Sample Business Contracts

Severance Agreement - Reader's Digest Association Inc. and James P. Schadt

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                                   August 10, 1997

Mr. James P. Schadt
Chairman and Chief Executive Officer
The Reader's Digest Association, Inc.
Pleasantville, NY 10570-7000

Dear Jim:

     As you know, you have entered into an agreement dated
April 1, 1996 with The Reader's Digest Association, Inc.
(the "Company") relating to payments and benefits that you
will receive in connection with a termination of your
employment with the Company under certain circumstances.
The April 1, 1996 Agreement has been modified and
supplemented by letter agreements dated June 18, 1997 and
July 10, 1997 and as so modified and supplemented is
referred to herein as the "Agreement".  The purpose of this
letter agreement is to further clarify and supplement the
terms and conditions of the Agreement and to provide for the
resignation by you of all your employment positions and
directorships with the Company.  In all other respects, the
Agreement is hereby ratified and confirmed in its entirety.
Unless otherwise defined herein, terms that are defined in
the Agreement shall have the same meanings when used in this
letter agreement.

     1.   You hereby resign from all employment positions
and directorships with the Company, its subsidiaries,
affiliates and related foundations and the Company hereby
accepts your resignation, effective as of Monday, August 11,
1997.  For all purposes relating to the termination of your
employment, whether pursuant to the Agreement or otherwise,
including, but not limited to, any severance, pension,
stock, stock option, compensation, benefits or similar
plans, your resignation shall be treated as a termination of
employment by the Company Without Cause.  You shall be paid
salary through August 10, 1997.  In addition, you shall be
entitled to a 100% joint and survivor life annuity with your
spouse as of the date hereof commencing at age 62 in the
amount of $300,000 per year (payable throughout the lifetime
of both you and that spouse) reduced by your annual
retirement benefits payable under The Reader's Digest
Association, Inc., Retirement Plan and the Excess Benefit
Retirement Plan of The Reader's Digest Association, Inc.
commencing at age 62 and converted to the form of a 100%
joint and survivor annuity.  The benefit provided herein
shall be in lieu of all benefits under The Reader's Digest
Executive Retirement Plan and in lieu of any benefits under
Section 4.1 or 4.2 of the Agreement.

     2.   You have reviewed the terms of the initial press
release respecting the termination of your employment.  The
Company agrees that it will not issue any disparaging
statements about you or your performance.

     3.   For the balance of the term of the Agreement
(i.e., through September 30, 2000), you will be entitled to
conduct your personal business affairs and search for new
employment, business opportunities and/or board engagements.
To assist you in connection therewith, and in full
satisfaction of your rights with respect to financial
counseling, car allowance, travel and entertainment
expenses, office accommodation, use of the Company's
apartment (which you are promptly relinquishing), use of the
Company's airplane or other property, and any country club
or similar membership, Company shall pay you a lump-sum,
within fifteen days after the date hereof, in the amount of

     4.   You shall be entitled to the following benefits:

          (a)  the right to host the Company's table, in
your name,(already paid for) for ten (10) guests at the
October, 1997, Norwalk Hospital Annual Gala and the
November, 1997, Stamford Symphony;

          (b)  the right to remove and retain, two (2) Dewey
paintings and photograph of Dobbs Ferry by the Detroit Photographic Company
currently in your office; provided, however, that you will
reimburse the Company to the extent the appraised value of
such artwork (as determined by an independent
appraiser selected by the Company) shall exceed

     5.   The Company shall match your charitable
contributions to Norwalk Hospital (on the basis of a $2.00
contribution by the Company for each $1.00 contribution made
by you) up to a maximum amount of $20,000 per year for the
balance of the term of the Agreement (i.e., through
September 30, 2000).

     6.   This is to confirm that, notwithstanding the
termination of your employment, your right to indemnify for
acts taken during the course of your employment with the
Company continues to the same extent as presently provided.

     7.   Upon expiration of the Severance Period, you will
become eligible to receive medical and dental benefits
equivalent to and upon the same terms (including payment of
employee and/or retiree premiums) that would have been
available to you under applicable Company plans had you
retired on the date hereof and been eligible to receive
benefits under all such plans.

     8.   You shall not be required to seek or obtain other
employment or in any other way mitigate damages as a
condition for receiving the compensation and benefits set
forth in the Agreement (as supplemented and modified hereby)
and any proceeds received by you from subsequent employment
shall not reduce or offset any such compensation or

     9.   The Agreement (as supplemented and modified
hereby) shall take precedence over and control in the event
of any conflict or ambiguity between the Agreement and any
of the Company's plan documents or program documents.

     10.  Any unvested securities or rights that you have
shall continue to vest during the Severance Period as if
your employment with the Company continued during that
period.  Notwithstanding the foregoing, this provisions
shall not require vesting of securities or rights, including
those issued under the Company's Key Employee Long Term
Incentive Plans, which by their terms will vest only upon
the satisfaction of performance criteria are satisfied or
such change in control occurs.  You shall have a period of
three years from the expiration of the Severance Period to
exercise any outstanding vested Company stock options or
vested stock appreciation rights or until expiration of the
term of the option or appreciation rights, if earlier.

     11.  The Company shall reimburse you for reasonable
legal expenses incurred in connection with the negotiation
of your resignation.  For purposes hereof, fees and expenses
of twenty five thousand dollars ($25,000) shall be
considered reasonable.

     The Agreement (as supplemented and modified hereby)
shall be governed 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.

                              /s/ JAMES E. PRESTON
                              James E. Preston

Agreed to and Accepted as of

August 11, 1997.

James P. Schadt