Exhibit 10.24
The Reader's Digest Association, Inc.
DIRECTOR COMPENSATION PROGRAM
(Amended and Restated as of January 1, 2003)
As amended by Amendment No. 1, effective as of September 18, 2002
As amended by Amendment No. 2, effective as of January 1, 2003
1. Definitions.
The following terms, when used herein, have the following meanings:
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Audit Committee" shall mean the Audit Committee of the Board.
"Common Stock" shall mean the Common Stock, $0.01 par value
per share, of the Company.
"Company" shall mean The Reader's Digest Association, Inc.
"Corporate Governance Committee" shall mean the Corporate
Governance Committee of the Board.
"Deferred Stock" shall mean an unfunded promise by the Company
to issue or deliver a share of Common Stock to a Director.
"Director" shall mean a member of the Board.
"Fair Market Value" for purposes of this Program, 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.
"Nonemployee Director" shall mean a Director who is a not an
employee of the Company.
"Post-1998 Director" shall mean a person who began service as
a Nonemployee Director on or after April 1, 1998.
"Pre-1998 Director" shall mean a person who began service as a
Nonemployee Director before April 1, 1998.
"Program" shall mean The Reader's Digest Association, Inc.
Director Compensation Program.
"Pro-Rated Amount" shall mean the amount of compensation that
a Director would be entitled to receive if the Director serves
as such as of the beginning of a calendar year, multiplied by
a fraction, the numerator of which is the number of full
months remaining in the calendar year after the Director
begins to serve as such and the denominator of which is 12.
"Transaction" shall have the meaning specified in Section 8.2
of the Program.
"Transfer" shall mean anticipate, alienate, attach, sell,
assign, pledge, encumber, charge or otherwise transfer.
2. Purpose.
The purpose of the Program is to attract and retain qualified
individuals to serve as Nonemployee Directors on the Board of the
Company. The Program is comprised of both cash and equity
components, with an emphasis on the latter so as to strengthen
the Nonemployee Directors' equity relationship with the Company
and to more completely align their interests with those of the
stockholders generally.
3. Compensation.
Except as provided in Section 4 of the Program, each Nonemployee
Director shall receive the following compensation, effective
commencing January 1, 2003.
3.1. Cash Compensation.
3.1.1. Pre-1998 Directors. The Company shall pay each
Pre-1998 Director cash compensation at the rate of
$18,000 per year for such service.
3.1.2. Post-1998 Directors. The Company shall pay each
Post-1998 Director cash compensation at the rate
of $30,000 per year for such service.
3.1.3. Audit Committee Chairperson. The Company shall pay
each Nonemployee Director who serves as
Chairperson of the Audit Committee cash
compensation at the rate of $15,000 per year for
such service.
3.1.4. Other Regular Committee Chairpersons. The Company
shall pay each Nonemployee Director who serves as
Chairperson of any regular Committee other than
the Audit Committee cash compensation at the rate
of $10,000 per year for such service.
3.1.5. Audit Committee Members. The Company shall pay each
Nonemployee Director who serves as a member of the
Audit Committee, other than the Chairperson, cash
compensation at the rate of $7,500 per year for
such service.
3.1.6. Quarterly Payment. The Company shall pay cash
compensation under this Section 3.1 quarterly to
each Nonemployee Director at the end of each
calendar quarter during which the Nonemployee
Director served in whole or in part.
3.2. Stock Compensation.
3.2.1. Pre-1998 Directors. The Company shall grant to each
Pre-1998 Director who serves as such as of the
beginning of the calendar year, on the first
trading day of such calendar year, a number of
shares of Common Stock equal to $20,000 divided by
the average per share closing price for the 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.
3.2.2. Post-1998 Directors. The Company shall grant to each
Post-1998 Director who serves as such as of the
beginning of the calendar year, on the first
trading day of such calendar year, a number of
shares of Common Stock equal to $30,000 divided by
the average per share closing price for the 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.
3.2.3. Pro-Rated Stock Compensation. The Company shall grant
to each Nonemployee Director who becomes a
Director after the beginning of a calendar year,
on the first trading day of the month following
the month during which the Director begins
service, the Pro-Rated Amount of Stock
Compensation under Section 3.2.2 of the Program
for such calendar year.
3.3. Deferred Stock Compensation.
3.3.1. Pre-1998 Directors. The Company shall grant to each
Pre-1998 Director who serves as such as of the
beginning of the calendar year, on the first
trading day of such calendar year, a number of
shares of Deferred Stock equal to $30,000 divided
by the average per share closing price for the
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.
3.3.2. Post-1998 Directors. The Company shall grant to each
Post-1998 Director who serves as such as of the
beginning of the calendar year, on the first
trading day of such calendar year, a number of
shares of Deferred Stock equal to $40,000 divided
by the average per share closing price for the
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.
3.3.3. Pro-Rated Deferred Stock Compensation. The Company
shall grant to each Nonemployee Director who
becomes a Director after the beginning of a
calendar year, on the first trading day of the
month following the month during which the
Director begins service, the Pro-Rated Amount of
Deferred Stock Compensation under Section 3.3.2 of
the Program for such calendar year.
3.3.4. Delivery of Deferred Stock Compensation. Deferred
Stock shall be delivered in a single issuance to
the Director on the first trading day of the
calendar year after termination of the Director's
service on the Board or thereafter, on a deferred
issuance date determined in accordance with
Section 10 of the Program. Neither dividends nor
interest shall be credited on Deferred Stock under
this Program.
4. Transition Provision Relating to Calendar Year 2003.
Each Nonemployee Director who serves as such on January 1, 2003
shall receive the following Stock Compensation and Deferred Stock
Compensation for calendar year 2003 in lieu of compensation under
Sections 3.2 and 3.3 of the Program.
4.1. Stock Compensation.
4.1.1. Pre-1998 Directors. The Company shall grant to each
Pre-1998 Director who serves as such as of the
beginning of calendar year 2003, on the first
trading day of January 2003, a number of shares of
Common Stock equal to $32,000 divided by the
average per share closing price for the 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.
4.1.2. Post-1998 Directors. The Company shall grant to each
Post-1998 Director who serves as such as of the
beginning of calendar year 2003, on the first
trading day of January 2003, a number of shares of
Common Stock equal to $52,000 divided by the
average per share closing price for the 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.
4.2. Deferred Stock Compensation.
4.2.1. Pre-1998 and Post-1998 Directors. The Company shall
grant to each Director who serves as such as of
the beginning of calendar year 2003, on the first
trading day of April 2003, a number of shares of
Deferred Stock equal to $18,000 divided by the
average per share closing price for the 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.
4.2.2. Delivery of Deferred Stock Compensation. Deferred
Stock shall be delivered in a single issuance to
the Director on the first trading day of the
calendar year after termination of the Director's
service on the Board or thereafter, on a deferred
issuance date determined in accordance with
Section 10 of the Program. Neither dividends nor
interest shall be credited on Deferred Stock under
this Program.
5. Special Committee Compensation.
5.1. Special Committee Chairperson. The Company shall pay each
Nonemployee Director who serves as Chairperson of a
committee of the Board other than a regular committee
of the Board such cash, stock or Deferred Stock
compensation, or a combination thereof, as shall be
determined, at the time such committee is formed, by
the Corporate Governance Committee of the Board.
5.2. Special Committee Members. The Company shall pay each
Nonemployee Director who serves as a member, other than
the Chairperson, of a committee of the Board other than
a regular committee of the Board such cash, stock or
Deferred Stock compensation, or a combination thereof,
as shall be determined, at the time such committee is
formed, by the Corporate Governance Committee of the
Board.
6. Additional Compensation.
Each Pre-1998 Director 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.
7. Shares Reserved.
The maximum aggregate number of shares of Common Stock reserved
for issuance under the Program is 300,000 shares.
8. Share Adjustments.
8.1. Capital Changes. In the event of any increase or reduction
in the number of shares of capital stock of the
Company, or any change (including, but not limited to,
in the case of a spin-off, dividend or other
distribution in respect of shares, a change in value)
in the capital stock of the Company or exchange of
capital stock of the Company for a different number or
kind of shares or other securities of the Company or
another corporation by reason of any stock dividend,
stock split or reverse stock split, reclassification,
recapitalization, reorganization, merger,
consolidation, spin-off, split-up, combination or
exchange of shares, distribution with respect to its
outstanding Common Stock or capital stock other than
Common Stock, reclassification of its capital stock,
issuance of warrants, rights or debentures 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 change in
corporate structure or otherwise; then (i) the
aggregate number and kind of shares of Common Stock or
other stock or securities which thereafter may be
issued under the Program, (ii) the number and kind of
shares subject to outstanding awards or other stock or
securities granted under the Program, and (iii) the
aggregate number and kind of shares of Common Stock or
other stock or securities with respect to which awards
may be granted to any Nonemployee Director in any
fiscal year period, shall be appropriately adjusted
consistent with such change in such manner as the
Corporate Governance Committee may deem equitable in
its sole discretion to prevent substantial dilution or
enlargement of the rights granted to, or available for,
participants under the Program. Any such adjustment
determined by the Corporate Governance Committee in
good faith shall be binding and conclusive on the
Company and all participants and their respective
heirs, executors, administrators, successors and
assigns. If, by reason of a change pursuant to this
Section, a holder of an award shall be entitled to new,
additional or different shares of stock or securities
of the Company or any other corporation, such new,
additional or different shares shall thereupon be
subject to all of the conditions and restrictions which
were applicable to the shares subject to the award
prior to such change.
8.2. Adjustments for Certain Transactions. Subject to the
provisions of the Deferred Stock award agreement, in
the event of the liquidation or dissolution of the
Company or a merger, consolidation, reorganization or
other corporate transaction of the Company (a
"Transaction"), the Program and such awards issued
hereunder shall continue in effect with their
respective terms, except that following a Transaction,
at the Corporate Governance Committee's sole
discretion, either (a) each outstanding award shall be
treated as provided for in the agreement entered into
in connection with the Transaction, or (b) if not so
provided in such agreement, each Nonemployee Director
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
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 and restrictions 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 8.2 of the Program.
9. Expenses.
The Company shall reimburse each Nonemployee Director for all
reasonable expenses relating to the Nonemployee's Director's
attendance at meetings and otherwise in connection with the
Nonemployee's Director's service as a Director.
10. Deferred Compensation.
Each Nonemployee Director may, under the terms of The Reader's
Digest Association, Inc. Deferred Compensation Plan for Directors
(or any successor or equivalent plan), elect to defer the receipt
of the cash and stock compensation described in Sections 3 and 4
of the Program for a designated period following the termination
of the Director's service on the Board. To the extent provided
under the Deferred Compensation Plan for Directors, each Director
may choose to receive deferred amounts of cash and stock in
either a lump sum and a single issuance, as the case may be, or
in annual installments and may choose to receive shares of stock
underlying Deferred Stock either in a single issuance or in the
same annual installments.
11. Miscellaneous.
11.1. Certificates for Shares. The Company may require each
person receiving Common Stock under the Program to
represent to and agree with the Company in writing that
the recipient is acquiring the shares without a view to
distribution thereof. The Company may require that the
certificates for such shares include a legend that 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.
11.2. Transfer. No award or other benefit payable under the
Program shall, except as otherwise specifically
provided by law or by the Program, 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.
11.3. Severability. Whenever possible, each provision of the
Program 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 Program 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 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 all other
provisions of the Program or the award agreement shall
remain in full force and effect.
11.4. Liability. None of the Board, any Committee of the Board,
any Director and any employee of the Company 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 Program have been delegated or,
except in circumstances involving such individual's bad
faith, gross negligence or fraud, for anything done or
omitted to be done by such individual.
11.5. Governing Law. The Program 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).
11.6. Unfunded Status of Plan. The Program is intended to
constitute an "unfunded" plan. 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.
12. Administration.
The Program shall be administered by the Senior Vice President,
Human Resources of the Company.
13. Amendment and Termination.
The 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 Nonemployee Director
pursuant to Sections 3 and 4 of the Program; provided, however,
that the Board may not amend or modify this Program to increase
the maximum share reserve under Section 7 of the Program without
approval of the stockholders of the Company entitled to vote.
14. Effective Date.
The Program was originally adopted effective on April 1, 1998.
Amendment No. 1 to the Program was adopted effective September
18, 2002. Amendment No. 2 to the Program was adopted effective
January 1, 2003.