THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Reader's Digest Association, Incorporated (RDA)

9/28/2005 Proxy Information

Pursuant to an agreement with Highfields Capital Management LP and related entities, which expired on June 4, 2004, Reader's Digest agreed, among other things, to appoint Mr. Mayer to the Board and to the Corporate Governance and Compensation and Nominating Committees.

9/29/2004 Proxy Information

On October 15, 2002, we entered into a revised agreement with the DeWitt Wallace-Reader's Digest Fund, Inc. and the Lila Wallace-Reader's Digest Fund, Inc. (the "Funds") providing for a series of actions that resulted in all shares of our Class B Voting Common Stock ("Class B Stock") and Class A Nonvoting Common Stock ("Class A Stock") being recapitalized into a single class of Reader's Digest Common Stock with one vote per share. At the time, the Funds beneficially owned in the aggregate 50% of the Class B Stock outstanding and approximately 12.1% of the Class A Stock outstanding.

Under the terms of the recapitalization agreement, we granted the Funds registration rights with respect to the shares of Reader's Digest Common Stock owned by them after the recapitalization. On September 23, 2003, The Wallace Foundation (which was formed by the merger of the Funds) sold their remaining shares of Reader's Digest Common Stock (12.82% of the shares outstanding) in a secondary public offering pursuant to their registration rights. As a result, The Wallace Foundation ceased to own any shares of Reader's Digest Common Stock.

Two purported class actions were brought on behalf of holder of Class B Stock against us, our Directors and the Funds challenging the original recapitalization transaction announced in April 2002. During fiscal 2004, the parties in those class actions entered into a settlement agreement, subject to court approval, with respect to the settlement of those actions. The settlement agreement provides that Reader's Digest will not oppose an application by plaintiffs for attorneys' fees to be paid by Reader's Digest not to exceed $115,000.

Pursuant to an agreement with Highfields Capital Management LP and related entities, which expired on June 4, 2004, Reader's Digest agreed, among other things, (1) to appoint Mr. Mayer to the Board and to the Corporate Governance and Compensation and Nominating Committees, (2) to nominate Mr. Mayer for election as a Class 1 Director and solicit votes for his re-election at the 2003 Annual Meeting of Stockholders, and (3) to appoint another Director to the Board no later than the 2003 Annual Meeting of Stockholders. The Board fulfilled the last obligation by appointing Mr. Isaacson in November 2003. Mr. Mayer continues to serve on the Board as a Class 1 Director.

9/30/2003 Proxy Information

In connection with the employment of Michael S. Geltzeiler as Senior Vice President and Chief Financial Officer of Reader's Digest, we have agreed to assist Mr. Geltzeiler in collecting amounts due from his prior employer and to pay Mr. Geltzeiler up to $400,000 in cash and $125,000 in restricted stock if corresponding amounts are not collected from the prior employer. We have agreed to incur legal expenses of no more than $50,000 to provide this assistance and, if any legal fees that have already been paid to Mr. Geltzeiler's counsel by Mr. Geltzeiler's former employer are required to be returned, we will pay those fees.

On October 15, 2002, we entered into a revised agreement with the DeWitt Wallace-Reader's Digest Fund, Inc. and the Lila Wallace-Reader's Digest Fund, Inc. (the Funds) providing for a series of actions that resulted in all shares of our Class B Voting Common Stock (Class B Stock) and Class A Nonvoting Common Stock (Class A Stock) being recapitalized into a single class of Reader's Digest Common Stock with one vote per share. At the time, the Funds beneficially owned in the aggregate 50% of the Class B Stock outstanding and approximately 12.1% of the Class A Stock outstanding.

The October 15, 2002 recapitalization agreement revised the recapitalization agreement that we entered into with the Funds on April 12, 2002. The terms of the revised recapitalization agreement were negotiated on our behalf by a special committee of our Directors who were independent of the Funds. The revised recapitalization transactions were the result of arm's-length negotiation. The transactions contemplated by the October recapitalization agreement were completed on December 13, 2002. As a result:

o We repurchased approximately 4.6 million shares of Class B Stock from the Funds for $100 million in cash in the aggregate;

o Each share of Class A Stock was recapitalized into one share of Reader's Digest Common Stock having one vote per share;

o Each remaining share of Class B Stock was recapitalized into 1.22 shares of Reader's Digest Common Stock having one vote per share; and

o We amended our charter to, among other things, reflect the reclassification of the stock, divide our Board of Directors into three classes and eliminate action by written consent of our stockholders.

Also under the terms of the October recapitalization agreement, we agreed to use our reasonable best efforts to cause one nominee of the Funds to be elected to the Board until the earlier of our 2004 Annual Meeting of Stockholders and the time at which the Funds jointly own less than 10% of the outstanding Reader's Digest Common Stock. We also granted the Funds registration rights with respect to the shares of Reader's Digest Common Stock owned by them after the recapitalization. On September 23, 2003, The Wallace Foundation (which was formed by the merger of the Funds) sold their remaining shares of Reader's Digest Common Stock in a secondary public offering pursuant to their registration rights. As a result, The Wallace Foundation no longer owns any shares of Reader's Digest Common Stock and their rights with respect to a nomination to the Board of Directors of Reader's Digest have ceased. At the time the revised recapitalization agreement was entered into, Ms. DeVita was President, and she and C.J. Silas were members and directors, of the Funds. Ms. DeVita and Mr. Silas were also Directors of Reader's Digest. Mr. Silas did not stand for reelection to our Board at the 2002 Annual Meeting and Ms. DeVita will retire from our Board at the 2003 Annual Meeting.

Four legal actions were commenced against us, our Directors and the Funds challenging the original recapitalization transaction announced in April 2002. Three of the four actions were purported class actions; the fourth action was brought by individual stockholders. The parties in two of the three class actions, which were brought on behalf of holders of Class B Stock, entered into a memorandum of understanding setting forth agreements in principle, subject to court approval, with respect to the settlement of those actions. The third class action, which was brought on behalf of holders of Class A Stock, was dismissed with prejudice by the Court of Chancery of the State of Delaware pursuant to a comprehensive settlement agreement that was approved by the Court of Chancery on February 12, 2003. The fourth action was voluntarily dismissed.