EXHIBIT 10.34
THE READER'S DIGEST ASSOCIATION, INC.
[2002] KEY EMPLOYEE LONG TERM INCENTIVE PLAN
Annual Non-Qualified Stock Option Grant:
TERMS AND CONDITIONS
This stock option grant (the "Option") from The Reader's Digest
Association, Inc. (the "Company") to purchase shares of its Common Stock,
$.01 par value (the "Common Stock"), is subject to the provisions of The
Reader's Digest Association, Inc. [2002] Key Employee Long Term Incentive
Plan (the "Plan") and the terms and conditions detailed below:
1. Option Terms. Except as provided in this Paragraph 1 and Paragraphs 2,
3, and 4, this Option may not be exercised prior to the first anniversary of
the Grant Date, and may not be exercised unless you have remained in the
continuous employ of the Company, or any of its subsidiaries as designated by
the Board of Directors of the Company under the Plan ("Designated
Subsidiaries"), from the Grant Date until the date of exercise. This Option
may be exercised from time to time after the expiration of the one year
period referred to above, provided that the aggregate number of shares of
Common Stock acquired pursuant to exercise of this Option is not in excess of:
[(a) after one (1) year, but before the expiration of two (2) years from the
Grant Date, 25 percent of the total number of shares which may be purchased
pursuant to this Option;
(b) after two (2) years, but before the expiration of three (3) years from
the Grant Date, 50 percent of the total number of shares which may be
purchased pursuant to this Option;
(c) after three (3) years, but before the expiration of four (4) years from
the Grant Date, 75 percent of the total number of shares which may be
purchased pursuant to this Option; and
(d) after four (4) years from the Grant Date, 100 percent of the total
number of shares which may be purchased pursuant to this Option.]
The "Grant Date" of the Option is the date of the Grant Letter with respect
to the Option. This Option expires at the close of business on the tenth
anniversary of the Grant Date.
Notwithstanding the foregoing, the Committee (as defined in the Plan),
in its sole discretion after the grant, may accelerate the exercisability of
all or part of this Option to a date or dates no earlier than within six (6)
months from the Grant Date.
2. Change in Control. Upon the occurrence of a Change in Control (as
defined in the Plan), this Option shall immediately be fully vested and
exercisable in its entirety in accordance with the terms of the Plan.
3. Termination of Employment.
(a) Retirement. If your employment by the Company or a Designated
Subsidiary terminates on or after age fifty-five (55) after at least five (5)
years of employment by the Company and/or a Designated Subsidiary and more
than one (1) year from the Grant Date, this Option, shall be fully vested
and, subject to Paragraph 9, may thereafter be exercised by you for a period
of three (3) years from the date of such termination of employment or until
the expiration of the stated term of this Option, whichever period is shorter.
(b) Total Disability. If your employment by the Company or a Designated
Subsidiary terminates by reason of a total disability as defined in the
Company's Healthcare Program (or an equivalent plan, as determined in the
sole discretion of the Company), this Option shall be fully vested and,
subject to Paragraph 9, may thereafter be exercised by you for a period of'
three (3) years from the date of your termination of employment or until the
expiration of the stated term of this Option, whichever period is shorter.
(c) Death While Employed. If your employment with the Company or a
Designated Subsidiary terminates by reason of your death, this Option shall
be fully vested and may thereafter be exercised by the legal representative
of your estate for a period of one (1) year from the date of your death or
until the expiration of the stated term of this Option, whichever period is
shorter.
(d) Other Termination. If your employment by the Company or its Designated
Subsidiary terminates for any reason other than as specified in
subparagraph (a), (b) or (c) above, this Option shall terminate on the date of
your termination of employment, except that, if you were involuntarily
terminated by the Company or a Designated Subsidiary without Cause, subject
to Paragraph 9, it may be exercised, to the extent exercisable on the date of
such termination, for the lesser of three (3) months or the balance of the
stated term of this Option. ("Cause" for this purpose shall include, by way
of example, but not limited to, insubordination, dishonesty, incompetence,
moral turpitude, other misconduct of any kind, conviction of (or pleading
guilty or nolo contendere to) a crime, or a material violation of any rules,
policies, procedures or guidelines of the Company or its affiliates, or
refusal to perform normal duties and responsibilities (for any reason other
than illness or incapacity) which, in any case, the Company classifies as a
termination for Cause.) In such case, however, the percentage limitations
provided in Paragraph 1 shall apply.
4. Death During the Three (3) Year Period under Paragraphs 3(a) and (b)
Hereof. If you die within either of the three (3) year periods mentioned in
Paragraphs 3(a) and (b) hereof, this Option, to the extent unexercised, shall
thereafter be exercisable, to the extent to which it was exercisable at the
time of death, for a period of twelve (12) months from the date of your death
or until the expiration of the stated term of this Option, whichever period
is shorter.
5. Exercise of Option. Subject to whatever installment exercise waiting
periods apply hereunder, exercise of this Option, in whole or in part, shall
be made by submitting to the Company written notice of exercise in a form of
the exercise letter provided by the Company, by specifying the number of
shares to be purchased or by providing such telephonic or other notice as the
Company shall specify, by making an arrangement for payment as provided in
the next sentence and by delivery of the certification required by Paragraph
9. The exercise of this Option shall be effective on the first business date
on which the Company receives due notice of exercise at the principal
corporate offices of the Company in accordance with the procedures
established by the Company, accompanied by payment in cash, through the
approved cashless broker exercise procedure or in Common Stock as provided in
the next sentence. Payment for the shares of Common Stock may be made in
cash and/or shares of Common Stock (accompanied by a stock power with your
signature guaranteed) owned by you for at least six (6) months and for which
you have good title, free and clear of any liens or encumbrances. No shares
of Common Stock shall be issued in connection with the exercise of the Option
until payment therefor has been made. All applicable tax withholding either
shall be paid by you directly to the Company in cash or shall be collected by
the Company's reduction of the number of shares otherwise deliverable to you,
in each case prior to the issuance of the Common Stock to be acquired by you
upon exercise of this Option.
6. Adjustments. If there is any change in the capital stock of the Company
by reason of any stock dividend or distribution, stock split,
recapitalization, merger, consolidation, split-up, combination or exchange of
shares, or any similar change affecting the capital stock of the Company as
provided under the Plan, the Committee may make such adjustments as it may
determine to be appropriate in accordance with the Plan and such
determination shall be final and binding.
7. Registration of Shares. The obligation of the Company to issue, sell
and deliver shares under this Option shall be subject to all applicable laws,
rules and regulations, and such approvals by governmental agencies as may be
required, including, without limitation, the effectiveness of a registration
statement under the Securities Act of 1933, as amended, covering the shares
to be so issued, and the receipt by the Company of an acknowledgment of
receipt of a prospectus. Accordingly, shares will not be issued upon the
exercise of the Option unless the Company has taken the steps necessary to
comply with applicable law.
8. Nontransferable. This Option is not transferable or assignable
otherwise than by will or by the laws of descent and distribution, and may be
exercised only during your lifetime and only by you, except as provided in
Paragraphs 3 and 4 hereof with respect to your death.
9. Cancellation and Recovery.
(a) Notwithstanding anything herein to the contrary, the Committee may
terminate this Option immediately if you engage in any Detrimental Activity.
(b) As a condition of the exercise of this Option, you shall certify at
the time of exercise in a manner acceptable to the Company that you are in
compliance with the terms and conditions of the Plan and that you have not
engaged in, and do not intend to engage in, any Detrimental Activity. In the
event you engage in a Detrimental Activity prior to, or during the two
(2)-year period after, your termination of employment with the Company and
its Designated Subsidiaries, the Company shall be entitled to recover from
you at any time within two (2) years after such termination of employment,
and you shall pay over to the Company, any gain realized as a result of the
exercise of this Option during the period of two (2) years prior to your
termination of employment and the period of two (2) years after your
termination of employment (whether the gain was realized at the time of
exercise or thereafter), and the Company shall be entitled to set-off against
the amount of any such gain any amount owed to you by the Company or its
affiliates and not honor any exercise of this Option made after you engage in
any Detrimental Activity. Furthermore, if you do not pay over to the Company
within twenty (20) days of demand any gain to the Company, such amount shall
thereafter bear interest at the maximum rate permitted by law and you shall
be liable for all of the Company's costs of collection, including but not
limited to, reasonable legal fees.
(c) Except in the event that a Change in Control has occurred and your
employment with the Company and its Designated Subsidiaries has terminated
involuntarily without Cause (as defined in Paragraph 3(d)), "Detrimental
Activity" means:
(i) the disclosure to anyone outside the Company or its affiliates,
or the use in other than the Company's or its affiliate's business,
without written authorization from the Company, of any confidential
information or proprietary information, relating to the business of the
Company or its affiliates, acquired by you during employment with the
Company or its affiliates;
(ii) activity while employed that results, or if known could
result, in termination of your employment that is classified by the
Company as a termination for Cause as defined in Paragraph 3(d) above;
(iii) any attempt, directly or indirectly, to solicit, induce or
hire (or the identification for solicitation, inducement or hire) any
non-clerical employee of the Company or its affiliates to be employed
by, or to perform services for, you or any person or entity with which
you are associated (including, but not limited to, due to your
employment by, consultancy for, equity interest in, or creditor
relationship with such person or entity) or any person or entity from
which you receive direct or indirect compensation or fees as a result of
such solicitation, inducement or hire (or the identification for
solicitation, inducement or hire) without, in all cases, written
authorization from the Company;
(iv) any attempt, directly or indirectly, to solicit in a
competitive manner any current or prospective customer (other than the
ultimate consumer) or advertiser of the Company or its affiliates
without, in all cases, written authorization from the Company;
(v) your Disparagement, or inducement of others to do so, of the
Company or its affiliates or their past and present officers, directors,
employees or products;
(vi) if you are at the time of exercise of any portion of this
Option or were at any time prior thereto a U.S. Grade 18 or higher level
employee or the equivalent (or, if the grading system is changed, an
equivalent level employee), without written authorization from the
Company, the rendering of services, at any time during the period of one
(1) year after your termination of employment with the Company and its
Designated Subsidiaries, for any organization, or engaging, directly or
indirectly, in any business, which is competitive with the Company or
its affiliates, or which organization or business, or the rendering of
services to such organization or business, is otherwise prejudicial to
or in conflict with the interests of the Company or its affiliates,
provided however that the only organizations and businesses which shall
be covered by this subparagraph (vi) shall be those set forth on Exhibit
A hereto (which list may be changed or expanded by the Committee at any
time on 90 days written notice to you which notice shall become
effective 90 days after the giving of such notice, if you are then
employed by the Company or any Designated Subsidiaries); or
(vii) any other conduct or act determined by the Committee, in its
sole discretion, to be injurious, detrimental or prejudicial to any
interest of the Company or its affiliates.
In the event that a Change in Control has occurred and your employment with
the Company and its Designated Subsidiaries has terminated involuntarily
without Cause (as defined in Paragraph 3(d)), "Detrimental Activity" shall
have the meaning stated in subparagraph 9(c)(i), only.
For purposes of subparagraphs 9(c)(i), (iii), (iv) and (vi) above, the
Chief Executive Officer, the most senior Human Resources officer and the most
senior legal officer of the Company shall each have authority to provide you
with written authorization to engage in the activities contemplated thereby
and no other person shall have authority to provide you with such
authorization.
(d) "Disparagement" includes, without limitation, comments or
statements to the press, the Company's or its affiliates' employees or any
individual or entity with whom the Company or its affiliates has a business
relationship which would adversely affect in any manner: (i) the conduct of
the business of the Company or its affiliates (including, without limitation,
any products or business plans or prospects), or (ii) the business reputation
of the Company or its affiliates, or any of their products, or their past or
present officers, directors or employees.
10. NOTWITHSTANDING ANY OTHER PROVISION CONTAINED HEREIN, THIS OPTION SHALL
NOT BE EXERCISABLE AFTER THE EXPIRATION OF TEN YEARS FROM THE GRANT DATE.
11. Miscellaneous.
(a) The Company shall have no obligation to notify you or your
representative of the expiration of this Option.
(b) This Option is subject to the detailed provisions of the Plan, a copy of
which may be obtained from the Company's Human Resources Department.
(c) Nothing herein is intended to or shall give you any right or status of
any kind as a stockholder of the Company in respect of any shares covered by
this Option or entitle you to any dividends or other distributions thereon
unless and until said shares shall have been registered in your name.
(d) The granting of this Option does not confer upon you any right to
continue in the employ of the Company or any of its subsidiaries or
affiliates. The granting of this Option does not entitle you to any benefit
other than the benefits specifically and expressly granted hereunder. Any
benefits granted under the Option are not part of your ordinary salary, and
shall not be considered as part of such salary in the event of severance,
redundancy or resignation.
(e) This Option is not intended to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
(f) These Terms and Conditions are an integral part of the Grant Letter to
which it is attached and is subject to and qualified by the provisions of the
Plan.
(g) Notwithstanding any other provision contained herein, this Option may
also be exercised to the extent provided in any employee benefit plan of the
Company.
(h) The Plan, the Grant Letter and the Terms and Conditions shall be
governed by the laws of the State of New York, excluding any conflict of laws
or choice of law rule or principle that might otherwise refer construction or
interpretation of the Plan, the Grant Letter and the Terms and Conditions to
the substantive law of another jurisdiction. You are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of New York,
County of Westchester, to resolve any and all issues that may arise out of or
relate to the Plan, the Grant Letter and the Terms and Conditions.