Exhibit 10.27

 

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THE READER’S DIGEST ASSOCIATION, INC.
READER’S DIGEST ROAD
PLEASANTVILLE, NY 10570-7000

 

MARY G. BERNER

 

 

 

TELEPHONE: (914) 244-5105

President and CEO

 

 

 

FAX: (914) 244-7555

 

 

 

 

mary_berner@rd.com

 

July 27, 2007

 

Jeffrey S. Spar

27 Boulder Ridge Road

Scarsdale, NY 10583

 

Dear Jeff:

 

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 March 28, 2003 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.

 

1.                                       The Company agrees to make a cash
payment to you of $500,000.00 within 10 business days of the execution of this
Agreement, and a cash payment to you of $800,000 on January 2, 2008
(collectively, “Payment Dates”). In consideration and exchange for these
payments you agree:

 

(a)                                  to waive your participation in the ICPs,
cancel the Termination Agreement and waive your right to participate in the
Severance Plans, all effective upon the execution of this Agreement,

 

(b)                                 should you decide to voluntarily terminate
your employment with the Company prior to January 2, 2009, you agree to provide
the Company with not less than 90 days advance written notice (“90-day Notice”)
of any such termination and you agree to devote your full-time, good faith
efforts to provide the Company with such transition assistance as it may
reasonably request during that notice period. Should the Company determine that
you have not complied with this 90-day Notice requirement, you agree to repay to
the Company in a single lump sum within 10 business days of receiving written
notice from the Company an amount equal to twenty five percent (25%) of the
payments actually made

 

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to you as of that date under this Agreement under this paragraph 1 as liquidated
damages.

 

(c)                                  You 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.

 

2.                                       In addition, the Company agrees to make
a cash payment to you of $300,000.00 within 10 business days of the execution of
this Agreement. In exchange for this payment 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 (the “Restricted Period”) 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, induce or hire
(or identify for the purpose of soliciting, inducing or hiring) any non-clerical
employee of the Company or its affiliates to be employed by, or to perform
services for, you or any person or entity with which you are associated
(including, but not limited to, due to your employment by, consultancy for,
equity interest in, or creditor relationship with such person or entity) or any
person or entity from which you receive direct or indirect compensation or fees
as a result of such solicitation, inducement or hire (or the identification for
solicitation, inducement or hire). Should the Company have reasonable cause to
believe and determine in good faith that you are in breach of any aspect of
these non-compete and/or non-solicitation restrictions at any time during the
Restricted Period, you agree to repay to the Company within 10 business days of
receiving written notice from the Company the $300,000.00 payment as liquidated
damages, which shall be the Company’s sole monetary remedy with respect to such
breach.

 

3.                                       Should you voluntarily terminate your
employment without Good Reason (as defined below) effective before any Payment
Date, or should you provide the 90-day Notice of such voluntary termination
prior to November 15, 2007, you acknowledge and agree that you will forfeit any
payment due with respect to any Payment Date occurring after such termination or
notice, as the case may be. In the event the Company terminates your employment
other than for Cause or you terminate your employment for Good Reason prior to
any Payment Date, payments not made to you as of your termination date with
respect to any subsequent Payment Date shall be paid to you in a lump sum
payment on your termination date. For purposes of this Agreement “Good Reason”
shall have the definition and procedures for determination as described in the
Termination Agreement, notwithstanding the cancellation of the Termination
Agreement under the terms of this Agreement “Cause” shall mean termination of
your employment occurring by reason of:

 

(a)                                  Your willful and continued failure to
perform substantially your duties for the Company (other than any such failure
resulting from incapacity due to physical or mental illness or following your
delivery of a notice of termination for Good Reason as defined in the
Termination Agreement), after written notice by the undersigned of this
Agreement and your failure

 

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to effectively cure the failure within 10 business days of delivery of such
notice;

 

(b)                                 Your conviction of, or plea of guilty or
nolo contendere to, a felony or another charge involving moral turpitude;

 

(c)                                  A material violation of any written
material Company policy, 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 Ethical, Legal and Business Conduct Policies

 

4.                                       The Company believes that the payments
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”). However, in the event that an excise tax under Section 4999 of the Code
is imposed on you based on the payments made to you under this Agreement (or any
payment you received from the Company as the result of the transaction involving
the Company which was consummated on March 2, 2007) , 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 been made pursuant to The Reader’s Digest
Association, Inc. 2001 Income Continuation Plan for Senior Management ( the
“2001 ICP”) under the same terms and conditions and for this purpose,
Section 5.9 of the 2001 ICP is specifically incorporated herein and made a part
of this Agreement by this reference.. In addition, the Company shall provide you
with (A) a gross-up payment in an amount equal to the amount of any interest and
excise tax that are imposed on you due to the application of
Section 409A(a)(1)(B) of the Internal Revenue Code of 1986, as amended, to any
payments to which you are entitled pursuant to this letter, and (B) an amount
equal to any income tax imposed as a result of such gross-up payment.

 

5.                                       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, 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 or termination because of your Disability while any amounts are still
payable to you under this Agreement, the Company shall pay all such unpaid
amounts to you or your designated beneficiary or, if none has been designated,
to your estate. For these purposes, “Disability” will be determined in
accordance with Internal Revenue Code Section 409A(a)(2)(C) and the regulations
and guidance issued thereunder.

 

6.                                       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.

 

7.                                       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.

 

8.                                       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

 

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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. .

 

9.                                       By execution of this Agreement on
behalf of the Company, the undersigned certifies and affirms that she has the
requisite authority to sign this Agreement on behalf of the Company and the
appropriate approvals necessary for its execution have been obtained from the
Company’s Board of Directors and/or its compensation committee (if such
committee is duly authorized by the Board of Directors to authorize such
agreements).

 

 

 

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 8/1, 2007

 

By:

/s/ Jeffrey S. Spar

 

 

 

 

Name:   Jeffrey S. Spar

 

 

 

 

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