EXHIBIT 10.45






               THE READER'S DIGEST ASSOCIATION, INC.

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               Directors' Phantom Stock Option Plan
                       {Inactive since 1998}
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                         Table of Contents
                                                        Page
ARTICLE I    Purpose........................................1
ARTICLE II   Definitions....................................1
ARTICLE III  Phantom Stock Options..........................2
ARTICLE IV   General Provisions.............................4


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               THE READER'S DIGEST ASSOCIATION, INC.

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               Directors' Phantom Stock Option Plan

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                             ARTICLE I
                              Purpose

           The  purpose of this  Directors'  Phantom  Stock  Option
Plan (the  "Plan") is to enable The  Reader's  Digest  Association,
Inc.  (the  "Company")  to  offer  non-employee  directors  of  the
Company   phantom  stock  options  with  respect  to  the  Class  A
Nonvoting  Common  Stock  of  the  Company,   thereby   attracting,
retaining and rewarding non-employee  directors,  and strengthening
the mutuality of interests between  non-employee  directors and the
Company's stockholders.

                            ARTICLE II
                            Definitions

           For  purposes of this Plan,  the  following  terms shall
have the following meanings:

           2.1  "Board"  shall mean the Board of  Directors  of the
Company.

           2.2  "Common  Stock"  shall  mean the Class A  Nonvoting
Common Stock, $.01 par value per share, of the Company.

           2.3  "Exchange Act" shall mean the  Securities  Exchange
Act of 1934, as amended.

           2.4  "Fair  Market  Value"  shall mean,  as of any date,
the mean  between  the high and low sales  price on the  applicable
date,  or if no sales price is  available  for that date,  the mean
between  the  closing  bid and asked  prices  for that  date,  of a
share of Common Stock  (i) as  reported by the  principal  national
securities  exchange  in the  United  States  on  which  it is then
traded,  or  (ii) if  not  traded on any such  national  securities
exchange,  as quoted on an automated  quotation system sponsored by
the National  Association of Securities  Dealers,  or if the Common
Stock shall not have been  reported or quoted on that date,  on the
first day prior  thereto on which the Common  Stock was reported or
quoted.

           2.5  "Grant  Date"  shall  mean  the  date on  which  an
Option is granted.

           2.6  "Non-employee  Director"  shall mean a director  of
the  Company  who is not an  employee  of the Company or any of its
subsidiaries.

           2.7  "Option"  shall mean a phantom stock option granted
under  the  Plan.  An  Option  in  respect  of one  share of Common
Stock  shall  mean the right to  receive an amount in cash equal to
the  difference  between  (x) the  Fair Market  Value of a share of
Common  Stock as of the date the Option is  exercised in respect of
that  share,  and (y) the  Fair  Market  Value of a share of Common
Stock as of the Grant Date.

           2.8  "Participant"  shall mean a  Non-employee  Director
to whom an Option has been granted pursuant to the Plan.

           2.9  "Transfer"   shall   mean   anticipate,   alienate,
attach,  sell,  assign,  pledge,  encumber,   charge  or  otherwise
transfer.

                            ARTICLE III
                       Phantom Stock Options

           3.1  Grant.  Each  Non-employee  Director of the Company
shall  be  granted,   on  the  date  of  his  or  her  election  or
reelection  as a  Director  at  the  Company's  Annual  Meeting  of
Stockholders  each year,  an Option in  respect of 1,000  shares of
Common  Stock.  Each  Option  shall be  evidenced  by an  agreement
containing  other terms and  conditions not  inconsistent  with the
provisions  of  the  Plan  as  may  be  determined  by  the  Board;
provided,  however,  that  those  terms  shall not vary the  price,
amount or timing of  Options,  including  provisions  dealing  with
vesting, forfeiture and termination.

           3.2  Term.  The term of each  Option  shall be ten years
from the Grant Date.

           3.3  Exercise.  Except as  provided  in Section  3.5, an
Option may not be exercised  prior to the first  anniversary of the
Grant  Date and may not be  exercised  unless the  Participant  has
remained  a  Non-employee  Director  from the Grant  Date until the
date of  exercise.  An Option  may be  exercised  from time to time
after the  expiration  of the  one-year  period  referred to above,
provided  that the  aggregate  number of shares of Common  Stock in
respect of which an Option is exercised shall not exceed:

           (i)  after one (1) year,  but before the  expiration  of
two (2)  years  from the Grant  Date,  twenty-five  percent  of the
total number of shares in respect of which the Option is granted;

           (ii) after two (2) years,  but before the  expiration of
three (3) years  from the Grant  Date,  fifty  percent of the total
number of shares in respect of which the Option is granted;

           (iii)after  three (3) years,  but before the  expiration
of four (4) years  from the Grant  Date,  seventy-five  percent  of
the  total  number  of shares  in  respect  of which the  Option is
granted;

           (iv) after  four (4)  years  from the  Grant  Date,  one
hundred  percent of the total  number of shares in respect of which
the Option is granted.

           3.4  Termination  by Death.  If a Participant  shall die
holding  an  Option  that has not  expired  and has not been  fully
exercised,   his  or  her  executors,   administrators,   heirs  or
distributees,  as the case may be,  may,  at any  time  within  one
year  after the date of death  (but in no event  after  the  Option
has  expired  under the  provisions  of Section 3.2 above or ceased
to be  exercisable  under the  provisions  of Section  3.5  below),
exercise  the  Option  with  respect  to any shares as to which the
decedent  could  have  exercised  the  Option at the time of his or
her death.

           3.5  Other  Termination.  If a  Participant  shall cease
to be a  Non-employee  Director  for any reason  other than  death,
any then  outstanding  Options shall be exercisable with respect to
one  hundred  percent  of the  number of shares in respect of which
the  Option  was  granted  and as to  which  it has  not  yet  been
exercised.  Each Option  shall remain  exercisable  for a period of
three  years  from  the  date  the  Participant   ceased  to  be  a
Non-employee  Director  (but  in no  event  after  the  Option  has
expired under the provisions of Section 3.2 above).

           3.6  Method  of  Exercise  of  Option.  Exercise  of  an
Option,  in  whole  or in  part  as to any  portion  that  is  then
exercisable,  shall be made by  submitting  to the Company  written
notice of exercise in the form of the exercise  letter  provided by
the Company with the agreement  evidencing  the Option,  specifying
the  number  of  shares in  respect  of which  the  Option is to be
exercised.  The  exercise  of  an  Option  shall  be  deemed  to be
effective on the first  business day on which the Company  receives
notice  of  exercise  at the  principal  corporate  offices  of the
Company  in  accordance  with  the  procedures  established  by the
Company.  All  applicable  withholding  taxes  shall be deducted by
the Company from the amount of cash payable upon exercise.

           3.7  Payment.   Upon  the   exercise   of  an  Option  a
Participant  shall  be  entitled  to  receive,  for  each  share of
Common  Stock as to which  the  Option is  exercised,  an amount in
cash equal in value to the excess of (x) the Fair  Market  Value of
one  share of  Common  Stock on the date the  Option  is  exercised
over (y) the Fair  Market  Value of one  share of  Common  Stock on
the Grant Date.  Payment  shall be made within three  business days
following the date the exercise becomes effective.

           3.8  Limitations  on Amendment.  To the extent  required
so  that  the  grant  of  Options  will  be  deemed  to  constitute
"formula  awards"  pursuant  to  Rule  16b-3(c)(2)(ii)   under  the
Exchange  Act,  the  provisions  in this  Article III and the other
provisions  of the Plan shall not be  amended  more than once every
six months.

                            ARTICLE IV
                        General Provisions

           4.1  Administration.  The Plan shall be  administered by
the Board.  The Board  shall  have all the  powers  vested in it by
the  terms  of  the  Plan,  including  the  authority  (within  the
limitations  described  in the Plan) to  prescribe  the form of the
agreement  embodying  awards of Options.  The Board shall,  subject
to the  provisions  of the  Plan,  have the power to  construe  the
Plan,  to determine  all  questions  arising  under the Plan and to
adopt and amend rules and  regulations  for the  administration  of
the Plan as it may deem  desirable.  Any  decisions of the Board in
the  administration  of the Plan  shall be  final  and  conclusive.
The Board may act only by a  majority  of its  members  in  office,
except  that the  members  of the  Board may  authorize  any one of
their number or the  Secretary or any other  officer of the Company
to execute and deliver documents on behalf of the Board.

           4.2  Changes  in  Capital  Stock.  In the  event  of any
change in the  capital  stock of the Company by reason of any stock
dividend  or  distribution,  stock  split or reverse  stock  split,
recapitalization,     reorganization,     merger,    consolidation,
split-up,  combination  or  exchange of shares,  distribution  with
respect to its  outstanding  Common  Stock of capital  stock  other
than  Common  Stock,   reclassification   of  its  capital   stock,
issuance of warrants  or options to  purchase  any Common  Stock or
securities  convertible  into Common Stock,  or rights  offering to
purchase  capital stock at a price below fair market value,  or any
similar  change  affecting the capital  stock of the Company,  then
the  number  of  shares  of Common  Stock  subject  to  outstanding
Options,  the Fair Market  Value of shares  subject to  outstanding
Options  and the  number  of  shares of  Common  Stock  subject  to
Options to be awarded  thereafter  pursuant to Section 3.1 shall be
appropriately  adjusted  consistent  with the change in such manner
as the Board may deem  equitable  to prevent  substantial  dilution
or  enlargement  of  the  rights  granted  to,  or  available  for,
Participants,  and any  adjustment  determined by the Board in good
faith  shall be  binding  and  conclusive  on the  Company  and all
Participants    and    their    respective    heirs,     executors,
administrators, successors and assigns.

           4.3  Termination  or  Amendment.  Subject to Section 3.8
but  notwithstanding  any other  provision  of the Plan,  the Board
may at any  time,  and  from  time to time,  amend,  in whole or in
part,  any or all of the  provisions  of the  Plan  (including  any
amendment  deemed  necessary  to ensure that the Company may comply
with any  regulatory  requirement  referred  to in Section  4.8, or
suspend or  terminate  it  entirely,  retroactively  or  otherwise;
provided,  however,  that,  unless  otherwise  required by law, the
rights of a  Participant  with respect to Options  granted prior to
any  amendment,  suspension  or  termination,  may not be  impaired
without the consent of the Participant.

           4.4  Unfunded  Plan.  The Plan is intended to constitute
an "unfunded"  plan for incentive and deferred  compensation.  With
respect to any payments as to which a  Participant  has a fixed and
vested  interest  but  which are not yet made to a  Participant  by
the  Company,  no  Participant  shall  have  any  rights  that  are
greater than those of a general creditor of the Company.

           4.5  Other  Plans.  Nothing  contained in the Plan shall
prevent the Board from adopting  other or  additional  compensation
arrangements,  subject to  shareholder  approval if  required;  and
these   arrangements   may  be  either   generally   applicable  or
applicable only in specific cases.

           4.6  Withholding  of Taxes.  The Company  shall have the
right to deduct from any  payment to be made  pursuant to the Plan,
or to otherwise  require,  as a condition to any payment to be made
pursuant to the Plan,  payment by the  Participant of, any Federal,
state or local taxes required by law to be withheld.

           4.7  No  Assignment   of  Benefits.   No  Option  shall,
except as  otherwise  specifically  provided by law,  and except as
provided  in  Section  3.4 upon  the  death  of a  Participant,  be
Transferable  in any  manner,  and  any  attempt  to  Transfer  any
benefit  shall be void,  and any benefit shall not in any manner be
liable  for  or  subject  to  the  debts,  contracts,  liabilities,
engagements  or torts of any person who shall be  entitled  to such
benefit,  nor shall it be subject to  attachment  or legal  process
for or against that person.

           4.8  Interpretation.      Following     the     required
registration  of any equity  security  of the  Company  pursuant to
Section 12 of the Exchange Act:

                (a)  It is  intended  that all  Options be excluded
from the  definition  of  derivative  securities  in Rule  16a-1(c)
under  the  Exchange  Act  and  the  Board  shall   interpret   and
administer  the  provisions of the Plan or any  agreement  pursuant
thereto  in  a  manner   consistent   therewith.   Any   provisions
inconsistent  with this  interpretation  shall be  inoperative  and
shall not affect the validity of the Plan.

                (b)  All  Options   are   intended  to  qualify  as
formula  awards under Rule  16b-3(c)(2)(ii)  under the Exchange Act
(thereby  preserving  the  disinterested   status  of  Non-employee
Directors  receiving  Options)  and the Board shall  interpret  and
administer  the  provisions of the Plan or any  agreement  pursuant
thereto  in  a  manner   consistent   therewith.   Any   provisions
inconsistent  with the foregoing  intent shall be  inoperative  and
shall not affect the validity of the Plan.

           4.9  Governing  Law.  The  Plan  and  actions  taken  in
connection  with  the Plan  shall  be  governed  and  construed  in
accordance  with the laws of the State of New York  (regardless  of
the law that  might  otherwise  govern  under  applicable  New York
principles of conflict of laws).

           4.10 Construction.  Wherever  any  words are used in the
Plan in the  masculine  gender  they shall be  construed  as though
they  were  also used in the  feminine  gender  in all cases  where
they  would  so  apply,  and  wherever  any  words  are used in the
singular  form they  shall be  construed  as though  they were also
used in the plural form in all cases where they would so apply.

           4.11 Liability.  No member of the Board and no  employee
of  the  Company   shall  be  liable  for  any  act  or  action  in
connection  with the Plan,  whether of omission or  commission,  by
any other  member  or  employee  or by any agent to whom  duties in
connection   with  the   administration   of  the  Plan  have  been
delegated  or,  except in  circumstances  involving  his bad faith,
gross  negligence  or fraud,  for  anything  done or  omitted to be
done by himself.

           4.12 Other  Benefits.  No  payment  under the Plan shall
be deemed  compensation  for purposes of computing  benefits  under
any  retirement  plan of the Company nor affect any benefits  under
any other  benefit plan now or  subsequently  in effect under which
the  availability  or amount of benefits is related to the level of
compensation.

           4.13 Costs.  The   Company   shall  bear  all   expenses
incurred in administering the Plan.

           4.14 Effective  Date of  Plan.  The  Plan  shall  become
effective  upon the date  specified by the Board in its  resolution
adopting the Plan.

           4.15 Term of Plan.  No  Option  shall be  granted  on or
after the tenth  anniversary  of the date the Plan is adopted,  but
Options  granted prior to the tenth  anniversary  may extend beyond
that date.