Document:

Exhibit 10.14

 

EXECUTION COPY

 

CONTRIBUTION AGREEMENT (this “Agreement”) dated as of March 2,
2007, is made by and between RDA Holding Co., a Delaware Company (“RDA
Holdco”), and The Reader’s Association, Inc., a Delaware
corporation (“Reader’s Digest”).

 

WHEREAS,
prior to the closing under the RDA Merger Agreement
(as defined below), pursuant to the Share Exchange Agreement dated as of March 2, 2007,
by and between RDA Holdco and 1302791 Alberta ULC, an Alberta unlimited
liability corporation (“Canadian Co.”), RDA Holdco. transferred all the
outstanding shares of Doctor Acquisition Co. to Canadian Co., and Canadian Co.
issued shares of common stock of Canadian Co. to RDA Holdco, resulting in RDA
Holdco directly owning all the outstanding common stock of Canadian Co. and
Canadian Co. directly owning all the outstanding common stock of Doctor
Acquisition Co.

 

WHEREAS,
pursuant to the Agreement and Plan of Merger, dated as of November 16, 2006,
among RDA Holdco (formerly known as Doctor Acquisition Holding Co.), Doctor
Acquisition Co. and Reader’s Digest (the “RDA Merger Agreement”), and
pursuant to the filing of a certificate of merger with the Secretary of State
of the State of Delaware on the date hereof, Canadian Co. became the direct
owner of all of the common stock, par value $1.00 per share, of Reader’s
Digest.

 

WHEREAS,
pursuant to the Agreement and Plan of Merger, dated as of January 23,
2007, among RDA Holdco, WRC Acquisition Co. and WRC Media Inc. (“WRC Media”),
and pursuant to the filing of a certificate of merger with the Secretary of
State of the State of Delaware on the date hereof, RDA Holdco became the direct
owner of all of the common stock, par value $1.00 per share, of WRC Media.

 

WHEREAS,
pursuant to the Stock Acquisition Agreement, dated as of January 23, 2007,
among RDA Holdco, Direct Holdings U.S. Corp. (“DH U.S. Corp.”) and each
of the members of Direct Holdings Worldwide L.L.C., RDA Holdco became the
direct owner of all of the common stock, par value $0.01 per share, of DH U.S.
Corp.

 

WHEREAS,
after the closing under the RDA Merger Agreement, Canadian Co. distributed all
the outstanding shares of common stock of Reader’s Digest to RDA Holdco as a
return of capital under Canadian corporate law, resulting in RDA Holdco
directly owning all the outstanding shares of common stock of Reader’s Digest.

 

WHEREAS,
after the closing under the RDA Merger Agreement and
the distribution by Canadian Co. of all the outstanding shares of common stock
of Reader’s Digest to RDA Holdco as a return of capital, pursuant to the Share
Exchange Agreement dated as of March 2, 2007, by and between RDA
Holdco and Reader’s Digest, RDA Holdco transferred all the outstanding common
stock of Canadian Co. to Reader’s Digest, and Reader’s Digest issued additional
shares of common stock of Reader’s Digest to RDA Holdco.

 

 

WHEREAS,
the board of directors of RDA Holdco, as in place after giving effect to the
agreements listed above, has determined that it is advisable and in the best
interests of RDA Holdco that RDA Holdco make a contribution of all of the
common stock of each of DH U.S. Corp. and WRC Media to Reader’s Digest,
immediately after RDA Holdco’s acquisition of such stock pursuant to the
agreements listed above.

 

NOW THEREFORE,
the parties hereto, intending to be legally bound, agree as follows:

 

Contribution.  RDA Holdco hereby transfers, conveys, assigns
and contributes to Reader’s Digest, and Reader’s Digest hereby accepts and
receives, all of the common stock of each of DH U.S. Corp. and WRC Media.

 

Additional
Actions.  Each
of RDA Holdco and Reader’s Digest agrees to execute and deliver all additional
documents and to do all other acts reasonably necessary to more fully implement
or evidence the transactions contemplated by this Agreement.

 

Term.  This Agreement shall become effective at such
time as the Effective Time (as defined under the RDA Merger Agreement) occurs.

 

Binding
Effect; Benefits. 
This Agreement shall be binding upon and inure to the benefit of the
parties to this Agreement and their respective successors and permitted
assignees.  Nothing in this Agreement,
express or implied, is intended or shall be construed to give any person other
than the parties to this Agreement any right, remedy or claim under or in respect
of any agreement or any provision contained herein.  This Agreement constitutes the entire
agreement and understanding between the parties hereto relating to the subject
matter hereof.

 

Amendments and
Waivers.  The
terms and provisions of this Agreement may be amended, waived, modified or terminated
only with the written consent of each of RDA Holdco and Reader’s Digest.

 

Governing Law.  This Assignment shall be governed by the laws
of the State of New York, without regard to the conflict of laws
principles of such State.

 

Severability.  If one or more of the provisions of this
Agreement shall for any reason whatsoever be held invalid or unenforceable,
such provisions shall be deemed severable from the remaining covenants,
agreements and provisions of this Agreement and such invalidity or unenforceability
shall in no way affect the validity or enforceability of such remaining
provisions or the rights of any parties hereto.

 

Assignment.  No party to this Agreement may assign this
Agreement or any of its rights, powers, duties or obligations hereunder without
the prior written consent of the other party, which consent shall not be
unreasonably withheld.

 

 

Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.

 

[Remainder of page intentionally left blank]

 

 

IN WITNESS
WHEREOF, the undersigned, intending to be legally bound, have executed this
Agreement as of the date first written above.

 

 

	
   

  	
  RDA HOLDING
  CO.,

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:
  Christopher Minnetian

  
	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE READER’S
  DIGEST ASSOCIATION, INC.,

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:Exhibit 10.15

 

EXECUTION COPY

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (the “Agreement”) dated as of February 1, 2008 (the “Restatement
Date”), between The Reader’s Digest Association, Inc., a Delaware
corporation (the “Company”), and Mary G. Berner (“Executive”).

 

WHEREAS, the Company and the
Executive entered into an Employment Agreement as to the terms of her
continuing employment dated as of March 1, 2007 (the “Initial Agreement”);

 

WHEREAS, the Company and the
Executive desire to enter into the Agreement to bring the Initial Agreement
into compliance with Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), and the regulations and Treasury guidance
thereunder as in effect from time to time (collectively hereinafter, “Section 409A”);

 

WHEREAS, except as otherwise
expressly provided herein, this Agreement shall supersede any prior written
agreement entered into between the Executive and the Company prior to the
Restatement Date with respect to the subject matter hereof, including, without
limitation, the Initial Agreement; and

 

WHEREAS the Company desires to
continue to employ Executive as its Chief Executive Officer and Executive
continues to be willing to serve the Company in such capacity for the period
and upon such other terms and conditions of this Agreement.

 

NOW, THEREFORE, in
consideration of the mutual agreements, provisions and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
set forth below:

 

1.  Term.  (a)  Duration.  The term of Executive’s employment under this
Agreement was effective as of the consummation of the merger of Doctor
Acquisition Co., a Delaware corporation, with the Company on March 2, 2007
(the “Effective Date”), and shall continue until the fifth anniversary
of the Effective Date (the “Expiration Date”).  On the Expiration Date, and on each
subsequent anniversary of the Expiration Date, the term of Executive’s
employment under this Agreement shall be extended for one additional year
unless either party provides written notice to the other party at least 60 days
prior to the Expiration Date (or any such anniversary, as applicable) that
Executive’s employment hereunder shall not be so extended; provided, however,
that Executive’s employment under this Agreement may be terminated at any time
pursuant to the provisions of Section 4. 
The period of time from the Effective Date through the termination of
Executive’s employment under this Agreement is herein referred to as the “Term.”

 

(b)  No Obligation.  The parties agree and acknowledge that
neither the Company nor Executive has an obligation to extend the Term or to
continue employment following the Expiration Date, and each party expressly
acknowledges that no promises or understandings to the contrary have been made
or reached.  The parties also agree and
acknowledge that, should Executive and the Company choose to continue Executive’s
employment for any period of time 

 

 

following the Expiration Date
without extending the term of Executive’s employment under this Agreement or
entering into a new written employment agreement, Executive’s employment with
the Company shall be “at will,” such that the Company may terminate Executive’s
employment at any time, with or without reason and with or without notice, and
Executive may resign at any time, with or without reason and with or without
notice.

 

(c)  Definitions.  For purposes of this Agreement, the following
terms, as used herein, shall have the definitions set forth below.

 

“Affiliate(s)” means, with respect to
any specified Person, any other Person that directly or indirectly, through one
or more intermediaries, Controls, is Controlled by, or is under common Control
with, such specified Person, provided that, in any event, any business
in which the Company has any direct or indirect ownership interest shall be
treated as an Affiliate of the Company.

 

“Control” (including, with correlative
meanings, the terms “Controlled by” and “under common Control with”),
as used with respect to any Person, means the direct or indirect possession of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.

 

“Limited Affiliate(s)”
means, with respect to any specified Person, any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
with respect to Persons in the publishing or media business, is under common
Control with, such specified Person, provided that, in any event, any
business in which the Company has any direct or indirect ownership interest
shall be treated as an Affiliate of the Company.

 

“Person” means any individual, firm,
corporation, partnership, limited liability company, trust, joint venture,
association, governmental entity, unincorporated entity or other entity.

 

2.  Duties
and Responsibilities.  (a)  During
the Term, Executive agrees to be employed and devote substantially all of
Executive’s business time, attention and efforts to the Company and the
promotion of its interests and the performance of Executive’s duties and
responsibilities hereunder, upon the terms and conditions of this
Agreement.  Executive shall render
Executive’s services hereunder as Chief Executive Officer of the Company, with
the duties, responsibilities and authority commensurate with Executive’s
status, including any duties and responsibilities as directed from time to time
by the Board of Directors of the Company (the “Board”) consistent with
Executive’s position hereunder. 
Executive shall report to the Board. 
Executive acknowledges that the Board is currently comprised of at least
a majority of directors who are selected or designated by Ripplewood Holdings
L.L.C. or one of its Affiliates (collectively, “Ripplewood”).  As of the Effective Date and during the Term
while the Company is not publicly traded, Ripplewood shall cause Executive to
be appointed or elected (and re-elected, as applicable) as a member of the
Board.

 

2

 

(b)  Place of
Employment; Business Travel.  During
the Term, Executive’s principal place of employment shall be based initially at
the Company’s Pleasantville, New York office or in New York, New York, as
determined by the Board, consistent with the needs of the Company and as
required in connection with the performance of Executive’s duties and
responsibilities hereunder.  Executive
acknowledges that Executive’s duties and responsibilities shall require
Executive to travel on business to the extent reasonably necessary to fully
perform Executive’s duties and responsibilities hereunder.

 

(c)  Board Membership;
No Conflict.   During the Term,
Executive shall not be permitted to be a member of the board of directors of any
for-profit company without the consent of the Company (such consent not to be
unreasonably withheld) (for all purposes under this Agreement, any required
consent of the Company shall be evidenced by the written approval of the
Chairman of the Board), provided that (i) Executive may serve on
the board of directors of any other portfolio company in which Ripplewood has
any ownership interest; (ii) Executive may continue to serve on the boards
of directors listed on Exhibit A attached hereto and Executive may
serve, without approval, on the boards of directors of not-for-profit entities;
provided that such activities do not interfere with the performance of
the Executive’s duties and responsibilities hereunder.

 

3.  Compensation
and Related Matters.  (a)   Base Salary.  During the Term, for all services rendered
under this Agreement, Executive shall receive an aggregate annual base salary (“Base
Salary”) at an initial rate of $500,000, payable in accordance with the
Company’s applicable payroll practices. 
Base Salary shall be subject to review by the Board for increases, but
not decrease, in its sole discretion and references in this Agreement to “Base
Salary” shall be deemed to refer to the most recently effective annual base
salary rate.

 

(b)  Annual Bonus.  During the Term, for each fiscal year,
Executive shall be paid a guaranteed annual bonus of $500,000 (the “Guaranteed
Bonus”).  In addition, Executive
shall be eligible to earn an annual performance bonus in an amount up to 400%
of Base Salary based on performance against specified objective performance
criteria as set forth on Exhibit B hereto (the “Annual Bonus”).  The Guaranteed Bonus, and any Annual Bonus
that Executive shall actually become entitled to receive hereunder, will be
payable by the Company at such time and in such manner that bonuses are paid to
other senior executives of the Company, but in no event later than the end of
the calendar year in which the fiscal year for which such bonus is earned ends.  Nothing herein to the contrary, Executive
shall be entitled to an Annual Bonus for the fiscal year ending June 30,
2007 prorated from November 1, 2006, which Annual Bonus shall be paid in
calendar year 2007.  Executive
acknowledges that this payment has been made.

 

(c)  Benefits and
Perquisites.  During the Term,
Executive shall be entitled to participate in the benefit and perquisite plans
and programs, commensurate with Executive’s position, that are established by
the Company from time to time for executive employees generally, subject to the
terms and conditions of such plans.  Executive shall also be entitled to the use of
a car service when traveling between New York, NY and Pleasantville, NY.  All amounts payable to Executive under this Section 3(c) shall
be reimbursed as soon as practicable after Executive incurs such expense and
submits documentation thereof (which shall be submitted within ninety (90) days
of the incurrence of the expense), but, to the extent taxable income to
Executive, in no event later than the “Short-Term Deferral Date” (as defined
below).  

 

3

 

The “Short-Term Deferral Date”
shall mean, with respect to any fee or expense, the 15th day of the third month
following the later of the end of the calendar year or the end of the Company’s
fiscal year in which the fee or expense is incurred.

 

(d)  Vacation.  During the Term, Executive shall be entitled
to paid vacation in accordance with the Company’s vacation policies applicable
to senior executives of the Company, but in no event less than four (4) weeks
per year.

 

(e)  Business Expense
Reimbursements.  During the Term, the
Company shall promptly reimburse Executive for Executive’s reasonable business
expenses incurred in connection with performing Executive’s duties hereunder in
accordance with its then-prevailing policies and procedures for expense
reimbursement, which shall provide for travel and entertainment at a level
commensurate with Executive’s position. 
In addition to the foregoing, Executive shall be entitled to reimbursement
for the use of a car service when traveling between New York, NY and
Pleasantville, NY.  All amounts payable
to Executive under this Section 3(e) shall be reimbursed as soon as
practicable after Executive incurs such expense and submits documentation
thereof (which shall be submitted within ninety (90) days of the incurrence of
the expense), but, to the extent taxable income to Executive, in no event later
than the Short-Term Deferral Date.

 

(f)  Stock Option.  Promptly following the Effective Date,
Executive shall be granted an option to purchase 3% of the outstanding shares
of common stock of RDA Holding Co. (“Common Stock”) at an exercise price
equal to the fair market value on the date of grant (the “Stock Option”),
pursuant to the Nonqualified Stock Option Agreement the form of which is
attached hereto as Exhibit C (with such changes thereto as mutually
agreed by the parties).  The parties
agree that the Stock Option is not intended to qualify as an “incentive stock
option” within the meaning of Section 422 of the Code.

 

(g)  Restricted Stock
Units. Promptly following the Effective Date, Executive shall be granted restricted
stock units (“Restricted Stock Units”) with an initial value of $2
million, which will vest and pay out in accordance with the terms of the
Restricted Stock Unit Agreement the form of which is attached hereto as Exhibit D
(with such changes thereto as mutually agreed by the parties).

 

(h)  Co-investment.  Executive shall be entitled to co-invest on a
carry-free basis side-by-side with Ripplewood in shares of Common Stock in an
amount up to $4.5 million, of which 50% shall be funded with third-party
leverage guaranteed by the Company.

 

(i)  Legal Fees.  The Company shall pay all reasonable
attorneys’ fees and disbursements incurred by Executive prior to the expiration
of the Term in connection with the negotiation of (i) this Agreement, and (ii) the
negotiation of any other agreements documenting Executive’s initial equity
arrangements with the Company and concomitant revisions of this Agreement.  Any reimbursement pursuant to this Section 3(i) shall
be paid to Executive promptly and in no event later than the Short-Term
Deferral Date.

 

4

 

4.  Separation
from Service with the Company.

 

(a)  Death or
Disability.

 

(i)  Executive’s
employment shall automatically terminate upon Executive’s death.  The Company may terminate Executive’s
employment hereunder in the event of Executive’s “Disability” (as
defined below) upon 30 days’ written notice to Executive.  In the event of a termination of Executive’s
employment hereunder by reason of death or by reason of Disability, the Company
shall pay to Executive or her estate, as applicable, any accrued but unpaid
Base Salary, accrued but unused vacation time, unreimbursed business expenses,
and unpaid Annual Bonus for any completed fiscal year prior to the year of
termination, and Executive or her estate shall be entitled to receive employee
benefits pursuant to the terms of the benefit plans and programs applicable to
terminated employees (collectively, the “Accrued Rights”).  The Accrued Rights shall be payable on their
normal payment dates; provided that accrued but unused vacation time
shall be paid within 30 days following the date of termination of Executive’s
employment.  In addition, Executive shall
be entitled to a pro-rata portion of the Annual Bonus for the fiscal year of
termination based on actual results of the Company, which amount shall be
calculated based upon a formula, the denominator of which shall be 365 and the
numerator of which shall be the number of days during the fiscal year during
which Executive was employed by the Company, and shall be paid at such time as
annual bonuses are ordinarily paid to other senior executives of the Company in
respect of the fiscal year in which Executive’s termination occurs, but in no
event later than the end of the calendar year in which such fiscal year ends (the
“Pro-Rata Bonus”).

 

(ii)  For purposes of this
Agreement, “Disability” means Executive has been physically or mentally
incapable for 6 consecutive months to perform her material duties
hereunder.  Any question as to the
existence of the Disability of Executive as to which the Company and Executive
shall not agree shall be determined in writing by a qualified independent
physician mutually acceptable to Executive and the Company (and if Executive
and the Company cannot agree as to a qualified independent physician, each
shall appoint a physician and those two physicians shall select a third
physician who shall make such determination in writing, which shall be final
and conclusive for all purposes of this Agreement).  In connection therewith, Executive agrees to
submit to any medical examination(s) as may be reasonably requested by the
Company for such purpose.

 

(b)   By the Company for Cause or By Executive
Without Good Reason.

 

(i)  The Company may
terminate Executive’s employment hereunder for “Cause” (as defined below) at
any time upon 30 days’ written notice to Executive and Executive may terminate
her employment hereunder without “Good Reason” (as defined below) at any time
upon 30 days’ written notice to the Company. 
In the event the Company terminates Executive’s employment hereunder for
Cause or Executive terminates her employment hereunder without Good Reason,
Executive shall be entitled to her Accrued Rights and the Company shall have no
further obligations to Executive under this Agreement.  The Accrued Rights shall be payable on 

 

5

 

their normal payment dates;
provided that accrued but unused vacation time shall be paid within 30 days
following the date of termination of Executive’s employment.

 

(ii)  For purposes of this
Agreement, “Cause” means:  (A) Executive’s
willful failure to substantially perform Executive’s duties hereunder (other
than due to physical or mental illness) after written notice of such failure to
Executive, (B) Executive’s conviction of, or plea of guilty or nolo
contendere to a felony (or the equivalent of a felony in a jurisdiction
other than the United States) other than, in any case, vicarious liability or
traffic violations, (C) Executive’s willful material breach of Sections 6,
7, or 9 hereof that, to the extent curable, is uncured by Executive promptly following
receipt of written notice given by the Company of such breach, (D) Executive’s
willful material violation of the Company’s written policies of a material
nature that has a detrimental impact on the Company and that, to the extent
curable, is uncured by Executive promptly following receipt of written notice given
by the Company of such breach; (E) Executive’s fraud or embezzlement with
respect to the Company; (F) Executive’s 
misappropriation or misuse of funds or property belonging to the Company
that is done in bad faith and is more than de minimis in nature; (F) Executive’s
use of illegal drugs that interferes with the performance of Executive’s duties
hereunder; or (G) Executive’s gross misconduct, whether or not done in
connection with employment, other than an action done in the good faith belief
that it was in the best interests of the Company, that materially adversely
affects the business or reputation of the Company, its subsidiaries or
Affiliates.

 

(iii)  For purposes of
this Agreement, “Good Reason” means (A) any diminution in Executive’s
title or position or a material diminution in Executive’s duties, authorities
or responsibilities (excluding for this purpose an insubstantial or inadvertent
action taken in good faith and which is remedied by the Company promptly after
receipt of notice thereof given by Executive); (B) the assignment to
Executive of duties inconsistent with her position (excluding for this purpose
an insubstantial or inadvertent action taken in good faith and which is remedied
by the Company promptly after receipt of notice thereof given by Executive); (C) any
material breach by the Company of this Agreement, any Exhibit hereto or
any other agreement or letter executed between the Company and the Executive
simultaneously with or following the date of this Agreement that specifically
provides that such agreement or letter is intended to modify or supplement this
Agreement, in each case that, to the extent curable, is uncured by the Company
promptly following receipt of written notice thereof from Executive; (D) any
reduction of Executive’s Base Salary, Guaranteed Bonus or Annual Bonus
opportunity; (E) the transfer or relocation of Executive’s principal place
of employment to a location further in miles and/or travel time from New York,
New York than is Pleasantville, New York; (F) any failure to re-elect
Executive to the Board if the Company is not public, or to nominate Executive
for election to the Board if the Company is public, or the removal of Executive
from the Board other than for cause in accordance with the Company’s by-laws or
in connection with a termination for “Cause” under the terms of this agreement;
or (G) the failure of the Company to obtain the assumption of this
Agreement by any person, firm, corporation or other business entity which at
any time, whether by purchase, merger or otherwise, directly or indirectly
acquires all or substantially all of the assets or business of the Company and
the failure to deliver a copy of the document effecting such assumption to the
Executive upon Executive’s written request.

 

(c)  By the Company
Other Than for Cause or by Executive for Good Reason.  The Company may terminate Executive’s
employment hereunder other than for Cause (and other 

 

6

 

than due to Disability) at any
time upon thirty (30) days’ advance written notice to Executive and Executive
may terminate her employment hereunder at any time upon thirty (30) days’
advance written notice to the Company. 
In the event of a termination of Executive’s employment hereunder by the
Company other than for Cause or by Executive for Good Reason, Executive shall
be entitled to her Accrued Rights (payable on their normal payment dates;
provided that accrued but unused vacation time shall be paid within thirty (30)
days following the date of termination of Executive’s employment) plus the
following benefits (collectively, the “Separation Benefits”):  (i) a severance payment equal to two
times the sum of (A) Executive’s then current Base Salary and (B) the
Guaranteed Bonus, which amount shall be paid, subject to the provisions of Section 16
hereof, in a lump-sum on the 53rd day following the date of termination; (ii) a
Pro-Rata Bonus, payable at such time as annual bonuses are ordinarily paid to
other senior executives of the Company in respect of the fiscal year in which
Executive’s termination occurs, but in no event later than the end of the
calendar year in which such fiscal year ends; (iii) continuation of any
fully insured health, dental and vision insurance benefits and any life
insurance benefits for Executive and her dependents, for twelve (12) months
following termination of employment (at a cost no less favorable than that
applicable to other participants in the Company’s benefit plans during such
time); (iv) subject to the provisions of Section 16 hereof, monthly
payments to Executive of the difference between Executive’s share of the
monthly COBRA premiums for any fully or partially self-funded health, dental
and vision plan coverage provided by the Company and the active employee
monthly contribution therefor, for twelve (12) months following termination of
employment (provided that any such payments otherwise payable to Executive
within the first 52 days following such termination shall not be paid on the
otherwise scheduled payment date but shall instead accumulate and be paid on
the 53rd day following the date of termination); (v) an additional twelve
(12) months of vesting credit with respect to the Stock Option.  Notwithstanding the foregoing, unless, on or
prior to the 52nd day following the date of termination of employment,
Executive shall have signed the Release of Claims in the form attached hereto
as Exhibit E and such Release of Claims shall have become effective
in accordance with its terms, (w) no payment shall be paid or made
available to Executive under clause (i) or (iv) of this Section 4(c),
(x) the Company shall be relieved of all obligations to make any further
payments, or provide or make available any further benefits, to Executive
pursuant to clause (ii) or (iii) of this Section 4(c), (y) Executive
shall be required to repay the Company, in cash, within five (5) business
days after written demand is made therefor by the Company, an amount equal to
the value of any payments or benefits received by Executive pursuant to clause (ii) or
(iii) of this Section 4(c) and (z) Executive shall forfeit
any portion of the Stock Option that vested pursuant to clause (v) of Section 4(c).  Notwithstanding anything in this Agreement to
the contrary, payment of any or all of the Separation Benefits is expressly
contingent upon the Executive’s continued substantial compliance with the terms
and conditions of Sections 6, 7, 8 and 9 of this Agreement; provided
Executive had received notice thereof and failed promptly to cure any such
breach to the extent curable.  Executive
recognizes that, except as expressly provided in this Section 4 or
pursuant to the terms of Executive’s equity grant agreements, no compensation
is owed to her after termination of her employment.

 

(d)  Expiration of Term.  If Executive’s employment shall terminate by
reason of the expiration of the Term as a result of either party giving notice
of non-extension of the Term to the other party pursuant to Section 1(a),
Executive shall be entitled to the Accrued Rights.  The Accrued Rights shall be payable on their
normal payment dates; provided that accrued but unused 

 

7

 

vacation time shall be paid
within 30 days following the date of termination of Executive’s employment.

 

(e)  Resignation from
Board.  Upon termination of Executive’s
employment for any reason, and regardless of whether Executive continues as a
consultant to the Company, upon the Company’s request Executive agrees to
resign, as of the date of such termination of employment or such other date
requested, from the Board and any committees thereof (and, if applicable, from
the board of directors (and any committees thereof) of any subsidiary or
Affiliate of the Company) to the extent Executive is then serving thereon.

 

(f)  Amounts Due Under
Plans.  Subject to the provisions
hereof, the payment of any amounts accrued under any benefit plan, program or
arrangement in which Executive participates shall be subject to the terms of
the applicable plan, program or arrangement, and any elections Executive has
made thereunder.

 

(g)  Waiver of Notice.  The Board may waive any notice required of
Executive and Executive may waive any notice required of the Company under this
Section 4 without liability, penalty or cost.

 

5.  Acknowledgments.  (a)  Executive acknowledges that the
Company has expended and shall continue to expend substantial amounts of time,
money and effort to develop business strategies, employee and customer
relationships and goodwill and build an effective organization.  Executive acknowledges that Executive is and
shall become familiar with the Company’s Confidential Information (as defined
below), including trade secrets, and that Executive’s services are of special,
unique and extraordinary value to the Company, its subsidiaries and
Affiliates.  Executive acknowledges that
the Company has a legitimate business interest and right in protecting its
Confidential Information, business strategies, employee and customer
relationships and goodwill, and that the Company would be seriously damaged by
the disclosure of Confidential Information and the loss or deterioration of its
business strategies, employee and customer relationships and goodwill.  The Company acknowledges that Executive is a
long serving executive in the industry and has acquired significant industry
experience and knowledge during her career.

 

(b)  Executive
acknowledges (i) that the business of the Company, its subsidiaries and
Affiliates is national in scope and without geographical limitation within the
United States and (ii) notwithstanding the jurisdiction of formation or
principal office of the Company, its subsidiaries and Affiliates, or the
location of any of their respective executives or employees (including, without
limitation, Executive), it is expected that the Company and its subsidiaries
and Affiliates will have business activities and have valuable business
relationships within their respective industries throughout the United States.  Executive also agrees and acknowledges that
the potential harm to the Company of the non-enforcement of Sections 6, 7,
8, 9 and 12 outweighs any potential harm to Executive of its enforcement by
injunction or otherwise.  In addition,
the Company agrees and acknowledges that the potential harm to the Executive of
the non-enforcement of Section 12 outweighs any potential harm to the
Company of its enforcement by injunction or otherwise.

 

8

 

(c)  Executive
acknowledges that she has carefully read this Agreement and has given careful
consideration to the restraints imposed upon Executive by this Agreement, and
is in full accord as to the necessity of such restraints for the reasonable and
proper protection of the Confidential Information, business strategies,
employee and customer relationships and goodwill of the Company and its
subsidiaries and Affiliates now existing or to be developed in the future.  Executive expressly acknowledges and agrees
that each and every restraint imposed by this Agreement is reasonable with
respect to subject matter, time period and geographical area.  Executive further acknowledges that although
Executive’s compliance with the covenants contained in Sections 6 and 7
may prevent Executive from earning a livelihood in a business similar to the
business of the Company, Executive’s experience and capabilities are such that
Executive has other opportunities to earn a livelihood and adequate means of
support for Executive and Executive’s dependents.

 

6.  Restrictive
Covenants.  (a)  Noncompetition
and Nonsolicitation. Executive agrees that
Executive shall not, while an employee of the Company and during the one-year
period following termination of employment (such one-year period, the “Restriction
Period”), directly or indirectly, without the prior written consent of the
Company:

 

(i)  engage in activities
or businesses within the United States on behalf of any Person that is in
competition with a portion of the Company’s business from which the Company
derives at least 15% of its revenues based on the Company’s fiscal prior to the
earlier of the activity or termination (“Competitive Activities”),
including (A) selling goods or services of the type sold by the Company or
any of its subsidiaries; (B) soliciting or attempting to solicit any
customer or client or prospective customer or client of the Company or any of
its subsidiaries or Limited Affiliates including, without limitation, actively
sought prospective customers or clients, to purchase any goods or services of
the specific type sold by the Company or any of its subsidiaries from anyone
other than the Company or any of its subsidiaries; and (C) assisting any
Person in any way to do, or attempt to do, anything prohibited by (A) or (B) above;
provided, however, that the foregoing shall not prevent or be violated
by Executive’s service in a non-competitive portion of a company or business
enterprise which is engaged in Competitive Activities with the Company or, as a
result thereof, owning compensatory equity in such a company or business
enterprise engaged in Competitive Activities; or

 

(ii)  (A) solicit,
recruit or hire any employees of the Company or any of its subsidiaries or
Limited Affiliates or Persons who have worked for the Company or any of its
subsidiaries or Limited Affiliates in the prior 6 months; (B) solicit or
encourage any employee of the Company or any of its subsidiaries or Limited
Affiliates to leave the employment of the Company or any of its subsidiaries or
Limited Affiliates; or (C) intentionally interfere with the relationship
of the Company or any of its subsidiaries or Limited Affiliates with any Person
who or which is employed by or otherwise engaged to perform services for the
Company or any of its subsidiaries or Limited Affiliates.  The restrictions in this Section 6(a)(ii) shall
not apply to (x) general solicitations that are not specifically directed
to employees of the Company or any Limited Affiliate, (y) serving as a
reference at the request of an employee or (z) actions taken in the good
faith performance of her duties for the Company.

 

(iii)  Notwithstanding the
foregoing provisions of this Section 6(a), in the event Executive’s
employment hereunder terminates due to the expiration of the Term, the Restriction

 

9

 

Period shall not apply unless
the Company provides Executive with at least 60 days advance written notice
prior to the date of such expiration of its election to have the Restriction
Period apply and in connection therewith agrees to pay the Executive $1,000,000
payable ratably over the Restriction Period in equal monthly installments.

 

The Restriction Period shall be tolled during
(and shall be deemed automatically extended by) any period in which Executive
is determined to be in violation of the provisions of this Section 6 by a
relevant trier of fact, but only with respect to specific provisions to which
the breach relates.

 

(b)  Notwithstanding
anything to the contrary contained in this Agreement, the provisions of Section 6(a) shall
not be deemed breached as a result of Executive’s passive ownership of: (i) less
than an aggregate of 3% of any class of securities of a Person engaged,
directly or indirectly, in Competitive Activities; provided, however,
that such stock is listed on a national securities exchange, is quoted on the
National Market System of NASDAQ or is otherwise publicly traded; (ii) less
than an aggregate of 3% in value of any instrument of indebtedness of a Person
engaged, directly or indirectly, in Competitive Activities; or (iii) less
than 3% in interest in mutual funds, private equity funds, hedge funds and
similar pooled entities that have interests in or are engaged, directly or
indirectly, in Competitive Activities, so long as such investments are totally
passive.

 

(c)  If a final and
non-appealable judicial determination is made that any of the provisions of
this Section 6 constitutes an unreasonable or otherwise unenforceable
restriction against Executive, the provisions of this Section 6 will not
be rendered void but will be deemed to be modified to the minimum extent
necessary to remain in force and effect for the longest period and largest
geographic area that would not constitute such an unreasonable or unenforceable
restriction.  Moreover, notwithstanding
the fact that any provision of this Section 6 is determined not to be
specifically enforceable, the Company will nevertheless be entitled to recover
monetary damages as a result of Executive’s breach of such provision to the
extent permitted by applicable law.

 

7.  Nondisclosure
of Confidential Information.  (a) 
Executive acknowledges that the Confidential Information obtained by Executive
while employed by the Company and its subsidiaries and Affiliates is the
property of the Company or its subsidiaries and Affiliates, as applicable.  Therefore, Executive agrees that other than
in connection with the good faith performance of her duties, Executive shall
not disclose to any unauthorized Person or use for Executive’s own purposes any
Confidential Information without the prior written consent of the Company,
unless and to the extent that the aforementioned matters (i) become
generally known in the relevant trade or industry or the public domain other
than as a result of Executive’s acts or omissions in violation of this
Agreement, (ii) become available to Executive on a non-confidential basis
or (iii) were within Executive’s possession prior to its being obtained by
Executive in the course of Executive’s employment with the Company; provided,
however, that if Executive receives a request to disclose Confidential
Information pursuant to a deposition, interrogation, request for information or
documents in legal proceedings, subpoena, civil investigative demand,
governmental or regulatory process or similar process, (A) Executive shall
promptly notify in writing the Company, and reasonably consult with and
reasonably assist the Company in seeking a protective order or request for
other appropriate remedy, (B) in the event that such protective order or
remedy is not obtained, or if the Company waives compliance with 

 

10

 

the terms hereof, Executive
shall disclose only that portion of the Confidential Information that,
according to Executive’s counsel, is legally required to be disclosed and (C) to
the extent possible, the Company shall be given an opportunity to review the
Confidential Information prior to disclosure thereof.

 

(b)  For purposes of this
Agreement, “Confidential Information” means information and data
concerning the business or affairs of the Company and its subsidiaries and
Affiliates, including, without limitation, all business information (whether or
not in written form) which relates to the Company, its subsidiaries or
Affiliates, or their customers, suppliers or contractors or any other third
parties in respect of which the Company or its subsidiaries or Affiliates has a
business relationship or owes a duty of confidentiality, or their respective
businesses or products, and which is not known to the public generally or
within the industry other than as a result of Executive’s breach of this
Agreement, including but not limited to: 
technical information or reports; trade secrets; unwritten knowledge and
“know-how”; operating instructions; training manuals; customer lists; customer
buying records and habits; product sales records and documents, and product
development, marketing and sales strategies; market surveys; marketing plans;
profitability analyses; product cost; long-range plans; information relating to
pricing, competitive strategies and new product development; information
relating to any forms of compensation or other personnel-related information;
contracts; and supplier lists. 
Confidential Information will not include such information known to
Executive prior to Executive’s involvement with the Company or its subsidiaries
or Affiliates or information rightfully obtained from a third party (other than
pursuant to a breach by Executive of this Agreement).  Without limiting the foregoing, Executive and
the Company agree to keep confidential the existence of, and any information
concerning, any dispute between Executive and the Company or its subsidiaries
and Affiliates, except that Executive and the Company may disclose information
concerning such dispute to the court that is considering such dispute or to
Executive’s or the Company’s legal counsel or related advisors and experts (provided
that such Persons may not disclose any such information other than as necessary
to the prosecution or defense of such dispute)

 

(c)  Except as expressly
set forth otherwise in this Agreement or to the extent previously disclosed by
the Company, Executive agrees that Executive shall not disclose the terms of
this Agreement, except (i) to Executive’s family and Executive’s financial
and legal advisors, (ii) as may be required by law or ordered by a court
or other governmental entity with subpoena power or (iii) as may be
reasonably necessary for the Company to implement the terms of this
Agreement.  Executive further agrees that
any disclosure to Executive’s financial and legal advisors will only be made
after such advisors acknowledge and agree to maintain the confidentiality of
this Agreement and its terms to the extent such advisors are not otherwise
bound by a duty of non-disclosure; provided that if Executive has
obtained such agreement and acknowledgement or to the extent the advisor is
otherwise so bound, Executive shall have no liability for disclosure of such
information by Executive’s financial and legal advisors that is made without
Executive’s knowledge or involvement.

 

(d)  Executive further
agrees that Executive will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employers or any other
Person to whom Executive has an obligation of confidentiality, and will not
bring onto the premises of the Company, its subsidiaries or Affiliates any
unpublished documents or any property belonging 

 

11

 

to any former employer or any
other Person to whom Executive has an obligation of confidentiality unless
consented to in writing by the former employer or other Person.

 

8.  Return
of Property.  Executive acknowledges
that all notes, memoranda, specifications, devices, formulas, records, files,
lists, drawings, documents, models, equipment, property, computer, software or
intellectual property relating to the businesses of the Company and its
subsidiaries and Affiliates, in whatever form (including electronic), and all
copies thereof, that are received or created by Executive while an employee of
the Company or its subsidiaries or Affiliates (including but not limited to
Confidential Information) are and shall remain the property of the Company and
its subsidiaries and Affiliates, and Executive shall immediately return such
property to the Company upon the termination of Executive’s employment and, in
any event, at the Company’s request. 
Executive further agrees that any property situated on the premises of,
and owned by, the Company or its subsidiaries or Affiliates, including disks
and other storage media, filing cabinets or other work areas, is subject to
inspection by Company’s personnel at any time with or without notice.  Notwithstanding the foregoing, Executive
shall be permitted to retain her rolodex and similar address books, including
those in electronic form and the parties agree that the names and contact
information therein are not Confidential Information.

 

9.  Intellectual
Property Rights.  (a)  Executive
agrees that the results and proceeds of Executive’s services for the Company or
its subsidiaries or Affiliates (including, but not limited to, any trade
secrets, products, services, processes, know-how, designs, developments, techniques,
formulas, methods, developmental or experimental work, improvements,
discoveries, inventions, ideas, source and object codes, programs, matters of a
literary, musical, dramatic or otherwise creative nature, writings and other
works of authorship) resulting from services performed while an employee of the
Company and any works in progress, whether or not patentable or registrable
under copyright or similar statutes, that were made or conceived or reduced to
practice or learned by Executive, either alone or jointly with others
(collectively, “Inventions”), shall be works-made-for-hire and the
Company (or, if applicable or as directed by the Company, any of its
subsidiaries or Affiliates) shall be deemed the sole owner throughout the
universe of any and all trade secret, patent, copyright and other intellectual
property rights (collectively, “Proprietary Rights”) of whatsoever
nature therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed, with the right to use the same in perpetuity in any
manner the Company determines in its sole discretion, without any further
payment to Executive whatsoever.  If, for
any reason, any of such results and proceeds shall not legally be a work-made-for-hire
and/or there are any Proprietary Rights which do not accrue to the Company (or,
as the case may be, any of its subsidiaries or Affiliates) under the
immediately preceding sentence, then Executive hereby irrevocably assigns and
agrees to assign any and all of Executive’s right, title and interest thereto,
including any and all Proprietary Rights of whatsoever nature therein, whether
or not now or hereafter known, existing, contemplated, recognized or developed,
to the Company (or, if applicable or as directed by the Company, any of its
subsidiaries or Affiliates), and the Company or such subsidiaries or Affiliates
shall have the right to use the same in perpetuity throughout the universe in
any manner determined by the Company or such subsidiaries or Affiliates without
any further payment to Executive whatsoever. 
As to any Invention that Executive is required to assign, Executive
shall promptly and fully disclose to the Company all information known to
Executive concerning such Invention.

 

12

 

(b)  Executive agrees
that, from time to time, as may be reasonably requested by the Company and at
the Company’s sole cost and expense, Executive shall do any and all things that
the Company may reasonably deem useful or desirable to establish or document
the Company’s exclusive ownership throughout the United States of America or
any other country of any and all Proprietary Rights in any such Inventions,
including the execution of appropriate copyright and/or patent applications or
assignments.  To the extent Executive has
any Proprietary Rights in the Inventions that cannot be assigned in the manner
described above, Executive unconditionally and irrevocably waives the
enforcement of such Proprietary Rights. 
This Section 9(b) is subject to and shall not be deemed to
limit, restrict or constitute any waiver by the Company of any Proprietary
Rights of ownership to which the Company may be entitled by operation of law by
virtue of the Company’s being Executive’s employer.  Executive shall reasonably assist the Company
in every proper and lawful way to obtain and from time to time enforce
Proprietary Rights relating to Inventions in any and all countries.  To this end, Executive shall execute, verify
and deliver such documents and perform such other reasonable acts (including
appearances as a witness) as the Company may reasonably request for use in
applying for, obtaining, perfecting, evidencing, sustaining, and enforcing such
Proprietary Rights and the assignment thereof. 
In addition, Executive shall execute, verify, and deliver assignments of
such Proprietary Rights to the Company or its designees.  Executive’s obligation to assist the Company
with respect to Proprietary Rights relating to such Inventions in any and all
countries shall continue beyond the termination of Executive’s employment with
the Company, provided that the Company shall compensate Executive at a
reasonable rate after such termination for the time actually spent by Executive
at the Company’s request on such assistance.

 

(c)  In the event the
Company is unable for any reason, after reasonable effort, to secure Executive’s
signature on any document required in connection with the actions specified in Section 9(b),
Executive hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney in fact, to
act for and in Executive’s behalf to execute, verify and deliver any such
documents and to do all other lawfully permitted acts to further the purposes
of Section 9(b) with the same legal force and effect as if executed
by Executive.  Executive hereby waives
and quitclaims to the Company any and all claims, of any nature whatsoever,
that Executive now or may hereafter have for infringement of any Proprietary
Rights assigned hereunder to the Company.

 

10.  Notification
of Subsequent Employer.  Executive
hereby agrees that prior to accepting employment with any other Person during
any period during which Executive remains subject to any of the covenants set
forth in Section 6, Executive shall provide such prospective employer with
written notice of such provisions of this Agreement, with a copy of such notice
delivered to the Company within a reasonable time thereafter.

 

11.  Remedies
and Injunctive Relief.  The parties
acknowledges that a violation by Executive or the Company of any of the
covenants applicable to Executive or the Company and contained in Section 6,
7, 8, 9 or 12 would cause irreparable damage to Executive or the Company in an
amount that would be material but not readily ascertainable, and that any
remedy at law (including the payment of damages) would be inadequate.  Accordingly, the parties agree that,
notwithstanding any provision of this Agreement to the contrary, each party
shall be entitled (without the necessity of showing economic loss or other
actual damage) to injunctive relief (including temporary restraining orders,
preliminary injunctions and/or permanent injunctions) in 

 

13

 

any court of competent jurisdiction
for any actual or threatened breach of any of the covenants set forth in Section 6,
7, 8, 9 or 12 in addition to any other legal or equitable remedies either may
have.  The preceding sentence shall not
be construed as a waiver of the rights that the parties may have for damages
under this Agreement or otherwise, and all of the rights held by either
Executive or the Company shall be unrestricted.

 

12.  Nondisparagement.  Executive shall not, whether in writing or
orally, directly or indirectly, criticize, denigrate or disparage Ripplewood,
the Company, its subsidiaries or Affiliates or their respective predecessors
and successors, or any of the current or former directors, officers, employees,
or, in their capacity as such, any of the current or former shareholders,
partners, members, agents or representatives of any of the foregoing, with
respect to any of their respective past or present activities, or otherwise
publish (whether in writing or orally) statements that tend to portray any of
the aforementioned parties in an unfavorable light; provided that the
foregoing shall only apply with respect to persons that Executive knows or
reasonably should know are covered thereby and shall not apply to statements
made by Executive in the reasonable good faith performance of her duties while
employed by the Company; provided further than nothing herein shall
create any right or cause of action with respect to any third party.    Tim Collins, Harvey Golub, the managing
director in charge of Ripplewood’s investment in the Company, the Company’s
directors, its chief executive officer and his or her direct reports shall not,
and the Company shall take all reasonable measures to ensure that the
directors, officers and employees of the Company and its subsidiaries and Affiliates
shall not, whether in writing or orally, directly or indirectly, criticize,
denigrate or disparage Executive with respect to her respective past or present
activities, or otherwise publish (whether in writing or orally) statements that
tend to portray her in an unfavorable light; provided that the foregoing
shall not apply to statements made by the foregoing persons in the reasonable
good faith performance of their duties while rendering services with respect to
the Company while Executive is in the employ of the Company.  The foregoing provisions of this Section 12
shall cease to apply 2 years after the end of Executive’s employment with the
Company and shall not apply to truthful testimony, normal competitive-type
statements, statements not made with an intent to damage the other party or
statements made in rebuttal of statements made by the other party.

 

13.  Representations
of Executive.  (a)  Executive
represents, warrants and covenants that (i) Executive has the full right,
authority and capacity to enter into this Agreement and perform Executive’s
obligations hereunder, (ii) Executive is not bound by any agreement that
conflicts with or prevents or restricts the full performance of Executive’s
duties and obligations to the Company hereunder during or after the Term and (iii) the
execution and delivery of this Agreement shall not result in any breach or
violation of, or a default under, any existing obligation, commitment or
agreement to which Executive is subject.

 

(b)  Prior to execution of
this Agreement, Executive was advised by the Company of Executive’s right to
seek independent advice from an attorney of Executive’s own selection regarding
this Agreement.  Executive acknowledges
that Executive has entered into this Agreement knowingly and voluntarily and
with full knowledge and understanding of the provisions of this Agreement after
being given the opportunity to consult with counsel.  Executive further represents that in entering
into this Agreement, Executive is not relying on any statements or
representations made by any of the Company’s directors, officers, employees or 

 

14

 

agents which are not expressly
set forth herein, and that Executive is relying only upon Executive’s own
judgment and any advice provided by Executive’s attorney.

 

14.  Cooperation.  Executive agrees that, upon reasonable notice
and without the necessity of the Company obtaining a subpoena or court order,
Executive shall provide reasonable cooperation
in connection with any suit, action or proceeding (or any appeal from any suit,
action or proceeding), and any investigation and/or defense of any
claims asserted against the Company or any of its subsidiaries or Affiliates, which relates to events occurring during Executive’s
employment with the Company, its subsidiaries
and Affiliates as to which Executive may have relevant information
(including but not limited to furnishing relevant information and materials to
the Company or its designee and/or providing testimony at depositions and at
trial).  With respect to such cooperation
occurring following termination of employment, the Company shall compensate
Executive at a reasonable per diem rate to be mutually agreed (other than with
regard to actual testimony), as well as reimburse Executive, on an after-tax
basis, for expenses reasonably incurred in
connection therewith, including legal fees, provided that any
such cooperation occurring after the termination of Executive’s employment
shall be scheduled to the extent reasonably practicable so as not to
unreasonably interfere with Executive’s business or personal affairs.

 

15.  Withholding.  The Company may deduct and withhold from any
amounts payable under this Agreement such Federal, state, local, foreign or
other taxes as are required or permitted to be withheld pursuant to any
applicable law or regulation.

 

16.  Section 409A
of the Code.  (a)    It is
intended that the provisions of this Agreement comply with Section 409A,
and all provisions of this Agreement shall be construed in a manner consistent
with the requirements for avoiding taxes or penalties under Section 409A.  If any provision of this Agreement (or of any
award of compensation, including equity compensation or benefits) would cause
Executive to incur any additional tax or interest under Section 409A, the
Company shall, after consulting with Executive, reform such provision to comply
with Section 409A, provided that the Company agrees to maintain, to the
maximum extent practicable, the original intent and economic benefit to
Executive of the applicable provision without violating the provisions of Section 409A.  The Company shall timely amend any plan or
program in which Executive participates to bring it in compliance with Section 409A.

 

(b)  A termination of employment
shall not be deemed to have occurred for purposes of any provision of this
Agreement providing for the payment of any amounts or benefits upon or
following a termination of employment unless such termination is also a “separation
from service” (within the meaning of Section 409A) and, for purposes of
any such provision of this Agreement, references to a “termination” or “termination
of employment” shall mean separation from service.  If Executive is deemed on the date of
termination of her employment to be a “specified employee”, within the meaning
of that term under Section 409A(a)(2)(B) of the Code and using the
identification methodology selected by the Company from time to time (or if
none, the default methodology), then with regard to any payment or the
providing of any benefit made subject to this Section 16, and any other
payment or the provision of any other benefit that is required to be delayed in
compliance with Section 409A(a)(2)(B) of the Code, such payment or
benefit shall not be made or provided prior to the earlier of (i) the 

 

15

 

expiration of the six-month
period measured from the date of Executive’s separation from service or (ii) the
date of Executive’s death.  On the first
day of the seventh month following the date of Executive’s separation from
service or, if earlier, on the date of her death, all payments delayed pursuant
to this Section 16(b) (whether they would have otherwise been payable
in a single sum or in installments in the absence of such delay) shall be paid
or reimbursed to Executive in a lump sum, and any remaining payments and
benefits due under this Agreement shall be paid or provided in accordance with
the normal payment dates specified for them herein.  In addition to the foregoing, to the extent
required by Section 409A(a)(2)(B) of the Code, the payment of any
compensation (other than amounts accrued as of the date of SFS Disability (as
defined below) that are paid at such time as they otherwise would have been
paid) to Executive under this Agreement shall be suspended for a period of six
months commencing at such time that Executive shall be deemed to have had,
prior to the occurrence of a Disability termination as provided in Section 4(a)(i) hereof,
a separation from service because either (A) a sick leave ceases to be a
bona fide sick leave of absence, or (B) the permitted time period for a
sick leave of absence expires (an “SFS Disability”), without regard to
whether such SFS Disability actually results in a Disability termination.  Promptly following the expiration of such
six-month period, all compensation suspended pursuant to the foregoing sentence
(whether it would have otherwise been payable in a single sum or in installments
in the absence of such suspension) shall be paid or reimbursed to Executive in
a lump sum.

 

(c)  If any action on the
part of the Board relating to any award of compensation, including equity
compensation or benefits, causes Executive to incur any additional tax or
interest under Section 409A, the Company shall indemnify and hold
harmless, on an after-tax basis, Executive from and against any accelerated or
additional tax (including interest and penalties with respect thereto) that may
be imposed on Executive by reason thereof; provided that Executive shall
not compromise or settle any claim relating to Section 409A without the Company’s
written consent.  Any payment or
reimbursement for taxes made pursuant this Section 16(c) shall be
paid to Executive no later than the end of the calendar year next following the
calendar year in which the applicable tax is paid by Executive.

 

(d)  Notwithstanding
anything to the contrary herein, Executive’s rights under this Section 16
shall survive the termination of her employment for any reason and the termination
or expiration of this Agreement for any reason.

 

(e)  With regard to any
provision herein that provides for reimbursement of expenses or in-kind
benefits, except as permitted by Section 409A, (i) the right to
reimbursement or in-kind benefits is not subject to liquidation or exchange for
another benefit, (ii) the amount of expenses eligible for reimbursement,
or in-kind benefits, provided during any taxable year shall not affect the
expenses eligible for reimbursement, or in-kind benefits to be provided, in any
other taxable year, provided that the foregoing clause (ii) shall
not be violated with regard to expenses reimbursed under any arrangement
covered by Section 105(b) of the Code solely because such expenses
are subject to a limit related to the period the arrangement is in effect.

 

17.  Parachute
Payments and Excise Taxes.  (a) 
  So long as the Company is described in Section 280G(b)(5)(A)(ii)(I) of
the Code, if any payment or benefit (within the meaning of Section 280G(b)(2) of
the Code), to Executive or for Executive’s benefit paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise in 

 

16

 

connection with, or arising out
of, Executive’s employment with the Company or a change in ownership or
effective control of the Company or of a substantial portion of its assets (any
such payment or benefit, a “Parachute Payment”), would be subject to the
excise tax imposed by Section 4999 of the Code, or if any interest or
penalties are incurred by Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then Executive will be
entitled to receive additional payments (a “Gross-Up Payment”) in an
amount equal to the Excise Taxes imposed upon the Parachute Payment and the
Gross-Up Payment.  Except as expressly
provided in this Section 17(a), Executive shall not be entitled to any
additional payments in connection with any Parachute Payments or Gross-Up
Payments, including any reimbursement for the income tax thereon, so long as
the Company is described in Section 280G(b)(5)(A)(ii)(I).

 

(b)  If the Company is not
described in Section 280G(b)(5)(A)(ii)(I) of the Code, and if
Executive shall become entitled to a Parachute Payment, which Parachute Payment
will be subject to the Excise Tax, subject to Section 17(e) below,
then the Company shall pay to Executive at the time specified below (i) a
Gross-Up Payment such that the net amount retained by Executive, after
deduction of any Excise Tax on the Parachute Payment and any Federal, state,
and local income or payroll tax upon the Gross-Up Payment provided for by this
paragraph, but before deduction for any Federal, state, and local income or
payroll tax on the Parachute Payment, shall be equal to the Parachute Payment,
and (ii) an amount equal to the product of any deductions disallowed for
Federal, state or local income tax purposes because of the inclusion of the Gross-Up
Payment in Executive’s adjusted gross income multiplied by the highest
applicable marginal rate of Federal, state or local income taxation,
respectively, for the calendar year in which the Gross-Up Payment is to be
made.

 

(c)  Notwithstanding the foregoing,
if it shall be determined that Executive is entitled to a Gross-Up Payment, but
that if the Parachute Payment (other than that portion valued under Treasury
Regulation Section 1.280G, Q&A 24(c)) (the “Cash Payment”) is
reduced by the amount necessary such that the receipt of the Cash Payment would
not give rise to any Excise Tax (the “Reduced Payment”) and the Reduced
Payment would not be less than 90% of the Cash Payment, then no Gross-Up
Payment shall be made to Executive and the Cash Payments, in the aggregate,
shall be reduced to the Reduced Payments. 
If the Reduced Payment is to be effective, payments shall be reduced in
the following order (i) any cash severance based on a multiple of Base
Salary or Annual Bonus, (ii) any other cash amounts payable to Executive, (iii) any
benefits valued as parachute payments, (iv) acceleration of vesting of any
Stock Options for which the exercise price exceeds the then fair market value,
and (v) acceleration of vesting of any equity not covered by subsection (iv) above,
unless Executive elects another method of reduction by written notice to the
Company prior to the change of ownership or effective control.

 

(d)  In the event that the
Internal Revenue Service or court ultimately makes a determination that the
excess parachute payments plus the base amount is an amount other than as
determined initially, an appropriate adjustment shall be made with regard to
the Gross-Up Payment or Reduced Payment, as applicable to reflect the final
determination and the resulting impact on whether the preceding Section 17(c) applies.

 

(e)  For purposes of
determining whether any of the Parachute Payments and Gross-Up Payments
(collectively the “Total Payments”) will be subject to the Excise Tax
and the 

 

17

 

amount of such Excise Tax, (i) the
Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2)
of the Code, and all “parachute payments” in excess of the “base amount” (as
defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the opinion
of the Company’s independent certified public accountants appointed prior to
any change in ownership (as defined under Section 280G(b)(2) of the
Code) or tax counsel selected by such accountants or the Company (the “Accountants”),
there is a reasonable reporting position that such Total Payments (in whole or
in part) either do not constitute “parachute payments,” including giving effect
to the recalculation of stock options in accordance with Treasury Regulation Section 1.280G-1,
Q&A 33, represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of the
“base amount” or are otherwise not subject to the Excise Tax, and (ii) the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles of Section 280G
of the Code.  To the extent permitted
under Revenue Procedure 2003-68, the value determination shall be recalculated
to the extent it would be beneficial to Executive.  All determinations hereunder shall be made by
the Accountants which shall provide detailed supporting calculations both to the
Company and Executive at such time as they are requested by the Company or
Executive.  If the Accountants determine
that payments under this Agreement must be reduced pursuant to this paragraph,
they shall furnish Executive with a written opinion to such effect.  The determination of the Accountants shall be
final and binding upon the Company and Executive.

 

(f)  For purposes of
determining the amount of the Gross-Up Payment, Executive’s marginal blended
rates of Federal, state and local income taxation in the calendar year in which
the change in ownership or effective control that subjects Executive to the
Excise Tax occurs shall be used.  In the
event that the Excise Tax is subsequently determined by the Accountants to be
less than the amount taken into account hereunder at the time the Gross-Up
Payment is made, Executive shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of
the prior Gross-Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and Federal, state and
local income tax imposed on the portion of the Gross-up Payment being repaid by
Executive if such repayment results in a reduction in Excise Tax or a Federal,
state and local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code.  Notwithstanding the foregoing, in
the event any portion of the Gross-Up Payment to be refunded to the Company has
been paid to any Federal, state and local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or credit of such
portion has been made to Executive, and interest payable to the Company shall
not exceed the interest received or credited to Executive by such tax authority
for the period it held such portion. 
Executive and the Company shall mutually agree upon the course of action
to be pursued (and the method of allocating the expense thereof) if Executive’s
claim for refund or credit from such tax authority is denied.

 

(g)  In the event that the
Excise Tax is later determined by the Accountants or the Internal Revenue
Service to exceed the amount taken into account hereunder at the time the
Gross-Up Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) at the
time that the amount of such excess is finally determined.

 

18

 

(h)  The Gross-up Payment
or portion thereof provided for above shall be paid not later than the sixtieth
day following a change in ownership or effective control covered by Section 280G(b)(2) of
the Code that subjects Executive to the Excise Tax; provided, however,
that if the amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay to Executive on
such day an estimate, as determined in good faith by the Accountant, of the
minimum amount of such payments and shall pay the remainder of such payments,
subject to further payments pursuant to Section 17(d), as soon as the
amount thereof can reasonably be determined, but in no event later than the
ninetieth day after the occurrence of the event subjecting Executive to the
Excise Tax.  In the event that the amount
of the estimated payments exceeds the amount subsequently determined to have
been due, subject to Section 17(l), such excess shall constitute a loan by
the Company to Executive, payable on the fifth day after demand by the Company
(together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).

 

(i)  In the event of any
controversy with the Internal Revenue Service (or other taxing authority) with
regard to the Excise Tax, Executive shall permit the Company to control issues
related to the Excise Tax (at its expense), but Executive shall control any
other issues unrelated to the Excise Tax. 
In the event that the issues are interrelated, Executive and the Company
shall cooperate in good faith.  In the
event of any conference with any taxing authority as to the Excise Tax or
associated income taxes, Executive shall permit the representative of the
Company to accompany Executive, and Executive and her representative shall
cooperate with the Company and its representative.

 

(j)  The Company shall be
responsible for all charges of the Accountant.

 

(k)  The Company and
Executive shall promptly deliver to each other copies of any written
communications, and summaries of any verbal communications, with any taxing
authority regarding the Excise Tax covered by this provision.

 

(l)  Nothing in this Section 17
is intended to violate the Sarbanes-Oxley Act and to the extent that any
advance or repayment obligation hereunder would do so, such obligation shall be
modified so as to make the advance a nonrefundable payment to Executive and the
repayment obligation null and void.

 

(m)  Notwithstanding the
foregoing, any payment or reimbursement made pursuant to Section 17(a),
17(b), 17(d), 17(f) or 17(g) shall be paid to the Executive promptly
and in no event later than the end of the calendar year next following the calendar
year in which the related tax is paid by the Executive.

 

18.  Assignment.  (a)    This Agreement is personal to Executive and
without the prior written consent of the Company shall not be assignable by
Executive, except for the assignment by will or the laws of descent and
distribution of any accrued pecuniary interest of Executive, and any assignment
in violation of this Agreement shall be void.

 

(b)  This Agreement shall
be binding on, and shall inure to the benefit of, the parties to it and their
respective heirs, legal representatives, successors and permitted assigns 

 

19

 

(including, without limitation,
in the event of Executive’s death, Executive’s estate and heirs in the case of
any payments due to Executive hereunder).

 

(c)  Executive
acknowledges and agrees that all of Executive’s covenants and obligations to
the Company, as well as the rights of the Company hereunder, shall run in favor
of and shall be enforceable by the Company and its successors and assigns, provided
that the successor or assignee is the successor to all or substantially all of
the assets of the Company and such assignee or successor assumes the rights and
duties of the Company as contained in this Agreement, either contractually or
as a matter of law.

 

19.  Indemnification
and Insurance; Legal Expenses. 
During the Term and for so long thereafter as liability exists with
regard to Executive’s activities during the Term on behalf of the Company, its
Affiliates, or as a fiduciary of any benefit plan of any of them, the Company
shall indemnify Executive to the fullest extent permitted by applicable law
(other than in connection with Executive’s gross negligence or willful
misconduct), and shall pay, or reimburse Executive for, reasonable attorneys’
fees and expenses as such fees and expenses are incurred, which amounts shall
be paid or reimbursed as soon as practicable after Executive incurs such fees
and expenses and submits documentation thereof (which shall be submitted within
ninety (90) days of the incurrence of the fees or expenses), but in no event
later than the Short-Term Deferral Date (subject to an undertaking from
Executive to repay such advances if it shall be finally determined by a
judicial decision which is not subject to further appeal that Executive was not
entitled to the reimbursement of such fees and expenses).  During the Term and thereafter while
liability exists, Executive shall be entitled to the protection of any
insurance policies the Company shall elect to maintain generally for the
benefit of its directors and officers (“Directors and Officers Insurance”)
against all costs, charges and expenses incurred or sustained by her in
connection with any action, suit or proceeding to which she may be made a party
by reason of her being or having been a director, officer or employee of the
Company or any of its Affiliates or her serving or having served any other
enterprise or benefit plan as a director, officer, fiduciary or employee at the
request of the Company (other than any dispute, claim or controversy arising
under or relating to this Agreement), provided that Executive shall, in
all cases, be entitled to Directors and Officers Insurance coverage no less
favorable than that (if any) then currently provided to any other present or
former director or officer of the Company.

 

20.  No
Mitigation; No Offset.  Executive
shall not be required to seek other employment or otherwise mitigate the amount
of any payments to be made by the Company pursuant to this Agreement.  The
payments provided pursuant to this Agreement shall not be reduced by any
compensation earned by Executive as the result of employment by another
employer after the termination of Executive’s employment or otherwise.  Except as specifically provided in this
Agreement, the Company’s obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive or others.

 

21.  Governing
Law.  This Agreement shall be deemed
to be made in the State of New York, and the validity, interpretation,
construction, and performance of this Agreement in all respects shall be
governed by the laws of the State of New York without regard to its principles
of conflicts of law.  No provision of
this Agreement or any related document will be 

 

20

 

construed against or interpreted
to the disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or drafted such provision.

 

22.  Consent
to Jurisdiction.  (a)  Except as
otherwise specifically provided herein, Executive and the Company each hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York (or, if subject matter jurisdiction
in that court is not available, in any state court located within the Borough
of Manhattan, New York) over any dispute arising out of or relating to this
Agreement.  Except as otherwise
specifically provided in this Agreement, the parties undertake not to commence
any suit, action or proceeding arising out of or relating to this Agreement in
a forum other than a forum described in this Section 22(a); provided,
however, that nothing herein shall preclude the Company from bringing
any suit, action or proceeding in any other court for the purposes of enforcing
the provisions of this Section 22 or enforcing any judgment obtained by
the Company.

 

(b)  The agreement of the
parties to the forum described in Section 22(a) is independent of the
law that may be applied in any suit, action, or proceeding and the parties
agree to such forum even if such forum may under applicable law choose to apply
non-forum law.  The parties hereby waive,
to the fullest extent permitted by applicable law, any objection which they now
or hereafter have to personal jurisdiction or to the laying of venue of any
such suit, action or proceeding brought in an applicable court described in Section 22(a),
and the parties agree that they shall not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court.  The parties agree that, to the
fullest extent permitted by applicable law, a final and non-appealable judgment
in any suit, action or proceeding brought in any applicable court described in Section 22(a) shall
be conclusive and binding upon the parties and may be enforced in any other
jurisdiction.

 

(c)  The parties hereto
irrevocably consent to the service of any and all process in any suit, action
or proceeding arising out of or relating to this Agreement by the mailing of copies
of such process to such party at such party’s address specified herein.  In addition, Executive irrevocably appoints
the General Counsel of the Company as Executive’s agent for service of process
in connection with any suit, action or proceeding, who shall promptly advise
Executive of any such service of process.

 

(d)  The prevailing party
in an action hereunder, as determined by the applicable court, shall be
entitled to recover reasonable legal fees and related costs from the other
party; provided that such fees and costs are incurred prior to the fifth
anniversary of the expiration of the Term, and that in the event the Company is
entitled to recover such fees and costs from Executive, the amount of such
recovery shall be limited to $150,000. 
In the event that Executive is entitled to recover such fees and costs
all such amounts shall be paid to her within thirty (30) days after the award
of such fees and costs by the applicable court.

 

23.  Amendment;
No Waiver.  No provisions of this
Agreement may be amended, modified, waived or discharged except by a written
document signed by Executive and a duly authorized officer of the Company
(other than Executive).  The failure of a
party to insist upon strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver of such party’s rights or deprive such party
of the right thereafter to insist upon strict adherence 

 

21

 

to that term or any other term
of this Agreement.  No failure or delay
by either party in exercising any right or power hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any such right or
power, or any abandonment of any steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.

 

24.  Severability.  If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any applicable law or public
policy, all other conditions and provisions of this Agreement shall nonetheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party.  Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.

 

25.  Entire
Agreement.  This Agreement (including
the Exhibits hereto and any other agreements or side letters entered into
simultaneously with or following the date hereof that specifically provide that
they are intended to modify or supplement this Agreement) constitutes the
entire agreement and understanding between the Company and Executive with
respect to the subject matter hereof and supersedes all prior agreements and
understandings (whether written or oral), between Executive and the Company,
relating to such subject matter.  None of
the parties shall be liable or bound to any other party in any manner by any
representations and warranties or covenants relating to such subject matter
except as specifically set forth herein.

 

26.  Survival.  The rights and obligations of the parties
under the provisions of this Agreement shall survive, and remain binding and
enforceable, notwithstanding the expiration of the Term, the termination of
this Agreement, the termination of Executive’s employment hereunder or any
settlement of the financial rights and obligations arising from Executive’s
employment hereunder, to the extent necessary to preserve the intended benefits
of such provisions.

 

27.  Notices.  All notices or other communications required
or permitted to be given hereunder shall be in writing and shall be delivered
by hand or sent by facsimile or sent, postage prepaid, by registered, certified
or express mail or overnight courier service and shall be deemed given when so
delivered by hand or facsimile, or if mailed, three days after mailing (one
business day in the case of express mail or overnight courier service) to the
parties at the following addresses or facsimiles (or at such other address for
a party as shall be specified by like notice):

 

	
  If to the
  Company:

  	
  The Reader’s
  Digest Association, Inc.

  Roaring Brook Road

  Pleasantville, New York  10570

  Attention: Board of Directors and General
  Counsel

  Fax:  914-244-5644

   

  

 

22

 

	
  With a copy to:

  	
  Ripplewood Holdings L.L.C.

  One
  Rockefeller Plaza, 32nd Floor

  New York,
  NY  10020

  Attention: Christopher Minnetian

  Fax:  212-218-2769

   

  
	
  If to Executive:

  	
  To the address last shown on the records of the Company

   

  

 

Notices delivered by facsimile shall have the same legal effect as if
such notice had been delivered in person.

 

28.  Headings
and References.  The headings of this
Agreement are inserted for convenience only and neither constitute a part of
this Agreement nor affect in any way the meaning or interpretation of this
Agreement.  When a reference in this
Agreement is made to a Section, such reference shall be to a Section of
this Agreement unless otherwise indicated.

 

29.  Counterparts.  This Agreement may be executed in one or more
counterparts (including via facsimile and electronic image scan (pdf)), each of
which shall be deemed to be an original, but all of which together shall constitute
one and the same instrument and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
parties.

 

23

 

IN WITNESS WHEREOF, this Agreement has been
executed by the parties as of the date first written above.

 

	
   

  	
  THE READER’S DIGEST 

  ASSOCIATION, INC.,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: Harvey Golub

  
	
   

  	
  Title: Chairman of the Board

  
						

 

	
   

  	
  MARY BERNER

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
				

 

24

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