Executive Retirement Plan - Reader's Digest Association Inc.
THE READER'S DIGEST EXECUTIVE RETIREMENT PLAN
(Effective As of July 1, 1992)
(As amended by Amendment No. 1, effective July 8, 1994
and Amendment No. 2, effective July 1, 1995)
TABLE OF CONTENTS
ITEM ARTICLE PAGE
DEFINITIONS 1 1
ELIGIBILITY AND PARTICIPATION 2 4
TERMINATION OF EMPLOYMENT 3 5
AMOUNT OF RETIREMENT INCOME BENEFIT 4 5
MODES AND TIME OF BENEFIT PAYMENT 5 7
DEATH BENEFIT 6 8
MEDICAL BENEFITS 7 8
GENERAL PROVISIONS 8 9
The Reader's Digest Executive Retirement Plan
Effective as of July 1, 1992, The Reader's Digest
Executive Retirement Plan has been adopted by the Board of
Directors of The Reader's Digest Association, Inc. to read
as follows:
ARTICLE 1
Definitions
The following words and phrases as used herein shall
have the following meanings, unless a different meaning is
plainly required by the context:
BENEFICIARY: The person or persons (including a trust
or estate) who are entitled to receive
any benefits under the Plan by reason of
the death of a Participant.
BOARD: The Board of
Directors of The Reader's Digest
Association, Inc.
COMPANY: The Reader's
Digest Association, Inc. or any
successor corporation by merger,
purchase, consolidation or otherwise.
COMPENSATION The compensation committee appointed by
COMMITTEE: the Board.
EARLY RETIREMENT The first day of any month coincident
DATE: with or subsequent to
a Participant's (i) attainment of age
fifty-five (55) and (ii)
completion of Periods of Service plus
attainment of an age
which, when added together, equal or
exceed sixty-five (65).
EMPLOYER: The Company and
any subsidiary of the Company which,
with the approval of the Board and
subject to such conditions as the Board
may impose, adopts this Plan, and any
successor or successors of any of them.
For purposes of this Plan, a subsidiary
shall include any corporation at least
fifty-one percent (51%) of the voting
stock of which is owned by the Company
or its stockholders or by one or more
corporations fifty-one percent (51%) of
the voting stock of which is owned by
the Company or its stockholders.
ENHANCED The enhanced retirement benefits
RETIREMENT payable to Participants and their joint
BENEFITS: or contingent annuitants and
Beneficiaries in accordance with the
applicable provisions of this Plan.
EXCESS PLAN: The Excess Benefit Retirement Plan of
The Reader's Digest Association, Inc.,
effective January 1, 1976 as may be
amended and restated from time to time.
EXCESS PLAN The benefit under the Excess Plan
BENEFIT: expressed as a single life
annuity for the life of the Participant
calculated as of the Participant's benefit
commencement date under the Plan.
MANAGEMENT Any compensation award under The
INCENTIVE BONUS: Reader's Digest Plan, effective as of
July 1, 1989 as may be amended and
restated from time to time.
NORMAL The first day of the month coincident
RETIREMENT DATE: with or next following
a Participant's 65th birthday.
PLAN: The Reader's Digest Executive Retirement
Plan, effective July 1, 1992 as may be
amended and restated from time to time.
PARTICIPANT: An individual who participates in the
Plan in accordance with the terms
herein.
POSTPONED The first day of the month coincident
RETIREMENT DATE: with or next following a Participant's
termination of employment after his Normal
Retirement Date.
PROFIT SHARING The Reader's Digest Employees Profit-
PLAN: Sharing Plan, effective January
1, 1963 and as restated as of July 1, 1992
and as may be further amended and restated
from time to time.
PROFIT SHARING Beginning with the fiscal year
PLAN BENEFIT: commencing on July 1, 1989 and for each
fiscal year thereafter, the sum of (1) the
amount of employer contributions under the
Profit Sharing Plan allocated to the
Participant which exceeds 6% of the
sum of the Participant's (i) annual base
salary and (ii) Management Incentive Bonus
and (2) the amount in (1)
above multiplied by 8% per year for each
year prior to the Participant's benefit
commencement date under the Plan,
expressed as a single life annuity for the
life of the Participant based on an 8%
interest rate and the PBGC mortality tables
for healthy males calculated as of the
Participant's benefit commencement date under
the Plan.
RETIREMENT INCOME The retirement benefits payable to
BENEFIT: Participants and their
joint or contingent annuitants and
Beneficiaries in accordance with
the applicable provisions of this Plan.
RETIREMENT PLAN: The Reader's Digest Association, Inc.
Retirement Plan or QSP, Inc. Retirement
Plan, as restated as of July 1, 1992 and
as such plans may be further amended and
restated from time to time.
RETIREMENT PLAN The benefit payable to the Participant
BENEFIT: under the Retirement Plan
expressed as a single life annuity for
the life of the Participant calculated
as of the Participant's benefit
commencement date under the Plan.
RETIREMENT SALARY: The average annual regular or basic
salary of a Participant and Management
Incentive Bonus including all amounts
contributed by the Employer on behalf of
the Participant under a cafeteria plan
as described in Section 125 of the
Internal Revenue Code of 1986, as
amended (the "Code"), but excluding
severance pay, bonuses which are not
Management Incentive Bonuses,
contributions made under any other
deferred compensation plan on behalf of
a Participant or other extra
compensation, during the three
consecutive years in the last ten years
of employment which are counted under
the Retirement Plan (or fewer, if
applicable) which provides the highest
such average. For purposes of this
definition, the Management Incentive
Bonus shall be determined by reference
to amounts payable with respect to the
same period for which the annual regular
or basic salary is determined.
SERP AGREEMENT: The Supplemental Retirement Benefit
Agreements as pertaining to individual
Participants.
SERP AGREEMENT The retirement benefit payable in the
BENEFIT: form of a 15 year certain annuity
calculated as of the Participant's benefit
commencement date specified in
the SERP Agreement, reduced by the
annual benefit which would be payable in the
form of a 15 year certain annuity calculated
as of the Participant's benefit commencement
date under the Plan and
which is attributable solely to
employee contributions using
an annual interest assumption of 8%.
SPOUSE: The spouse of a
Participant who is legally married to
the Participant on the earlier of (i)
the date of the Participant's death, or
(ii) the Participant's benefit
commencement date.
All terms not defined herein shall have the same
meanings as set forth in the Retirement Plan.
ARTICLE 2
Eligibility and Participation
Section 2.1 Unless otherwise determined by the Board
or the Compensation Committee, eligibility to participate in
the Plan shall be determined from time to time by the Senior
Vice President, Human Resources, with the approval of the
Chief Executive Officer, in their discretion, but shall be
limited to senior officers, senior management and other key
employees of an Employer. Each Employee who has been
designated to participate in the Plan shall commence
participation on the date of his designation.
Section 2.2 When an Employee first becomes a
Participant in the Plan, the Senior Vice President, Human
Resources may notify him promptly of that fact and of his
rights hereunder.
Section 2.3 Participants eligible for Enhanced
Retirement Benefits shall be those Participants in positions
at salary grade level 21 and higher designated from time to
time by the Senior Vice President, Human Resources and
approved by the Chief Executive Officer.
ARTICLE 3
Termination of Employment
Section 3.1 If a Participant's employment with the
Employer is terminated prior to his Early Retirement Date
other than by reason of death, no benefits shall be provided
hereunder.
Section 3.2 If a Participant's employment with the
Employer is terminated on or after his Normal Retirement
Date, he shall be entitled to the benefits under the Plan.
If a Participant's employment with the Employer is
terminated on or after his Early Retirement Date but before
his Normal Retirement Date, he shall be entitled to the
benefits under the Plan only with the consent of the
Compensation Committee.
Section 3.3 If a Participant's employment with the
Employer is terminated by reason of death, his Spouse shall
be entitled to the benefits under Article 6.
ARTICLE 4
Amount of Retirement Income Benefit
Section 4.1 Normal Retirement Benefit. A
Participant's annual rate of Retirement Income Benefit in
the form of a single life annuity for the life of the
Participant commencing on his Normal Retirement Date shall
be equal to (1) (i) three percent (3%) of his Retirement
Salary multiplied by his years or fractions of years of
Credited Service for the first fifteen (15) years plus (ii)
one percent (1%) multiplied by his years or fractions of
years of Credited Service for each of the next twenty (20)
years, less (2) the sum of such Participant's (i) Retirement
Plan Benefit, (ii) Excess Plan Benefit, (iii) SERP Agreement
Benefit and (iv) Profit Sharing Plan Benefit.
Section 4.2 Early Retirement Benefit. A Participant
who retires before his Normal Retirement Date but on or
after his Early Retirement Date and who is otherwise
entitled to a benefit under the Plan may elect with the
consent of the Compensation Committee to receive the
Retirement Income Benefit described in this Article prior to
his Normal Retirement Date. The amounts under Section
4.1(1) shall be reduced by .4167 percent (.004167) for each
month by which the Participant's benefits commencement date
under this Plan precedes the Participant's attainment of age
62.
Section 4.3 Postponed Retirement Benefit. Any
Participant who continues in the employ of the Employer
after Normal Retirement Date shall not be entitled to
receive his Retirement Income Benefit until he actually
retires. A Participant who continues in the employ of the
Employer beyond the Normal Retirement Date shall have his
Retirement Income Benefit determined by counting all years
or fractions of years of Credited Service and for purposes
of determining the Retirement Salary of such Participant all
periods of employment with the Employer shall be taken into
account.
Section 4.4 Enhanced Retirement Benefit. For
purposes of Articles 4 and 5, a Participant first employed
by an Employer or an Affiliate after he attains age 45 shall
be entitled to an additional year of Credited Service for
each completed year of Period of Service beginning after
five full years of Credited Service but only to the extent
the Participant's age at the date of hire by the Employer or
Affiliate exceeds 45. For purposes of determining
eligibility for retirement at an Early Retirement Date, a
Participant first employed by an Employer or an Affiliate
after he attains age 45 shall be entitled to an additional
year of Periods of Service for each completed full year of
Period of Service beginning after five full years of Periods
of Service but only to the extent the Participant's age at
the date of hire by the Employer or Affiliate exceeds 45.
ARTICLE 5
Modes and Time of Benefit Payment
Section 5.1 If a Participant or Beneficiary is
entitled to a benefit hereunder, the Compensation Committee
shall in its sole discretion determine to pay to such
Participant a series of payments in one of the forms of
payment permitted under Article 6 of the Retirement Plan
(excluding any lump sum payment option, except as described
herein), with the payments under the selected form having an
aggregate value actuarially equivalent to such amount
payable under Article 4 of this Plan, based on the actuarial
equivalent factors as defined in the Retirement Plan. The
Compensation Committee shall in its sole discretion
determine when such payments shall commence; provided,
however, that in no event shall benefits hereunder commence
later than one year after the Participant terminates
employment with the Employer after attainment of Normal
Retirement Date or Postponed Retirement Date.
Notwithstanding the foregoing, the Compensation Committee
may, in its sole discretion, accelerate the remaining unpaid
portion of such payments into one or more payments having in
the aggregate an equivalent actuarial value, based on the
PBGC mortality tables for healthy males and one hundred
twenty (120) percent of the PBGC immediate interest rate
then in effect. If a Participant who is receiving a
Retirement Income Benefit or who has previously received a
Retirement Income Benefit shall return to the employ of the
Employer as an Employee and such employment is substantial,
the Retirement Income Benefit shall cease for as long as he
continues to be so employed. Upon a subsequent termination
of employment with the Employer, the Retirement Income
Benefit of such Employee shall be recomputed based on his
Retirement Salary and years or fraction of years of Credited
Service prior and subsequent to his re-employment date and
reduced by the Retirement Income Benefit previously received
by him. In determining such previously received benefit,
equivalent actuarial value shall be based on the PBGC
mortality tables for healthy males and one hundred twenty
(120) percent of the PBGC immediate interest rate then in
effect. For purposes of this Article, an Employee's
employment with the Employer shall be substantial if he
renders forty (40) or more Hours of Service (except for
Hours of Service credited as a result of back pay) in a
calendar month.
ARTICLE 6
Death Benefit
Section 6.1 In the event of a married Participant's
death while in the employ of the Employer prior to his
benefit commencement date under the Plan after attainment of
age fifty-five (55) and the completion of a five-year Period
of Service (without regard to any break-in-service rules
applicable under the Retirement Plan), his Spouse shall
receive, commencing on the first working day of the month
following the Participant's death, the benefit under the
Plan in the form and amount such Spouse would otherwise have
received under the 50% qualified joint and survivor annuity
form if the Participant had terminated employment with the
Employer on the day before his death and had been entitled
to benefits under the Plan at the time of termination in the
form of a 50% qualified joint and survivor annuity.
Section 6.2 In the event of a Participant's death
after benefits under the Plan have commenced, his
Beneficiary shall receive any amounts provided under the
form of payment under which the Participant was receiving
such benefits at the time of his death.
ARTICLE 7
Medical Benefits
Section 7.1 If any Participant terminates employment
with the Employer on or after his Early Retirement Date,
such Participant and his Spouse with the consent of the
Compensation Committee shall be eligible to receive the
benefits provided under The Reader's Digest Association,
Inc. Medical and Dental Expense Plan for Retirees and
Disabled Individuals (the "Retiree Health Plan") as if the
Participant had met the eligibility requirements under such
plan, provided that the Participant or Spouse makes the
contributions required under such plan.
Section 7.2 If a married Participant dies while in
the employ of the Employer prior to his benefit commencement
date under the Plan after attaining age fifty-five (55) and
the completion of a five-year Period of Service (without
regard to any break-in-service rules applicable under the
Retirement Plan), his Spouse shall be eligible to receive
the benefits provided under the Retiree Health Plan as if
the Participant had retired prior to his death having
satisfied the eligibility requirements of such plan,
provided that such Spouse makes the contributions required
under such plan.
Section 7.3 If a married Participant dies following
the Participant's retirement from the Employer after
attaining his Early Retirement Date, his Spouse shall be
eligible to receive the benefits provided under the Retiree
Health Plan as if the Participant had retired prior to his
death having satisfied the eligibility requirements of such
plan, provided that such Spouse makes the contributions
required under such plan.
ARTICLE 8
General Provisions
Section 8.1 The Employer shall only have a
contractual obligation to make payments to the Participant
or Beneficiary, as applicable, referred to herein when due,
and the amounts of such payments shall not be held in trust
for the Participant or Beneficiary, as applicable, but shall
be paid from the general assets of the Employer. This Plan
is intended to constitute an unfunded plan and no assets
shall be segregated or earmarked in respect of any amount
due hereunder.
Section 8.2 Nothing contained herein shall confer
any right on a Participant to be continued in the employ of
the Company or any other Employer, or as a limitation of the
right of the Company or Employer to discharge any
Participant with or without cause, nor shall anything herein
affect the right of the Participant to participate in and
receive benefits under and in accordance with any pension,
profit sharing, incentive compensation or other benefit plan
or program of any Employer. Nothing herein shall be
construed as a contract of employment between the Employer
and any Participant.
Section 8.3 This Plan shall be binding upon any
successor to or purchaser of substantially all the assets of
the Company or an Employer with respect to such Employer's
Employees. The Board reserves the right at any time and
from time to time to modify, amend or terminate in whole or
in part any or all of the provisions of the Plan. Upon any
such termination of this Plan, the Company may in its sole
discretion accelerate payment of all benefits that are in
pay status on the date of termination and benefits to which
a Participant or Beneficiary, as applicable, would be
entitled under the terms of the Plan then in effect based on
events which occur prior to the date of termination of the
Plan. In no event, however, shall any modification,
amendment or plan termination by the Board deprive any
Participant or Beneficiary, as applicable, of any amount
which is payable to such person under the Plan by reason of
the Participant's attainment of age 65 or death prior to
such modification, termination or amendment.
Section 8.4 No right or interest of a Participant or
Beneficiary, as applicable, under this Plan shall be subject
to voluntary or involuntary alienation, assignment or
transfer of any kind.
Section 8.5 The administration of this Plan and the
interpretation thereof, including the authority to decide
all questions that arise thereunder, shall be the
responsibility of the Compensation Committee or such other
person or entity as the Company shall designate. The
decisions and interpretations of such administrator of the
Plan shall be final and binding upon each Employer that
shall have adopted this Plan, Employees of such Employers,
each Participant and his Beneficiary, and other interested
parties.
Section 8.6 The Company shall have the right to
deduct from any payment to be made pursuant to this Plan any
Federal, state, local or other taxes required by law to be
withheld.
Section 8.7 If any payment to be made under this
Plan is to be made on account of a Participant who was
employed by an Employer that shall have adopted this Plan,
other than the Company, the cost of such benefit payment
shall be borne by the Employer of the Employee.
Section 8.8 This Plan shall be construed, regulated
and administered for all purposes according to the laws of
the State of New York and the United States.
Section 8.9 No member of the Board, no Employee and
no member of the Compensation Committee (nor the
Compensation Committee itself) shall be liable for any act
or action hereunder, including acts of omission or
commission, by any other member or Employee or by any agent
to whom duties in connection with the administration of the
Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything
done or omitted to be done by himself.
Section 8.10 Wherever any words are used in this Plan
in the masculine gender they shall be construed as though
they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as
though they were also used in the plural form in all cases
where they would so apply.
Section 8.11 In the event any provision of this Plan,
if challenged, would be declared invalid, illegal or
unenforceable, such provision shall be construed and
enforced as if it had been more narrowly drawn so as not to
be illegal, invalid or unenforceable and the validity,
legality and enforceability of the remaining provisions
shall not be affected or impaired thereby.