Severance Agreement - Reader's Digest Association Inc. and Paul A. Soden
April 1, 1996
Mr. Paul A. Soden
Senior Vice President, General Counsel and Secretary
The Reader's Digest Association, Inc.
Pleasantville, NY 10570-7000
Dear Paul:
This letter serves to confirm those payments and benefits that
you will receive, subject to and in accordance with the terms and
conditions of this Agreement in connection with a termination of
your employment with the Company.
1. Termination of Employment
1.1 The Company may terminate your employment at any time, with
or without stated reason. You shall receive the benefits
provided hereunder upon the termination of your employment
by you for "Good Reason," as defined in Section 1.2, or the
termination of your employment by the Company, unless such
termination is for "Cause," as defined in Section 3.1 of the
Severance Plan. Any termination by you shall be
communicated by written Notice of Termination indicating the
termination provision in this Agreement relied upon, if any,
and the Date of Termination; provided that the Date of
Termination shall in no event be earlier than 10 business
days after the date on which such Notice of Termination is
effective pursuant to Section 15 hereof.
1.2 For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following without your express
written consent:
1.2.1 the assignment to you without your written consent
of any duties materially inconsistent with your
then current position, duties, responsibilities
and status with the Company, or a material change
or a substantial diminution in your then current
authority, reporting responsibilities, titles or
offices, or removal from or failure to re-elect
you to any such position or office except in the
event of a termination of your employment for
Cause, death, total disability (as defined in The
Reader's Digest Association, Inc. Retirement Plan)
or mandatory retirement;
1.2.2 a reduction by the Company in your annual base
salary as in effect on the date of this Agreement
or as the same may be increased from time to time,
unless such reduction is part of and consistent
with a good faith management-wide or Company-wide
cost cutting program, and then only if the
percentage of your reduction is no greater than
that of the other management personnel;
1.2.3 a relocation without your written consent to an
office located anywhere other than within 50 miles
of your primary residence, except for required
travel on Company business to an extent
substantially consistent with your then current
business travel obligations;
1.2.4 the failure by the Company to continue in effect
any compensation plan or other fringe benefit
provided by the Company in which you participate
on the date of this Agreement that, by itself or
in the aggregate, is material to your total
compensation from the Company, unless there shall
have been instituted a replacement or substitute
plan or fringe benefit providing comparable
benefits or unless such failure is part of and
consistent with a good faith benefit
discontinuance applicable to all of the management
personnel of the Company and then only if the
scope of the discontinuance with respect to you is
no greater than that of the other management
personnel; or
1.2.5 the failure of the Company to obtain a
satisfactory agreement from any successor to the
Company to assume and agree to perform this
Agreement. The Company shall use its best efforts
to require any successor (whether direct or
indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the
businesses or assets of the Company to expressly
assume and agree to perform this Agreement.
1.3 Any termination of your employment by you for "Good Reason"
shall be made within 180 days after the occurrence of the
"Good Reason."
2. Compensation Upon Termination
2.1 If your employment shall be terminated and you are entitled
to benefits under Section 1 of this Agreement then, except
as provided in Section 2.2 and 2.3, you shall receive the
following benefits for each year of the Severance Period (as
defined below):
2.1.1 the Company shall pay to you as severance pay a
total amount equal to the sum of
(a) your highest annual base salary in effect any time
during the 12-month period prior to the Date of
Termination plus
(b) the higher of the following:
(i) the highest amount paid to you under The
Reader's Digest Association, Inc. Management
Incentive Compensation Plan (the "Annual
Incentive Plan") during the three plan years
most recently ended prior to the Date of
Termination; or
(ii) the originally approved target amount of the
highest award, if any, under the Annual
Incentive Plan outstanding on the Date of
Termination, as such target amount may have
been increased prior to the Date of
Termination.
Any compensation received by you or granted to you
in lieu of an amount paid under the Annual
Incentive Plan for any one-year period (whether in
the form of restricted stock or otherwise) shall
be deemed to be an amount paid to you under the
Annual Incentive Plan for purposes of this
Section. Any compensation receivable by you in
lieu of an amount payable under the Annual
Incentive Plan for any period shall be deemed to
be an additional target amount for purposes of
this Section. The amount of any non-cash
compensation received or receivable shall be the
greater of the fair market value of such
compensation on the date of award or the cash
amount that would have been received by you in
lieu of such non-cash compensation.
The aggregate amount of severance payable under this
Section shall be paid in equal installments on a bi-
weekly basis, commencing upon the Date of Termination.
2.1.2 the Company shall maintain in full force and
effect, for your continued benefit for the
Severance Period, all welfare benefit plans and
programs or arrangements in which you participated
immediately prior to the Date of Termination,
provided that your continued participation is
possible under the general terms and conditions of
such welfare plans and programs. In the event
that your participation in any such plan or
program is barred, the Company shall provide you
with benefits substantially similar to those which
you would have been entitled to receive under such
welfare plans and programs had your participation
not been barred.
2.2 If your employment is terminated by you for "Good Reason" or
if your employment is terminated by the Company other than
for "Cause," then the Severance Period shall be the period
of two years immediately following the Date of Termination.
2.3 If your employment is terminated for Cause, the Company
shall pay you your base salary through the Date of
Termination, and the Company shall have no further
obligations to you under this Agreement.
3. Long-Term Incentive Plan Benefits
3.1 You shall have the right to exercise your outstanding stock
options and stock appreciation rights under the 1989 and
1994 Key Employee Long-Term Incentive Plans (the "Long Term
Incentive Plans") to the extent they are exercisable or
would become exercisable during the Severance Period as if
your employment with the Company continued during the
Severance Period. Such stock options and stock appreciation
rights shall continue to vest during the Severance Period as
if your employment with the Company continued during the
Severance Period and, upon completion of the Severance
Period, shall vest and be exercisable as if your employment
terminated at that time by reason of either (a) an
involuntary termination without cause or a mutual agreement
(within the terms of the particular award) or (b) retirement
(within the terms of the particular award), if applicable.
3.2 Your outstanding performance units, restricted stock and
awards (other than stock options and stock appreciation
rights) under the Long Term Incentive Plans shall continue
to be outstanding and payable during the Severance Period as
if your employment with the Company continued during the
Severance Period and, if applicable, shall vest upon
completion of the Severance Period in accordance with the
terms of the award as if your employment terminated at that
time by reason of either (a) an involuntary termination
without cause or a mutual agreement (within the terms of the
particular award) or (b) retirement (within the terms of the
particular award), if applicable. Any such award that is
based on a period of employment shall be payable on a
prorated basis as if your employment had continued during
the Severance Period.
3.2.1 If any such award is subject to specific
performance goals and your employment is
terminated by you for "Good Reason" or your
employment is terminated by the Company other than
for "Cause," then the award shall be payable to
the extent such performance goals are attained.
3.3 If any benefits due under Section 3 cannot be paid under the
existing or amended terms of an applicable plan or award
agreement, the Company shall pay you the value of such
benefits at the time they would otherwise be payable if they
were payable under such terms.
4. Retirement Plan Benefits
4.1 The Company shall pay to you an amount equal to the
difference between your monthly retirement benefit payable
under The Reader's Digest Association, Inc. Retirement Plan
(the "Retirement Plan"), the Excess Benefit Retirement Plan
of The Reader's Digest Association, Inc. (the "Excess
Benefit Retirement Plan") and The Reader's Digest Executive
Retirement Plan (the "Executive Retirement Plan") and the
amount that would have been payable if your age and
aggregate periods of service under those plans included the
Severance Period. In addition, the Severance Period shall
be considered to be additional Credited Service for all
purposes (including vesting) under the Executive Retirement
Plan. Any amount payable under this Section 4.1 shall be
payable at the same time and in the same form as such
payments would have been made under the Retirement Plan.
4.2 Upon completion of the Severance Period, if you are not
vested under the Retirement Plan, the Excess Retirement Plan
or the Executive Retirement Plan, you will receive a lump
sum payment in the amount of the equivalent actuarial value
(as determined under the Retirement Plan) of pension credits
that would have been earned through the end of the Severance
Period, without regard to vesting, with any such payment to
be made within 90 days of the end of the Severance Period.
5. Your participation in The Reader's Digest Employees Profit-
Sharing Plan and the Profit -Sharing Benefit Restoration
Plan of The Reader's Digest Association, Inc. (the "Profit-
Sharing Plans") ceases upon your termination of employment
with the Company. However, you shall receive cash payments
equal to the amounts that would have been contributed to
your account had your employment with the Company continued
for the Severance Period, with payments to be made to you by
the Company at the time any contributions have been made for
participants in the Profit-Sharing Plans. In addition, the
Severance Period shall be considered to be additional
Credited Service for purposes of your vesting in any amounts
previously contributed to your account under the Profit-
Sharing Plans.
6. Any benefits payable under this Agreement shall be reduced
by the amount of any benefits paid under The Reader's Digest
Association, Inc. Severance Plan for Senior Management or
The Reader's Digest Association, Inc. Income Continuation
Plan for Senior Management.
7. The payment of any amounts or benefits under this Agreement
is expressly conditioned on the receipt by the Company from
you of a duly executed General Waiver and Release of Claims
in the form specified under the Severance Plan, the
repayment by you of any outstanding advances or loans due
the Company and the return by you of all Company property.
8. Any reference to a specific plan in this Agreement shall be
deemed to include any similar plan or program of the Company
then in effect that is the predecessor of, the successor to,
or the replacement for, such specific plan.
9. The Company may withhold from any benefits payable under
this Agreement all federal, state, local or other applicable
taxes as shall be required pursuant to any law or
governmental regulation or ruling.
10. In case of your death while any amounts are still payable to
you under this Agreement, the Company shall pay all such
amounts to your designated beneficiary or, if none has been
designated, to your estate as if your employment had
continued until the end of the Severance Period.
11. The Company shall indemnify you and hold you harmless from
any and all liabilities, losses, costs or damages, including
defense costs and expenses (including, without limitation,
fees and disbursements of counsel incurred by you in any
action or proceeding between the parties to this Agreement
or between you and any third party or otherwise) in
connection with all claims, suits or proceeding relating to
or arising from a breach or alleged breach of this Agreement
by the Company.
12. You acknowledge that (i) prior to executing this Agreement,
you had an opportunity to consult with an attorney of your
choosing and review this Agreement with such counsel, (ii)
you are executing this Agreement knowingly and voluntarily
and (iii) you understand all of the terms set forth herein.
13. In the event the Company terminates your employment for
Cause and you dispute the Company's right to do so or you
claim that you are entitled to terminate your employment for
Good Reason and the Company disputes your right to do so, a
mediator acceptable to you and the Company will be appointed
within 10 days to assist in reaching a mutually satisfactory
resolution, but will have no authority to issue a binding
decision. Such mediation must be concluded within 60 days
of the date of termination or claim to termination for Good
Reason. You agree that you will not institute any legal
proceeding relating to the matter until the conclusion of
such mediation. Should such mediation fail to reach an
acceptable conclusion and you are successful in any
litigation or settlement that issues from such dispute, you
shall be entitled to receive from the Company all of the
expenses incurred by you in connection with any such
dispute, including reasonable attorney's fees.
14. Acts Detrimental to the Company
14.1 You agree that you will not do any of the following during
the Severance Period:
14.1.1 commit any criminal act against the Company or any
act that would constitute "Cause;"
14.1.2 disclose any information likely to be regarded as
confidential and relating to the Company's
business;
14.1.3 solicit the Company's employees to work for a
competitor of the Company; or
14.1.4 perform any act detrimental to the Company or its
employees, including, but not limited to,
disparaging the Company, its senior management or
its products.
14.2 You agree that any breach or threatened breach of Section
14.1 shall entitle the Company to apply for and to obtain
injunctive relief, which shall be in addition to any and all
other rights and remedies available to the company at law or
in equity.
14.3 All of your rights and benefits under this Agreement shall
cease upon any breach by you of Section 14.1 of this
Agreement.
15. Miscellaneous
15.1 Notices and other communications provided for herein shall
be in writing and shall be effective upon delivery addressed
as follows:
if to the Company:
The Reader's Digest Association, Inc.
Reader's Digest Road
Pleasantville, NY 10570-7000
Attention: Senior Vice President, Human Resources
with a copy to
The Reader's Digest Association, Inc.
Reader's Digest Road
Pleasantville, NY 10570-7000
Attention: General Counsel
or if to you, at the address set forth above,
or to such other address as to which either party shall give
notice in accordance with the foregoing.
15.2 This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement may not be assigned by either party without the
consent of the other party.
15.3 Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other
jurisdiction.
15.4 This Agreement constitutes the entire understanding of the
parties hereto with respect to the subject matter hereof and
supersedes any prior agreements, written or oral, with
respect thereto.
15.5 This Agreement may be amended or modified only by a written
agreement duly executed by both of the parties hereto.
15.6 This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York applicable
to contracts executed in and to be wholly performed within
that State.
Very truly yours,
The Reader's Digest
Association, Inc.
By
Name: Joseph M. Grecky
Joseph M. Grecky
Title: Senior Vice President,
Human Resources
Agreed to and accepted as of 4/1/96:
Name: Paul A. Soden
Paul A. Soden