EXHIBIT 10.35
The Reader's Digest Association, Inc.
TERMS AND CONDITIONS
RESTRICTED STOCK
This grant of shares (the "Restricted Stock") of Common
Stock, $.01 par value of The Reader's Digest Association, Inc.
(the "Company") 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. Grant of Shares Subject to Conditions and
Restrictions. This grant of Restricted Stock is subject to the
condition that you shall have delivered to the Company a duly
signed stock power, endorsed in blank, relating to the Restricted
Stock. The Restricted Stock is also granted to you subject to
the restrictions contained herein and in the Plan, which shall
lapse after the expiration of period or periods described below
(the "Restrictions").
2. Restrictions.
(a) Transfer. Until the Restrictions have lapsed, as
provided below, you may not anticipate, alienate, attach, sell,
assign, pledge, encumber, charge or otherwise transfer any of the
Restricted Stock still subject to Restrictions without the
written consent of the Company as authorized by its Board of
Directors or the Committee (as defined in the Plan) under the
Plan.
(b) Forfeiture. Upon your Termination of employment
(as defined in the Plan) by the Company or any of its
subsidiaries as designated by the Board of Directors of the
Company under the Plan ("Designated Subsidiaries"), then, except
as provided in Paragraphs 5(a) and 5(b) hereof, all Restricted
Stock still subject to Restrictions shall be returned to or
canceled by the Company, and shall be deemed to have been
forfeited by you.
3. Lapse of Restrictions. Subject to prior lapse of
Restrictions pursuant to Paragraphs 4 or 5 hereof, the
Restrictions shall lapse with respect to:
[(a) one-third of the Restricted Stock after two years
from the date of grant,
(b) one-third of the Restricted Stock after three
years from the date of grant and
(c) one-third of the Restricted Stock after four years
from the date of grant.]
Notwithstanding the foregoing, the Committee may, in its
sole discretion at any time after the grant, accelerate the lapse
of Restrictions as to some or all of the Restricted Stock.
4. Change in Control. Notwithstanding the foregoing, the
Restrictions applicable to all of the Restricted Stock granted
hereunder shall lapse upon a "Change in Control" of the Company
(as defined in the Plan) as if the applicable Restrictions had
lapsed upon such Change in Control in accordance with the terms
of the Plan.
5. Termination of Employment.
(a) 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
Reader's Digest), the Restrictions shall lapse upon such
Termination of employment.
(b) Death. If your employment by the Company or a
Designated Subsidiary terminates by reason of your death, the
Restrictions shall lapse upon your death.
(c) Other Termination. If your employment by the
Company or a Designated Subsidiary terminates for any reason
other than total disability or death as provided in (a) and (b)
above, respectively, the provisions of Paragraph 2(b) above shall
apply.
6. Adjustments. If there is any change in the capital
stock of the Company, the term "Restricted Stock" shall include
any securities and other property that you receive or become
entitled to receive as a result of your ownership of the original
Restricted Stock, and the Committee may make any other
adjustments as it may determine to be appropriate in accordance
with the Plan, such determination to be final and binding.
7. Restrictive Legend. Either a stock certificate will be
issued in your name in respect of the Restricted Stock or the
Restricted Stock will be issued in your name and maintained in
non-certificated form. Any certificate for Restricted Stock will
be inscribed with the following legend and such additional legend
as may be required to comply with the Securities Act of 1933 or
as otherwise permitted under the Plan:
"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. 2002 Key
Employee Long Term Incentive Plan and an
Agreement entered into between the
registered owner (the Employee) and the
Company dated _________. Copies of such
Plan and Agreement are on file at the
principal office of the Company."
8. Custody and Tax Withholding. Any stock certificates
evidencing the Restricted Stock will be held in custody by the
Company until the Restrictions thereon have lapsed and all
applicable withholding taxes have been collected by (a)
withholding and re-transferring to the Company or a Designated
Subsidiary the appropriate number of shares necessary to cover
the withholding taxes, (b) lump sum payroll deduction or (c)
direct payment to the Company or a Designated Subsidiary. For
purposes of tax withholding, shares of Restricted Stock shall be
valued at their Fair Market Value (as defined in the Plan) on the
date of the taxable event that gives rise to the tax withholding
obligation.
9. Compliance With Laws. The obligation of the Company to
issue and deliver the Restricted Stock granted hereunder shall be
subject to all applicable laws, rules and regulations, and such
approvals by governmental agencies as may be required, including,
without limitation, if deemed advisable by the Committee upon the
advice of counsel, the effectiveness of a registration statement
under the Securities Act of 1933, as amended, covering the shares
to be so issued.
10. Cancellation and Recovery
(a) Notwithstanding anything herein to the contrary,
the Committee may terminate this award and cancel the Restricted
Stock immediately if you engage in any Detrimental Activity.
(b) As a condition of the lapse of Restrictions on
this Restricted Stock, you shall certify at the time of such
vesting, 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, the Fair
Market Value (as defined in the Plan), on the date the
Restrictions lapsed, of any shares of Restricted Stock on which
the Restrictions lapsed during the period of two (2) years prior
to your termination of employment, and the Company shall be
entitled to set-off against the amount of any such payment any
amount owed to you by the Company or its affiliates and the
Restrictions shall be deemed not to have lapsed after you engage
in any Detrimental Activity. Furthermore, if you do not pay over
to the Company within twenty (20) days of demand any payment due
under this subparagraph (b), 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,
"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;
(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 vesting of any portion
of the Restricted Stock 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 subsection (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, "Detrimental Activity"
shall have the meaning stated in subparagraph 10(c)(i), only.
For purposes of subparagraphs 10(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.
(e) For purposes of this Paragraph, "Cause" 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. The determination
of whether "Cause" has occurred shall be solely in the discretion
of the Chief Executive Officer, with the advice of the most
senior Human Resources officer and the most senior legal officer
of the Company.
11. Miscellaneous
(a) The Restricted Stock is subject to the detailed
provisions of the Plan, a copy of which may be obtained from the
Human Resources Department of the Company.
(b) Upon timely acceptance of this grant and
registration of the Restricted Stock in your name, you shall have
all of the rights and status as a stockholder of the Company in
respect of the Restricted Stock, except as otherwise specifically
provided herein or under the Plan. You will not receive regular
quarterly cash dividends or dividend equivalent payments on the
Restricted Stock prior to the lapse of the Restrictions.
(c) The granting of the Restricted Stock 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 the Restricted Stock does not entitle you to any benefit other
than the benefits specifically and expressly granted hereunder.
Any benefits granted under the Restricted Stock 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.
(d) These Terms and Conditions are subject to and
qualified by the provisions of the Plan.
(e) The Plan, and the Grant Letter and the Terms and
Conditions relating to this grant of Restricted Stock 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.