DEFERRED STOCK AWARD (FISCAL 2006)
August 12, 2005
<<First_plus_Middle>> <<Last>>
Dear <<First>>:
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, a Deferred
Stock Award relating to <<Restricted_Shares>> 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 Deferred 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 Deferred Stock grant by
signing and dating this letter below and returning it to the address indicated
below within 30 days from the date hereof.
This award is intended to be a one-time grant. It is not the
Company's intention to make this type of award on any regular or periodic basis
or cycle.
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:
- --------------------------------- ---------------------------
Signature Date
Return signed and dated copy to: Lisa Cribari, Vice President, Global
Compensation and Benefits.
-5-
The Reader's Digest Association, Inc.
TERMS AND CONDITIONS
DEFERRED STOCK AWARD (Fiscal 2006)
The Deferred Stock Award 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. Deferred Stock Award Subject to Conditions and Restrictions. This award
represents an unfunded promise by The Reader's Digest Association, Inc.
("Reader's Digest") to deliver to you a number of shares of Reader's Digest
Common Stock, $0.01 par value, specified in a Grant Letter, at one or more
future dates (a "Deferred Stock Award"). The shares deliverable pursuant to
the Deferred Stock Award are referred to as "Deferred Stock." The granting
of the Deferred Stock Award does not involve an actual transfer of property
on the date of grant or at any time prior to the lapse of the Restrictions
(referred to below).
2. Restrictions. The Deferred Stock Award is granted to you subject to the
following restrictions (the "Restrictions").
(a) Transfer. You may not anticipate, alienate, attach, sell, assign,
pledge, encumber, charge or otherwise transfer the Deferred Stock
Award without the written consent of Reader's Digest 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) with Reader's Digest or any of its Designated Subsidiaries,
then, except as provided in Paragraphs 5(a) and 5(b) hereof, any
portion of the Deferred Stock Award that is still subject to the
Restrictions shall be canceled by Reader's Digest and shall be deemed
to have been forfeited by you.
3. Conditions for Lapse of Restrictions (Vesting) and Delivery of Deferred
Stock. Subject to prior lapse of the Restrictions pursuant to Paragraph 4
or 5 hereof, the Restrictions shall lapse with respect to (a) one-half of
the Deferred Stock Award after two years from the date of grant, and (b)
one-half of the Deferred Stock Award after three years from the date of
grant. Notwithstanding the foregoing, the Committee may, in its sole
discretion at any time after the grant of the Deferred Stock Award,
accelerate the lapse of the Restrictions as to all or any part of the
Deferred Stock Award.
4. Change in Control. The Restrictions applicable to the Deferred Stock Award
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 Reader's Digest or a
Designated Subsidiary terminates by reason of a total disability as
defined in Reader's Digest'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 Reader's Digest or a Designated
Subsidiary terminates by reason of your death, the Restrictions shall
lapse upon your death.
(c) Other Termination. If your employment by Reader's Digest or a
Designated Subsidiary terminates for any reason other than total
disability or death as provided in (a) and (b) above, respectively,
the Deferred Stock Award shall be forfeited pursuant to Paragraph 2(b)
above.
6. Adjustments. If there is any change in the capital stock of Reader's
Digest, the term "Deferred Stock" shall include any securities and other
property that you would have received or become entitled to receive upon
lapse of the Restrictions, 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. Tax Withholding. You are responsible for satisfying any tax withholding
obligation that is applicable to you, including any U.S., non-U.S. or
social insurance tax withholding obligation. In order to satisfy any such
obligation in connection with the lapse of the Restrictions and the vesting
of the Deferred Stock, Reader's Digest is authorized to deduct from the
number of shares of Deferred Stock deliverable to you a sufficient number
of those shares, valued at their Fair Market Value on the date the
pertinent Restrictions lapse. If Reader's Digest is unable to satisfy all
or any portion of any applicable tax withholding obligation by deducting
shares of Deferred Stock, you must deliver sufficient funds in cash to
Reader's Digest to satisfy the obligation either, in the discretion of
Reader's Digest, by direct payment to Reader's Digest or by payroll or
salary deduction.
8. Cancellation and Recovery
(a) Notwithstanding anything herein to the contrary, the Committee may
terminate the Deferred Stock Award immediately if you engage in any
Detrimental Activity.
(b) As a condition of the lapse of Restrictions on the Deferred Stock
Award, you shall certify at the time of such vesting, in a manner
acceptable to Reader's Digest, 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 8(c)(v) and
(vii)) after, your termination of employment with Reader's Digest and
its Designated Subsidiaries, Reader's Digest 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 Reader's Digest,
the Fair Market Value (as defined in the Plan), on the date the
Restrictions lapsed, of any shares of Deferred Stock on which the
Restrictions lapsed during the period of two (2) years prior to your
termination of employment, and Reader's Digest shall be entitled to
set-off against the amount of any such payment any amount owed to you
by Reader's Digest 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 Reader's Digest
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
Reader's Digest'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 Reader's Digest and its Designated Subsidiaries has
terminated involuntarily without Cause, "Detrimental Activity" means:
(i) the disclosure to anyone outside Reader's Digest or its
affiliates, or the use in other than Reader's Digest's or its
affiliate's business, without written authorization from Reader's
Digest, of any confidential information or proprietary
information or trade secrets, relating to the business of
Reader's Digest or its affiliates, acquired by you during
employment with Reader's Digest or its affiliates;
(ii) activity while employed that results, or if known could result,
in termination of your employment that is classified by Reader's
Digest 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 Reader's Digest 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 Reader's
Digest;
(iv) any conduct otherwise violating any non-competition or
non-solicitation agreement with Reader's Digest or its
affiliates;
(v) for employees of Reader's Digest or its affiliates directly
engaged in sales activities, soliciting, in direct competition
with Reader's Digest 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 Reader's Digest;
(vi) your Disparagement, or inducement of others to do so, of Reader's
Digest or its affiliates or their past and present officers,
directors, employees or products;
(vii) without written authorization from Reader's Digest, 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 Reader's Digest or any
Designated Subsidiary); provided, however, that this subparagraph
(vii) shall apply only if you are at the time of the vesting of
the Deferred 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 Reader's Digest or its affiliates.
In the event that a Change in Control has occurred and your employment
with Reader's Digest and its Designated Subsidiaries has terminated
involuntarily without Cause, "Detrimental Activity" shall have the
meaning stated in subparagraph 8(c)(i), only.
For purposes of subparagraphs 8(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 Reader's Digest 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, Reader's Digest's or its affiliates' employees or any
individual or entity with whom Reader's Digest or its affiliates has a
business relationship which would adversely affect in any manner: (i)
the conduct of the business of Reader's Digest or its affiliates
(including, without limitation, any products or business plans or
prospects), or (ii) the business reputation of Reader's Digest 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 Reader's Digest or its affiliates, or refusal to perform normal
duties and responsibilities (for any reason other than illness or
incapacity) which, in any case, Reader's Digest 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 Reader's Digest.
9. Miscellaneous
(a) The Deferred Stock Award is subject to the detailed provisions of the
Plan, a copy of which may be obtained from the Human Resources
Department of Reader's Digest.
(b) The Deferred Stock Award, does not give you any rights as a holder of
Common Stock prior to the lapse of the Restrictions. You will not
receive regular quarterly cash dividends or dividend equivalents with
respect to the Deferred Stock Award.
(c) The granting of the Deferred Stock Award does not confer upon you any
right to continue in the employ of Reader's Digest or any of its
subsidiaries or affiliates.
(d) The Deferred Stock Award does not entitle you to any benefit other
than the benefits specifically and expressly granted hereunder. Any
benefits granted under the Deferred Stock Award 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 statement of Terms and Conditions is subject to and qualified by
the provisions of the Plan.
(f) The Committee may amend the these Terms and Conditions as necessary or
appropriate to comply with applicable laws and regulations.
(g) The Plan, and the Grant Letter and the Terms and Conditions relating
to the Deferred Stock Award 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.