Document:

Exhibit
10.16

 

 

THE READER’S
DIGEST ASSOCIATION, INC.

READER’S DIGEST
ROAD

PLEASANTVILLE,
NY  10570-7000

 

August 7, 2007

 

Ms. Jean
B. Clifton

6
Weatherfield Drive

Newtown,
PA  18940

 

Dear
Jean:

 

I
am pleased to confirm the verbal offer of employment extended to you for the
position of Senior Vice President, Chief Financial Officer, reporting to Mary
Berner, Chief Executive Officer, Reader’s Digest Association, Inc., the
details of which are outlined below.   As
discussed, your start date will be September 4, 2007.

 

COMPENSATION AND BENEFITS

 

1.               As previously discussed, your annual base
salary will be $500,000 payable in biweekly installments, and subject to
periodic increases based upon performance reviews, which are typically done on
an annual basis.

 

2.               You will receive an annual
guaranteed payment of $50,000, less appropriate tax withholding, payable each
July, beginning in July of 2008.

 

3.               You will participate in our annual incentive
plan, the Reader’s Digest Management Incentive Plan.  The bonus target for this position is
$400,000 with a range of opportunity of up to 200% of target (or up to
$800,000).  This plan will begin in
FY2008 (July 1, 2007 — June 30, 2008).  Awards are based on Company and individual
performance against pre-established goals.  Receipt of a bonus requires that you be on the
active payroll at the time awards are paid, which is typically in August.  Your incentive target for FY2008 will not be
prorated based upon your effective date of hire.

 

4.               You will receive an equity stake in the
company, commensurate with your level of responsibility and consistent with
other senior executive positions. This equity stake equals 0.45%  or approximately 268,383 shares delivered in
a combination of 201,287 stock options and 67,096 restricted shares.

 

 

5.               You will participate in Reader’s Digest’s
Senior Executive Long-Term Incentive Program (LTIP).  This plan measures and rewards performance
over a multi-year period.  A new
performance cycle begins each year.  The
award earned can range up to 250% of target depending on the extent to which
the performance goals are achieved. 
Performance cycles and incentive targets are outlined below.

 

	
  Cycle

  	
   

  	
  Target

  	
   

  	
  Anticipated 

  Payout Date

  	
   

  
	
  2008-2009

  	
   

  	
  $

  	
  500,000

  	
   

  	
  December 2009

  	
   

  
	
  2008-2010

  	
   

  	
  $

  	
  500,000

  	
   

  	
  December 2010

  	
   

  

 

6.               You will be eligible to participate in the
benefit programs that are made generally available to Reader’s Digest employees
in accordance with their terms, as from time to time in effect, including The
Reader’s Digest Association, Inc. Retirement Plan (cash balance account),
which currently provides an annual age-based contribution ranging from 3% to
12% of eligible compensation, The 401(k) Partnership of The Reader’s
Digest Association, Inc., a savings plan which currently provides a 50%
match on the first 6% of pre-tax contributions, and medical, dental, life
insurance, short- and long-term disability plans.  Details of these benefit plans are included
in the attached information packet.

 

7.               You will be eligible for the following
executive level perquisites:  financial
planning benefits provided through Ayco, the Company’s service provider; a
calendar year flexible perquisite allowance (under the “Flexnet Program”) of
$25,500 or an annual payment in the gross amount of $25,500 in lieu of participation
in the Flexnet Program, to be used for transportation and/or other
miscellaneous expenses.

 

8.               You will be eligible for temporary housing,
paid for and provided by the Company, for up to twelve months.   In addition, you are eligible for relocation
assistance under Reader’s Digest’s relocation policy (see attached) including
but not limited to the following:  home
sale assistance, home search, home purchase assistance, shipment of household
goods and storage for up to three months, miscellaneous relocation allowance of
$15,000 net of taxes and related tax assistance.   You will have up to two years from your
start date to complete the relocation process. 
The term “transfer date” in the relocation package documentation is your
start date with the Company.  The
definition of “cause” for purposes of the repayment agreement will be
consistent with the definition of “Cause” referred to in paragraph 9 below.

 

9.               You will be eligible for severance totaling
24 months of base salary and two times your annual bonus target if your
employment is terminated involuntarily by the company for reasons other than “Cause”
(as defined in the attached) provided you execute a release in a reasonable and
customary form satisfactory to the company and return all company property.  For clarification purposes, this is an
obligation of the company that will be binding on any successor or assign in
connection with a transfer of the business or otherwise.

 

 

10.         By virtue of accepting these terms of
employment with Reader’s Digest, you also agree that, for the 24 month period
following your termination for any reason at any time, you will not, directly
solicit (or have a third party solicit for your benefit) any employee of Reader’s
Digest (or their affiliates or subsidiaries) to cease employment with those
entities or seek employment elsewhere.

 

11.         Your employment is contingent upon
verification of the accuracy of information obtained in the employment process
through an independently conducted background investigation, and authorization
to work pursuant to the Immigration Reform and Control Act of 1986 (“IRCA”).  In addition, your current consulting
arrangement with your prior employer must be terminated prior to your start
date. Your employment cannot commence until these conditions have been
satisfied.

 

Jean,
while this letter provides you with information about compensation and
benefits, neither this letter nor any conversation is intended to create an
employment contract.  In all instances
mentioned above, the specific terms of the applicable plans and awards govern,
and Reader’s Digest reserves the right to amend or terminate those plans or
policies in accordance with their terms. 
Additionally, our policy is that “all employment by the Company is at
will and the Company reserves the right to terminate any employee at any time
with or without cause.”

 

We
look forward to you joining the senior leadership team of Reader’s Digest and
are confident that you will make a significant difference for our Company.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Lisa Cribari

  
	
   

  	
  Vice President,

  
	
   

  	
  Global
  Human Resources

  

 

cc:  Mary BernerExhibit 10.17

 

 

THE READER’S DIGEST ASSOCIATION, INC.

READER’S DIGEST ROAD

PLEASANTILLE, NY 10570-7000

 

	
  MARY
  G. BERNER

  President
  and CEO

  	
   

  	
  TELEPHONE: (914) 244-5105

  FAX: (914) 244-7555

  mary_berner@rd.com

  

 

March 20, 2007

 

Michael Geltzeiler

61 Rockwell Road

Ridgefield, CT 06877

 

Dear Mike:

 

This letter (the “Agreement”) serves to
confirm those payments and benefits that you will receive in consideration of
your agreement to waive your participation in The Reader’s Digest Association,
Inc. 2001 Income Continuation Plan for Senior Management, The Reader’s Digest
Association, Inc. 2006 Income Continuation Plan for Senior Management (the
“ICPs”), your agreement to cancel that certain agreement between you and The
Reader’s Digest Association, Inc. (the “Company”) dated December 18, 2001
providing for certain benefits upon your termination of employment (the
“Termination Agreement”), your agreement to waive participation in The Reader’s
Digest Association, Inc. Severance Plan and in any and all successors to such plan
and any other Company plan or policy respecting severance and/or separation pay
or benefits (all such plans are referred to herein as the “Severance Plans”)
and your agreement to the non-compete and non-solicitation restrictions stated
below.

 

Within 20 days of the execution of this Agreement, the Company will pay
you in a single lump sum $1,200,000. In consideration and exchange for this
payment you agree to waive your participation in the ICPs, cancel the
Termination Agreement and waive your right to participate in the Severance
Plans, all effective on the date payment is received. You also acknowledge and
agree that no conditions exist currently that would constitute a Constructive
Termination under the ICPs, that this Agreement does not constitute a
Constructive Termination under the ICPs and that you waive any right you may have
to declare a Constructive Termination under the ICPs.

 

Within 20 days of the execution of this Agreement, the Company will
also:

 

1.                                       Pay
you in a single lump sum $1,300,000 (the “Non-Compete
Advance”);

 

2.                                       Make
an additional Contribution Credit (the “Supplemental Contribution Credit”) to
your account under The Reader’s Digest Association, Inc. Executive Cash Balance
Plan (the “Executive Cash Balance Plan”) equal to $240,000; and

 

3.                                       Credit
you with 9.000 additional years of service for purposes of determining your
vesting under Section 4.2 of the Executive Cash Balance Plan (the “Supplemental
Service Credit”); provided, that such Supplemental Service Credit shall apply
only to your balance under the Executive Cash Balance Plan as determined
immediately following the

 

 

addition of the Supplemental Contribution Credit above together with
any Investment Adjustments (as such term is defined in the Executive Cash
Balance Plan) thereon.

 

In consideration and exchange for the Non-Compete Advance, the
Supplemental Contribution Credit and the Supplemental Service Credit, you
agree: (a) not to render any services at any time during the 24-month
period after your termination of employment with the Company and its affiliates
for any organization, or to engage, 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 non-compete restriction shall be
those set forth on Exhibit A hereto and (b) not to directly or
indirectly, solicit or hire any non-clerical employee of the Company or its
affiliates during the 12-month period after your termination of employment with
the Company; provided, however, the foregoing will not apply to
any individual hired as a result of such individual’s response to a general
solicitation (such as a newspaper, radio, television or internet advertisement
or by an independent employment agency) not specifically directed at such
individual. Should the Company determine that you are in breach of any aspect
of these non-compete and/or non-solicitation restrictions, you agree to repay
to the Company within 10 business days of receiving written notice from the
Company, the Non-Compete Advance, the Supplemental Contribution Credit and the
value of the Supplemental Service Credit (including the value of any Investment
Adjustments thereon), as determined by the Company in its discretion.

 

The Company believes that the payments and benefits made to you under this
Agreement will not result in the imposition of an excise tax under Section 4999
of the Internal Revenue Code of 1986, as amended (the “Code”) or the additional
income tax imposed under Section 409A of the Code. However, in the event that
an excise tax under Section 4999 of the Code is imposed on you based on the
payments and benefits made to you under this Agreement, the Company agrees to
provide you with a tax gross up equal to the tax gross up that would have been
provided had the payments and benefits been made pursuant to The Reader’s
Digest Association, Inc. 2001 Income Continuation Plan for Senior Management
under the same terms and conditions. In the event that any additional tax is
imposed on you under Section 409A of the Code, including any interest and
penalties related thereto, as a result of the payments and benefits made to you
under this Agreement, you shall be entitled to a full gross-up payment, on an
after-tax basis, with respect to such taxes, interest and penalties in
accordance with the terms of Exhibit B hereto.

 

The Company agrees to (i) reimburse you (within ten (10) days
following the Company’s receipt of an invoice from you) for any legal fees and
reasonable expenses incurred in the negotiation and documentation of this
Agreement and (ii) agrees to pay as incurred (within ten (10) days
following the Company’s receipt of an invoice from you), to the fullest extent
permitted by law, all legal fees and expenses that you may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, yourself or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by you about the amount of any payment
pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code.

 

Except as otherwise provided herein, this Agreement constitutes the
entire agreement between the parties relating to the subject matter hereof and
supersedes any and all prior agreements, or understandings, written or oral,
relating to the subject matter hereof, including, but not limited to,

 

2

 

the
ICPs, the Termination Agreement and the Severance Plans. The Company may withhold
from any payments under this Agreement all federal, state, local or other
applicable taxes as shall be required pursuant to any law or governmental
regulation or ruling. In the event of your death while any amounts are still
payable to you under this Agreement, the Company shall pay all such unpaid
amounts to your designated beneficiary or, if none has been designated, to your
estate.

 

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.

 

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.

 

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. The parties hereby agree and consent to exclusive
jurisdiction of any dispute under this Agreement in the federal or state courts
of Westchester County in New York State.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mary G. Berner

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mary
  G. Berner

  
	
   

  	
   

  	
  Title:

  	
  President
  and CEO

  
	
  Agreed
  to and accepted as of /I/, 2007

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael
  Geltzeiler

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael
  Geltzeiler

  	
   

  
	
   

  	
  Title:

  	
  SVP
  and Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
								

 

3

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