RESTRICTED STOCK AWARD (FISCAL 2006)
August 12, 2005
Dear [Name]:
I am pleased to inform you that The Reader's Digest Association, Inc.
(the "Company") hereby grants to you, as of the date of this letter, 0000 shares
of its Common Stock, $.01 par value, subject to the provisions of The Reader's
Digest Association, Inc. 2002 Key Employee Long Term Incentive Plan, and the
attached statement of Terms and Conditions.
In consideration of the grant of the Restricted Stock Award to you,
you hereby agree that the Award is governed by, and subject to, the Terms and
Conditions attached (including, without limitation, the conditions regarding
"Cancellation and Recovery") and is also subject to the provisions of the
Company's 2002 Key Employee Long Term Incentive Plan, as amended. You recognize
and acknowledge that the Cancellation and Recovery provisions of the attached
Terms and Conditions are an integral condition of this Award grant and that,
except for your agreement to such provisions, this Award would not be granted to
you. You also agree that such Cancellation and Recovery provisions and any
Exhibit A to the attached Terms and Conditions shall apply to and supersede any
analogous provisions in the Terms and Conditions of each prior equity-based
award of any type made to you from and including 1998 under the Company's 1989,
1994 and 2002 Key Employee Long Term Incentive Plans as if such provisions and
such Exhibit A were incorporated in and attached to the Terms and Conditions of
those prior awards.
Kindly signify your acceptance of this Restricted Stock grant by
signing and dating this letter below and returning it to the address indicated
below within 30 days from the date hereof.
If you have any questions, please contact Lisa Cribari.
Very truly yours,
THE READER'S DIGEST ASSOCIATION, INC.
By:____________________________________
Thomas O. Ryder
Chairman and Chief Executive Officer
Accepted:
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Signature Date
Return signed and dated copy to: Lisa Cribari, Vice President, Global
Compensation and Benefits.
The Reader's Digest Association, Inc.
TERMS AND CONDITIONS
RESTRICTED STOCK (Fiscal 2006)
The grant of shares of Common Stock, $.01 par value (the "Restricted Stock") of
The Reader's Digest Association, Inc. (the "Company") specified in the Grant
Letter to which these Terms and Conditions are attached 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 restrictions contained herein and in
the Plan, which shall lapse upon satisfaction of the conditions
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 Designated Subsidiaries
(as defined in the Plan), 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. Conditions for Lapse of Restrictions (Vesting). Subject to prior lapse
of Restrictions pursuant to Paragraphs 4 or 5 hereof, the Restrictions
shall lapse with respect to: (a) one-half of the Restricted Stock after
two years from the date of grant, and (b) one-half of the Restricted
Stock after three 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. The Restrictions applicable to all of the Restricted
Stock granted hereunder shall lapse upon a Change in Control (as
defined in the Plan) 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
the Company), 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 Restricted Stock shall be forfeited pursuant
to Paragraph 2(b) above.
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
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 or (b) 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 (one (1)-year period in the case
of subparagraphs 10(c)(v) and (vii)) 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 or trade secrets, 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 conduct otherwise violating any non-competition or
non-solicitation agreement with the Company or its
affiliates;
(v) for employees of the Company or its affiliates directly
engaged in sales activities, soliciting, in direct
competition with the Company or its affiliates, any account
or customer previously solicited by you or your immediate
subordinates within the last year of your employment,
without written authorization from the Company;
(vi) 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;
(vii) without written authorization from the Company, the
rendering of services for organizations and businesses set
forth on Exhibit A (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 Subsidiary); provided, however, that this
subparagraph (vii) shall apply only if you are at the time
of the vesting of the Restricted Stock or were at any time
prior thereto a U.S. Grade 18 or higher level employee or if
you have otherwise received an Exhibit A with these Terms
and Conditions; or
(viii) any other conduct or act reasonably determined by the
Committee to be significantly 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), (v) and (vii)
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 mean
insubordination, dishonesty, moral turpitude, other significant
misconduct of any kind, conviction of (or pleading guilty or
nolo-contendere to) a crime, or a significant 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 reasonably 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, 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 Committee may amend the these Terms and Conditions as
necessary or appropriate to comply with applicable laws and
regulations.
(f) 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.