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Sample Business Contracts

Severance Agreement - Reader's Digest Association Inc. and Barbara J. Morgan

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                                   April 1, 1996

Mrs. Barbara J. Morgan
Senior Vice President and Editor-in-Chief,
  Books and Home Entertainment
The Reader's Digest Association, Inc.
Pleasantville, NY  10570-7000

Dear Barbara:

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 4/25/96:


Name:  Barbara J. Morgan
       Barbara J. Morgan