then upon
the request of any party hereto, the Company, the Administrative Agent and the
Banks shall enter into negotiations in good faith, if and to the extent
necessary, to amend such covenant or such terms as would be affected by such
changes in GAAP, in accordance with Section 10.01, in such manner as would
maintain the economic terms of such covenant as in effect under this Agreement,
prior to giving effect to the occurrence of any such changes; and provided
further, however, that until the amendment of the covenant and

                                       12



the defined terms referred to in the immediately preceding proviso becomes
effective, such covenant and defined terms shall be performed, observed and
determined, and any determination of compliance with such covenant shall be
made, as though no such changes in accounting principles had been made and the
Company shall deliver to the Banks, in addition to the consolidated financial
statements otherwise required to be delivered to the Banks under Sections
5.03(a) or 5.03(b) during such period, a statement of reconciliation conforming
such consolidated financial statements to GAAP prior to such changes.

          (b) If the Administrative Agent determines that modifications to this
Agreement are necessary as a result of the commencement of the third stage of
European Economic and Monetary Union, then the Company, the Administrative Agent
and the Banks shall enter into negotiations in good faith to amend this
Agreement in such manner as to put the parties in the same position as if the
Euro Implementation Date had not occurred. No such modifications shall become
effective until this Agreement has been amended in accordance with Section 10.01
to incorporate such modifications.

                                   ARTICLE II

                        AMOUNTS AND TERMS OF THE ADVANCES

     SECTION 2.01 The Committed Advances. Each Bank severally agrees, on the
terms and conditions hereinafter set forth, to make Committed Advances to the
Borrowers from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an aggregate amount with respect to
all Borrowers not to exceed at any time outstanding an amount (such Bank's
"Available Commitment") equal to (i) the amount set forth opposite such Bank's
name on Schedule I hereto or, if such Bank has entered into any assignment
agreement, set forth for such Bank in the Register, as such amount may be
reduced pursuant to Section 2.05 (such Bank's "Commitment") minus (ii) such
Bank's Pro Rata Share of the aggregate amount of the Uncommitted Advances then
outstanding. Each Committed Borrowing shall be in an aggregate amount of not
less than $20,000,000 or an integral multiple of $1,000,000 in excess thereof
or, if the requested currency for such Committed Advance is not Dollars, an
equivalent amount (determined in accordance with Section 2.16) and multiple in
the requested Alternative Currency, and, subject to Section 2.02, shall consist
of Committed Advances of the same Type made on the same day to the same Borrower
by the Banks ratably according to their respective Commitments in the currency
so requested. Within the limits of each Bank's Available Commitment, a Borrower
may borrow under this Section 2.01, prepay pursuant to Section 2.10, and
reborrow under this Section 2.01.

     SECTION 2.02 Making the Committed Advances. (a) Each Committed Borrowing
shall be made on notice by the Company (or, if such Borrower is a Borrowing
Subsidiary, by the Company on behalf of such Borrowing Subsidiary) to the
Administrative Agent (which shall give each Bank prompt notice thereof by
telecopy), given not later than 10:00 A.M. (Chicago time) on (i) the date of a
proposed Committed Borrowing comprised of Base Rate Advances, (ii) the third
Business Day prior to the date of a proposed Committed Borrowing comprised of
Eurocurrency Rate Advances to be denominated in Dollars, and (iii) the fourth
Business Day prior to the date of a proposed Committed Borrowing comprised of
Eurocurrency Rate Advances to be denominated in an Alternative Currency. Each
such notice of a Committed

                                       13



Borrowing (a "Notice of Committed Borrowing") shall be by telecopy confirmed
immediately in writing, in substantially the form of Exhibit D-1 hereto,
specifying therein the requested (i) date of such Committed Borrowing, (ii) Type
of Committed Advances comprising such Committed Borrowing, which, in the case of
a Committed Borrowing denominated in an Alternative Currency, shall be
Eurocurrency Rate Advances, (iii) currency for such Committed Borrowing, which
shall be in Dollars or an Alternative Currency, (iv) aggregate amount of such
Committed Borrowing, (v) in the case of a Committed Borrowing consisting of
Eurocurrency Advances, the initial Interest Period for each Committed Advance
comprising such Committed Borrowing, and (vi) whether such Committed Borrowing
is to be made by the Company or by a specified Borrowing Subsidiary. The
Administrative Agent shall, promptly after such time as the Company or such
Borrower may no longer revoke the Notice of Committed Borrowing without any
liability to the Company or such Subsidiary, notify each Bank and the Company or
such Borrower of the applicable interest rate under Section 2.07(a) or (b). Each
Bank shall, before 12:00 P.M. (Chicago time) on the date of such Committed
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at the Domestic Lending Office of the Bank then acting
as Administrative Agent, in federal or otherwise immediately available funds,
such Bank's Pro Rata Share of such Committed Borrowing. After the Administrative
Agent receives such funds and upon fulfillment of the applicable conditions set
forth in Article III, the Administrative Agent will make such funds available to
the applicable Borrower at the Administrative Agent's aforesaid address.

          (b) Anything in subsection (a) above to the contrary notwithstanding:

          (i)   If with respect to a request for a Committed Borrowing of an
     Alternative Currency other than Sterling, Euros or Yen, any Bank shall,
     prior to 10:00 A.M. (Chicago time) on the second Business Day before the
     requested date of such Committed Borrowing, notify the Administrative Agent
     that the requested Alternative Currency is not practically available to
     such Bank in the amount required to make its Committed Advance in
     connection therewith; or

          (ii)  If any Bank shall, prior to making any requested Committed
     Borrowing consisting of Eurocurrency Rate Advances in an Alternative
     Currency, notify the Administrative Agent that the introduction of or any
     change in or in the interpretation of any law or regulation makes it
     unlawful, or that any central bank or other governmental authority asserts
     that it is unlawful, for such Bank or its Eurocurrency Lending Office or
     any other Applicable Lending Office to perform its obligations hereunder to
     make Eurocurrency Rate Advances in such currency or to fund or maintain
     Eurocurrency Rate Advances in such currency hereunder; or

          (iii) If the Majority Banks shall, prior to making any requested
     Committed Borrowing of an Alternative Currency other than Sterling, Yen or
     the Euro, notify the Administrative Agent or the Administrative Agent shall
     reasonably determine that currency control or other exchange regulations
     are imposed in the country in which such currency is issued which result in
     the introduction of different types of such currency or that there is a
     change in national or international financial, political or economic
     conditions or currency exchange rates or exchange controls which would make
     it impracticable for such Advance to be denominated in the Alternative
     Currency;

                                       14








then, upon receipt of such notice, the Administrative Agent shall so notify the
Company and the applicable Borrower (if other than the Company) and the Company
or such Borrower may, without incurring an obligation to indemnify for losses,
costs or expenses under Section 2.02(d), by notice to the Administrative Agent
(which shall promptly notify each Bank), either

               (x)  withdraw the applicable Notice of Committed Borrowing, in
     which case the Committed Borrowing shall not occur;

               (y)  request that such Committed Borrowing be made by the Banks
     in Dollars as a Committed Borrowing comprised of either Eurocurrency Rate
     Advances or Base Rate Advances, in which case the original Notice of
     Committed Borrowing shall be deemed to be a Notice of Committed Borrowing
     which requests a Committed Borrowing in an aggregate principal amount in
     Dollars equivalent, on the date the Company or such Borrower so notifies
     the Administrative Agent, to the amount of the originally requested
     currency for such Type of Committed Advances (determined in accordance with
     Section 2.16); provided that such request may not be made by the Company or
     such Borrower if the requested Type of Committed Advances is Eurocurrency
     Rate Advances and the request by the Company or such Borrower is not given
     to the Administrative Agent prior to 2:00 P.M. (London time) on the second
     Business Day before the requested date of such Committed Borrowing; or

               (z)  only in the case of a Bank giving a notice described in
     Section 2.02(b)(ii) above, request that such Committed Borrowing be made by
     the Banks (other than the notifying Bank) and that no Committed Advance be
     made by the notifying Bank in connection with such Committed Borrowing.

In the case of any notice given under clause (y) above, the Company or such
Borrower shall specify in such notice the amount and type of Committed Advance
to be made by each Bank in connection therewith. Any notice under this
subsection (b) shall be given no later than 2:00 P.M. (London time) two Business
Days before the date of the requested Committed Borrowing, may be given by
telephone and, if by telephone, shall be confirmed promptly in writing. If
neither the Company nor the applicable Borrower shall provide a timely notice as
contemplated in clause (x), (y) or (z) above in response to a notice by any Bank
under clause (i) or (ii) above, the applicable Notice of Committed Borrowing
shall be deemed withdrawn.

          (c)  Anything in subsection (a) above to the contrary notwithstanding,
if the Majority Banks shall, no later than 5:00 P.M. (Chicago time) three
Business Days before the date of any requested Committed Borrowing, continuation
or conversion consisting of Eurocurrency Rate Advances, or any continuation
thereof or conversion thereto, notify the Administrative Agent that the
Eurocurrency Rate for any Interest Period for such Eurocurrency Rate Advances,
plus additional interest, if any, payable under Section 2.08, will not
adequately reflect the cost to such Majority Banks of making, funding,
converting to or continuing their respective Eurocurrency Rate Advances for such
Committed Borrowing for such Interest Period, then the Administrative Agent
shall promptly notify the Company, the applicable Borrower (if other than the
Company) and the Banks of such circumstances and upon receipt of such notice,
the Company or such Borrower may, without incurring an obligation to indemnify
for losses, costs

                                       15



or expenses under Section 2.02(d), by notice to the Administrative Agent (which
shall promptly notify each Bank), either:

               (i)   withdraw the applicable Notice of Committed Borrowing, in
     which case the Committed Borrowing shall not occur;

               (ii)  withdraw the applicable Notice of Conversion or
     Continuation, in which case the conversion or continuation of such
     Committed Borrowing shall not occur; or

               (iii) request that such Committed Borrowing, continuation or
     conversion be made by the Banks in Dollars as a Committed Borrowing,
     continuation or conversion, in which case the original Notice of Committed
     Borrowing, or Notice of Conversion or Continuation shall be deemed to be a
     Notice of Committed Borrowing, or Notice of Conversion or Continuation
     which requests a Committed Borrowing, continuation or conversion in an
     aggregate principal amount in Dollars equivalent, on the date the Company
     or such Borrower so notifies the Administrative Agent, to the amount of the
     originally-requested currency for such Committed Advances; provided that
     such request may not be made by the Company or such Borrower if the request
     by the Company or such Borrower is not given to the Administrative Agent
     prior to 2:00 P.M. (London time) on the second Business Day before the
     requested date of such Committed Borrowing, continuation or conversion.

In the case of any notice given under clause (iii) above, the Company or such
Borrower shall specify in such notice the amount and Type of Committed Advances
to be made, continued or converted by the Banks in connection therewith. Any
notice under this subsection (c) shall be given no later than 2:00 P.M. (London
time) two Business Days before the date of the requested Committed Borrowing,
may be given by telephone, and, if by telephone, shall be confirmed promptly in
writing. From and after the date the Administrative Agent receives the notice
described in Section 2.02(c), the Banks' obligation to make Eurocurrency
Advances for any affected Interest Period shall be suspended until the Majority
Banks notify the Administrative Agent that the circumstances giving rise to such
notice no longer exist. If neither the Company nor the applicable Borrower shall
provide a timely notice as contemplated in clauses (i), (ii) or (iii) above with
respect to a Notice of Committed Borrowing, the applicable Notice of Committed
Borrowing shall be deemed withdrawn. If neither the Company nor the applicable
Borrower shall provide timely a notice as contemplated in clauses (i), (ii) or
(iii) above with respect to a Notice of Continuation or Conversion, the Company
or such applicable Borrower shall be deemed to have made the request described
in clause (iii).

          (d)  Each Notice of Committed Borrowing and Notice of Conversion or
Continuation may be revoked by the Company or, if other than the Company, the
applicable Borrower, by notice to the Administrative Agent without any liability
on the part of the Company or such Borrower at any time prior to (i) 10:00 A.M.
(Chicago time) on the date of a proposed Committed Borrowing, continuation or
conversion comprised of Base Rate Advances, (ii) 11:00 A.M. (London time) on the
second Business Day prior to the date of a proposed Committed Borrowing,
continuation or conversion comprised of Eurocurrency Rate Advances to be
denominated in Dollars, and (iii) 11:00 A.M. (London time) on the third Business
Day prior

                                       16



to the date of a proposed Committed Borrowing, continuation or conversion
comprised of Eurocurrency Rate Advances to be denominated in an Alternative
Currency. In the case of any Committed Borrowing, continuation or conversion
which the related Notice of Committed Borrowing, or Notice of Conversion or
Continuation, specifies is to be comprised of Eurocurrency Rate Advances, unless
the Company or the applicable Borrower revokes such Notice of Committed
Borrowing or Notice of Conversion or Continuation in accordance with the
preceding sentence and except as otherwise provided in Sections 2.02(b) and (c),
the Company or such Borrower shall indemnify each Bank against any loss, cost or
expense reasonably incurred by such Bank as a result of any failure to fulfill
on or before the date specified in such Notice of Borrowing or Notice of
Conversion or Continuation for such Committed Borrowing, conversion or
continuation, the applicable conditions set forth in Article III, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense reasonably incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Bank to fund the Committed Advance to
be made by such Bank as part of such Committed Borrowing, conversion or
continuation, when such Committed Advance, as a result of such failure, is not
made, continued or converted on such date.

          (e)  Unless the Administrative Agent shall have received notice from a
Bank prior to the date of any Committed Borrowing that such Bank will not make
available to the Administrative Agent such Bank's Pro Rata Share of such
Committed Borrowing, the Administrative Agent may assume that such Bank has made
such Pro Rata Share available to the Administrative Agent on the date of such
Committed Borrowing in accordance with subsection (a) of this Section 2.02 and
the Administrative Agent may, in reliance upon such assumption, make a
corresponding amount available to the applicable Borrower on such date. If and
to the extent that such Bank shall not have so made such Pro Rata Share
available to the Administrative Agent, such Bank and such Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to such Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of such Borrower, the
interest rate applicable at the time to Committed Advances comprising such
Committed Borrowing and (ii) in the case of such Bank, the Federal Funds Rate.
If such Bank shall repay such corresponding amount to the Administrative Agent,
such amount so repaid shall constitute such Bank's Committed Advance as part of
such Committed Borrowing for purposes of this Agreement.

          (f)  A Bank's failure to make the Committed Advance to be made by it
as part of any Committed Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its Committed Advance on the date of such
Committed Borrowing. No Bank shall be responsible for the failure of any other
Bank to make the Committed Advance to be made by such other Bank on the date of
any Committed Borrowing.

     SECTION 2.03 The Uncommitted Advances. (a) Each Bank severally agrees that
any Borrower may make Uncommitted Borrowings in Dollars from time to time on any
Business Day during the period from the date hereof until 30 days before the
Termination Date in the manner set forth below; provided that, following the
making of each Uncommitted Borrowing, the aggregate amount with respect to all
Borrowers of the Advances then outstanding shall not exceed the aggregate amount
of the Commitments of the Banks.

                                       17



               (i)  A Borrower may request, and the Company may request for the
     benefit of any Borrowing Subsidiary, an Uncommitted Borrowing to be made by
     such Borrower under this Section 2.03 by delivering to the Administrative
     Agent, by telecopier not later than the applicable Request Deadline a
     notice of an Uncommitted Borrowing (a "Notice of Uncommitted Borrowing"),
     in substantially the form of Exhibit D-2 hereto, specifying therein (A) the
     requested date of the proposed Uncommitted Borrowing, (B) the aggregate
     amount of the proposed Uncommitted Borrowing, (C) that each Bank submitting
     an offer shall quote an Uncommitted Borrowing Margin, or that each Bank
     submitting an offer shall quote a fixed interest rate per annum without
     reference to the Eurocurrency Rate, (D) the maturity date for repayment of
     each Uncommitted Advance to be made as part of such Uncommitted Borrowing
     (which maturity date may not be earlier than one (1) day, or later than 270
     days after the date of the proposed Uncommitted Borrowing or later than the
     Termination Date in the case of a Fixed Rate Uncommitted Borrowing, and
     which shall be one, two, three or six months, subject to the limitations
     set forth in the definition of "Interest Period" in the case of a
     Eurocurrency Rate Uncommitted Borrowing) and whether such Uncommitted
     Advance may be prepaid, and if so, whether with or without penalty, (E) the
     interest payment date or dates relating thereto, (F) the Borrower and (G)
     other material terms to be applicable to such Uncommitted Borrowing. The
     Administrative Agent shall promptly notify each Bank of its receipt of each
     such Notice of Uncommitted Borrowing by sending each Bank a copy thereof.
     "Request Deadline" means (x) in the case of a Fixed Rate Uncommitted
     Borrowing, 4:00 P.M. (Chicago time) on the Business Day prior to the date
     of such proposed Uncommitted Borrowing and (y) in the case of a
     Eurocurrency Rate Uncommitted Borrowing, 4:00 P.M. (Chicago time) four (4)
     Business Days prior to the date of such proposed Uncommitted Borrowing.

               (ii) Each Bank shall, if, in its sole discretion, it elects to do
     so, irrevocably offer to make one or more Uncommitted Advances to such
     Borrower as part of such proposed Uncommitted Borrowing at a rate or rates
     of interest specified by such Bank, in its sole discretion, by notifying
     the Administrative Agent not later than the applicable Quote Deadline of
     the minimum amount (if any) and maximum amount of each Uncommitted Advance
     which such Bank would be willing to make as part of such proposed
     Uncommitted Borrowing (which amounts may, subject to the proviso to the
     first sentence of this Section 2.03(a), exceed such Bank's Commitment, if
     any), the Uncommitted Borrowing Margin or Margins to be applied in the
     determination of the rate or rates of interest therefor (or, if the Notice
     of Uncommitted Borrowing shall have requested that fixed rates per annum be
     quoted, the fixed rate or rates per annum therefor) and such Bank's
     Applicable Lending Office with respect to such Uncommitted Advance. If any
     Bank shall elect not to make such an offer, such Bank shall so notify the
     Administrative Agent before the applicable Quote Deadline, and such Bank
     shall not be obligated to, and shall not, make any Uncommitted Advance as
     part of such Uncommitted Borrowing; provided that the failure by any Bank
     to give such notice shall not cause such Bank to be obligated to make any
     Uncommitted Advance as part of such proposed Uncommitted Borrowing. The
     Administrative Agent shall promptly notify the Company and, if applicable,
     the applicable Borrowing Subsidiary of each Bank's response pursuant to
     this paragraph (ii); provided, that if Bank One shall elect to make an
     offer under this paragraph (ii), such offer shall be delivered to the
     Company and, if

                                       18



     applicable, the Borrowing Subsidiary not later than one-half hour prior to
     the applicable Quote Deadline. Each Borrower shall be entitled to assume
     that each quote of an Uncommitted Borrowing Margin or a fixed rate per
     annum by a Bank includes, and such Bank shall not be entitled to claim as
     additional interest or costs under Section 2.08 or otherwise, any costs to
     such Bank in the nature of a reserve requirement, assessment or other
     charge in connection with the Uncommitted Advance to which such quote
     relates, except that such Bank shall be entitled to claim increased costs
     and additional compensation under Section 2.12(a) and (b) and Section 2.18,
     but solely with respect to the changes described in such provisions that
     occur after the date such Uncommitted Advance is made. "Quote Deadline"
     means, (x) in the case of a Fixed Rate Uncommitted Borrowing, 9:00 A.M.
     (Chicago time) on the date of such proposed Uncommitted Borrowing and (y)
     in the case of a Eurocurrency Rate Uncommitted Borrowing, 9:00 A.M.
     (Chicago time) three Business Days prior to the date of such proposed
     Uncommitted Borrowing.

               (iii) Such Borrower, or the Company on behalf of such Borrower,
     shall, in turn, before the applicable Acceptance Deadline, either

               (A)   cancel, without incurring an obligation on the part of such
          Borrower or the Company to indemnify for losses, costs or expenses
          under Section 2.02(d), such Uncommitted Borrowing by giving the
          Administrative Agent notice to that effect, in which case such
          Uncommitted Borrowing shall not be made, or

               (B)   accept one or more of the offers made by any Bank or Banks
          pursuant to paragraph (ii) above, in its sole discretion but in any
          event in ascending order of the fixed rates of interest or Uncommitted
          Borrowing Margins (as applicable) offered by all of the Banks
          responding to such Notice of Uncommitted Borrowing, by giving notice
          to the Administrative Agent of the relevant Banks and the respective
          amounts of each Uncommitted Advance (each of which amounts shall be
          equal to or greater than the minimum amount, and equal to or less than
          the maximum amount, offered to be made by the respective Bank for such
          Uncommitted Advance pursuant to Section 2.02(a)(ii) above) and reject
          any remaining offers made by Banks pursuant to such Section by giving
          the Administrative Agent notice to that effect. The Company (either
          for itself or on behalf of a Borrowing Subsidiary) may not accept
          offers which, in the aggregate, exceed the requested Uncommitted
          Borrowing specified in the applicable Notice of Uncommitted Borrowing.
          If two or more Banks bid at the same Uncommitted Borrowing Margin or
          fixed rate of interest, as the case may be, and the amount of accepted
          offers is less than the aggregate amount of such offers, the amount to
          be borrowed from such Banks as part of such Uncommitted Borrowing
          shall be allocated pro rata on the basis of the maximum amount offered
          by each such Bank at such fixed rates or Uncommitted Borrowing Margins
          in connection with such Uncommitted Borrowing.

The Administrative Agent shall promptly notify the Banks of each notice it
receives pursuant to this paragraph (iii). "Acceptance Deadline" means, (x) in
the case of a Fixed Rate Uncommitted

                                       19



Borrowing, 10:00 A.M. (Chicago time) on the date of such proposed Uncommitted
Borrowing and (y) in the case of a Eurocurrency Rate Uncommitted Borrowing, 4:00
P.M. (Chicago time) three Business Days prior to the date of such proposed
Uncommitted Borrowing.

          (iv) If such Borrower accepts, or the Company accepts on such
     Borrower's behalf, one or more of the offers made by any Bank or Banks
     pursuant to Section 2.03(a)(iii)(B) above, the Administrative Agent shall
     in turn promptly notify (A) each Bank that has made an offer pursuant to
     Section 2.03(a)(ii) of the date and aggregate amount of such Uncommitted
     Borrowing and whether or not any offer or offers so made by such Bank have
     been accepted by such Borrower, (B) each Bank that is to make an
     Uncommitted Advance as a part of such Uncommitted Borrowing, of the amount
     of each Uncommitted Advance to be made by such Bank as part of such
     Uncommitted Borrowing, and (C) each Bank that is to make an Uncommitted
     Advance as part of such Uncommitted Borrowing, upon receipt, that the
     Administrative Agent has received forms of documents appearing to fulfill
     the applicable conditions set forth in Article III. Each Bank that is to
     make an Uncommitted Advance as part of such Uncommitted Borrowing shall,
     before 1:00 P.M. (Chicago time) on the date of such Uncommitted Borrowing
     specified in the notice received from the Administrative Agent pursuant to
     clause (A) of the preceding sentence or any later time when such Bank shall
     have received notice from the Administrative Agent pursuant to subclause
     (C) of the preceding sentence, make available to the Administrative Agent
     at the Administrative Agent's Domestic Lending Office, in federal or
     otherwise immediately available funds, such Bank's portion of such
     Uncommitted Borrowing. After the Administrative Agent receives such funds
     and when the applicable conditions set forth in Article III have been
     fulfilled, the Administrative Agent will make such funds available to the
     applicable Borrower at the Administrative Agent's aforesaid address.
     Promptly after (x) each Uncommitted Borrowing, the Administrative Agent
     will notify each Bank of the amount and date of the Uncommitted Borrowing
     and the maturity date thereof and the Available Commitment of each Bank
     after giving effect to such Uncommitted Borrowing and (y) the prepayment of
     any Uncommitted Borrowing by or on behalf of such Borrower, the
     Administrative Agent will notify each Bank of the amount and date of each
     such prepayment and the Available Commitment of each Bank after giving
     effect thereto.

          (b)  Each Uncommitted Borrowing shall be in an aggregate amount of not
less than $25,000,000 or an integral multiple of $1,000,000 in excess thereof,
or if the requested currency for such Advance is not Dollars, the equivalent of
such amount (determined in accordance with Section 2.16) or multiple in the
requested Alternative Currency.

          (c)  Within the limits and on the conditions set forth in this Section
2.03, each Borrower may from time to time borrow under this Section 2.03, repay
pursuant to subsection (d) below, and reborrow under this Section 2.03; provided
that an Uncommitted Borrowing shall not be made within three Business Days of
any other Uncommitted Borrowing.

          (d)  Each Borrower shall repay to the Administrative Agent, for the
account of each Bank which has made an Uncommitted Advance to such Borrower, on
the maturity date of each such Uncommitted Advance (such maturity date being
that specified for repayment of such Uncommitted Advance in the related Notice
of Uncommitted Borrowing delivered pursuant to

                                       20



Section 2.03(a)(i) above) the then unpaid principal amount of such
Uncommitted Advance. A Borrower shall not have the right to prepay any principal
amount of any Uncommitted Advance without the consent of the Bank making such
Advance.

          (e) Each Borrower shall pay interest on the unpaid principal amount of
each Uncommitted Advance made to it, from the date of such Uncommitted Advance
to the date the principal amount of such Uncommitted Advance is repaid in full,
at the rate of interest for such Uncommitted Advance specified by the Bank
making such Uncommitted Advance in its notice with respect thereto delivered
pursuant to Section 2.03(a)(ii) above, payable on the interest payment date or
dates specified for such Uncommitted Advance in the related Notice of
Uncommitted Borrowing delivered pursuant to Section 2.03(a)(i) above.

          (f) The Borrower of any Uncommitted Advance shall, promptly upon
request by the Bank making such Uncommitted Advance (either in the quote
delivered by such Bank pursuant to Section 2.03(a)(ii) or by notice to the
Administrative Agent), execute and deliver to the Administrative Agent an
Uncommitted Note payable to the order of such Bank in a principal amount equal
to the principal amount of such Uncommitted Advance and otherwise on such terms
as were agreed to for such Uncommitted Advance in accordance with Section 2.03.

     SECTION 2.04 Facility Fee and Utilization Fee. (a) The Company and each
Borrowing Subsidiary jointly and severally agree to pay to the Administrative
Agent, for the account of each Bank, a facility fee ("Facility Fee") on the
average daily Commitment of such Bank from the date hereof until the Termination
Date (or, if the Company has made the Term Loan Election, until the Maturity
Date), payable in arrears on the first Business Day of each January, April, July
and October during the term of such Bank's Commitment, commencing January 2,
2004, and on the Termination Date (or, if the Company has made the Term Loan
Election, on the Maturity Date), at the Applicable Facility Fee Rate; provided,
that if any Bank continues to have Advances outstanding hereunder after the
termination of its Commitment (including, without limitation, during any period
when Advances may be outstanding but new Advances may not be borrowed
hereunder), then such Facility Fee shall continue to accrue on the aggregate
principal amount of the Advances owed to such Bank until such Advances are
repaid in full.

          (b) To the extent, and for so long as, the average daily aggregate
outstanding principal amount of Advances in any calendar quarter exceeds
one-half of the average daily aggregate outstanding Commitments during such
calendar quarter, the Company and each Borrowing Subsidiary, jointly and
severally, agree to pay to each Bank a utilization fee (the "Utilization Fee")
equal to the Applicable Utilization Fee Rate times the aggregate principal
amount of such Bank's average daily outstanding Advances during such calendar
quarter. The Utilization Fee shall be payable on each date the Facility Fee is
payable.

          (c) Notwithstanding the foregoing, (i) any Facility Fee or Utilization
Fee accrued with respect to any Commitment of a Defaulting Bank during the
period prior to the time such Bank became a Defaulting Bank and unpaid at such
time shall not be payable by the Borrowers so long as such Bank shall be a
Defaulting Bank, except to the extent such Facility Fee or Utilization Fee was
due and payable prior to such time, and (ii) no Facility Fee or

                                       21



Utilization Fee shall accrue on the Commitment of a Defaulting Bank so long as
such Bank is a Defaulting Bank.

     SECTION 2.05 Reduction and Termination of the Commitments. (a) The Company
shall have the right, upon at least four (4) Business Days' notice to the
Administrative Agent to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Banks, provided that the aggregate
amount of the Commitments of the Banks shall not be reduced to an amount which
is less than the aggregate principal amount of the Uncommitted Advances then
outstanding and provided, further, that each partial reduction shall be in an
aggregate amount of $10,000,000 or any integral multiple of $1,000,000 in excess
thereof.

          (b) Provided that no Event of Default shall have occurred and be
continuing, the Company may at any time replace any Bank, in whole but not in
part, by (i) giving such Bank and the Administrative Agent not less than ten
(10) Business Days' prior notice thereof, which notice shall be irrevocable and
effective only when received by such Bank and the Administrative Agent and shall
specify the effective date of such replacement, and (ii) effecting an assignment
of all of the Bank's Commitment and Advances in accordance with Section 9.03.

          (c) On the Termination Date, if the Company has made the Term Loan
Election in accordance with Section 2.06(a) prior to such date, and from time to
time thereafter upon each prepayment of the Advances, the aggregate Commitments
of the Banks shall be automatically and permanently reduced on a pro rata basis
by an amount equal to the amount by which (i) the aggregate Commitments
immediately prior to such reduction exceeds (ii) the aggregate unpaid principal
amount of all Advances (determined in the case of any Advances denominated in an
Alternative Currency by reference to the Dollar Amount) outstanding at such
time.

     SECTION 2.06 Payment; Conversion and Continuation. (a) On the Termination
Date, the Borrowers shall, subject to the next succeeding sentence, repay to the
Administrative Agent for the account of the Banks, the entire unpaid principal
amount of the Advances made by each Bank. The Company may, upon not less than 15
days' notice to the Administrative Agent, elect (the "Term Loan Election") to
convert all of the Committed Advances outstanding on the Termination Date in
effect at such time into a term loan which the Borrowers shall repay in full,
together with all accrued interest, ratably to the Banks on the Maturity Date,
with any prepayment thereof subject to Section 2.11; provided that the Term Loan
Election may not be exercised if an event shall have occurred and be continuing
which constitutes an Event of Default or which would constitute an Event of
Default but for the requirement that notice be given or time elapse or both on
the date of notice of the Term Loan Election or on the date on which the Term
Loan Election is to be effected. All Advances converted to a term loan pursuant
to this Section 2.06(a) shall continue to constitute Advances except that the
Borrowers may not reborrow pursuant to Section 2.01 after all or any portion of
the Advances have been prepaid pursuant to Section 2.10.

          (b) Any Borrower may elect (x) to convert Base Rate Advances or any
portion thereof to Eurocurrency Rate Advances, (y) to convert Eurocurrency Rate
Advances or

                                       22



any portion thereof for an additional Interest Period; provided, however, that
the aggregate amount of Base Rate Advances being converted into Eurocurrency
Rate Advances or of Eurocurrency Rate Advances being continued shall, in the
aggregate, equal $20,000,000 or an integral multiple of $1,000,000 in excess
thereof. The applicable Interest Period for the continuation of any Eurocurrency
Rate Advance shall commence on the day on which the immediately-preceding
Interest Period expires. Each conversion or continuation shall be allocated
among the Committed Advances of each Bank (other than Banks which had not made
the Advance so converted or continued) in accordance with its Pro Rata Share of
the amount so converted or continued. Each such election shall be in
substantially the form of Exhibit E (a "Notice of Conversion or Continuation")
and shall be made by giving the Administrative Agent notice by 10:00 a.m.
(Chicago time) on the date of such conversion or continuation, in the case of a
conversion to a Base Rate Advance, giving the Administrative Agent at least
three Business Days' prior written notice thereof in the event of a conversion
to or continuation of a Eurocurrency Advance specifying, in each case (i)
whether a conversion or continuation is to take place, (ii) what Advances are to
be converted or continued, and if converted, the Type of Advance to which it is
to be converted, (iii) the amount of the conversion or continuation, (iv) the
Interest Period therefor and (v) in the case of a conversion, the date of
conversion (which date shall be a Business Day). The Administrative Agent shall
promptly notify each Bank of its receipt of a Notice of Conversion or
Continuation by sending such Bank a copy thereof. If, within the time period
required under the terms of this Section 2.06(b), the Administrative Agent does
not receive a Notice of Conversion or Continuation from the applicable Borrower
containing an election to continue or convert any Advances for an additional
Interest Period, then, upon the expiration of the Interest Period therefor, such
Advances will be automatically converted to Base Rate Advances.

     SECTION 2.07 Interest on Committed Advances. Each Borrower shall pay
interest on the unpaid principal amount of each Committed Advance made by each
Bank to it from the date of such Committed Advance until such principal amount
shall be paid in full, at the following rates per annum:

          (a) Base Rate Advances. During such period as such Committed Advance
is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in
effect from time to time, payable quarterly in arrears on the first Business Day
of each January, April, July and October, commencing January 2, 2004, and on the
Termination Date (or, if the Company has made the Term Loan Election, on the
Maturity Date). The Administrative Agent shall give notice to the Company and
the applicable Borrower (if other than the Company) and each Bank of any change
in the Base Rate promptly after such change occurs, but the Administrative
Agent's failure to give such notice shall not affect the obligation of the
Company or such Borrower to pay interest at such rate when it becomes due and
payable.

          (b) Eurocurrency Rate Advances. During such period as such Committed
Advance is a Eurocurrency Rate Advance, a rate per annum equal at all times
during each Interest Period for such Committed Advance to the sum of the
Eurocurrency Rate for such Interest Period plus the Applicable Margin, payable
on the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day which occurs during such
Interest Period every three months from the first day of such Interest Period
and on the date such Eurocurrency Rate Advance shall be converted or paid in
full.

                                       23



          (c) Default Interest. Notwithstanding the foregoing provisions of this
Section 2.07, any amount of principal and fees and, to the extent permitted by
law, interest, that is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the date on which such
amount is due until such amount is paid in full, payable in arrears on the date
such amount shall be paid in full and on demand, at a rate per annum equal at
all times to 2% per annum above (i) in the case of principal, the rate of
interest otherwise applicable thereto from time to time in accordance with the
terms hereof, and (ii) in the case of interest and fees, the Base Rate in effect
from time to time.

     SECTION 2.08 Additional Interest on Eurocurrency Rate Advances. Each
Borrower shall pay to each Bank, so long as and to the extent such Bank shall be
required under regulations of the Board of Governors of the Federal Reserve
System (or any similar authority outside the United States, in the case of
Committed Advances in Alternative Currencies) to maintain reserves with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities (or
any other category of liabilities that includes deposits by reference to which
the interest rate on Eurocurrency Rate Advances in the applicable Alternative
Currency is determined) and such Bank's performance under this Agreement (and
other like agreements) shall have given rise to additional reserve requirements
for such Bank thereunder, additional interest on the unpaid principal amount of
each Committed Advance constituting a Eurocurrency Rate Advance of such Bank
made to such Borrower, from the date of such Committed Advance until such
principal amount is paid in full, at an interest rate per annum equal at all
times to the remainder obtained by subtracting (i) the Eurocurrency Rate for the
applicable Interest Period for such Committed Advance from (ii) the rate
obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus
the Eurocurrency Rate Reserve Percentage of such Bank for such Interest Period,
payable on each date on which interest is payable on such Committed Advance.
Such Bank shall, not later than the last day of the applicable Interest Period,
provide notice to the Administrative Agent, the Company and, if other than the
Company, the applicable Borrower of any such additional interest arising in
connection with such Committed Advance. Such additional interest so notified on
a timely basis by any Bank shall be payable to the Administrative Agent for the
account of such Bank on the dates specified for payment of interest for such
Committed Advance in Section 2.07.

SECTION 2.09      Interest Rate Determination.

          (a) The Administrative Agent shall give prompt notice to the Company
and the applicable Borrower (if other than the Company) and each of the Banks of
the applicable interest rate determined by the Administrative Agent for purposes
of Section 2.07(a) or (b).

          (b) On the date on which the aggregate unpaid principal amount of
Eurocurrency Rate Advances comprising any Committed Borrowing shall be reduced,
by payment, prepayment or otherwise, to less than $20,000,000, such Advances
shall automatically convert into Base Rate Advances and such conversion shall be
subject to Section 2.11.

     SECTION 2.10 Prepayments. A Borrower may prepay, on any Business Day
following notice by 11:00 a.m. (Chicago time) on such Business Day to the
Administrative Agent (in the case of Base Rate Advances) and on three Business
Days' prior notice to the Administrative Agent (in the case of Eurocurrency Rate
Advances), each Committed Borrowing

                                       24



made to such Borrower, in whole or in part. Such notice shall include the
proposed date and aggregate principal amount of such prepayment, and if such
notice is given, such Borrower shall prepay such principal amount, together with
accrued interest to the date of such prepayment on the principal amount prepaid.
Any amounts payable, if any, pursuant to Section 2.11 hereof in connection with
any prepayment shall be paid on the date of such prepayment; provided, however,
that each partial prepayment shall be in an aggregate principal amount of not
less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
Subject to Sections 2.12 and 2.13, each prepayment of a Committed Borrowing
shall be made to each Bank in accordance with such Bank's Pro Rata Share thereof
(other than any Banks which did not make such Committed Borrowing). The Company
shall, on the first Business Day of each January, April, July and October, if
the aggregate outstanding principal Dollar Amount of all Advances, calculated by
the Administrative Agent on the seventh Business Day prior to such payment date
and reported to the Company by the fifth Business Day prior to such payment
date, exceeds (as the result of fluctuations in applicable foreign exchange
rates or otherwise) 105% of the then aggregate amount of the Banks' Commitments
(calculated as aforesaid), prepay a Committed Borrowing or Borrowings (in whole
or in part, and in any case as selected by the Company) in an aggregate Dollar
Amount (calculated as aforesaid, and rounded upward, if necessary, to the
nearest $1,000,000) equal to the excess of:

          (i) the aggregate principal Dollar Amount (calculated as aforesaid) of
     Advances outstanding, over

          (ii) the then aggregate amount of the Banks' Commitments (calculated
     as aforesaid).

Each prepayment of any Committed Borrowing (in whole or in part) made pursuant
to this Section 2.10 shall be without premium or penalty, but shall be subject
to the provisions of Section 2.11. Any mandatory prepayment of a Committed
Borrowing shall be made to the Administrative Agent for the account of each Bank
based on such Bank's Pro Rata Share of such Committed Borrowing and shall
include accrued and unpaid interest on the principal amount prepaid and all
amounts owing under Section 2.11.

     SECTION 2.11 Funding Indemnification. If any payment of principal of any
Advance (other than a Base Rate Advance) is made other than on the last day of
an Interest Period for such Advance, as a result of acceleration of the maturity
of the Advances pursuant to Section 6.01 or for any other reason, or if any
Eurocurrency Rate Advance is converted to a Base Rate Advance pursuant to
Section 2.13(b) on any day other than the last day of an Interest Period for
such Eurocurrency Rate Advance, the applicable Borrower shall, upon demand by
any Bank (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank any amounts required to
compensate such Bank for any additional losses, costs or expenses which it may
reasonably incur as a result of such payment or conversion, including without
limitation any loss (excluding loss of anticipated profits), cost or expense
reasonably incurred as a result of the liquidation or re-employment of deposits
or other funds acquired by such Bank to fund or maintain such Advance.

     SECTION 2.12 Increased Costs and Reduced Return. (a) Subject to the
limitation in Section 2.03(a)(ii), if, due to either (i) the introduction of or
any change (other than any

                                       25



change by way of imposition or increase of reserve requirements, in the case of
Eurocurrency Rate Advances, included in the Eurocurrency Rate Reserve
Percentage), after the date hereof, in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
issued after the date hereof, there shall be any increase in the cost to any
Bank of agreeing to make, making, funding or maintaining Eurocurrency Rate
Advances (including, without limitation, any conversion of any Advance
denominated in an Alternative Currency other than the Euro into an Advance
denominated in Euro), by an amount reasonably deemed by such Bank to be
material, then from time to time, within ten days after demand by such Bank
(with a copy of such demand to the Administrative Agent), such Borrower shall
pay to the Administrative Agent for the account of such Bank additional amounts
sufficient to compensate such Bank for such increased cost; provided that no
Borrower shall be obligated to pay any such amount to the extent such amount
results from a change, guideline or request which took effect more than 90 days
prior to the date of such demand.

          (b) Subject to the limitation in Section 2.03(a)(ii), if any Bank
shall have determined that the adoption, after the date hereof, of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive issued after the date
hereof regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's capital as a consequence of
its obligations hereunder to a level below that which such Bank could have
achieved but for such adoption, change or compliance by an amount reasonably
deemed by such Bank to be material, then from time to time, within ten days
after demand by such Bank (with a copy of such demand to the Administrative
Agent), the Company shall pay to the Administrative Agent for the account of
such Bank such additional amount or amounts as will compensate such Bank, in
light of such circumstances, to the extent such Bank reasonably determines such
reduction to be allocable to the existence of such Bank's Commitment; provided
that no Borrower shall be obligated to pay any such amount to the extent such
amount results from an adoption, change, request or directive which took effect
or was issued more than 90 days prior to the date of such demand.

          (c) Each Bank will promptly notify the Administrative Agent and the
Company of any event of which it has knowledge, occurring after the date hereof,
which would entitle such Bank to compensation pursuant to this Section 2.12. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall create a
rebuttable presumption as to the correctness of such additional amount or
amounts. Each Bank agrees not to request any payment under this Section 2.12
unless similar requests are then generally being made by such Bank of other
borrowers similarly situated, and to use a reasonable basis for calculating
amounts allocable to its Commitment hereunder.

     SECTION 2.13 Illegality. (a) If any Bank shall determine (which
determination shall be rebuttably presumed correct as to all parties) at any
time that the making or continuance of its Eurocurrency Rate Advances has become
unlawful because of the introduction of or any

                                       26



change in or in the interpretation of any law or regulation or because of the
assertion of unlawfulness by any central bank or other governmental authority,
then, in any such event, such Bank shall give prompt notice (by telephone
confirmed in writing) to the Administrative Agent of such determination (which
notice the Administrative Agent shall promptly transmit to each Borrower and the
other Banks).

          (b) Upon the giving of the notice to the Company referred to in
subsection (a) above, if the affected Advances are then outstanding, each
Borrower shall, upon at least one Business Day's written notice to the
Administrative Agent and the affected Bank, or if permitted by applicable law no
later than the date permitted thereby, in such Borrower's sole discretion,
either (i) prepay the principal amount of all outstanding Advances of such Bank
to which such notice relates, together with accrued interest thereon to the date
of payment, or (ii) convert each such Advance into a Base Rate Advance
denominated in Dollars and, in each case, be obligated to reimburse the Banks in
respect thereof pursuant to Section 2.11 hereof. If more than one Bank gives
notice pursuant to Section 2.13(a) at any time, then all outstanding Advances of
the affected Type or currency of such Banks must be treated in the same manner
by the Borrowers pursuant to this subsection 2.13(b) and the Banks' obligations
to make, convert or continue Eurocurrency Rate Advances shall be suspended until
the Administrative Agent notifies the Borrowers that the circumstances causing
such suspension no longer exist.

     SECTION 2.14 Payments and Computations. (a) The Company and each Borrowing
Subsidiary shall make each payment hereunder and under the Notes without
set-off, counterclaim or other deduction by causing a wire transfer of
immediately-available funds to be initiated to the Administrative Agent in an
amount equal to such payment not later than 12:00 noon (Chicago time) on the day
when due from the Company or such Borrowing Subsidiary. The Administrative Agent
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest or fees ratably (other than amounts payable
pursuant to Sections 2.03, 2.05(b), 2.08, 2.11, 2.12, 2.15, 2.18 or 2.19) to the
Banks for the account of their respective Applicable Lending Offices, and like
funds relating to the payment of any other amount payable to any Bank to such
Bank for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. All such payments shall
be made in Dollars, except that payments of principal of and interest on
Borrowings in an Alternative Currency shall be made in such Alternative Currency
or, where such Alternative Currency has converted to the Euro, in the Euro;
provided that if the applicable Borrower fails to make any payment of principal
or interest with respect to any Borrowing in an Alternative Currency (including
the Euro) on the due date thereof because such Alternative Currency has ceased
to be freely transferable and convertible into Dollars in the international
currency and exchange markets, such failure shall not constitute an Event of
Default or an event which would constitute an Event of Default but for the
requirement that notice be given or time elapse or both, if such Borrower pays
the equivalent in Dollars of such payment on the due date thereof. In addition
to any such Dollar payment, such Borrower agrees to pay to each affected Bank an
indemnity payment within five Business Days after such Borrower shall have
received a certificate from such Bank setting forth in reasonable detail the
amount of any loss, cost, damage or expense suffered by such Bank as a
consequence of such inability to make any such payment in such Alternative
Currency on the due date thereof. Each Bank agrees to use reasonable efforts to
avoid or minimize all such loss, cost, damage or expense.

                                       27



          (b) All computations of interest based on the Base Rate, or the
Eurocurrency Rate applicable to Borrowings denominated in Sterling, shall be
made by the Administrative Agent on the basis of a year of 365 or 366 days, as
the case may be, and all computations of interest based on the Eurocurrency Rate
(as to all other currencies) or the Federal Funds Rate, all computations of
interest pursuant to Section 2.08 and all computations of the Facility Fee and
the Utilization Fee shall be made by the Administrative Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Administrative Agent
(or, in the case of Section 2.08, by a Bank) of an interest rate or fee owing
hereunder shall create a rebuttable presumption as to the correctness of such
determination.

          (c) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be;
provided, however, if such extension would cause payment of interest on or
principal of Eurocurrency Rate Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.

          (d) Unless the Administrative Agent shall have received notice from
the applicable Borrower prior to the date on which any payment is due to the
Banks hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent such
Borrower shall not have so made such payment in full to the Administrative
Agent, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds Rate.

     SECTION 2.15 Sharing of Payments, Etc. If any Bank shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Committed Advances made by it (other than
pursuant to Sections 2.08, 2.11, 2.12, 2.13(b), 2.18 or 2.19) in excess of its
ratable share of payments on account of the Committed Advances obtained by all
the Banks, such Bank shall forthwith purchase from the other Banks such
participations in the Committed Advances made by them as shall be necessary to
cause such purchasing Bank to share the excess payment ratably with each of
them, provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase from each Bank
shall be rescinded and such Bank shall repay to the purchasing Bank the purchase
price to the extent of such recovery together with an amount equal to such
Bank's ratable share (according to the proportion of (i) the amount of such
Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. Each Borrower
agrees that any Bank so purchasing a participation from another Bank with
respect to Advances made to such Borrower pursuant to this Section 2.15 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with

                                       28



respect to such participation as fully as if such Bank were the direct creditor
of such Borrower in the amount of such participation.

     SECTION 2.16 Currency Equivalents. (a) For purposes of this Article II, (i)
the equivalent in Dollars of any Alternative Currency shall be determined by
using the arithmetical mean of the buy and sell spot rates at which Bank One's
principal office in London exchanges Dollars for such Alternative Currency in
the interbank market in London at 11:00 A.M. (London time) two Business Days
prior to the date on which such equivalent is to be determined, (ii) the
equivalent in any Alternative Currency of any other Alternative Currency shall
be determined by using the arithmetical mean of the buy and sell spot rates at
which Bank One's principal office in London exchanges such Alternative Currency
for the equivalent in such other Alternative Currency in London at 11:00 A.M.
(London time) two Business Days prior to the date on which such equivalent is to
be determined, and (iii) the equivalent in any Alternative Currency of Dollars
shall be determined by using the arithmetical mean of the buy and sell spot
rates at which Bank One's principal office in London exchanges such Alternative
Currency for Dollars in London at 11:00 A.M. (London time) two Business Days
prior to the date on which such equivalent is to be determined. The equivalent
in Dollars of each Eurocurrency Rate Advance made in an Alternative Currency
shall be recalculated hereunder on each day that it is necessary to determine
the unused portion of each Bank's Commitment, or any or all of the Advances on
such date.

          (b) If for the purpose of obtaining a judgment in any court with
respect to any obligation of a Borrower hereunder, it shall become necessary for
the Administrative Agent or any Bank entitled to receive payments hereunder to
convert any amount into a currency other than the currency denominated hereunder
for such obligation, then such conversion shall be made on the basis of rates
(the "Exchange Rates") determined in the manner described in subsection (a)
above (or, if the applicable currency to be converted is not at the time of
conversion available in the interbank market in London, then in such other
interbank market as the Administrative Agent shall determine to have adequate
availability of such currency) and the date with respect to which such an
equivalent is to be determined shall be the first Business Day preceding the
date on which final judgment is entered. If pursuant to any such judgment
conversion is to be made with respect to a date other than the date referred to
above, and there shall occur a change between the Exchange Rates in effect on
such date and the Exchange Rates in effect on the date of payment, (i) the
applicable Borrower agrees to pay such additional amounts (if any) as may be
necessary to ensure that the amount paid is the amount in such other currency
which, when converted at the Exchange Rates as in effect on the date of payment
or distribution, is the amount then due hereunder in the relevant currency and
(ii) such Borrower shall not be required to pay any amount in excess of the
amount determined to be payable in connection with such obligation, calculated
on the basis of the Exchange Rates in effect on the first Business Day preceding
the date on which final judgment is entered. Any amount due from a Borrower
under this subsection (b) shall be due as a separate debt and is not to be
affected by or merged into any judgment being obtained for any other sums due
hereunder.

     SECTION 2.17 Borrowing Subsidiaries. The Company may at any time or from
time to time add as a party to this Agreement any Subsidiary of the Company to
be a "Borrowing Subsidiary" hereunder by causing such Subsidiary to execute and
deliver a duly completed Assumption Letter to the Administrative Agent, with the
written consent of the Company at the

                                       29



foot thereof. Upon such execution, delivery and consent such Subsidiary shall
for all purposes be a party hereto as a Borrowing Subsidiary as fully as if it
had executed and delivered this Agreement. So long as the principal of and
interest on all Advances made to any Borrowing Subsidiary under this Agreement
shall have been paid in full and all other obligations of such Borrowing
Subsidiary shall have been fully performed, such Borrowing Subsidiary may, by
not less than five Business Days' prior notice to the Administrative Agent
(which shall promptly notify the Banks thereof), terminate its status as a
"Borrowing Subsidiary."

     SECTION 2.18 Taxes. (a) Any and all payments by a Borrower hereunder or
under the Notes shall be made in accordance with Section 2.14, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Administrative Agent, taxes imposed
on its income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Bank or the Administrative Agent is organized or any
political subdivision thereof and taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Bank or the Administrative Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.18) such Bank or the Administrative Agent (as the case may be) receives an
amount equal to the sum it would have received had no deductions been made, (ii)
such Borrower shall make such deductions and (iii) such Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and provide such Bank with originals or certified
copies of the tax receipts or other evidence of such payment reasonably
acceptable to such Bank.

          (b) In addition, each Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement (hereinafter referred to as "Other Taxes").

          (c) Each Borrower will indemnify each Bank and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.18) paid by such Bank or the Administrative Agent
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted; provided, that the Borrowers shall have no obligation under
this subsection (c) to indemnify any Bank or the Administrative Agent if a
Borrower shall have performed its obligations under subsection (a) and (b),
thereby providing such Bank or the Administrative Agent (as the case may be) the
wherewithal to make payment, or demonstrate that payment has been made, of any
such Taxes or Other Taxes, and such Bank or the Administrative Agent (as the
case may be) shall not have effected such payment or made such demonstration of
payment on a timely basis to the relevant taxing authorities. This
indemnification shall be made to the Administrative Agent for the account of
such Bank or the

                                       30



Administrative Agent (as the case may be) within 30 days from the date such Bank
or the Administrative Agent makes written demand therefor (with a copy, in the
case of a demand by a Bank, of such demand to the Administrative Agent).

          (d)  Notwithstanding the foregoing, unless, prior to the date of the
initial Committed Borrowing (in the case of a Bank listed on Schedule I hereto),
and prior to the effective date of the assignment agreement by which it became a
Bank (in the case of a Bank that became a Bank pursuant to such assignment
agreement), and in respect of borrowings by a Borrowing Subsidiary organized
under the laws of a jurisdiction outside the United States, prior to the date on
which such Borrowing Subsidiary became a Borrower pursuant to Section 2.17, and
in each case from time to time thereafter, if requested by any Borrower,

               (i)  each Bank organized under the laws of a jurisdiction outside
     the United States shall have provided the Company with the forms prescribed
     by the Internal Revenue Service of the United States certifying as to such
     Bank's status for purposes of determining exemption from United States
     withholding taxes with respect to all payments to be made to such Bank
     hereunder or other documents satisfactory to the Company which shall
     indicate that all payments to be made to such Bank hereunder are not
     subject to United States withholding tax or are subject to such taxes at a
     rate reduced to zero by an applicable tax treaty, neither the Company nor
     any other Borrower shall have any obligation under the last sentence of
     Section 2.18(a) to make any payments to or for the benefit of such Bank in
     excess of the amounts otherwise payable under this Agreement, and

               (ii) each Bank organized under the laws of a jurisdiction outside
     the jurisdiction where any Borrowing Subsidiary is incorporated shall have
     taken all reasonably available steps prescribed by the applicable
     governmental authority in the jurisdiction where such Borrowing Subsidiary
     is located so that such Bank is exempt from applicable withholding taxes
     with respect to all payments to be made to such Bank hereunder or so that
     all payments to be made to such Bank hereunder are not subject to
     applicable withholding taxes or are subject to such taxes at a rate reduced
     to zero by an applicable tax treaty, neither the Company nor any other
     Borrower shall have any obligation under the last sentence of Section
     2.18(a) to make any payments to or for the benefit of such Bank in excess
     of the amounts otherwise payable under this Agreement; provided, however,
     that the applicable Borrower shall make the payments required by the last
     sentence of Section 2.18(a) if the obligation to withhold arises from a
     change in applicable law after the date hereof (or, with respect to
     payments to a new Applicable Lending Office designated pursuant to Section
     2.20, after the date such Bank designates such new Applicable Lending
     Office).

Unless the applicable Borrower has received forms or other documents, including
Form W-8ECI, Form W-8BEN or any other applicable tax forms from the United
States or any other applicable jurisdiction, such forms to be satisfactory to
the Company, indicating that payments hereunder are not subject to any
withholding tax or are subject to such tax at a rate reduced to zero by an
applicable tax treaty, the applicable Borrower shall withhold taxes from such
payments at the applicable statutory rate in the case of payments to or for any
Bank organized under the laws of a jurisdiction outside the United States (or in
the case of a Borrowing Subsidiary incorporated

                                       31



outside the United States, any Bank organized under the laws outside of the
jurisdiction where such Borrowing Subsidiary is incorporated). Should a Bank
become subject to Taxes because of its failure or inability to deliver a form
required hereunder, the Company shall take such steps not requiring the
expenditure of money as the Bank shall reasonably request to assist the Bank to
recover such Taxes.

     SECTION 2.19 Defaulting Banks. (a) If at any time (i) any Bank shall be a
Defaulting Bank, (ii) such Defaulting Bank shall owe a Defaulted Advance to the
Borrower and (iii) the Borrower shall be required to make any payment hereunder
or under any Note to or for the account of such Defaulting Bank, then the
Borrower may, so long as no Event of Default shall have occurred and be
continuing at such time and to the fullest extent permitted by applicable law,
set off and otherwise apply the amount owed by the Borrower to or for the
account of such Defaulting Bank against the obligation of such Defaulting Bank
to make such Defaulted Advance. If the Borrower shall so set off and otherwise
apply the amount owed by the Borrower to or for the account of such Defaulting
Bank against the obligation of such Defaulting Bank to make any such Defaulted
Advance on any date, the amount so set off and otherwise applied by the Borrower
shall constitute for all purposes of this Agreement and the Notes an Advance by
such Defaulting Bank made on the date of such setoff. Such Advance shall be a
Base Rate Advance and shall be considered, for all purposes of this Agreement,
to comprise part of the Borrowing in connection with which such Defaulted
Advance was originally required to have been made pursuant to Section 2.01 or
Section 2.03(a), as the case may be, even if the other Advances comprising such
Borrowing shall be Eurocurrency Rate Advances on the date such Advance is deemed
to be made pursuant to this Section 2.19(a). The Borrower shall notify the
Administrative Agent at any time the Borrower makes a setoff under this Section
2.19(a) and shall specify in such notice (A) the name of the Defaulting Bank and
the Defaulted Advance required to be made by such Defaulting Bank and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this Section 2.19(a). Any part of such payment otherwise required to
be made by the Borrower to or for the account of such Defaulting Bank that is
paid by the Borrower, after giving effect to the amount set off and otherwise
applied by the Borrower pursuant to this Section 2.19(a), shall be applied by
the Administrative Agent as specified in Section 2.19(b) or 2.19(c).

          (b) If at any time (i) any Bank shall be a Defaulting Bank, (ii) such
Defaulting Bank shall owe a Defaulted Amount to the Administrative Agent or any
of the other Banks and (iii) the Borrower shall make any payment hereunder or
under any Note to the Administrative Agent for the account of such Defaulting
Bank, then the Administrative Agent may, on its behalf or on behalf of such
other Banks and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Bank to the payment of each such Defaulted Amount to the extent required to pay
such Defaulted Amount. If the Administrative Agent shall so apply any such
amount to the payment of any such Defaulted Amount on any date, the amount so
applied by the Administrative Agent shall constitute for all purposes of this
Agreement and the Notes payment to such extent of such Defaulted Amount on such
date. Any such amount so applied by the Administrative Agent shall be retained
by the Administrative Agent or distributed by the Administrative Agent to such
other Banks, ratably in accordance with their respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent and such
other Banks and, if the amount of such payment made by the Borrower shall at any
time be insufficient to pay all Defaulted Amounts

                                       32



owing at such time to the Administrative Agent and the other Banks, in the
following order of priority:

               (A) first, to the Administrative Agent for any Defaulted Amounts
          owing to the Administrative Agent (solely in its capacity as
          Administrative Agent) at such time; and

               (B) second, to the other Banks for any Defaulted Amounts owing to
          the other Banks (solely in their capacity as Banks) at such time,
          ratably in accordance with such respective Defaulted Amounts owing to
          each other Bank (solely in its capacity as a Bank) at such time.

Any part of such payment made by the Borrower for the account of such Defaulting
Bank remaining, after giving effect to the amount applied by the Administrative
Agent pursuant to this Section 2.19(b), shall be applied by the Administrative
Agent as specified in Section 2.19(c).

          (c)  If at any time, (i) any Bank shall be a Defaulting Bank, (ii)
such Defaulting Bank shall not owe a Defaulted Advance or a Defaulted Amount and
(iii) the Borrower, the Administrative Agent or any other Bank shall be required
to pay or to distribute any amount hereunder or under any Note to or for the
account of such Defaulting Bank, then the Borrower or such other Bank shall pay
such amount to the Administrative Agent to be held by the Administrative Agent,
to the fullest extent permitted by applicable law, in escrow or the
Administrative Agent shall, to the fullest extent permitted by applicable law,
hold in escrow such amount otherwise held by it. Any funds held by the
Administrative Agent in escrow under this Section 2.19(c) shall be deposited by
the Administrative Agent in an account with Bank One, in the name and under the
control of the Administrative Agent, but subject to the provisions of this
Section 2.19(c). The terms applicable to such account, including the rate of
interest payable with respect to the credit balance of such account from time to
time, shall be Bank One's standard terms applicable to escrow accounts
maintained with it. Any interest credited to such account from time to time
shall be held by the Administrative Agent in escrow under, and applied by the
Administrative Agent from time to time in accordance with the provisions of,
this Section 2.19(c). The Administrative Agent shall, to the fullest extent
permitted by applicable law, apply all funds so held in escrow from time to time
to the extent necessary to make any Advances required to be made by such
Defaulting Bank and to pay any amount payable by such Defaulting Bank hereunder
to the Administrative Agent or any other Bank, as and when such Advances or such
amounts are required to be made or paid and, if the amount so held in escrow
shall any time be insufficient to make and pay all such Advances and all such
amounts required to be made or paid at such time, in the following order of
priority:

               (A) first, to the Administrative Agent for any amounts due and
          payable by such Defaulting Bank to the Administrative Agent hereunder
          (solely in its capacity as Administrative Agent) at such time;

               (B) second, to the other Banks for any amounts due and payable by
          such Defaulting Bank to the other Banks hereunder (solely in their
          capacity as Banks) at such time, ratably in accordance with such
          respective amounts due and payable to each other Bank (solely in its
          capacity as Bank) at such time; and

                                         33



               (C) third, to the Borrower for any Advances required to be made
          by such Defaulting Bank pursuant to the Commitment of such Defaulting
          Bank at such time.

     If such Defaulting Bank shall, at any time, cease to be a Defaulting Bank,
any funds held by the Administrative Agent in escrow at such time with respect
to such Defaulting Bank shall be distributed by the Administrative Agent to such
Defaulting Bank and applied by such Defaulting Bank to the amounts owing to such
Defaulting Bank at such time under this Agreement in accordance with the terms
of this Agreement.

          (d)  The rights and remedies against a Defaulting Bank under this
Section 2.19 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Bank with respect to any Defaulted Advance and that
the Administrative Agent or any other Bank may have against such Defaulting Bank
with respect to any Defaulted Amount.

     SECTION 2.20 Mitigation. Any Bank claiming any additional amounts payable
pursuant to Sections 2.12 or 2.18 or subject to Section 2.13 shall use its
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to change the jurisdiction of its Applicable Lending Office if the
making of such a change would avoid the need for, or reduce the amount of, any
such additional amounts which may thereafter accrue under Sections 2.12 or 2.18
or would avoid the unavailability of Eurocurrency Rate Advances under Section
2.13 and would not, in any such case, in the judgment of such Bank, be otherwise
disadvantageous to such Bank.

     SECTION 2.21 European Economic and Monetary Union. (a) Advances in the
Euro. If any Advance is capable of being made in either the Euro or in a
National Currency Unit, then such Advance shall be made in the Euro.

          (b)  Rounding and Other Consequential Changes. Without prejudice to
any method of conversion or rounding prescribed by any legislative measures of
the Council of the European Union, each reference in this Agreement to a fixed
amount or to fixed amounts in a National Currency Unit to be paid to or by the
Administrative Agent shall, notwithstanding any other provision of this
Agreement and to the extent the Euro has replaced such National Currency Unit,
be replaced by a reference to such comparable and convenient fixed amount or
fixed amounts of the Euro as the Administrative Agent may from time to time
reasonably specify.

     SECTION 2.22 Extension of Termination Date. (a) The Company may, by written
notice to the Administrative Agent (each such notice being an "Extension
Request") given no more than 59 days nor less than 30 days prior to each
anniversary date of this Agreement, extend the then applicable Termination Date
to a date 364 days after the then- applicable Termination Date; provided,
however, that such extension shall be effective only with respect to a Bank
which, by a written notice (a "Continuation Notice") to the Company and the
Administrative Agent given no more than 30 days and no less than 15 days before
such anniversary date, consents to such extension (each Bank giving a
Continuation Notice thereafter being referred to as a "Continuing Bank" and each
Bank other than a Continuing Bank being a "Non-Extending Bank"); provided
further, however, that the Borrowers shall not have made the

                                       34



Term Loan Election for Advances outstanding on such Termination Date prior to
such time; provided further, however, that such extension shall be effective
only if the aggregate Commitments of the Continuing Banks are not less than 51%
of the aggregate Commitments in effect at the date the Company gives the
applicable Extension Request. Within five Business Days after the Administrative
Agent receives an Extension Request it shall notify each Bank thereof. If any
Bank fails to notify the Administrative Agent in writing of its consent to, or
refusal of, any such Extension Request at least 15 days prior to such
anniversary date, such Bank shall be deemed to be a Non-Extending Bank with
respect to such Extension Request. The Commitment of each Non-Extending Bank
shall terminate on the Termination Date in effect for such Non-Extending Bank
immediately prior to such Extension Request, and on such Termination Date the
Company shall pay the Administrative Agent, for the account of such
Non-Extending Banks, an amount equal to such Non-Extending Banks' Advances plus
accrued but unpaid interest and fees thereon and all other amounts owed such
Bank hereunder; provided that the Company has not replaced such Non-Extending
Banks pursuant to Section 2.22(b) below.

          (b) A Non-Extending Bank shall be obligated, at the request of the
Company and subject to the Non-Extending Bank receiving payment in full of (i)
the principal amount of all Advances owing to such Non-Extending Bank, and (ii)
all accrued interest and fees owing to such Non-Extending Bank and all other
amounts owing to such Non-Extending Bank hereunder, to assign without recourse,
representation, warranty (other than good title to its Advances) or expense to
such Non-Extending Bank, at any time prior to the Termination Date applicable to
such Non-Extending Bank, all of its rights (other than rights that would survive
the termination of this Agreement pursuant to Section 10.12) and obligations
hereunder to one or more Purchasers (the "Replacement Banks") nominated by the
Company and willing to take the place of such Non-Extending Bank; provided that
each such Replacement Bank satisfies all the requirements of this Agreement and
the Administrative Agent shall have consented to such assignment, which consent
shall not be unreasonably withheld. Each such Replacement Bank shall become a
Continuing Bank hereunder in replacement for the Non-Extending Bank.

          (c) If the Termination Date shall have been extended in respect of
Continuing Banks in accordance with Section 2.22(a), any notice of borrowing
specifying a date for the borrowing of an Advance occurring after the
Termination Date applicable to a Non-Extending Bank or requesting an Interest
Period extending beyond such date shall (a) have no effect in respect of such
Non-Extending Bank and (b) not specify a requested aggregate principal amount
exceeding the Aggregate Commitment excluding the Commitments of all such
Non-Extending Banks.

          (d) If the Termination Date shall have been extended in respect of
Continuing Banks in accordance with this Section 2.22, all references herein to
the "Termination Date" shall, with respect to all parties hereto other than
Non-Extending Banks, refer to the Termination Date as so extended.

     SECTION 2.23 Increase of Aggregate Commitments. (a) The Company may from
time to time, on the terms set forth below, request that the aggregate amount of
the Commitments be increased to an amount which does not exceed $200,000,000;
provided, however, that an increase in the Commitments hereunder may only be
made at a time when (i) no Event of Default or event which, with notice or the
passage of time or both, would constitute an Event of

                                       35



Default shall have occurred and be continuing or would result therefrom and (ii)
the Public Debt Rating from S&P is at least BBB- and the Public Debt Rating from
Moody's is at least Baa3.

          (b)  If the Company requests an increase in the aggregate Commitments:

               (i)  each of the Banks shall be given the opportunity to
     participate in the increased aggregate Commitments (x) initially, ratably
     in accordance with its Pro Rata Share, and (y) next, to the extent that the
     requested increase in the aggregate Commitments is not fulfilled pursuant
     to the preceding clause (x) and subject to Section 2.23(d) below, in such
     additional amounts as any Bank and the Company agree, and

               (ii) if, after each Bank has been afforded an opportunity to
     increase its Commitment to satisfy the Company's requested increase, the
     aggregate increase in the Commitments offered by the Banks is less than the
     Company's requested increase, then the Company shall consult with the
     Administrative Agent as to the number, identity and requested Commitments
     of additional financial institutions which the Company may, with the
     written consent of the Administrative Agent (which consent shall not be
     unreasonably withheld) invite to participate in the aggregate Commitments.

          (c)  No Bank shall have any obligation to increase its Commitment
pursuant to a request by the Company hereunder. No Bank shall be deemed to have
approved an increase in its Commitment unless such approval is in writing.
Failure on the part of any Bank to respond to a request by the Company within 30
days of such Bank's receipt of notice of such request hereunder shall be deemed
a rejection of such request.

          (d)  In no event shall any Bank's Commitment, after giving effect to
an increase in its Commitment hereunder, exceed 25% of the aggregate Commitments
under this Agreement.

          (e)  If the Company and one or more of the Banks (or other financial
institutions) shall agree upon such an increase in the aggregate Commitments
hereunder (i) the Company, the Administrative Agent and each Bank or other
financial institution increasing its Commitment or extending a new Commitment
shall enter into a consent in the form of Exhibit F hereto and (ii) the Company
shall furnish new Notes to each financial institution that is extending a new
Commitment and to each Bank which is increasing its Commitment. Notwithstanding
anything else to the contrary contained in Section 2.06(b), if an increase in
the aggregate Commitments pursuant to this Section 2.23 occurs during an
Interest Period for an outstanding Committed Borrowing, (a) such Committed
Borrowing may not be continued or converted pursuant to Section 2.06(b) and (b)
such Committed Borrowing shall be due and payable at the end of the current
Interest Period applicable thereto, without prejudice to the Company's right,
subject to the terms and conditions of this Agreement, to reborrow all or any
portion of the amount of such Committed Borrowing.

                                       36



                                   ARTICLE II

                              CONDITIONS PRECEDENT

     SECTION 3.01 Conditions Precedent to Effectiveness of Sections 2.01 and
2.03. Sections 2.01 and 2.03 shall become effective on the first day (the
"Effective Date") on which all of the following conditions precedent have been
satisfied:

          (a)  The Administrative Agent shall have received the following, in
form and substance reasonably satisfactory to the Administrative Agent and
(except for the Committed Notes) in sufficient copies for the Banks:

               (i)   This Agreement, executed by the Company, the Administrative
     Agent and each of the Banks;

               (ii)  A Committed Note executed by the Company, payable to each
     Bank;

               (iii) A certificate of the Secretary of the Company certifying
     (A) copies attached thereto of the resolutions of the Board of Directors of
     the Company authorizing and empowering certain officers of the Company to
     effect such borrowings as such officers may deem necessary or desirable for
     proper corporate purposes, subject to the limitations set forth in such
     resolutions, (B) copies attached thereto of the Certificate of
     Incorporation and by-laws of the Company, and (C) the names and true
     signatures of the officers of the Company authorized to sign this Agreement
     and the Notes and other documents to be executed and delivered by the
     Company hereunder;

               (iv)  A certificate of a duly authorized officer of the Company,
     dated the Effective Date, certifying that as of such date, (A) the
     representations and warranties contained in Section 4.01 are correct on and
     as of the Effective Date and (B) no event shall have occurred and be
     continuing that constitutes an Event of Default or which would constitute
     an Event of Default but for the requirement that notice be given or time
     elapse or both;

               (v)   A favorable opinion of counsel for the Company,
     substantially in the form of Exhibit G hereto; and

               (vi)  Copies of the restated certificate of incorporation of the
     Company, together with all amendments, and a certificate of good standing,
     each certified by the Secretary of State of Delaware, as well as any other
     information required by Section 326 of the USA Patriot Act or necessary for
     the Administrative Agent or any Bank to verify the identity of the Company
     as required by Section 326 of the USA Patriot Act.

          (b)  The Company shall have paid all accrued fees and expenses of the
Arranger, the Administrative Agent and the Banks which are due and payable on
the Effective Date (including, without limitation, the reasonable fees and
expenses of counsel for the Arranger and the Administrative Agent);

                                       37



          (c) There shall have occurred no material adverse change in the
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole, since December 31, 2002;

          (d) There shall exist no action, suit or proceeding (investigative,
judicial or otherwise) against the Company or any of its Subsidiaries pending
before any court or arbitrator or any governmental body, agency or official, or
to the knowledge of any Responsible Officer of the Company, threatened, that
could reasonably be expected (i) to have a Material Adverse Effect (except as
set forth on Schedule III hereto as of the date hereof) or (ii) to materially
and adversely affect the legality, validity or enforceability of this Agreement
or any Note;

          (e) The representations and warranties contained in Section 4.01 shall
be correct on and as of the Effective Date, as though made on and as of such
date; and

          (f) No event shall have occurred and be continuing which constitutes
an Event of Default or which would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.

     For purposes of determining compliance with the conditions specified above,
each Bank shall be deemed to have consented to, approved and accepted, and to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Banks unless
the officer of the Administrative Agent responsible for the transactions
contemplated by this Agreement shall have received notice from such Bank prior
to the proposed Effective Date, as notified by the Administrative Agent to the
Banks, specifying its objection thereto. The Administrative Agent shall promptly
notify the Banks of the occurrence of the Effective Date.

     SECTION 3.02 Conditions Precedent to Initial Advance to Each Borrowing
Subsidiary. The obligation of each Bank to make its initial Advance hereunder to
any Borrowing Subsidiary is subject to the conditions precedent that the
Effective Date shall have occurred and the Administrative Agent shall have
received on or before the day of the initial Borrowing by such Borrowing
Subsidiary the following, each in form and substance reasonably satisfactory to
the Administrative Agent and in sufficient copies for the Banks:

          (a) The Assumption Letter executed and delivered by such Borrowing
Subsidiary and containing the written consent of the Company at the foot
thereof, as contemplated by Section 2.17 hereof;

          (b) A Committed Note executed by such Borrowing Subsidiary, payable to
each Bank;

          (c) Certified copies of the resolutions of the Board of Directors of
such Borrowing Subsidiary approving the Assumption Letter and all other
documents evidencing corporate action and governmental approvals, if any,
required with respect to the Assumption Letter;

          (d) A certificate of the Secretary or an Assistant Secretary of such
Borrowing Subsidiary certifying the names and true signatures of the officers of
such Borrowing Subsidiary

                                       38



authorized to sign the Assumption Letter and the other documents to be executed
and delivered by such Borrowing Subsidiary hereunder;

          (e) An opinion of counsel to such Borrowing Subsidiary, substantially
in the form of Exhibit H hereto and as to such other matters as the
Administrative Agent shall reasonably request; and

          (f) Copies of the articles or certificate of incorporation of such
Borrowing Subsidiary, together with all amendments, and a certificate of good
standing, each certified by the appropriate governmental officer in its
jurisdiction of incorporation, as well as any other information required by
Section 326 of the USA Patriot Act or necessary for the Administrative Agent or
any Bank to verify the identity of such Borrowing Subsidiary as required by
Section 326 of the USA Patriot Act.

     SECTION 3.03 Conditions Precedent to Each Committed Borrowing. The
obligation of each Bank to make a Committed Advance on the occasion of each
Committed Borrowing (including the initial Committed Borrowing) shall be subject
to the further conditions precedent that the Effective Date shall have occurred
and on the date of such Committed Borrowing the following statements shall be
true (and each of the giving of the applicable Notice of Committed Borrowing and
the acceptance by the applicable Borrower of the proceeds of such Committed
Borrowing shall constitute a representation and warranty by such Borrower that
on the date of such Committed Borrowing such statements are true):

          (a) The representations and warranties contained in subsections (a),
(b), (c), (d), (e)(i), (f)(ii) and (g) through (p) of Section 4.01 are correct
on and as of the date of such Committed Borrowing, before and after giving
effect to such Committed Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date;

          (b) No event has occurred and is continuing, or would result from such
Committed Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or which would constitute an Event of Default
but for the requirement that notice be given or time elapse or both; provided,
that with respect to each Committed Borrowing proposed to be made to a Borrowing
Subsidiary, each reference in Section 6.01(e), (f) and (i) to "Material
Subsidiary" shall, solely for purposes of this Section 3.03(b), be deemed to
include such Borrowing Subsidiary; and

          (c) The aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted amount)
of indebtedness for borrowed money (after giving effect to such Committed
Borrowing and the application of the proceeds thereof) of the Company and its
Subsidiaries does not exceed the maximum amount then authorized by the Company's
Board of Directors.

     SECTION 3.04 Conditions Precedent to Each Uncommitted Borrowing. Each
bidding Bank's obligation to make an Uncommitted Advance as part of an
Uncommitted Borrowing (including the initial Uncommitted Borrowing) is subject
to the conditions precedent that on the date of such Uncommitted Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Uncommitted Borrowing and the acceptance by such

                                       39



Borrower of the proceeds of such Uncommitted Borrowing shall constitute a
representation and warranty by such Borrower that on the date of such
Uncommitted Borrowing such statements are true):

          (a) The representations and warranties contained in subsections (a),
(b), (c), (d), (e)(i), (f)(ii) and (g) through (p) of Section 4.01 are correct
on and as of the date of such Uncommitted Borrowing, before and after giving
effect to such Uncommitted Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date,

          (b) No event has occurred and is continuing, or would result from such
Uncommitted Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or which would constitute an Event of Default
but for the requirement that notice be given or time elapse or both, and

          (c) The aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted amount)
of indebtedness for borrowed money (after giving effect to the application of
the proceeds of such Uncommitted Borrowing) of the Company and its Subsidiaries
does not exceed the maximum amount thereof then authorized by the Company's
Board of Directors.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     SECTION 4.01 Representations and Warranties of the Company. The Company
represents and warrants to the Banks as follows:

          (a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Agreement.

          (b) The execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Company's certificate of incorporation, as amended, or by-laws or (ii) law or
any contractual restriction binding on or affecting the Company.

          (c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Company of this Agreement.

          (d) This Agreement has been, and each of the Notes when delivered
hereunder will have been, duly executed and delivered by the applicable
Borrower. This Agreement is, and each of the Notes when delivered hereunder will
be, a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with their respective terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and to general principles of equity.

                                       40



           (e)  (i) The consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of December 31, 2002, and the related consolidated
statements of income, cash flow and shareholders' equity of the Company and its
Consolidated Subsidiaries for the fiscal year then ended, copies of which have
been furnished to each Bank, fairly present the financial condition of the
Company and its Consolidated Subsidiaries as at such date and the consolidated
results of the operations of the Company and its Consolidated Subsidiaries for
the period ended on such date, all in accordance with generally accepted
accounting principles.

           (ii) Since December 31, 2002, there has been no material adverse
change in the business, financial condition, operations, properties or
performance of the Company and its Subsidiaries, taken as a whole.

           (f)  There are no actions, suits or proceedings (investigative,
judicial or otherwise) against the Company or any of its Subsidiaries pending
before any court or arbitrator or any governmental body, agency or official, or,
to the knowledge of any Responsible Officer of the Company, threatened, that
could reasonably be expected (i) to have a Material Adverse Effect (except as
set forth on Schedule III hereto as of the date hereof) or (ii) to materially
and adversely affect the legality, validity or enforceability of this Agreement
or any Note.

           (g)  Following application of the proceeds of each Advance to the
Company, not more than 25% of the value of the assets (either of the Company
only or of the Company and its Consolidated Subsidiaries) will be Margin Stock
subject to any restriction contained in any agreement or instrument between the
Company and any Bank or any affiliate of any Bank relating to Debt within the
scope of Section 6.01(e).

           (h)  The Company is not principally engaged in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.

           (i)  The Advances to each Borrower, and all related obligations of
such Borrower under this Agreement, rank pari passu with all other unsecured
indebtedness for money borrowed or raised by such Borrower that is not, by its
terms, expressly subordinated to other such indebtedness of such Borrower.

           (j)  No Borrower is an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of
1940, as amended.

           (k)  (i) All necessary Environmental Permits have been obtained and
are in effect for the operations and properties of the Company and its
Subsidiaries, and the Company and its Subsidiaries are in compliance with all
such Environmental Permits, except to the extent that the failure to so obtain
or comply could not reasonably be expected to have a Material Adverse Effect;
and (ii) no circumstances exist that could reasonably be expected to (A) form
the basis of an Environmental Action against the Company or any of its
Subsidiaries or any of their properties that could reasonably be expected to
have a Material Adverse Effect or (B) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability under any
Environmental Law that could reasonably be expected to have a Material Adverse
Effect.

                                       41



           (l)  None of the properties owned or leased by the Company or any of
its Subsidiaries is the subject of any investigation or cleanup, whether
voluntary or required pursuant to any Environmental Law or ordered by any
governmental authority, that could reasonably be expected to have a Material
Adverse Effect.

           (m)  No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan.

           (n)  Neither the Company nor any of its ERISA Affiliates (i) has
incurred or is reasonably expected to incur any Withdrawal Liability with
respect to any Multiemployer Plan or (ii) has been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in reorganization or has been
terminated, within the meaning of Title IV of ERISA, and no such Multiemployer
Plan is reasonably expected to be in reorganization or to be terminated, within
the meaning of Title IV of ERISA.

           (o)  As of the last annual actuarial valuation date, the aggregate
current liability (as defined in Section 412 of the Internal Revenue Code) under
the Plans does not exceed the aggregate fair market value of the assets of such
Plans by more than $50,000,000.

           (p)  The Company does not intend to treat the Advances and related
transactions as being a "reportable transaction" (within the meaning of Treasury
Regulation Section 1.6011-4). In the event the Company determines to take any
action inconsistent with such intention, it will promptly notify the
Administrative Agent thereof.

                                   ARTICLE V

                            COVENANTS OF THE COMPANY

     So long as any Advance shall remain unpaid or any Bank shall have any
Commitment hereunder, unless the Majority Banks shall otherwise consent in
writing:

     SECTION 5.01  Compliance with Laws, Etc. The Company will comply, and cause
each of its Subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations and orders, except for laws, rules, regulations and
orders the violation of which, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

     SECTION 5.02  Interest Coverage Ratio. The Company will, as of the end of
each fiscal quarter after the Effective Date, maintain an Interest Coverage
Ratio of not less than 2.0 to 1.

     SECTION 5.03  Reporting Requirements. The Company will furnish to the
Banks:

           (a) within 60 days after the end of each of the first three quarters
of each fiscal year of the Company, but in no case earlier than when such report
shall be required to be filed with the Commission, a copy of the Company's Form
10-Q filed with the Commission for such quarter, or any similar quarterly report
required to be filed by the Company with the Commission; provided that if the
Company shall no longer be required to so file with the Commission, the Company
will nonetheless thereafter continue to furnish to the Banks such

                                       42



financial statements and related materials as would have comprised such filings,
at such times as the Company would have otherwise delivered the same to the
Commission;

           (b) within 120 days after the end of each fiscal year of the Company,
but in no case earlier than when such report shall be required to be filed with
the Commission, a copy of the Company's Form 10-K filed with the Commission for
such year, or any similar annual report required to be filed by the Company with
the Commission; provided that if the Company shall no longer be required to so
file with the Commission, the Company will nonetheless thereafter continue to
furnish to the Banks such financial statements and related materials as would
have comprised such filings, at such times as the Company would have otherwise
delivered the same to the Commission;

           (c) simultaneously with the delivery of the reports referred to in
clauses (a) and (b) above, a certificate of a designated financial officer of
the Company (i) setting forth in reasonable detail the calculations required to
establish whether the Company was in compliance with the requirements of Section
5.02 on the date of such financial statements and (ii) stating whether there
exists on the date of such certificate any Event of Default or condition or
event which with notice or lapse of time or both would become an Event of
Default and, if any Event of Default or any such condition or event then exists,
setting forth the details thereof and the action which the Company is taking
with respect thereto;

           (d) promptly after the sending or filing thereof, copies of all
reports which the Company sends to any of its security holders, and copies of
all reports and registration statements (other than Form S-8 or any similar
form) which the Company or any Borrowing Subsidiary files with the Commission or
any national securities exchange;

           (e) promptly following any Responsible Officer's knowledge thereof,
notice in writing of (i) the occurrence of any Event of Default or condition or
event which with notice or lapse of time or both would become an Event of
Default and, if any Event of Default or any such condition or event then exists,
setting forth the details thereof and the action which the Company is taking
with respect thereto, or (ii) the institution of, or any adverse final judgment
in, any litigation, arbitration proceeding or governmental proceeding which, in
the Company's judgment, if adversely determined, could reasonably be expected to
have a Material Adverse Effect; and

           (f) such other pertinent information as any Bank may reasonably
request.

     SECTION 5.04 Use of Proceeds. The Borrowers will use the proceeds of the
Advances made under this Agreement only for general corporate purposes otherwise
permitted under this Agreement, including, without limitation, mergers and
acquisitions, the purchase of stock of other Persons, the repurchase of shares
of capital stock of the Company, the repayment of indebtedness, the funding of
employee benefit plans of the Company or its Subsidiaries, the purchase of goods
and services and the making of capital expenditures and for other lawful
purposes; provided that, no Borrower shall use the proceeds of any Advances made
hereunder to acquire 20% or more of the outstanding shares of the capital stock
of any Person unless (a) at the time of such acquisition, such Person shall have
consented to such acquisition either by having entered into an agreement with
the Company or a subsidiary of the Company contemplating a

                                       43



merger of such Person with or into the Company or such subsidiary or by its
Board of Directors having authorized, approved or consented to such acquisition,
or (b) such Borrower shall have obtained the prior written consent with respect
thereto of (i) in the case of any Committed Borrowing the proceeds of which
shall be used to facilitate such acquisition, the Banks and (ii) in the case of
any Uncommitted Borrowing the proceeds of which shall be used to facilitate such
acquisition, the Banks extending Uncommitted Advances in connection therewith;
provided further that if the applicable Borrower shall have specified the
intended use of proceeds of an Uncommitted Borrowing in the Notice of
Uncommitted Borrowing with respect thereto, each Bank electing to offer to make
one or more Uncommitted Advances in response thereto shall be deemed to have
provided the written consent required under this Section 5.04 for such use of
the proceeds of such Uncommitted Advances.

     SECTION 5.05 Limitation on Liens, Etc. The Company will not create or
suffer to exist, or permit any of its Consolidated Subsidiaries to create or
suffer to exist, any Lien, upon or with respect to any of its properties (other
than Margin Stock), whether now owned or hereafter acquired, or assign, or
permit any of its Consolidated Subsidiaries to assign, any right to receive
income, in each case to secure any Debt of any Person or entity, other than:

           (a)  Liens arising in connection with the obligations of the Company
or any Subsidiary under industrial revenue bonds;

           (b)  Liens on assets of a Subsidiary of a Borrower to secure Debt of
such Subsidiary to any Borrower;

           (c)  Purchase money Liens claimed by sellers of goods on ordinary
trade terms provided that no financing statement has been filed to perfect such
Liens, and provided that no such Lien shall extend to assets of any character
other than the goods being acquired;

           (d)  Liens securing Debt existing as of December 31, 2002;

           (e)  Liens securing Debt on property of a corporation or firm (or
division thereof) that becomes a Subsidiary of the Company or of any of its
Subsidiaries after the date hereof in accordance with Section 5.06 and existing
at the time such corporation is merged or consolidated with the Company or any
Subsidiary, at the time such corporation or firm (or division thereof) becomes a
Subsidiary of the Company or any of its Subsidiaries, or at the time of a sale,
lease or other disposition of the properties of a corporation or a firm (or
division thereof) as an entirety or substantially as an entirety to the Company
or a Subsidiary, provided that such Liens were not created in contemplation of
such merger, consolidation, acquisition, sale, lease or disposition and do not
extend to assets other than those of the Person merged into or consolidated with
the Company or such Subsidiary or acquired by the Company or such Subsidiary;

           (f)  Liens on life insurance policies owned by the Company or any
Subsidiary, securing Insurance Policy Debt;

           (g)  Purchase money Liens constituting the interest of a lessor under
a lease that would be capitalized on the lessee's balance sheet in accordance
with GAAP, or under a

                                       44



sale-leaseback transaction, in each case relating to equipment, provided that
after giving effect thereto, no Event of Default under Section 5.02 shall exist;

           (h) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Liens referred to in the
foregoing subsections (a) through (g); provided that, in the case of Liens
referred to in the foregoing subsections (c), (d), (e), (f) and (g), the
principal amount of Debt secured thereby shall not exceed the principal amount
of Debt so secured at the time of such extension, renewal or replacement, and
that such extension, renewal or replacement Lien shall be limited to all or a
part of the property which is subject to the Lien so extended, renewed or
replaced (plus improvements on such property);

           (i) Liens incurred in connection with Securitization Transactions;
provided, that such Liens do not encumber any property other than the
Receivables and Related Security relating to such Securitization Transactions;
and

           (j) Additional Liens securing Debt other than as may be included in
the foregoing subsections (a) through (i), provided, that the aggregate
outstanding principal amount of such Debt shall not at any time exceed 10% of
Consolidated Tangible Net Worth at such time.

     SECTION 5.06 Merger; Sale of Assets. The Company will not, and will not
permit its Material Subsidiaries to, merge or consolidate with or into any other
Person, or sell, transfer, lease or otherwise dispose of all or substantially
all of its assets (whether now owned or hereafter required), except that:

           (a) the Company or a Material Subsidiary may acquire another
corporation by merger, provided that, if the Company is a party to such merger,
the Company is the surviving corporation, and provided further that after giving
effect to such merger, no Event of Default (or event which, with the giving of
notice or the passing of time or both would constitute an Event of Default)
shall exist;

           (b) any Material Subsidiary may merge or consolidate with or into, or
sell or otherwise dispose of any or all of its assets to, the Company or another
Subsidiary, and any Material Subsidiary that is not a Borrowing Subsidiary may
sell all or substantially all of its assets; provided that (a) after giving
effect to such merger, consolidation, sale or other disposition, no Event of
Default (or any event which, with the giving of notice or the passing of time or
both would constitute an Event of Default) shall exist, and (b) in the case of
an asset sale by such a Material Subsidiary, the assets to be sold do not
constitute all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole; and

           (c) the Company or any Material Subsidiary may transfer interests in
accounts or notes receivable on a limited recourse basis in connection with
Securitization Transactions.

    SECTION 5.07 Books and Records; Inspection. The Company will, and will cause
each of its Subsidiaries to, (a) maintain complete and accurate books and
records, in which full and correct entries shall be made of all financial
transactions of the Company and each such Subsidiary in accordance with
generally accepted accounting principles, and (b) permit any Bank, the
Administrative Agent and their respective employees and agents, at such
reasonable

                                       45



times during normal business hours and as often as may be reasonably requested,
to inspect any of the properties of the Company or any of its Subsidiaries and
to inspect and make copies of the material books and records of the Company and
its Subsidiaries and to discuss the affairs and finances of the Company and its
Subsidiaries with their officers; provided that such Bank or the Administrative
Agent shall have delivered a written request for such inspection to the Company
prior to the date of any such inspection.

     SECTION 5.08   Corporate Existence. Subject to the Company's rights under
Section 5.06, the Company will, and will cause each of its Material Subsidiaries
to, at all times maintain its corporate existence and preserve and keep, or
cause to be preserved and kept, in full force and effect its rights and
franchises material to its businesses.

     SECTION 5.09   Conduct of Business. The Company shall not, and shall not
permit any Material Subsidiary to, engage in any line of business other than (A)
the businesses engaged in by the Company and its Subsidiaries on the date hereof
and (B) any business or activities substantially similar or related thereto
(which shall include, without limitation, other businesses related to the
handling and/or distribution of data used or processed in the businesses engaged
in by the Company and its Subsidiaries on the date hereof).

     SECTION 5.10   Payment of Taxes. The Company will pay and discharge, and
cause each of its Material Subsidiaries to pay and discharge, before the same
shall become delinquent, all material taxes, assessments and governmental
charges or levies imposed upon it or its property; provided, however, that
neither the Company nor any of its Material Subsidiaries shall be required to
pay or discharge any such tax, assessment, charge or levy that is being
contested in good faith and by proper proceedings and as to which appropriate
reserves are being maintained in accordance with GAAP, as long as no action has
been commenced to enforce any Lien securing any such tax, assessment, charge or
levy.

                                   ARTICLE VI

                                EVENTS OF DEFAULT

     SECTION 6.01   Events of Default. If any of the following events ("Events
of Default") shall occur and be continuing:

        (a)    A Borrower shall fail to pay when due any installment of
principal of any Advance; or

        (b)    A Borrower shall fail to pay any fee under this Agreement, or any
installment of interest on any Advance, within five (5) days after the due date
thereof; or

        (c)    Any written representation or warranty made or deemed made by a
Borrower herein or in connection with this Agreement shall prove to have been
incorrect in any material respect when made or deemed made; or

        (d)    The Company shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 5.02, 5.03(a), (b) or (e), 5.04,
5.05, 5.06, 5.07, 5.08, 5.09 or 5.10, or (ii) any other term, covenant or
agreement contained in this Agreement, other than as

                                       46



otherwise provided in this Section 6.01, on its part to be performed or observed
if such failure shall remain unremedied for 30 days after written notice thereof
shall have been given to the Company by the Majority Banks through the
Administrative Agent; or

        (e)    The Company or any Material Subsidiary shall fail to pay any
principal of or premium or interest on any Debt, or any obligations in respect
of acceptances, letters of credit or other similar instruments, of the Company
or such Material Subsidiary which is outstanding in a principal amount of at
least $50,000,000 in the aggregate (but excluding Debt arising under this
Agreement), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt or other obligation; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt or other obligation and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or permit
the acceleration of, the maturity of such Debt or other obligation; or any Debt
or other such obligation in which the outstanding principal exceeds $50,000,000
shall be otherwise declared to be due and payable (by acceleration or otherwise)
or required to be prepaid, redeemed, defeased or otherwise repurchased by the
Company or any Material Subsidiary (other than by a regularly-scheduled required
prepayment), or any offer to prepay, redeem, defease or purchase such Debt shall
be required to be made, prior to the stated maturity thereof; or

        (f)    (i) The Company or any Material Subsidiary (A) shall generally
not pay its debts as such debts become due, or (B) shall admit in writing its
inability to pay its debts generally, or (C) shall make a general assignment for
the benefit of creditors; or (ii) any proceeding shall be instituted by or
against the Company or any Material Subsidiary seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property, and in the event of any such proceeding instituted against the
Company or any Material Subsidiary (but not instituted by it), such proceeding
shall remain undismissed or unstayed for a period of 60 days or shall result in
the entry of an order for relief, the appointment of a trustee or receiver, or
other action in such proceeding or result adverse to the Company or such
Material Subsidiary, as applicable; or (iii) the Company or any Material
Subsidiary shall take any corporate action to authorize any of the actions set
forth above in this subsection (f)(i)(B), (i)(C) or (ii); or

        (g)    Any Person, or a group of Persons acting in concert, shall at any
time acquire, directly or indirectly, in excess of 50% of the securities having
ordinary voting power to elect members of the board of directors of the Company;
or

        (h)    The Company shall incur liability in excess of $50,000,000 in the
aggregate as a result of one or more of the following: (i) the occurrence of any
ERISA Event; (ii) the partial or complete withdrawal of the Company or any of
its ERISA Affiliates from a Multiemployer Plan; or (iii) the reorganization or
termination of a Multiemployer Plan; or

                                       47



        (i)    One or more final judgments or orders for the payment of money,
in an aggregate amount exceeding $50,000,000 at any one time outstanding
(exclusive of judgment amounts fully covered by insurance, to the extent the
insurer has admitted liability in respect thereof), shall be rendered against
the Company or any Material Subsidiary and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order, or (ii)
such judgments or orders shall not be discharged (or provision shall not have
been made for such discharge), a stay of execution thereof shall not be
obtained, or such judgments or orders shall not be paid or bonded, within 60
days from the date of entry thereof, and the Company or such Material
Subsidiary, as the case may be, shall not, within such 60-day period, appeal
therefrom and cause the execution thereof to be stayed pending such appeal;

then, and in any such event, the Administrative Agent shall at the request, or
may with the consent, of the Majority Banks, by notice to the Company, (i)
declare the obligation of each Bank to make Advances to any Borrower to be
terminated, whereupon the same shall forthwith terminate, and (ii) declare the
Notes, all interest thereon and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by each Borrower; provided, however, that if an Event of Default under
Section 6.01(f) (other than subsection (i)(a) thereof) occurs with respect to
the Company, (A) the obligation of each Bank to make Advances to any Borrower
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Borrower.

                                  ARTICLE VII

                                    GUARANTEE

     SECTION 7.01   Unconditional Guarantee. For valuable consideration, receipt
whereof is hereby acknowledged, and to induce the Banks to make Advances to each
Borrowing Subsidiary, the Company unconditionally and irrevocably guarantees to
the Banks and the Administrative Agent that the principal of and interest on
each Advance and all other amounts payable by each Borrowing Subsidiary
hereunder shall be promptly paid in full when due (whether at stated maturity,
by acceleration or otherwise) in accordance with the terms hereof and thereof,
and, in the case of any extension of time of payment, in whole or in part, that
all such amounts shall be promptly paid when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. In
addition, the Company unconditionally agrees that upon (a) default in the
payment when due (whether at stated maturity, by acceleration or otherwise) of
any of such principal, interest or other amounts, the Company shall forthwith
pay the same, or (b) the occurrence and continuance of any event described in
Section 6.01(e), (f) or (i) with respect to any Borrowing Subsidiary (as if each
reference therein to "Material Subsidiary" were a reference to such Borrowing
Subsidiary), the Company shall forthwith pay all principal, interest and other
amounts payable hereunder by such Borrowing Subsidiary. Without limiting the
generality of the foregoing, the Company's liability shall extend to all amounts
that constitute part of the obligations of any Borrowing Subsidiary guaranteed
by the Company under this Article VII and would be owed by any such Borrowing
Subsidiary to any Bank or the Administrative Agent under this Agreement or the
Notes but for

                                       48



the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving such Borrowing
Subsidiary.

     SECTION 7.02   Validity. The obligations of the Company under this
Article VII are independent of the obligations of the Borrowing Subsidiaries
guaranteed hereunder, and a separate action or actions may be brought and
prosecuted against the Company to enforce its obligations under this Article
VII, irrespective of whether any action is brought against any Borrowing
Subsidiary or whether any Borrowing Subsidiary is joined in any such action or
actions. The obligations of the Company under this Article VII shall be
unconditional irrespective of (i) the genuineness, validity, regularity or
enforceability of the obligations of the Borrowing Subsidiaries under this
Agreement, any Note or any Assumption Letter, (ii) any law, regulation or order
of any jurisdiction affecting any term of any obligation of any Borrowing
Subsidiary under this Agreement or the rights of any Bank or the Administrative
Agent with respect thereto, (iii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of any
Borrowing Subsidiary guaranteed by the Company under this Article VII, or any
other amendment or waiver of or any consent to departure from this Agreement or
the Notes, (iv) any change, restructuring or termination of the corporate
structure or existence of any Borrowing Subsidiary or any of its Subsidiaries,
or (v) to the fullest extent permitted by applicable law, any other circumstance
which might otherwise constitute a legal or equitable discharge of a surety or
guarantor.

     SECTION 7.03   Waivers. The Company expressly waives promptness, diligence,
presentment, protest and any other notice with respect to the obligations of the
Company under this Article VII and any requirement that any right or power be
exhausted or any action be taken against any Borrowing Subsidiary and all
notices and demands whatsoever.

     SECTION 7.04   Subrogation. The Company shall be subrogated to the rights
of the Banks or the Administrative Agent against any Borrowing Subsidiary
hereunder only after the Banks and the Administrative Agent shall have been paid
in full all such amounts, with interest thereon, for which such Borrowing
Subsidiary shall have become indebted hereunder.

     SECTION 7.05   Acceleration. The Company agrees that, as between the
Company on the one hand, and the Banks and the Administrative Agent, on the
other hand, the obligations of each Borrowing Subsidiary guaranteed under this
Article VII may be declared to be forthwith due and payable, or may be deemed
automatically to have been accelerated, as provided in Section 6.01 hereof for
purposes of this Article VII, notwithstanding any stay, injunction or other
prohibition (whether in a bankruptcy proceeding affecting such Borrowing
Subsidiary or otherwise) preventing such declaration as against such Borrowing
Subsidiary and that, in the
event of such declaration or automatic acceleration, such obligations (whether
or not due and payable by such Borrowing Subsidiary) shall forthwith become due
and payable by the Company for purposes of this Article VII.

     SECTION 7.06   Reinstatement. The Company's obligations under this Article
VII shall be reinstated if at any time any payment received by any Bank or the
Administrative Agent from any Borrowing Subsidiary hereunder is required to be
repaid or returned by such Bank or the Administrative Agent, all as though such
payment had not been made.

                                       49



     SECTION 7.07   Continuing Guaranty; Assignments. This guarantee of the
Company shall (a) remain in full force and effect until the later of (i) the
cash payment in full of the obligations of any Borrowing Subsidiary guaranteed
by the Company under this Article VII and (ii) the Termination Date (or, if the
Company has made the Term Loan Election, the Maturity Date), (b) be binding upon
the Company, its successors and assigns and (c) inure to the benefit of, and be
enforceable by, the Banks and the Administrative Agent and their successors,
transferees and assigns (provided that the applicable transfers and assignments
are made in accordance with the terms of this Agreement).

                                   ARTICLE VIII

                    ADMINISTRATIVE AGENT; SYNDICATION AGENT;
                         DOCUMENTATION AGENT; CO-AGENTS

     SECTION 8.01   Authorization and Action. Each Bank appoints and authorizes
Bank One to act as the Administrative Agent hereunder, and each Bank irrevocably
authorizes the Administrative Agent (for so long as the Administrative Agent
remains in such capacity under this Agreement) to act as the contractual
representative of such Bank with only the rights and duties expressly set forth
herein. The Administrative Agent agrees to act as such contractual
representative upon the express conditions contained in this Article VIII.
Notwithstanding the use of the defined term "Administrative Agent," it is
expressly understood and agreed that the Administrative Agent shall not have any
fiduciary responsibilities to any Bank by reason of this Agreement and that the
Administrative Agent is merely acting as the representative of the Banks with
only those duties as are expressly set forth in this Agreement. In its capacity
as the Banks' contractual representative, the Administrative Agent (i) does not
assume any fiduciary duties to any of the Banks, (ii) is a "representative" of
the Banks within the meaning of Section 9-105 of the Uniform Commercial Code and
(iii) is acting as an independent contractor, the rights and duties of which are
limited to those expressly set forth in this Agreement. Each Bank agrees to
assert no claim against the Administrative Agent on any agency theory or any
other theory of liability for breach of fiduciary duty, all of which claims each
Bank waives. The Administrative Agent shall have and may exercise such powers
under this Agreement as are specifically delegated to the Administrative Agent
by the terms hereof, together with such powers as are reasonably incidental
hereto. The Administrative Agent shall have no implied duties to the Banks, or
any obligation to the Banks to take any action hereunder, except any action
specifically provided by this Agreement to be taken by the Administrative Agent.
As to any matters not expressly provided for by this Agreement (including,
without limitation, enforcement or collection of the Notes), the Administrative
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Majority
Banks, and such instructions shall be binding upon all Banks and all holders of
the Notes; provided, however, that the Administrative Agent shall not be
required to take any action which exposes the Administrative Agent to personal
liability or which is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Bank prompt notice of each notice
given to it by any Borrower pursuant to the terms of this Agreement. The
Administrative Agent may execute any of its duties as Administrative Agent
hereunder and under any other instrument, document or agreement executed in
connection herewith by or through employees, agents, and attorney-in-fact and
shall not be answerable to the Banks, except as to money or

                                       50



securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Without limiting the foregoing, the Administrative Agent may
appoint any Affiliate as its agent for all matters relating to Advances made in
Alternative Currencies. Each such agent shall be entitled to all of the rights
and benefits granted to the Administrative Agent hereunder, and each Bank shall
treat any notice given by any such agent as if it had been given directly by the
Administrative Agent.

     SECTION 8.02 Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an assignment
agreement entered into by the Bank that is the payee of such Note, as assignor,
and a Purchaser, as assignee, as provided in Section 9.03; (ii) may consult with
legal counsel (including counsel for any Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of any Borrower or to inspect the
property (including the books and records) of any Borrower; (v) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (vi) shall not have any duty
to ascertain, inquire into or verify the financial condition of the Company or
any of its Subsidiaries; (vii) shall have no duty to disclose to the Banks
information that is not required to be furnished by the Company to the
Administrative Agent at such time, but is voluntarily furnished by the Company
to the Administrative Agent (either in its capacity as Administrative Agent or
in its individual capacity); and (viii) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telegram) believed by it to be
genuine and signed or sent by the proper party or parties. The Administrative
Agent shall be entitled to advice of counsel concerning the contractual
arrangement between the Administrative Agent and the Banks and all matters
pertaining to the Administrative Agent's duties hereunder.

     SECTION 8.03 The Administrative Agent and Affiliates. With respect to any
financial institution which shall become the Administrative Agent hereunder, and
with respect to such financial institution's Commitment and the Advances made by
it, such financial institution shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not the
Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise
expressly indicated, include such financial institution in its individual
capacity, if applicable. Each such financial institution and its affiliates may
accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, any Borrower, any of their
respective Subsidiaries and any Person who may do business with or own
securities of any Borrower or any such Subsidiary, all as if such financial
institution were not the Administrative Agent and without any duty to account
therefor to the Banks.

                                       51



     SECTION 8.04 Bank Credit Decision; Notice of Default. Each Bank
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Bank and based on the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement. The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default, or an event which would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both, unless the Agent has received written notice from a Bank or
the Company referring to this Agreement describing such Event of Default, or
such event which would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall give prompt notice thereof to the Banks.

     SECTION 8.05 Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrowers), ratably
according to the respective principal amounts of the Notes held by each of them
(or, if no Notes are outstanding at the time or if any Notes are held by Persons
that are not Banks, ratably according to the respective amounts of their
Commitments) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Administrative Agent in any way relating to or arising out
of this Agreement or any action taken or omitted by the Administrative Agent
under this Agreement; provided that no Bank shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent any of the foregoing is
found in a final non-appealable judgment by a court of competent jurisdiction to
have resulted from the Administrative Agent's gross negligence or willful
misconduct. Without limiting the foregoing, each Bank agrees to reimburse the
Administrative Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Administrative
Agent in connection with the administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Administrative Agent is not reimbursed for such expenses
by the Borrowers. The obligation of the Banks under this Section 8.05 shall
survive payment of the Obligations and the termination of this Agreement.

     SECTION 8.06 Successor Administrative Agent. The Administrative Agent may
resign at any time by giving written notice thereof to the Banks and the Company
and may be removed at any time with or without cause by the Majority Banks. Upon
any such resignation or removal, the Majority Banks shall have the right to
appoint another Bank as successor Administrative Agent or, if acceptable to the
Company, any other commercial bank organized under the laws of the United States
of America or of any State thereof and having a combined capital and surplus of
at least $500,000,000. If no successor Administrative Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent gives notice of
resignation or the Majority Banks remove the retiring Administrative Agent, then
the retiring Administrative Agent may, on behalf

                                       52



of the Banks, appoint a successor Administrative Agent, which shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$500,000,000 and otherwise acceptable to the Company. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent.

     SECTION 8.07 Syndication Agent; Documentation Agent; Managing Agent. The
Banks identified in this Agreement as the Syndication Agent, the Documentation
Agent or the Managing Agent shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing, such Banks
shall not have or be deemed to have a fiduciary relationship with any Bank. Each
Bank hereby makes the same acknowledgments with respect to such Banks as it
makes with respect to the Administrative Agent in Section 8.04.

                                   ARTICLE II

                BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

     SECTION 9.01 Successors and Assigns. The terms and provisions of this
Agreement and the Notes shall be binding upon and inure to the benefit of the
Company and the Banks and their respective successors and assigns permitted
hereby, except that (a) neither the Company nor any Borrowing Subsidiary shall
have the right to assign its rights or obligations under this Agreement and the
Notes without the prior written consent of each Bank, (b) any assignment by any
Bank must be made in compliance with Section 9.03, and (c) any transfer by
participation must be made in compliance with Section 9.02. Any attempted
assignment or transfer by any party not made in compliance with this Section
9.01 shall be null and void, unless such attempted assignment or transfer is
treated as a participation in accordance with Section 9.02. The parties to this
Agreement acknowledge that clause (b) of this Section 9.01 relates only to
absolute assignments and this Section 9.01 does not prohibit assignments
creating security interests, including, without limitation, (x) any pledge or
assignment by any Bank of all or any portion of its rights under this Agreement
and any Note to a Federal Reserve Bank or (y) in the case of a Bank which is a
Fund, any pledge or assignment of all or any portion of its rights under this
Agreement and any Note to its trustee in support of its obligations to its
trustee; provided, that no such pledge or assignment creating a security
interest shall release the transferor Bank from its obligations hereunder unless
and until the parties thereto have complied with the provisions of Section 9.03
and no Person acquiring any interest in any pledge or assignment creating a
security interest shall be entitled to exercise any voting rights hereunder. The
Administrative Agent may treat the Person which made any Advance or which holds
any Note as the owner thereof for all purposes hereof unless and until such
Person complies with Section 9.03; provided, that the Administrative Agent may
in its discretion (but shall not be required to) follow instructions from the
Person which made any Advance or which holds any Note to direct payments
relating to such Advance or Note to another Person. Any assignee of the

                                       53



rights to any Advance or any Note agrees by acceptance of such assignment to be
bound by all the terms and provisions of this Agreement and the Notes. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the owner of the rights to any
Advance (whether or not a Note has been issued in evidence thereof), shall be
conclusive and binding on any subsequent holder or assignee of the rights to
such Advance.

     SECTION 9.02 Participations.

          9.02.1 Permitted Participants; Effect. Any Bank may at any time sell
to one or more banks or other entities ("Participants") participating interests
in any Loan owing to such Bank, any Note held by such Bank, any Commitment of
such Bank or any other interest of such Bank under this Agreement and the Notes.
In the event of any such sale by a Bank of participating interests to a
Participant, such Bank's obligations under this Agreement and the Notes shall
remain unchanged, such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, such Bank shall remain the owner
of its Advances and the holder of any Note issued to it in evidence thereof for
all purposes under this Agreement and the Notes, all amounts payable by the
Borrowers under this Agreement shall be determined as if such Bank had not sold
such participating interests, and the Borrowers and the Administrative Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement and the Notes.

          9.02.2 Voting Rights. Each Bank shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of this Agreement and the Notes other than any
amendment, modification or waiver with respect to any Advance or Commitment in
which such Participant has an interest which would require consent of all of the
Banks pursuant to the terms of clause (iii) or (iv) of Section 10.01.

          9.02.3 Benefit of Certain Provisions. The Company agrees that each
Participant shall be deemed to have the right of setoff provided in Section 9.05
in respect of its participating interest in amounts owing under this Agreement
and the Notes to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement and the Notes;
provided, that each Bank shall retain the right of setoff provided in Section
9.05 with respect to the amount of participating interests sold to each
Participant to the extent not applied by such Participant. The Banks agree to
share with each Participant, and each Participant, by exercising the right of
setoff provided in Section 9.05, agrees to share with each Bank, any amount
received pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with Section 2.15 as if each Participant were a Bank. The
Company further agrees that each Participant shall be entitled to the benefits
of Sections 2.02(d), 2.11, 2.12 and 2.18 to the same extent as if it were a Bank
and had acquired its interest by assignment pursuant to Section 9.03; provided,
that (a) a Participant shall not be entitled to receive any greater payment
under Sections 2.02(d), 2.11, 2.12 or 2.18 than the Bank who sold the
participating interest to such Participant would have received had it retained
such interest for its own account, unless the sale of such interest to such
Participant is made with the prior written consent of the Company, and (b) any
Participant not incorporated under the laws of the United States of America or
any State thereof agrees to comply with the provisions of Section 2.18 to the
same extent as if it were a Bank.

                                       54



     SECTION 9.03 Assignments.

          9.03.1 Permitted Assignments. Any Bank may at any time assign to one
or more banks or other entities ("Purchasers") all or any part of its rights and
obligations under this Agreement and the Notes. Such assignment shall be
substantially in the form of Exhibit A or in such other form as may be agreed to
by the parties thereto. Each such assignment with respect to a Purchaser which
is not a Bank or an Affiliate of a Bank shall either be in an amount equal to
the entire applicable Commitment and Advances of the assigning Bank or (unless
each of the Company (unless an Event of Default has occurred and is continuing)
and the Administrative Agent otherwise consents) be in an aggregate amount not
less than the lesser of (a) $10,000,000 or (b) the remaining amount of the
assigning Bank's Commitment. The amount of the assignment shall be based on the
Commitment or outstanding Advances (if the Commitment has been terminated)
subject to the assignment, determined as of the date of such assignment or as of
the "Trade Date," if the "Trade Date" is specified in the assignment. Any
assignment required pursuant to Section 2.05(b) shall also be made pursuant to
this Section 9.03.

          9.03.2 Consents. The consent of the Company shall be required prior to
an assignment becoming effective unless the Purchaser is a Bank or an Affiliate
of a Bank; provided, that the consent of the Company shall not be required if an
Event of Default has occurred and is continuing or if the assignment is in
connection with the physical settlement of credit derivative transactions and
the Administrative Agent shall use commercially reasonable efforts to give
prompt notice to the Company of any such assignment. The consent of the
Administrative Agent shall be required prior to an assignment becoming effective
unless the Purchaser is a Bank or an Affiliate of a Bank. Any consent required
under this Section 9.03.2 shall not be unreasonably withheld or delayed.

          9.03.3 Effect; Effective Date. Upon (a) delivery to the Administrative
Agent of an assignment, together with any consents required by Sections 9.03.1
and 9.03.2, and (b) payment of a $3,500 fee to the Administrative Agent for
processing such assignment (unless such fee is waived by the Administrative
Agent), such assignment shall become effective on the effective date specified
in such assignment. The assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the purchase
of the Commitment and Advances under the applicable assignment agreement
constitutes "plan assets" as defined under ERISA and that the rights and
interests of the Purchaser in and under this Agreement and the Notes will not be
"plan assets" under ERISA. On and after the effective date of such assignment,
such Purchaser shall for all purposes be a Bank party to this Agreement and
shall have all the rights and obligations of a Bank under this Agreement and the
Notes, to the same extent as if it were an original party thereto, and the
transferor Bank shall be released with respect to the Commitment and Advances
assigned to such Purchaser without any further consent or action by the Company,
the Banks or the Administrative Agent. In the case of an assignment covering all
of the assigning Bank's rights and obligations under this Agreement, such Bank
shall cease to be a Bank hereunder but shall continue to be entitled to the
benefits of, and subject to, those provisions of this Agreement which survive
payment of the Obligations and termination of the applicable agreement. Any
assignment or transfer by a Bank of rights or obligations under this Agreement
that does not comply with this Section 9.03.3 shall be treated for purposes of
this Agreement as a sale by such Bank of a participation in such rights and
obligations in accordance with Section 9.03.2. Upon the consummation of any
assignment to a

                                       55



Purchaser pursuant to this Section 9.03.3, the transferor Bank, the
Administrative Agent and the Company shall, if the transferor Bank or the
Purchaser desires that its Advances be evidenced by Notes, make appropriate
arrangements so that new Notes or, as appropriate, replacement Notes are issued
to such transferor Bank and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting their
respective Commitments, as adjusted pursuant to such assignment.

          9.03.4 Register. The Administrative Agent, acting solely for this
purpose as an agent of the Company, shall maintain at one of its offices in
Chicago, Illinois a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Banks, and the
Commitments of, and principal amounts of the Advances owing to, each Bank
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Company, the Administrative Agent and the Banks may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Bank hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Company and any
Bank, at any reasonable time and from time to time upon reasonable prior notice.

     SECTION 9.04 Dissemination of Information. The Company authorizes each Bank
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in this Agreement and the Notes by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Bank's possession concerning the creditworthiness of the Company and its
Subsidiaries; provided, that each Transferee and prospective Transferee agrees
to be bound by Section 10.09 of this Agreement.

     SECTION 9.05 Tax Treatment. If any interest in this Agreement or any Note
is transferred to any Transferee which is not incorporated under the laws of the
United States or any State thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.18.

                                  ARTICLE III

                                  MISCELLANEOUS

     SECTION 10.01 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Notes, nor any consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Banks, directly do any of the following: (i) waive
any of the conditions specified in Section 3.01 or 5.04, (ii) increase or extend
the Commitments of the Banks (except pursuant to Section 2.06(a), 2.22 or 2.23)
or subject the Banks to any additional obligations, (iii) reduce the principal
of, or the stated rate at which interest accrues on, the Notes or reduce the
stated rate at which the Facility Fee and the Utilization Fee are calculated,
(iv) postpone any date fixed for any payment of principal of, or interest on,
the Committed Advances or any fees or other amounts payable hereunder, (v)
change the percentage

                                       56



of the Commitments, or of the aggregate unpaid principal amount of the Notes, or
the number of Banks which shall be required for the Banks or any of them to take
any action hereunder or (vi) amend this Section 10.01; provided, further, that
no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Banks required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement or any Note.

     SECTION 10.02 Notices, Etc. (a) All notices and other communications
provided for hereunder shall be in writing (including telegraphic or telecopy
communication) and mailed, telegraphed, telecopied or delivered,

              (i)    if to the Company, at its address at 77 West Wacker Drive,
     Chicago, Illinois 60601 Attention: Treasurer, telecopy number (312)
     326-8557;

              (ii)   if to any Borrowing Subsidiary, at the address specified in
     the Assumption Letter pursuant to which it became a Borrowing Subsidiary,
     with a copy to the Company at the address specified herein; provided that
     any such notice may be given solely to the Company, at the option of the
     party giving such notice;

              (iii)  if to any bank listed on the signature pages hereof, at its
     Domestic Lending Office specified opposite its name on Schedule I hereto;

              (iv)   if to any other Bank, at its Domestic Lending Office
     specified in the assignment agreement pursuant to which it became a Bank;

              (v)    if to the Administrative Agent, at the Domestic Lending
     Office specified opposite its name on Schedule I hereto;

or as to the Borrowers and the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties, and
as to each such other party, at such other address as shall be designated by
such party in a written notice to the Company and the Administrative Agent. All
such notices and communications shall, when sent by overnight courier, mailed or
telecopied, be effective when delivered to such courier, deposited in the mails,
or telecopied and confirmed by return telecopy, respectively, except that
notices and communications to the Administrative Agent pursuant to Articles II,
III and VIII shall not be effective until received by the Administrative Agent.
Notices hereunder to the Company shall not be given by electronic mail.

          (b) If any notice required under this Agreement is permitted to be
made, and is made, by telephone, actions taken or omitted to be taken in
reliance thereon by the Administrative Agent or by any Bank shall be binding
upon the Company and each other Borrower notwithstanding any inconsistency
between the notice provided by telephone and any subsequent writing in
confirmation thereof provided to the Administrative Agent or such Bank;
provided that any such action taken or omitted to be taken by the Administrative
Agent or such Bank shall have been in good faith and in accordance with the
terms of this Agreement.

     SECTION 10.03 No Waiver; Remedies. No failure on the part of any Bank or
the Administrative Agent to exercise, and no delay in exercising, any right
hereunder or under any

                                       57



Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

     SECTION 10.04 Costs and Expenses. (a) The Company agrees to pay on demand
all reasonable, documented out-of-pocket costs and expenses of the Arranger and
the Administrative Agent (including, without limitation, reasonable fees and
expenses of counsel), in connection with any amendments, modifications or
waivers of the provisions hereof, or in determining the rights and obligations
of the parties hereto under this Agreement and the Notes, or the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Agreement
and the other documents to be delivered hereunder; provided that if, in the
event of any enforcement undertaken by the Banks hereunder, it shall be
determined that sufficient conflicts exist such that a single law firm engaged
by the Administrative Agent or the Majority Banks is precluded by law or by
standards of conduct from representing the Banks as a group, and such conflicts
would exist with respect to any other law firm representing the Banks as a
group, the Company agrees to pay on demand all reasonable, documented
out-of-pocket costs and expenses of each Bank, if any (including, without
limitation, reasonable fees and expenses of counsel), in connection with such
enforcement undertaking.

          (b) The Company agrees to pay to the Administrative Agent such fees as
shall have been agreed to by the Administrative Agent and the Company in a
separate agreement regarding the provision by the Administrative Agent of
services as Administrative Agent under this Agreement.

     SECTION 10.05 Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the declaration that the Advances
are due and payable pursuant to the provisions of Section 6.01, each Bank is
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Bank to or for the credit or the account of any Borrower
against any and all of the obligations of such Borrower now or hereafter
existing under this Agreement and the Notes held by such Bank, irrespective of
whether or not such Bank shall have made any demand under this Agreement or such
Notes and although such obligations may be unmatured. Each Bank shall promptly
notify the Company after any such set-off and application made by such Bank,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which such Bank may have.

     SECTION 10.06 Binding Effect. This Agreement (other than Sections 2.01 and
2.03, which shall only become effective upon satisfaction of the conditions set
forth in Section 3.01) shall become effective when it shall have been executed
by the Company and the Administrative Agent and when the Administrative Agent
shall have been notified by each bank listed on the signature pages hereof that
it has executed this Agreement and thereafter shall be binding upon and inure to
the benefit of the Company, the Administrative Agent and each Bank and their
respective successors and assigns, except that neither the Company nor any
Borrowing Subsidiary shall have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Banks.

                                       58



     SECTION 10.07 Governing Law. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the State of Illinois.

     SECTION 10.08 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

     SECTION 10.09 Confidentiality. Each Bank agrees that it will use reasonable
efforts to keep confidential any information from time to time supplied to it by
the Company which the Company designates in writing at the time of its delivery
to the Bank is to be treated confidentially; provided, however, that nothing
herein shall affect the disclosure of any such information to: (i) the extent
required by statute, rule, regulation or judicial process; (ii) counsel for any
Bank or to their respective accountants; (iii) bank examiners and auditors; (iv)
any Affiliate of such Bank; (v) any other Bank, or, subject to Section 9.04, any
Transferee or prospective Transferee; or (vi) any other Person in connection
with any litigation to which any one or more of the Banks is a party; provided
further, however, that each Bank agrees that it will use reasonable efforts to
promptly notify the Company of any request for information under this clause
(vi) or with respect to any request for information not enumerated in this
Section 10.09, if not otherwise prohibited from doing so. Notwithstanding
anything herein to the contrary, confidential information shall not include, and
each Bank (and each employee, representative or other agent of any Bank) may
disclose to any and all Persons, without limitation of any kind, the "tax
treatment" and "tax structure" (in each case, within the meaning of Treasury
Regulation Section 1.6011-4) of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are or
have been provided to such Bank relating to such tax treatment or tax structure;
provided that with respect to any document or similar item that in either case
contains information concerning such tax treatment or tax structure of the
transactions contemplated hereby as well as other information, this sentence
shall only apply to such portions of the document or similar item that relate to
such tax treatment or tax structure. The foregoing sentence shall be effective
retroactively to the time of the first discussions between the parties relating
to the Advances and the transactions related thereto.

     SECTION 10.10 Non-Reliance by the Banks. Each Bank by its signature to this
Agreement represents and warrants that (i) it has not relied in the extension of
the credit contemplated by this Agreement, nor will it rely in the maintenance
thereof, upon any assets of the Company or its Subsidiaries consisting of Margin
Stock as collateral and (ii) after reviewing the financial statements of the
Company and its Consolidated Subsidiaries referred to in Section 4.01(e), such
Bank has concluded therefrom that the consolidated cash flow of the Company and
its Consolidated Subsidiaries is sufficient to support the credit extended to
the Company pursuant to this Agreement.

     SECTION 10.11 No Indirect Security. Notwithstanding any Section or
provision of this Agreement to the contrary, nothing in this Agreement shall
restrict or limit the right or ability of the Company or any of its Subsidiaries
to pledge, mortgage, sell, assign, or otherwise encumber or dispose of any
Margin Stock.

                                       59



     SECTION 10.12 Indemnification. The Company agrees to indemnify and hold
harmless the Administrative Agent, each Bank, and their respective officers,
directors, employees and agents (any one of the foregoing being an "Indemnified
Party" and any two or more of the foregoing being "Indemnified Parties") from
and against, and pay the Indemnified Parties the amount of, any and all claims,
damages, liabilities, and reasonable, documented out-of-pocket costs and
expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against an Indemnified
Party relating in whole or in part to this Agreement, the Notes, any documents
delivered in connection herewith and the transactions contemplated hereby, and
in connection with or arising out of or by reason of, or in connection with the
preparation of a defense of, any investigation, litigation or proceeding brought
by a Person other than the Indemnified Parties or the Company and its
Subsidiaries, arising out of, related to or in connection with (i) this
Agreement, the Notes, any of the transactions contemplated herein or the use or
proposed use of the proceeds of any Advances, (ii) any acquisition or proposed
acquisition by the Company or any of its Subsidiaries of all or any portion of
the stock or all or substantially all of the assets of any Person, or (iii) the
actual or alleged presence of Hazardous Materials on any property of the Company
or any of its Subsidiaries or any Environmental Action relating to any of them,
in each case whether or not such investigation, litigation or proceeding is
brought by the Company, any other Borrower, their respective shareholders or
creditors, an Indemnified Party or any other Person, and whether or not an
Indemnified Party is otherwise a party thereto, provided, however, that this
indemnification shall not apply to any claim, damage, liability, cost or expense
that is found in a final, nonappealable judgment by a court of competent
jurisdiction to have resulted from an Indemnified Party's gross negligence or
willful misconduct. The covenants of the Company contained in this Section 10.12
and in Sections 10.04, 2.11, 2.12 and 2.19 shall survive the repayment of all
amounts due and payable under this Agreement and the termination of this
Agreement.

     SECTION 10.13 Partial Invalidity. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.

     SECTION 10.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE
COMPANY, ANY BORROWING SUBSIDIARY, THE ADMINISTRATIVE AGENT OR ANY BANK IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. EACH OF THE
PARTIES HERETO AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY BENCH TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY
FILE AN

                                       60



ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

     SECTION 1.01 Jurisdiction, Etc. (a) Each of the parties hereto irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any Illinois state court or federal court of the United States
of America sitting in Chicago, Illinois, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in any such Illinois state court or, to the extent permitted by law, in such
federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement or the Notes
in the courts of any jurisdiction.

          (a) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any
Illinois state or federal court. Each of the parties hereto irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.

     SECTION 1.02 Nonliability of Banks. The relationship between the Borrowers
on the one hand and the Banks and the Administrative Agent on the other hand
shall be solely that of borrower and lender. Neither the Administrative Agent,
the Arranger nor any Bank shall have any fiduciary responsibilities to the
Borrower. Neither the Administrative Agent, the Arranger nor any Bank undertakes
any responsibility to the Borrowers to review or inform the Borrowers of any
matter in connection with any phase of the Borrowers' business or operations.
Neither the Administrative Agent, the Arranger nor any Bank shall have any
liability with respect to, and the Borrowers waive, release and agree not to sue
for, any special, indirect or consequential damages suffered by the Borrowers in
connection with, arising out of, or in any way related to this Agreement or the
transactions contemplated thereby.

     SECTION 1.03 Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, no Bank shall be obligated to extend credit to
any Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.

     SECTION 1.04 USA Patriot Act Notification. The following notification is
provided to each Borrower pursuant to Section 326 of the USA Patriot Act of
2001, 31 U.S.C. Section 5318 (the "USA Patriot Act"):

          IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To
     help the government fight the funding of terrorism and money laundering
     activities, Federal law requires all financial institutions to obtain,
     verify, and record information that identifies each person or entity that
     opens an account, including

                                       61



     any deposit account, treasury management account, loan, other extension of
     credit, or other financial services product. What this means for such
     Borrower: When such Borrower opens an account, if such Borrower is an
     individual, the Administrative Agent and the Banks will ask for such
     Borrower's name, residential address, tax identification number, date of
     birth, and other information that will allow the Administrative Agent and
     the Banks to identify such Borrower, and, if such Borrower is not an
     individual, the Administrative Agent and the Banks will ask for such
     Borrower's name, tax identification number, business address, and other
     information that will allow the Administrative Agent and the Banks to
     identify such Borrower. The Administrative Agent and the Banks may also
     ask, if such Borrower is an individual, to see such Borrower's driver's
     license or other identifying documents, and, if such Borrower is not an
     individual, to see such Borrower's legal organization documents or other
     identifying documents.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       62



     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                           R.R. DONNELLEY & SONS COMPANY

                                           By: /s/ James M. Moran
                                               ---------------------------------

                                           Title: VP & TREASURER
                                                 -------------------------------

                                           BANK ONE, NA, as Administrative Agent
                                           and as a Bank

                                           By: /s/ Diane M. Faunda
                                               ---------------------------------

                                           Title: Director, Capital Markets
                                                  ------------------------------



                                           WACHOVIA BANK, NATIONAL
                                           ASSOCIATION, as Syndication Agent and
                                           a Bank

                                           By: /s/ Steven [ILLEGIBLE]
                                               ---------------------------------

                                           Title: Director
                                                  ------------------------------



                                           THE NORTHERN TRUST COMPANY, as
                                           Documentation Agent and a Bank

                                           By: /s/ David [ILLEGIBLE]
                                               ---------------------------------

                                           Title: VP
                                                  ------------------------------



                                           JP MORGAN CHASE BANK,
                                           as Managing Agent and a Bank

                                           By: /s/ Beth [ILLEGIBLE]
                                               ---------------------------------

                                           Title: Vice President
                                                  ------------------------------



                                           CITIBANK, N.A.,
                                           as a Bank

                                           By: /s/ Henry J. Matthews
                                               ---------------------------------

                                           Title: Vice President
                                                 -------------------------------



                                           FIFTH THIRD BANK,
                                           as a Bank

                                           By: /s/ [ILLEGIBLE]
                                               ---------------------------------

                                           Title: Assistant Vice President
                                                  ------------------------------



                                           ING BANK,
                                           as a Bank
/s/ [ILLEGIBLE]
Drs. M.J.J van der Hooft                   By: /s/ [ILLEGIBLE]
                                               ---------------------------------

Relationship Manager                       Title: Relationship Manager
                                                  ------------------------------




                                              THE BANK OF TOKYO - MITSUBISHI,
                                              LTD., CHICAGO BRANCH, as a Bank


                                              By: /s/ Shinichiro Munechika
                                                 -------------------------------

                                              Title: Deputy General Manager
                                                    ----------------------------



                                              BARCLAYS BANK PLC, as a Bank


                                              By: /s/ Nicholas A. Bell
                                                 -------------------------------

                                              Title: Director Loan Transaction
                                                    ----------------------------
                                                     Management
                                                    ----------------------------



                                              EXPORT DEVELOPMENT CANADA, as
                                              a Bank



                                              By: /s/ David Baron
                                                 -------------------------------

                                              Title: Financial Services Manager
                                                    ----------------------------


                                              By: /s/ Carl Burlock
                                                 -------------------------------

                                              Title: Senior Financial Services
                                                    ----------------------------
                                                     Manager
                                                    ----------------------------




                                              MORGAN STANLEY BANK, as a Bank


                                              By: /s/ Jaap L. Tonckens
                                                 -------------------------------

                                              Title:   Vice President
                                                    ----------------------------
                                                       Morgan Stanley Bank
                                                    ----------------------------



                                              PNC BANK, as a Bank



                                              By: /s/ Dorothy G. W. Brailer
                                                 -------------------------------

                                              By: Dorothy G. W. Brailer
                                                 -------------------------------

                                              Title: Vice President
                                                    ----------------------------




                                              BANK OF IRELAND, as a Bank



                                              By: /s/ Lain Donovan
                                                 -------------------------------

                                              Title: Manager
                                                    ----------------------------


                                              By: /s/ Gwen Evans
                                                 -------------------------------

                                              Title: Manager
                                                    ----------------------------



                                   SCHEDULE I



                                                                                     Eurocurrency
                                                 Domestic                               Lending
   Name of Bank                  Commitment      Lending Office                          Office
   ------------                  ----------      --------------                          ------
                                                                            
Bank One, NA                    $27,000,000      1 Bank One Plaza                         same
                                                 14th Floor, Suite 0088
                                                 Chicago, IL 60670
                                                 Attn:  Diane Faunda
                                                 Phone: (312) 732-1612
                                                 FAX:   (312) 732-5161

Wachovia Bank, National         $27,000,000      191 Peachtree Street, N.E.               same
Association                                      Atlanta, GA 30303
                                                 Attn: Rob Wilson
                                                 Phone: (404) 332-6538
                                                 FAX.   (404) 332-4058

The Northern Trust Company      $20,000,000      50 South LaSalle Street                  same
                                                 11th Floor
                                                 Chicago, IL 60675
                                                 Attn:  Laura Watzke
                                                 Phone: (312) 444-2311
                                                 FAX:   (312) 444-6062

JP Morgan Chase Bank            $14,000,000      2 Chase Manhattan Plaza                  same
                                                 13th Floor
                                                 New York, NY 10081
                                                 Attn:  Nicoleen Prince
                                                 Phone: (212) 552-4657
                                                 FAX:   (212) 552-1020

Citibank, N.A.                  $12,000,000      233 South Wacker Drive                   same
                                                 86th Floor
                                                 Chicago, IL 60606
                                                 Attn:  Peter Koesler
                                                 Phone: (312) 876-3273
                                                 FAX:   (312) 876-3387

Fifth Third Bank                $12,000,000      1701 West Golf Road                      same
                                                 Rolling Meadows, IL 60008
                                                 Attn:  Jeff Assenmacher
                                                 Phone: (847) 354-7183
                                                 FAX:   (847) 354-7130






                                                                                     Eurocurrency
                                                 Domestic                               Lending
   Name of Bank                  Commitment      Lending Office                          Office
   ------------                  ----------      --------------                          ------
                                                                            
ING Bank                        $10,000,000      1325 Avenue of the Americas              same
                                                 6th Floor
                                                 New York, NY 10019
                                                 Attn:  Norma Cruz
                                                 Phone: (646) 424-8230
                                                 FAX:   (646) 424-8253

The Bank of Tokyo -             $10,000,000      227 West Monroe Street                   same
Mitsubishi, Ltd., Chicago                        Suite 2300
Branch                                           Chicago, IL 60606
                                                 Attn:  Diane Tkach
                                                 Phone: (312) 696-4663
                                                 FAX:   (312) 696-4535

Barclays Bank PLC               $10,000,000      200 Park Avenue                          same
                                                 4th Floor
                                                 New York, NY 10186
                                                 Attn:  David Barton
                                                 Phone: (212) 412-7693
                                                 FAX:   (212) 412-7511

Export Development Canada       $10,000,000      151 O'Connor Street                      same
                                                 Ottawa, Canada K1A 1K3
                                                 Attn:  Carl Burlock/David Baron
                                                 Phone: (613) 598-3087/2558
                                                 FAX:   (613) 598-6858

Morgan Stanley Bank             $8,000,000       750 Seventh Avenue                       same
                                                 11th Floor
                                                 New York, NY 10020
                                                 Attn:  Joseph DiTomaso
                                                 Phone: (212) 762-2320
                                                 FAX:   (212) 762-0346

PNC Bank, N.A.                  $7,500,000       249 Fifth Avenue                         same
                                                 2nd Floor
                                                 Pittsburgh, PA 15222
                                                 Attn:  Hana Deiter
                                                 Phone: (412) 762-8865
                                                 FAX:   (412) 762-6484






                                                                                     Eurocurrency
                                                 Domestic                               Lending
   Name of Bank                  Commitment      Lending Office                          Office
   ------------                  ----------      --------------                          ------
                                                                            
Bank of Ireland                 $7,500,000       FL4 La Touche House, I.F.S.C.            same
                                                 Custom Dock House
                                                 Dublin 1, Ireland
                                                 Attn:  Gwen Evans
                                                 Phone: 011-353-1-611-5328
                                                 FAX:   011-353-1-829-0129





                                   SCHEDULE II

                                PRICING SCHEDULE



================================================================================================================
            APPLICABLE
              MARGIN
          (EUROCURRENCY               LEVEL I       LEVEL II       LEVEL III        LEVEL IV        LEVEL V
              RATE)                   STATUS         STATUS          STATUS          STATUS          STATUS
- ----------------------------------------------------------------------------------------------------------------
                                                                                     
Eurocurrency Rate (Revolving           0.24%         0.28%           0.32%            0.40%          0.625%
Loans)
- ----------------------------------------------------------------------------------------------------------------
Eurocurrency Rate (Term Loans)        0.365%         0.405%          0.445%          0.525%          0.75%
================================================================================================================




================================================================================================================
            APPLICABLE                LEVEL I       LEVEL II       LEVEL III        LEVEL IV        LEVEL V
           FACILITY FEE               STATUS         STATUS          STATUS          STATUS          STATUS
               RATE
================================================================================================================
                                                                                     
Applicable Facility Fee                0.06%         0.07%           0.08%            0.10%          0.125%
================================================================================================================
Applicable Utilization Fee Rate        0.05%         0.05%           0.05%           0.125%          0.125%
================================================================================================================


     For the purposes of this Schedule, the following terms have the following
meanings, subject to the final paragraph of this Schedule:

     "Level I Status" exists at any date if, on such date, the Company's Moody's
Rating is A1 or better or the Company's S&P Rating is A+ or better.

     "Level II Status" exists at any date if, on such date, (a) the Company has
not qualified for Level I Status and (b) the Company's Moody's Rating is A2 or
better or the Company's S&P Rating is A or better.

     "Level III Status" exists at any date if, on such date, (a) the Company has
not qualified for Level I Status or Level II Status and (b) the Company's
Moody's Rating is A3 or better or the Company's S&P Rating is A- or better.

     "Level IV Status" exists at any date if, on such date, (a) the Company has
not qualified for Level I Status, Level II Status or Level III Status and (b)
the Company's Moody's Rating is Baa1 or better or the Company's S&P Rating is
BBB+ or better.

     "Level V Status" exists at any date if, on such date, the Company has not
qualified for Level I Status, Level II Status, Level III Status or Level IV
Status.




     "Moody's Rating" means, at any time, the Public Debt Rating issued by
Moody's and then in effect with respect to the Company's senior unsecured
long-term debt securities without third-party credit enhancement.

     "S&P Rating" means, at any time, the Public Debt Rating issued by S&P and
then in effect with respect to the Company's senior unsecured long-term debt
securities without third-party credit enhancement.

     "Status" means either Level I Status, Level II Status, Level III Status,
Level IV Status or Level V Status.

     The Applicable Margin, Applicable Facility Fee Rate and Applicable
Utilization Fee Rate shall be determined in accordance with the foregoing table
based on the Company's Status as determined from its then-current Moody's and
S&P Ratings. The credit rating in effect on any date for the purposes of this
Schedule is that in effect at the close of business on such date. If at any time
the Company has no Moody's Rating or no S&P Rating, Level V Status shall exist.

                                        2



                                  SCHEDULE III

                                   LITIGATION

Jones, et al. v. R.R. Donnelley & Sons Co.

On November 25, 1996, a class action was brought against the Company in federal
district court in Chicago, Illinois, on behalf of current and former
African-American employees, alleging that the Company racially discriminated
against them in violation of the Civil Rights Act of 1871, as amended, and the
U.S. Constitution. The complaint seeks declaratory and injunctive relief, and
asks for actual, compensatory, consequential and punitive damages in an amount
not less than $500 million. The company settled that portion of Jones, et al. v.
R.R. Donnelley & Sons Co., relating to claims arising in locations other than
the closure of the Chicago catalog operations in 1993 without any admission of
wrongdoing by the company. The issue remaining in the Jones case affects two
classes certified by the trial court: a class consisting of African-American
employees discharged in connection with the shutdown of the Chicago catalog
operations, and a class consisting of African-American employees of the Chicago
catalog operations after November 1992 who were other than permanent employees.
On September 16, 2002, the Seventh Circuit Court of Appeals overturned a ruling
by the trial court and held that a two year statute of limitations applies to
the claims of these classes, which absent any other ruling would result in
dismissal of the claims on the basis of timeliness. On May 19, 2003, the United
States Supreme Court agreed to review the issue of the appropriate statute of
limitations to apply and set the matter for argument in the 2003 term.



                                    EXHIBIT A

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

     This Assignment and Assumption (the "Assignment and Assumption") is dated
as of the Effective Date set forth below and is entered into by and between
[Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the
"Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
"Credit Agreement"), receipt of a copy of which is hereby acknowledged by the
Assignee. The Terms and Conditions set forth in Annex 1 attached hereto (the
"Standard Terms and Conditions") are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.

     For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Agent as contemplated below, the interest in and to all of the Assignor's
rights and obligations in its capacity as a Bank under the Credit Agreement and
any other documents or instruments delivered pursuant thereto that represents
the amount and percentage interest identified below of all of the Assignor's
outstanding rights and obligations under the respective facilities identified
below (including without limitation any letters of credit, guaranties and
swingline loans included in such facilities and, to the extent permitted to be
assigned under applicable law, all claims (including without limitation contract
claims, tort claims, malpractice claims, statutory claims and all other claims
at law or in equity), suits, causes of action and any other right of the
Assignor against any Person whether known or unknown arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby) (the
"Assigned Interest"). Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.

1.   Assignor:    ________________________________________________

2.   Assignee:    ________________________________________________
                      [and is an Affiliate/of [identify Bank]/1/

3.   Borrower(s): R.R. Donnelley & Sons Company

4.   Agent:       Bank One, NA , as the administrative agent under the Credit
                  Agreement.


- ------------
/1/ Select as applicable.

                               Exhibit A - Page 1



5.   Credit Agreement:  The 364-Day Credit Agreement dated as of October 9, 2003
                        among R.R. Donnelley & Sons Company, the Banks party
                        thereto, Bank One, NA as Administrative Agent, and the
                        other agents party thereto.

6.   Assigned Interest:



- -------------------------------------------------------------------------------------------------------------
                                  Aggregate Amount of            Amount of                 Percentage
      Facility Assigned            Commitment/Loans          Commitment/Loans              Assigned of
                                     for all Banks               Assigned*               Commitment/Loans/2/
- -------------------------------------------------------------------------------------------------------------
                                                                                
         ___________/3/                    $                         $                      _______%
- -------------------------------------------------------------------------------------------------------------
         ------------                      $                         $                      _______%
- -------------------------------------------------------------------------------------------------------------
         ------------                      $                         $                      _______%
- -------------------------------------------------------------------------------------------------------------



7.   Trade Date: ____________________/4/

Effective Date: ____________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE
AGENT.]

     The terms set forth in this Assignment and Assumption are hereby agreed to:

                                         ASSIGNOR
                                         [NAME OF ASSIGNOR]


                                         By:___________________________________
                                            Title:


                                         ASSIGNEE
                                         [NAME OF ASSIGNEE]


                                         By:___________________________________
                                            Title:


- ------------

/2/ Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
of all Banks thereunder.

/3/ Fill in the appropriate terminology for the types of facilities under the
Credit Agreement that are being assigned under this Assignment (e.g. "Revolving
Credit Commitment," "Term Loan Commitment,", etc.)

/4/ Insert if satisfaction of minimum amounts is to be determined as of the
Trade Date.

                               Exhibit A - Page 2




[Consented to and]/5/ Accepted:

BANK ONE, NA, as Administrative Agent


By:______________________________
     Title:



[Consented to:]/6/



R.R. DONNELLEY SONS & COMPANY

By:________________________________

Name:______________________________

Title:_____________________________


- ------------

/5/  To be added only if the consent of the Administrative Agent is required by
the terms of the Credit Agreement.

/6/  To be added only if the consent of the Borrower and/or other parties is
required by the terms of the Credit Agreement.


                               Exhibit A - Page 3



                                     ANNEX 1
                            TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

     1.  Representations and Warranties.

         1.1. Assignor. The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby. Neither the Assignor nor any of its officers, directors,
employees, agents or attorneys shall be responsible for (i) any statements,
warranties or representations made in or in connection with the Credit Agreement
or any other Loan Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency, perfection, priority, collectibility,
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrowers, any of its Subsidiaries or Affiliates or any other
Person obligated in respect of any Loan Document, (iv) the performance or
observance by the Borrowers, any of its Subsidiaries or Affiliates or any other
Person of any of their respective obligations under any Loan Document, (v)
inspecting any of the property, books or records of the Borrowers, or any
guarantor, or (vi) any mistake, error of judgment, or action taken or omitted to
be taken in connection with the Loans or the Loan Documents.

         1.2. Assignee. The Assignee (a) (i) represents and warrants that it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Bank under the Credit Agreement, (ii) agrees
that from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Bank thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Bank thereunder, (iii) agrees that its
payment instructions and notice instructions are as set forth in Schedule 1 to
this Assignment and Assumption, (iv) confirms that none of the funds, monies,
assets or other consideration being used to make the purchase and assumption
hereunder are "plan assets" as defined under ERISA and that its rights, benefits
and interests in and under the Loan Documents will not be "plan assets" under
ERISA, (v) agrees to indemnify and hold the Assignor harmless against all
losses, costs and expenses (including, without limitation, reasonable attorneys'
fees) and liabilities incurred by the Assignor in connection with or arising in
any manner from the Assignee's non-performance of the obligations assumed under
this Assignment and Assumption, (vi) represents and warrants that it has
received a copy of the Credit Agreement, together with copies of financial
statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Bank, and (vii) represents and warrants that
attached as Schedule 1 to this Assignment and Assumption is any documentation
required to be delivered by the Assignee with respect to its tax status pursuant
to the terms of the Credit Agreement, duly completed and executed by the
Assignee and (b) agrees that (i) it will, independently and without reliance on
the Administrative Agent, the Assignor or any other Bank, and based on such
documents and information as it shall deem


                                Exhibit A - Page 4



appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Bank.

     2. Payments. The Assignee shall pay the Assignor, on the Effective Date,
the amount agreed to by the Assignor and the Assignee. From and after the
Effective Date, the Administrative Agent shall make all payments in respect of
the Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to but excluding the
Effective Date and to the Assignee for amounts which have accrued from and after
the Effective Date.

     3. General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of Illinois.

                               Exhibit A - Page 5



                          ADMINISTRATIVE QUESTIONNAIRE

     (Schedule to be supplied by Closing Unit or Trading Documentation Unit)

    (For Forms for Primary Syndication call Peterine Svoboda at 312-732-8844)
      (For Forms after Primary Syndication call Jim Bartz at 312-732-1242)

                               Exhibit A - Page 6




              US AND NON-US TAX INFORMATION REPORTING REQUIREMENTS

     (Schedule to be supplied by Closing Unit or Trading Documentation Unit)

    (For Forms for Primary Syndication call Peterine Svoboda at 312-732-8844)
      (For Forms after Primary Syndication call Jim Bartz at 312-732-1242)

                               Exhibit A - Page 7




                                    EXHIBIT B

                           [FORM OF ASSUMPTION LETTER]

                                                     _____________________, ____



To the Banks parties to the
  364-Day Credit Agreement referred
  to below

Ladies and Gentlemen:

     Reference is made to the 364-Day Credit Agreement dated as of October 9,
2003 among R.R. Donnelley & Sons Company, the Banks named therein and Bank One,
NA, as Administrative Agent for such Banks (as amended and in effect from time
to time, the "364-Day Credit Agreement"). Terms defined in the 364-Day Credit
Agreement and capitalized herein are used herein as defined therein.

     The undersigned, ___________ (the "Subsidiary"), a _________________
corporation, proposes to become a "Borrowing Subsidiary" under the 364-Day
Credit Agreement, and accordingly agrees that from the date hereof it shall
become a "Borrowing Subsidiary" under the 364-Day Credit Agreement and agrees
that from the date hereof and until the payment in full of the principal of and
interest on all Advances made to it under the 364-Day Credit Agreement and
performance of all of its other obligations thereunder, and termination
hereunder of its status as a "Borrowing Subsidiary" as provided below, it shall
perform, comply with and be bound by each of the provisions of the 364-Day
Credit Agreement which are stated to apply to the "Company", a "Borrowing
Subsidiary" or a "Borrower". Without limiting the generality of the foregoing,
that Subsidiary represents and warrants that: (i) each of the representations
and warranties set forth in Sections 4(a), (b), (c) and (d) of the 364-Day
Credit Agreement is hereby made by such Subsidiary on and as of the date hereof
as if made on and as of the date hereof and as if such Subsidiary is the
"Company", this Assumption Letter is the "Agreement" referenced therein and each
Note issued by such Borrowing Subsidiary is the "Note" referenced therein, and
(ii) it has heretofore received a true and correct copy of the 364-Day Credit
Agreement (including any modifications thereof or supplements or waivers
thereto) as in effect on the date hereof.

     So long as the principal of and interest on all Advances made to the
Subsidiary under the 364-Day Credit Agreement shall have been paid in full and
all other obligations of the Subsidiary shall have been fully performed, the
Subsidiary may by not less than five Business Days' prior notice to the Banks
terminate its status as a "Borrowing Subsidiary."

     The Subsidiary irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any Illinois state court or
federal court of the United States of America sitting in Chicago, Illinois, and
any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Assumption Letter, the 364-Day Credit Agreement or

                               Exhibit B - Page 1



the Notes, or for recognition or enforcement of any judgment, and the Subsidiary
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such Illinois state
court or, to the extent permitted by law, in such federal court. The Subsidiary
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Assumption Letter shall
affect any right that any Bank or the Administrative Agent may otherwise have to
bring any action or proceeding relating to this Assumption Letter, the 364-Day
Credit Agreement or the Notes in the courts of any jurisdiction.

         The Subsidiary irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Assumption Letter, the 364-Day Credit Agreement or
the Notes in any Illinois state or federal court. The Subsidiary irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

         This Assumption Letter shall be governed by, and construed in
accordance with, the laws of the State of Illinois.

                               Exhibit B - Page 2



         IN WITNESS WHEREOF, the Subsidiary has duly executed and delivered this
Assumption Letter as of the date and year first above written.

                                          [NAME OF BORROWING SUBSIDIARY]



                                          By:________________________________
                                          Title:_____________________________


                                          Address for Notices under the 364-Day
                                          Credit Agreement:

                                          ____________________________________

                                          ____________________________________

                                          ____________________________________

                                          ____________________________________

                                          ____________________________________

Consented to:

R.R. DONNELLEY & SONS COMPANY


By:________________________________
Title:_____________________________

                               Exhibit B - Page 3



                                   EXHIBIT C-1

                             FORM OF COMMITTED NOTE

                                                             ____________, _____

         FOR VALUE RECEIVED, the undersigned, [R.R. DONNELLEY & SONS COMPANY, a
Delaware corporation] [NAME OF APPLICABLE BORROWING SUBSIDIARY, a
__________________ corporation] (the "Company"), PROMISES TO PAY to the order of
________________________ (the "Bank") for the account of its Applicable Lending
Office on the Termination Date (or, if the Company has made the Term Loan
Election, the Maturity Date) (each as defined in the 364-Day Credit Agreement
referred to below) the aggregate principal amount of the Committed Advances made
by the Bank to the Company pursuant to the 364-Day Credit Agreement dated as of
October 9, 2003 among [the Company] [R.R. Donnelley & Sons Company], the Bank
and certain other banks parties thereto, and Bank One, NA, as Administrative
Agent for the Bank and such other banks (as amended or modified from time to
time, the "364-Day Credit Agreement"); the terms defined therein being used
herein as therein defined) outstanding on the Termination Date (or, if the
Company has made the Term Loan Election, the Maturity Date).

         The Company promises to pay interest on the unpaid principal amount of
each Committed Advance made to it from the date of such Committed Advance until
such principal amount is paid in full, at such interest rates, and payable at
such times, as are specified in the 364-Day Credit Agreement.

         Both principal and interest are payable in lawful money of the United
States of America to Bank One, NA, as Administrative Agent, at the address
specified pursuant to Article II of the 364-Day Credit Agreement, in same day
funds. Each Committed Advance owing to the Bank by the Company pursuant to the
364-Day Credit Agreement, and all payments made on account of principal thereof,
shall be recorded by the Bank and, prior to any transfer hereof, endorsed on the
grid attached hereto which is part of this Promissory Note.

         This Promissory Note is one of the Committed Notes referred to in, and
is entitled to the benefits of, the 364-Day Credit Agreement. The 364-Day Credit
Agreement, among other things, (i) provides for the making of Committed Advances
by the Bank to the Company from time to time, the indebtedness of the Company
resulting from each such Committed Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.

                              Exhibit C-1 - Page 1



         This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of Illinois.

                                                 [R.R. DONNELLEY & SONS COMPANY]
                                                 [NAME OF APPLICABLE BORROWING
                                                 SUBSIDIARY]

                                                 By:__________________________
                                                 Title:_______________________

                              Exhibit C-1 - Page 2



                       ADVANCES AND PAYMENTS OF PRINCIPAL

================================================================================
                                Amount of            Unpaid
   Date     Amount of         Principal Paid        Principal          Notation
             Advance            or Prepaid           Balance            Made By
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

================================================================================

                              Exhibit C-1 - Page 3


                                   EXHIBITC-2

                            FORM OF UNCOMMITTED NOTE

U.S. $_______________                                        ____________, _____


          FOR VALUE RECEIVED, the undersigned, [R.R. DONNELLEY & SONS COMPANY, a
Delaware corporation] [NAME OF APPLICABLE BORROWING SUBSIDIARY, a
__________________ corporation] (the "Company"), PROMISES TO PAY to the order of
________________________ (the "Bank") for the account of its Applicable Lending
Office (as defined in the 364-Day Credit Agreement dated as of October 9, 2003
among [the Company] [R.R. Donnelley & Sons Company], the Bank and certain other
banks parties thereto, and Bank One, NA, as Administrative Agent for the Bank
and such other banks (as amended or modified from time to time, the "364-Day
Credit Agreement"; the terms defined therein being used herein as therein
defined) on _______________, 19__, the principal amount of U.S.$______________.

         The Company promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:

               Interest Rate: ____% per annum (calculated on the basis of a year
               of ____ days for the actual number of days elapsed).

               Interest Payment Date(s):

         Both principal and interest are payable in lawful money of the United
States of America to Bank One, NA, for the account of the Bank, at the address
specified pursuant to Article II of the 364-Day Credit Agreement, in same day
funds.

         This Promissory Note is one of the Uncommitted Notes referred to in,
and is entitled to the benefits of, the 364-Day Credit Agreement. The 364-Day
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereupon upon the happening of certain stated events.

         The Company waives presentment, demand, protest and notice of any kind.
No failure to exercise, and no delay in exercising, any rights hereunder on the
part of the holder hereof shall operate as a waiver of such rights.

                              Exhibit C-2 - Page 1



         This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of Illinois.

                                                 [R.R. DONNELLEY & SONS COMPANY]
                                                 [NAME OF APPLICABLE BORROWING
                                                 SUBSIDIARY]

                                                 By:___________________________
                                                 Title:________________________

                              Exhibit C-2 - Page 2



                                   EXHIBIT D-1

                          NOTICE OF COMMITTED BORROWING

Bank One, NA, as Administrative Agent
1 Bank One Plaza
Chicago, Illinois  60670

                                                             ____________, _____

Ladies and Gentlemen:

         The undersigned, ________________, refers to the 364-Day Credit
Agreement dated as of October 9, 2003 (as amended, modified or supplemented from
time to time, the "364-Day Credit Agreement", the terms defined therein being
used herein as therein defined), among [the undersigned,] [R.R. Donnelley & Sons
Company (the "Company")], certain Banks parties thereto and Bank One, NA, as
Administrative Agent for such Banks, and notifies you, pursuant to Section 2.02
of the 364-Day Credit Agreement, that the undersigned requests a Committed
Borrowing under the 364-Day Credit Agreement, and in that connection sets forth
below the information relating to such Committed Borrowing (the "Proposed
Committed Borrowing") as required by Section 2.02(a) of the 364-Day Credit
Agreement:

         (i) The Business Day of the Proposed Committed Borrowing is
____________, _____.

         (ii) The Type of Committed Advances comprising the Proposed Committed
Borrowing is [Base Rate Advances] [Eurocurrency Rate Advances].

         (iii) The currency for the Proposed Committed Borrowing is [Dollars]
[type of Alternative Currency].

         (iv) The aggregate amount of the Proposed Committed Borrowing is
$__________.

         (v) The Interest Period for each Eurocurrency Rate Advance made as part
of the Proposed Committed Borrowing is ______ month[s].

         The undersigned certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Committed Borrowing:

                  (a) the representations and warranties contained in
subsections (a), (b), (c), (d), (e)(i), (f)(ii) and (g) through (o) of Section
4.01 of the 364-Day Credit Agreement are correct, before and after giving effect
to the Proposed Committed Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date;

                              Exhibit D-1 - Page 1



         (b) no event has occurred and is continuing, or would result from the
Proposed Committed Borrowing or from the application of the proceeds therefrom,
that constitutes an Event of Default or that would constitute an Event of
Default but for the requirement that notice be given or time elapse or both; and

         (c) the aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted amount)
of indebtedness for borrowed money (after giving effect to the Proposed
Committed Borrowing and the application of the proceeds thereof) of [the
undersigned] [the Company] and its Subsidiaries does not exceed the maximum
amount thereof presently authorized by [the undersigned's] [the Company's] Board
of Directors.

                                                      Very truly yours,

                                                      [NAME OF BORROWER]


                                                      By:_______________________
                                                      Title:____________________

                              Exhibit D-1 - Page 2



                                   EXHIBIT D-2

                         NOTICE OF UNCOMMITTED BORROWING

Bank One, NA, as Administrative Agent
1 Bank One Plaza
Chicago, Illinois  60670

                                                             ____________, _____

Attention:  ____________________

Ladies and Gentlemen:

         The undersigned, _____________, refers to the 364-Day Credit Agreement,
dated as of October 9, 2003 ( as amended, modified or supplemented from time to
time, the "364-Day Credit Agreement", the terms defined therein being used
herein as therein defined), among [the undersigned] [R.R. Donnelley & Sons
Company (the "Company")], certain Banks parties thereto and Bank One, NA, as
Administrative Agent for such Banks, and notifies you pursuant to Section 2.03
of the 364-Day Credit Agreement that the undersigned requests an Uncommitted
Borrowing under the 364-Day Credit Agreement, and in that connection sets forth
the terms on which such Uncommitted Borrowing (the "Proposed Uncommitted
Borrowing") is requested to be made:

                  (A) Date:                       ____________________________
                  (B) Amount:                     $___________________________
                  (C) Type of Quote Requested/7/: Uncommitted
                                                  Borrowing Margin____________
                                                  Fixed Rate__________________

                  (D) Maturity Date:              ____________________________
                  Prepayment terms:               May [not] be prepaid,
                                                  [with] [without]penalty

                  Prepayment penalty:/8/          ____________________________
                  (E) Interest Payment Date(s):   ____________________________
                  (F) Borrower:                   ____________________________
                  (G) Other terms:


_____________________________
/7/ Select one.
/8/ Include if applicable.

                              Exhibit D-2 - Page 1



     The undersigned certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Uncommitted Borrowing:

     (a) the representations and warranties contained in subsections (a), (b),
(c), (d), (e)(i), (f)(ii) and (g) through (o) of Section 4.01 are correct,
before and after giving effect to the Proposed Uncommitted Borrowing and to the
application of the proceeds therefrom, as though made on and as of such date;

     (b) no event has occurred and is continuing, or would result from the
Proposed Uncommitted Borrowing or from the application of the proceeds
therefrom, that constitutes an Event of Default or that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both;

     (c) the aggregate principal amount (or, in the case of securities issued at
a discount from the principal amount at maturity, the accreted amount) of
indebtedness for borrowed money (after giving effect to the Proposed Uncommitted
Borrowing and to the application of proceeds therefrom) of [the undersigned]
[the Company] and its Subsidiaries does not exceed the maximum amount thereof
presently authorized by the Board of Directors of [the undersigned] [the
Company];

     The undersigned confirms that the Proposed Uncommitted Borrowing is to be
made available to it in accordance with Section 2.03(a)(iv) of the 364-Day
Credit Agreement.

                                        [NAME OF BORROWER]


                                        By:_________________________
                                        Title:______________________

                              Exhibit D-2 - Page 2



                                    EXHIBIT E

                  FORM OF NOTICE OF CONVERSION OR CONTINUATION

TO:  Bank One, NA, as Administrative Agent (the "Administrative Agent") under
     that certain 364-Day Credit Agreement dated as of October 9, 2003 (the
     "364-Day Credit Agreement") by and among R.R. Donnelley & Sons Company (the
     "Company"), the Administrative Agent and the Banks parties thereto.

     Pursuant to the terms and conditions of the 364-Day Credit Agreement, this
Notice of Conversion or Continuation ("Notice") represents the election of the
Company to [insert one of the following]:

     /9/convert $__________ in aggregate principal amount of Base Rate Advances
to Eurocurrency Rate Advances on __________, _____. The initial Interest Period
for such Eurocurrency Rate Advances is requested to be a __________ (_____)
month period. [and]/10/

     /11/convert $__________ in aggregate principal amount of Eurocurrency Rate
Advances with a current Interest Period ending _____________ to Base Rate
Advances on __________, _____.

     /12/continue as Eurocurrency Rate Advances $__________ in aggregate
principal amount of presently outstanding Eurocurrency Rate Advances with a
current Interest Period ending __________, for a _____ month period commencing
on __________, _____.

     Unless otherwise defined herein, terms defined in the 364-Day Credit
Agreement shall have the same meanings in this Notice.

Dated:  ____________, _____

                                              [NAME OF BORROWER]



                                              By:__________________________
                                              Title:_______________________

______________________
/9/  Use if converting Base Rate Advances to Eurocurrency Rate Advances.
/10/ Use if converting only a portion of Eurocurrency Rate Advances and
continuing the balance as Eurocurrency Rate Advances.
/11/ Use if converting Eurocurrency Rate Advances to Base Rate Advances.
/12/ Use if continuing Eurocurrency Rate Advances.

                               Exhibit E - Page 1





                                    EXHIBIT F

                           COMMITMENT INCREASE CONSENT

     This Commitment Increase Consent (this "Assumption Agreement") among R.R.
Donnelley & Sons Company (the "Borrower"), Bank One, NA, as Administrative Agent
and __________ (the "Assuming Bank") is dated as of ______, ______. The parties
hereto agree as follows:

     1.   PRELIMINARY STATEMENT. The Borrower, the Agent and certain Banks are
party to that certain 364-Day Credit Agreement dated as of October 9, 2003
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.

     2.   ASSUMPTION. Pursuant to Section 2.23 of the Credit Agreement, the
Borrower has requested an increase in the aggregate Commitments and the Assuming
Bank has agreed, pursuant to such request, to assume the rights and obligations
of a Bank party to the Credit Agreement with a Commitment of $__________.
Immediately upon giving effect to the execution and delivery of this Assumption
Agreement, the Assuming Bank will be a Bank under the Credit Agreement with a
Commitment in such amount, together with all the rights and obligations
appurtenant thereto, including without limitation an obligation to make
Committed Advances to the Borrower in an aggregate amount at any one time
outstanding not exceeding the amount of its Commitment.

     3.   CONDITIONS PRECEDENT. This Assumption Agreement shall become effective
as of the Effective Date (defined below) when the Agent has received:

          (i)   counterparts of this Assumption Agreement duly executed and
delivered by each of the Borrower, the Agent and the Assuming Bank,

          (ii)  a Committed Note in the amount of $________ duly executed by the
Borrower payable to the order of the Assuming Bank, and

          (iii) a certificate of an officer of the Borrower confirming that the
amount of the aggregate Commitments, after giving effect to the assumption, has
been authorized by the Borrower's Board of Directors.

     4.   EFFECTIVE DATE. The effective date of this Assumption Agreement (the
"Effective Date") shall be ________, _______ or such other date as is specified
by the Agent to the Assuming Bank.

     5.   PAYMENT OBLIGATIONS. In consideration for the assumption of its rights
and obligations hereunder, the Assuming Bank shall pay the Borrower and/or the
other Banks under the Credit Agreement, on the Effective Date, the amounts
specified by the Agent and agreed to by such parties. On and after the Effective
Date, the Assuming Bank shall be entitled

                               Exhibit F - Page 1




to receive from the Agent all payments of principal, interest and fees and other
amounts with respect to the interest assumed hereby. The Assuming Bank will
promptly remit to the Agent for further distribution any interest on Committed
Advances and fees received from the Agent which relate to the portion (if any)
of the Commitment, Committed Advances or other obligations assumed by the
Assuming Bank hereunder for periods prior to the Effective Date and not
previously paid by the Assuming Bank to the Agent.

     6. REPRESENTATIONS AND UNDERTAKINGS OF THE ASSUMING BANK. The Assuming Bank
(i) confirms that it has received a copy of the Credit Agreement, together with
copies of the financial statements requested by the Assuming Bank and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Commitment Increase Consent, (ii)
agrees that it will, independently and without reliance upon the Agent or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, (iii) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto, (iv) confirms
that the execution and delivery of this Commitment Increase Consent by the
Assuming Bank is duly authorized, (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Bank, (vi) agrees that its
payment instructions and notice instructions are as set forth in the attachment
hereto, (vii) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are "plan
assets" as defined under ERISA and that its rights, benefits and interests in
and under the Credit Agreement and the Notes will not be "plan assets" under
ERISA, (viii) agrees to indemnify and hold the Agent and the Borrower harmless
against all losses, costs and expenses (including, without limitation,
reasonable attorneys' fees) and liabilities incurred by the Agent or the
Borrower in connection with or arising in any manner from the Assuming Bank's
non-performance of the obligations assumed under this Commitment Increase
Consent, and (ix) if applicable, attaches the forms prescribed by the Internal
Revenue Service of the United States certifying that the Assuming Bank is
entitled to receive payments under the Credit Agreement and the Notes without
deduction or withholding of any United States federal income taxes.

     7. GOVERNING LAW. This Commitment Increase Consent shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.

     8. NOTICES. Notices shall be given under this Commitment Increase Consent
in the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment hereto.

     9. COUNTERPARTS; DELIVERY BY FACSIMILE. This Commitment Increase Consent
may be executed in counterparts. Transmission by facsimile of an executed
counterpart of this Commitment Increase Consent shall be deemed to constitute
due and sufficient delivery of such counterpart and such facsimile shall be
deemed to be an original counterpart of this Commitment Increase Consent.

                               Exhibit F - Page 2



     IN WITNESS WHEREOF, the duly authorized officers of the parties hereto have
executed this Commitment Increase Consent as of the date first above written.

                                           R.R. DONNELLEY & SONS COMPANY


                                           By:_________________________
                                           Title:______________________



                                           BANK ONE, NA, as Administrative Agent


                                           By:_________________________
                                           Title:______________________


Commitment:  $__________                   ____________________________,
                                           as Assuming Bank


                                           By:_________________________
                                           Title:______________________

                               Exhibit F - Page 3



                    Attachment to COMMITMENT INCREASE CONSENT

                        ADMINISTRATIVE INFORMATION SHEET

       Attach Assuming Bank's Administrative Information Sheet, which must
                 include notice addresses for the Assuming Bank
                            (Sample form shown below)

                            ASSUMING BANK INFORMATION

Contact:
- --------

Name:___________________________________     Telephone No.:_____________________
Fax No.:________________________________

Key Operations Contacts:
- ------------------------

Booking Installation:____________________    Booking Installation:______________
Name:____________________________________    Name:______________________________
Telephone No.:___________________________    Telephone No.:_____________________
Fax No.:_________________________________    Fax No.:___________________________
Telex No.:_______________________________    Telex No.:_________________________
Answerback:______________________________    Answerback:________________________

Payment Information:
- --------------------

Name & ABA # of Destination Bank: ______________________________________________
________________________________________________________________________________

Account Name & Number for Wire Transfer: _______________________________________
                                       _________________________________________

Other Instructions: ____________________________________________________________
________________________________________________________________________________

Address for Notices for Assuming Bank: _________________________________________
- -------------------------------------  _________________________________________
                                       _________________________________________

                               Exhibit F - Page 4



                              BANK ONE INFORMATION

   Assuming Bank will be called promptly upon receipt of the signed agreement.

Initial Funding Contract:                   Subsequent Operations Contact:
- -------------------------                   ------------------------------

Name:_________________________________      Name:
Telephone No.: (312)                        Telephone No.: (312)
             -------------------------                   -----------------------
Fax No.: (312)                              Fax No.: (312)
        ------------------------------             -----------------------------

Initial Funding Standards:
- --------------------------

Libor - Fund 2 days after rates are set.

Bank One Wire Instructions:                 Bank One, NA, ABA # 071000013
- ---------------------------                 BNF = 7521[_]7653/DES, Ref: _______

Address for Notices for Bank One:           1 Bank One Plaza
- --------------------------------            Chicago, IL 60670
                                            Attn:  Agency Compliance Division,
                                                   Suite 0353
                                            Fax No. (312) 732-2038 or
                                                    (312) 732-4339

                               Exhibit F - Page 5



                                    EXHIBIT G

                        Opinion of Counsel to the Company

                                 October 9, 2003

To each of the Banks parties to
the "364-Day Credit Agreement" (as defined below),
and to Bank One, NA, as Administrative Agent

         Re:   R.R. Donnelley & Sons Company

Ladies and Gentlemen:

         We have acted as counsel to R.R. Donnelley & Sons Company, a Delaware
corporation (the "Company"), in connection with the 364-Day Credit Agreement of
even date herewith (the "364-Day Credit Agreement") among the Company, the
financial institutions parties thereto (the "Banks") and Bank One, NA, as
Administrative Agent, and the transactions contemplated thereby.

         This opinion is furnished to you at the request of the Company pursuant
to Section 3.01(a)(v) of the 364-Day Credit Agreement. Capitalized terms used
herein and not otherwise defined are used as defined in the 364-Day Credit
Agreement.

         In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the 364-Day Credit
Agreement and the promissory notes delivered on the date hereof to the Banks
signatory to the 364-Day Credit Agreement (the "Notes").

         In rendering the opinions set forth herein, we have also examined
originals or copies, certified to our satisfaction, of such (i) certificates of
public officials, (ii) certificates of officers and representatives of the
Company, and (iii) other documents and records, and we have made such inquiries
of officers and representatives of the Company, as we have deemed relevant or
necessary as the basis for such opinions. We have relied as to factual matters
upon, and assumed the accuracy of, such certificates, the representations and
warranties of the Company made in the 364-Day Credit Agreement, and other
statements, documents and records supplied to us by the Company, and we have
assumed the genuineness of all signatures (other than signatures of officers of
the Company) and the authenticity of all documents submitted to us as originals
and the conformity to original documents of all documents submitted to us as
certified or photostatic copies.

         In rendering the opinions set forth herein, we have assumed that:

         (i) all the parties to the 364-Day Credit Agreement, other than the
Company, are duly organized, validly existing, and in good standing under the
laws of their respective jurisdictions

                               Exhibit G - Page 1



of organization and have the requisite corporate power to enter into the 364-Day
Credit Agreement; and

         (ii)  the execution and delivery of the 364-Day Credit Agreement have
been duly authorized by all necessary corporate action and proceedings on the
part of all parties thereto other than the Company; the 364-Day Credit Agreement
has been duly executed and delivered by all parties thereto and constitutes the
valid and binding obligation of all parties thereto other than the Company,
enforceable against such parties in accordance with its terms.

         Based upon the foregoing and subject to the qualifications stated
herein, we are of the opinion that, as of the date hereof:

         1.    The Company has been duly organized and is validly existing and
in good standing under the laws of the State of Delaware. The Company has the
requisite corporate power and authority to conduct its business as currently
conducted.

         2.    The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the 364-Day Credit Agreement
and the Notes. Such execution, delivery and performance:

               (a)   have been duly authorized by all necessary and proper
corporate action of the Company,

               (b)   do not violate any provision of the certificate of
incorporation or by-laws of the Company or require any approval of the Company's
stockholders,

               (c)   do not violate the General Corporation Law of the State of
Delaware, any law or regulation of the State of Illinois (including, without
limitation, any usury laws) or of the United States of America applicable to the
Company,

               (d)   do not contravene that certain Indenture dated as of
November 1, 1990, between the Company and Citibank, N.A., as Trustee, or, to our
knowledge, any other material agreement or instrument binding on the Company.

         3.    The 364-Day Credit Agreement constitutes, and from and after the
initial Committed Borrowing the Committed Notes will constitute, the valid and
binding obligations of the Company, enforceable in accordance with their
respective terms.

         4.    No approval, consent or authorization of, or filing or
registration with, any governmental department, agency or instrumentality is
necessary for the Company's execution or delivery of the 364-Day Credit
Agreement or the Notes, or for the Company's performance of any of the terms
thereof.

         Our opinions above are subject to the following qualifications:

               (a)   Our opinions relating to validity, binding effect and
enforceability in Paragraph 3 above are subject to limitations imposed by any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights

                               Exhibit G - Page 2



generally. In addition, our opinions relating to enforceability in paragraph 3
above are subject to (i) the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law) and (ii) limitations
imposed by public policy under certain circumstances on the enforceability of
provisions indemnifying a party against liability for its own wrongful or
negligent acts. In applying principles of equity referred to in clause (i)
above, a court, among other things, might not allow a creditor to accelerate
maturity of a debt upon the occurrence of a default deemed immaterial. Such
principles applied by a court might include a requirement that a creditor act
reasonably and in good faith.

               (b)   Certain remedial and waiver provisions of the 364-Day
Credit Agreement may be unenforceable in whole or in part, but the inclusion of
such provisions does not affect the validity of the 364-Day Credit Agreement;
however, the unenforceability of such provisions may result in delays in the
enforcement of the Administrative Agent's and the Banks' rights and remedies
under the 364-Day Credit Agreement (and we express no opinion as to the economic
consequences, if any, of such delays).

               (c)   We express no opinion as to the effect of the compliance
or noncompliance of the Administrative Agent or any of the Banks with any state
or federal laws or regulations applicable to the Administrative Agent or any of
the Banks because of the Administrative Agent's or any of the Banks' legal or
regulatory status, the nature of the business of the Administrative Agent or any
of the Banks or the qualification of any such party to conduct business in any
jurisdiction.

         The foregoing opinions are limited to the laws of the United States,
the State of Illinois and the General Corporation Law of the State of Delaware,
and we express no opinion with respect to the laws of any other state or
jurisdiction.

         Whenever in this opinion reference is made to our knowledge, such
reference is to the conscious awareness of [insert appropriate names] of
information regarding factual matters. With respect to such matters, such
persons have not, with your express permission and consent, undertaken any
investigation or inquiry either of other lawyers, files maintained by the firm,
or officers or employees of the Company or any of its Subsidiaries (including
without limitation the Borrowing Subsidiary). The reference to "conscious
awareness" as used in this paragraph has the meaning given that phrase in the
Third-Party Legal Opinion Report, Including the Legal Opinion Accord, of the
Section of Business Law, American Bar Association, 47 Bus. Law. 167, 192 (1991).
The opinions expressed herein are being delivered to you as of the date hereof
and are solely for your benefit in connection with the transactions contemplated
in the 364-Day Credit Agreement and may not be relied on in any manner or for
any purpose by any other person, nor any copies published, communicated or
otherwise made available in whole or in part to any other person or entity
without our express prior written consent, except that you may furnish copies
thereof to each party that becomes a Bank after the date hereof pursuant to the
364-Day Credit Agreement, and such parties may rely on this opinion as if it had
been originally addressed to them.

         We do not express any opinion, either implicitly or otherwise, on any
issue not expressly addressed in numbered Paragraphs 1 through 4. The opinions
expressed above are based solely on facts, laws and regulations existing and in
effect on the date hereof, and we assume no

                               Exhibit G - Page 3





obligation to revise or supplement this opinion should such facts change or
should such laws or regulations be changed by legislative or regulatory action,
judicial decision or otherwise, notwithstanding that such changes may affect the
legal analysis or conclusions contained in this opinion.


                                                  Very truly yours,

                               Exhibit G - Page 4




                                   CERTIFICATE

         I, ___________________, am the _____________ ___________________ of
R.R. Donnelley & Sons Company, a Delaware corporation (the "Company"). The
Company is entering into the 364-Day Credit Agreement dated as of October 9,
2003 among the Company, the banks party thereto ("Banks") and Bank One, NA, as
Administrative Agent ("Administrative Agent") for such Banks (the "364-Day
Credit Agreement").

         The 364-Day Credit Agreement requires that [name of law firm] issue a
legal opinion to the Administrative Agent and the Banks. In connection with such
legal opinion, the Company certifies to [name of law firm] that:

         1. Not more than twenty-five percent (25%) of the value of the assets
subject to any "arrangement" (as such term is used in Section 221.2(g)(1) of
Regulation U of the Board of Governors of the Federal Reserve System) under the
364-Day Credit Agreement is represented by "margin stock" (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System).

         2. The Company has not granted to the Administrative Agent or the Banks
any direct security for the Company's obligations to the Administrative Agent
and the Banks under the 364-Day Credit Agreement.

         3. There is no material agreement or instrument binding on the Company
that governs or evidences indebtedness for borrowed money or would affect the
Company's ability to perform its obligations under the 364-Day Credit Agreement
or the Notes, except:

         a._______________________

         b._______________________

         c._______________________


                                                     [COMPANY]


                                                     By:________________________
                                                     Title:_____________________

Dated:_____________________

                               Exhibit G - Page 5



                                    EXHIBIT H

                  Opinion of Counsel to a Borrowing Subsidiary

                                     [Date]

To each of the Banks parties to
the "364-Day Credit Agreement" (as defined below),
and to Bank One, NA, as Administrative Agent

         Re:  [Borrowing Subsidiary]

Ladies and Gentlemen:

         We have acted as counsel to R.R. Donnelley & Sons Company, a Delaware
corporation (the "Company") and __________________, a ___________ corporation
and Subsidiary of the Company (the "Borrowing Subsidiary"), in connection with
the 364-Day Credit Agreement dated as of October 9, 2003 (as the same has been
or may be amended, modified or supplemented, the "364-Day Credit Agreement")
among the Company, the financial institutions parties thereto (the "Banks") and
Bank One, NA, as Administrative Agent, and the transactions contemplated
thereby.

         This opinion is furnished to you at the request of the Company pursuant
to Section 3.02(e) of the 364-Day Credit Agreement. Capitalized terms used
herein and not otherwise defined are used as defined in the 364-Day Credit
Agreement.

         In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the 364-Day Credit
Agreement, the Assumption Letter of even date herewith executed by the Borrowing
Subsidiary and delivered to the Banks (the "Assumption Letter") and the
promissory notes executed by the Borrowing Subsidiary on the date hereof and
delivered to the Banks (the "Notes").

         In rendering the opinions set forth herein, we have also examined
originals or copies, certified to our satisfaction, of such (i) certificates of
public officials, (ii) certificates of officers and representatives of the
Company and the Borrowing Subsidiary (including the certificate attached hereto
(the "Certificate")), and (iii) other documents and records, and we have made
such inquiries of officers and representatives of the Company and the Borrowing
Subsidiary, as we have deemed relevant or necessary as the basis for such
opinions. We have relied as to factual matters upon, and assumed the accuracy
of, such certificates, the representations and warranties of the Company and the
Borrowing Subsidiary made (or deemed made) in the 364-Day Credit Agreement and
the Assumption Letter, and other statements, documents and records supplied to
us by the Company and the Borrowing Subsidiary, and we have assumed the
genuineness of all signatures (other than signatures of officers of the
Borrowing Subsidiary) and the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents submitted to
us as certified or photostatic copies.

                               Exhibit H - Page 1



         In rendering the opinions set forth herein, we have assumed that:

         (i) all the parties to the 364-Day Credit Agreement and the Assumption
Letter, other than the Borrowing Subsidiary, are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of organization and have the requisite corporate power to enter into the 364-Day
Credit Agreement and the Assumption Letter; and

         (ii) the execution and delivery of the 364-Day Credit Agreement have
been duly authorized by all necessary corporate action and proceedings on the
part of all parties thereto; the 364-Day Credit Agreement has been duly executed
and delivered by all parties thereto and constitutes the valid and binding
obligation of all parties thereto, other than the Borrowing Subsidiary,
enforceable against such parties in accordance with its terms.

         Based upon the foregoing and subject to the qualifications stated
herein, we are of the opinion that, as of the date hereof:

         1. The Borrowing Subsidiary has been duly organized and is validly
existing and in good standing under the laws of _____________. The Borrowing
Subsidiary has the requisite corporate power and authority to conduct its
business as currently conducted.

         2. The Borrowing Subsidiary has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Assumption
Letter, the 364-Day Credit Agreement and the Notes. Such execution, delivery and
performance:

            (a) have been duly authorized by all necessary and proper corporate
action of the Borrowing Subsidiary,

            (b) do not violate any provision of the certificate of incorporation
or by-laws of the Borrowing Subsidiary or require any approval of the Borrowing
Subsidiary's stockholders,

            (c) will not violate any law or regulation of ____________, the
State of Illinois (including, without limitation, any usury laws) or of the
United States of America applicable to the Borrowing Subsidiary, and

            (d) do not contravene any agreement set forth on the Certificate,
or, to our knowledge, any other material agreement or instrument binding on the
Borrowing Subsidiary.

         3. The Assumption Letter constitutes, and from and after the initial
Committed Borrowing to the Borrowing Subsidiary, the Notes will constitute, the
valid and binding obligations of the Borrowing Subsidiary, enforceable in
accordance with their respective terms.

         4. No approval, consent or authorization of, or filing or registration
with, any governmental department, agency or instrumentality is necessary for
the Borrowing Subsidiary's execution or delivery of the Assumption Letter or the
Notes, or for the Borrowing Subsidiary's performance of any of the terms
thereof.

         Our opinions above are subject to the following qualifications:

                               Exhibit H - Page 2



                  (a) Our opinions relating to validity, binding effect and
enforceability in Paragraph 3 above are subject to limitations imposed by any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights generally. In addition,
our opinions relating to enforceability in paragraph 3 above are subject to (i)
the effect of general principles of equity (regardless of whether considered in
a proceeding in equity or at law) and (ii) limitations imposed by public policy
under certain circumstances on the enforceability of provisions indemnifying a
party against liability for its own wrongful or negligent acts. In applying
principles of equity referred to in clause (i) above, a court, among other
things, might not allow a creditor to accelerate maturity of a debt upon the
occurrence of a default deemed immaterial. Such principles applied by a court
might include a requirement that a creditor act reasonably and in good faith.

                  (b) Certain remedial and waiver provisions of the 364-Day
Credit Agreement applicable to the Borrowing Subsidiary pursuant to the
Assumption Letter may be unenforceable in whole or in part, but the inclusion of
such provisions does not affect the validity of the Assumption Letter; however,
the unenforceability of such provisions may result in delays in the enforcement
of the Administrative Agent's and the Banks' rights and remedies under the
Assumption Letter (and we express no opinion as to the economic consequences, if
any, of such delays).

                  (c) We express no opinion as to the effect of the compliance
or noncompliance of the Administrative Agent or any of the Banks with any state
or federal laws or regulations applicable to the Administrative Agent or any of
the Banks because of the Administrative Agent's or any of the Banks' legal or
regulatory status, the nature of the business of the Administrative Agent or any
of the Banks or the qualification of any such party to conduct business in any
jurisdiction.

         The foregoing opinions are limited to the laws of the United States,
the State of Illinois and the corporate law of [jurisdiction where the Borrowing
Subsidiary is incorporated] and we express no opinion with respect to the laws
of any other state or jurisdiction.

         Whenever in this opinion reference is made to our knowledge, such
reference is to the conscious awareness of [insert appropriate names] of
information regarding factual matters. With respect to such matters, such
persons have not, with your express permission and consent, undertaken any
investigation or inquiry either of other lawyers, files maintained by the firm,
or officers or employees of the Company or any of its Subsidiaries (including
without limitation the Borrowing Subsidiary). The reference to "conscious
awareness" as used in this paragraph has the meaning given that phrase in the
Third-Party Legal Opinion Report, Including the Legal Opinion Accord, of the
Section of Business Law, American Bar Association, 47 Bus. Law. 167, 192 (1991).

         The opinions expressed herein are being delivered to you as of the date
hereof and are solely for your benefit in connection with the transactions
contemplated in the 364-Day Credit Agreement and may not be relied on in any
manner or for any purpose by any other person, nor any copies published,
communicated or otherwise made available in whole or in part to any other person
or entity without our express prior written consent, except that you may furnish
copies thereof to each party that becomes a Bank after the date hereof pursuant
to the 364-Day Credit

                               Exhibit H - Page 3



Agreement, and such parties may rely on this opinion as if it had been
originally addressed to them.

         We do not express any opinion, either implicitly or otherwise, on any
issue not expressly addressed in numbered Paragraphs 1 through 4. The opinions
expressed above are based solely on facts, laws and regulations existing and in
effect on the date hereof, and we assume no obligation to revise or supplement
this opinion should such facts change or should such laws or regulations be
changed by legislative or regulatory action, judicial decision or otherwise,
notwithstanding that such changes may affect the legal analysis or conclusions
contained in this opinion.

                                                          Very truly yours,

                               Exhibit H - Page 4



                                   CERTIFICATE

         I, ___________________, am the _____________ ___________________ of
[Borrowing Subsidiary], a __________ corporation (the "Borrowing Subsidiary").
The Borrowing Subsidiary is entering into an Assumption Letter dated as of
_____________, 20__, pursuant to which it will become a party to the 364-Day
Credit Agreement dated as of October 9, 2003 among R.R. Donnelley & Sons Company
(the "Company"), the banks party thereto ("Banks") and Bank One, NA, as
Administrative Agent ("Administrative Agent") for such Banks (the "364-Day
Credit Agreement").

         The 364-Day Credit Agreement requires that [name of law firm] issue a
legal opinion to the Administrative Agent and the Banks. In connection with such
legal opinion, the Company certifies to [name of law firm] that:

         1. Not more than twenty-five percent (25%) of the value of the assets
subject to any "arrangement" (as such term is used in Section 221.2(g)(1) of
Regulation U of the Board of Governors of the Federal Reserve System) under the
364-Day Credit Agreement is represented by "margin stock" (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System).

         2. The Borrowing Subsidiary has not granted to the Administrative Agent
or the Banks any direct security for the Company's or the Borrowing Subsidiary's
obligations to the Administrative Agent and the Banks under the 364-Day Credit
Agreement.

         3. There is no material agreement or instrument binding on the
Borrowing Subsidiary that governs or evidences indebtedness for borrowed money
or would affect the Borrowing Subsidiary's ability to perform its obligations
under the Assumption Letter, the 364-Day Credit Agreement or the Notes, except:

         a._______________________

         b._______________________

         c._______________________


                                                         [BORROWING SUBSIDIARY]



                                                         By:____________________
                                                         Title:_________________
Dated:_____________________

                               Exhibit H - Page 5

EX-10.(A)

                                                                   Exhibit 10(a)

                          R.R. DONNELLEY & SONS COMPANY

                            2000 STOCK INCENTIVE PLAN

 (as adopted by the Board of Directors on January 27, 2000; as amended September
                                    25, 2003)

                                   I. GENERAL

1. Plan. To provide incentives to management through rewards based upon the
ownership or performance of the common stock of R.R. Donnelley & Sons Company
(the "Company"), the Committee hereinafter designated, may grant cash or bonus
awards, stock options, stock appreciation rights ("SARs"), or combinations
thereof, to eligible participants, on the terms and subject to the conditions
stated in the Plan. In addition, to provide incentives to members of the Board
of Directors ("Board") who are not employees of the Company ("non-employee
directors"), such non-employee directors are hereby granted options on the terms
and subject to the conditions set forth in the Plan. For purposes of the Plan,
references to employment by the Company also means employment by a
majority-owned subsidiary of the Company and employment by any other entity
designated by the Board or the Committee in which the Company has a direct or
indirect equity interest.

2. Eligibility. Officers and other key management employees of the Company, its
subsidiaries, and any other entity designated by the Board or the Committee in
which the Company has a direct or indirect equity interest, shall be eligible,
upon selection by the Committee, to receive cash or bonus awards, stock options
or SARs, either singly or in combination, as the Committee, in its discretion,
shall determine ("participants"). Non-employee directors shall receive stock
options on the terms and subject to the conditions stated in the Plan.

3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I, 8,000,000 shares of common stock, par value $1.25
per share ("common stock"), shall be available under the Plan, reduced by the
aggregate number of shares of common stock which become subject to outstanding
bonus awards, stock options and SARs which are not granted in tandem with or by
reference to a stock option ("free-standing SARs"). Shares subject to a grant or
award under the Plan or under any other stock incentive plan of the Company
approved by stockholders on or prior to December 31, 1999 which are not issued
or delivered by reason of the expiration, termination, cancellation or
forfeiture of all or a portion of the grant or award, or by reason of
withholding of shares to pay all or a portion of the exercise price or to
satisfy tax withholding obligations, or by reason of the delivery of shares
prior to June 30, 2003 to



pay all or a portion of the exercise price or to satisfy tax withholding
obligations, shall again be available for future grants and awards; provided,
however, that for purposes of this sentence, stock options and SARs granted in
tandem with or by reference to a stock option granted prior to the grant of such
SARs ("tandem SARs") shall be treated as one grant. To the extent that the
Company repurchased shares in the open market or otherwise prior to June 30,
2003, a number of shares having a repurchase price equal to the aggregate
proceeds received by the Company from the exercise of stock options granted by
the Company under the Plan or any other stock incentive plan of the Company
approved by stockholders on or prior to December 31, 1999 shall again be
available for future grants and awards. For the purpose of complying with
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the rules and regulations thereunder, the maximum number of shares of common
stock with respect to which options or SARs or a combination thereof may be
granted during any one-year period to any person shall be 1,000,000, subject to
adjustment as provided in Section 5 of this Article I; provided, however, that
for purposes of this sentence, stock options and tandem SARs shall be treated as
one grant. The maximum number of shares of common stock with respect to which
bonus awards, including performance awards or fixed awards in the form of
restricted stock or other form may be granted hereunder is 3,000,000 in the
aggregate, subject to adjustment as provided in Section 5 of this Article I.

   Shares of common stock to be issued shall be treasury stock of the Company.

4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board of Directors (the "Committee"). Each member of the
Committee may be (i) an "outside director" within the meaning of Section 162(m)
of the Code and (ii) a "Non-Employee Director" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall, subject to the terms of the Plan, select eligible participants
for grants and awards; determine the form of each grant and award, either as
cash, a bonus award, stock options or SARs or a combination thereof; and
determine the number of shares or units subject to the grant or award, the fair
market value of the common stock or units when necessary, the time and
conditions of vesting, exercise or settlement, whether dividends or dividend
equivalents accrue under any award, and all other terms and conditions of each
grant and award, including, without limitation, the form of instrument
evidencing the grant or award. The Committee may establish rules and regulations
for the administration of the Plan, interpret the Plan, and impose, incidental
to a grant or award, conditions with respect to competitive employment or other
activities not inconsistent with the Plan. All such rules, regulations,
interpretations and conditions shall be conclusive and binding on all parties.
Each grant and award shall be evidenced by a written instrument and no grant or
award shall be valid until an agreement is executed by the Company and such
grant or award shall be effective as of the effective date set forth in the
agreement.

     The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (i) the selection for
participation in the Plan of (A) a participant who is a "covered employee"
within the meaning of Section 162(m) of the

                                       2



Code or who, in the Committee's judgment, is likely to be a covered employee at
any time during the period a grant or award hereunder to such participant would
be outstanding or (B) an officer or other person subject to Section 16 of the
Exchange Act or (ii) decisions concerning the timing, pricing or amount of a
grant or award to a participant, officer or other person described in clause (i)
above. A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.

5. Adjustments. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of common stock other than a regular cash
dividend, the number and class of securities available under the Plan, the
number and class of securities subject to each outstanding bonus award, the
number and class of securities subject to each outstanding stock option and the
purchase price per security and the terms of each outstanding SAR shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding stock options and SARs without an increase in the aggregate
purchase price or base price. If any such adjustment would result in a
fractional security being (i) available under the Plan, such fractional security
shall be disregarded, or (ii) subject to an outstanding grant or award under the
Plan, the Company shall pay the holder thereof, in connection with the first
vesting, exercise or settlement of such grant or award, in whole or in part,
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the fair market value on the vesting, exercise or
settlement date over (B) the exercise or base price, if any, of such grant or
award; provided, however, that if the fair market value of such fractional
security immediately after such adjustment is less than the fair market value of
one share of common stock immediately prior to such adjustment, such fractional
security shall be disregarded and no payment shall be made.

6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the 2000 annual meeting of
stockholders and, if approved, shall become effective on the date of such
stockholder approval. The Plan shall terminate on the date on which shares are
no longer available for grants or awards under the Plan, unless terminated prior
thereto by action of the Board, except that Section III 1.(b), Automatic Options
for Non-Employee Directors shall terminate on December 31, 2009. No further
grants or awards shall be made under the Plan after termination, but termination
shall not affect the rights of any participant under any grants or awards made
prior to termination.

7. Amendments. The Plan may be amended or terminated by the Board in any respect
except that no amendment may be made without stockholder approval if stockholder
approval is required by applicable law, rule or regulation, including Section
162(m) of the Code, or such amendment would increase (subject to Section 5 of
this Article I) the number of shares available under the Plan. No amendment may
impair the rights of a holder of an outstanding grant or award without the
consent of such holder.

                                       3



                                II. BONUS AWARDS

1. Form of Award. Bonus awards, whether performance awards or fixed awards, may
be made to eligible participants in the form of (i) cash, whether in an absolute
amount or as a percentage of compensation, (ii) stock units, each of which is
substantially the equivalent of a share of common stock but for the power to
vote and, subject to the Committee's discretion, the entitlement to an amount
equal to dividends or other distributions otherwise payable on a like number of
shares of common stock, (iii) shares of common stock issued to the participant
but forfeitable and with restrictions on transfer in any form as hereinafter
provided or (iv) any combination of the foregoing.

2. Performance Awards. (a) Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with such actual amount, percentage or number to be determined by reference to
the level of achievement of corporate, sector, business unit, division,
individual or other specific performance goals over a performance period of not
less than one nor more than ten years, as determined by the Committee.

     (b) In no event shall any participant receive a payment with respect to any
performance award if the minimum threshold performance goals requirement
applicable to the payment is not achieved during the performance period.

     (c) If the Committee desires that compensation payable pursuant to any
performance award be "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code, then with respect to such performance
award, for any calendar year no participant shall receive stock units or shares
of common stock in excess of 100,000 stock units or shares of common stock or a
cash award in excess of the then fair market value of 100,000 shares of common
stock, subject to adjustment as provided in Section 5 of Article I.

     (d) The Committee retains sole discretion to reduce the amount of or
eliminate any payment otherwise payable to a participant with respect to any
performance award. The Committee may exercise such discretion by establishing
conditions for payments with respect to performance awards in addition to the
performance goals, including the achievement of financial, strategic or
individual goals, which may be objective or subjective, as it deems appropriate.

     (e) For purposes of the Plan, "performance goals" means the objectives
established by the Committee which shall be satisfied or met during the
applicable performance period as a condition to a participant's receipt of all
or a part of a performance-based award under the Plan. The performance goals
shall be tied to one or more of the following business criteria, determined with
respect to the Company or the applicable sector, business unit or division: net
sales, cost of sales, gross profit, earnings from operations, earnings before
interest, taxes, depreciation and amortization ("EBITDA"), earnings before
income taxes, earnings before interest and taxes, cash flow measures, return on
equity, return on assets, return on net assets employed, net income per common
share (basic or diluted), EVA (Economic Value Added, which represents the

                                       4



cash operating earnings of the Company after deducting a charge for capital
employed) or any other similar criteria established by the Committee for the
applicable performance period. In the discretion of the Committee, the Committee
may amend or adjust the performance goals or other terms or conditions of an
outstanding award in recognition of unusual or nonrecurring events. If the
Committee desires that compensation payable pursuant to any award subject to
performance goals be "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code, the performance goals (i) shall be
established by the Committee no later than 90 days after the beginning of the
applicable performance period (or such other time designated by the Internal
Revenue Service) and (ii) shall satisfy all other applicable requirements
imposed under Treasury Regulations promulgated under Section 162(m) of the Code,
including the requirement that such performance goals be stated in terms of an
objective formula or standard.

3. Fixed Awards. Awards may be made which are not contingent on the achievement
of specific objectives, but are contingent on the participant's continuing in
the Company's employ for a period specified in the award.

4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless and
until such award is forfeited or unless otherwise determined by the Committee at
the time of grant, to vote the shares and to receive dividends thereon from the
date of grant and the right to participate in any capital adjustment applicable
to all holders of common stock; provided, however, that a distribution with
respect to shares of common stock, other than a regular quarterly cash dividend,
shall be deposited with the Company and shall be subject to the same
restrictions as the shares of common stock with respect to which such
distribution was made.

     During the restriction period, a certificate or certificates representing
restricted shares shall be registered in the holder's name or the name of a
nominee of the Company and may bear a legend, in addition to any legend which
may be required under applicable laws, rules or regulations, indicating that the
ownership of the shares of common stock represented by such certificate is
subject to the restrictions, terms and conditions of the Plan and the agreement
relating to the restricted shares. All such certificates shall be deposited with
the Company, together with stock powers or other instruments of assignment
(including a power of attorney), each endorsed in blank with a guarantee of
signature if deemed necessary or appropriate, which would permit transfer to the
Company of all or a portion of the shares of common stock subject to the award
in the event such award is forfeited in whole or in part. Upon termination of
any applicable restriction period, including, if applicable, the satisfaction or
achievement of applicable objectives, and subject to the Company's right to
require payment of any taxes, the requisite number of shares of common stock
shall be delivered to the holder of such award.

5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, subject to the Committee's discretion,
amounts equal to dividends and other distributions otherwise payable on a like
number of shares of common stock after the crediting of the units (unless the
record date for such dividends or other distributions

                                       5



precedes the date of grant of such award) shall be credited to an account for
the participant and held until the award is forfeited or paid out and interest
shall be credited on the account at a rate determined by the Committee.

6. Vesting and Resultant Events. The Committee may, in its discretion, provide
for early vesting of an award in the event of the participant's death, permanent
and total disability or retirement. At the time of vesting, (i) the award (and
any dividend equivalents, other distributions and interest which have been
credited), if in units, shall be paid to the participant either in shares of
common stock equal to the number of units, in cash equal to the fair market
value of such shares, or in such combination thereof as the Committee shall
determine, (ii) the award, if a cash bonus award, shall be paid to the
participant either in cash, or in shares of common stock with a then fair market
value equal to the amount of such award, or in such combination thereof as the
Committee shall determine and (iii) shares of restricted common stock issued
pursuant to an award shall be released from the restrictions.


                               III. STOCK OPTIONS

1. Grants. (a) Options for Eligible Participants. Options to purchase shares of
common stock of the Company may be granted to such eligible participants as may
be selected by the Committee. These options may, but need not, constitute
"incentive stock options" under Section 422 of the Code. To the extent that the
aggregate fair market value (determined as of the date of grant) of shares of
common stock with respect to which options designated as incentive stock options
are exercisable for the first time by an optionee during any calendar year
(under the Plan or any other plan of the Company, or any parent or subsidiary)
exceeds the amount (currently $100,000) established by the Code, such options
shall not constitute incentive stock options.

     (b) Automatic Options for Non-Employee Directors. The Company shall grant
an option to purchase shares of common stock of the Company on the date of the
2000 annual meeting of stockholders and, thereafter, annually on the date of the
Company's annual meeting of stockholders to each individual who immediately
following such meeting on such date is a non-employee director. The number of
shares of common stock subject to an option granted to a non-employee director
pursuant to this Section 1(b) (a "Director Option") shall equal the number
determined by (i) multiplying (A) the then current annual cash retainer fee
payable to a non-employee director by (B) 2.5, and (ii) dividing that product by
100% of the fair market value of a share of common stock on the date of grant of
such option. A Director Option shall become exercisable in whole or in part on
the earlier to occur of (i) the date which is the first anniversary of the date
the Director Option is granted (the date of grant being hereafter referred to as
the "Option Date") or (ii) the day immediately preceding the date of the first
annual meeting of stockholders of the Company next following the Option Date.
Subject to Section 4 of this Article III, a Director Option shall expire on the
first business day preceding the date of the tenth anniversary of the date of
grant.

                                       6



     (c) Elective Options for Non-Employee Directors. Each non-employee director
may from time to time elect, in accordance with procedures to be specified by
the Committee, to receive in lieu of all or part of (i) the annual cash retainer
fee for services as a director of the Company, any fees for attendance at
meetings of the Board or any committee of the Board and any fees for serving as
a member or chairman of any committee of the Board that would otherwise be
payable to such non-employee director ("Fees") or (ii) the annual phantom stock
award granted to such non-employee director pursuant to the Retirement Benefits
and Phantom Stock Grants for Directors Policy ("Retirement Benefit"), an option
to purchase shares of Common Stock, which option shall have a value (as
determined in accordance with the Black-Scholes stock option valuation method)
as of the date of grant of such option equal to the amount of such Fees or
Retirement Benefit. An option granted to a non-employee director pursuant to
this Section 1(c) shall be a Director Option and shall become exercisable in
full on the date which is the first anniversary of the date the Director Option
is granted.

2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option, including a Director Option; provided further, that
if an incentive stock option shall be granted to any person who, on the date of
grant of such option, owns capital stock possessing more than ten percent of the
total combined voting power of all classes of capital stock of the Company (or
of any parent or subsidiary) (a "Ten Percent Holder"), the purchase price per
share of common stock shall be the price (currently 110% of fair market value)
required by the Code in order to constitute an incentive stock option.

3. Exercise of Options. The period during which options granted hereunder (other
than Director Options) may be exercised shall be determined by the Committee;
provided, however, that no stock option shall be exercised later than ten years
after its date of grant; provided further, that if an incentive stock option
shall be granted to a Ten Percent Holder, such option shall not be exercisable
more than five years after its date of grant. The Committee may, in its
discretion, establish performance measures which shall be satisfied or met as a
condition to the grant of an option or to the exercisability of all or a portion
of an option. The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments and in part or in full
at any time. An exercisable option, or portion thereof, may be exercised only
with respect to whole shares of common stock.

     An option may be exercised (i) by giving written notice to the Company
specifying the number of whole shares of common stock to be purchased and
accompanied by payment therefor in full (or arrangement made for such payment to
the Company's satisfaction) either (A) in cash, (B) in previously owned whole
shares of common stock (which the optionee has held for at least six months
prior to delivery of such shares or which the optionee purchased on the open
market and for which the optionee has good title free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price

                                       7



payable by reason of such exercise, (C) in cash by a broker-dealer acceptable to
the Company to whom the optionee has submitted an irrevocable notice of exercise
or (D) a combination of (A) and (B), (ii) if applicable, by surrendering to the
Company any SARs which are canceled by reason of the exercise of the option and
(iii) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (B)-(D). Any fraction of a share of common stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the optionee. No shares of common stock
shall be delivered until the full purchase price therefor has been paid.

4. Termination of Employment or Service. Subject to the requirements of the
Code, all of the terms relating to the exercise, cancellation or other
disposition of an option upon a termination of employment with the Company or
service on the Board, as the case may be, of the holder of such option, whether
by reason of disability, retirement, death or any other reason, shall be
determined by the Committee; provided, however, that the expiration date of an
option may never be extended beyond the original expiration date of such option.


                          IV. STOCK APPRECIATION RIGHTS

1. Grants. Free-standing SARs entitling the grantee to receive cash or shares of
common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock from the date of grant to the
date of exercise of such SARs, or in the case of tandem SARs, from the date of
grant of the related stock option to the date of exercise of such tandem SARs,
may be granted to such participants as may be selected by the Committee. The
holder of a tandem SAR may elect to exercise either the option or the SAR, but
not both. Tandem SARs shall be automatically canceled upon exercise of the
related stock option.

2. Number of SARs and Base Price. The number of SARs subject to a grant shall be
determined by the Committee. Any tandem SAR related to an incentive stock option
shall be granted at the same time that such incentive stock option is granted.
The base price of a tandem SAR shall be the purchase price per share of common
stock of the related option. The base price of a free-standing SAR shall be
determined by the Committee; provided, however, that such base price shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of such SAR.

3. Exercise of SARs. The agreement relating to a grant of SARs may specify
whether such grant shall be settled in shares of common stock (including
restricted shares of common stock) or cash or a combination thereof. Upon
exercise of an SAR, the grantee shall be paid the excess of the then fair market
value of the number of shares of common stock to which the SAR relates over the
base price of the SAR. Such excess shall be paid in cash or in shares of common
stock having a fair market value equal to such excess or in such combination
thereof as the Committee shall determine. The period during which SARs granted
hereunder may be exercised shall be determined by the Committee;

                                       8



provided, however, no SAR shall be exercised later than ten years after the date
of its grant; and provided, further, that no tandem SAR shall be exercised if
the related option has expired or has been canceled or forfeited or has
otherwise terminated. The Committee may, in its discretion, establish
performance measures which shall be satisfied or met as a condition to the grant
of an SAR or to the exercisability of all or a portion of an SAR. The Committee
shall determine whether an SAR may be exercised in cumulative or non-cumulative
installments and in part or in full at any time. An exercisable SAR, or portion
thereof, may be exercised, in the case of a tandem SAR, only with respect to
whole shares of common stock and, in the case of a free-standing SAR, only with
respect to a whole number of SARs. If an SAR is exercised for restricted shares
of common stock, the restricted shares shall be issued in accordance with
Section 4 of Article II and the holder of such restricted shares shall have such
rights of a stockholder of the Company as determined pursuant to such Section.
Prior to the exercise of an SAR for shares of common stock, including restricted
shares, the holder of such SAR shall have no rights as a stockholder of the
Company with respect to the shares of common stock subject to such SAR.

     A tandem SAR may be exercised (i) by giving written notice to the Company
specifying the number of whole SARs which are being exercised, (ii) by
surrendering to the Company any options which are canceled by reason of the
exercise of such SAR and (iii) by executing such documents as the Company may
reasonably request. A free-standing SAR may be exercised (i) by giving written
notice to the Company specifying the whole number of SARs which are being
exercised and (ii) by executing such documents as the Company may reasonably
request.

4. Termination of Employment. Subject to the requirements of the Code, all of
the terms relating to the exercise, cancellation or other disposition of an SAR
upon a termination of employment with the Company of the holder of such SAR,
whether by reason of disability, retirement, death or any other reason, shall be
determined by the Committee; provided, however, that the expiration date of an
SAR may never be extended beyond the original expiration date of such SAR.


                                    V. OTHER

1. Non-Transferability of Options and Stock Appreciation Rights. No option or
SAR shall be transferable other than (i) by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise set forth in the agreement relating to such option
or SAR. Each option or SAR may be exercised during the participant's lifetime
only by the participant or the participant's guardian, legal representative or
similar person or the permitted transferee of the participant. Except as
permitted by the second preceding sentence, no option or SAR may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option or SAR, such
award and all rights thereunder shall immediately become null and void.

                                       9



2. Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of common stock or the payment of any cash
pursuant to a grant or award hereunder, payment by the holder thereof of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date the
obligation to withhold or pay taxes arises in connection therewith (the "Tax
Date"), or withhold an amount of cash which would otherwise be payable to a
holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a cash
payment to the Company, (B) delivery to the Company of previously owned whole
shares of common stock (which the holder has held for at least six months prior
to the delivery of such shares or which the holder purchased on the open market
and for which the holder has good title, free and clear of all liens and
encumbrances) having an aggregate fair market value determined as of the Tax
Date, equal to the amount necessary to satisfy any such obligation, (C)
authorizing the Company to withhold whole shares of common stock which would
otherwise be delivered having an aggregate fair market value determined as of
the Tax Date or withhold an amount of cash which would otherwise be payable to a
holder, equal to the amount necessary to satisfy any such liability, (D) in the
case of the exercise of an option, a cash payment by a broker-dealer acceptable
to the Company to whom the optionee has submitted an irrevocable notice of
exercise or (E) any combination of (A), (B) and (C); provided, however, that the
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (B)-(E). An agreement relating to a grant or award hereunder may
not provide for shares of common stock to be withheld having an aggregate fair
market value in excess of the minimum amount of taxes required to be withheld.
Any fraction of a share of common stock which would be required to satisfy such
an obligation shall be disregarded and the remaining amount due shall be paid in
cash by the holder.

3. Acceleration Upon Change in Control. If while (i) any performance award or
fixed award granted under Article II is outstanding or (ii) any stock option
granted under Article III of the Plan or SAR granted under Article IV of the
Plan is outstanding --

          (a) any "person," as such term is defined in Section 3(a)(9) of the
     Exchange Act, as modified and used in Section 13(d) and 14(d) thereof (but
     not including (i) the Company or any of its subsidiaries, (ii) a trustee or
     other fiduciary holding securities under an employee benefit plan of the
     Company or any of its subsidiaries, (iii) an underwriter temporarily
     holding securities pursuant to an offering of such securities, or (iv) a
     corporation owned, directly or indirectly, by the stockholders of the
     Company in substantially the same proportions as their ownership of stock
     of the Company) (hereinafter a "Person") is or becomes the beneficial
     owner, as defined in Rule 13d-3 of the Exchange Act, directly or
     indirectly, of securities of the Company (not including in the securities
     beneficially owned by such Person any securities acquired directly from the
     Company or its affiliates, excluding an acquisition resulting from the
     exercise of a conversion or exchange privilege in respect of outstanding
     convertible or

                                       10



     exchangeable securities) representing 50% or more of the combined voting
     power of the Company's then outstanding securities; or

          (b) during any period of two (2) consecutive years beginning January
     1, 2000, individuals who at the beginning of such period constitute the
     Board and any new director (other than a director designated by a Person
     who has entered into any agreement with the Company to effect a transaction
     described in Clause (a), (c) or (d) of this Section) whose election by the
     Board or nomination for election by the Company's stockholders was approved
     by a vote of at least two-thirds (2/3) of the directors then still in
     office who either were directors at the beginning of the period or whose
     election or nomination for election was previously so approved, cease for
     any reason to constitute a majority thereof; or

          (c) the stockholders of the Company approve a merger or consolidation
     of the Company with any other corporation, other than (i) a merger or
     consolidation which would result in the voting securities of the Company
     outstanding immediately prior thereto continuing to represent (either by
     remaining outstanding or by being converted into voting securities of the
     surviving or acquiring entity), in combination with the ownership of any
     trustee or other fiduciary holding securities under an employee benefit
     plan of the Company, at least 50% of the combined voting power of the
     voting securities of the Company or such surviving or acquiring entity
     outstanding immediately after such merger or consolidation, or (ii) a
     merger or consolidation effected to implement a recapitalization of the
     Company (or similar transaction) in which no Person acquires more than 50%
     of the combined voting power of the Company's then outstanding securities;
     or

          (d) the stockholders of the Company approve a plan of complete
     liquidation of the Company or an agreement for the sale or disposition by
     the Company of all or substantially all the Company's assets,

(any of such events being hereinafter referred to as a "Change in Control"),
then from and after the date on which public announcement of the acquisition of
such percentage shall have been made, or the date on which the change in the
composition of the Board set forth above shall have occurred, or the date of any
such stockholder approval of a merger, consolidation, plan of complete
liquidation or an agreement for the sale of the Company's assets as described
above occurs (the applicable date being hereinafter referred to as the
"Acceleration Date"), (i) with respect to such performance awards, the highest
level of achievement specified in the award shall be deemed met and the award
shall be immediately and fully vested, (ii) with respect to such fixed awards,
the period of continued employment specified in the award upon which the award
is contingent shall be deemed completed and the award shall be immediately and
fully vested and (iii) with respect to such options and SARs, all such options
and SARs, whether or not then exercisable in whole or in part, shall be fully
and immediately exercisable.

4. Restrictions on Shares. Each grant and award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or

                                       11



qualification of the shares of common stock subject thereto upon any securities
exchange or under any law, or the consent or approval of any governmental body,
or the taking of any other action is necessary or desirable as a condition of,
or in connection with, the delivery of shares thereunder, such shares shall not
be delivered unless such listing, registration, qualification, consent, approval
or other action shall have been effected or obtained, free of any conditions not
acceptable to the Company. The Company may require that certificates evidencing
shares of common stock delivered pursuant to any grant or award made hereunder
bear a legend indicating that the sale, transfer or other disposition thereof by
the holder is prohibited except in compliance with the Securities Act of 1933,
as amended, and the rules and regulations thereunder.

5. No Right of Participation or Employment. No person (other than non-employee
directors to the extent provided in Article III) shall have any right to
participate in the Plan. Neither the Plan nor any grant or award made hereunder
shall confer upon any person any right to continued employment by the Company,
any subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.

6. Rights as Stockholder. No person shall have any right as a stockholder of the
Company with respect to any shares of common stock or other equity security of
the Company which is subject to a grant or award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of common
stock or equity security.

7. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

8. Foreign Participants. Notwithstanding any provision of the Plan to the
contrary the Committee may, with a view to both promoting achievement of the
purposes of the plan and complying with provisions of laws in countries outside
the United States in which the Company or its subsidiaries operate or have
employees, determine which persons outside the United States shall be eligible
to participate in the Plan on such terms and conditions different from those
specified in the Plan as may in the judgement of the Committee be necessary or
advisable and, to that end, the Committee may establish sub-plans, modified
option exercise procedures and other terms and procedures.

9. Approval of Plan. The Plan and all grants and awards made hereunder shall be
null and void if the adoption of the Plan is not approved by the affirmative
vote of a majority of the shares of common stock present in person or
represented by proxy at the 2000 annual meeting of stockholders.

                                       12

EX-10.(B)

                                                                   Exhibit 10(b)

                          R.R. DONNELLEY & SONS COMPANY

                      2000 BROAD-BASED STOCK INCENTIVE PLAN

          (as adopted by the Board of Directors on January 27, 2000; as

           amended May 2, 2002; as further amended September 25, 2003)

                                   I. GENERAL

1. Plan. To provide incentives to certain key employees through rewards based
upon the ownership or performance of the common stock of R.R. Donnelley & Sons
Company (the "Company"), the Committee hereinafter designated, may grant cash or
bonus awards, stock options, stock appreciation rights ("SARs"), or combinations
thereof, to eligible participants, on the terms and subject to the conditions
stated in the Plan. For purposes of the Plan, references to employment by the
Company also means employment by a majority-owned subsidiary of the Company and
employment by any other entity designated by the Board of Directors of the
Company (the "Board") or the Committee in which the Company has a direct or
indirect equity interest.

2. Eligibility. "Exempt employees" as defined under the Fair Labor Standards Act
of 1938 and selected other employees of the Company, its subsidiaries, and any
other entity designated by the Board or the Committee in which the Company has a
direct or indirect equity interest, shall be eligible, upon selection by the
Committee, to receive cash or bonus awards, stock options or SARs, either singly
or in combination, as the Committee, in its discretion, shall determine
("participants").

3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I, 5,000,000 shares of common stock, par value $1.25
per share ("common stock"), shall be available under the Plan, reduced by the
aggregate number of shares of common stock which become subject to outstanding
bonus awards, stock options and SARs which are not granted in tandem with or by
reference to a stock option ("free-standing SARs"). Shares subject to a grant or
award under the Plan which are not issued or delivered by reason of the
expiration, termination, cancellation or forfeiture of all or a portion of the
grant or award, or by reason of withholding of shares to pay all or a portion of
the exercise price or to satisfy tax withholding obligations, or by reason of
the delivery of shares prior to June 30, 2003 to pay all or a portion of the
exercise price or to satisfy tax withholding obligations, shall again be
available for future grants and awards; provided, however, that for purposes of
this sentence, stock options and SARs granted in tandem with or by reference to
a stock option granted prior to the grant of such SARs



("tandem SARs") shall be treated as one grant. To the extent that the Company
repurchased shares in the open market or otherwise prior to June 30, 2003, a
number of shares having a repurchase price equal to the aggregate proceeds
received by the Company from the exercise of stock options granted by the
Company under the Plan shall again be available for future grants and awards.

     Shares of common stock to be issued shall be treasury stock of the Company.

4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board of Directors (the "Committee"). Each member of the
Committee may be (i) an "outside director" within the meaning of Section 162(m)
of the Code and (ii) a "Non-Employee Director" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall, subject to the terms of the Plan, select eligible participants
for grants and awards; determine the form of each grant and award, either as
cash, a bonus award, stock options or SARs or a combination thereof; and
determine the number of shares or units subject to the grant or award, the fair
market value of the common stock or units when necessary, the time and
conditions of vesting, exercise or settlement, whether dividends or dividend
equivalents accrue under any award, and all other terms and conditions of each
grant and award, including, without limitation, the form of instrument
evidencing the grant or award. The Committee may establish rules and regulations
for the administration of the Plan, interpret the Plan, and impose, incidental
to a grant or award, conditions with respect to competitive employment or other
activities not inconsistent with the Plan. All such rules, regulations,
interpretations and conditions shall be conclusive and binding on all parties.
Each grant and award shall be evidenced by a written instrument and no grant or
award shall be valid until an agreement is executed by the Company and such
grant or award shall be effective as of the effective date set forth in the
agreement.

     The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (i) the selection for
participation in the Plan of (A) a participant who is a "covered employee"
within the meaning of Section 162(m) of the Code or who, in the Committee's
judgment, is likely to be a covered employee at any time during the period a
grant or award hereunder to such participant would be outstanding or (B) an
officer or other person subject to Section 16 of the Exchange Act or (ii)
decisions concerning the timing, pricing or amount of a grant or award to such a
participant, officer or other person. A majority of the Committee shall
constitute a quorum. The acts of the Committee shall be either (i) acts of a
majority of the members of the Committee present at any meeting at which a
quorum is present or (ii) acts approved in writing by all of the members of the
Committee without a meeting.

5. Adjustments. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of common stock other than a regular cash
dividend, the number and class of securities available under the Plan, the
number and class of securities subject to each outstanding

                                        2



bonus award, the number and class of securities subject to each outstanding
stock option and the purchase price per security and the terms of each
outstanding SAR shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding stock options and SARs without
an increase in the aggregate purchase price or base price. If any such
adjustment would result in a fractional security being (i) available under the
Plan, such fractional security shall be disregarded, or (ii) subject to an
outstanding grant or award under the Plan, the Company shall pay the holder
thereof, in connection with the first vesting, exercise or settlement of such
grant or award, in whole or in part, occurring after such adjustment, an amount
in cash determined by multiplying (i) the fraction of such security (rounded to
the nearest hundredth) by (ii) the excess, if any, of (A) the fair market value
on the vesting, exercise or settlement date over (B) the exercise or base price,
if any, of such grant or award; provided, however, that if the fair market value
of such fractional security immediately after such adjustment is less than the
fair market value of one share of common stock immediately prior to the
adjustment, such fractional security shall be disregarded and no payment shall
be made.

6. Effective Date and Term of Plan. The Plan shall become effective on March 23,
2000. The Plan shall terminate on the date on which shares are no longer
available for grants or awards under the Plan, unless terminated prior thereto
by action of the Board. No further grants or awards shall be made under the Plan
after termination, but termination shall not affect the rights of any
participant under any grants or awards made prior to termination.

7. Amendments. The Plan may be amended or terminated by the Board in any
respect. No amendment may impair the rights of a holder of an outstanding grant
or award without the consent of such holder.

                                II. BONUS AWARDS

1. Form of Award. Bonus awards, whether performance awards or fixed awards, may
be made to eligible participants in the form of (i) cash, whether in an absolute
amount or as a percentage of compensation, (ii) stock units, each of which is
substantially the equivalent of a share of common stock but for the power to
vote and, subject to the Committee's discretion, the entitlement to an amount
equal to dividends or other distributions otherwise payable on a like number of
shares of common stock, (iii) shares of common stock issued to the participant
but forfeitable and with restrictions on transfer in any form as hereinafter
provided or (iv) any combination of the foregoing.

2. Performance Awards. (a) Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with such actual amount, percentage or number to be determined by reference to
the level of achievement of corporate, sector, business unit, division,
individual or other specific performance goals over a performance period of not
less than one nor more than ten years, as determined by the Committee.

                                        3



     (b) In no event shall any participant receive a payment with respect to any
performance award if the minimum threshold performance goals requirement
applicable to the payment is not achieved during the performance period.

     (c) The Committee retains sole discretion to reduce the amount of or
eliminate any payment otherwise payable to a participant with respect to any
performance award. The Committee may exercise such discretion by establishing
conditions for payments with respect to performance awards in addition to the
performance goals, including the achievement of financial, strategic or
individual goals, which may be objective or subjective, as it deems appropriate.

     (e) For purposes of the Plan, "performance goals" means the objectives
established by the Committee which shall be satisfied or met during the
applicable performance period as a condition to a participant's receipt of all
or a part of a performance-based award under the Plan. The performance goals
may, without limitation, be tied to one or more of the following business
criteria, determined with respect to the Company or the applicable sector,
business unit or division: net sales, cost of sales, gross profit, earnings from
operations, earnings before interest, taxes, depreciation and amortization
("EBITDA"), earnings before income taxes, earnings before interest and taxes,
cash flow measures, return on equity, return on assets, return on net assets
employed, net income per common share (basic or diluted), EVA (Economic Value
Added, which represents the cash operating earnings of the Company after
deducting a charge for capital employed) or any other similar criteria
established by the Committee for the applicable performance period.

3. Fixed Awards. Awards may be made which are not contingent on the achievement
of specific objectives, but are contingent on the participant's continuing in
the Company's employ for a period specified in the award.

4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless and
until such award is forfeited or unless otherwise determined by the Committee at
the time of grant, to vote the shares and to receive dividends thereon from the
date of grant and the right to participate in any capital adjustment applicable
to all holders of common stock; provided, however, that a distribution with
respect to shares of common stock, other than a regular quarterly cash dividend,
shall be deposited with the Company and shall be subject to the same
restrictions as the shares of common stock with respect to which such
distribution was made.

     During the restriction period, a certificate or certificates representing
restricted shares shall be registered in the holder's name or the name of a
nominee of the Company and may bear a legend, in addition to any legend which
may be required under applicable laws, rules or regulations, indicating that the
ownership of the shares of common stock represented by such certificate is
subject to the restrictions, terms and conditions of the Plan and the agreement
relating to the restricted shares. All such certificates shall be deposited with
the Company, together with stock powers or other instruments of assignment
(including a power of attorney), each endorsed in blank with a guarantee of

                                        4



signature if deemed necessary or appropriate, which would permit transfer to the
Company of all or a portion of the shares of common stock subject to the award
in the event such award is forfeited in whole or in part. Upon termination of
any applicable restriction period, including, if applicable, the satisfaction or
achievement of applicable objectives, and subject to the Company's right to
require payment of any taxes, the requisite number of shares of common stock
shall be delivered to the holder of such award.

5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, subject to the Committee's discretion,
amounts equal to dividends and other distributions otherwise payable on a like
number of shares of common stock after the crediting of the units (unless the
record date for such dividends or other distributions precedes the date of grant
of such award) shall be credited to an account for the participant and held
until the award is forfeited or paid out and interest shall be credited on the
account at a rate determined by the Committee.

6. Vesting and Resultant Events. The Committee may, in its discretion, provide
for early vesting of an award in the event of the participant's death, permanent
and total disability or retirement. At the time of vesting, (i) the award (and
any dividend equivalents, other distributions and interest which have been
credited), if in units, shall be paid to the participant either in shares of
common stock equal to the number of units, in cash equal to the fair market
value of such shares, or in such combination thereof as the Committee shall
determine, (ii) the award, if a cash bonus award, shall be paid to the
participant either in cash, or in shares of common stock with a then fair market
value equal to the amount of such award, or in such combination thereof as the
Committee shall determine and (iii) shares of restricted common stock issued
pursuant to an award shall be released from the restrictions.

                               III. STOCK OPTIONS

1. Grants for Eligible Participants. Options to purchase shares of common stock
of the Company may be granted to such eligible participants as may be selected
by the Committee.

2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option.

3. Exercise of Options. The period during which options granted hereunder may be
exercised shall be determined by the Committee; provided, however, that no stock
option shall be exercised later than ten years after its date of grant. The
Committee may, in its discretion, establish performance measures which shall be
satisfied or met as a condition to the grant of an option or to the
exercisability of all or a portion of an option. The Committee shall determine
whether an option shall become exercisable in cumulative or

                                        5



non-cumulative installments and in part or in full at any time. An exercisable
option, or portion thereof, may be exercised only with respect to whole shares
of common stock.

     An option may be exercised (i) by giving written notice to the Company
specifying the number of whole shares of common stock to be purchased and
accompanied by payment therefor in full (or arrangement made for such payment to
the Company's satisfaction) either (A) in cash, (B) in previously owned whole
shares of common stock (which the optionee has held for at least six months
prior to delivery of such shares or which the optionee purchased on the open
market and for which the optionee has good title free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such exercise, (C) in
cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (D) a combination of (A) and (B),
(ii) if applicable, by surrendering to the Company any SARs which are canceled
by reason of the exercise of the option and (iii) by executing such documents as
the Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(D). Any fraction of a
share of common stock which would be required to pay such purchase price shall
be disregarded and the remaining amount due shall be paid in cash by the
optionee. No shares of common stock shall be delivered until the full purchase
price therefor has been paid.

4. Termination of Employment or Service. Subject to the requirements of the
Code, all of the terms relating to the exercise, cancellation or other
disposition of an option upon a termination of employment with the Company or
service on the Board, as the case may be, of the holder of such option, whether
by reason of disability, retirement, death or any other reason, shall be
determined by the Committee; provided, however, that the expiration date of an
option may never be extended beyond the original expiration date of such option.

                          IV. STOCK APPRECIATION RIGHTS

1. Grants. Free-standing SARs entitling the grantee to receive cash or shares of
common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock from the date of grant to the
date of exercise of such SARs, or in the case of tandem SARs, from the date of
grant of the related stock option to the date of exercise of such tandem SARs,
may be granted to such participants as may be selected by the Committee. The
holder of a tandem SAR may elect to exercise either the option or the SAR, but
not both. Tandem SARs shall be automatically canceled upon exercise of the
related stock option.

2. Number of SARs and Base Price. The number of SARs subject to a grant shall be
determined by the Committee. The base price of a tandem SAR shall be the
purchase price per share of common stock of the related option. The base price
of a free-standing SAR shall be determined by the Committee; provided, however,
that such base price shall

                                        6



not be less than 100% of the fair market value of a share of common stock on the
date of grant of such SAR.

3. Exercise of SARs. The agreement relating to a grant of SARs may specify
whether such grant shall be settled in shares of common stock (including
restricted shares of common stock) or cash or a combination thereof. Upon
exercise of an SAR, the grantee shall be paid the excess of the then fair market
value of the number of shares of common stock to which the SAR relates over the
base price of the SAR. Such excess shall be paid in cash or in shares of common
stock having a fair market value equal to such excess or in such combination
thereof as the Committee shall determine. The period during which SARs granted
hereunder may be exercised shall be determined by the Committee; provided,
however, no SAR shall be exercised later than ten years after the date of its
grant; and provided, further, that no tandem SAR shall be exercised if the
related option has expired or has been canceled or forfeited or has otherwise
terminated. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a tandem SAR, only with respect to whole shares of
common stock and, in the case of a free-standing SAR, only with respect to a
whole number of SARs. If an SAR is exercised for restricted shares of common
stock, the restricted shares shall be issued in accordance with Section 4 of
Article II and the holder of such restricted shares shall have such rights of a
stockholder of the Company as determined pursuant to such Section. Prior to the
exercise of an SAR for shares of common stock, including restricted shares, the
holder of such SAR shall have no rights as a stockholder of the Company with
respect to the shares of common stock subject to such SAR.

     A tandem SAR may be exercised (i) by giving written notice to the Company
specifying the number of whole SARs which are being exercised, (ii) by
surrendering to the Company any options which are canceled by reason of the
exercise of such SAR and (iii) by executing such documents as the Company may
reasonably request. A free-standing SAR may be exercised (i) by giving written
notice to the Company specifying the whole number of SARs which are being
exercised and (ii) by executing such documents as the Company may reasonably
request.

4. Termination of Employment. Subject to the requirements of the Code, all of
the terms relating to the exercise, cancellation or other disposition of an SAR
upon a termination of employment with the Company of the holder of such SAR,
whether by reason of disability, retirement, death or any other reason, shall be
determined by the Committee; provided, however, that the expiration date of an
SAR may never be extended beyond the original expiration date of such SAR.

                                    V. OTHER

                                        7



1. Non-Transferability of Options and Stock Appreciation Rights. No option or
SAR shall be transferable other than (i) by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise set forth in the agreement relating to such option
or SAR. Each option or SAR may be exercised during the participant's lifetime
only by the participant or the participant's guardian, legal representative or
similar person or the permitted transferee of the participant. Except as
permitted by the second preceding sentence, no option or SAR may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option or SAR, such
award and all rights thereunder shall immediately become null and void.

2. Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of common stock or the payment of any cash
pursuant to a grant or award hereunder, payment by the holder thereof of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date the
obligation to withhold or pay taxes arises in connection therewith (the "Tax
Date"), or withhold an amount of cash which would otherwise be payable to a
holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a cash
payment to the Company, (B) delivery to the Company of previously owned whole
shares of common stock (which the holder has held for at least six months prior
to the delivery of such shares or which the holder purchased on the open market
and for which the holder has good title, free and clear of all liens and
encumbrances) having an aggregate fair market value determined as of the Tax
Date, equal to the amount necessary to satisfy any such obligation, (C)
authorizing the Company to withhold whole shares of common stock which would
otherwise be delivered having an aggregate fair market value determined as of
the Tax Date or withhold an amount of cash which would otherwise be payable to a
holder, equal to the amount necessary to satisfy any such liability, (D) in the
case of the exercise of an option, a cash payment by a broker-dealer acceptable
to the Company to whom the optionee has submitted an irrevocable notice of
exercise or (E) any combination of (A), (B) and (C); provided, however, that the
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (B)-(E). An agreement relating to a grant or award hereunder may
not provide for shares of common stock to be withheld having an aggregate fair
market value in excess of the minimum amount of taxes required to be withheld.
Any fraction of a share of common stock which would be required to satisfy such
an obligation shall be disregarded and the remaining amount due shall be paid in
cash by the holder.

3. Acceleration Upon Change in Control. If while (i) any performance award or
fixed award granted under Article II is outstanding or (ii) any stock option
granted under Article III of the Plan or SAR granted under Article IV of the
Plan is outstanding --

                                        8



          (a) any "person," as such term is defined in Section 3(a)(9) of the
     Exchange Act, as modified and used in Section 13(d) and 14(d) thereof (but
     not including (i) the Company or any of its subsidiaries, (ii) a trustee or
     other fiduciary holding securities under an employee benefit plan of the
     Company or any of its subsidiaries, (iii) an underwriter temporarily
     holding securities pursuant to an offering of such securities, or (iv) a
     corporation owned, directly or indirectly, by the stockholders of the
     Company in substantially the same proportions as their ownership of stock
     of the Company) (hereinafter a "Person") is or becomes the beneficial
     owner, as defined in Rule 13d-3 of the Exchange Act, directly or
     indirectly, of securities of the Company (not including in the securities
     beneficially owned by such Person any securities acquired directly from the
     Company or its affiliates, excluding an acquisition resulting from the
     exercise of a conversion or exchange privilege in respect of outstanding
     convertible or exchangeable securities) representing 50% or more of the
     combined voting power of the Company's then outstanding securities; or

          (b) during any period of two (2) consecutive years beginning January
     1, 2000, individuals who at the beginning of such period constitute the
     Board and any new director (other than a director designated by a Person
     who has entered into any agreement with the Company to effect a transaction
     described in Clause (a), (c) or (d) of this Section) whose election by the
     Board or nomination for election by the Company's stockholders was approved
     by a vote of at least two-thirds (2/3) of the directors then still in
     office who either were directors at the beginning of the period or whose
     election or nomination for election was previously so approved, cease for
     any reason to constitute a majority thereof; or

          (c) the stockholders of the Company approve a merger or consolidation
     of the Company with any other corporation, other than (i) a merger or
     consolidation which would result in the voting securities of the Company
     outstanding immediately prior thereto continuing to represent (either by
     remaining outstanding or by being converted into voting securities of the
     surviving or acquiring entity), in combination with the ownership of any
     trustee or other fiduciary holding securities under an employee benefit
     plan of the Company, at least 50% of the combined voting power of the
     voting securities of the Company or such surviving or acquiring entity
     outstanding immediately after such merger or consolidation, or (ii) a
     merger or consolidation effected to implement a recapitalization of the
     Company (or similar transaction) in which no Person acquires more than 50%
     of the combined voting power of the Company's then outstanding securities;
     or

          (d) the stockholders of the Company approve a plan of complete
     liquidation of the Company or an agreement for the sale or disposition by
     the Company of all or substantially all the Company's assets,

(any of such events being hereinafter referred to as a "Change in Control"),
then from and after the date on which public announcement of the acquisition of
such percentage shall have been made, or the date on which the change in the
composition of the Board set

                                        9



forth above shall have occurred, or the date of any such stockholder approval of
a merger, consolidation, plan of complete liquidation or an agreement for the
sale of the Company's assets as described above occurs (the applicable date
being hereinafter referred to as the "Acceleration Date"), (i) with respect to
such performance awards, the highest level of achievement specified in the award
shall be deemed met and the award shall be immediately and fully vested, (ii)
with respect to such fixed awards, the period of continued employment specified
in the award upon which the award is contingent shall be deemed completed and
the award shall be immediately and fully vested and (iii) with respect to such
options and SARs, all such options and SARs, whether or not then exercisable in
whole or in part, shall be fully and immediately exercisable.

4. Restrictions on Shares. Each grant and award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of common stock subject thereto upon
any securities exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of common stock delivered pursuant
to any grant or award made hereunder bear a legend indicating that the sale,
transfer or other disposition thereof by the holder is prohibited except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

5. No Right of Participation or Employment. No person shall have any right to
participate in the Plan. Neither the Plan nor any grant or award made hereunder
shall confer upon any person any right to continued employment by the Company,
any subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.

6. Rights as Stockholder. No person shall have any right as a stockholder of the
Company with respect to any shares of common stock or other equity security of
the Company which is subject to a grant or award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of common
stock or equity security.

7. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

8. Foreign Participants. Notwithstanding any provision of the Plan to the
contrary the Committee may, with a view to both promoting achievement of the
purposes of the plan and complying with provisions of laws in countries outside
the United States in which the Company or its subsidiaries operate or have
employees, determine which persons outside the United States shall be eligible
to participate in the Plan on such terms

                                       10



and conditions different from those specified in the Plan as may in the
judgement of the Committee be necessary or advisable and, to that end, the
Committee may establish sub-plans, modified option exercise procedures and other
terms and procedures.

                                       11

EX-12

EXHIBIT 12

RATIO OF EARNINGS TO FIXED CHARGES

(In thousands except ratios)

	Nine Months Ending September 30, 2003
Earnings available for fixed charges:
Earnings before income taxes (1)	$	123,165
Less: Equity earnings of minority-owned companies		(3,264	)
Add: Dividends received from investees under the equity method		973
Add: Minority interest expense in majority-owned subsidiaries		261
Add: Fixed charges before capitalized interest		46,378
Add: Amortization of capitalized interest		5,322
Total earnings available for fixed charges	$	172,835
Fixed charges:
Interest expense	$	36,673
Interest portion of rental expense		9,679
Amortization of discount related to indebtedness		26
Total fixed charges before capitalized interest		46,378
Capitalized interest		4,500
Total fixed charges	$	50,878
Ratio of earnings to fixed charges		3.40

(1) Includes restructuring and impairment charges of $9,390 million ($5,634 million after-tax, or $0.05 per diluted share).

EX-31.1

Exhibit 31.1

Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)

of the Securities Exchange Act of 1934

I, William L. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of R.R. Donnelley & Sons Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2003

/S/    WILLIAM L. DAVIS                                                 

William L. Davis

Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)

of the Securities Exchange Act of 1934

I, Gregory A. Stoklosa, certify that:

1. I have reviewed this quarterly report on Form 10-Q of R.R. Donnelley & Sons Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2003

/S/    GREGORY A. STOKLOSA                                    

Gregory A. Stoklosa

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18

OF THE UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of R.R. Donnelley & Sons Company (the “Company”) on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William L. Davis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/    William L. Davis

William L. Davis

Chief Executive Officer

November 12, 2003

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18

OF THE UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of R.R. Donnelley & Sons Company (the “Company”) on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory A. Stoklosa, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/    Gregory A. Stoklosa

Gregory A. Stoklosa

Chief Financial Officer

November 12, 2003