EXHIBIT 10.24
THE READER'S DIGEST ASSOCIATION, INC.
1994 KEY EMPLOYEE LONG TERM
INCENTIVE PLAN
(Amended and Restated as of September 18, 2002)
As amended by Amendment No. 1, effective as of July 1, 1997
As amended by Amendment No. 2, effective as of April 28, 1998
As amended by Amendment No. 3, effective as of April 28, 1998
As amended by Amendment No. 4, effective as of August 13, 1999
As amended by Amendment No. 5, effective as of April 13, 2001
As amended by Amendment No. 6, effective as of September 18, 2002
THE READER'S DIGEST ASSOCIATION, INC.
1994 KEY EMPLOYEE LONG TERM INCENTIVE PLAN
ARTICLE I
Purpose
The purpose of this 1994 Key Employee Long Term Incentive Plan (the
"Plan") is to enable The Reader's Digest Association, Inc. (the "Company") to
offer key employees of the Company and Designated Subsidiaries (defined
below) performance-based stock incentives and other equity interests in the
Company and other incentive awards, thereby attracting, retaining and
rewarding such key employees, and strengthening the mutuality of interests
between key employees and the Company's stockholders.
ARTICLE II
Definitions
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Award" shall mean any award under this Plan of any Stock Option,
Stock Appreciation Right, Restricted Stock, Performance Shares, Performance
Units or Other Stock-Based Award. All Awards shall be granted by, confirmed
by, and subject to the terms of, a written agreement executed by the Company
and the Participant.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Change in Control" shall have the meaning set forth in Article
12.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.5 "Committee" shall mean a committee of the Board appointed from
time to time by the Board consisting of three or more Directors, none of whom
shall be eligible to receive any Award pursuant to this Plan.
2.6 "Common Stock" means the Class A non-voting Common Stock, $.01
par value per share, of the Company.
2.7 "Designated Subsidiary" shall mean one of such subsidiaries of
the Company, 80 percent or more of the voting capital stock of which is
owned, directly or indirectly, by the Company, which are designated from time
to time by the Board.
2.8 "Disability" shall mean Total Disability as defined in the
Company's Long Term Disability Plan.
2.9 "Eligible Employees" shall mean the employees of the Company and
the Designated Subsidiaries who are eligible pursuant to Article 5 to be
granted Awards under this Plan.
2.10 "Fair Market Value" for purposes of this Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the mean between the high and low
sales prices on the applicable date, or if no sales price is available for
such date, the mean between the closing bid and asked prices for such date,
of a share of Common Stock (i) as reported by the principal national
securities exchange in the United States on which it is then traded, or (ii)
if not traded on any such national securities exchange, as quoted on an
automated quotation system sponsored by the National Association of
Securities Dealers, or if the Common Stock shall not have been reported or
quoted on such date, on the first day prior thereto on which the Common Stock
was reported or quoted. If the Common Stock is not readily tradeable on a
national securities exchange or any system sponsored by the National
Association of Securities Dealers, its Fair Market Value shall be set by the
Board on the advice of an investment advisor in good faith.
2.11 "Incentive Stock Option" shall mean any Stock Option awarded
under this Plan intended to be and designated as an "Incentive Stock Option"
within the meaning of Section 422A of the Code.
2.12 "Non-Qualified Stock Option" shall mean any Stock Option awarded
under this Plan that is not an Incentive Stock Option.
2.13 "Other Stock-Based Award" shall mean an Award under Article 11 of
this Plan that is valued in whole or in part by reference to, or is payable
in or otherwise based on, Common Stock.
2.14 "Participant" shall mean an employee to whom an Award has been
made pursuant to this Plan.
2.15 "Performance Cycle" shall have the meaning set forth in Section
10.1.
2.16 "Performance Period" shall have the meaning set forth in Section
9.1.
2.17 "Performance Share" shall mean an Award made pursuant to Article
9 of this Plan of the right to receive Common Stock or cash of an equivalent
value at the end of a specified Performance Period.
2.18 "Performance Unit" shall mean an Award made pursuant to Article
10 of this Plan of the right to receive a fixed dollar amount, payable in
cash or Common Stock or a combination of both.
2.19 "Reference Stock Option" shall have the meaning set forth in
Section 7.1.
2.20 "Restricted Stock" shall mean an Award of shares of Common Stock
under this Plan that is subject to restrictions under Article 8.
2.21 "Restriction Period" shall have the meaning set forth in
Subsection 8.3(a).
2.22 "Retirement" shall mean termination of employment by an employee
who is at least 55 years of age after at least 5 years of employment by the
Company and/or a Designated Subsidiary.
2.23 "Stock Appreciation Right" shall mean the right pursuant to an
Award granted under Article 7. A Tandem Stock Appreciation Right shall mean
the right to surrender to the Company all (or a portion) of a Stock Option in
exchange for an amount equal to the difference between (i) the Fair Market
Value, as of the date such Stock Option (or such portion thereof) is
surrendered, of the shares of Common Stock covered by such Stock Option (or
such portion thereof), and (ii) the aggregate exercise price of such Stock
Option (or such portion thereof). A Non-Tandem Stock Appreciation Right
shall mean the right to receive an amount equal to the difference between (x)
the Fair Market Value of a share of Common Stock as of the date such Right is
exercised, and (y) the Fair Market Value of a share of Common Stock as of the
date such Right is awarded, otherwise than on surrender of a Stock Option.
2.24 "Stock Option" or "Option" shall mean any option to purchase
shares of Common Stock (including Restricted Stock and Performance Shares, if
the Committee so determines) granted pursuant to Article 6.
2.25 "Termination of Employment" shall mean a termination of service
for reasons other than military or personal leave of absence granted by the
Company or a transfer of a Participant from the Company or a Designated
Subsidiary to another Designated Subsidiary or to the Company or to any
affiliate as defined in Section 414 of the Code.
2.26 "Transfer" shall mean anticipate, alienate, attach, sell, assign,
pledge, encumber, charge or otherwise transfer.
2.27 "Withholding Election" shall have the meaning set forth in
Section 15.4.
ARTICLE III
Administration
3.1 The Committee. The Plan shall be administered and interpreted by
the Committee.
3.2 Awards. The Committee shall have full authority to grant,
pursuant to the terms of this Plan, to eligible employees: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv)
Performance Shares, (v) Performance Units, and (vi) Other Stock-Based
Awards. In particular, the Committee shall have the authority:
(a) to select the eligible employees to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares,
Performance Units and Other Stock-Based Awards may from time to
time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares, Performance Units and Other
Stock-Based Awards, or any combination thereof, are to be granted
hereunder to one or more eligible employees;
(c) to determine the number of shares of Common Stock to be covered
by each such Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Award granted hereunder (including,
but not limited to, the share price, any restriction or
limitation, any vesting schedule or acceleration thereof, or any
forfeiture restrictions or waiver thereof, regarding any Stock
Option or other Award and the shares of Common Stock relating
thereto, based on such factors, if any, as the Committee shall
determine, in its sole discretion);
(e) to determine whether, to what extent and under what circumstances
grants of Options and other Awards under this Plan are to operate
on a tandem basis and/or in conjunction with or apart from other
awards made by the Company outside of this Plan;
(f) to determine whether and under what circumstances a Stock Option
may be settled in cash, Common Stock, Performance Shares and/or
Restricted Stock under Subsection 6.4(k); and
(g) to determine whether, to what extent and under what circumstances
Common Stock and other amounts payable with respect to an Award
under this Plan shall be deferred either automatically or at the
election of the Participant.
3.3 Guidelines. Subject to Article 13 hereof, the Committee shall
have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing this Plan and perform all acts, including
the delegation of its administrative responsibilities, as it shall, from time
to time, deem advisable; to construe and interpret the terms and provisions
of this Plan and any Award issued under this Plan (and any agreements
relating thereto); and to otherwise supervise the administration of this
Plan. The Committee may correct any defect, supply any omission or reconcile
any inconsistency in this Plan or in any agreement relating thereto in the
manner and to the extent it shall deem necessary to carry this Plan into
effect. Notwithstanding the foregoing, no action of the Committee under this
Section 3.3 shall impair the rights of any Participant without the
Participant's consent.
3.4 Decisions Final. Any decision, interpretation or other action
made or taken in good faith by or at the direction of the Company, the Board,
or the Committee (or any of its members) arising out of or in connection with
the Plan shall be within the absolute discretion of all and each of them, as
the case may be, and shall be final, binding and conclusive on the Company
and all employees and Participants and their respective heirs, executors,
administrators, successors and assigns.
3.5 Reliance on Counsel. The Company or the Committee may consult
with legal counsel, who may be counsel for the Company or other counsel, with
respect to its obligations or duties hereunder, or with respect to any action
or proceeding or any question of law, and shall not be liable with respect to
any action taken or omitted by it in good faith pursuant to the advice of
such counsel.
ARTICLE IV
Share Limitation
4.1 Shares. The maximum aggregate number of shares of Common Stock
which may be issued under this Plan or with respect to which Non-Tandem Stock
Appreciation Rights may be granted shall not exceed 17,300,000 shares
(subject to any increase or decrease pursuant to Section 4.2) which may be
either authorized and unissued Common Stock or outstanding Common Stock
reacquired by the Company. No more than 10% of such maximum shall be issued
under this Plan as Restricted Stock. If any Option granted under this Plan
shall expire, terminate or be cancelled for any reason without having been
exercised in full, or payment shall have been made in other than Common
Stock, the number of unpurchased shares shall again be available for the
purposes of the Plan; provided, however, that if such expired, terminated or
cancelled Option shall have been issued in tandem with a Stock Appreciation
Right or other Award, none of such unpurchased shares shall again become
available for purposes of this Plan to the extent that the related Right or
Award granted under this Plan is exercised. Further, if any shares of Common
Stock granted hereunder are forfeited or such Award otherwise terminates
without the delivery of such shares upon the lapse of restrictions, the
shares subject to such grant, to the extent of such forfeiture or
termination, shall again be available under this Plan.
4.2 Changes. In the event of any change in the capital stock of the
Company by reason of any stock dividend or distribution, stock split or
reverse stock split, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, distribution with respect to its
outstanding Common Stock of capital stock other than Common Stock,
reclassification of its capital stock, issuance of warrants or options to
purchase any Common Stock or securities convertible into Common Stock, or
rights offering to purchase capital stock at a price below fair market value,
or any similar change affecting the capital stock of the Company; then the
aggregate number and kind of shares which thereafter may be issued under this
Plan, the number and kind of shares subject to outstanding Options granted
under this Plan and the purchase price thereof, and the number and kind of
shares subject to other outstanding Awards (including but not limited to
Awards of Restricted Stock, Performance Shares and Other Stock-Based Awards)
granted under this Plan, shall be appropriately adjusted consistent with such
change in such manner as the Committee may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available
for, Participants under this Plan, and any such adjustment determined by the
Committee in good faith shall be binding and conclusive on the Company and
all Participants and employees and their respective heirs, executors,
administrators, successors and assigns. Any such adjusted Option price shall
also be used to determine the amount payable by the Company upon the exercise
of any Stock Appreciation Right associated with any Stock Option.
4.3 Purchase Price. Notwithstanding any provision of this Plan to
the contrary, if authorized but previously unissued shares of Common Stock
are issued under this Plan, such shares shall be issued for a consideration
which shall not be less than par value.
ARTICLE V
Eligibility
5.1 Senior officers, senior management and key employees of the
Company and its Designated Subsidiaries and members of the Executive
Committee of the Company's Board of Directors are eligible to be granted
Options and other Awards under this Plan. Eligibility under this Plan shall
be determined by the Committee.
ARTICLE VI
Stock Options
6.1 Options. Stock Options may be granted alone or in addition to
other Awards granted under this Plan. Each Stock Option granted under this
Plan shall be one of two types: (i) an Incentive Stock Option or (ii) a
Non-Qualified Stock Option.
6.2 Grants. The Committee shall have the authority to grant to any
Participant one or more Incentive Stock Options, Non-Qualified Stock Options,
or both types of Stock Options (in each case with or without Stock
Appreciation Rights); provided, however, that no Participant shall be granted
Stock Options or Non-Tandem Stock Appreciation Rights, or both, with respect
to a total of more than 1,200,000 shares of Common Stock during any fiscal
year of the Company. To the extent that any Stock Option does not qualify as
an Incentive Stock Option (whether because of its provisions or the time or
manner of its exercise or otherwise), such Stock Option or the portion
thereof which does not qualify shall constitute a separate Non-Qualified
Stock Option.
6.3 Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under Section 422A of the Code, or, without the consent of the
Participants affected, to disqualify any Incentive Stock Option under such
Section 422A.
6.4 Terms of Options. Options granted under this Plan shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms
of this Plans, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the
Committee at the time of grant but shall be not less than 100% of
the Fair Market Value of the Common Stock at grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable
more than ten years after the date the Option is granted, and no
Non-Qualified Stock Option shall be exercisable more than ten
years and one day after the date the Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be
determined by the Committee at grant; provided, however, that,
except as provided in subsections (f), (g) and (h) below and
Article 3, unless otherwise determined by the Committee at grant,
no Stock Option shall be exercisable prior to the first
anniversary date of the granting of the Option. If the Committee
provides, in its discretion, that any Stock Option is exercisable
only in installments, the Committee may waive such installment
exercise provisions at any time at or after grant in whole or in
part, based on such factors, if any, as the Committee shall
determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (c) above, Stock
Options may be exercised in whole or in part at any time during
the option term, by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such
notice shall be accompanied by payment in full of the purchase
price in such form as the Committee may accept. If and to the
extent determined by the Committee in its sole discretion at or
after grant, payment in full or in part may also be made in the
form of Common Stock (other than Restricted Stock) owned by the
Participant (and for which the Participant has good title free
and clear of any liens and encumbrances) or Restricted Stock, or
by reduction in the number of shares issuable upon such exercise
based, in each case, on the Fair Market Value of the Stock on the
payment date as determined by the Committee (without regard to
any forfeiture restrictions applicable to Restricted Stock). No
shares of Stock shall be issued until payment, as provided
herein, therefor has been made. A Participant shall generally
have the rights to dividends or other rights of a shareholder
with respect to shares subject to the Option when the optionee
has given written notice of exercise, has paid for such shares as
provided herein, and, if requested, has given the representation
described in Section 15.1. Notwithstanding the foregoing, if
payment in full or in part has been made in the form of
Restricted Stock, an equivalent number of shares of Common Stock
issued on exercise of the Option shall be subject to the same
restrictions and conditions, and during the remainder of the
Restriction Period, applicable to the shares of Restricted Stock
surrendered therefor.
(e) Transferability of Options.
(1) No Stock Option shall be Transferable by the Participant
otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable,
during the Participant's lifetime, only by the
Participant. Notwithstanding the foregoing, the Committee
may provide in the terms and conditions governing any Stock
Option other than an Incentive Stock Option, at the time of
grant or thereafter, that the Stock Option may be
Transferred, to the extent vested, to members of the
Participant's immediate family, to trusts solely for the
benefit of such immediate family members, and to
partnerships in which such immediate family members and/or
trusts are the only partners. For this purpose "immediate
family members" means the Participant's spouse, parents,
children, stepchildren, grandchildren and other issue and
legal dependents. Any Transfer of Stock Options made under
this provision will not be effective until notice of such
Transfer is received by the Company.
(2) Notwithstanding any thing to the contrary herein, if a
Stock Option has been Transferred in accordance with this
Section 6.4, the Stock Option shall be exercisable solely
by the Transferee. The Stock Option shall remain subject
to the provisions of the Plan, including that it shall be
exercisable only to the extent that the Participant or
Participant's estate would have been entitled to exercise
it if the Participant had not Transferred the Stock
Option. In the event of the death of the Participant prior
to the expiration of the right to exercise the Transferred
Stock Option, the period during which the Stock Option
shall be exercisable shall terminate on the date one year
following the date of the Participant's death. In the
event of the death of the Transferee prior to the
expiration of the right to exercise the Stock Option, the
period during which the Stock Option shall be exercisable
by the executors, administrators, legatees and distributees
of the Transferee's estate, as the case may be, shall
terminate on the date one year following the date of the
Transferee's death. In no event, however, shall the Stock
Option be exercisable after the expiration of the Stock
Option period set forth in the terms and conditions of the
Stock Option. The Stock Option shall be subject to such
other rules as the Committee shall determine.
(f) Termination by Death. Subject to subsection (j) below, if a
Participant's employment by the Company or a Designated
Subsidiary terminates by reason of death, any Stock Option held
by such Participant, unless otherwise determined by the Committee
at grant, shall be fully vested and may thereafter be exercised
by the legal representative of the estate, for a period of one
year (or such other period as the Committee may specify at grant)
from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Subject to subsection (j)
below, if a Participant's employment by the Company or a
Designated Subsidiary terminates by reason of Disability, any
Stock Option held by such Participant, unless otherwise
determined by the Committee at grant, shall be fully vested and
may thereafter be exercised by the Participant for a period of
three years (or such other period as the Committee may specify at
grant) from the date of such termination of employment or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that, if the
Participant dies within such three-year period (or such other
period as the Committee shall specify at grant), any unexercised
Stock Option held by such Participant shall thereafter be
exercisable to the extent to which it was exercisable at the time
of death for a period of twelve months from the date of such
death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422A of the
Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. Subject to subsection (j),
if a Participant's employment by the Company or a Designated
Subsidiary terminates by reason of Retirement, any Stock Option
held by such Participant, unless otherwise determined by the
Committee at grant, shall be fully vested and may thereafter be
exercised by the Participant for a period of three years (or such
other period as the Committee may specify at grant) from the date
of such termination of employment or the expiration of the stated
term of such Stock Option, whichever period is the shorter;
provided, however, that, if the Participant dies within such
three-year period, any unexercised Stock Option held by such
Participant shall thereafter be exercisable, to the extent to
which it was exercisable at the time of death, for a period of
twelve months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of
Section 422A of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee
at or after grant, if a Participant's employment by the Company
or a Designated Subsidiary terminates for any reason other than
death, Disability or Retirement, the Stock Option shall thereupon
terminate, except that such Stock Option may be exercised, to the
extent it was exercisable immediately preceding such termination,
for the lesser of three months or the balance of such Stock
Option's term if the Participant is involuntarily terminated by
the Company or the Designated Subsidiary without cause.
(j) Incentive Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the time of grant)
of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Participant during any
calendar year under the Plan and/or any other stock option plan
of the Company or any subsidiary or parent corporation (within
the meaning of Section 425 of the Code) exceeds $100,000, such
Options shall be treated as Options which are not Incentive Stock
Options.
To the extent (if any) permitted under Section 422A of the Code,
or the applicable regulations thereunder or any applicable
Internal Revenue Service pronouncement, if (i) a Participant's
employment with the Company or a Designated Subsidiary is
terminated by reason of death, Disability or Retirement and (ii)
the portion of any Incentive Stock Option that is otherwise
exercisable during the post-termination period specified under
subsections (f), (g) or (h) above, computed without regard to the
$100,000 limitation currently contained in Section 422A(d) of the
Code, is greater than the portion of such Stock Option that is
immediately exercisable as an "incentive stock option" during
such post-termination period under Section 422A, such excess
shall be treated as a Non-Qualified Stock Option. If the
exercise of an Incentive Stock Option is accelerated by reason of
a Change in Control, any portion of such Option that is not
exercisable as an Incentive Stock Option by reason of the
$100,000 limitation contained in Section 422A(d) of the Code
shall be treated as a Non-Qualified Stock Option.
Should any of the foregoing provisions not be necessary in order
for the Stock Options to qualify as Incentive Stock Options, or
should any additional provisions be required, the Committee may
amend the Plan accordingly, without the necessity of obtaining
the approval of the shareholders of the Company.
(k) Buyout and Settlement Provisions. The Committee may at any time
offer to buy out an Option previously granted, based on such
terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is
made.
In addition, if the Option agreement so provides at grant or is
amended (with the Participant's consent) after grant and prior to
exercise to so provide, the Committee may require that all or
part of the shares to be issued with respect to the spread value
of an exercised Option take the form of Performance Shares or
Restricted Stock, which shall be valued on the date of exercise
on the basis of the Fair Market Value of such Performance Shares
or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
ARTICLE VII
Stock Appreciation Rights
7.1 Tandem Stock Appreciation Rights. Stock Appreciation Rights may
be granted in conjunction with all or part of any Stock Option (a "Reference
Stock Option") granted under this Plan ("Tandem Stock Appreciation Rights").
In the case of a Non-Qualified Stock Option, such rights may be granted
either at or after the time of the grant of such Reference Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of the grant of such Reference Stock Option.
7.2 Terms and Conditions of Tandem Stock Appreciation Rights. Tandem
Stock Appreciation Rights shall be subject to such terms and conditions, not
inconsistent with the provisions of this Plan, as shall be determined from
time to time by the Committee, including the following:
(a) Term. A Tandem Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Stock Option shall
terminate and no longer be exercisable upon the termination or
exercise of the Reference Stock Option, except that, unless
otherwise determined by the Committee, in its sole discretion, at
the time of grant, a Tandem Stock Appreciation Right granted with
respect to less than the full number of shares covered by the
Reference Stock Option shall not be reduced until and then only
to the extent the exercise or termination of the Reference Stock
Option causes the number of shares covered by the Tandem Stock
Appreciation Right to exceed the number of shares remaining
available and unexercised under the Reference Stock Option.
(b) Exercisability. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the
Reference Stock Options to which they relate shall be exercisable
in accordance with the provisions of Article 6 and this Article
7; provided, however, that any Tandem Stock Appreciation Right
granted subsequent to the grant of the Reference Stock Option
shall not be exercisable during the first six months of its term,
except that this special limitation shall not apply in the event
of death or Disability of the Participant prior to the expiration
of the six-month period.
(c) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by an optionee by surrendering the applicable portion
of the Reference Stock Option. Upon such exercise and surrender,
the Participant shall be entitled to receive an amount determined
in the manner prescribed in this Section 7.2. Stock Options
which have been so surrendered, in whole or in part, shall no
longer be exercisable to the extent the related Tandem Stock
Appreciation Rights have been exercised.
(d) Payment. Upon the exercise of a Tandem Stock Appreciation Right
a Participant shall be entitled to receive up to, but no more
than, an amount in cash and/or shares of Common Stock equal in
value to the excess of the Fair Market Value of one share of
Common Stock over the option price per share specified in the
Reference Stock Option multiplied by the number of shares in
respect of which the Tandem Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine
the form of payment.
(e) Non-Transferability. Tandem Stock Appreciation Rights shall be
Transferable only when and to the extent that the underlying
Stock Option would be Transferable under Subsection 6.4(e) of the
Plan.
(f) Deemed Exercise of Reference Stock Option. Upon the exercise of
a Tandem Stock Appreciation Right, the Reference Stock Option or
part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the
limitation set forth in Article 4 of the Plan on the number of
shares of Common Stock to be issued under the Plan.
7.3 Non-Tandem Stock Appreciation Rights. Non-Tandem Stock
Appreciation Rights may also be granted without reference to any Stock
Options granted under this Plan; provided, however, that no Participant shall
be granted Stock Options or Non-Tandem Stock Appreciation Rights, or both,
with respect to a total of more than 500,000 shares of Common Stock during
any fiscal year of the Company.
7.4 Terms and Conditions of Non-Tandem Stock Appreciation Rights.
Non-Tandem Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by the Committee, including the following:
(a) Term. The term of each Non-Tandem Stock Appreciation Right shall
be fixed by the Committee, but shall not be greater than ten
years and one day after the date the Right is granted.
(b) Exercisability. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at grant;
provided, however, that any Right shall not be exercisable during
the first six months of its term, except that this special
limitation shall not apply in the event of death or Disability of
the Participant prior to expiration of this six-month period. If
the Committee provides, in its discretion, that any such Right is
exercisable only in installments, the Committee may waive such
installment exercise provisions at any time at or after grant in
whole or in part, based on such factors, if any, as the Committee
shall determine, in its sole discretion.
(c) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (b) above,
Non-Tandem Stock Appreciation Rights may be exercised in whole or
in part at any time during the option term, by giving written
notice of exercise to the Company specifying the number of Rights
to be exercised.
(d) Payment. Upon the exercise of a Non-Tandem Stock Appreciation
Right a Participant shall be entitled to receive, for each Right
exercised, up to, but no more than, an amount in cash and/or
shares of Common Stock equal in value to the excess of the Fair
Market Value of one share of Common Stock on the date the Right
is exercised over the Fair Market Value of one share of Common
Stock on the date the Right was awarded to the Participant, with
the Committee having the right to determine the form of payment.
(e) Non-Transferability. No Non-Tandem Stock Appreciation Right
shall be Transferable by the Participant otherwise than by will
or by the laws of descent and distribution, and all such Rights
shall be exercisable, during the Participant's lifetime, only by
the Participant.
(f) Termination by Death. If a Participant's employment by the
Company or a Designated Subsidiary terminates by reason of death,
any Non-Tandem Stock Appreciation Right held by such Participant,
unless otherwise determined by the Committee at grant, shall be
fully vested and may thereafter be exercised by the legal
representative of the estate, for a period of one year (or such
other period as the Committee may specify at grant) from the date
of such death or until the expiration of the stated term of such
Right, whichever period is the shorter.
(g) Termination by Reason of Disability or Retirement. If a
Participant's employment by the Company or a Designated
Subsidiary terminates by reason of Disability or Retirement, any
Non-Tandem Stock Appreciation Right held by such Participant,
unless otherwise determined by the Committee at grant, shall be
fully vested and may thereafter be exercised by the Participant
for a period of three years (or such other period as the
Committee may specify at grant) from the date of such termination
of employment or until the expiration of the stated term of such
Right, whichever period is the shorter; provided, however, that,
if the Participant dies within such three-year period (or such
other period as the Committee shall specify at grant), any
unexercised Non-Tandem Stock Appreciation Right held by such
Participant shall thereafter be exercisable to the extent to
which it was exercisable at the time of death for a period of
twelve months from the date of such death or until the expiration
of the stated term of such Right, whichever period is the shorter.
(h) Other Termination. Unless otherwise determined by the Committee
at or after grant, if a Participant's employment by the Company
or a Designated Subsidiary terminates for any reason other than
death, Disability or Retirement, the Non-Tandem Stock
Appreciation Right shall thereupon terminate, except that such
Right may be exercised, to the extent it was exercisable
immediately preceding such termination, for the lesser of three
months or the balance of the stated term of such Right if the
Participant is involuntarily terminated by the Company or the
Designated Subsidiary without cause.
ARTICLE VIII
Restricted Stock
8.1 Awards of Restricted Stock. Shares of Restricted Stock may be
issued either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the eligible persons to whom, and the time or
times at which, grants of Restricted Stock will be made, the number of shares
to be awarded, the price (if any) to be paid by the recipient (subject to
Section 8.2), the time or times within which such Awards may be subject to
forfeiture, the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the Awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
8.2 Awards and Certificates. The prospective Participant selected to
receive a Restricted Stock Award shall not have any rights with respect to
such Award, unless and until such Participant has delivered a fully executed
copy of the agreement evidencing the Award to the Company and has otherwise
complied with the applicable terms and conditions of such Award. Further,
such Award shall be subject to the following conditions:
(a) Purchase Price. Subject to Section 4.3, the purchase price for
shares of Restricted Stock may be less than their par value and
may be zero.
(b) Acceptance. Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may
specify at grant) after the Award date, by executing a Restricted
Stock Award agreement and by paying whatever price (if any) the
Committee has designated thereunder.
(c) Legend. Each Participant receiving a Restricted Stock Award
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the
name of such Participant, and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable
to such Award, substantially in the following form:
"The anticipation, alienation, attachment, sale, transfer,
assignment, pledge, encumbrance or charge of the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of The Reader's Digest Association, Inc.
(the "Company") 1994 Key Employee Long Term Incentive Plan and an
Agreement entered into between the registered owner and the
Company dated . Copies of such Plan and
Agreement are on file at the principal office of the Company."
(d) Custody. The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until
the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock Award, the Participant shall
have delivered a duly signed stock power, endorsed in blank,
relating to the Common Stock covered by such Award.
8.3 Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Plan shall be subject to the following restrictions
and conditions:
(a) Restriction Period. Subject to the provisions of this Plan and
the Award agreement, during a period set by the Committee
commencing with the date of such Award (the "Restriction
Period"), the Participant shall not be permitted to Transfer
shares of Restricted Stock awarded under this Plan. Within these
limits, the Committee, in its sole discretion, may provide for
the lapse of such restrictions in installments and may accelerate
or waive such restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as the
Committee may determine in its sole discretion.
(b) Rights as Stockholder. Except as provided in this subsection (b)
and subsection (a) above, the Participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a
holder of shares of Common Stock of the Company including the
right to receive any dividends. The Committee, in its sole
discretion, as determined at the time of Award, may permit or
require the payment of dividends to be deferred.
(c) Termination of Employment. Subject to the applicable provisions
of the Award agreement and this Plan, upon termination of a
Participant's employment with the Company or a Designated
Subsidiary for any reason during the Restriction Period, all
Restricted Shares still subject to restriction will vest or be
forfeited in accordance with the terms and conditions established
by the Committee at grant.
(d) Hardship. In the event of hardship or other special
circumstances of a Participant whose employment with the Company
or a Designated Subsidiary is involuntarily terminated (other
than for cause), the Committee may, in its sole discretion, waive
in whole or in part any or all remaining restrictions with
respect to such Participant's shares of Restricted Stock, based
on such factors as the Committee may deem appropriate.
(e) Lapse of Restrictions. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Stock
subject to such Restriction Period, the certificates for such
shares shall be delivered to the Participant. All legends
relating to the restrictions applicable to the Restricted Stock
shall be removed from said certificates at the time of delivery
to the Participant.
ARTICLE IX
Performance Shares
9.1 Award of Performance Shares. Performance Shares may be awarded
either alone or in addition to other Awards granted under this Plan. The
Committee shall determine the eligible persons to whom and the time or times
at which Performance Shares shall be awarded, the number of Performance
Shares to be awarded to any person, the duration of the period (the
"Performance Period") during which, and the conditions under which, receipt
of the Shares will be deferred, and the other terms and conditions of the
Award in addition to those set forth in Section 9.2.
The Committee may condition the grant of Performance Shares upon
the attainment of specified performance goals or such other factors or
criteria as the Committee shall determine, in its sole discretion.
9.2 Terms and Conditions. Performance Shares awarded pursuant to
this Article 9 shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable provisions of the
Award agreement and this Plan, Performance Share Awards may not
be Transferred during the Performance Period.
(b) Dividends. Unless otherwise determined by the Committee at the
time of Award, amounts equal to any dividends declared during the
Performance Period with respect to the number of shares of Common
Stock covered by a Performance Share Award will not be paid to
the Participant.
(c) Payment. Subject to the provisions of the Award agreement and
this Plan, at the expiration of the Performance Period, share
certificates and/or cash of an equivalent value (as the Committee
may determine in its sole discretion) shall be delivered to the
Participant, or his legal representative, in a number equal to
the vested shares covered by the Performance Share Award.
(d) Termination of Employment. Subject to the applicable provisions
of the Award agreement and this Plan, upon termination of a
Participant's employment with the Company or a Designated
Subsidiary for any reason during the Performance Period for a
given Award, the Performance Shares in question will vest or be
forfeited in accordance with the terms and conditions established
by the Committee at grant.
(e) Accelerated Vesting. Based on service, performance and/or such
other factors or criteria, if any, as the Committee may
determine, the Committee may, at or after grant, accelerate the
vesting of all or any part of any Performance Share Award and/or
waive the deferral limitations for all or any part of such Award.
(f) Hardship. In the event of hardship or other special
circumstances of a Participant whose employment with the Company
or a Designated Subsidiary is involuntarily terminated (other
than for cause), the Committee may, in its sole discretion, based
on such factors as the Committee may deem appropriate, waive in
whole or in part any or all of the remaining deferral limitations
imposed hereunder with respect to any or all of the Participant's
Performance Shares.
ARTICLE X
Performance Units
10.1 Award of Performance Units. Performance Units may be awarded
either alone or in addition to other Awards granted under this Plan. The
Committee shall determine the eligible persons to whom and the time or times
at which Performance Units shall be awarded, the number of Performance Units
to be awarded to any person, the duration of the period (the "Performance
Cycle") during which, and the conditions under which, a Participant's right
to Performance Units will be vested, the ability of Participants to defer the
receipt of payment of such Units, and the other terms and conditions of the
Award in addition to those set forth in Section 10.2.
A Performance Unit shall have a fixed dollar value.
The Committee may condition the vesting of Performance Units upon the
attainment of specified performance goals or such other factors or criteria
as the Committee shall determine, in its sole discretion.
10.2 Terms and Conditions. The Performance Units awarded pursuant to
this Article 10 shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable provisions of the
Award agreement and this Plan, Performance Unit Awards may not be
Transferred.
(b) Vesting. At the expiration of the Performance Cycle, the
Committee shall determine the extent to which the performance
goals have been achieved, and the percentage of the Performance
Units of each Participant that have vested.
(c) Payment. Subject to the applicable provisions of the Award
agreement and this Plan, at the expiration of the Performance
Cycle, cash and/or share certificates of an equivalent value (as
the Committee may determine in its sole discretion) shall be
delivered to the Participant, or his legal representative, in
payment of the vested Performance Units covered by the
Performance Unit Award.
(d) Termination of Employment. Subject to the applicable provisions
of the Award agreement and this Plan, upon termination of a
Participant's employment with the Company or a Designated
Subsidiary for any reason during the Performance Cycle for a
given Award, the Performance Units in question will vest or be
forfeited in accordance with the terms and conditions established
by the Committee at grant.
(e) Accelerated Vesting. Based on service, performance and/or such
other factors or criteria, if any, as the Committee may
determine, the Committee may, at or after grant, accelerate the
vesting of all or any part of any Performance Unit Award and/or
waive the deferral limitations for all or any part of such Award.
(f) Hardship. In the event of hardship or other special
circumstances of a Participant whose employment with the Company
or a Designated Subsidiary is involuntarily terminated (other
than for cause), the Committee may, in its sole discretion, based
on such factors as the Committee may deem appropriate, waive in
whole or in part any or all of the remaining deferral limitations
imposed hereunder with respect to any or all of the Participant's
Performance Units.
ARTICLE XI
Other Stock-Based Awards
11.1 Other Awards. Other Awards of Common Stock and other Awards that
are valued in whole or in part by reference to, or are payable in or
otherwise based on, Common Stock ("Other Stock-Based Awards"), including,
without limitation, Awards valued by reference to subsidiary performance, may
be granted either alone or in addition to or in tandem with Stock Options,
Stock Appreciation Rights, Restricted Stock, Performance Shares or
Performance Units.
Subject to the provisions of this Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which
such Awards shall be made, the number of shares of Common Stock to be awarded
pursuant to such Awards, and all other conditions of the Awards. The
Committee may also provide for the grant of Common Stock under such Awards
upon the completion of a specified performance period.
11.2 Terms and Conditions. Other Stock-Based Awards made pursuant to
this Article 11 shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable provisions of the
Award agreement and this Plan, shares of Common Stock subject to
Awards made under this Article 11 may not be Transferred prior to
the date on which the shares are issued, or, if later, the date
on which any applicable restriction, performance or deferral
period lapses.
(b) Dividends. Unless otherwise determined by the Committee at the
time of Award, subject to the provisions of the Award agreement
and this Plan, the recipient of an Award under this Article 11
shall be entitled to receive, currently or on a deferred basis,
dividends or dividend equivalents with respect to the number of
shares of Common Stock covered by the Award, as determined at the
time of the Award by the Committee, in its sole discretion.
(c) Vesting. Any Award under this Article 11 and any Common Stock
covered by any such Award shall vest or be forfeited to the
extent so provided in the Award agreement, as determined by the
Committee, in its sole discretion.
(d) Waiver of Limitation. In the event of the Participant's
Retirement, Disability or death, or in cases of special
circumstances, the Committee may, in it sole discretion, waive in
whole or in part any or all of the limitations imposed hereunder
(if any) with respect to any or all of an Award under this
Article 11.
(e) Price. Common Stock issued on a bonus basis under this Article
11 may be issued for no cash consideration; Common Stock
purchased pursuant to a purchase right awarded under this Article
11 shall be priced as determined by the Committee.
ARTICLE XII
Change in Control Provisions
12.1 Benefits. In the event of a Change in Control of the Company (as
defined below), and except as otherwise provided by the Committee upon the
grant of an Award, the Participant shall be entitled to the following
benefits:
(a) All outstanding Stock Options and Non-Tandem Stock Appreciation
Rights of such Participant granted prior to the Change in Control
shall be fully vested and immediately exercisable in their
entirety. In its sole discretion, the Committee may provide for
the purchase of any such Stock Options by the Company or
Designated Subsidiary for an amount of cash equal to the excess
of the Change in Control price (as defined below) of the shares
of Common Stock covered by such Stock Options, over the aggregate
exercise price of such Stock Options. For purposes of this
Section 12.1, Change in Control price shall mean the higher of
(i) the highest price per share of Common Stock paid in any
transaction related to a Change in Control of the Company, or
(ii) the highest Fair Market Value per share of Common Stock at
any time during the 60-day period preceding a Change in Control.
(b) All Performance Share Awards and Performance Unit Awards of such
Participant granted prior to the Change in Control shall vest, at
a minimum, as if the applicable Performance Period or Performance
Cycle had ended upon such Change in Control and the determination
of the extent to which any specified performance goals or targets
had been achieved had been made at such time.
(c) The restrictions to which any shares of Restricted Stock of such
Participant granted prior to the Change in Control are subject
shall lapse as if the applicable Restriction Period had ended
upon such Change in Control.
Any determination by the Committee made pursuant to paragraph (a) of
this Section 12.1 may be made as to all outstanding Awards or only as to
certain outstanding Awards specified by the Committee and any such
determination may be made prior to or after a Change in Control.
12.2 Change in Control. For the purposes of the Plan, a "Change in
Control" means:
(a) if the Company's equity capital structure consists of Class A
Nonvoting Common Stock and Class B Voting Common Stock, as in effect
on the date of adoption of this provision, then an acquisition (other
than directly from the Company) or holding by a Person or a Group
(other than a Permitted Holder) of Beneficial Ownership of shares
representing at least 35% of the combined voting power of the
outstanding voting securities of the Company entitled to vote
generally in the election of Directors (the "Outstanding Company
Voting Power"), if following such acquisition or at the time of such
holding, the Funds do not own, in the aggregate, at least 50% of the
Outstanding Company Voting Power; provided, however, that a Business
Combination satisfying clauses 12.2(d)(i) through (iii) below shall
not constitute a Change in Control;
(b) if the Company's equity capital structure is different from that
described in subsection 12.2(a) above, then an acquisition (other than
directly from the Company) or holding by a Person or a Group (other
than a Permitted Holder) of Beneficial Ownership of shares
representing 20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the outstanding voting securities
of the Company entitled to vote generally in the election of Directors
(the "Outstanding Company Voting Power"), if following such
acquisition or at the time of such holding, the Funds do not own, in
the aggregate, at least 30% of the Outstanding Company Voting Power;
provided, however, that a Business Combination satisfying clauses
12.2(d)(i) through (iii) below shall not constitute a Change in
Control;
(c) if the Directors who were members of the Board on the date of adoption
of this provision (the "Initial Directors") and any Directors whose
election by the Company's stockholders was approved by a majority of
the Company's Directors then still in office who were either Incumbent
Directors or whose election or nomination for election was previously
so approved, but excluding any such individual whose election as a
Director occurs as a result of an actual or threatened proxy contest
or consent solicitation by or on behalf of a person other than the
Company or the Board (the "Approved Directors, and together with the
Initial Directors, the "Incumbent Directors"), shall cease for any
reason to constitute at least a majority of the Board;
(d) consummation of a Business Combination, other than a transaction
(i) in which all or substantially all of the stockholders of the
Company receive Beneficial Ownership of more than 50% of the
voting securities of the company resulting from the Business
Combination,
(ii) in which at least a majority of the board of directors of the
resulting company were Incumbent Directors, and
(iii)after which no Person or Group has Beneficial Ownership of 35%
or more of the voting securities of the resulting company, who
did not own at least such percentage of stock of the Company
immediately before the Business Combination; or
(e) stockholder approval of a complete liquidation or dissolution
of the Company.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person or Group has Beneficial Ownership
of shares of Outstanding Company Common Stock or Outstanding Company Voting
Power equal to the 35% or 20% thresholds in subsections 12.2(a) and 12.2(b)
above (as the case may be) as a result of the acquisition by the Company of
such common stock or other voting securities which reduces the number of
shares of Outstanding Company Common Stock or reduces the Outstanding Company
Voting Power; provided, that if, after such acquisition by the Company, such
Person or Group obtains Beneficial Ownership of shares of common stock or
other voting securities that increases the percentage of Outstanding Company
Common Stock or Outstanding Company Voting Power Beneficially Owned by such
person while such Person or Group has met the 35% or 20% threshold in
subsections 12.2(a) and 12.2(b) above (as the case may be), a Change in
Control shall then be deemed to occur.
For purposes of this Section 12.2:
"Beneficial Ownership" shall have the meaning given to that term
under Rule 13d-3 under the Securities Exchange Act of 1934.
"Business Combination" shall mean a merger, consolidation or
reorganization involving the Company or its subsidiaries or a sale, lease,
exchange or other disposition of all or substantially all of the Company's
assets.
"Director" shall mean a member of the Board.
"Group" shall have the meaning given to that term under Rule
13d-5 under the Securities Exchange Act of 1934.
"Permitted Holder" shall mean (i) the DeWitt Wallace-Reader's
Digest Fund, Inc. and the Lila Wallace-Reader's Digest Fund, Inc.
(collectively, the "Funds") and (ii) the Company or an employee benefit plan
of the Company or a corporation controlled by the Company.
"Person" shall have the meaning given to that term under Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934.
"Securities Exchange Act of 1934" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
12.3 Effect of Certain Transactions. Subject to Sections 12.1 and
12.2 or as otherwise provided in an Award agreement, in the event of (a) the
liquidation or dissolution of the Company, or (b) a merger, consolidation,
reorganization or other corporate transaction of the Company (a
"Transaction"), the Plan and the Awards issued hereunder shall continue in
effect with their respective terms, except that following a Transaction, at
the Committee's sole discretion, either (i) each outstanding Award shall be
treated as provided for in the agreement entered into in connection with the
Transaction, or (ii) if not so provided in such agreement, each Participant
shall be entitled to receive in respect of each share of Common Stock or
other stock or securities subject to any outstanding Awards, as the case may
be, upon exercise of any Option or payment or transfer in respect of any
Award, the same number and kind of stock, securities, cash, property or other
consideration that each holder of a share of Common Stock or other stock or
securities was entitled to receive in the Transaction in respect of such
share; provided, however, that such stock, securities, cash, property, or
other consideration shall remain subject to all of the conditions,
restrictions and performance criteria which were applicable to the Awards
prior to such Transaction. The treatment of any Award as provided in this
Section shall be conclusively presumed to be appropriate for purposes of
Section 4.2.
ARTICLE XIII
Termination or Amendment of the Plan
13.1 Termination or Amendment. Notwithstanding any other provision of
this Plan, the Board may at any time, and from time to time, amend, in whole
or in part, any or all of the provisions of the Plan (including any amendment
deemed necessary to ensure that the Company may comply with any regulatory
requirement referred to in Article 15), or suspend or terminate it entirely,
retroactively or otherwise; provided, however, that, unless otherwise
required by law, the rights of a Participant with respect to Options or other
Awards granted prior to such amendment, suspension or termination, may not be
impaired without the consent of such Participant and, provided further,
without the approval of the holders of the Company's stock entitled to vote,
no amendment may be made which would (i) increase the aggregate number of
shares of Common Stock that may be issued under this Plan (except by
operation of Section 4.2); (ii) change the definition of employees eligible
to receive Stock Awards under this Plan; (iii) decrease the option price of
any Stock Option to less than 100% of the Fair Market Value on the date of
grant for a Stock Option; or (iv) reduce the option price of an outstanding
Stock Option, either by lowering the option price or by canceling an
outstanding Stock Option and granting a replacement Stock Option with a lower
exercise price, or (v) extend the maximum option period under Section 6.4 of
the Plan.
The Committee may amend the terms of any Stock Option or other
Award theretofore granted, prospectively or retroactively, but, subject to
Article IV above, no such amendment or other action by the Committee shall
impair the rights of any holder without the holder's consent.
Notwithstanding the foregoing, if a Stock Option has been Transferred in
accordance with the Plan, written consent of the Transferee (and not the
Participant) shall be necessary to impair the rights of the holder under the
Stock Option. The Committee may also substitute new Stock Options for
previously granted Stock Options having higher option exercise prices than
the new Stock Options being substituted therefor.
ARTICLE XIV
Unfunded Plan
14.1 Unfunded Status of Plan. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which
are not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company.
ARTICLE XV
General Provisions
15.1 Legend. The Committee may require each person purchasing shares
pursuant to a Stock Option or other Award under the Plan to represent to and
agree with the Company in writing that the Participant is acquiring the
shares without a view to distribution thereof. In addition to any legend
required by this Plan, the certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
Transfer.
All certificates for shares of Common Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed or any national securities exchange
system upon whose system the Stock is then quoted, any applicable Federal or
state securities law, and any applicable corporate law, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
15.2 Other Plans. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
15.3 No Right to Employment. Neither this Plan nor the grant of any
Option or other Award hereunder shall give any Participant or other employee
any right with respect to continuance of employment by the Company or any
subsidiary, nor shall they be a limitation in any way on the right of the
Company or any subsidiary by which an employee is employed to terminate his
employment at any time.
15.4 Withholding of Taxes.
(a) At such times as a Participant recognizes taxable income in
connection with the receipt of shares of Common Stock or cash
hereunder (a "Taxable Event"), the Participant shall pay to the
Company an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld
by the Company in connection with the Taxable Event (the "Tax
Withholding") prior to the issuance, or release from escrow, of
such shares of Common Stock or the payment of such cash. The
Company shall have the right to deduct from any payment of cash
to a Participant an amount equal to the Tax Withholding in
satisfaction of the obligation to pay Tax Withholding. In
satisfaction of the obligation to pay Tax Withholding to the
Company, a Participant may make a written election (the "Tax
Election"), which may be accepted or rejected in the sole
discretion of the Committee, to have withheld a portion of the
shares then issuable to him or her having an aggregate Fair
Market Value equal to the Tax Withholding.
(b) To the extent required by the Committee in its discretion, if a
Participant makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any
share or shares of Common Stock issued to the Participant
pursuant to the exercise of an Incentive Stock Option within the
two-year period commencing on the day after the date of grant or
within the one-year period commencing on the day after the
transfer of such share or shares of Common Stock to the
Participant pursuant to such exercise, the Participant shall,
within ten (10) days after such disposition, notify the Company
thereof, by delivery of written notice to the Company at its
principal executive office.
(c) Notwithstanding the foregoing, if Stock Options have been
Transferred, the Participant shall provide the Company with funds
sufficient to pay such Tax Withholding when such Tax Withholding
is due. Furthermore, if such Participant does not satisfy the
applicable Tax Withholding obligation, the Transferee may provide
the funds sufficient to enable the Company to pay the Tax
Withholding. However, if Stock Options have been Transferred,
the Company shall have no right to retain or sell without notice,
or to demand surrender from the Transferee of, shares of Common
Stock in order to pay such Tax Withholding. Any fraction of a
share of Common Stock required to satisfy such tax obligations
shall be disregarded and the amount due shall be paid instead in
cash by the Participant.
15.5 Deferral Election. A Participant may elect, in the sole
discretion of the Committee and consistent with any rules, procedures or
regulations established by the Committee, to defer the delivery of the
proceeds of any Award. A Participant may elect to have the payment of a
portion of each Award deferred in accordance with the terms and procedures
set forth in the Company's Deferred Compensation Plan, or any equivalent or
successor plan, as in effect from time to time (the "Deferred Compensation
Plan"). The election to defer the delivery of the proceeds from any eligible
Award must be made on or before the Election Date (as such term is defined in
the Deferred Compensation Plan).
15.6 No Assignment of Benefits. No Option, Award or other benefit
payable under this Plan shall, except as otherwise specifically provided by
law or by the Plan, be Transferable in any manner, and any attempt to
Transfer any such benefit shall be void, and any such benefit shall not in
any manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person who shall be entitled to such benefit, nor
shall it be subject to attachment or legal process for or against such person.
15.7 Listing and Other Conditions.
(a) As long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities
association, the issue of any shares of Common Stock pursuant to
an Option or other Award shall be conditioned upon such shares
being listed on such exchange or system. The Company shall have
no obligation to issue such shares unless and until such shares
are so listed, and the right to exercise any Option or other
Award with respect to such shares shall be suspended until such
listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion
that any sale or delivery of shares of Common Stock pursuant to
an Option or other Award is or may in the circumstances be
unlawful or result in the imposition of excise taxes under the
statutes, rules or regulations of any applicable jurisdiction,
the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of
1933, as amended, or otherwise with respect to shares of Common
Stock or Awards, and the right to exercise any Option or other
Award shall be suspended until, in the opinion of said counsel,
such sale or delivery shall be lawful or will not result in the
imposition of excise taxes.
(c) Upon termination of any period of suspension under this Section
15.7, any Award affected by such suspension which shall not then
have expired or terminated shall be reinstated as to all shares
available before such suspension and as to shares which would
otherwise have become available during the period of such
suspension, but no such suspension shall extend the term of any
Option.
15.8 Governing Law. This Plan and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of New York (regardless of the law that might otherwise govern under
applicable New York principles of conflict of laws).
15.9 Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
15.10 Liability. No member of the Board, no employee of the Company
and no member of the Committee (nor the Committee itself) shall be liable for
any act or action hereunder, whether of omission or commission, by any other
member or employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in circumstances
involving his bad faith, gross negligence or fraud, for anything done or
omitted to be done by himself.
15.11 Other Benefits. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of
the Company or its subsidiaries nor affect any benefits under any other
benefit plan now or subsequently in effect under which the availability or
amount of benefits is related to the level of compensation.
15.12 Costs. The Company shall bear all expenses incurred in
administering this Plan, including expenses of issuing Common Stock pursuant
to any Awards hereunder.
15.13 No Right to Same Benefits. The provisions of Awards need not be
the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
15.14 Severability. Whenever possible, each provision of the Plan or
an Award agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of the Plan or an Award
agreement shall be held by a court of competent jurisdiction to be prohibited
by or invalid of unenforceable under applicable law, then (a) such provision
shall be deemed to be amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law and (b) all
other provisions of the Plan or the Award agreement shall remain in full
force and effect.
ARTICLE XVI
Effective Date of Plan
The Plan shall become effective upon the date specified by the Board in
its resolution adopting the Plan, subject to the approval of the Plan by the
holders of a majority of the capital stock of the Company entitled to vote
thereon within one year after the Plan is adopted. Any grants of Awards
hereunder prior to such approval shall be effective when made (unless
otherwise specified by the Committee at the time of grant), but shall be
conditioned on, and subject to, such approval of the Plan by stockholders.
ARTICLE XVII
Term of Plan
No Stock Option, Stock Appreciation Right, Restricted Stock,
Performance Shares, Performance Unit or Other Stock-Based Award shall be
granted pursuant to the Plan on or after the tenth anniversary of the earlier
of the date the Plan is adopted or the date of shareholder approval but
Awards granted prior to such tenth anniversary may extend beyond that date.
ARTICLE XVIII
Name of Plan
This Plan shall be known as "The Reader's Digest Association, Inc. 1994
Key Employee Long Term Incentive Plan."
ARTICLE XIX
Election to Receive Awards in Lieu of Other Compensation
The Committee, in its sole discretion, may permit a Participant to
elect pursuant to this Plan, on such terms and conditions as shall be
approved by the Committee, to receive an Award under this Plan in lieu of
receiving payment of other compensation, under this Plan or otherwise, from
the Company or any Designated Subsidiary. The Committee shall have sole
discretion to consent to or disapprove any such election by any Participant.
The grant of Awards pursuant to such election shall be subject to the
provisions and limitations of this Plan and applicable law.