EXHIBIT 10.26
The Reader's Digest Association, Inc.
DIRECTOR COMPENSATION PROGRAM
(Amended and Restated as of September 18, 2002)
As amended by Amendment No. 1, effective as of September 18, 2002
1. Purpose.
The purpose of The Reader's Digest Association, Inc. Director
Compensation Program (the "Program") is to attract and retain qualified
individuals to serve as non-employee directors on the Board of Directors (the
"Board") of The Reader's Digest Association, Inc. (the "Company"). The
Program is comprised of both cash and equity components, with an emphasis on
the latter so as to strengthen the non-employee directors' equity
relationship with the Company and to more completely align their interests
with those of the stockholders generally.
2. Administration.
The Program shall be administered by the Vice President, Human
Resources of the Company.
3. Compensation.
a. Stock Retainer.
(i) Annual Grant. In lieu of an annual cash retainer,
the Company shall grant to each non-employee director who is a director as of
the beginning of the calendar year, on the first trading day of each calendar
year beginning with the 1999 calendar year, a number of shares of the
Company's Class A Nonvoting Common Stock (the "Class A Common Stock") equal
to (A) $32,000 divided by (B) the average per share closing price for Class A
Common Stock over the twenty (20) trading days immediately preceding the date
of grant, such number of shares to be rounded to the nearest number of fifty
(50) shares.
(ii) Pro-Rated Grant for Directors Beginning Service
Mid-Year. The Company shall grant to each non-employee director who becomes
a director during the calendar year other than during the month of December,
on the first trading day of the month following the month during which such
director begins service, a number of shares of Class A Common Stock equal to
(A) the Pro-Rated Stock Retainer divided by (B) the average per share closing
price for Class A Common Stock over the twenty (20) trading days immediately
preceding the date of grant, such number of shares to be rounded to the
nearest number of fifty (50) shares. For purposes of this Section 3(a)(ii),
"Pro-Rated Stock Retainer" shall mean $32,000, $24,000, $16,000 or $8,000
based on whether the grant to the non-employee director is made during the
first, second, third or fourth calendar quarter, respectively.
b. Cash Retainer.
As compensation for attendance at meetings of the Board or
committees thereof, each non-employee director shall receive quarterly $4,500
in cash. Each non-employee director who serves as the Chairperson of a
committee of the Company's Board shall receive quarterly an additional $750
in cash. All cash compensation relating to meetings of the Board and
committees thereof shall be payable at the end of each calendar quarter
during which the individual served in whole or in part as a director or
Chairperson, beginning with the April 1, 1998 calendar quarter.
c. Shares Reserved.
The maximum aggregate number of shares of Class A Nonvoting
Common Stock of the Company reserved for issuance under the Program is
300,000 shares.
4. Additional Benefits.
a. Directors Who Began Service Prior to April 1, 1998 -
Retirement Benefit. Each non-employee director who began service prior to
April 1, 1998 (a "Current Director") and who serves for at least five (5)
years shall remain eligible to receive a retirement benefit equal to $32,000,
payable in four equal installments at the end of each calendar quarter, under
the non-employee director compensation program in effect immediately prior to
April 1, 1998.
b. Directors Who Begin Service After April 1, 1998 - Equity
Compensation. Each non-employee director who begins service after April 1,
1998 (a "New Director") shall be entitled to receive, beginning in 1999 and
in lieu of any retirement benefit, the following:
(i) Stock Grant.
(A) Annual Stock Grant. The Company shall grant to
each New Director who is a director as of the beginning of the calendar year,
on the first trading day of each calendar year, a number of shares of Class A
Common Stock equal to (1) $20,000 divided by (2) the average per share
closing price for Class A Common Stock over the twenty (20) trading days
immediately preceding the date of grant, such number of shares to be rounded
to the nearest number of fifty (50) shares.
(B) Pro-Rated Stock Grant for Directors Beginning
Service Mid-Year. The Company shall grant to each New Director who becomes a
director during the calendar year other than during the month of December, on
the first trading day of the month following the month during which such
director begins service, a number of shares of the Class A Common Stock equal
to (A) the Pro-Rated Stock Grant divided by (B) the average per share closing
price for Class A Common Stock over the twenty (20) trading days immediately
preceding the date of grant, such number of shares to be rounded to the
nearest number of fifty (50) shares. For purposes of this Section
3(c)(ii)(A), "Pro-Rated Stock Grant" shall mean $20,000, $15,000, $10,000 or
$5,000 based on whether the grant to New Director is made during the first,
second, third or fourth calendar quarter, respectively; and
(ii) Cash Award. Each New Director shall receive
quarterly $3,000 in cash, payable at the end of each calendar quarter during
which the New Director served in whole or in part.
5. Transition Provisions Relating to Calendar Year 1998.
a. First Quarter 1998.
In respect of the calendar quarter ending March 31, 1998,
each Current Director shall receive in cash the following pro-rated amounts
earned under the non-employee director compensation program existing prior to
April 1, 1998: (i) a retainer of $8,000 and (ii) $1,000 for each Board or
committee meeting attended during such quarter (with an additional amount of
$500 payable to each committee Chairperson for each committee meeting
attended during such quarter). Such amounts shall be payable as soon as
practicable after March 31, 1998. Any election made by a Current Director
under the Deferred Compensation Plan for Non-Employee Directors of The
Reader's Digest Association, Inc. (the "Deferred Compensation Plan") relating
to the annual retainer payable in respect of calendar year 1998 shall be
applied to the $8,000 pro-rated retainer payment.
b. Second, Third and Fourth Quarters 1998.
In respect of the calendar quarters ending June 30, 1998,
September 30, 1998 and December 31, 1998, each Current Director shall
receive: (i) on April 1, 1998, in lieu of a cash retainer, a number of shares
of Class A Common Stock equal to (A) $24,000 divided by (B) the average per
share closing price for Class A Common Stock over the twenty (20) trading
days immediately preceding April 1, 1998, such number of shares to be rounded
to the nearest number of fifty (50) shares; and (ii) in lieu of meeting and
committee fees, at the end of each such quarter, $4,500 in cash (with an
additional amount of $750 payable to each committee Chairperson).
6. Expenses.
The Company shall reimburse each non-employee director for all
reasonable expenses relating to his or her attendance at meetings and
otherwise in connection with his or her duties as a director.
7. Deferred Compensation.
Each non-employee director may elect to defer, under the terms of
the Deferred Compensation Plan, 50%, 75% or 100% of the cash retainer and
cash award described in Section 3(b), Section 4(b)(ii) and Section 5(b)(ii)
hereof for a designated period following his or her termination from the
Board. Under the Deferred Compensation Plan, each director may chose to
receive deferred amounts in either a lump sum or in annual installments. The
Company shall send a deferral election form to each director before the
beginning of each calendar year.
8. Amendment and Termination of this Program.
This Program may be amended, modified, suspended or terminated by
the Board at any time; provided, however, that no such amendment,
modification, suspension or termination shall adversely effect any benefit or
compensation which either is vested or accrued but unpaid as of the date of
such amendment, modification, suspension or termination. The Board may, in
its sole discretion, increase the amount of any compensation payable to a
non-employee director pursuant to Sections 3 and 4; provided, however, that
the Board may not amend or modify this Program to increase the maximum share
reserve under Section 3c. without approval of the stockholders of the Company
entitled to vote.
9. Effective Date.
The effective date of this Program is April 1, 1998.