Sample Business Contracts

Severance Agreement - Reader's Digest Association Inc. and Martin Pearson

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                     READER'S DIGEST ROAD
                 PLEASANTVILLE, NY 10570-7000
                         August 1, 1997

Mr. Martin J. Pearson
15 River Road
Unit 213
Cos Cob, Connecticut  06807

Dear Martin:

     This letter serves to confirm the additional
understandings between The Reader's Digest Association, Inc.
(the "Company") and you regarding your separation from the
Company, effective as of June 30, 1997.  This letter
supplements a certain letter agreement between you and the
Company dated as of April 1, 1996 (the "Agreement").

     The Company will provide you with the following additional
benefits and payments (provided you execute the General Waiver
and Release of Claims form referred to in Section 8 of the

          1.   The Company will waive your fourth (4th) and fifth
(5th) year contributions (each payment of $20,200 to your
Supplemental Retirement Benefits Agreement dated as of June 8,
1994 (the "SRBA") and you will be deemed fully vested under the
SRBA, subject to and in accordance with its terms;

          2.   During the severance period, you will continue to
have the use of your company car while you remain in the U.S.
Upon return to Australia, and for the remaining months of your
severance period, you will receive a cash allowance of $1,100
which represents the cost of leasing your company car,
insurance and repairs.  You will be liable for any income tax
assessment on the car usage in the U.S. and the cash payment in

          3.   You will receive the following benefits in
connection with your personal relocation to Australia:

               a)   one way airfare to Australia, at the Company's expense,
                 for you and, if necessary, your spouse; and

               b)   tax preparation assistance to enable you to prepare your
                 personal United States and Australian tax returns for the
                 tax year in which you relocate to Australia.
              You acknowledge that the Company is under no
obligation to provide these relocation benefits to you.
Moreover, all of these benefits shall not be available to you
if your relocation occurs after the end of the Severance

               4.   In calculating your retirement benefits
under the Agreement, your "final average compensation" shall
also include Severance Payments made under the Agreement
otherwise calculated in accordance with the terms of the
applicable plans.

     In consideration for these benefits and payments, you
agree you will not during the Severance Period (as defined in
the Agreement), without the prior written consent of the Chief
Executive Officer, become a proprietor, director, partner or
employee of, or otherwise become connected with Time Warner,
Bertelsman and/or Rodale (or their affiliates) in the United
States, and/or Bertelsman, Time Warner and/or IMP (or their
affiliates) in Australia (other than as a stockholder with a
nonsubstantial interest in any such business).  You  also agree
that if during the Severance Period, you commit any criminal
act against the Company, or any act that would constitute Cause
as defined herein, or if you disclose any information regarded
as confidential and relating to the Company's business, or if
you solicit advertising clients against the interest of the
Company or solicit the Company's employees to work for a
competitor of the Company, or if you perform any act which is
substantially detrimental to the Company or its employees,
including but not limited to disparaging the Company, its
senior management or its products, all payments and benefits
and all rights under this letter agreement shall cease as of
the initial date of such conduct.  The determination of whether
such conduct has occurred shall be in the sole discretion of
the Chief Executive Officer with the advice of the Senior Vice
President, Human Resources and the General Counsel.  For
purposes of this paragraph, "Cause" shall mean improper
communication of confidential information obtained in the
course of employment, material violation of Company rules,
including but not limited to a material violation of the
Company's Proprietary and Confidential Information Policy or a
material violation of the Company's Code of Conduct if you had
continued to be employed by the Company.

     Please signify your agreement with the above by signing on
the line below and returning a copy of this agreement to me.

                              THE READER'S DIGEST
                              ASSOCIATION, INC.

                             By:/s/ Suzanne Pilnick
                              Suzanne Pilnick
                              Title:  Acting Senior Vice President,
                              Strategic Planning and Human

Agreed and Accepted:

Martin J. Pearson

Dated:  August 28, 1997